CL-2022-000456 - [2025] EWHC 1938 (Comm)

The 2020 Opinion sets out the criteria for assessing control, and then says that NCAs are competent to determine control (p. 3):

“The NCA is competent to determine, in light of the above clarifications, taking into account all the elements at its disposal and the specific circumstances of the case, whether the designated person has control over the Entity.”

A little later, it then acknowledges the legal status of such a determination by an NCA, and for this reason recommends that such determinations be published (p. 4):

“In order to ensure legal certainty, the NCAs should publish their conclusions on the relationship of control between designated persons and controlled entities. This will allow economic operators to become aware of the determinations made by the NCA and, consequently, to comply with the freezing obligations under Article 2(1) of the Regulation. In order to avoid over-compliance, the NCAs could also publicly indicate the assets of these entities that they have determined are not controlled by the designated persons and therefore do not need to be frozen, if any.”

It next states that such a determination means that the assets of the entity must be frozen under Article 2(1) (which had been referred to at the beginning of the relevant passage) (p. 4):

“In light of the foregoing, if the designated person is determined to have control over the Entity, the Commission takes the view that the assets of the Entity must be frozen. The Entity may obtain the lifting of the freeze on some or all of its assets by showing that they are in fact not “controlled” by the designated person. The way to do so depends on national procedures. NCAs should make the conclusions regarding the existence of such control public.”

Thus, it is for the NCA to determine control, in which case an asset-freeze must follow. If the relevant entity wishes to have the freeze lifted, it must apply to have it lifted in the relevant member state, in accordance with the procedures in that member state. In practice, such an application is likely to involve the NCA.

The 2021 Opinion contained a similar explanation, but this time stated that only the NCAs (and not the Commission) can make the relevant determination (p. 3):

“The NCA is competent to factually determine whether the elements that it has identified as linking the designated person to Entity A amount to meeting any of these criteria or others which may prove that the designated person has control over Entity A. This determination should be made in light of the above clarifications, taking into account all the elements at the NCA’s disposal and the specific circumstances of the case. The Commission is not empowered to make this factual determination on behalf of the NCAs.”

The 2021 Opinion then proceeds to consider whether Article 2(2) prohibits payments to an EU subsidiary of Entity A, if the relevant NCA’s factual assessment is that the designated person controls Entity A. It concludes:

“… the Commission takes the view thatmaking payments to an EU Subsidiary controlled by Entity A amounts to making them available to the latter. To the extent Entity A is controlled by the designated person, the payments can be considered as made indirectly available to the designated person. Such payments are therefore prohibited, unless authorised by the NCA pursuant to one of the derogations provided for in the Regulation, or unless it is reasonably determined, on a case-by-case basis using a risk-based approach, taking into account all of the relevant circumstances, that the funds will not be used by or be for the benefit of the designated person. EU banks must apply the appropriate due diligence procedures to avoid that a payment made to a certain non-designated entity results in the indirect making available of funds to a designated person.”

The Claimants suggested that the meaning of the penultimate sentence is that payment is prohibited unless (i) authorised by the NCA pursuant to a derogation under the Regulation or (ii) the paying party makes its own determination that the funds will not be used by or be for the payment of the designated person. It seems much more likely from the context that the 2020 Opinion anticipated that such a case-by-case determination would be made by the NCA, as the domestic enforcement body in the relevant member state. This is primarily because it would be surprising if the presumption that follows under Article 2(2) from the NCA’s determination that an entity/subsidiary in the member state is controlled by a designated person could be displaced by a decision by the very person whose action in paying would otherwise be a criminal offence under the domestic law of that state, rather than by the body whose role is to enforce that law. However, it is also because it must be borne in mind that the 2020 Opinion and the 2021 Opinion both responded to questions from NCAs. They are all about what NCAs can, cannot, should and should not do, in the course of enforcing Regulation 269.

In Andrey Melnichenko v Council T-1114/23 (ECLI:EU:T:2024:599), the Court stated at [26]:

“The question whether EuroChem is controlled by the applicant within the meaning of Article 2 of Decision 2014/145, as amended, and Article 2 of Regulation No 269/2014, as amended, does not form part of the subject matter of the case, since the examination of that question falls, in particular, to the competent authorities of the Member States when they are called upon to rule on whether or not to order the freezing of that company’s funds and economic resources.”

In EuroChem v Council T-1111/23, the Court stated at [56]:

“… the fact that a legal person or an entity is owned, held or controlled by a person whose name is included on the lists at issue must be established, in the case of the freezing of funds and economic resources, by the authorities of the Member States…”