Background
Before Yemen’s current conflict, its Ministry of Oil and Minerals and the state-owned Yemen Oil & Gas Corporation entered into oil and gas exploitation and production-sharing agreements with DNO Yemen AS and other companies. After the companies withdrew from the agreements in 2015, the Ministry and YOGC commenced International Chamber of Commerce arbitration. A Paris award issued in 2019 ordered DNO, Petrolin Trading, and Moe Oil & Gas Yemen to pay damages to the Ministry and YOGC.
The companies sought annulment in France, arguing that enforcement could indirectly make funds available to Houthi-linked persons listed under Regulation (EU) No 1352/2014. The Paris Court of Appeal rejected that challenge, finding insufficient evidence that the Ministry or YOGC acted for, under the control of, or on the instructions of listed persons. On appeal, the French Court of Cassation asked the CJEU how the regulation applies when sanctioned persons claim influence over a public entity also claimed by Yemen’s internationally recognised government, and what degree of risk and proof is required.
Meanwhile, Norwegian courts enforced the award against DNO. In December 2023, DNO paid the net amount due solely to the Ministry after YOGC assigned its award rights to the Ministry and agreed not to claim sums already paid.
The Court’s Holding
The CJEU held that paying funds to an unlisted public entity to enforce an arbitration award may amount to indirectly making funds available to listed persons even if those persons do not control or direct the entity. The prohibition can apply where they claim such authority and are actually capable of obtaining the funds. Recognition and enforcement of an arbitral award falls within the broad concept of making funds available when it enables sanctioned persons to obtain power to dispose of the money.
A merely hypothetical possibility of diversion is insufficient. Objective material evidence must show a sufficiently significant probability that listed persons will benefit from all or part of the funds, assessed in light of every relevant circumstance, including measures capable of preventing them from obtaining the money. Listed persons are not presumed to control a public entity merely because they claim control over it.
The national court must assess whether a sufficiently specific, precise, and consistent set of indicia demonstrates the relevant risk. The party alleging a sanctions violation bears the initial burden, although the beneficiaries may be required to answer prima facie evidence by showing effective safeguards. The legitimate Yemeni government’s non-cooperation with the Houthis is relevant but does not by itself eliminate the risk; the government and public entity must identify concrete measures actually capable of preventing diversion.
Key Takeaways
- Payment to an unlisted entity can violate EU sanctions if listed persons are actually positioned to obtain the funds, even without formal control or authority over the recipient.
- No general presumption of control arises merely because sanctioned actors claim authority over a public entity.
- The risk of sanctioned persons benefiting must rest on objective evidence and be sufficiently significant, not merely hypothetical; effective anti-diversion safeguards form part of that assessment.
Why It Matters
The judgment gives courts and businesses a fact-sensitive framework for assessing arbitral awards and other payments involving entities operating amid competing governmental structures. Formal ownership and control are not decisive: practical access to funds can trigger the prohibition against indirect availability.
At the same time, the ruling limits overbroad sanctions enforcement. Payments benefiting an unlisted public entity—and indirectly a legitimate government—cannot be blocked on speculation alone. Courts must examine concrete evidence, the likelihood of diversion, and the effectiveness of safeguards while ensuring that EU sanctions remain fully effective.