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The EU sanctions imposed on a Latvian citizen Petr Aven on the 28th of February 2022 have been lifted by a decision of the General Court of the European Union. The Council of the EU has not yet taken a decision on whether to file an appeal in this case, however, according to a representative of P. Aven, the managing partner of Jnis Krkli Law Firm, professor of the Faculty of Law of the University of Latvia, attorney at law Jnis Krkli, the judgment of the Court is crushing.

How is the EU sanctions policy shaped and how effective is this tool in achieving its stated objective not to punish, but rather to get the sanctioned persons to change their policies or behaviour? Do these sanctions work?

The sanctions undoubtedly work on each individual natural person, because natural persons are absolutely restricted in their property transactions. The individual is excluded from economic life altogether. In comparison, just like a person put in prison cannot communicate with the outside world and enjoy physical freedom, a sanctioned person cannot enjoy any economic freedom unless special permits are obtained for certain activities. And so, from the point of view of the individual, sanctions are effective. However, the objective of sanctions is not to harm a particular individual; the objective is politically much broader: to change or influence the behaviour of certain countries, such as Iran, North Korea or Russia.

More than two years have passed since Russia started the war in Ukraine and we see that this objective has not been achieved. I believe that this is because the Western world, which has imposed sanctions, is not actually the whole world; there are enough countries that continue to do business with Russia. Taking into account globalisation and supply chains, Russia is mitigating the negative impact of sanctions by cooperating with countries that have not joined the implementation of the sanctions. Setting aside the moral and reputation damage in this case, we can see that, in purely economic terms, Russia has not been harmed by the sanctions and the sanctions have not affected the course of the war.

The imposition of sanctions at the outset of the war was a political gesture by the West, and it was something that had to be done. It showed that we condemn the war. When a country threatens the values of Western civilisation, the West reacts and declares that we will sanction this country or these particular individuals. However, in my view, the sanctions policy needs to be improved in order to be more effective. Unfortunate as it is, for the time being, Russia is not particularly suffering from sanctions.

Bloomberg reported last year that Russian businesspersons have pulled at least USD 50 billion worth of assets out of Europe under Putins pressure and because of sanctions.

The question is what do we, as the Western civilisation, want. Do we want to grandstand and punish all businesspersons who come from Russia? But how would this help Ukraine on the battlefield? In my opinion, it would not.

The people who have made it in the West in business are probably the best of Russian minds. It is wrong to push such people back to Russia where they would contribute to the development of the Russian economy and increase the income of that country allowing it to produce even more weapons. I think that the right policy would be to invite Russian businesspersons who truly hold the Western values to move to the West. The job of the special services, meanwhile, should be to identify those who support the Russian aggression in whatever form.

The European Union could have said, for example, that we have identified all the wealthy Russian businesspersons who have a big influence on the economy, and if you support the war or violate any of the criteria we have set, you will be sanctioned. In that case, a great many Russian businesspersons would stay in the West and avoid returning to Russia. In this case a Russian businessperson could clearly understand I can avoid being sanctioned and I can protect my assets if I do a, b, c and d. However, many were sanctioned without any legal justification, and this is also demonstrated by the judgment of the General Court of the European Union in the case of Petr Aven, where the Court clearly and plainly stated that there were no grounds for the sanctions imposed on him.

A great number of business people in Russia do not support Russias war in Ukraine. Of course, one might say: why do they not publicly condemn the war? However, one has to understand what kind of regime is ruling Russia. To publicly condemn this war would be the same as, say, in Latvia in the 1970s, standing up and publicly condemning the Soviet occupation. These days we could reproach everybody and say Gunrs Astra stood up, and so did a few others, but what did the rest of you do? Why were you silent? Did you also support that regime? So you cannot naively say go ahead and say it! After all, people have relatives, friends, business partners who will be negatively affected. There are no Western freedoms there, where people can say what they think and suffer no negative consequences. That is why, in my opinion, we should have made a distinction between those business people who are pro-Western (and there are indeed such people in Russia) and those who really do have an imperialist mindset. Now everyone is being painted by the same brush. I agree that, at the beginning of the war, perhaps this really had to be done, after all, what could have been sorted out in a few days after the invasion? It was therefore right that all those who were seemingly linked with the regime were initially sanctioned. However, as time went on, it had to be sorted out. If Russian businesspersons were to see that people adhering to the Western values were being protected by the West, it would also encourage others to side with it. In the current state, they see no point, no benefit to doing so, and they are going back to Russia.

Earlier this year, the Cyprus media reported that after the Cyprus authorities started investigating sanction evasion cases many large Russian companies have left the countrys jurisdiction and chose to relocate to the hastily set up Russias special administrative regions.

Putin wants all Russian businesspersons to move their assets back to Russia to strengthen the countrys economy, and in fact the West is helping him in this endeavour. That is not right, because that is how we strengthen the Russian state. We should be pumping money out of Russia through Russian businesspersons loyal to the West. The problem is that for the European public, including the Latvian public, the Russian rich are associated with yachts, money of uncertain origin and huge villas abroad. Though it is only true of a highly visible minority of Russian businesspersons the public projects this image on all of them.

Undoubtedly, sanctions against businesspersons, who continue to support the regime while the war continues, by, for example, investing in military production facilities, are entirely justified, but the vast majority of Russian businesspersons have absolutely nothing to do with this.

The Financial Times reported at the end of April that Western banks that have not ceased operations in Russia paid more than EUR 800 million in taxes to the Kremlin last year, four times more than in 2021, before Russia started the war in Ukraine. Does this not mean that, basically, these banks should also be penalised for supporting the Russian economy?

This once again gives rise to discussions of Western hypocrisy and undermines the Western brand. That is to say, on the one hand, the West talks about values, on the other hand, it supports the economy of the aggressor country. At the same time, Mr. Aven was also sanctioned because he partly owns a company that pays taxes in Russia. Following that logic, those Western companies that pay taxes in the aggressor country should also be sanctioned. The opinion that the mere fact that you pay taxes means that you support the war is absurd. There is no correlation between the two. If, on the other hand, Russian businesspersons are viewed as supporting the war by paying taxes, then how can we be sure that Western businesspersons are not also supporting the war by paying taxes in Russia? There is a very clear hypocrisy here. And then the Russians think deep down, well, look at those westerners they protect their own lot and profit at our expense, while they push others out so that there is no competition! They make up all sorts of stories. It is not a good look, and that is why I believe that this policy needs to be created more wisely and pragmatically.

Clearly, the Western world and any reasonable person condemns this war. Meanwhile, it is also necessary to decide wisely on how to make Russia end or at least limit its aggression, as well as on how to get the best and the brightest minds in that country on our side. We need to achieve a split in the Russian elite. If all these elites are driven back to Russia and everything is taken away from them, this will only result in revanchism. In turn, if these same elites see that businesspersons loyal to the West can carry on with their normal lives, those who remained will inevitably start to think: why are we with Putin? There will be a split among the elite and there will be internal discontent in Russia, a notion that something has to change. There is nothing like this now, because everyone got lumped together.

Will someone have to pay for the damages suffered by Petr Aven in the period during which the sanctions have been found unjustified according to the judgment of the General Court of the EU? If so, who will pay the damages and who will determine the amount of these damages?

If this judgment takes effect and the conclusion remains that the Council of the European Union unduly sanctioned the individual in question, then it will be clearly and unequivocally established that during the period from March 2022 to mid-2023 Mr. Aven was sanctioned unduly. This means that these actions were unlawful and that the European Union must pay compensation for the damages caused. And these damages are enormous, seeing how it was in the first year that the biggest fall in the value of his assets occurred. This will therefore result in legal proceedings unless the Council of the European Union changes its policy in some way.

The political will of the European Union was clear and understandable when sanctions were imposed. However, this is not just a political decision; it is a life-destroying one, and it also affects the persons children. Therefore, the group of countries will have to answer in this case, as determined by a highly qualified EU court. Putting a person on sanctions lists is not a simple matter of we wanted to do it and so we did it, there have to be certain consequences. As far as Mr. Aven is concerned, the Court has made it very clear that there is no evidence whatsoever to justify the allegations that he supported the war in any way, financially or otherwise. Just because he is a big businessperson in Russia does not automatically mean that he has supported the war. It must be proven that he has supported this violation of Ukraines territorial integrity by his actions.

Unfortunately, the European Union taxpayers might have to pay billions for wrongly placing a person on a sanctions list. If any of us were suddenly wrongly placed on a sanctions list, that person would be financially ruined. There has to be accountability.

You mentioned earlier that Mr. Aven was sanctioned because a company he partly owns pays taxes in Russia. Please elaborate.

If a person is blamed for a company he partly owns paying taxes in Russia, it should in fact be announced that it is forbidden to do business in Russia.

Interestingly, the Council of the European Union changes the grounds for sanctions over time. As an example, at the beginning paying taxes was not frowned upon, this came later, when it was said retrospectively you were paying taxes when the war started! But, first of all, how can one not pay taxes when it is a mandatory norm imposed by the state? Secondly, many people held these assets in the West, including Mr. Aven. On the one hand, the European Union says that you cannot pay taxes in Russia, and on the other hand, even if you wanted to sell your assets and not pay these taxes, you cannot do so because the assets are frozen.

According to publicly available information, P. Aven and M. Fridman have been trying to sell their shares in Alfa Bank for more than a year, but this is not possible because the Cyprus regulator does not provide a permission for the transaction.

Mr. Aven has specifically stated that he wants to get out of the Russian market, he wants to have no connection with Russia and intends to spend his life in Latvia, i.e. in the West, and he has approached one of the European Union countries, Cyprus, asking for permission to sell these assets. Permission has not been granted. It is puzzling that a person wants to sever all ties with Russia but he is not allowed to do so. The Latvian state is not helping either. We have appealed to the state for help, but this is not considered to be Latvias responsibility. Politicians have some incomprehensible fear or lack of courage to come out and say: yes, we support Ukraine, but just because we help our citizen to get out of the Russian market does not mean that we are in any way harming Ukraine. That would be pragmatic.

The impression is that the West wants that such people, who basically want to be in the West and to support it, would go back to Russia. But it should be the other way round. If he were to sell these assets, the money he would receive would go into a Western credit institution and would be immediately frozen. It would be sitting in a Western bank and not working for the Russian war machine. Once there is conviction that the person really wants to be in the West and has cut all ties with Russia, he should be taken off the sanctions list and his money should flow into the European economy, where it would be subject to taxes, which, in turn, could be used to produce weapons and give them to Ukraine. That would be a pragmatic action and real support.

The Latvian public has only had the opportunity to read the conclusions of the General Court of the European Union. You have said that the judgment is crushing. Could you elaborate?

The rationale for including Mr. Aven in the sanctions list in March 2022 contained two points. One, that he is a natural person responsible for actions or policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine, and two, that as a natural person he has materially or financially supported or benefited from Russian decision-makers responsible for the annexation of Crimea and the destabilisation of Ukraine.

The Council of the European Union submitted various pieces of information to the case to justify the allegation of Mr. Aven support for the war. However, the Court noted that all the events involving Mr. Aven and his links with Putin were in the past. For example, there is an allegation that Mr. Aven provided some assistance to Putin in 1992 when the latter was working in St. Petersburg. The Court says that one cannot establish a causal link between the threat to Ukraines independence and the assistance given in 1992, even if there had been such assistance. If it were to be assumed that this was the case, then Mr. Aven must have known in 1992 that Putin would become President, invade Ukraine and therefore should have refused to work with him. There is a number of events in the past that seem to be strung together to prove that Mr. Aven is a person close to Putin. One case is even comical. One time an award issued by a Moscow arbitration court was unfavourable to Mr. Aven, and he felt that it was probably unlawful. Mr. Aven wrote a letter to the Presidential Administration asking to draw the attention of the Prosecutors Office to the fact that there may have been irregularities. The Council of the European Union spins it this way look how influential he is to be able to write a letter to the President! But if he were so influential, he could simply go to Putin or call him. However, like every Russian citizen, he wrote an official petition. The Court also says that the fact that Aven exercised his legal right to complain about something to the President does not prove that he was close to the President, nor that he in any way supported the destabilisation of Ukraine. What makes this even more absurd is that those events took place in the 1990s and the very beginning of the 2000s.

The Court also noted that there was no connection between P. Aven participation in the Atlantic Council meeting in May 2018 and the EU Councils conclusion that he had thereby supported actions or policies that threatened the territorial integrity, sovereignty or independence of Ukraine. The Court writes that it cannot be assumed that Aven, while having historically operated in Russia, could have envisioned specific actions to support policies destabilising Ukraine.

There were also accusations from the EU Council that Mr. Aven had not publicly condemned the war, and the Court said that such inaction, such silence, could not be considered an act of support either. That is to say, in order to accuse someone of supporting the destabilisation of Ukraine, there must be an action. Silence does not equal support. There are reasons why in Russia one cannot simply go out and say what one thinks about this particular regime. That is why the Court very succinctly said that silence cannot be equated to support in any way. Otherwise, it would mean that all those who were silent in the Soviet Latvia were supporters of the Soviet regime. We, however, do not believe that all Latvians who did not take to the streets during the Soviet occupation were collaborating with the occupation regime! Similarly, all those people who are silent about Russias aggression in Ukraine cannot be said to be supporters of the war.

The Court also noted that the EU Council did not provide any additional evidence compared to those it had relied on at the time of imposing the original sanctions and including Mr. Aven name in the sanctions list. Thus, during the two years of the proceedings, the Council was unable to provide any new evidence to substantiate the allegation that Mr. Aven had contributed to the destabilisation of Ukraine.

What evidence did the EU Council mainly rely on? Is it true that it was mainly press reports?

Yes, they were really mostly based on the news or investigative journalism. I do not want to say that investigative journalism is something to scoff at, because there is a plethora of cases where many things have been exposed thanks to journalists. However, in this case, there is no information where the source was competent authorities, and, for the most part, all this evidence was really based on information from various, even dubious, websites. In my opinion, no citizen should be subject to such severe economic consequences as sanctions on the basis of some record on the Internet stating that someone has seen or heard something. That might serve as the first lead in the investigation, but it is then necessary to find the facts that prove something to be true, not just speculate there are three publications and we think they are true. If this is how it is done, it would become a recipe to destroy any person.

Following the EU General Courts rulings lifting sanctions against Petr Aven and Mikhail Fridman, concerns have been raised that now numerous EU-sanctioned Russian individuals and legal entities will petition the EU Court to lift the sanctions imposed on them. Are these concerns justified, or was Aven case special?

However, the Court considers each case on its own merit. In Mr. Aven case, it is glaringly obvious that his business has been tied to the West since 2014, he lived in London and has built a house in Latvia for his family. So it is different in his case, and I am not surprised by this judgment. This, however, does not automatically mean that other Russian businesspersons will now also be removed from the sanctions list. The Court did indeed examine this case very thoroughly. Moreover, Mr. Aven made his fortune before Putin came to power, and this, too, is very different from many others who have made money using the state budget during the Putins reign. And that is an entirely different story. Still, I do think that now more than a few Russian businesspersons will indeed be challenging the sanctions at the EU Court. This does not mean, however, that the judgment lifting the sanctions against Mr. Aven can be extrapolated and that the Court will simply rubber-stamp decisions to remove Russian businesspersons from the sanctions list. There is no cause for concern. This will not happen.

Latvia has asked the European Unions Legal Service to appeal against the lifting of sanctions against Petr Aven. This is, of course, not a matter for idle speculation on whether or not the Council of the EU will file an appeal, still what is your opinion?

I think there will be no appeal. But even if there is, from the text of this judgment I do not see any reason to appeal it. The judgment is absolutely legally correct and absolutely crushing. The Council of the EU may very well decide that it does not want to suffer humiliation again at the second instance court. The question is whether Latvia needs this. I think that this call for filing an appeal was more of a political statement to show that we are among the most ardent supporters of Ukraine. However, it has nothing to do with support for Ukraine. Ukraine needs military weapons with which it can win on the battlefield, not some appeals regarding lifting sanctions on an individual.

We rush into a lot of things. Three hours after the news broke that the EU General Court had ruled in Aven favour, the announcement was made Latvia will call for an appeal! It turns out that the Latvian state is very actively standing up against one of its own citizens. As a citizen, I find this strange.

At least examine the judgment, read it, get together and in five days announce whether or not you will call for an appeal, or consult other Member States first. What happens if, after the Latvian state has called for an appeal, the Council of the European Union does not file it because it considers the judgment to be very strong and that there is no basis for an appeal? Will the fact that something is done in a highly emotional state, without examining the judgment, not diminish Latvias prestige among the other countries of the European Union? If an appeal is filed, the Ministry of Justice will be able to give itself a pat on the back and say: we gave them such a thrashing! But if not? Will that not show that the Ministry of Justice is incompetent? Policy, however, must be measured and wise, not taking the form of slogans.

However, even if the judgment of the General Court of the EU takes effect and the sanctions against Mr.Aven for the relevant period are lifted, this does not mean that the sanctions imposed later will also be lifted. Is there any other justification for these sanctions?

There is another justification that has come up in 2023. Namely: He is a leading businessperson operating in Russia and a businessperson involved in an economic sector providing a substantial source of revenue to the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine. Now, regarding the tax issue. It has been brought up before, but not as directly. The Court will have to assess whether the fact that a company in which Aven is a minority shareholder pays taxes in Russia means that he supports the war. If so, then all those Western companies operating in Russia are also supporting the annexation of Crimea and the destabilisation of Ukraine. In our view, this causal chain does not exist here either.

The Court must take into account, and this is important, that it is not Mr. Aven (a Latvian tax resident Ed.) who pays taxes in Russia, but the company in which he owns shares. For example, I am free to buy shares in Apple or Microsoft on the stock exchange. Can it therefore be considered that I pay taxes in America because I own these shares? No, the company pays taxes. It must be understood that he is simply the owner of the shares, moreover, he owns them indirectly, through several entities. He has not been in Russia since the beginning of the war, what taxes could he have possibly paid there?

One of the accusations against Mr. Aven is that he was in a meeting held by Putin on the day Putin announced the start of the special operation in Ukraine.

The argument that he was present at that meeting was also made in court, including by the Latvian state. The Court assessed it and found that it did not constitute support of the destabilisation of Ukraine. After all, he was not summoned to the meeting fifteen minutes before the start; the meeting with the President is scheduled several weeks in advance. The invasion of Ukraine was also not on the agenda of that meeting. It was only on the morning of that meeting when Mr. Aven found out that the war had started. He then boarded a plane out of Russia and has not been there since.

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Lawyer: EU taxpayers might have to pay billions for Russian billionaire's unjustified inclusion on a sanctions list - bnn-news.com

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