EM System CJEU Judgment: 50% Shareholding Creates Rebuttable Presumption of Control for Asset Freezing

April 22, 2026

EM System: CJEU elaborates on presumption of control of non-designated entities for asset-freezing purposes

Renato Antonini, Domenico Gullo, Byron Maniatis, Flaminia Perna, Elli Zachari Hogan Lovells + Follow Contact LinkedIn Facebook X ;) Embed

[co-author: Massimiliano Bocchio]

Key takeaways

In its recent judgment in Case C 84/24, EM System, the Court of Justice of the European Union made a number of important clarifications regarding the application of EU asset freezing measures to non designated entities, largely confirming and elaborating principles already reflected in Council guidance on the implementation of EU restrictive measures. In particular:

The funds of a company not itself subject to EU restrictive measures may nevertheless be frozen where they are owned, held or controlled by a listed person.

The Court confirmed that a 50% shareholding held by a listed individual gives rise to a rebuttable presumption of control, justifying the freezing of the company’s assets under EU restrictive measures.

At the same time, the Court emphasised that any presumption of control must remain rebuttable, and the company concerned must have access to effective judicial protection before national authorities and courts.

In its judgment in Case C-84/24, EM System, the Court of Justice of the European Union clarified the application of asset‑freezing measures under Regulation (EC) No 765/2006, in particular as regards when the funds of a non‑designated entity may be treated as owned or controlled by a listed person. While many of the relevant principles had already been set out in Council guidance on the implementation of EU restrictive measures, the Court confirmed and further elaborated those principles, giving them clear judicial authority. The judgment provides important confirmation of how the presumption of control may arise based on ownership structures, while reiterating that such presumption must remain rebuttable and subject to effective judicial review.

Background to the preliminary ruling request

Case C-84/24 concerns a request for a preliminary ruling from a Lithuanian court arising out of a decision of the Council of the European Union to add a Belarusian national to the list of legal and natural persons subject to restrictive measures, set out in Annex I to Regulation (EC) No 765/2006, as amended (“ Regulation 765/2006 ”). Following that listing, two Lithuanian banks froze the assets held in several bank accounts by EM System UAB (“ EM System ”), a Lithuanian company in which the sanctioned individual held a 50% shareholding.

EM System challenged the measure before the Lithuanian courts seeking, at first instance, an order requiring the banks to unfreeze the assets in the bank accounts. The court of first instance dismissed the action, finding that the listed individual’s 50% shareholding was sufficient to give rise to control over EM System for the purposes of the restrictive measures. The same reasoning was upheld by the court of appeal, which dismissed the appeal brought by EM System against the first-instance decision.

EM System subsequently challenged the appellate decision before the Supreme Court of Lithuania. Observing that, at the time when EM System’s bank accounts were frozen, Regulation 765/2006 did not lay down specific criteria for determining whether a legal person or entity is owned or controlled by another person or entity, the Supreme Court referred three preliminary questions to the EU Court of Justice concerning the interpretation of Regulation 765/2006:

1. Whether a person listed in Annex I to Regulation No 765/2006 who owns exactly 50% of a non‑listed company must be presumed to own, hold or control that company’s funds, such that those funds must be frozen.
2. Whether a company whose funds have been frozen on that basis may challenge the freezing measure in national proceedings by arguing that its funds are not used by, or for the benefit of, the listed person.
3. If so, which criteria should apply to determine whether the company’s funds are not used by, or for the benefit of, the listed person, including whether factors such as the separation of the company’s assets from those of its shareholders, the role of non-listed managers, and restricted access to the company’s bank accounts may suffice. While the questions referred arose in the specific context of Regulation 765/2006 concerning restrictive measures in respect of Belarus, the Court’s judgment is of broader relevance. The provisions interpreted by the Court mirror those used across a wide range of EU sanctions regimes, which likewise require the freezing of funds and economic resources “belonging to, owned, held or controlled by” listed persons. As a result, the Court’s reasoning on the presumption of control, is likely to be applicable beyond the Belarus regime. More generally, the judgment largely confirms and gives judicial endorsement to principles already reflected in existing EU guidance, in particular the Council’s guidance on the implementation of asset‑freezing measures and the assessment of ownership and control.

Presumption of control over non-designated entities

Regulation 765/2006 does not define the notions of “held” or “controlled” relevant for the purposes of Article 2(1), nor does it establish relevant thresholds, for example under the form of percentage of stakes of corporate capital, that, if met, determine a presumption of control by the shareholder. The concepts of ownership and control have, however, been elaborated in EU guidance, specifically the Council’s Best Practices for the effective implementation of restrictive measures, which the Court also referred to in its analysis. In particular, the 2018 version of those Guidelines stated that ownership is presumed where a person holds more than 50% of an entity’s proprietary rights or a majority interest in it. The updated version of those Guidelines which was published in 2024 specifically refers to ownership where a person is in possession of 50% or more of the proprietary rights of an entity or having majority interest in it.

In this context, the Court’s judgment confirms and gives judicial authority to principles already reflected in EU guidance. While Regulation 765/2006 itself does not lay down ownership or control thresholds, the Court relied on the objectives of the sanctions regime and on existing guidance to conclude that a 50% shareholding gives rise to a rebuttable presumption of control. The judgment thus aligns the interpretation of Article 2(1) of Regulation 765/2006 with the approach set out in the Council’s Best Practices, clarifying that ownership or control may be presumed on the basis of shareholding thresholds, as this is necessary to ensure the swift and effective application of asset‑freezing measures.

In its ruling, the Court began its analysis by recalling that the words “ belonging to, owned, held or controlled by ” listed persons must be interpreted broadly to cover not only cases in which funds and economic resources are directly owned, held or controlled, but also situations in which a listed person exercises influence indirectly over such funds and resources through a corporate entity, even where that entity is not itself designated. The Court considered that restricting the freezing obligation only to entities listed under Annex I would undermine the effectiveness of the sanctions regime and would enable sanctioned persons to circumvent the restrictive measures through corporate structures and exploit weaknesses in the system.

Against this background, the Court considered whether a person holding a 50% stake in a company should be deemed as holding or controlling the funds held by such company. In addressing that question, the Court interpreted the concepts of “held” and “controlled” in light of the objectives of the sanctions regime, emphasising that restrictive measures must be applied swiftly and with a surprise effect, which requires the use of clear criteria and rebuttable presumptions when assessing ownership or control. Such presumptions facilitate the rapid identification of assets to be frozen, help prevent the outflow of funds, and reduce the risk that listed persons evade restrictive measures by exploiting complex legal arrangements.

In this context, the Court referred to the Council’s Best Practices, according to which the assessment of control may be based on a range of indicative factors, including (i) the right or ability to appoint or remove a majority of the members of the administrative, management or supervisory body of the entity concerned; (ii) the right or ability to exercise a dominant influence over that entity; and (iii) the right to use all or part of its assets. These elements reflect the broader notion of control as the capacity to determine, directly or indirectly, the use of the entity’s economic resources.

By reference to those indicia where control may be established, the Court considered that a person holding a 50% stake in a company must be presumed capable of exercising control over that entity and its assets. Such a position enables the shareholder to dictate or block certain decisions within the company or, at the very least, to ensure that its affairs are conducted in accordance with its wishes, thereby exercising a “ dominant influence ” over the use of its resources.

Consequently, the funds of an entity in which a sanctioned person holds a 50% stake must be presumed to be held or controlled by that person and may therefore be subject to freezing for the purposes of Regulation 765/2006.

Rebuttable nature of the presumption

At the same time, the Court emphasised that the use of such presumptions must comply with fundamental procedural guarantees. In particular, it recalled the obligation for the administration to state reasons, as laid down in Article 8a of Regulation 765/2006, and the requirement for Member States, under Article 19(1) TEU, to provide remedies sufficient to ensure effective judicial protection in the fields covered by EU law.

Where the funds of a non-listed entity are frozen based on a presumption that they are held or controlled by a listed person, Member States must therefore provide procedures enabling both the affected entity and the listed person to challenge the measure and, where appropriate, to secure its lifting. According to the Court, a presumption that a listed person holds or controls the funds of a non‑designated entity is compatible with the principles of good administration and effective judicial protection only if it is rebuttable.

Against that background, the Court answered the second preliminary question in the affirmative, holding that a company whose funds have been frozen on the basis of a presumption of control must be able to challenge that measure in national proceedings by arguing that its funds are not used by, or for the benefit of, the listed person.

As noted above, the third preliminary question concerned the criteria to be applied by national courts when assessing whether a presumption of ownership or control has been rebutted. While the Court did not lay down an exhaustive list of factors or provide detailed guidance on their application, it clarified that the presumption may be overturned where it is demonstrated that the listed person does not in fact hold or control the entity’s funds or economic resources. In making that assessment, particular regard may be had to the entity’s governance structure, its articles of association and its functioning in practice. Where the presumption is successfully rebutted, the entity must be afforded the opportunity to secure the unfreezing of its funds or economic resources. The listed person must likewise be given an opportunity to challenge the presumption of ownership or control.

Firewalls as a potential means of rebutting control

Accordingly, as regard the third preliminary question on how a presumption of ownership or control may be rebutted, the Court confirmed that such a rebuttal must be possible and identified certain relevant considerations, but did not provide detailed or exhaustive guidance on how those criteria should be applied in practice. Against that background, and beyond the specific findings of the judgment, operators and national authorities may look to existing EU‑level guidance for further direction on mechanisms capable of preventing a listed person from exercising control over a non‑designated entity.

In this context, it is worth briefly noting the existence of certain potential safeguards – commonly referred to as “firewalls” – aimed at preventing a listed person from exercising control over a non-designated EU entity, allowing that entity to continue operating while ensuring that no funds or economic resources are made directly or indirectly available to the listed person. In any event, irrespective of the firewall, the funds and economic resources of the designated person remain subject to freezing.

The European Commission issued in 2023 a Guidance Note on the Implementation of Firewalls in cases of EU entities owned or controlled by a designated person or entity. According to that Guidance, a properly implemented firewall entails a structural reorganisation of the entity’s corporate governance, ensuring that the designated person is excluded from day-to-day management and from any business decisions, as well as from access to the resulting resources and profits. The purpose of such measures is to ring-fence the entity’s assets and prevent any economic resources from being made available, directly or indirectly, to the designated person.

The Guidance contemplates that firewalls contemplated may be implemented either through legislation or by economic operators themselves. Where implemented through legislation, the structure of a firewall may differ from country to country and legislation must grant the national competent authority the ability to appoint, according to specific criteria, an independent supervising third party responsible for overseeing compliance with EU sanctions and reporting on the functioning of the firewall.

Alternatively, firewalls may be implemented by operators. In that scenario, the entity may, subject to specified criteria, decide to implement safeguards to decouple itself from a designated person who owns or controls it, typically relying on an external audit, acting in full independence from the entity.

In this sense, firewalls may be regarded as a potential means of a rebuttal of the presumption that, where a person designated under EU restrictive measures exercises control over an entity, such control necessarily extends to all assets owned by that entity.

Companies, financial institutions, and other operators exposed to EU asset‑freezing measures should review existing sanctions screening, ownership and control assessments, and account‑freezing protocols to ensure they appropriately reflect the rebuttable presumption of control arising from a 50% shareholding. Non‑designated entities affected by asset freezes should consider whether their governance arrangements and safeguards are sufficient to demonstrate the absence of use or benefit for a listed person, including, where appropriate, the use of effective firewalls. For assistance with these or any other sanctions-related concerns, please reach out to any of the listed contacts.
[View source.]

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