Opera Laboratori Fiorentini SpA v Ministero della Cultura
The case arose from a challenge to the award of a public contract for catering services to Scudieri International Srl (“SI“). SI is an Italian entity whose administrative board included two Russian nationals during the tendering procedure, one of whom also served as sole administrator of SI’s parent company. A third party challenged the award, arguing that it violated the prohibition to award public or concession contracts to persons or entities acting on behalf or at the direction of Russian persons or entities.
The CJEU ruled that the concept ‘on behalf or at the direction of’ must receive an autonomous and uniform interpretation across all Member States, independent of national law distinctions. Given its anti-circumvention function, the expression must be interpreted broadly to encompass all sanctioned persons (including natural persons), with the focus on de facto control rather than formal ownership structures. The CJEU held that the administrators’ Russian nationality alone did not automatically trigger the prohibition. The CJEU reasoned that contracts are concluded with a company, not its administrators personally. The relevant funds flow to shareholders, not administrators. The CJEU also considered that administrators lack unilateral power to divert corporate funds without incurring personal liability for breach of fiduciary duty. According to the CJEU, where the company and shareholders have no connection with Russia, there is no inherent diversion risk. However, the prohibition may apply where competent authorities, following exhaustive factual examination, identify a plausible risk of fund diversion. Relevant considerations include ownership and control structure, personal and professional links, evidence of past instructions or coordination with sanctioned entities, capital held on behalf of sanctioned persons, and recent transfers of previously Russian-owned stakes.
Review of due diligence procedures
Entities should review their due diligence procedures to focus on substantive control relationships rather than formal indicators like administrators’ nationality. Government agencies may be unable to exclude companies with Russian officials but without substantial Russian ownership or control from tenders and concessions, unless they can demonstrate that there is a realistic possibility of funds being diverted to Russia.