On 28 March 2017, the Court of Justice of the European Union (CJEU) delivered its judgment1 in a case referred by the UK High Court in which Rosneft has challenged the validity of the EU's sanctions targeting Russia, as well as related UK implementing measures.2 The focus of Rosneft's challenge were certain restrictions on access to the EU's capital market, and on the provision of financial assistance related to the supply of specified key equipment for the Russian oil sector.

After confirming the validity of the EU Russia sanctions, and the possibility for the UK to impose criminal penalties for alleged violations, the CJEU clarified two important questions concerning the scope of the EU Russia sanctions. Specifically, the CJEU made an important clarification of the term "financial assistance" in Article 4(3)(b) of Regulation 833/2014, which may trigger the prior authorisation requirement if related to the sale, supply, transfer or export of specified equipment for the Russian oil sector.

The UK authorities and the European Commission have both in their respective guidance on the Russia sanctions interpreted the term broadly to include payment services. The CJEU rejected this view. Instead, the Court held that financial assistance in this case “does not include the processing of a payment, as such, by a bank or other financial institution". This holding was in line with arguments made by both Rosneft and the intervening German government that the mere processing of third party payments is different from providing active and substantive support. The CJEU considered the underlying purpose of the provision, and concluded that the law only intends to restrict financial assistance comparable to loans, credits or export credit insurance, and not intermediary payment services as these do not touch a bank's own funds. The Court noted that if the EU had wanted to restrict fund transfers, it would have used a different term.

The CJEU also clarified the scope of the EU's capital market sanctions related to certain "transferable securities" issued by certain listed parties (including Rosneft). It ruled that the issue of Global Depositary Receipts (GDRs) post-12 September 2014 (i.e. after the sanctions were imposed) pursuant to a depositary agreement with a listed party is prohibited, even where those GDRs represent shares issued by the listed party before that date.