The European Court of Justice (ECJ) recently issued a judgment in Case C-109/23, which addresses the legal question of whether a German notary’s role in authenticating the sale of immovable property owned by a Russian legal entity violates the EU’s restrictive measures concerning Russia. Specifically, this case revolves around Article 5n(2) of Council Regulation (EU) No 833/2014, as amended in response to Russia’s aggression against Ukraine.
FACTS
The case originated from a transaction in Berlin involving a Russian company selling an apartment to German nationals. The notary refused to authenticate the sale on the grounds that it might violate Article 5n(2), which prohibits legal advisory services to Russian entities. The purchasers and seller appealed the refusal, leading to the Regional Court of Berlin seeking a preliminary ruling from the ECJ.
Article 5n(2) of Regulation No 833/2014 prohibits the provision of legal advisory services to Russian legal entities. The key issue was whether the notary’s authentication, necessary under German law for the sale of immovable property, could be classified as a “legal advisory service” and thus fall under this prohibition. The court also considered whether ancillary tasks, such as handling escrow payments and registering the transfer of ownership, would violate this provision.
Under German law, the authentication of contracts for the sale of immovable property by a notary is mandatory. Notaries hold a public office, providing impartial legal oversight rather than representing any specific party’s interests. This role includes authenticating legal documents, managing associated legal processes (such as escrow accounts and property registration), and ensuring legal certainty in transactions.
Under § 311b(1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB), a contract for the sale of immovable property must be authenticated by a notary for it to be legally valid. Furthermore, § 873(1) BGB states that the transfer of ownership requires both the consent of the parties involved and the registration of the transfer in the Land Register. Such consent must be given before a notary (§ 925(1) BGB) with the contract present (§ 925a BGB).
Notaries must refuse to authenticate any act that conflicts with their official duties according to § 4 of the Law on the Authentication of Documents (Beurkundungsgesetz), particularly if the act is intended to serve an unlawful or dishonest purpose, bringing the issue to light.
REASONING
The ECJ concluded that a notary’s role in authenticating the sale of immovable property does not amount to “legal advisory services” as defined under Article 5n(2) of Regulation No 833/2014. The court emphasized that a notary’s duties are rooted in public law, as they are appointed by the state to perform functions that ensure legal certainty and the validity of transactions. Unlike legal advisors who advocate or guide one party’s interests in a commercial or legal matter, notaries do not offer advice on how to structure a transaction for a specific party’s benefit. Instead, their role is to ensure that the legal formalities are observed, and that the transaction complies with the law. Their task is not to represent the parties’ interests but to act as neutral overseers of the legal process.
Additionally, the Court noted that a notary’s authentication of a contract involves no discretionary legal judgment or advocacy but merely confirms the formal legal validity of the transaction. This impartial and public function is distinct from the commercial nature of “legal advisory services,” which involve advising, negotiating, or structuring legal outcomes in favor of a client. Therefore, the notary’s involvement does not fall within the scope of the EU sanctions that prohibit providing legal advisory services to Russian entities.
Therefore, authentication of the contract, managing escrow funds, and assisting with the registration of property do not fall under the EU’s sanctions prohibiting legal services to Russian entities. Furthermore, the court clarified that services provided by interpreters during such transactions do not constitute legal advisory services either.
This ruling provides critical clarification on the scope of the EU’s sanctions regime. It confirms that notarial activities, even when involving Russian entities, are not restricted under the existing regulations. As the EU continues to impose sanctions in response to geopolitical conflicts, this case sets a clear boundary between legal advisory services and public legal functions like notarial acts, ensuring that such administrative transactions remain feasible under EU law. This judgment also suggests that future sanctions must be carefully framed to avoid unintended consequences for standard legal processes within member states.
The EGC is set to deliver another important decision on October 2, 2024, which will address a broader question concerning the legality of Article 5n of Regulation No 833/2014 regarding fundamental rights enshrined in EU law.