European judges say no jackpot for Ukraine after freezing lottery firm’s assets

(CN) — After years of legal battles, Ukraine’s freeze on a lottery company’s assets ended in defeat Thursday. Europe’s human rights court said the wartime sanctions went too far and violated the firm’s rights.

In its ruling, the European Court of Human Rights found that Kyiv had overstepped when it froze the assets of M.S.L. TOV, a Kyiv-based lottery operator, without giving any clear reason or chance to challenge the decision. The judges said the company was left without a real way to defend itself.

The dispute dates to 2015, after Russia’s 2014 annexation of Crimea and the war in eastern Ukraine triggered a wave of sanctions against people and businesses accused of siding with Moscow or threatening national security. In September that year, acting on recommendations from the National Security and Defense Council, the Ukrainian president signed a decree freezing the assets of hundreds of entities — M.S.L. among them.

Ukrainian authorities accused M.S.L., the state-licensed lottery operator, of having Russian ties and dabbling in illegal gambling and tax evasion. The claims came from classified intelligence collected by the nation's Security Service, information that was never made public.

When the government froze the company’s bank accounts, M.S.L. suddenly couldn’t process electronic payments or pay out its lottery prizes. Still, it kept the lights on, running games and pulling in cash wherever it could. The sanctions stung, but they didn’t shut the business down.

A month later, in October 2015, the company’s owner went straight to the Security Service, asking it to check the accusations for itself. The agency launched a terrorism-financing probe, only to close it in March 2017 after finding no evidence of any wrongdoing. By September that year, the Security Service even urged the National Security and Defense Council to lift the sanctions, yet the freeze stayed put.

M.S.L. then took the fight to court, claiming the freeze was arbitrary and unsupported by any real proof of Russian control or criminal conduct. Judges, however, declined to go further, ruling that national security decisions lay outside their hands.

That explanation didn’t sit well with the judges in Strasbourg. They said that kind of blanket immunity left the company unprotected from arbitrary action. 

The judges noted that “none of the impugned decisions contained any individualized justifications” and that officials had simply repeated the same broad claims without explaining how they applied to M.S.L. They also warned “the judicial review conducted by the Supreme Court could not be regarded as a sufficient procedural guarantee against arbitrariness.”

With so few safeguards in place, the judges ruled Kyiv had failed on both fronts — protecting private ownership and providing a real and effective remedy in the domestic courts.

The timing couldn’t be trickier for Kyiv. Since Russia’s full-scale invasion in 2022, Ukraine has tightened its security grip and rolled out sweeping sanctions against hundreds of people and companies accused of helping Moscow. Three years on, the war is still grinding along the eastern front, with heavy fighting around Kharkiv and Zaporizhzhia and waves of Russian drone and missile strikes hitting cities.

The court didn’t order Ukraine to pay any money, saying the judgment itself was enough to recognize what went wrong.

The ruling doesn’t challenge Ukraine’s right to act in wartime, but it sets a clear boundary: even under fire, governments have to explain their actions and give people a chance to appeal. 

Bohdan Bernatskyi, a sanctions and rule of law expert and research fellow at Vilnius University and the European University Institute in Italy, said the judgment could pave the way for more legal pushback inside Ukraine — but it’s unlikely to shake up sanctions law beyond the country. 

“It might set a precedent, but only for situations specifically involving Ukrainian sanctions, which are structurally different from those in other Council of Europe countries,” he said. 

He added that going after domestic actors with sanctions instead of filing criminal charges was “both unique to Ukraine and detrimental to the rule of law,” and said he hoped the ruling would spark overdue debate about fixing Kyiv’s internal sanctions system.

Ukrainian authorities and representatives of M.S.L. did not respond to requests for comment.

The decision will stand unless either side asks the court’s Grand Chamber to take another look within three months — a review that’s rarely granted.

Courthouse News reporter Eunseo Hong is based in the Netherlands.