Conservatory measures despite the freezing of assets under EU sanctions?

On 11 November 2021, the CJEU (C-340/20) ruled that the freezing of assets and economic resources under the EU restrictive measures (economic sanctions) precludes protective measures by creditors. Therefore, creditors should proactively seek protective measures or rely on a sanctions regime’s exception.  

Restrictive measures

EU sanctions traditionally prescribe the freezing of assets and economic resources of specifically targeted persons and entities. They aim to prevent the sanction target’s use of funds or economic resources.

Such measures have been implemented towards different states. While the CJEU’s recent ruling relates to Iran, the guidance arising may apply more broadly.

Creditors’ position

The restrictive measures affect creditors (enforcing against a sanction target) whose claims may be unrelated to the justification for the sanctions. Such a claim may predate the sanctions.

The case of Bank Sepah’s creditors

Bank Sepah was a target of the restrictive measures against Iran. Part of its debt was possibly time-barred for lack of enforcement measures during the period when the restrictive measures were in place. The French Cour de Cassation referred the following question to the CJEU: did the restrictive measures under Regulation (EC) 423/2007 preclude the creditors from implementing conservatory measures, even if the grounds for the claim were unrelated to Iran’s nuclear and ballistic programme and predated the relevant sanctions regime?

Under French law, a conservatory attachment has no earmarking effect (“effet attributif”), implying that (i) the funds would remain in the bank’s estate and (ii) that the creditor’s claim must be settled on a priority basis out of the proceeds of the enforcement.

The CJEU’s decision

The freeze under the Regulation precludes creditor’s conservatory measures. In Case C-34/20 (Bank Sepah) the CJEU has favoured a broad interpretation of the restrictive measures.

The wording

The Regulation defines the “freezing of funds” as, “preventing any moving, transfer, alteration, use of access to, or dealing with funds in any way that would result in any change in their […] destination or other change that would enable the funds to be used […]”. The “freezing of economic resources” is defined as “preventing the use of economic resources to obtain funds, goods or services in any way, including but not limited to by selling, hiring or mortgaging them”.

The CJEU has held that conservatory measures establishing “a right to be paid on a priority basis over other creditors in favour of the creditor concerned” have “the effect of changing the destination of frozen funds and are liable to permit the use of frozen economic resources”. The fact that the creditor’s measures do not remove the assets from the debtor’s estate does not alter this situation.

The objectives

The freezing measures aim to prevent the assets from being used for nuclear proliferation in Iran. Any circumvention of the sanctions and exploitation of their weaknesses should be prevented. It is therefore precluded to “establish a right to be paid on a priority basis in favour of the creditor concerned in relation to other creditors, even if such measures do not have the effect of removing assets from the debtor’s estate”.

The irrelevance of the grounds of the creditor’s claim

The fact that the grounds for the claim are unrelated to Iran’s nuclear and ballistic programme is irrelevant. The creditor’s measures should be assessed solely in terms of their legal effects. The objectives pursued justify (substantial) negative consequences for creditors.

Some considerations

  • The CJEU has not elaborated on the general nature of conservatory measures. It has focused on the French measures establishing a priority right in favour of one creditor and seen that as a change in the destination of the frozen funds. Under Belgian law, an attachment does not create privilege or priority. It merely freezes the asset. This may be a ground to distinguish future cases.
  • The CJEU has not distinguished between the funds’ unavailability and immunity from (conservatory) attachment. As long as the funds remain unavailable and their release subject to prior administrative authorization, then the Regulation’s purposes are complied with. Granting immunity to the sanction target seems excessive.
  • As long as sanctions are in place, creditors cannot interrupt prescription by attaching assets. Sanction targets’ debts might become time-barred…
  • The CJEU has stated that substantial negative consequences for creditors are justified. However, in the light of article 6 of the European Convention on Human Rights and/or article 1 of the 1st protocol thereto, creditors would be interested in understanding how exactly this private burden is proportionate to the public policy objective pursued.


  • Given the broad reading of the sanctions, creditors must be diligent.
  • They should proceed to pre-judgment/award measures as soon as possible, i.e. before any sanctions regime is installed. Funds subject to a judicial, administrative or arbitral lien before the entry into force of the restrictions may be exempted.
  • Every sanctions regime provides for a number of exceptions. Creditors should carefully review whether any exceptions apply in their particular case.
  • Creditors should systematically follow-up on changes to restrictive measures. Changes can open new perspectives for recovery.
  • Upon abrogation: be the first to take action.