Background
NKO AO National Settlement Depository (NSD) is Russia’s central securities depository — the country’s only such institution with direct links to the international financial system and the largest by market value of assets held in custody. It operates as a licensed non-bank credit institution and is almost wholly owned by Moscow Exchange, which is itself subject to a high degree of Russian government control. Following Russia’s full-scale invasion of Ukraine on 24 February 2022, the EU expanded its restrictive-measures framework to cover entities “supporting, materially or financially” the Government of the Russian Federation (the “(f) criterion” under Article 2(1)(f) of Decision 2014/145/CFSP and Article 3(1)(f) of Regulation (EU) No 269/2014).
On 3 June 2022, the Council listed NSD on its Ukraine-sanctions registers, citing NSD’s systemic importance to Russia’s financial infrastructure, its role enabling the Russian government’s “activities, policies and resources,” and its state-adjacent ownership chain through Moscow Exchange. The listing was maintained twice — in March and September 2023. NSD challenged all three sets of acts before the General Court, arguing insufficient statement of reasons, manifest error of assessment, disproportionate restriction of its property rights, and failure to meet the requisite standard of proof. The General Court dismissed the action in full on 11 September 2024 (T‑494/22). NSD then appealed to the Court of Justice.
On appeal, NSD raised three grounds: (1) that the Council’s statement of reasons was inadequate because it identified no specific transactions or concrete acts of support; (2) that the General Court misinterpreted the (f) criterion by reading “supporting, materially or financially” too broadly, when — NSD argued — the criterion covers only entities that directly transfer funds or goods to the Russian government, not mere infrastructure facilitators; and (3) that the asset freeze was disproportionate and failed to account for the economic harm suffered by NSD’s European-depositor customers.
The Court’s Holding
The Court of Justice dismissed the appeal in its entirety. On the statement-of-reasons ground, the Court confirmed that the Council’s recitals — identifying NSD as Russia’s systemically important central securities depository, its exclusive access to the international financial system, its ownership by state-adjacent Moscow Exchange, and its role in enabling the Russian government’s activities — were sufficiently clear and precise. The Court reiterated that the duty to state reasons is a procedural requirement distinct from substantive correctness: the absence of references to specific transactions does not render the statement of reasons deficient where, as here, the addressee could not reasonably have been unaware of the context and the basis for the listing.
On the interpretation of the (f) criterion, the Court rejected NSD’s argument that “supporting, materially or financially” requires a direct transfer of funds or goods to the Russian government. Applying standard methods of EU statutory interpretation, the Court held that the ordinary meaning of “support” — providing aid or assistance to reinforce or facilitate another’s action — is broad. The criterion’s text imposes no requirement that support be direct, and drawing a distinction between entities that “finance” the government and those that merely “facilitate” such financing would undermine the criterion’s scope and effectiveness and permit easy circumvention through structural layering. The Court also rejected the analogy to “financial assistance” under Article 4(3)(b) of Regulation No 833/2014, finding that concept operates in a materially different context.
On proportionality, the Court upheld the General Court’s assessment that the gravity of Russia’s continuing military aggression against Ukraine, combined with NSD’s central and systemic role in Russia’s financial infrastructure, justified the asset freeze notwithstanding the consequential harm to NSD’s own customers. The Council was not required to weigh the economic interests of third-party clients when deciding whether to maintain NSD’s listing; the overriding public interest in applying pressure on the Russian government outweighed any such collateral effects.
Key Takeaways
- The (f) criterion — “supporting, materially or financially, the Government of the Russian Federation” — is to be interpreted broadly: it encompasses entities whose systemic role in Russia’s financial infrastructure enables or facilitates government activity, and does not require proof of direct fund transfers or specific transactions.
- A Council sanctions listing is adequately reasoned when it identifies the listed entity’s systemic importance, its functional role enabling the sanctioned government, and its ownership or control structure, even without citing individual transactions or specifying the precise timing or mechanism of support.
- The proportionality analysis for Ukraine-related asset freezes does not require the Council to weigh the economic interests of third-country customers of a listed entity; the public interest in countering ongoing military aggression is sufficient justification for far-reaching financial restrictions on systemically important Russian institutions.
- The concept of “financial assistance” under Regulation No 833/2014 is sector-specific and cannot be imported by analogy to define the scope of individual-listing criteria under Decision 2014/145/CFSP and Regulation No 269/2014.
Why It Matters
This ruling is significant for the architecture of EU individual sanctions targeting Russia’s financial sector. By endorsing a broad reading of the “material or financial support” criterion, the Court has confirmed that the Council may list entities whose value to the Russian government lies in infrastructure and market access — not merely in direct fiscal transfers — without needing to document specific supportive acts. That interpretation materially widens the pool of financial intermediaries, clearing houses, and state-adjacent market operators potentially subject to EU asset freezes.
For the international legal and financial community, the judgment also signals that the collateral economic harm suffered by European counterparties of listed Russian institutions will not, standing alone, compel the Council to delist or carve out exemptions. Practitioners advising clients with frozen assets in NSD or with contractual exposure to Russian market infrastructure should note that the General Court’s judgment — and now the CJEU’s dismissal of the appeal — forecloses proportionality challenges premised on third-party customer hardship, reinforcing the durability of these listings for as long as the Council deems its Ukraine-policy objectives unmet.