Russia’s Supreme Court will give judgment on an appeal brought by the proprietor of office premises in Russia leased to VTB Bank before VTB was subject to US, Canadian, and EU sectoral sanctions. VTB brought the claim for a declaration that it had validly rescinded this lease when sanctions were imposed. The first instance court held that the lease had been validly rescinded because the imposition of sanctions on VTB constituted “an exceptional and unforeseen circumstance…which the parties did not except while entering into the contract”, and its findings were upheld on appeal to the Court of Cassation. The case name is VTB v Luisa Bikmaeva (Case А39-5782/2015).
The House of Commons Foreign Affairs Committee has published a report on the UK’s relations with Russia (link to the report here) which addresses sanctions on Russia.
The report notes that the UK is one of the strongest western supporters of sanctions on Russia, that “recent developments in both the EU and US have put the future of the sanctions regime in doubt”, and that “its withdrawal from the EU might add weight to the voices of those inside the bloc who would like to see the sanctions eased or lifted”. It states therefore that:
“if the UK is determined to maintain a principled stance in relation to the sanctions on Russia, this may require uncomfortable conversations with close allies. The withdrawal of the existing sanctions should be linked to Russia’s compliance with its obligations towards Ukraine, and should not be offered in exchange for Russian cooperation in other areas… The challenge in this approach is that the practical effect of economic sanctions on Russian decision-making is doubtful. It looks as though it will be increasingly difficult to sustain a united western position on sanctions, not least if they becoming a bargaining point during Brexit negotiations”.
The committee calls on the international community to remain unified and that the FCO should continue to work closely with the EU to maintain support for Ukraine, whether through sanctions or otherwise. It notes that it is difficult to measure the impact of the sanctions on Russia’s economy, and heard from a number of witnesses who suggested that the sanctions may be cementing support for President Putin. It supported the introduction of “Magnitsky-style” sanctions against those responsible for gross human rights abuses in Russia, noting that “Russia’s actions demonstrating compliance with the rule of international law in Ukraine could be linked to the gradual removal of sanctions”. The report states that people associated with the Putin regime and responsible for human rights violations use British financial and legal services and have other links with the UK, and suggests introducing sanctions along the lines set out in the Criminal Finances Bill (which would allow the UK to seize the UK-held property of targeted people).
The Committee called on the FCO to clarify by March 2018 “how the UK will impose sanctions post-Brexit, explain whether Brexit would entail changes from the current sanctions regime and analyse the costs and benefits of the possible models for future UK-administered sanctions”. As noted in our previous blog, the UK government is to introduce a Bill on post-Brexit sanctions policy soon, and there is a House of Lords inquiry (blog here) on post-Brexit UK sanctions policy.
G7 foreign ministers have rejected UK Foreign Secretary Boris Johnson’s call for sanctions on Syrian and Russian military figures responsible for coordinating Syrian military efforts (see previous blog). Italian foreign minister Angelino Alfano said that there was no consensus for imposing the new sanctions, and the group concluded that an investigation into the attack was necessary before taking any such action.
UK Foreign Secretary Boris Johnson has said that G7 foreign ministers, meeting this week, would discuss the possibility of imposing further sanctions on some of the Syrian and Russian military figures responsible for co-ordinating Syrian military efforts. Speaking on his arrival in Italy for the talks, Johnson added that Russia has a choice to stick with the Assad regime or “to work with the rest of the world…to find a political solution for Syria”.
President Trump has renewed US sanctions on people and entities involved in malicious cyber-activities for 1 year, until 1 April 2018. The sanctions were introduced by President Obama in April 2015 (see previous blog), and were expanded in scope at the end of last year following allegations of Russia’s “aggressive harassment of U.S. officials and cyber operations aimed at the U.S. election” (see previous blog). 6 Russian people and 4 Russian entities are currently designated under these measures.
The ECJ has today answered questions the UK High Court referred to it (on which see previous blog) in the EU’s preliminary reference procedure asking for the ECJ to interpret some of the EU’s sanctions on Russia imposed in July 2014. The ECJ’s judgment is here; Case C-72/15. The EU Russia sanctions at issue are those imposing restrictions on some financial transactions and on the access of some Russian entities to EU capital markets, and on the export of some goods and technology and services required for oil transactions. The questions were referred to the ECJ in the course of a judicial review brought by Rosneft (the Russian oil and gas company) against the UK Government and Financial Conduct Authority (see previous blog for the background to this case). See previous blog for the Advocate General’s opinion in this case.
The ECJ judgment holds (link to the Court’s summary of its judgment here) that:
- It has jurisdiction to answer most of the questions on the validity of these restrictive measures, even though they are EU Common Foreign & Security Policy (CFSP) measures, because the ECJ has jurisdiction to consider whether CFSP measures comply with Article 40 TEU (which concerns institutional competence) and CFSP decisions imposing restrictive measures on natural or legal persons. The Court commented that the exclusion of jurisdiction for certain CFSP decisions should be “interpreted strictly” given the need to ensure effective judicial protection as part of the rule of law.
- The ECJ rejected Rosneft’s argument that the EU Council had encroached on the powers of the Commission and EU High Representative for foreign & security policy in breach of Article 40 by enacting these measures.
- These measures were not incompatible with the EU-Russia Partnership agreement because the EU institutions could take the view that they were necessary to protect essential EU security interests and to maintain peace and international security.
- The measures gave sufficient reasons and did not breach the principle of equal treatment or misuse the EU’s powers, nor did they amount to a disproportionate interference with Rosneft’s fundamental rights.
- Rosneft would have to have challenged the Council’s refusal to give full access to its file in an action for annulment before the General Court, not in a preliminary reference in the ECJ.
- The ECJ said the vagueness of some of the measures did not make them invalid for lack of certainty or prevent member states from imposing criminal penalties for breach, and gave interpretations of a few provisions:
- The power for authorities to grant an authorisation in Article 3(5) of Regulation 833/2014 must be understood as meaning that they had to ensure that the application of the first sub-para of Article 3(5) was without prejudice to the execution of contracts concluded before 1 August 2014.
- The measures on “financial assistance” in Article 4(3)(b) do not include the processing of a payment by a bank or other financial institution.
- Article 5(2) prohibits the issuance of Global Depositary Receipts pursuant to a depositary agreement concluded with one of the entities listed in Annex VI where those GDRs represent shares issued by one of those entities before 12 September 2014.
Ukraine has prohibited Russia’s Eurovision contestant from entering the country, preventing her from taking part in the competition that is due to be hosted in Kiev in May this year. The singer, Julia Samoilova, said that she performed in Crimea in 2015; Ukraine has accused her of entering Crimea illegally, having entered the country from Russia and not through Ukraine. Leading Russian politicians have called for the contest to be boycotted.
Ukraine is reported to have proposed sanctions on 5 Ukrainian subsidiaries of Russian banks in which the Russian state has an interest (Sberbank, VTB, Prominvestbank, VS Bank). According to an official from Ukraine’s central bank, the sanctions prevent the subsidiaries from removing capital from Ukraine.