EU CONTINUES SANCTIONS AGAINST REPUBLIC OF MOLDOVA

The European Union imposed restrictive measures against the leadership of the on region of the Republic of Moldova in September 2010, consisting of a travel ban on a list of people “responsible for the design and implementation of the campaign of intimidation and closure against Latin-script Moldovan schools in the Transnistrian region of the Republic of Moldova”. These measures were amended in September 2012, and have just been extended for another year by Council Decision 2013/477/CFSP of 27 September 2013.

 Links to all the current European sanctions (including those against Moldova) are on the ‘EU sanctions in force’ section of this blog.

 

RECENT EUROPEAN COURT JUDGMENTS ON IRANIAN SANCTIONS

195px-european_court_of_justice_insignia-svgAs per our previous blog, there are a number of new European court judgments on the designations of Iranian banks, shippers and other Iranian companies in EU sanctions.  The following are a few thoughts about these judgments.

Reasons

The Court’s approach is to look at each of the reasons the Council gives for including each company in the EU restrictive measures.  If all of the reasons are too vague to comply with the Council’s obligation to give clear and specific reasons, the Council will annul that company’s listing (this happened in the case of Bank Refah Karagan).  However, if even one of the reasons is sufficiently specific and is an independent reason for that company’s inclusion, the Court will not annul a designation on the grounds that other reasons are too vague.  However, the Court only permit the Council to rely on the good reason in considering the other grounds for potential annulment (see below).

Evidence

Having eliminated any reasons that fall short of the Council’s duty to give reasons, the Court then considers whether the Council has presented any evidence to support the remaining reasons.  In line with the approach of the Court of Justice in the recent Kadi 2 judgment (see previous blog post), the Court will annul the listing if the applicant challenges the factual basis for the reasons and the Council cannot support the reasons with supporting evidence.  For that reason, the Court has held that the Council cannot support the listings of IRISL, 16 companies listed as IRISL subsidiaries, Khazar Shipping Lines, Good Luck Shipping, Iran Insurance Company, Iran Offshore Engineering & Construction Co., Post Bank Iran, Export Development Bank of Iran, Bank Refah Kargaran, and Persia International Bank.

The Court rejected the Council’s argument that it cannot be expected to adduce proof of involvement in nuclear proliferation given its clandestine nature.  The Court said (eg in the Post Bank case) that the fact of adoption of sanctions presupposes that there is evidence demonstrating that the person or entity concerned is involved in nuclear proliferation. In the IRISL judgment, the Court said that the mere risk of involvement in proliferation in the future is insufficient, there must be evidence of actual past involvement.

Two comments:

  1. Although these cases are important (politically as well as legally) their significance may be limited by the fact that most of them concern listings in 2010, when the criteria for designation on the EU’s Iranian sanctions  required some kind of support for nuclear proliferation.  The newer Iran sanctions are broader and require only connection with the Iranian government (the IRISL judgment comments that “If the Council is of the opinion that the applicable legislation does not enable it to intervene in a sufficiently effective manner in order to combat nuclear proliferation, it is open to the Council to amend in its role as legislator – subject to a review of lawfulness by the Courts of the European Union – so as to extend the situations in which restrictive measure may be adopted” – and the Council has done so).
  2. It may be that the Fourth Chamber is taking a slightly different approach from other chambers of the Court in sanctions cases, eg the Sixth Chamber which has decided the recent Syrian cases (see previous blog).  In those cases the Court does not seem to have required actual evidence that e.g. individuals are responsible for suppressing the protest of the Syrian people (the relevant listing criterion) but has permitted the Council to rely on presumptions of connection with a regime.

Secret evidence?

There has been talk of changing the Court’s rules to permit the Council to rely on confidential evidence – see previous blogs.  In the recent Iran cases, the Council (supported by the UK) has argued that it cannot submit evidence where it “comes from confidential sources”, and that the Court’s review should be limited to whether the Council’s grounds for listing a company are “plausible”. The Court has rejected both arguments on the basis that the effective judicial review requires it to see all the evidence, but there are hints again that “overriding considerations pertaining to the security of the European Union or of its Member States or to the conduct of the international relations” may preclude disclosure to listed entities, and the Court has  pointed to one of its Rules of Procedure (Article 67(3)) that it says permits it to review the legality of the denial of access to a document in the Council’s file “without communicating that document to the entity concerned”.

Rights of defence

The Court has rejected most other arguments in these cases, including those based on the legal basis and proportionality of EU sanctions against Iran.  On rights of defence, the Court has now said that:

  1. There is no right to an oral hearing in the Council for listed people and entities.
  2. A failure by the Council to notify an entity individually of its listing will not in itself result in an annulment.
  3. Failing to show a party a document on which the Council has relied will also not in itself result in an annulment unless the measure “could not have been lawfully adopted or maintained if the document that was not communicated had to be excluded as inculpatory evidence”.
  4. The Council is wrong to say that an entity that is a “State emanation” cannot rely on rights of defence, or that people / companies on the Iran sanctions lists have no rights of defence because they are listed as part of a “category”.

Guidance on scope of sanctions

Finally, there is some helpful commentary from the Court on various aspects of the Iran sanctions measures, in particular:

  1. In the EIH judgment on authorisations / licences from Member States and on the circumvention provisions.
  2. In the Persia International Bank judgment on what it means for a company to be “owned or controlled” by another (60% capital ownership by Bank Mellat was insufficient to constitute ownership / control in that case).

EU TO LIFT SANCTIONS ON ZIMBABWE MINING COMPANY

imagesCATZL9VGOn 17 September 2013, the EU announced that it had begun the process of lifting sanctions against the Zimbabwe Mining Development Corporation (ZMDC). The EU Regulation and Decision removing the ZMDC were published on 23 September 2013.

The EU suspended an asset freeze and travel ban against 81 individuals and 8 companies on 25 March 2013 in recognition of a “peaceful, successful and credible vote to approve a new constitution”, although sanctions against Mugabe and 11 others remained in place (see earlier blog post). This included ZMDC which was alleged to have provided funds to the ruling ZANU-PF party. On 21 August 2013, EU foreign ministers decided to continue these sanctions for a further six months (see earlier blog post).

ZMDC operates five joint-venture mines in the Marange diamond fields and produced 8 million carats of diamonds in 2012 generating $685 million in revenue. Belgium, the centre of the global diamond trade, has been pushing the EU to remove ZMDC from the sanctions list, which would enable the firm to sell its diamonds in the EU and raise large amounts of tax revenue in Zimbabwe. However, other EU countries, including the UK, have advocated a more cautious approach

The move has come despite controversial elections in Zimbabwe on 31 July 2013 which were won overwhelmingly by Robert Mugabe but were marred by allegations of fraud and other irregularities. The Southern African Development Community determined that the elections were largely “free and peaceful” (see earlier blog post). However, EU officials have expressed concerns about issues highlighted by election observers and have said that they raise “serious questions about the fairness and credibility of the process”. They have however concluded that there is no evidence that ZMDC’s activities were linked to violence during the election period.

EUROPEAN COURT HANDS DOWN 11 IRANIAN SANCTIONS JUDGMENTS, MOSTLY ANNULLING SANCTIONS AGAINST BANKS AND SHIPPERS

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The Fourth Chamber of the General Court of the European Union (the judges that have decided most of the European Iran sanctions cases so far) has handed down 11 judgments on Iranian sanctions over the past two weeks.  In almost all of them, the applicants have won their applications for annulment, the Court holding that the European Council did not have any evidence to support its reasons for adding them to the European sanctions list.

All of the following have succeeded in this latest tranche of cases (click on each to access the judgment):

Shipping: The Islamic Republic of Iran Shipping Line (IRISL) & 16 companies listed as IRISL subsidiaries, Khazar Shipping Lines, Good Luck Shipping (see previous blog), Naser Bateni (who worked for a shipping company).  [Maya Lester acted for IRISL and Good Luck Shipping Company]

Insurance/construction: Iran Insurance Company, Iran Offshore Engineering & Construction Co.

Banking: Post Bank Iran, Export Development Bank of Iran, Bank Refah Kargaran, Persia International Bank.

A previous version of sanctions against Europaisch-Iranische Handelsbank was annulled (but not the amended version). Bank Melli Iran lost its case (its second challenge in the European court), as did a number of banks listed as Bank Melli Iran’s subsidiaries.

NB these cases do not mean that the companies have become de-listed straight away.  The orders annulling their listings do not take effect until the time period for the European Council (the defendant) to appeal against these judgments has expired (2 months and 10 days from the date of the judgments).  So it is possible that the Council will appeal and/or will re-list some or all of these companies in a way that tries to comply with the Court’s judgments.

Some thoughts on these judgments will follow shortly…

EUROPEAN COURT REJECTS CHALLENGE TO SYRIAN SANCTIONS

assadOn 13 September 2013, the General Court of the European Union in Luxembourg upheld EU sanctions imposed on two Syrian nationals, Eyad Makhlouf and Issam Anbouba.

The European Council first imposed restrictive measures against Syria on 9 May 2011, including an arms embargo, travel bans, and freezing the funds and economic resources of people responsible for “the violent repression of the civilian population in Syria”.  Sanctions against Syria have extended since then, most recently for a further 12 months in June 2013   (see previous blog posts here).

Eyad Makhlouf, an officer in the Syrian army, was included on the list on 23 May 2011 and Issam Anbouba, the president of an agro-industrial company, was added on 2 September 2011.  Mr Makhlouf was included on the grounds that he is the brother of Rami Makhlouf, and is an army officer involved in violence against the civilian population.  Mr Anbouba was included on the grounds of his position as president of an agro-industry company, and for providing “economic support for the Syrian regime”.

The Court dismissed the actions for annulment brought by the applicants, and found that the European Council:

  • Did not infringe the rights of defence of either applicant by including them on the list, even though neither of them had received individual notification of their inclusion, because they were able to bring actions before the European court.

  • Had given specific enough reasons for including both individuals to allow them to know why they had been included.

  • Had not erred in its assessment that either of them should be included.

On the last point, it is arguable that the approach of this Court (the Sixth Chamber) differs somewhat from some of the Court’s previous case law, and from the approach of the recent Iranian judgments decided at the same time (which will be the subject of other blog pieces), in the following respects.

In a number of recent Iranian nuclear proliferation cases, a different chamber of the Court has held that the Council may not maintain designations where applicants refute the factual basis for their inclusion and the Council cannot supply evidence to support its assertions.  In these Syrian cases, by contrast, the Court has emphasised the Council’s broad discretion over the Council’s judgments in including people on sanctions lists, the limited role of the Court, and has permitted the Court to rely on rebuttable presumptions against individuals rather than evidence that they have engaged in prohibited conduct.

By contrast to the Tay Za case in which the Court would not permit presumptions that businessman in Burma/Myanmar must be connected with the regime, in relation to Mr Anbouba, the Court found that it was reasonable for the Council to assume that, as a leading businessman in Syria, he supported the Syrian regime on the basis that he could only have succeeded in business if he was receiving favours from the Assad regime and providing some support in return. Presumably the Court is also assuming that a connection with the Assad regime equates to the requirement that a person be responsible for the violent suppression of the civilian population in Syria if he is to be included on the list.

The Court also considered both listing decisions to be proportionate when considered in light of the repression that President Assad has carried out against the Syrian population and the objectives of these restrictive measures.

Links to the judgments are here: (Case T-383/11 Eyad Makhlouf v Council), (Cases T-563/11 and T-592/11 Issam Anbouba v Council) and the European Court’s summary press release (in English) is here. The applicants have two months and 10 days in which to appeal to the European Court of Justice.  Links to the current EU sanctions against Syria are on the blog here.

EUROPEAN COURT REFUSES TO SUSPEND SANCTIONS PREVENTING IRANIAN GAS COMPANY FROM PERFORMING CONTRACTS

Iran Liquefied Gas Company, which challenged its inclusion in the European Union’s sanctions against Iran, asked the European Court to suspend operation of the provisions that prevent it from performing contracts with European companies until its annulment action has been heard by the European court, because EU sanctions prevent it from completing the construction of a liquefied natural gas production plant.

There are two notable parts of the Order of the President of the General Court (dated 29 August 2013) in Case T-13/R (link here) refusing that application.  First, the Court said that in principle it has the power to grant “interim measures” in order to safeguard a party’s interests during the course of legal proceedings (although it has never done so in a sanctions case, as far as I am aware).  It refused to do so in this case because the Court found that the company’s challenge to the provision preventing it from performing contracts was inadmissible (it had been raised too late and in relation to the wrong provisions).

The Court distinguished (I think for the first time) between the “personalised” aspects of the EU’s sanctions regime (by which it means the provisions freezing the funds of a targeted lists of individuals and companies) and the more recent “objective” parts, which impose a complete commercial embargo on certain goods.  The latter are not “targeted” or “smart” sanctions.

EUROPEAN COURT ANNULS SHIPPING COMPANY’S INCLUSION ON IRAN SANCTIONS LIST

195px-european_court_of_justice_insignia-svgThe General Court (Fourth Chamber) has annulled the EU’s restrictive measures on Good Luck Shipping LLC, a shipping agency based in Dubai, which had been included on the list on the basis of an allegation that it acted on behalf of the Islamic Republic of Iran Shipping Lines (IRISL) and two other designated entities.

The Court has said that it was wrong for the Council to have included Good Luck Shipping on the list because it had not provided any evidence to substantiate its allegations.  The Council had relied only on proposals from two Member States requesting that Good Luck Shipping be sanctioned, and reports of meetings of a Council working group and a note to Coreper which did not contain details or evidence relating to that company.  The Court would not permit the Council to rely on unsubstantiated allegations read out from the internet without notice at the oral hearing.

A link to the judgment is here.  The Court will hand down its judgment about IRISL’s own listing on 16 September 2013.  Maya Lester acts for Good Luck Shipping.