The European Court of Justice confirms that trust structures cannot shield sanctioned assets

Background

On 21 May 2026, the First Chamber of the Court of Justice handed down two judgments relating to three cases.

The first judgment relates to Case C‑483/23,wherethe Italian Financial Security Committee froze the assets of four Italian companies on the basis that those assets were, pursuant to Article 2 of EU Regulation 269/2014, "indirectly attributable" toan individual listed on the Annex I sanctions list (Designated Person). The companies were ultimately owned through a Bermuda parent company, which was itself held in an irrevocable trust governed by Bermudian law. The settlor of that trust was listed as a Designated Person. The settlor had been formally excluded from the group of trust beneficiaries shortly before his listing. The companies argued that this formal exclusion meant the assets could not be attributed to him.

The second judgment related to cases C‑428/24 and C‑476/24, where the assets of an Italian company and a superyacht, valued at approximately EUR 530 million, were held through trust structures whose beneficiary was a Designated Person. In both cases, the trust instrument contained a "compliance clause" expressly prohibiting the trustee from making any distribution to a listed person. The companies argued that because the beneficiary was legally prevented from receiving anything from the trust during the period of her listing, the assets could not be regarded as "belonging to" or "controlled by" her.

In both judgments the ECJ held that the terms "belonging to" and "control" respectively extend to de facto power over, and the ability to influence decisions concerning, assets, even in the absence of any legal or ownership link between the Designated Person and those assets.

The decisions reaffirm the position taken by the English Court in LLC EuroChem North-West-2 & Anor v Société Générale S.A. & Ors [2025] EWHC 1938 (Comm), where it was held that the banks involved with EuroChem were prohibited from making payment under on-demand bonds, including pursuant to Regulation 269. The English Court held that it had to apply a purposive approach to interpreting EU sanctions instruments, emphasising that the concepts of “ownership” and “control” are to be given an autonomous and broad meaning. In applying such an approach, the Court held that a beneficiary under a discretionary trust is the owner of the trust assets (or alternatively, the person to whom the assets belong or is their holder), for the purpose of Article 2 of Regulation 269, even if that is not the case as a matter of English or Bermudian law (see our previous blog post here).

Rulings

Substance over Form

Having regard to the purpose and general scheme of EU Regulation 269/2014, and to the various language versions of Regulation 269, which refer to a variety of relationships between the Designated Person and the relevant assets and economic resources, the ECJ ruled that the provision encompasses "all legal and factual situations in which a person holds power enabling that person to use, benefit from, dispose of or have influence over the funds and economic resources concerned." The provision thus covers a spectrum of relationships. "Belonging to" catches not only formal legal title but also situations where a person holds de facto power over assets, notwithstanding that legal title resides elsewhere. "Control" encompasses the ability to influence another person's decisions, even in the absence of any legal or ownership link.

The formal registration of title in the name of a trustee is not determinative. What matters is whether the Designated Person holds power, formal or informal, to use, benefit from, dispose of, or influence the assets in question.

The Settlor as a Designated Person (Case C‑483/23)

Applying the interpretive principles set out above, the ECJ held that where a settlor is a Designated Person, the fact that legal title to trust assets stands in the name of the trustee does not preclude those assets from being regarded as "belonging to" or "controlled by" the settlor. To hold otherwise would undermine the fundamental purpose of Regulation 269, whose objectives, the protection of Ukraine's territorial integrity, sovereignty and independence, militate in favour of an interpretation that maximises the effectiveness of restrictive measures and prevents their circumvention. Accordingly, assets placed in a trust by a designated settlor may be regarded as belonging to or controlled by that settlor, provided the settlor retains the requisite power or influence, and a freezing measure may be adopted in respect of those assets. The ECJ found it unconvincing that the settlor lacked formal management powers over the trust assets. Looking beyond the trust instrument, it observed that the law of Bermuda grants the settlor prerogatives including the ability to revoke all or part of the trust, give binding instructions, and appoint or replace any trustee. The Court considered that such prerogatives may be indicative of the settlor's capacity to influence the trust assets, even where not explicitly set out in the trust instrument or amendments. In this regard, the Court noted the difficulty of ascertaining the precise terms of a trust given the absence of any publicity obligation and the possibility of amendment. The ECJ further directed the national court to consider:

1. the relationships between the settlor and persons involved in the trust;
2. whether the trust assets were allocated solely or primarily for the benefit of the settlor or entities belonging to or controlled by the settlor;
3. the use of needlessly complex structures, which may itself be suggestive of concealed control;

and whether the settlor held:

1. directly or indirectly a majority of the capital or voting rights in; or
2. the right to appoint or remove a majority of the governing body of; or
3. the right to exercise decisive influence over,

the trustee.

The ECJ ruled that Article 2(1) of Regulation 269 requires assets placed in a trust by a settlor who is a Designated Person to be regarded as belonging to or controlled by that settlor, provided that the settlor retains power enabling him to use, benefit from or dispose of those assets, or to influence them or the decisions made by the trustees in respect of them.

The Beneficiary as a Designated Person and the Compliance Clause argument (Cases C‑428/24 and C‑476/24)

In its joint ruling in Cases C‑428/24 and C‑476/24, the ECJ reiterated the importance of the effectiveness of restrictive measures and the broad interpretation of "belonging to" and "control" for the purposes of Regulation 269.

The ECJ noted that, whilst a beneficiary formally holds no rights over trust assets, the fact that those assets are managed solely in the beneficiary's interests may indicate that they belong to or are controlled by the beneficiary. The Court accordingly emphasised the relevance of relationships between the beneficiary and other persons involved in the trust, beyond the formalised trust instruments. The allocation of funds solely or primarily for the benefit of the beneficiary was likewise treated as an indication of the influence the beneficiary exercises over the trust and its resources.

The Court rejected the argument that a compliance clause defeats a freezing measure. Such a clause cannot be decisive for two reasons. First, whether assets "belong to" or are "controlled by" a listed person under Article 2(1) is a logically distinct inquiry from whether making them available is prohibited under Article 2(2); the compliance clause addresses the latter, not the former. Second, trust instruments are not subject to mandatory publicity obligations and may be modified at any time, rendering a compliance clause an inherently unreliable basis on which to assess whether a real connection exists.

Accordingly, the ECJ determined that Article 2(1) of Regulation 269 requires assets held in a trust whose beneficiary is a Designated Person to be regarded as belonging to or controlled by that beneficiary, provided that the beneficiary is able to use, benefit from or dispose of the funds and economic resources held in trust, or to influence them or the decisions made by the trustee in respect of those assets.

Comment

Taken together, the ECJ's rulings confirm that the sanctions framework under Regulation 269 applies beyond the terms of the trust deed, capturing situations of what it is possible to achieve through a trust structure (rather than what the terms of the particular structure in question may provide for).  Legal arrangements, whether an exclusion of the settlor from beneficiary status or a compliance clause in a trust deed, will not insulate trust assets from a freezing measure. The Courts will continue to apply a purposive approach to interpretation of the relevant legislation and, in particular, as to what constitutes "ownership" or "control".