EU Court of Justice Clarifies Ownership and Control Criteria of EU Russia Asset Freeze Measures in the Context of Trusts

On May 21, 2026, the Court of Justice of the European Union (CJEU) issued two preliminary rulings in response to referrals by the Regional Administrative Court of Lazio, Italy. The court provided important guidance on the application of EU asset freeze measures in the context of trusts associated with persons designated under Council Regulation (EU) No 269/2014 (the Russia Asset Freeze Regulation).

The rulings in Case C-483/23, T Trust,[1] and Joined Cases C-428/24, FZ AR, and C-476/24, SX,[2] arose amid challenges to asset freezes imposed by the Italian authorities pursuant to Article 2(1) of the Russia Asset Freeze Regulation. In all cases the assets were ultimately held by trusts set up under Bermudian law.

Both rulings addressed the delicate question of whether assets that have been placed, directly or indirectly, in a trust may be regarded as “belonging to” or being “controlled by” a designated settlor or beneficiary, notwithstanding that such person does not hold the legal title to such assets or enforceable rights under the trust instrument or the law governing the trust.

Since preliminary rulings are effectively binding on both the referring court and all courts in the Member States, and also given the largely similar reasoning applied in both judgments, these rulings are likely to serve as authoritative guidance on national competent authorities (NCA) and national courts across the EU when evaluating the existence of ownership or control in structures that include trusts.

KEY TAKEAWAYS

• Lack of legal ownership is not decisive in evaluating ownership and control: The court found that assets held in a trust may be frozen pursuant to Article 2(1) of the Russia Asset Freeze Regulation despite the lack of legal ownership, if a designated settlor or beneficiary retains legal or de facto ability to use, benefit from, dispose of, or influence the assets.
• Evaluation of ownership and control criteria requires a broad assessment of the totality of facts and circumstances: When evaluating ownership and control over trusts and trust assets, national courts and NCAs must look at the totality of facts and circumstances; they should not be bound by the trust instrument and the provisions of the law governing the trust. Importantly, the rulings do not suggest that trust beneficiaries and/or settlors are automatically to be considered to own or control the trust or trust assets. Rather, each situation must be evaluated on a case-by-case basis.
• Purposive interpretation of the ownership and control criteria: The rulings confirm the court’s continued purposive interpretation of the ownership and control criteria, i.e., an interpretation that considers the overall purpose intended by the legislation, in this case to give effect to the overarching objectives and the anti-circumvention provisions of the Russia Asset Freeze Regulation.

BACKGROUND AND CONTEXT

The referrals were made amid challenges brought before the Regional Administrative Court of Lazio against asset freeze measures imposed by Italian authorities under the Russia Asset Freeze Regulation.[3] The cases involved various types of assets, including shares in companies, real estate, car rental, garage services and seasonal tourism sectors, as well as luxury assets such as a yacht.[4] All these assets were held through discretionary trusts, governed by the laws of Bermuda and linked to designated Russian leading businesspersons.

In the first case (T Trust), the question for the court was whether assets held in a Bermuda law trust could be frozen where the designated settlor, who also had been one of the beneficiaries, ceased to be a beneficiary prior to designation.

 In FZ AR and SX, the settlor, who was also the initial beneficiary of the relevant discretionary trusts, relinquished his status shortly before or after his designation. His spouse succeeded him as a beneficiary, when she was then designated.

The referring court sought the court’s guidance on whether the concepts of assets “belonging to” or being “controlled by” a designated settlor or beneficiary under the Russia Asset Freeze Regulation may extend to trust assets where the legal title is with the trustee and the trust instrument limits the designated person's ability to influence the administration of the trust or the disposition of the trust assets.[5]

BROAD INTERPRETATION OF OWNERSHIP AND CONTROL CRITERIA

The CJEU adopted a broad and purposive interpretation of Article 2(1), holding that the concepts of “belonging to” and “controlled by” are autonomous concepts of EU law and must be interpreted uniformly and in light of the objectives and effectiveness of the relevant sanctions regime.[6]

The court rejected a purely formalistic approach to ownership and control. According to the court, Article 2(1) covers a range of legal and factual relationships between a designated person and the funds or economic resources concerned,[7] so that ownership and control may not be limited to formal legal ownership or enforceable proprietary rights, but extends to situations in which a designated person has legal or de facto ability to use, benefit from, dispose of, or influence the management of the assets.[8]

This broad interpretation of ownership and control appears driven by the desire to preserve the effectiveness of the Russia asset freeze sanctions. A narrower interpretation of ownership and control would, according to the court, create a risk that designated persons could retain practical access to economic resources through trust, fiduciary, or other layered arrangements while avoiding the formal appearance of ownership or control.

To the extent that the Russia Asset Freeze Regulation does not define beneficial ownership, the court relied upon the extensive definition of beneficial ownership given in EU AML Directive (EU) 2015/849, to conclude that beneficial owners of a trust may include a broad categories of persons, including the settlor, the trustee, the protector, the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate control over the trust by direct or indirect means.[9] As such, the Court considered that, depending on the specific features of a given trust and factual circumstances, economic benefit and effective influence may be with persons other than the trustee.

APPLICATION TO TRUSTS

While the legal systems of certain Member States may view trusts with some skepticism, the Court acknowledged the essential characteristics of a trust, including the separation between legal ownership, vested in the trustee, and beneficial ownership, which may accrue to beneficiaries.[10] However, the Court emphasized that the classification of a trust under its governing law is not necessarily decisive when evaluating ownership and control for purposes of the of EU asset freeze sanctions.

Accordingly, assets held in trusts may still be regarded as belonging to, or being controlled by, a designated settlor or beneficiary where that person retains legal or factual power enabling them to influence, use, benefit from, or dispose of the assets. This may be so even where the trustee holds the legal title, the beneficiary lacks an immediate enforceable right to demand distributions, or the trust instrument purports to restrict the designated person’s access to the assets while sanctions remain in force.[11]

That being said, this does not mean that settlors and beneficiaries of trusts will automatically be viewed as owning or controlling such trusts or trust assets. Rather, national courts and NCAs must conduct a case-by-case assessment, based on the totality of facts and circumstances, and may not rely solely on the terms of the trust instrument or the law governing the trust.[12]

RELEVANT FACTORS SUGGESTIVE OF OWNERSHIP OR CONTROL IN TRUSTS

The court described a non-exhaustive list of indicators that may be relevant to determining whether assets held in a trust “belong to” or are “controlled by” a designated person, that fall into three categories:

• Legal or de facto influence over the trust. This would require an examination of whether the designated person retains the ability to influence the trust through settlor prerogatives under the law governing the trust,[13] rights to appoint or remove key decision-makers,[14] any amendable clause restricting access to the assets during the designation period,[15] whether there are close personal/professional relationships with the trustee, protector, appointor, director, beneficiaries, or any persons involved in the arrangement and whether such persons are likely to follow designated person’s instructions or suggestions as regards the administration of the trust and the trust assets.[16]
• Continued direct or indirect benefit from trust assets. This would include an assessment of whether the designated person continues to benefit, directly or indirectly, from the assets, including where the assets are managed exclusively in that person’s interest,[17] used for their benefit, or where companies placed in the trust continue to provide goods or services to entities owned or controlled by that person.[18]
• Control through non-designated entities. It includes circumstances which, according to the court, may indicate that the designated person controls a non-designated entity, including the use of unnecessarily complex structures,[19] the creation or restructuring of entities shortly before designation, the absence of genuine business activity, the transfer of assets into trust arrangements linked to the designated person, and the involvement in the management of the trusts of professionals from the jurisdiction in which the trusts were established.[20]

PRACTICAL IMPLICATIONS FOR CLIENTS

These rulings confirm that sanctions compliance assessments of ownership and control in trusts must go beyond formal ownership or control. In our experience regulators and other institutions have always looked behind the relevant trust instruments and legal title to form their own view as to whether a designated person does in fact effectively own or control the assets. The guidance of the court provides judicial backing for the diligence exercises that many institutions undertake in any event.

Going forward we therefore recommend that clients who deal with assets in the context of trusts and similar arrangements carefully assess the specific features and governance of the structure, including any retained powers, informal influence, patterns of benefit, related-party dealings, recent restructurings, and the involvement of family members or professional intermediaries.

Where assets are connected to a designated person, reliance on trust documentation alone is likely to be insufficient to determine ownership, control, or beneficial influence. Conducting this type of diligence is of importance not only when evaluating control and ownership in the context of trusts, but also when dealing with foundations, nominee arrangements, layered holding structures, family-owned vehicles, and other arrangements that separate legal ownership from beneficial ownership.

HOW CAN WE HELP

Morgan Lewis regularly advises clients on EU sanctions compliance, including matters involving complex ownership structures, fiduciary arrangements, and trust-held assets. In light of these judgments, we can assist trustees, financial institutions, family offices, corporate service providers, asset managers, and counterparties in assessing whether assets may be regarded as belonging to, owned, held, or controlled by a designated person.