AUSTRIA Law and Practice Contributed by: Anna Zeitlinger, Gabriel Lansky, Philip Goeth and Konstantin Oppolzer, Lansky Ganzger Goeth + Partner Rechtsanwälte GmbH
in 2001, in a sanctions regulation on combating ter - rorism). A designated person “owns” a legal entity if the per - son holds 50 or percent of the proprietary rights of the legal entity (eg, shares). A designated person may exert “control” if such person essentially can control the management or strategy of the concerned legal entity. This covers the right to appoint or remove the majority of the management board of the legal entity or the holding of the majority of the voting rights in the legal entity. Another factor for control is the right of the designated person to use the assets of the legal entity (often decisive when assessing property companies that own high-end luxury goods, such as vessels or real estate). Substance Over Form Crucially, the principle of “substance over form” applies when determining “control”. It is irrelevant who the legal owner of an asset is; it is also irrelevant if constitutional documents of a legal entity limit or exclude any rights of a designated person vis-à-vis the legal entity and its assets. If the designated person can de facto exert influence that amounts to “con - trol”, the assets of the concerned legal entity are to be frozen. To better assess such scenarios of de facto control, the Council of the European Union introduced in the Best Practices several indications according to which it is likely that a designated person maintains con - trol over a legal entity or its assets. These indications include, among others, the retention of a buyback option after a designated person sold a business to a third person (often a management buyout), use of strawmen (often close family members or associates), use of needlessly complex corporate structures or trusts. Moreover, a telling indication is the sale of a business by the designated person shortly before the inclusion of said person into the applicable sanctions list. It is for the operator to assess the structure of a legal entity and decide whether a designated person has ownership or control. Once ownership or control has been established, the operator may presume that the assets of the concerned non-listed legal entity are
controlled by the designated person. Consequently, these assets may be frozen. However, the presump - tion of control is rebuttable, and the concerned legal entity may demonstrate that all or part of its assets are not (anymore) controlled by the designated person. For the operator it is paramount to treat each case individually as excessive application of freezing meas - ures may also lead to damage claims against them, if the asset freeze is imposed excessively and without sufficient basis. Accordingly, blocking all assets and refusing to engage solely for fear of breaching sanc - tions may not constitute an appropriate defence for an operator. Firewall Following the European Commissions “Guidance Note on Implementation of Firewalls in cases of EU entities owned or controlled by a designated person or entity” a so-called “firewall” may be implemented. A firewall is a complex of compliance and ringfencing measures that can be adopted by the legal entity which is asso - ciated with a sanctioned person and whose funds are, therefore, frozen. The firewall aims to eliminate control by the sanctioned person over the legal entity and its assets, and to prevent such person from accessing them. If successfully implemented and – to the extent possible – acknowledged by the competent sanctions authority, the assets of such legal entity ought to be released and funds or economic resources ought to In Austria, the fact that assets of a non-listed legal entity are frozen may be displayed by way of an anno - tation in the commercial register excerpt of the con - cerned legal entity. The court includes such annota - tion regarding the asset freeze upon notification by the Ministry of the Interior. The concerned non-listed entity may challenge the inclusion of such annotation in the commercial register. If the legal entity can dem - onstrate that it is in fact not owned or controlled by a designated person, the court will remove the anno - tation from the commercial register, and the assets concerned are not deemed frozen. Should an Austrian operator still refuse to “unfreeze” the assets despite the removal of the annotation (eg, a bank refuses to unblock the account), the concerned legal entity be made available again. Austrian Particularities
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