EU Court of Justice rejects Rosneft’s challenge to EU’s Russian Sanctions

30 Mar 2017

Case C-72/15 OJSC Rosneft Oil Company v. HM Treasury; the Secretary of State for Business, Innovation, and Skills; the Financial Conduct Authority

The Grand Chamber of the EU Court of Justice has handed down an important judgment concerning the validity of the EU’s sanctions on Russia in response to Russia’s actions in Ukraine, and the scope of the CJEU’s jurisdiction to review the validity of decisions adopted under the EU’s Common Foreign and Security Policy.

The case was referred by the High Court in February 2015 (see [2015] EWHC 248 (Admin)) following a challenge by Rosneft to UK statutory instruments giving effect to the sanctions, and the legality of the underlying sanctions against the Russian oil sector.

In its judgment, available here, the CJEU finds that:

  1. the Court has jurisdiction to give preliminary rulings on the validity of CFSP acts, provided that it relates either to the monitoring of the act’s compliance with Article 40 TEU, or to reviewing the legality of restrictive measures against natural or legal persons. The exclusion of the Court’s jurisdiction in the field of the CFSP should be interpreted strictly;
  2. the adoption by the Council of restrictive measures against Russia in CFSP Decision 2014/512 did not breach Article 40 TEU by impinging on the Union’s competences under the TFEU;
  3. in so far as it prohibits / requires prior authorisation for the sale, supply, transfer or export of technologies or services suited to specific categories of oil exploration and production, the CFSP measure does not prescribe restrictive measures against natural or legal persons, because the scope is determined by objective criteria;
  4. on the other hand, measures applicable to specific entities including Rosneft were targeted at he named entities and the Court has jurisdiction to review their validity under Article 275 TFEU;
  5. it was within the Council’s broad discretion to determine that the measures adopted against Russia were necessary for the protection of essential European Union security interests and the maintenance of peace and international security, within the meaning of Article 99 of the EU‑Russia Partnership Agreement;
  6. the measures did not involve any breach of the Council’s obligation to state reasons, nor of Rosneft’s right of access to the file, rights of defence or right to effective judicial protection, nor any misuse of power, or breach of the principle of proportionality;
  7. the fact that the measures were targeted at the oil industry did not infringe the principle of equal treatment. The Court agreed with the United Kingdom that it was open to the Council to target specific sectors of the Russian economy particularly reliant on products, technologies or services imported from the EU;
  8. the fact that certain of the terms used in Regulation No 833/2014 are general in nature and may be subject to clarification by the Court does not breach the principle of legal certainty and does not prevent a Member State from establishing criminal penalties for breach of the Regulation.

The Court also clarified the use of the term ‘financial assistance’ in Article 4(3)(b) of Regulation No 833/2014, to exclude processing of payments by a bank or other financial institution, and the application of the prohibition on the issuance of global depositary receipts representing shares issued by one of the sanctioned entities before 12 September 2014.

The significance of the judgment lies, in particular, in the clarification of the scope of the CJEU’s jurisdiction to review CFSP acts under the preliminary reference procedure, and the degree of deference to be accorded to the Council in respect of the content of such acts.

Gerry Facenna QC acted for the United Kingdom in the Court of Justice. Gerry, Tim Ward QC and Julianne Kerr Morrison also acted for HM Treasury and the Secretary of State for Business in associated domestic proceedings leading to the reference.