A company operating across multiple jurisdictions receives notice that its parent entity has been added to the EU sanctions list. Within days, accounts are frozen, trading relationships collapse, and in-house counsel is fielding calls from counterparties who have suspended contracts. The question is immediate: can the designation be challenged, and on what grounds?
An annulment action before the EU General Court is the primary judicial route to challenge a Council designation under EU sanctions law. The applicant must demonstrate a ground for annulment – most commonly, manifest error of assessment, insufficient statement of reasons, or breach of fundamental rights. The procedural clock starts the moment the designation is published in the Official Journal, and the window is short.
This case comment draws on the lessons that cross-border businesses and their counsel take from EU General Court proceedings – how matters unfold, where applications succeed or fail, and what a compliance team should do the moment a listing appears. We also compare the EU route with the parallel options under UK and US regimes, because designation across multiple regimes at once is the pattern we see most often in practice.
The situation: a designation across two regimes simultaneously
In a recent matter, a trading group active in the commodities sector discovered that its ultimate beneficial owner had been designated under the relevant EU thematic sanctions regulations at the same time as a parallel designation was made under the UK regime administered by OFSI (the Office of Financial Sanctions Implementation). The group's operating subsidiaries – none of them named on the list – immediately found their banking relationships suspended. Counterparties invoked sanctions clauses in supply contracts and refused further performance.
The legal question was whether the subsidiaries were themselves subject to the asset freeze, and whether the Council's designation of the parent could be challenged in time to restore normal operations. In our experience, this dual-designation pattern is now the default for listings touching entities with any EU or UK footprint. A single-regime analysis at the outset is rarely sufficient.
The subsidiaries' position turned on the EU ownership and control test – the principle that an entity may be caught by the freeze even if it is not itself listed, where a designated person owns or controls it. Under EU Council regulations, the test looks beyond registered ownership to effective control, including through informal arrangements. That is a broader enquiry than the mechanical OFAC 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked), and it created immediate uncertainty about which subsidiaries were operationally free to act.
What went wrong: the evidence gap and the timing failure
The single most consequential failure in EU General Court annulment matters is not a weak legal argument – it is an inadequate evidence package assembled too late. In this matter, internal records capable of rebutting the Council's stated reasons for the designation had not been preserved in a form accessible to external counsel. By the time litigation was contemplated, some documents were held by entities in jurisdictions where data requests were complicated, and the window for filing was already narrowing.
EU General Court proceedings operate on defined timelines. The application must be lodged within a short statutory period from the date of publication or notification of the contested measure. Extensions are not freely granted. What does this mean in practice? It means that a business discovering a designation on a Monday cannot spend three weeks assembling a fact-finding team before it instructs litigation counsel. The parallel internal investigation and the legal proceedings must run concurrently from day one.
A secondary failure in this matter involved the statement of reasons. The Council is required to give reasons for a designation – reasons that are specific and individually tailored to the designated person, not generic recitals. In the initial challenge, the applicant focused on disputing the underlying facts without first testing whether the reasons given were legally sufficient on their face. That sequencing cost time. In our cross-border practice, we advise clients to run both analyses simultaneously: is the statement of reasons legally adequate? And if it is adequate, is the factual basis it asserts correct?
How the EU General Court annulment procedure works
An annulment action before the EU General Court proceeds under the Court's Rules of Procedure, which govern pleadings, timelines, and the standard of review. The Court applies an intensity of review calibrated to the subject matter: in the context of restrictive measures, it examines whether the Council committed a manifest error of assessment of the facts, violated fundamental rights (including the right to an effective remedy and the principle of proportionality), or failed to state adequate reasons.
The Council is required to produce the evidence that supported its designation decision. Where that evidence is classified or sensitive, the Court has procedures for handling it in a way that respects both confidentiality and the applicant's rights of defence. This is an important practical point: the applicant does not need to know the Council's full file before it files – but it needs to have a compelling initial pleading that identifies the grounds of challenge with precision.
Grounds most frequently argued before the EU General Court include:
- Manifest error of assessment – the Council misidentified the designated person, relied on factually incorrect information, or drew an inference from the facts that no reasonable authority could draw.
- Inadequate statement of reasons – the designation notice did not articulate specific, individual reasons linking the designated person to the criteria used.
- Breach of proportionality – the measure was not necessary and appropriate to achieve the legitimate aim pursued.
- Breach of the right to be heard – the designated person was not given an opportunity to make representations before listing, in circumstances where such an opportunity was required.
Interim measures – suspension of the designation pending final judgment – are also available but are granted only where urgency and a prima facie case are both established. We have acted in both full annulment proceedings and applications for interim relief, and the latter require a particularly swift and focused pleading on the irreparable harm the applicant would suffer absent suspension.
Cross-regime comparison: EU, UK, and US annulment or delisting routes
A business designated simultaneously by the EU Council, OFSI, and OFAC faces three distinct challenge routes, each with its own procedure, its own standard of review, and its own practical timeline. Getting this right requires a coordinated approach across all three, not three separate instructions to three separate advisers operating in silos.
Under OFSI and the UK regime, a designated person may apply for revocation or variation of the designation through an administrative route, and may also apply for judicial review in the High Court on public-law grounds. The administrative route requires the applicant to submit representations and evidence to the Secretary of State. Judicial review follows if the administrative process fails. The UK ownership and control test under the relevant thematic sanctions regulations differs from the EU test in some respects, particularly in how control through non-ownership means is assessed.
Under OFAC, the mechanism is the petition for reconsideration or for removal from the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) through an administrative process. There is no equivalent of the EU General Court's direct judicial review of the underlying listing decision by an independent court with full access to the Council's file. The OFAC petition process is an executive-branch mechanism, and the standard of review in subsequent US federal-court proceedings is generally deferential.
What does this divergence mean for a multi-designated client? It means that the strongest judicial lever is often in the EU – where an independent court with robust review powers can examine and annul the Council's decision. That does not mean the EU route is easy or swift. But for a designated person with substantial EU-nexus assets or business relationships, an EU General Court annulment is frequently the most potent tool available, and success there can create political and practical pressure on co-designating jurisdictions to reconsider.
Have you mapped all three regimes against your client's asset profile and business relationships before deciding where to focus the primary litigation effort?
The route taken and the risk flags encountered
In this matter, the primary litigation effort was directed to the EU General Court, while parallel administrative representations were submitted to OFSI. The OFAC position was monitored but no immediate challenge was filed, on the basis that the client's US-nexus assets and relationships were limited and the administrative process would not yield results quickly.
Several risk flags materialised during the proceedings that are instructive for similar businesses:
Risk flag one: subsidiaries not individually designated but operationally frozen. Even though the subsidiaries were not on the list, their banks had suspended accounts on the basis of a broad reading of the ownership and control provision. Getting legal clarity – and communicating it credibly to the counterparties and banks – required a formal legal opinion on the subsidiaries' status under EU law, not merely an internal compliance assessment. That opinion needed to be prepared quickly and updated as the litigation developed.
Risk flag two: procedural deadlines running simultaneously in two jurisdictions. The EU filing deadline and the OFSI representations deadline fell within weeks of each other. Coordinating across two sets of pleadings with overlapping factual records requires a single case management structure. Instructing separate teams with no common oversight is a material risk in multi-regime matters.
Risk flag three: the humanitarian and operational carve-out question. EU sanctions regulations typically include provisions authorising certain transactions even where a listed person is involved – for example, payments for basic needs or to meet legal obligations. Whether those provisions applied to the subsidiaries' situation required a careful reading of the applicable regime, and the answer was not self-evident.
What the matter revealed: lessons for counsel and compliance teams
The core lesson is one that applies across every annulment matter we handle: the evidence package is the case. A legally impeccable pleading built on an incomplete or poorly organised factual record will not succeed. And the factual record must be assembled before the deadline, not during the proceedings.
This has a direct implication for how compliance teams should prepare – not when a designation has already occurred, but now, as a matter of standard practice. Ownership charts should be current and accessible. Records of commercial relationships, financial flows, and governance decisions should be retained and indexed. If a designation arrives, the internal record is the raw material of the external challenge.
The second lesson concerns sequencing. In most EU General Court proceedings, applicants face a choice between pursuing interim measures quickly and investing that time in a stronger main application. The choice depends on the degree of operational harm being caused by the designation. Where the harm is existential – accounts frozen, contracts suspended, supply chains broken – an application for interim measures may be the priority even at the cost of a less polished initial pleading on the main application. In our practice, we advise clients on this sequencing decision at the first meeting.
The third lesson is the value of a coordinated multi-regime approach. In this matter, the parallel OFSI representations, while not the primary effort, produced a useful dialogue with that authority that informed the factual narrative being developed for the EU proceedings. Cross-regime work is not additive overhead – it is strategic intelligence gathering.
A common myth among businesses facing a first designation is that the Council's decision is effectively unreviewable – that the process is too slow, too opaque, or too tilted toward the designating authority to be worth pursuing. That is not the experience of practitioners who have taken EU General Court proceedings. The Court does annul designations. It examines evidence. It holds the Council to the standards the Treaties require. The proceedings take time, but an interim-measures application can provide faster relief. The threshold question is not whether to challenge, but how and with what evidence.
Related practices
- Delisting evidence packages – building the factual record for designation challenges across regimes.
- Further EU General Court case comment – additional practitioner analysis of EU annulment proceedings.
- Judicial review of designations: cross-border matter – comparative analysis of UK and EU judicial challenge routes.