I. Introduction:

On 27 November 2024, the French Supreme Court referred questions for a preliminary ruling to the Court of Justice of the European Union (CJEU) requesting its opinion on whether the payment of damages ordered by an arbitral award to non-designated entities could result in indirectly making available funds or economic resources to designated persons when the designated person could exercise influence within the non-designated entity.

II. Background:

In 2014, several companies decided to terminate their oil and gas exploration and production sharing agreements with the Ministry of Oil and Minerals of the Republic of Yemen and Yemen Oil & Gas Corporation (YOGC). In 2015, the Ministry of Oil and Minerals and YOGC started arbitration proceedings before the International Chamber of Commerce, which concluded in damages to be paid by the companies to the Ministry of Oil and Minerals and YOGC. The companies initiated an action for annulment of the award before the Court of appeal of Paris.

The judges applied EU Regulation No. 1352/2014 regarding restrictive measures concerning the situation in Yemen and explained that Article 2(2) provides that no funds or economic resources shall be made available directly or indirectly to designated persons. The Court then checked whether the execution or recognition of the award would breach this rule by performing a test based on the elements available on the day of the ruling and with sufficient, reliable and consistent evidence. The Court of appeal searched whether the Ministry of Oil and Minerals and YOGC were acting on behalf, under the control or instructions of designated persons and had the intention to exploit the funds obtained through the award to the benefit of designated persons. The Court ruled that none of the produced elements demonstrated that neither the Ministry of Oils and Minerals, the true representative of the Yemenite government recognized by the international community, nor YOGC were acting under the instruction of, or controlled by designated persons such as the armed group Houthist. Therefore, the award was upheld by the Court of appeal.

III. The Supreme Court’s decision:

The companies decided to go to the French Supreme Court to challenge the Court of appeal’s decision. In its judgment of 27 November 2024, the French Supreme Court recalls Article 2.2 of EU Regulation No. 13/2014 on the prohibition to make funds available to designated entities. It stresses that the Guidelines on implementation and evaluation of restrictive measures (sanctions) in the framework of the EU Common Foreign and Security Policy in its last version of 4 May 2018 defines the criteria to assess whether an entity is controlled by another one and to consider whether the making available of the funds results in indirect availability to the designated person.

Quoting CJEU case law, the Supreme Court reminds that “making available” must be broadly understood and that a payment can result in making funds indirectly available when there is legal or financial links between the beneficiary of the funds and the designated persons. Following developments, the French Supreme Court refers questions for a preliminary ruling to the CJEU as it wants to know, before ruling on the decision of the Court of appeal of Paris, whether the payment of the damages of the arbitral award to the Ministry of Oils and Minerals and YOGC, which are not designated persons and related to the legitimate Government of Yemen, would indirectly result in making funds available to designated persons, i.e. Houthist leaders which potentially have an influence within those non designated entities. Thus, the French Supreme requests to the CJEU more details as to the criteria of indirectly making available funds to designated persons as follows:

• Where there is an established influence in a non-designated entity exercised by a designated entity which competes with the non-designated legitimate government, does making funds available to this non-designated entity result in making funds indirectly available to the designated person according to Article 2(2) of EU Regulation No. 1352/2014?
• In case the influence is established, should one presume that the non-designated entity is controlled by the designated person according to Article 2(2) of EU Regulation No. 1352/2014? And, if so, is it a rebuttable presumption, for which the non-cooperation of the legitimate government with the designated person is relevant?
• When it is impossible to determine before the Member State court whether there is a decisive influence or not by the designated entity within the legitimate government does the mere reasonable risk that the designated entity may benefit from funds justify applying restrictive measures?

IV. Implications for future proceedings:

The implications of this referral for future proceedings will depend on the ruling of the CJEU. Should the CJEU provide affirmative answers to the questions referred by the French Supreme Court, it would endorse a particularly broad approach of the concept of indirect availability of funds. Indeed, applying this principle, any provision of funds or economic resources to a non-designated person, could be prohibited where a designated person is found to exercise influence over that entity. This could even be strengthened by a presumption of control when the influence is established. Such interpretations could have serious consequences for non-designated entities, that are already suffering from the influence of designated persons, potentially depriving them of resources. This would also increase compliance obligations for institutions that are required to conduct due diligence before making funds available.

It must be emphasized that preliminary rulings from the CJEU are binding for both the referring court and the courts and tribunals of all the Member States. Therefore, the rulings from the CJEU will not only apply to the present case but to any future case within the jurisdiction of the European Union.[1]