EU ruling permits full confiscation of proceeds in military brokering case

The Court of Justice of the European Union (‘CJEU’) has ruled that the EU’s prohibition on providing brokering services for military equipment to Russia permits the full confiscation of proceeds, even if the goods never entered the EU.

The 10 September judgment also affirmed the Court’s authority to interpret the EU Common Foreign and Security Policy (‘CFSP’) decisions that underpin national sanctions.

The case centred around Romanian aeronautics firm Neves 77 Solutions SRL, which facilitated a transaction involving 32 radio sets, 20 of which were manufactured in Russia. Despite being warned in 2019 that their brokering activities were prohibited under EU sanctions due to Russia’s actions in Ukraine, Neves received nearly €3 million from SFTE Spetstechnoexport for these services. Romanian authorities imposed a fine of 30,000 Romanian lei (about €6,000) and confiscated the funds received.

The Romanian court sought clarification from the CJEU on whether the prohibition applied even if the military equipment did not enter the EU, and whether the confiscation of funds violated property rights.

The European Court affirmed that its ‘jurisdiction to give a uniform interpretation of EU law cannot be circumvented where, as in the present case, the restrictive measure of general scope concerned should have been included in a regulation.’

It ruled that the prohibition on brokering services for military equipment to Russia is applicable regardless of whether the goods are imported into the EU.

‘Such a prohibition could be circumvented easily if it were sufficient, in order to escape it, for that equipment to be routed without passing through EU territory,’ the Court observed.

It also noted that EU law allows for the automatic confiscation of the full amounts received for brokering services related to military equipment.

‘Although this limits the provider’s right to property, such a limitation is appropriate to ensure that the prohibition is effective and, consequently, proportionate in light of the EU’s legitimate objectives, namely the protection of Ukraine’s territorial integrity, sovereignty, and independence,’ the Court concluded.

https://curia.europa.eu/jcms/upload/docs/application/pdf/2024-09/cp240136en.pdf