When sanctions freeze the contract: Lithuanian courts on non-performance, damages and the limits of civil liability under EU restrictive measures

Justinas Jarusevičius
Motieka & Audzevicius
Justinas.Jarusevicius@motieka.com 
 

Over the past twelve months, Lithuanian courts have produced a settled line of authority on a question with obvious cross-border resonance: who bears the losses when EU sanctions make contractual performance unlawful? Building on a June 2024 Supreme Court ruling that asset-freezing measures render pre-existing contracts non-performable for as long as the measures apply, the Lithuanian Court of Appeal in March 2025 dismissed damages claims of approximately EUR 8 million and EUR 6 million brought against an electricity supplier that had been identified as controlled by a designated person. The courts held that suspending or terminating the affected contracts was the only lawful course of action, so no unlawful act – and hence no civil liability – could arise from sanctions-driven non-performance. The Supreme Court has since declined to reopen these rulings and saw no need for a preliminary reference to the Court of Justice of the European Union (CJEU). For businesses transacting in or through the Baltic region, the message is that sanctions risk is, in effect, allocated to whichever party it happens to fall on.

The regulatory backdrop

Article 2 of Council Regulation (EU) No 269/2014 requires the freezing of all funds and economic resources belonging to, owned, held or controlled by designated persons and by entities associated with them, and prohibits making funds or economic resources available to them, directly or indirectly. Lithuania has transposed that obligation into Article 7 of the Law on International Sanctions. Its third paragraph is unusually blunt: transactions concluded, and obligations arising, before international sanctions took effect must be immediately terminated – unilaterally or by agreement – or their performance suspended for the duration of the sanctions. The fourth paragraph completes the scheme: no civil liability attaches to natural or legal persons for non-performance of transactions and obligations resulting from the implementation of international sanctions.

When the successive sanctions packages adopted after 24 February 2022 were combined with national designations of “controlled” entities, a significant number of long-term commercial contracts became legally impossible to perform overnight. Litigation about the resulting losses was only a matter of time.

Performance itself is frozen: the Vydmantai wind park ruling

The foundational ruling is the Supreme Court of Lithuania (Lietuvos Aukščiausiasis Teismas) judgment of 27 June 2024 in case No e3K-3-139-701/2024. The claimant, UAB Vydmantai wind park, operates a 30 MW wind farm in western Lithuania and has been treated by the FNTT since May 2022 as controlled by a person designated under Regulation 269/2014. When its electricity buyer suspended the power purchase agreement, the wind farm sued for the price of electricity it had actually generated and delivered, together with contractual penalties, arguing that the freezing of “funds” and “economic resources” could not extend to payment for goods already supplied.

The Supreme Court disagreed on every point. Drawing on the CJEU’s case law on parallel sanctions regimes (Bank Sepah, C-340/20; SH, C-168/17; Möllendorf, C-117/06), it held that the concepts of freezing of funds and of economic resources in Regulation 269/2014 must be interpreted very broadly, and that a claim for payment for electricity supplied after the restrictive measures took effect falls squarely within the claims affected by those measures, which cannot be satisfied for as long as the measures remain in force. The court’s central conclusion is that a contract concluded before the measures took effect “must be regarded as non-performable while the restrictive measures apply”: the electricity itself is a frozen economic resource which may not be used in economic activity or sold, and no economic benefit may be derived from it by or for the benefit of the person whose assets are frozen (unofficial translation).Suspension of performance was therefore not merely permissible – it was the only conduct compatible with the law. The dismissal of the debt claim, however, does not extinguish it: the restrictions operate only while the measures apply, and the claim may be brought anew once they are lifted.

Who pays for non-delivery? The Inter RAO damages litigation

The mirror-image question – whether the counterparties of a “controlled” entity can recover the losses caused by its non-performance – was answered in two rulings of the Court of Appeal of Lithuania (Lietuvos apeliacinis teismas) in March 2025.
AB Inter RAO Lietuva was, until May 2022, one of Lithuania’s major independent electricity suppliers, serving numerous government institutions and businesses under long-term supply contracts. After the FNTT determined that the company was controlled by a person designated under Regulation 269/2014, the Nord Pool exchange suspended its trading (citing settlement risk) and the national energy regulator suspended and later revoked its supply permit. From May 2022 the company could no longer perform its contracts. Its former customers had to procure replacement electricity on a market in which the sudden withdrawal of a major supplier had contributed to sharply higher prices, and several of them sued for the difference.

AB ORLEN Lietuva, the refinery controlled by the Polish state-owned Orlen group, claimed EUR 7.93 million plus interest; AB Roquette Amilina, the Lithuanian subsidiary of the international Roquette group, claimed EUR 6.11 million. Both claims were dismissed in full at first instance and on appeal (Court of Appeal of Lithuania, ruling of 12 March 2025 in case No e2A-39-881/2025 (ORLEN); ruling of 27 March 2025 in case No e2A-75-467/2025 (Amilina)).

The reasoning of both panels rests on the same foundation. The sole reason the contracts went unperformed was the application of international sanctions once the FNTT began treating the supplier as controlled by a designated person; the loss of the permits necessary for performance was directly connected to those restrictive measures. From that moment, Article 7(3) of the Law on International Sanctions imposed on the parties a statutory duty to terminate the pre-existing contracts immediately or to suspend their performance for the duration of the sanctions – a duty the Amilina panel described as imperative and binding on all parties to the transaction, including the claimant (buyer of electricity) itself. Ceasing performance was accordingly the only lawful course of action, so the claimants could not establish unlawful conduct, the threshold condition of civil liability. Both panels also held, in identical terms, that the statutory exclusion of civil liability for sanctions-driven non-performance protects all parties to the transaction, whether or not they are themselves subject to the restrictive measures.

Blanket immunity or force majeure? An unresolved nuance

The two panels diverged, however, on the doctrinal character of Article 7(4). In ORLEN, the court treated the provision as lex specialis displacing the general force majeure regime of the Civil Code: where non-performance results from the implementation of international sanctions, civil liability “is not applicable at all”, making it unnecessary to examine the conditions for exemption from liability. In Amilina, decided a fortnight later, a differently constituted panel read the same provision more narrowly: Article 7(4) does not exclude liability automatically, but only exempts a party that proves the strict conditions of force majeure – otherwise, the court warned, sanctions could be abused as a pretext for non-performance. On the facts, that test was satisfied: the panel located the force majeure event not primarily in the actions of the FNTT, the exchange or the regulator, but in Russia’s war against Ukraine launched on 24 February 2022, of which the institutional measures were the consequence. The result was the same – full dismissal – but the reasoning was different. 

ORLEN put that inconsistency squarely before the Supreme Court in its appeal and asked the court to refer questions on Article 11(1) of Regulation 269/2014 to the CJEU. The selection panel refused to accept the appeal (ruling of 1 July 2025, procedural No 2-55-3-01399-2023-4). On the referral request, it reasoned that Article 11(1) had not been – and did not have to be – applied in the case: the prohibition on performing the parties’ contract flowed from Article 2 of the Regulation and Article 7(3) of the national statute, so the answers sought could not affect the outcome. Both appeals failed,  and the appellate rulings stand as final.

What this means for cross-border disputes

Taken together, these rulings move the needle in two respects. First, they establish that, in Lithuania, compliance with EU asset-freezing measures is a complete answer to contractual claims: suspension or termination of an affected contract is the only lawful conduct, and losses caused by such compliance lie where they fall. Counterparties of entities linked to designated persons therefore carry replacement-cost and market-price risk without recourse – in the Inter RAO litigation, claims totalling some EUR 14 million were dismissed in full. Second,, contract drafters should take note: with statutory liability shields of this breadth, the meaningful levers left to parties are sanctions-triggered termination and suspension clauses, pricing arrangements that survive a counterparty’s designation, and structures that avoid concentrating supply risk in entities with elevated designation exposure. Whether other Member State courts will draw the line between blanket statutory immunity and force majeure in the same place remains open – which is precisely why the Lithuanian experience deserves the attention of practitioners handling disputes touched by sanctions.

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Sources

1.    Supreme Court of Lithuania, ruling of 27 June 2024 in civil case No e3K-3-139-701/2024 (UAB Vydmantai wind park v UAB Elektrum Lietuva); 
2.    Court of Appeal of Lithuania, ruling of 12 March 2025 in civil case No e2A-39-881/2025 (AB ORLEN Lietuva v AB INTER RAO Lietuva); 
3.    Court of Appeal of Lithuania, ruling of 27 March 2025 in civil case No e2A-75-467/2025 (AB Roquette Amilina v AB INTER RAO Lietuva); 
4.    Supreme Court of Lithuania, selection panel ruling of 1 July 2025, procedural No 2-55-3-01399-2023-4; 
5.    Council Regulation (EU) No 269/2014; 
6.    Directive (EU) 2024/1226; 
7.    Law on International Sanctions of the Republic of Lithuania, Article 7; 
8.    FNTT, list of legal entities owned or controlled by designated persons, https://fntt.lrv.lt/lt/tarptautines-finansines-sankcijos/ (accessed July 2026). Translations of the rulings are the author’s own and unofficial.