Sanctions: Commission Guidance does not give full certainty
Court of Justice clarifies the notion of “legal advisory services” under EU sanctions law and throws into doubt the Commission’s interpretation.
The Court of Justice of the European Union (CJEU) delivered a ruling on 5 September 2024 on the prohibition against providing legal advisory services to Russian entities, in Case C-109/23 [Jemerak]. The case concerned a Russian company that owned an apartment in Germany and sought to sell the property to two German individuals. Under German law, such sales require a notary to authenticate the transaction. But here the notary refused, arguing that to do so would constitute “legal advisory services” under Art. 5n(2) of Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine, which prohibits providing “legal advisory services” to “legal persons, entities or bodies established in Russia.”
The main issue before the CJEU was whether a notary’s authentication of a sale contract counts as “legal advisory services” banned by the EU regulation. While the regulation itself does not define “legal advisory services,” the European Commission’s interpretive guidance, articulated in its FAQs, suggests that notarial services fall under the ban.
In line with the opinion filed in the case by Advocate General Laila Medina, the CJEU found that a notary does not violate sanctions against Russia by authenticating the sale of a property owned by an unlisted Russian company. The court held that in authenticating such a transaction, a notary does not provide “legal advisory services” but rather performs an independent and impartial function mandated by the state. The CJEU reasoned that in the context of this case, interpreting notarial services as prohibited by the sanctions would de facto jeopardise the objective of the EU sanctions law, which permits unlisted Russian entities to dispose of real property in the EU. The court further clarified that related actions by a notary, such as cancelling property charges, transferring payment, and entering ownership in the land register, fall outside the scope of the legal services ban.
This case is important not just for legal experts, but also for businesses. The CJEU did not directly address the Commission’s FAQ, but the judgment differs from the view expressed there. The Commission’s guidance is clearly marked “non-binding,” but it is often seen as a strong source of legal interpretation, especially when laws are changing quickly and there are few legal precedents. This case makes clear that such guidance does not have final authority.
In this situation, the notary acted cautiously by refusing to provide services that seemed restricted, only to learn that this caution was unnecessary. On the other hand, there could be situations where businesses rely on the Commission’s guidance to carry out transactions they think are allowed, only for the CJEU to later decide otherwise. The ruling does not clarify whether following the Commission’s guidelines counts as due diligence and protects the business from liability for violating sanctions. In our view, although compliance with the Commission’s guidelines does not ensure immunity from liability for sanctions violations, it should be regarded as a key factor in evaluating due diligence and serve as a strong defence against liability. That being said, businesses should combine their compliance efforts with independent legal advice, and work with the authorities when possible to ensure they are fully compliant with sanctions laws.
Łukasz Lasek, adwokat, Anna Olejniczak-Michalska, attorney-at-law, Dispute Resolution & Arbitration practice, Wardyński & Partners
