The European Court of Justice in Luxembourg (ECJ) is set to deliver a ruling that could reshape Europe’s trust and wealth management industry.
The case, which originates from an Italian court questioning about whether assets placed in trusts by sanctioned businessmen should be subject to asset freezes, could ripple through financial centres from Luxembourg to Malta and reach into the pockets of Europe’s political elite.
At issue is whether assets held in discretionary trusts - where beneficiaries don’t have legal claim unless and until distributions are made - should also be frozen when one of the potential beneficiaries appears on an EU sanctions list.
This seemingly narrow legal question has opened a much broader debate: can the foundational principle of trust law - that assets are owned and controlled by the trustee - survive in a world increasingly shaped by geopolitics?
The ECJs Advocate General Campos Sánchez-Bordona recently argued, in a non-binding yet influential legal opinion, that that trusts inherently represent suspicious arrangements used to circumvent sanctions and therefore ought to arguably fall within sanction measures.
Discretionary trusts are a cornerstone of European and broader Western asset protection and estate planning. They are not solely tools for the ultra-wealthy. Doctors, entrepreneurs, and even middle-class families use them for estate planning, wealth stability and continuity.
EU officials, following recommendations by the Commission, routinely place assets in blind or discretionary trusts to avoid conflicts of interest. If the European Court of Justice rules that such structures no longer provide legal protection, Europe may be forced to rethink how it governs private assets - and how it regulates its own lawmakers.
Trusts’ role in global finance
Consider a few examples of trust usage. Hundreds of top European companies, from LVMH to Ferrari to Heineken to Lego, are owned partly through family trusts. In 2017, after being elected President of the United States, Donald Trump placed his business assets into a blind trust. During her tenure as UK Prime Minister, Theresa May employed a blind trust to manage her financial interests. Italian Prime Minister Silvio Berlusconi and former ECB President Mario Draghi also utilised similar structures. The list could include hundreds more names.
The original case involve facing ECJ involve two Russian nationals who were sanctioned due to Moscow’s war in Ukraine. The political case for freezing anything remotely tied to Kremlin-linked figures is strong. But the implications go far beyond Russia. If the Court establishes that merely being a possible future beneficiary is enough to justify freezing assets, then trust law as Europe knows it begins to erode.
That would leave more than just yachts and bank accounts at risk. It could render worthless the legal arrangements that public officials, investors and professionals across the EU have long relied on. If trust-held assets are suddenly viewed as de facto personal property in one domain, then those assets could soon be treated differently in other domains, requiring them to be declared in tax filings, disclosed under ethics rules, or scrutinised under conflict-of-interest laws. That could spell retroactive trouble for many people and families across Europe.
The precedent could damage the very concept of trust separation. For centuries, trust law has maintained that a trustee owns and controls the asset - not the beneficiary. Undoing that distinction doesn’t just affect two Russians in this case. It could make Europe’s entire trust industry - and the estimated 290,000 professionals it supports - legally obsolete. And while the assets might remain in Europe for a time, capital is mobile. Investors will simply move their wealth to jurisdictions where the rules are clearer, such as UAE, Hong Kong or Singapore.
While trusts, according to ECJs Advocate General, can be used to circumvent sanctions - so can other perfectly legal arrangements. Trusts are not inherently evil and there is no need to destroy trusts to enforce sanctions. The existing legal mechanisms, properly applied, are sufficient safeguards against sanctions circumvention and evasion.
The Court could try to limit its ruling to only sanctioned Russians, but that creates its own problem: legal inconsistency. If the same trust structure is treated differently based on who the beneficiary is or where they come from, then the EU risks undermining its own commitment to equal treatment and legal certainty.
This raises an uncomfortable question for the EU: are short-term political victories worth destabilising a centuries-old legal framework? The danger is that a hasty decision, aimed at punishing a few bad actors, could unintentionally empower exactly the kinds of financial secrecy the EU claims to oppose. The more trust law becomes unpredictable, the more likely individuals are to seek out opaque and unregulated alternatives.
Europe’s wealthy - and its institutions - now face a sobering reality. The centuries-old tools may not withstand pressure from their own governments’ sanctions regimes. The Court’s decision will not only determine the fate of two trusts. It will test whether Europe still upholds the rule of law when it becomes politically inconvenient.
For now, lawyers, fiduciaries, and policymakers across the continent are watching. Not just because Russia is involved — but because Europe is.
