UK COMMERCIAL COURT GRANTS SUMMARY JUDGMENT TO MELLI BANK PLC

Melli Bank Plc applied to the High Court in London for summary judgment for sums owed to it by a customer (Holbud Limited).  The customer had refused to pay the Bank sums due under a Facility Agreement on the grounds that Melli Bank Plc had been listed on the European Union’s restrictive measures against Iran in 2008.  Holbud argued that the contract was frustrated, breached, and and illegal as a result of Melli Bank Plc’s designation.
The Commercial Court (Robin Knowles CBE QC) granted summary judgment to Melli Bank Plc on 13 May 2013.  The Court rejected the argument that the contract had been frustrated, holding that the Bank’s designation did not render obligations under the Facility Agreement incapable of performance because the customer could have sought a licence from Her Majesty’s Treasury to permit payments to be made to Melli Bank Plc but had not done so.  Nor was the Bank’s designation a reputatory breach of contract.

FIRST ARAB SPRING SANCTIONS JUDGMENTS – 3 ANNULMENTS OF TUNISIAN LISTINGS BY THE EUROPEAN COURT

195px-european_court_of_justice_insignia-svgIn three judgments handed down on 28 May 2013, the Third Chamber of the General Court of the European Union (the EU’s first instance court) annulled the listings of three people on the European Union’s restrictive measures against Tunisia.  The EU imposed sanctions on people it said were “responsible for misappropriating the funds of the State of Tunisia” in January 2011.  The Court has annulled the listings of Fahed Al Matri, Mohamed Trabelsi, and Slim Chiboub, although the annulments will not take effect until the 2 month period for the European Council to appeal has expired.
The reason the Court annulled their listings was the same in all three judgments.  All of the applicants had been included by the European Council because the Ministry of Foreign Affairs in Tunisia had informed the European Council that they were subject to judicial investigation for money laundering offences in Tunisia. The Court held that this did not satisfy the criterion for designation in the relevant Decision and Regulation (responsibility for misappropriation of State funds) because money laundering does not necessarily imply public as opposed to private funds.  This was not a point the parties had taken in the Trabelsi case, but the Court invited the parties to consider it nonetheless.
The Court also said, following the ECJ’s judgment in Tay Za, that the Council was not entitled to presume that since Mr El Matri was the son-in-law of former President Ben Ali, that money-laundering relating to him would necessarily involve State funds. Somewhat curiously, the Court held that it did not need to consider the standing of Mr Trabelsi’s wife and children to bring their applications since they raised the same arguments as Mr Trabelsi, and appears not to have considered their cases further or annulled the restrictive measures in so far as they applied to them, but did order to pay the Council their costs. Links to the judgments are here: Case T-200/11 Al Matri (Maya Lester appeared for Mr Al Matri), T-187/11 Trabelsi, T-188/11 Chiboub).
The next Arab Spring judgments that are expected will relate to the similar EU sanctions relating to Egypt which the European Courts have not yet adjudicated upon. It may be relevant to the pending Egyptian cases that the Court in the Tunisian cases suggests that being prosecuted (as opposed to convicted) in Tunisia for misappropriating State funds might have been a sufficient basis for concluding that the applicants were responsible for misappropriation, and that the Court will  not permit the Council to rely on presumptions as a reason for including family members.

COURT OF JUSTICE HOLDS THAT A DE-LISTED PERSON STILL HAS AN INTEREST IN ANNULMENT PROCEEDINGS

On 28 May 2013, The Court of Justice (sitting in Grand Chamber in Case C-239/12 P) ruled that a person delisted from an EU sanctions list in the course of proceedings still has an interest in the proceedings continuing.

Mr Abdulrahim was designated by the UN Security Council 1267 Committee in 2008, and therefore by the European Union, implementing the UN listing in in the EU in Regulation 881/2002 (the Al Qaida list).  He applied to the General Court to annul his EU designation. The UN Security Council removed his name from the 1267 list in 2010 and he was therefore deleted from the EU list in 2011. The General Court held that his action for annulment was devoid of purpose, and that there was no need for the Court to adjudicate on it because he had been deleted from the list by the European Council before his case reached judgment.

The Court of Justice followed the opinion of Advocate General Bot (see earlier blog dated 27 January 2013) and has decided that despite being removed from the list, his interest in the annulment proceedings continues, to allow him to try to obtain a declaration from the Court that he should never have been included on the list, and thereby some form of reparation and rehabilitation. The Court emphasised that impact on the rights and freedoms of listed individuals and their families as well as the reputational damage caused by placing a person on an EU sanctions list alleging association with a terrorist organisation, even where an applicant is already on a UN list.

This overturns the Court’s previous jurisprudence (in cases like Bredenkamp) to the effect that de-listed people have no continuing interest in annulment proceedings.  Mr Abdulrahim’s case has now been referred back to the General Court for it to rule on his application for annulment.

HMG ANSWERS PQ ABOUT EUROPEAN COURT RULE CHANGE PROPOSAL RE CLASSIFIED EVIDENCE

As our previous blog noted, Lord Pannick QC asked the British Government (in a parliamentary question) what assessment it had made of the proposal from the General Court of the European Union to permit the use of classified evidence in actions for annulment, and whether it will ensure public consultation on it given its potential impact on rights of defence and the rule of law.  
Baroness Warsi, the senior Minister for Foreign and Commonwealth Affairs, has given the following written answer: “The Court has not yet published its proposals for revisions to the General Court’s Rules of Procedure, although the Government are aware that these are currently being considered. The Government anticipate that proposals for revised Rules of Procedure will be published later in the year and will scrutinise the proposals in detail once circulated”.

THE UK HAS ASKED THE EU TO IMPOSE SANCTIONS ON HEZBOLLAH AS A TERRORIST ORGANISATION

The United Kingdom has asked the European Council to add Hezbollah’s military wing to the list of organisations on the European Union’s counter-terrorist sanctions.  According to the Financial Times and Reuters, this follows the preliminary results of Bulgaria’s investigation into a bomb explosion in Burgas in July 2012, killing 5 Israelis and 1 Bulgarian and injuring 32 others, which apparently indicates that Hezbollah organised the attack.  The EU will consider the UK’s request on 4 June 2013. If granted, it is likely to mean EU-wide asset freezes and travel bans for identified members of Hezbollah’s military wing.

GENERAL COURT SAYS SINGLE STANDARD OF JUDICIAL REVIEW FOR ALL EU SANCTIONS CASES – IRAN TRANSFO v COUNCIL

195px-european_court_of_justice_insignia-svgIran Transfo has won its case in the General Court of the European Union (Case C-392/11).  The Fourth Chamber of the Court (which hears most of the Iran sanctions cases) held on 16 May 2013 that the Council had made a manifest error in its assessment that Iran Transfo was involved in the construction of the Fordow (Qom) facility.  Although the Court held that the reasons given in the EU sanctions measures were clear enough to be understood, they were unsupported by any evidence.

There are two interesting aspects of the judgment.  First, the Court rejected the Council’s argument that there should be a less intense standard of judicial review for sanctions measures aimed at the policies of a regime (such as Iran) as compared with sanctions aimed at terrorist activities.  Second, the Court rejected the Council’s argument that it could not be expected to provide evidence because of the inherently secret nature of nuclear activities, and noted that the Council had not identified what evidence was confidential in this case.  The Court analysed the case law of the European Court of Human Rights on secret evidence (Chahal, Ocalan, Jaspers), and reaffirmed the principle that it is central to effective judicial review that the Council provides evidence justifying a designation, on the basis of facts existing at the time of the decision to add a company to the sanctions list.  The Council is making increasing reference to classified and confidential evidence, which may explain the General Court’s proposals for rule changes to deal with evidence of that kind (see previous blog on this issue).

The annulment of Iran Transfo’s listing came into effect after the two month time limit for the Council to appeal to the European Court of Justice expired, as this UK Treasury notice of 30 July 2013 makes clear.  Link to the judgment here (in French, not yet available in English).

IRANIAN BANKS AND EUROPEAN SANCTIONS

This article (by Maya Lester and Fred Hobson, Brick Court Chambers) in the Journal of International Banking and Financial Law discusses the position of Iranian banks and European sanctions.  It summarises the scope of sanctions on the Iranian banking sector, the recent European court cases concerning Iranian banks, and identifies issues likely to arise in the near future.

Link to the article (in English) here: JIBFL article.  Link to a Persian version of the article in the Tejarate Farda Journal (July 13th 2013) is here.

EUROPEAN PARLIAMENT PRESSES FOR SANCTIONS AGAINST RUSSIAN OFFICIALS

The European Parliament has been asking the European Council for some time to impose sanctions on Russian individuals said to have played a role in the death of Sergei Magnitsky.  Mr Magnitsky was the lawyer for Hermitage Capital Management Ltd and had alleged corruption amongst senior Russian enforcement officials  when he was arrested and died in prison in November 2009. There is evidence that he was tortured and beaten shortly before his death.

On 14 December 2012, President Obama signed into law the Sergei Magnitsky Rule of Law Accountability Act, which imposes asset freezes and visa restrictions on 18 Russian officials said  to have play a role in Mr Magnitsky’s death.  The Liberal Group of MEPs is now threatening to block legislation in the European Parliament unless the Council imposes European travel bans along similar lines.  Former Belgian Prime Minister Guy Verhofstadt stated that “the European Union should follow the US Congress and Senate in adopting a sanctions list. If the European Council fails to act in this regard, then the European Parliament should establish its own list based on the US Congress visa ban list“.