EU SANCTIONS AND CRITERION (G): CJEU LIMITS THE COUNCIL’S “AUTOMATIC” APPROACH

In March 2026, the Court of Justice of the European Union delivered a judgment in several appeals joined into a single set of proceedings: C-696/23 P (Dmitry Pumpyanskiy v Council), C-704/23 P (Tigran Khudaverdyan v Council), C-711/23 P (Viktor Rashnikov v Council), C-35/24 P (Dmitry Mazepin v Council) and C-111/24 P (German Khan v Council).

SUBJECT MATTER: CRITERION (G)

These are so-called joined cases, where the Court examines several appeals together because they raise the same legal issues. In this instance, the central question concerned the interpretation of one of the key criteria of the EU sanctions regime against Russia – criterion (g).

This criterion allows for the listing of “leading businesspersons operating in economic sectors providing a substantial source of revenue to the Russian Government”. Its interpretation was at the core of all five appeals.

The applicants – including some of Russia’s largest businessmen and top executives – challenged the EU Council’s decisions, pointing to a systemic issue: in practice, criterion (g) had been applied in an almost automatic manner. It was often sufficient to state that a person is a major business figure operating in an economically significant sector, and this was treated as enough to justify listing.

THE COURT’S POSITION: SECTOR-BASED, BUT NOT AUTOMATIC

In its judgment, the Court began with an important clarification of the structure of the criterion. In paragraphs 98–127, it held that the requirement of “providing a substantial source of revenue” relates to economic sectors, not to individual businesspersons.

In other words, the EU legislature deliberately designed criterion (g) as sector-based rather than person-based: it is the sector that must constitute a significant source of revenue for the State.

At first glance, this may appear to ease the Council’s burden of proof: there is no need to demonstrate how much tax a particular individual pays or what share of the State budget they generate. However, the Court immediately introduced an important limitation.

While criterion (g) refers to economic sectors, the inclusion of a person on the list still requires an individualised assessment and cannot be based solely on that person’s presence in a relevant sector.

Put differently, criterion (g) does not allow for the automatic transposition of sector characteristics onto any individual operating within that sector. Otherwise, it would effectively amount to a form of collective responsibility, which is incompatible with the inherently individual nature of EU restrictive measures.

According to both the judgment and the accompanying press release, the Court’s reasoning operates on two distinct levels.

On the one hand, it must be established that the relevant sector indeed generates substantial revenue for the State. This is a macroeconomic element that may be supported by general data on the industry.

On the other hand – and this is the central point of the judgment – the Council must demonstrate that the individual concerned is genuinely connected to that sector in a manner that makes them relevant for the application of the criterion.

The Court does not require proof of direct financial flows from the individual to the State, such as specific tax payments or dividends. However, it does require evidence that the person is not a merely incidental or peripheral participant. Rather, the individual must occupy a meaningful position within the sector, allowing them to be regarded as part of the economic structure that generates revenue for the State.

Accordingly, in the Court’s logic, the link between the individual and State revenue is indirect: it operates through participation in the sector, not through direct payments.

IMPLICATIONS FOR CHALLENGING EU SANCTIONS

The judgment in the joined cases C-696/23 P, C-704/23 P, C-711/23 P, C-35/24 P and C-111/24 P does not fundamentally alter the architecture of the EU sanctions regime. However, it significantly refines the applicable standard of proof – and this is where its practical importance lies.

First, the Court clearly limits the Council’s ability to rely solely on categorical reasoning. A mere reference to a “strategic sector” combined with the status of “leading businessperson” is no longer sufficient without a more detailed analysis of the individual’s role within that sector.

Second, the requirement of individualization is reinforced. This opens the door to arguments that the applicant:

• does not exercise control over the business,
• does not hold a key position in the industry,
• operates in a limited or ancillary segment, or
• does not materially influence the economic performance of the sector.

Third, the judgment confirms an important principle: belonging to a sector is not equivalent to contributing to State revenue. This is particularly relevant for minority shareholders, investors and managers without decisive influence.

Finally, the Court implicitly raises the bar for the Council’s evidentiary standard. General references to the importance of a sector or reliance on public sources without a concrete assessment of the individual’s role are now more vulnerable to challenge before the EU courts.