On 3 September 2026, the Court of Justice of the European Union (“CJEU” or the “Court”) delivered its judgment in Case C-147/25, Inter Rao Lietuva, concerning the evidential basis required to establish that an undertaking is controlled by a person subject to EU restrictive measures.
Inter Rao Lietuva AB operated in Lithuania as an independent importer and supplier of electricity. In 2022, its funds were frozen after the company was included by the competent Lithuanian authority on a national list of persons considered to have links with persons subject to EU restrictive measures, in this instance the President of Russia.
The national authority relied, inter alia, on the company’s ownership structure. Inter Rao Lietuva was indirectly owned by Inter Rao, a company incorporated under Russian law whose principal shareholders included undertakings indirectly owned by the Russian Federation.
Inter Rao Lietuva challenged the freezing of its funds before the Lithuanian courts. The Supreme Administrative Court of Lithuania referred questions to the CJEU concerning the implementation of EU restrictive measures, the procedural safeguards applicable to national measures and the evidential basis required to establish control.
The Court held that, where a national asset-freezing measure is based on the existence of control by a person subject to EU restrictive measures, the competent national authority must establish such control on an objective and sufficiently solid basis, either by direct evidence or by a sufficiently specific, precise and consistent body of circumstantial evidence.
A central issue concerned the reliance placed by the Lithuanian authorities on the nature of Russia’s political system and the powers exercised by its President as part of the basis for concluding that he was capable of exercising genuine and effective control over persons and undertakings operating in Russia.
The Court held that such considerations do not, in themselves, constitute sufficiently solid evidence capable of establishing control over a particular company.
The Court did not, however, exclude the possibility that control may be exercised informally or in the absence of legal ties or links based on ownership or equity participation. The referring court may take into account all information or circumstances relating to the reality and effectiveness of the control exercised over the company concerned, including control of an informal nature, provided that those matters are supported by objective and sufficiently solid evidence.
The Court’s reasoning therefore permits control to be established otherwise than through formal ownership or direct legal rights. Where reliance is placed on informal control, however, the reality and effectiveness of that control over the particular undertaking must be substantiated in accordance with the evidential standard identified by the Court.
The judgment also addressed the procedural safeguards applicable when national authorities implement EU restrictive measures. The Court recalled that restrictive measures imposed by an EU Regulation are directly applicable in all Member States. A national measure freezing funds on the basis that they belong to, are owned, held or controlled by a person subject to EU restrictive measures constitutes implementation of those EU measures and must comply with the fundamental rights guaranteed by the Charter of Fundamental Rights of the European Union.
The Court further held that prior communication of the grounds for an asset-freezing measure, and a prior hearing of the person or entity concerned, are not required where this would jeopardise the effectiveness of the measure. The grounds must, however, be communicated as soon as possible after its adoption, so that the person or entity concerned can effectively exercise the right to challenge it.
Where the measure is challenged, the national court must satisfy itself that it rests on a sufficiently solid factual basis, including by verifying the facts relied upon in the statement of reasons. Where the measure is based on alleged control, the court must therefore verify whether that control has been established on the objective and sufficiently solid basis required by EU law.
As the proceedings arose by way of a reference for a preliminary ruling, the CJEU did not determine whether the funds of Inter Rao Lietuva should ultimately remain frozen. That determination remains for the referring Lithuanian court, applying the interpretation of EU law provided by the Court.
MK Compliance Limited can provide regular updates on EU sanctions developments, including changes affecting asset-freezing measures, ownership and control assessments, and the interpretation of restrictive measures by EU and national authorities. These updates can assist businesses in identifying relevant regulatory developments and assessing their potential impact on existing or proposed business relationships.
