What does the decision to lift EU sanctions against the former head of Ozon mean?

The European Union Court of General Jurisdiction in Luxembourg ruled to lift the sanctions against former Ozon CEO Alexander Shulgin. The corresponding decision, issued on September 6, published on the site of the authority. But it will enter into force only after the expiration of the period for filing an appeal by the EU Council of two months and ten days.

In April 2022, Shulgin was included in the European sanctions list, and even the departure of a businessman from a leadership position on April 11 could not change the situation. According to a publication on the website of the EU magazine, the sanctions were imposed due to the fact that on February 24, 2022, the day the military operation in Ukraine began, Shulgin attended a meeting of Russian big businessmen with Russian President Vladimir Putin. According to the EU authorities, the presence of Shulgin at this meeting meant support for Russia’s policy towards Ukraine.

Later, on June 18, 2022, the businessman filed a request with the EU court demanding that all decisions of the EU Council that mention his name be canceled, as well as reimburse all legal costs. As justification for these claims, the request cites the following points: violation of the rights to legal protection, the inconsistency of the arguments provided by the Council, violation of the principle of proportionality, as well as restriction of the principle of equal treatment. But the main claim of Shulgin, which eventually played a decisive role, was the statement about the erroneous justification for including the businessman on the sanctions list. The EU document says that Shulgin is a “leading businessman”, but since he is no longer the CEO of Ozon, Shulgin disputed this position. The Council of the EU has not provided any evidence why this statement is correct regarding the former Ozon CEO.

This decision, if it survives a likely appeal or the EU authorities do not file it, is a likely precedent for other similar cases of EU personal sanctions against Russian businessmen, says Sergey Glandin, Head of Compliance and Sanctions Law at BGP Litigation. In the Shulgin case, the European Court examined him through an examination of Shulgin’s compliance with the two criteria set out in Article 3 of EU Regulation 269, on the basis of which he fell under blocking sanctions. According to Glandin, these are the criteria from points “a” (if a person is associated with persons in power in Russia who make relevant decisions on Ukraine or supports them) and “g” (“a leading businessman from the sector of the economy that significantly fills the budget of the Russian Federation”).

The court found that at the time of inclusion on the sanctions list, Shulgin met the criterion of paragraph “g”, being present in an important sector that fills the Russian budget. But, having left the industry, leaving the post, he ceased to comply with it, as well as carry an indirect threat to Ukraine, and the EU authorities did not fulfill the burden of checking the current status of Shulgin, which allows maintaining sanctions against him. In addition, Shulgin did not make any political statements on the conflict in Ukraine, and his presence at a meeting of business representatives with Putin on February 24, 2022 does not give grounds to judge his position, which is also important for other similar cases, Glandin notes.

Andrey Ryabinin, the head of the International Practice of the Delcredere Bar Association, says that the adoption of a final decision by the court after almost a year is a normal practice in these cases, not related to the existing political and other conjuncture. However, the lawyer clarified that there are exceptions. So he gave an example of a decision in the case of RT France, considered in less than three months (the lawsuit was filed on March 8, 2022, the decision was made on July 27). “This case was chosen on purpose, because in it the EU Court gave its international legal assessment of the actions of the Russian Federation, and for this this case was most welcome,” Ryabinin said.

At the same time, earlier on the same day, on September 6, the European Court of Justice in Luxembourg rejected the claim of a Russian entrepreneur, a former controlling shareholder of the Pipe Metallurgical Company (TMK) Dmitry Pumpyansky, Gennady Timchenko, Mikhail Gutseriev and Tigran Khudaverdyan, who challenged EU sanctions. Businessmen Petr Aven, Mikhail Fridman and others also filed lawsuits with the European Court of Justice over EU sanctions. According to Bild, as of December 2022, more than 60 entrepreneurs and companies from Russia and Belarus have filed lawsuits with the European Court of Justice to challenge the inclusion on the EU sanctions list. According to Bloomberg on September 6, the EU imposed sanctions on about 1,800 people and organizations.