Some clarifications on the validity and the scope of restrictive measures towards Russia

Judgment
C-72/15
28.03.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingPJSC Rosneft Oil Company v. Her Majesty's Treasury and OthersCJEUGrand ChamberA. RosasM. WatheletRestrictive measures
KeywordsReference for a preliminary ruling – Common Foreign and Security Policy (CFSP) – Restrictive measures adopted in view of Russia’s actions destabilising the situation in Ukraine – Provisions of Decision 2014/512/CFSP and Regulation (EU) No 833/2014 – Validity – Jurisdiction of the Court – EU‑Russia Partnership Agreement – Obligation to state reasons – Principles of legal certainty and nulla poena sine lege certa – Access to capital markets – Financial assistance – Global Depositary Receipts – Oil sector – Request for interpretation of concepts of ‘shale’ and ‘waters deeper than 150 metres’ – Inadmissibility
Significant pointsWhile Decision 2014/512 and Regulation 833/2014 of the Council introduced targeted restrictive measures, the United Kingdom adopted implementing measures based on these Council acts, which provided for criminal penalties in the case of an infringement of the restrictive measures.

In this preliminary ruling on the legality and the interpretation of the Council acts, the CJ considered first that a Member State can impose criminal penalties in the case of an infringement of the restrictive measures provided for in the Regulation, in order to effectively implement the latter.

Second, the CJ ruled that the Decision and the Regulation at issue were valid. Indeed, the importance of the objectives pursued by the contested acts was such as to justify certain operators being adversely affected. Insisting on the broad discretion of the Council when it determines the aim of restrictive measures, the CJ explained that targeting specific high value undertakings or sectors aims at ensuring the effectiveness of the restrictive measures (paragraph 132). The CJ also insisted on the proportionality of the interference with Rosneft’s freedom to conduct a business and its right to property in view of the objective of increasing the costs to be borne by the Russian Federation for its actions to undermine Ukraine’s territorial integrity, sovereignty and independence. Finally, the CJ refused to rule that the acts at issue were incompatible with the EU-Russia Partnership Agreement.

Third, the CJ ruled that the principles of legal certainty and of precision of law, which it considered to be applicable in this matter too, were respected in this case. Even if some terms of the regulation at issue have not been interpreted and clarified by the CJ yet, a Member State can establish penalties in order to ensure the implementation of this regulation (paragraphs 167 and 168). Indeed, the CJ recalled that the legislation must clearly define offences and the penalties, before ruling that “the terms which are claimed by Rosneft to be lacking in precision, while they are not absolutely precise, are not such that it is impossible for an individual to know for which acts and omissions he may be criminally liable” (paragraph 166).

Fourth, regarding the processing of payments by banks, the CJ ruled that given the fact that the payment services are provided by financial institutions as intermediaries, without any commitment of their own resources, the processing of bank transfers are not to be considered “financial assistance” within the meaning of Article 4(3)(b) of Regulation 833/2014. This expression refers to measures comparable to grants, loans and export credit insurance, which require the financial institution concerned to use its own resources (paragraph 179). The CJ noted that the aim of the EU legislature was neither to submit every bank transfer to an additional authorisation request, nor to establish a freezing of assets or restrictions on the transfer of funds (paragraph 181). However, the CJ also ruled that this interpretation is without prejudice to the prohibition that applies to any processing of payments that is related to a commercial transaction that is itself prohibited under Article 3(5) of Regulation 833/2014 (paragraph 183).

Finally, the CJ considered that the Regulation prohibits the issuance of international certificates representative of share ownership (Global Depositary Receipts), even if they represent shares which were emitted before the adoption of the contested acts. Indeed, pursuant to Article 5(2) of Regulation 833/2014, the issuance of transferable securities in respect of the shares of the entities listed in Annex VI to that regulation (including Rosneft) are prohibited from 12 September 2014, irrespective of the date of issue of those shares. The CJ ruled that GDR are “transferable securities” within the meaning of Article 5(2) of Regulation 833/2014 (paragraphs 187 to 189). Therefore, the CJ ruled that restrictive measures prohibit the issuance of GDR when holders of shares in the entities targeted by the restrictive measures re-package their shares in these GDR.
NoteworthyThis judgement reflects the importance and variety of legal issues in the field of restrictive measures, such as the impact of general principles of EU law on restrictive measures and the interpretation of the scope of some prohibited operations. On this last point, it is worth highlighting that the CJEU has carefully construed the notions of ‘financial assistance’ and of ‘Global Depositary Receipts’.

The CJ confirmed also the possibility for Member States to impose criminal penalties in the case of an infringement of the restrictive measures provided for by EU law in order to effectively implement the latter. Such a ruling contributes to the enforcement of the restrictive measures.