On 12 March 2026, within the framework of the preliminary ruling procedure, the highest EU Court issued a succinct judgement stating that the owner of the blocked securities (DRs in the present case) shall not be permitted to exercise either voting rights arising under such DRs, or even be permitted to attend the meeting where the voting occurs.
By way of summary, the dispute related to what was originally Sberbank’s financing of one of the Croatian retailers and food producers which was not able to repay its loans and went into a corporate reorganisation. Sberbank’s affiliate was one of its major creditors and, a result of this reorganisation, it became the holder of 41.82% of voting DRs issued by a holding company of the retailer and held by a Dutch trustee on behalf of DR-holders. Sberbank is subject to EU blocking sanctions (which equally apply to its affiliates).
The proposed resolutions put for vote related to the amendments of the trustee’s management charter and articles and were aimed to change the quorum and majority thresholds applicable to voting. Sberbank’s affiliate (holder of DRs) wanted to vote on such resolutions. It was denied voting and meeting attendance rights by the trustee and the matter went all the way through the Dutch Courts to the ECJ for its preliminary ruling whether this denial of rights was justified.
We discussed the legal background to this matter in our earlier post, where we analysed the opinion of the Advocate General.
Regrettably, the ECJ decided to reconfirm this opinion and prohibit voting with respect to all matters with no distinction made as to the purpose for which voting rights were exercised or the effect which they might have on the blocked securities.
Further, the ECJ took no consideration of the abuse which might occur with respect to a blocked shareholder (which now is never permitted to vote) from its fellow shareholders, for example, in case of a corporate conflict, or proposed the workable venue to prevent such an abuse in the absence of voting rights.
For some reason and with no explanation why this was necessary, the ECJ decided to prohibit not only the exercise of voting rights, but also of the right to attend the meetings where corporate decisions are made (a position which, quite likely, will be extended to prohibit the blocked shareholder to receive information on the matters put for voting). This further increases the likelihood of abuse of the shareholder which securities are blocked in case of a corporate conflict.
We discussed earlier the legal and practical reasons why this approach is unfortunate and a more reasonable approach which is based on the substance of corporate decisions proposed for voting when voting is prohibited only if the decision affects the nature of the security itself (e.g., redomiciliation of the company or conversion of securities). For the avoidance of doubt, arguably, such voting should be prohibited for all shareholders, because dealing with blocked asset is prohibited in the EU for any person and not just the blocked person itself.
It is also regrettable to read how little analysis was put by the Court to issue a judgement which will result in fundamental limitations of property rights and quite substantial opportunities to “extract” value from the blocked shareholder in case of corporate conflicts, something which, presumably, cannot advance any objective set by a public authority in its sanctions’ program.
The key legal argument of the ECJ, in essence, came down to a point that any exercise of voting rights affects the corporate matters of a company (which securities are being voted) which then back affects the value of the blocked securities (see paragraph 46). The Court found unacceptable that the estimate value of the blocked securities may change as a result of this process. Yet, even if the blocked shareholder does not exercise its voting rights, the value of its blocked securities may also change (and, probably, even more radically, although more likely down-wards) as a result of non-blocked shareholders voting their shares and, by doing so, for example, extracting value from the blocked shareholder.
Another argument which is repeatedly made by the Court to justify its as restrictive as possible approach to interpreting sanctions’ laws is the need to serve a wider objective of inflicting negative consequences on sanctioned countries (see paragraph 51). Yet, this is a political and not a legal objective, something which the Council and the Commission (and not the Court) shall pursue. The ECJ’s function is limited to interpreting laws and, given that sanctions’ breach is a criminal offence, the normal way to interpret the laws which carry a criminal penalty is to interpret them restrictively and not as broad as possible.
On a more general level, the judgement, certainly, results in a strong argument that the EU sanctions’ regime with respect to blocked securities results in their expropriation. This will give rise to multiple investor arbitrations, as is quite likely to occur in this case after this judgement.