Central Bank Sues EU in Luxembourg over Frozen Assets

On 3 March 2026 the Central Bank of Russia announced that it had initiated proceedings before the General Court of the European Union challenging the EU’s decision to indefinitely immobilize approximately EUR 210 billion in Russian sovereign assets held in the EU.

1. Background: The EU’s Indefinite Asset Freeze

In December 2025, the EU adopted a regulation that effectively froze Russian Central Bank assets located within the Union indefinitely. These measures apply to roughly €210 billion in sovereign reserves held across EU financial institutions, the majority of which are deposited with the Brussels-based securities depository Euroclear.

Council Regulation (EU) 2025/2600 was adopted in order to prevent Russia-friendly Slovakia and Hungary from vetoing new sanction packages. This power is usually used by these states to negotiate better deals for themselves, such as an exemption from participation in a loan deal to Ukraine or to obtain approvals from the EU to finance their own national projects.

2. Reasons behind the decision to circumvent the standard mechanism to adopt restrictive measures against third countries

While the EU maintains that the measure is lawful and necessary, it follows from the press release of the Russian Central Bank that it argues that the decision violates several principles of EU and international law, including sovereign immunity, property rights and access to justice.

The Bank’s core argument is that the EU adopted the measure using a special economic emergency procedure (Article 122(1)) rather than Article 215 of the Treaty on the Functioning of the European Union (TFEU), which provides the primary legal basis for the EU sanctions framework typically used for unilateral restrictive measures against third countries.

3. Shooting from all judicial cannons

In parallel, the Russian Central Bank filed a claim against Euroclear with the Moscow Arbitrazh Court to recover roughly EUR 200 billion (RUB 18,2 trillion). However, the proceedings are confidential and all of the hearings are being conducted behind closed doors.

4. Why Russia May Argue that the EU breached the rule of procedure

To date it has used Article 122 only in situations where there was an urgent need to address a crisis, usually of an economic nature:

• Council Regulation (EU) 2022/1369: adopted on the basis on Article 122 (1) TFEU in 2022 aimed to address severe supply disruptions caused by the geopolitical crisis involving Russia, and requiring EU states to reduce gas demand by 15 percent;
• Council Regulation (EU) 2022/1854: referred to Article 122 TFEU to introduce revenue caps on electricity producers, solidarity contributions from fossil fuel companies and emergency redistribution of energy profits. All of these measures were designed to mitigate the economic effects of sanctions against Russia and Russia’s reduction of gas supplies;
• Council Regulation (EU) No 407/2010: adopted on the basis of Article 122(2) TFEU in order to provide emergency financial assistance to EU Member States facing severe economic difficulties;
• Council Regulation (EU) 2020/672: adopted to provide financial support for employment protection schemes in Member States.

It is therefore clear that Article 122 is not used to create sanctions regimes, but rather that it functions as a crisis-management clause allowing exceptional economic action, whilst Article 215 of the TFEU was specifically designed to adopt restrictive measures against third countries, to freezes asset and impose trade embargoes.

For this reason, the process to adopt the measure based will differ significantly and will depend on which article is to be applied, since Article 122 of the TFEU is designed to enable the Council to adopt measures following a proposal from the European Commission’s without the involvement of the European Parliament in the decision-making process. The proposal must be justified by showing that the situation fits one of the two scenarios in Article 122: either severe difficulties in the supply of certain products (notably energy) or a Member State facing serious economic difficulties caused by exceptional events. The key feature is that a qualified majority of votes is sufficient to adopt a measure and that such a measure is usually adopted as a Council regulation with immediate effect. Therefore, in the European Parliament’s own words, such procedures are deemed “non-legislative”.

Meanwhile, the standard legal basis for sanctions against third countries is Article 215 of the TFEU, following a Common Foreign and Security Policy (“CFSP”) decision under Article 29 of the Treaty on the European Union (TEU). It can be put forward either by the High Representative for Foreign Affairs or a Member State. Under Articles 24 and 31 of the TEU, the CFSP is governed by unanimity, and as a result a veto exercised by a Member State when voting in the Council may block the adoption of the decision, as has happened in the course of the Russia-Ukraine conflict, as described above.

5. Other proceedings triggered by the EU’s sanctions package

In October 2025, Russian investors began challenging provisions contained in the EU’s 18th package of sanctions which restrict access to investment arbitration. The lawsuits were filed in September, although extracts from the claims became public only in November.

Under the regulatory framework introduced by the package, recognition and enforcement of investment arbitration awards that would violate EU sanctions regulations (Nos. 269 and 833) are deemed contrary to EU public policy. As a result, EU Member States may refuse to recognise or enforce such arbitral awards and must oppose the continuation of those proceedings.

Additionally, Articles 11e and 11f of Regulation No. 833/2014 allow EU Member States to recover damages and legal costs from parties initiating investment arbitration related to EU sanctions. These claims may be brought not only against the claimants themselves but also against companies involved in the arbitration process, entities attempting to enforce the award, and even controlling shareholders.

Four individuals are currently challenging these provisions before the General Court:

Vladimir Ber (Case T-640/25)

Vladimir Shelkov (Case T-655/25)

Ekaterina Zhukova (Case T-698/25)

Konstantin Vakorin (Case T-699/25)

The applicants argue that the measures violate several international obligations, including:

• The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
• The 1965 Washington Convention (which Russia signed as early as 1992 but never ratified)
• The principle of pacta sunt servanda under the Vienna Convention on the Law of Treaties.

They also claim that the EU regulations conflict with EU law and human rights guarantees, including the right to effective judicial protection and the protection of private property under the EU Charter of Fundamental Rights and the European Convention on Human Rights.

The claimants aim to annul elements of the 18th sanctions package that allegedly contradict bilateral investment treaties and arbitration agreements concluded by EU Member States. At the same time, there is no publicly available information which would suggest that the said claimants are foreign investors and are “directly concerned” by the regulation as required under Article 263(4) of the TFEU, which is one of the requirements for the Court to uphold jurisdiction over the claims.

6. Russia’s chances of prevailing in the case before the CJEU

Russia – in the guise of its Central Bank – will not be the first state to try to challenge the legality of the application of sanctions. The first state which tried to do so was Venezuela, even though the major difference between these two cases is that the unilateral restrictive measures against Venezuela were adopted on the basis of Article 215 of the TFEU.

A. Background to the dispute

In 2017, the EU adopted a framework of restrictive measures against Venezuela (Decision and Regulation) in response to concerns regarding human rights violations, the erosion of democratic institutions and the rule of law under the government of Nicolás Maduro.

The measures included:

• An arms embargo and a prohibition on exporting equipment or technology that could be used for internal repression;
• Restrictions on the sale of surveillance technology;
• Asset freezes and travel bans on certain Venezuelan officials accused of involvement in repression or undermining democracy.

B. Venezuela’s legal battle

In 2018, in response to that Regulation, Venezuela brought an action before the General Court of the European Union seeking the annulment of several provisions of the EU regulation imposing sanctions.

Venezuela advanced several arguments:

• Lack of Legal Basis / Misuse of Power: Venezuela argued that the EU lacked authority to adopt unilateral sanctions affecting a third state in this manner.
• Violation of International Law: The country contended that the sanctions constituted unlawful countermeasures under customary international law and breached principles such as non-intervention and sovereignty.
• Violation of Procedural Rights: Venezuela alleged that the EU had failed to provide sufficient reasoning or to allow the state to present its views before imposing measures.
• Economic and Sovereignty Impact: It argued that the restrictions directly affected Venezuela’s ability to acquire equipment and conduct international trade, thereby harming its sovereign interests.

C. Procedural Developments

Initial Dismissal (2019)

In its initial judgment, the General Court held that Venezuela lacked standing to challenge the sanctions.

The court reasoned that:

• The measures were directed primarily at EU operators, not Venezuela itself.
• Therefore, Venezuela was not “directly concerned” by the regulation as required under Article 263(4) of the TFEU.

As a result, the action was dismissed as inadmissible.

Appeal Before the Court of Justice (2021)

Venezuela appealed to the Court of Justice of the European Union (“CJEU”).

The Court held that:

• A third state (non-EU Member State) qualifies as a “legal person” capable of bringing proceedings before EU courts.
• The EU legal order must allow such challenges in order to guarantee effective judicial protection and the rule of law.

The CJEU therefore overturned the earlier ruling and referred the case back to the General Court to consider the merits.

Judgment on the Merits (2023)

After reconsideration, the General Court dismissed Venezuela’s claims on the merits.

The Court held that the sanctions were restrictive measures of general application, aimed primarily at EU operators rather than directly at the Venezuelan state. It also concluded that the EU institutions had properly justified the sanctions and acted within their powers under EU foreign policy law. The Court rejected Venezuela’s argument that the sanctions were unlawful countermeasures and stated that the measures were autonomous EU foreign-policy actions, not countermeasures under the law of state responsibility. Finally, the Court found that the measures did not violate international law principles such as non-intervention, since they regulated conduct within the jurisdiction of the EU, such as the activities of EU companies.

Consequently, the Court dismissed the action in its entirety and ordered Venezuela to bear the costs of the proceedings on the merits.

Prospects on the Central Bank’s claim

Based on the findings of the Court in the above case, the Court will most likely uphold the jurisdiction in the case being brought by the Central Bank of Russia, but will dismiss the claims on the merits, similar to the way in which it dismissed them in the case brought by Venezuela.

How Gherson can assist

Challenges involving compliance databases sit at the intersection of regulatory law, financial crime frameworks and data protection rights.

Gherson’s Regulatory, White-Collar and Investigations team has extensive experience assisting individuals facing:

• Bank account freezes or closures;
• Compliance-driven restrictions;
• Fraud prevention markers; and
• Adverse database entries.

This may include submitting Data Subject Access Requests, analysing institutional responses and advising on appropriate strategies for correction or challenge.

Where inaccurate compliance information is affecting your financial relationships or reputation, expert legal advice can assist with identifying potential corrective strategies.

If you would like to speak to us in respect of any of the issues raised in this blog or about your specific circumstances, do not hesitate to contact us for advice, send us an e-mail, or alternatively, follow us on X, Facebook, or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice.  Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position.  Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog.  For formal advice on the current law please do not hesitate to contact Gherson.  Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson. 

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