Foreign policy sanctions and criminal law harmonisation

 

Professor Steve Peers, Royal Holloway University of London

Photo credit: Pierre Blaché, via Wikicommons

*This blog post draws upon and updates research for the 5th edition of EU Justice and Home Affairs Law (OUP, 2023)

Late last year, the EU Member States and the European Parliament agreed upon a Directive to harmonise criminal law as regards EU foreign policy sanctions.  (Update: the Directive was officially adopted in April 2024, and published in the EU Official Journal afterwards) This followed barely a year after the EU Council adopted a decision to extend EU criminal law competence to cover those sanctions. This blog post updates a previous post that discussed both the 2022 decision on competence and the initial Commission proposal for a Directive that has now been agreed in principle.

The Decision extending competence

As noted in the previous post – and discussed in more detail there – the 2022 Decision extending EU competence was the first use of the EU’s power to extend the list of crimes which it had competence to harmonise, as set out in Article 83 of the Treaty on the Functioning of the European Union (TFEU). The previous list of crimes was: ‘terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime’.

That competence involves not only the ‘definition of criminal offences’ but also ‘sanctions’, ie the length of jail terms and/or other sanctions that can be imposed as part of the criminal law. However, these are ‘minimum rules’ – meaning that Member States can add to them as part of their criminal law.

Since the Treaty of Lisbon entered into force in 2009, the EU has adopted Directives regarding most of the ten Eurocrimes, in most cases replacing older forms of EU law adopted before the Treaty of Lisbon entered into force. The exceptions are arms trafficking, corruption, and organized crime – although there are pre-Lisbon EU laws concerning the latter two crimes, a proposal from 2023 to update the law regarding corruption, and other EU legislation concerning firearms that falls short of adopting criminal sanctions for arms trafficking. In any event, as we shall see, some arms trafficking will fall within the scope of the newly agreed EU Directive on criminal law and EU foreign policy sanctions.

The legal context: EU foreign policy sanctions

As discussed in more detail in the previous blog post, there is a body of EU law already in this field, based on the EU’s powers to adopt Decisions on foreign policy sanctions (along with other foreign policy issues) on the basis of Article 29 of the Treaty of European Union (TEU), alongside Article 215 TFEU, which provides for most of those foreign policy sanctions to be paralleled in the form of ordinary EU law (in practice, Regulations).

Although Article 215 provides for qualified majority voting of Member States in the Council, the effective rule is actually unanimity, for that is the rule which applies in the foreign policy provisions of the TEU (with marginal exceptions) to the adoption of the EU foreign policy measures which the Article 215 legislation gives effect to.  The Commission proposed a few years ago to drop unanimity here, but Member States didn’t bite. (They would have to agree unanimously to change the voting rule).

Over the years, there have been a lot of EU foreign policy sanctions and a lot of litigation – mostly direct challenges to the validity of the sanctions measures by the persons or companies (or even the States) concerned by them in the EU General Court. That Court’s judgments can be appealed to the CJEU; and national courts have occasionally asked the CJEU about the interpretation or validity of sanctions decisions too. (Although in general the CJEU has no jurisdiction over EU foreign policy measures – an exception which the Court has been slowly eroding for awhile – as an exception to the exception, the CJEU has its normal jurisdiction over foreign policy sanctions: see Article 275 TFEU).

The details of the Decision

A key point about the Decision extending EU competence is that it applies only to the breach of EU foreign policy sanctions. So the Decision does not give the EU power to harmonize criminal law as regards the breach of purely national foreign policy sanctions. The recently agreed Directive respects this distinction, applying only to EU sanctions.

However, the competence – and the recently agreed Directive – are not limited to breach of EU foreign policy sanctions relating to the Russian invasion of Ukraine, even though that invasion was the reason why the Decision and the Directive were adopted and agreed. In fact, the Commission proposal for the Decision noted that the EU has forty sanctions regimes, applying not only to countries but also ‘targeting proliferation and use of chemical weapons, cyberattacks, human rights violations and terrorism’. (For more details, see the Council website, especially its sanctions map). The anti-terrorism sanctions have been around for awhile, attracting high profile litigation such as cases involving Mr Kadi or Hamas; the human rights sanctions are fairly new, but will sometimes cross over with other sanctions – see, for instance, the sanctions against Putin’s erstwhile allies, the Wagner Group, for human rights breaches (along with links to other EU sanction measures).

In terms of the type of sanctions covered, the preamble to the Decision, as well as the recently agreed Directive, also makes clear that this is broad, applying not only to economic sanctions such as restrictions on trade or financial relations, but to bans on entry into the territory (which are also already given effect to by listing the sanctioned people in the Schengen Information System) and to arms embargoes. 

The agreed Directive

Basic rules

The recently agreed Directive has similarities to other Directives in this area – see, for instance, the Directive on harmonization of criminal law as regards terrorism. But there are also some new elements compared to other Directives; and in any event, it is the EU’s first foray into adopting criminal law relating to EU foreign policy sanctions.

It should be stressed that (as the preamble to the Decision confirms) the Directive will not make breaches of EU foreign policy sanctions criminal for the first time in most Member States. Just as with issues like terrorism and drug trafficking, these were already crimes in most national laws before EU law came along. But the details of the national laws probably differed more before the EU got involved; the point of the EU’s involvement is to harmonize the national laws somewhat. 

Member States will have to apply the Directive one year after its formal adoption (update: the deadline in the published Directive is 20 May 2025). This is longer than the six months proposed by the Commission, but less than the two year deadline usually applicable to Member States applying Directives.  

As noted already, just like the Decision on competence, the Directive will not be limited just to sanctions against Russia, but will apply to EU foreign policy sanctions across the board.

Denmark has an opt out of EU criminal law adopted after the Treaty of Lisbon, while Ireland opted in.

Definition of crimes

The agreed Directive will require Member States to criminalize nine types of breach of EU sanctions, which can be summarised as: making funds available to sanctioned persons; failing to freeze funds of sanctioned persons; enabling the entry or transit of a person covered by an entry ban deriving from EU sanctions (in effect, an immigration law offence that might overlap with the pre-existing EU law on facilitation of illegal entry and residence – itself subject to a recent proposed replacement); entering into transactions with sanctioned entities; trading in goods or services covered by EU sanctions; providing financial services despite an EU law sanction; providing other services banned by sanctions law; circumvention of sanctions; or abusing exceptions to the sanctions laws.

Member States will have an option (not in the Commission proposal) to exempt from criminalisation breaches involving sums less than €10k, although where multiple such minor breaches are linked, Member States must accumulate them so that they might reach the €10k threshold that way. (This threshold does not apply to entry bans, presumably because a financial threshold is irrelevant)

In every case, an intentional breach will have to be criminalized; and in one case (trade in arms or dual use goods subject to sanctions), ‘serious negligence’ resulting in the breach will have to be criminalized too. The Commission had proposed that ‘serious negligence’ should be criminalised in most cases.   

There is a novel clause on the position of lawyers advising those accused of sanctions breaches, which differs somewhat from the Commission’s proposal:

Nothing in paragraph 1 shall be understood as imposing an obligation on legal professionals to report information that they receive from, or obtain on, one of their clients, in the course of ascertaining the legal position of their client, or performing the task of defending or representing that client in, or concerning, judicial proceedings, including providing advice on instituting or avoiding such proceedings

There is also an exemption for goods or services provided for persons in need or humanitarian aid, although usually EU sanctions law has its own exceptions for those cases anyway.

Inchoate offences of incitement and (in most cases) attempts are also criminalized, as is aiding and abetting.

Penalties

Member States will have to provide for a maximum possible penalty of at least five years for most of the main offences (not the inchoate offences), and one year for most of the rest of the main offences – subject to a threshold of €100,000 being involved (which can again be satisfied by a linked series of offences). No financial threshold will apply in two cases: breaches of entry bans and trade in sanctioned arms or dual use goods. Furthermore, a three year maximum possible penalty applies to breaches of entry bans.

More generally, as regards the commission of any of the offences defined by the Directive, Member States will be obliged to provide for additional penalties, such as fines, withdrawal of permits, and even (a novelty for EU criminal law) a temporary ban on running for office.

Legal persons are subject to liability, too, and must be subject to penalties such as shutting down the business or withdrawal of its licences. This is a longer list than usually provided for in EU criminal law Directives. The Directive will go further than usual in specifying the amount of possible fines, including basing them on annual turnover (a method previously applied in non-criminal areas of EU law, such as competition law and the GDPR).

Criminal liability must be aggravated in certain cases (such as organized crime, breach of duty by a public official or a professional, obstruction of justice, or prior convictions in this field), and mitigated in others (where the offender ‘flips’ on his or her criminal associates).

Other provisions

Criminal jurisdiction would apply, as usual under EU criminal law Directives, to acts committed on the territory, on a ship or aircraft with a national flag, or by nationals. Member States will have an option to apply liability to habitual residents.

Unusually, there will be rules on limitation periods, ie when Member States would be out of time to bring a prosecution or enforce a sentence. In most cases the limitation period would be five years, with a possibility for derogation to at least three years where the period can be interrupted by specified acts. Previously Member States have only agreed to regulate this issue via EU law as regards fraud against the EU budget (although the agreed Directive on environmental crime contains limitation rules, and the proposal on violence against women would also address this point).

Finally, there would be links to other EU law (besides, obviously, the sanctions laws themselves). The proposal would link up with EU criminal law on money laundering and confiscation (the latter now also being amended), plus there is a novel link to the EU legislation on whistleblowers: that law must also apply to protect those in a company or organization who tip off the authorities about breaches of sanctions. Conversely, there is no proposed amendment of the law on the European Arrest Warrant – even though breach of EU foreign policy sanctions is not on the list of crimes where the dual criminality condition for extradition must be waived. However, prosecution or sentences for sanctions breaches will sometimes fall within areas where dual criminality has to be waived (like terrorism or organized crime); and the dual criminality condition is more likely to be met as a result of the harmonization Directive anyway (it may even be met already, simply by virtue of the foreign policy sanctions measures themselves). 

Comments

It is hard to assess the likely impact of the Directive, for several reasons.

First of all, it is difficult to see what impact the Directive will have in practice without more detail on what changes would be made to national law as a consequence of its adoption. As noted already, while the Directive will bring about some harmonisation, Member States already have some criminal laws on the books in this field.

Secondly, a key issue with criminal law – just as with non-criminal forms of regulation of conduct – is that its effectiveness depends upon the resources and expertise necessary to investigate and bring prosecutions. On this point, the prospect of extending competence to the European Public Prosecutor’s Office (EPPO) to include breaches of EU foreign policy sanctions was raised by the German and French justice ministers. This would be important but has not been raised again since the Directive was proposed. (Extensions of EPPO competence need unanimous agreement of Member States, although some Member States have opted out of the EPPO; the Commission’s proposal to extend its competence to terrorism has not been agreed so far).

An extension of EU competence might be seen as an EU power-grab, but it is notable that it is an exception: over fourteen years after the Lisbon Treaty came into force, it is the only such extension of competence to date. By contrast, as noted above, Member States have not yet agreed an earlier proposal to extend the list of Eurocrimes to cover hate speech and hate crimes, or agreed the proposal to drop unanimous voting for some foreign policy measures; nor have they agreed to drop unanimity in a number of other areas which the Commission proposed years ago.  

It is striking to see some novel points (for EU criminal law) in this Directive: the specific rule on lawyers; the penalty of a ban on running for office (obviously relevant because politicians might be tempted to, and be in a position to, breach the sanctions); the more detailed regulation of financial penalties a la other areas of (non-criminal) EU law; the obstruction of justice point; and the link with the whistleblowers law. It is only the second time that the EU has agreed to regulate limitation periods (although the revised environmental crime directive, also including similar provisions, was agreed essentially simultaneously).

It is also significant to see the singling out of arms trade in breach of sanctions for stricter treatment in several respects, given the EU’s reluctance to regulate this issue as a Eurocrime to date. In the context of foreign policy sanctions, it makes sense to treat the arms trade more seriously, given its more direct contribution to the death and injury which the EU sanctions aim to end.

The extension of competence is also best understood as part of the EU’s response to the Russian invasion of Ukraine – which has also prompted developments as regards the start (in principle) of accession negotiations, the use of EU defence powers, and the first-ever use of the long-dormant temporary protection Directive. By itself, the extension of EU competence and the use of those criminal law powers will not end the invasion – and, as noted already, the agreed Directive applies to other EU sanctions too. Nor does it address the criticism that that those sanctions are too little and too late. But it may make some contribution to the effective implementation of those sanctions which have been established to oppose the invasion, and in any event it sends a political message that the EU is stepping up their enforcement.

The son of a leading businessperson under the Russian sanctions framework before the CJEU: Ongoing relevance of the Tay-Za case law

 

 By Antje Kunst*

Photo credit: Alvegaspar, via Wikicommons media

Many challenges before the EU General Court of listings or re-listings of Russian oligarchs and their immediate family members have been unsuccessful in recent past. 

However, on 29 November 2023, a second de-listing application of Alexander Pumpyanskiy before the EU General Court was successful (Case T‑734/22 Pumpyanskiy v Council, ECLI:EU:T:2023:761 only available in French). This came after a first application was unsuccessful (Case T-291/22 Pumpyanskiy v Council, EU:T:2023:499 only available in French).

Alexander Pumpyanskiy is the son of Dmitry Pumpyanskiy, a Russian billionaire and founder of TMK, a leading producer of pipes for the oil and gas industry in Russia.  Sinara Group is a Russian investment company. Dimitry, the primary target of the designation criteria, and his wife have separate cases before the Court.

Introduction

The basis for Mr. Pumpyanskiy’s initial listing stemmed from his association with his father, Dmitry, through their roles in TMK and the Sinara Group. He was also said to provide support to and benefit from the government of Russia. In his first case the Court held that the positions in the two companies ‘undoubtedly gave him a power of influence and responsibilities within those undertakings’. His family relationship and business ties with his father were sufficient to show that he was associated with him.

Regarding his re-listings in Case T-734/22, after periodic reviews, the EU General Court found that the criterion of association was no longer fulfilled as the applicant had resigned from his positions within the Sinara group and TMK on 9 March 2022 following his initial listing. The only remaining connection to his father was his familial tie, which the Court deemed insufficient for an association in this particular context. Furthermore, the General Court ruled that his former roles were insufficient evidence to demonstrate ongoing ‘support for the government’. The Court only dismissed his request for damages

This ruling from the General Court within the context of Russian sanctions offers valuable insights into the Court's approach in how it will address future challenges of listings or re-listings by immediate family members of leading Russian businesspersons.  It also appears that the Prigozhina case, the case of the mother of the late Chef of the Wagner Group Yevgeni Prigozhin (Case T-212/22, Prigozhina v Council, EU:T:2023:104) continues to be important case law on which the Court will rely regarding applications of immediate family members of Russian oligarchs.

Ceasing of business relationship with primary target

In the case at hand the Court recalled that the applicant's name was initially listed on the grounds that he was related to his father, by reason of their family relationship and their business relationship, i.e., their respective activities within the TMK company and the Sinara group.

The General Court found that since the applicant had ceased his functions on 9 March 2022, i.e., six months before the adoption of the first maintenance measures, one year before the adoption of the second and one and a half years before the adoption of the third, such past functions, could not, by reason of the length of time, justify, on their own, the maintenance of the measures. The past functions alone were deemed insufficient to establish a link of association with his father within the meaning of the criterion (g). (para. 61 of the Judgment)

Mere family relationship insufficient

The General Court determined that, at the time of the applicant's re-listing, there was no evidence of ‘economic or capital ties’ or ‘common interests’ between the applicant and his father which are necessary for fulfilling the criterion of association. Relying on its case law of Tay Za v Council (C-376/10 P, ECLI:EU:C:2012:138) regarding associated family members the listing was effectively grounded solely on the family tie between him and his father which was considered insufficient.

Ongoing relevance of Tay Za case law

The Court accepted the Council’s argument that the sanctions framework was different in the present case than in the Tay Za case related to the regime of Myanmar, however it considered that notwithstanding that, the case-law of Tay Za could be applied mutatis mutandis, to the applicant's situation. (paras. 62 to 64 of the Judgment)

This underscores the ongoing relevance of the Tay Za case law, also within the context of Russian sanctions. It appears to enable sons and daughters who have been listed under the criterion associated with leading businesspersons operating in Russia to be successful with their challenges of their listings or re-listings when resigning from company positions in which the primary sanctioned individual is or was involved.

Without association no risk of circumvention established

The General Court found that the Council had not established a risk of circumvention making the exact same findings as in the Prigozhina case on the ground that there was no association. (see paras. 54, 68-71 of the Judgment)

The General Court like in Prigozhina accepted that there was a ‘non-negligible risk’ that individuals providing support to the government, e.g., leading businesspersons, might exert pressure on individuals associated with them, e.g., their family members, in order to circumvent the effect of the measures imposed on them. (see para. 105 of Prigozhina case) However in the case at hand association to a leading businessperson had not been established.

In the Syrian sanctions framework it was expressly provided for ‘leading businesspersons operating in Syria’ and ‘members of the Assad or Makhlouf families’ and ‘persons associated with them’. The familial connection with these families might be adequate to include individuals' names on the lists using the criterion of 'association with members of these families.' (para. 70 of the Judgment) In Pumpyanskiy's case, the relevant legal framework did not include 'members of certain families' among the listing criteria.

The importance of being up-to-date

As in other sanctions cases in which applicants succeeded with their de-listing applications, the Court made clear how important an up-to-date statement of reasons and up-to-date evidence is. In the court proceedings the Council relied, to justify the re-listings, on matters on which it did not rely when it adopted the contested measures. Regarding the Council’s claim that the applicant continued to be involved in TMK’s foreign subsidiaries after resigning from his company roles the Court ruled that this assertion was absent from the statement of reasons. Some evidence the Council provided post-dated the contested measures and was therefore dismissed. (see paras. 74 and 76, 77 of the Judgment). Other evidence was not regarded as sufficiently concrete and precise.

Material or financial support to the Government of Russia

The Court also found that the Council could not assume, merely because the applicant was chairman and a member of the board of directors of the Sinara group or a member of the board of directors of the TMK company when his name was initially entered on the lists at issue, that he could be classified as a natural person who provides material or financial support to the Government of Russia, even several months after leaving such functions. That would lead to the applicant's situation being frozen and to the periodic review exercise being deprived of any useful effect. (para. 85 of the Judgment)

In line with previous case law the General Court held that the ceasing of exercising functions within a structure did not in itself imply that former functions in companies were irrelevant, as past activities could influence behaviour. However, taken in isolation, a person's former functions could not justify the listing. If the Council intended to rely on past activities, it needed to provide serious and corroborating evidence in support of its view that the applicant maintained links with the companies in question on the date on which the contested measures were adopted. (para. 87 of the Judgment)

Conclusion

In this case the Council failed to convincingly prove that the applicant maintained ties with his father and the companies in question after stepping down from his roles in those companies at the time of his initial listing. In future similar cases, the Council might be able to furnish convincing up-to-date evidence and establish that the family member in question remained connected to the primary targeted individual by for example ‘common interests’.

This case shows that there must a complete cutting off of business ties with the primary targeted individual in order to be successful before the Court and in order not to risk a further listing by the Council on the basis of association.

The Court was correct in requiring an up-to-date statement of reasons and up-to-date evidence to support a continuous involvement of the applicant in TMK, e.g., in TMK’s foreign subsidiaries. The result might be though that the Council in Pumpyanskiy's case decides to update the statement of reasons and use the evidence which post-dated the contested measures in support of a new listing. This might be then the subject of further litigation before the General Court which is already swamped with sanctions cases.

The risk of circumvention might be considered by the Council as significant in many Russian sanctions cases. However, fact remains in the absence of a presumption of circumvention by immediate family members and the Council failing to provide convincing evidence which establishes association and a risk of circumvention, immediate family members of leading businesspersons will be successful before the Court.

What role the Council’s introduction of the new listing criterion of ‘immediate family member of leading Russian businesspersons operating in Russia’ can and will in the future play in all of this remains to be seen. On this point see my previous post: ‘The risk of circumvention of EU sanctions through the immediate family of leading businesspersons and the case law of the CJEU’.

 

*Antje Kunst is an international lawyer and a member of Pavocat Chambers advising and representing individuals in a wide range of matters in the field of the EU’s Common Foreign Security Policy (CFSP) and takes instructions from individuals for challenging EU and UN sanctions before the EU courts and international bodies.

The risk of circumvention of EU sanctions through the immediate family of leading businesspersons and the CJEU’s case law

 

 

Antje Kunst*

*Antje Kunst is an international lawyer and barrister of Pavocat Chambers, admitted to the bar of England and Wales and the Bar of Berlin advising and representing individuals in a wide range of matters related to the CFSP ranging from EU employment cases to EU and international sanctions against individuals.

***Comments of academic researcher of the University of Luxembourg, Ms. Francesca Finelli were gratefully received. All views contained in this article, however, remain those of the author alone.

Photo credit: W Bulach, via Wikimedia Commons

 

The inclusion of family members in the categories of persons covered by EU targeted sanctions against Russia has been justified, in the Council’s view, for maximising the effectiveness of those sanctions. The inclusion of family members of leading businesspersons aims to prevent the circumvention of EU targeted sanctions (in the forms of asset freeze) by the transfer of assets between targeted leading businesspersons and their immediate family.

Updating the EU sanctions regime against Russian businesspersons

 

The EU's targeted sanctions against Russia's economic elites introduced on 5 June 2023 a short but significant amendment to its current sanctions regime. It extended the scope of the sanctions regime through Council Decision (CFSP) 2023/1094 (‘Council decision of 5 June 2023’) to permit the designation of immediate family members of leading Russian businesspersons operating in Russia. There are in other words now EU legal acts in place which allow for the adoption of EU sanctions against the sons and daughters, spouses and parents of Russian oligarchs based on the autonomous designation criterion of immediate family members of leading Russian businesspersons operating in Russia. (In 2015 the Council introduced the ‘leading businessperson operating in Syria’ as an autonomous general listing criterion. See Council Decision (CFSP) 2022/329 and Council Regulation (EU) 2022/330 of 25 February 2022 on the criterion of ‘leading businesspersons’.) Family members of Russian leading businesspersons have been put on the lists since early 2022 but under different grounds.

The Council’s reason for the recent amendment, undoubtedly owing to the initial rulings on Russian sanctions from the General Court in recent months (Case T-743/22 R, Nikita Dmitrievich Mazepin v Council, Order of 1 March 2023 and Case T-212/22, Violetta Prigozhina v Council, ECLI:EU:T:2023:104), is that ‘leading Russian businesspersons have engaged in a systematic practice of distributing their funds and assets amongst their immediate family members and other persons, often in order to hide their assets, to circumvent the restrictive measures and to maintain control over the resources available to them’ (Recital 5 of Council Decision 2023/1094  of 5 June 2023).

The amendment was prompted, in particular by the successful annulment of the listing in Case T-212/22, Prigozhina, which was initiated by the mother of the head of the Wagner Group. In that case, the General Court emphasized that in a legal framework such as the Syrian sanctions regime (after 2015: see Council Decision (CFSP) 2015/1836 of 12 October 2015 and Council Regulation (EU) 2015/1828 of 12 October 2015), the family link with ‘certain families’ may be sufficient to include the name of the persons on the lists at issue. In Prigozhina however, so the General Court, the EU legal acts setting out the framework for EU sanctions as a result of the invasion of Ukraine by Russia, did not refer to the members of ‘certain families’. That is why the Council had not established the risk of circumvention (para. 105 of the judgment). Another main reason was that the Council could not prove a sufficient ‘association’ with the primary target beyond mere family ties.

The curious nature of words

With this most recent amendment of the framework in June 2023, the chosen wording is of particular note. It refers to the possibility of the inclusion of immediate family members of leading businesspersons operating in Russia, even if the question is what exactly immediate family members are. Also, the Council does not refer to members of ‘certain families’ as it previously did as regard sanctions taken against Syria. Rather, the Council’s wording vis-à-vis Russia it appears to imply a presumption of circumvention through immediate family members of leading businesspersons operating in Russia.

In the Syrian sanctions framework since 2015, the EU legal acts have explicitly provided for the freezing of funds of ‘leading businesspersons operating in Syria’ and ‘members of the Assad families or Makhlouf’, as well as persons ‘associated with them’ (Council Decision (CFSP) 2015/1836 and Regulation (EU) 2015/1828). In this context, presumptions are used (by the Council) and accepted by the CJEU (see for example C‑458/17 P, Rami Makhlouf v Council, ECLI:EU:C:2018:441, para. 91, Case T‑186/19, Zubedi v Council, ECLI:EU:T:2020:317 para. 72; Case T‑256/19, Bashar Assi v Council, ECLI:EU:T:2021:818 para. 166) that individuals falling under these categories benefit from the sanctioned regime in order inter alia ‘to avoid the risk of circumvention of restrictive measures through family members’ (Recital 7 of Council Decision (CFSP) 2015/1836). 

Testing the presumption of circumvention

The question, therefore, is whether the Court of Justice – on appeal from a raft of judgments that the General Court will continue to deliver in the immediate future, in the context of the Russian sanction regime – would accept a (new) rebuttable presumption of circumvention (see Case T-5/17 Sharif v Council, EU:T:2019:216, para. 86), i.e., that the Council can legitimately presume leading businesspersons operating in Russia will transfer assets within their immediate family to circumvent EU sanctions (see paras. 103–110 of that judgment).

There is no reference to ‘certain families’ in the EU sanctions legal framework as was the case in the Syrian sanctions regime. Thus, the Court of Justice might not so easily accept a presumption of circumvention based on a sole family link (taken in consideration the Court of Justice’s Tay Za reasoning, and the Advocate General’s Opinion). It is only if the Council could provide solid evidence that there is indeed a ‘systematic practice of distributing their and assets amongst their immediate family members’ (see Recital 5 of Council Decision of 5 June 2023), that the Court of Justice might accept the Council’s rationale, accounting for fundamental rights too.

This information of a ‘systematic practice’ of circumvention might be in the Council’s possession, but it might not be possible to disclose the evidence based on its classified nature. The alternative is disclosing classified evidence, which the Council may be reluctant to do. The Court of Justice’s closed evidence procedure (under Article 105 of the General Court’s Rules of Procedure), introduced as a possibility for use in restrictive measures cases, to date, remains inactive, and has never been utilised.

“Associated”

Immediate family members have been included in EU sanctions lists since early 2022 as ‘associated’ with leading Russian businesspersons in their individual statements of reasons. In Prigozhina, the Council was not able to establish ‘(economic) association’ of the mother of the chief of the Wagner Group at the time the measures were adopted, and sufficiently link her to her son, the primary target, and the Russian government. Thus, the General Court relied on its established case law of Tay Za regarding an ‘association’ which considers a mere family tie to the primary target, a business leader, associated with the government not sufficient. That said, the General Court in Prigozhina ruled that there is a ‘non-negligible risk’ that individuals providing support to the government, e.g., leading businesspersons, might exert pressure on individuals associated with them, e.g., their family members, in order to circumvent the effect of the measures to which they are subject (para. 105 of the Prigozhina judgment. See also Amer Foz v Council, Case T-296/20 ECLI:EU:T:2022:298, paras. 174 and 176, Sharif v Council, T-540/19, not published, EU:T:2021:220, paragraph 159, and, by analogy, judgment of 4 September 2015, NIOC and Others v Council, T-577/12, not published, EU:T:2015:596, para. 139).  

Businesspersons vs rulers

Generally speaking, the case law of the Court on the legality of family members’ designations is characterized by two main approaches. Regarding family members of leading businesspersons, their designation would be annulled if based on the sole ground that the family member also benefits from the economic policies of the government (Tay Za approach). Regarding the family members of rulers of a third country, their designation would be lawful by a presumed connection between the individual and the (targeted) regime (Al Assad approach). The case law has been though at times inconsistent. For a broader analysis on circumvention of EU restrictive measures, see Francesa Finelli, ‘Countering Circumvention of Restrictive Measures: The EU Response’.

In Al-Assad, another Syrian ‘immediate family member’ case (concerning the President’s sister), the Court of Justice found that the presumed risk of circumvention was ‘quite obvious’ between leaders of a state and their immediate family members. It also observed that, if the EU sanctions in question targeted only the leaders of the Syrian regime, the objectives pursued by the Council could have been frustrated as the leaders can ‘easily circumvent’ those measures by means of their relatives and associates.

The Al-Assad approach has generally not been followed by the CJEU in the case of immediate family members of leading business persons (see Tay Za) but only in cases of ‘immediate family members’ of rulers of a third country (see Butler, G 2023, 'Of Rulers, Relatives, and Businesspersons: The Imposition of EU Restrictive Measures through Sanctions on Family Members', Legal Issues of Economic Integration, vol. 50, no. 4). The rationale is explained by Advocate General Mengozzi in his Opinion in Tay Za with three circles of targeted individuals, which has been accepted by the CJEU. In the Syrian sanctions case of Foz, the CJEU  accepted the presumption of a real risk of circumvention, in a case of an immediate family member of a leading business person operating in Syria case.  The Court of Justice ruled in that case that it is reasonable to presume a ‘real risk of circumvention’ if a family member has close business and family ties with a designated individual, even when the designated person is a leading businessperson and not a political leader in Syria. Moreover, it found that family ties may pose a real risk of circumvention of EU restrictive measures, irrespective of the role of the designated individual in the targeted regime (see Finelli, ‘Countering Circumvention of Restrictive Measures: The EU Response’).

The relevance of presumptions

Generally, the CJEU has accepted indirect evidence such as rebuttable presumptions in view of the difficulties encountered by the Council to find direct evidence (see para 46 Anbouba v Council, C-605/13 P, ECLI:EU:C:2015:248) for the fact than an individual like an immediate family member of a primary target supports a regime or benefits from it. In Syrian sanctions cases, since 2015, the Council consistently relied on and the Court of Justice accepted rebuttable presumptions rather than evidence that they have engaged in prohibited conduct. Their designation presupposes the personal link between them and the already designated individuals, and ultimately the third country’s regime targeted.

Consistent case law of the Court of Justice provides that the use of presumptions is only permitted on the condition that (i) those presumptions have been provided for by the measures at issue, (ii) are consistent with the objective of the legislation at issue, (iii) proportionate to the aim pursued by the EU, (iv) rebuttable and (vi) safeguard rights of defence are safeguarded (see Case T‑714/20, Ovsyannikov v Council, ECLI:EU:T:2022:674).

The Council will need to establish that the inclusion of immediate family members of Russian business leaders is proportionate to the pursued aim of inter alia preventing circumvention of the sanctions imposed.

At the moment it is unclear whether the Court implied in the case of Prigozhina that the ‘real risk of circumvention’ through family members can only be invoked in the context of EU sanctions against Syria (see Finelli, ‘Countering Circumvention of Restrictive Measures: The EU Response’). The established case law of Tay-Za provides there can be no presumption that leading businesspersons with links and association to a governing regime are using their family members for circumventing EU sanctions (see Butler, 'Of Rulers, Relatives, and Businesspersons’).

The Court of Justice has accepted presumptions if they are rebuttable, but rebuttals for targeted individuals are immensely difficult and have not been successful in most Syrian sanctions cases before the Court of Justice since the presumptions were introduced (see the Zubedi and Bashar Assi judgments).

The family member would have to demonstrate to the Council that s/he has dissociated himself from a parent, child – the primary target – and that s/he does not pose a real risk of circumvention of the restrictive measures. Rebuttals may be possible based on evidence that immediate family members do not assist the primary target to have access or continue controlling the assets.  A difficult task.

The risk of circumventing EU sanctions

The risk of circumvention is considerable in the case of leading businesspersons operating in Russia and their immediate family and the Court of Justice might well opt in developing its case law further for the Russian sanctions context instead of simply continue applying its Tay-Za case law. Similarly, as in the RT France case, it might opt for an exceptional reasoning due to exceptional circumstances. It might even apply its case law on the immediate family of rulers, rather than on the immediate family of leading businesspersons, finding that in certain exceptional cases leading businesspersons are comparable to rulers in the Russian context.

A balance will have to be struck by the Court of Justice between the fundamental rights of the targeted immediate family members, who might pose no risk of circumvention whatsoever and the difficult task to rebut presumptions, on the one hand, and the importance of the effectiveness of targeted sanctions against Russia, accounting for the Council’s ability in certain cases to rely on presumptions on the other hand (for the reasons it set out in its case law (e.g., in Anbouba v Council, para. 46). A general blunt presumption of circumvention of sanctions in cases of immediate family members of leading businesspersons operating in Russia is unlikely to be accepted by the Court of Justice.

EU foreign policy sanctions: extending and using EU criminal law powers to enforce them

 

Professor Steve Peers, University of Essex

Photo credit: Pierre Blaché, via Wikicommons

*This blog post draws upon research for the forthcoming 5^th edition of EU Justice and Home Affairs Law (OUP, 2023)

On Monday this week, the EU Council adopted a decision to extend EU criminal law competence to cover EU foreign policy sanctions. Today, the EU Commission proposed a Directive that, if agreed, would use that competence to harmonize the criminal law of Member States on this issue. The following blog post analyses in turn the decision and the proposed Directive, in order to assess the potential impact.

The Decision extending competence

The legal context: criminal law

The context of the Decision is the Treaty framework on the EU’s power to harmonize substantive criminal law. That power is set out firstly in Article 83 of the Treaty on the Functioning of the European Union (TFEU), in particular Article 83(1), which reads as follows:

1. The European Parliament and the Council may, by means of directives adopted in accordance with the ordinary legislative procedure, establish minimum rules concerning the definition of criminal offences and sanctions in the areas of particularly serious crime with a cross-border dimension resulting from the nature or impact of such offences or from a special need to combat them on a common basis.

These areas of crime are the following: terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime.

On the basis of developments in crime, the Council may adopt a decision identifying other areas of crime that meet the criteria specified in this paragraph. It shall act unanimously after obtaining the consent of the European Parliament.

As can be seen, the second sub-paragraph lists ten crimes (commonly referred to as ‘Eurocrimes’) which the EU has competence to harmonize. That competence involves not only the ‘definition of criminal offences’ but also ‘sanctions’, ie the length of jail terms and/or other sanctions that can be imposed as part of the criminal law. However, these are ‘minimum rules’ – meaning that Member States can add to them as part of their criminal law.

Since the Treaty of Lisbon entered into force in 2009, the EU has adopted Directives regarding most of the ten Eurocrimes, in most cases replacing older forms of EU law adopted before the Treaty of Lisbon entered into force. The exceptions are arms trafficking, corruption, and organized crime – although there are pre-Lisbon EU laws concerning the latter two crimes, and other EU legislation concerning firearms that falls short of adopting criminal sanctions for arms trafficking. In any event, as we shall see, some arms trafficking will fall within the scope of the new EU competence regarding criminal law and EU foreign policy sanctions.

Opt-outs apply to the new Decision: Denmark is entirely opted out of EU criminal law adopted after the Treaty of Lisbon, while Ireland chose to opt in. We can only speculate whether the UK would have chosen to opt in or not.

Since the Treaty of Lisbon, ordinary CJEU jurisdiction applies in this area – meaning that national courts can ask the CJEU questions about the validity and interpretation of EU Directives on substantive criminal law. (There have only been a few such references to the CJEU by national courts). The EU Commission can also bring infringement proceedings against Member States for late or inaccurate transposition of the Directives which the EU adopts.

Finally, the context of EU criminal law includes the other related competences of the EU. Article 83(2) provides for the EU to adopt criminal law harmonization Directives also in other areas of criminal law, where this ‘proves essential to ensure the effective implementation of a Union policy in an area which has been subject to harmonisation measures’. This has, for instance, been used to adopt a Directive on fraud against the EU’s financial interests. (It might be argued that foreign policy sanctions already fell within the scope of Article 83(2), so the recent decision extending the list of ‘Eurocrimes’ was unnecessary, but the EU thought otherwise)

Furthermore, Article 82(1) gives competence to adopt measures on mutual recognition in criminal matters, along with other forms of cooperation between criminal law authorities, while Article 82(2) gives competence to adopt harmonization measures on national criminal procedure – listing evidence, victims’ rights, and fair trials as areas where the EU can act. Article 84 gives limited powers regarding crime prevention; Article 85 gives powers relating to Eurojust, the EU agency on cooperation between prosecutors; and Article 86 provides for a European Public Prosecutor’s Office (EPPO) to be set up.

In practice regarding those other powers, since the Treaty of Lisbon, the EU has adopted a few mutual recognition measures, a law on victims’ rights, six Directives on fair trials, and Regulations on Eurojust and the EPPO. Most of these laws update pre-Lisbon legislation (except the fair trials Directives and the EPPO Regulation); and there is still an important batch of pre-Lisbon law on mutual recognition (most significantly, the European Arrest Warrant law). Some of this legislation generates CJEU case law – mostly regarding the European Arrest Warrant, but also there are judgments on most of the fair trials directives and most of the other mutual recognition measures.

The legal context: EU foreign policy sanctions

Unlike the other Eurocrimes listed in Article 83(1), there is a body of EU law already in this field. This has been built up on the basis of two related powers to act: first the EU’s powers to adopt Decisions on foreign policy sanctions (along with other foreign policy issues) on the basis of Article 29 of the Treaty of European Union (TEU). Secondly, Article 215 TFEU, which provides for most of those foreign policy sanctions to be paralleled in the form of ordinary EU law (in practice, Regulations):

1. Where a decision, adopted in accordance with Chapter 2 of Title V of the Treaty on European Union, provides for the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries, the Council, acting by a qualified majority on a joint proposal from the High Representative of the Union for Foreign Affairs and Security Policy and the Commission, shall adopt the necessary measures. It shall inform the European Parliament thereof.

2. Where a decision adopted in accordance with Chapter 2 of Title V of the Treaty on European Union so provides, the Council may adopt restrictive measures under the procedure referred to in paragraph 1 against natural or legal persons and groups or non-State entities.

3. The acts referred to in this Article shall include necessary provisions on legal safeguards.

Although Article 215 provides for qualified majority voting of Member States in the Council, the effective rule is actually unanimity, for that is the rule which applies (with marginal exceptions) to the adoption of the EU foreign policy measures which the Article 215 legislation gives effect to.  The Commission proposed a few years ago to drop unanimity here, but Member States didn’t bite. (They would have to agree unanimously to change the voting rule).

Over the years, there have been a lot of EU foreign policy sanctions and a lot of litigation – mostly direct challenges to the validity of the sanctions measures by the persons or companies (or even the States) concerned by them in the EU General Court. That Court’s judgments can be appealed to the CJEU; and national courts have occasionally asked the CJEU about the interpretation or validity of sanctions decisions too. (Although in general the CJEU has no jurisdiction over EU foreign policy measures – an exception which the Court has been slowly nibbling away at for awhile – as an exception to the exception, the CJEU has its normal jurisdiction over foreign policy sanctions: see Article 275 TFEU).

Given that the new Eurocrime refers back to a body of EU law, it is thematically very similar to the areas covered by the EU’s separate powers to harmonize criminal law to give effect to EU policies, as set out in Article 83(2) TFEU – for instance, see the proposed new Directive on environmental crime, which refers back to specific EU legislation. 

The details of the Decision

The main text of the Decision simply adds the breach of EU foreign policy sanctions to the list of Eurocrimes. Note that this is a breach of EU sanctions: the Decision does not give the EU power to harmonize criminal law as regards the breach of purely national foreign policy sanctions. (How much power Member States have to adopt national sanctions is an interesting question, but need not concern us further here, because of this distinction).  

On the other hand, the new competence is not limited to breach of EU foreign policy sanctions relating to the Russian invasion of Ukraine. Even though that event is obviously what led the EU to extend its competence, as acknowledged in the preamble to the Decision, there is nothing in the wording of the Decision to say that it only applies to sanctions against Russia. Indeed, the Commission proposal for the Decision noted that the EU has forty sanctions regimes, applying not only to countries but also ‘targeting proliferation and use of chemical weapons, cyberattacks, human rights violations and terrorism’. (For more details, see the Council website, especially its sanctions map). The anti-terrorism sanctions have been around for awhile, attracting high profile litigation such as cases involving Mr Kadi or Hamas; the human rights sanctions are fairly new, but will sometimes cross over with other sanctions – see, for instance, the sanctions against Putin’s alleged allies, the Wagner Group, for human rights breaches (along with links to other EU sanction measures).

In terms of the type of sanctions covered, the preamble also makes clear that this is broad, applying not only to economic sanctions such as restrictions on trade or financial relations, but to bans on entry into the territory (which are also already given effect to by listing the sanctioned people in the Schengen Information System) and to arms embargoes. 

Much of the preamble to the Decision justifies this new extension of EU competence on the basis of the criteria set out in Article 83(1) TFEU, which any extension of competence has to satisfy: ‘particularly serious crime with a cross-border dimension resulting from the nature or impact of such offences or from a special need to combat them on a common basis’. For instance, the preamble refers to the threats to international peace and security dealt with by sanctions as being ‘particularly serious’, as well as the cross-border scale of the offences.

The proposed Directive

Content of the proposal

The proposed Directive has similarities to other Directives in this area – see, for instance, the Directive on harmonization of criminal law as regards terrorism. But there are also some new elements compared to other Directives; and in any event, it is the EU’s first foray into adopting criminal law relating to EU foreign policy sanctions.

It should be stressed that (as the preamble to the Decision confirms) the Directive would not make breaches of EU foreign policy sanctions criminal for the first time in most Member States. Just as with issues like terrorism and drug trafficking, these were already crimes in most national laws before EU law came along. But the details of the national laws probably differed more before the EU got involved; the point of the EU’s involvement is to harmonize the national laws somewhat.  

Today’s proposal would require Member States to criminalize nine types of breach of EU sanctions, such as trading in goods or services covered by EU sanctions, providing financial services despite an EU law sanction, or even enabling the entry or transit of a person covered by an entry ban deriving from EU sanctions (in effect, an immigration law offence that might overlap with the pre-existing EU law on facilitation of illegal entry and residence in general – although the EU criminal law in that area is less detailed than today’s proposal). In every case, an intentional breach would have to be criminalized; and in most cases, ‘serious negligence’ resulting in the breach would have to be criminalized too. As with the Decision on competence, the Directive would not be limited just to sanctions against Russia, but would apply to EU foreign policy sanctions across the board.

There is a novel clause on the position of lawyers advising those accused of sanctions breaches:

Nothing in paragraph 2 [the list of crimes] shall be understood as imposing an obligation on legal professionals to report information which is obtained in strict connection with judicial, administrative or arbitral proceedings, whether before, during or after judicial proceedings, or in the course of ascertaining the legal position of a client. Legal advice in those circumstances shall be protected by professional secrecy, except where the legal professional is taking part in the violation of Union restrictive measures, the legal advice is provided for the purposes of violating Union restrictive measures, or the legal professional knows that the client is seeking legal advice for the purposes of violating Union restrictive measures.

There is also a specific guarantee for the right to silence, and exemptions for goods or services provided for daily use, failure to report, or humanitarian aid for those in need. Inchoate offences of incitement and (in most cases) attempts are also criminalized, as is aiding and abetting. As for penalties, Member States must provide for a maximum possible penalty of at least five years for most offences, and one year for the rest – subject to a threshold of €100,000 being involved (which can be satisfied by a linked series of offences). Otherwise, Member States are obliged to provide at least for the possibility of some imprisonment (for instance for sanctions with a lower value, or breach of an entry ban), and in all cases to provide for additional penalties, such as fines.

Legal persons are subject to liability, too, and must be subject to penalties such as shutting down the business or withdrawal of its licences. This is a longer list than usually provided for in EU criminal law Directives. Criminal liability must be aggravated in certain cases (such as organized crime, or breach of duty by a public official or a professional), and mitigated in others (where the offender ‘flips’ on his or her criminal associates).

Criminal jurisdiction would apply more widely than under most EU criminal law Directives, where it usually applies to acts committed on the territory (sometimes with further elaboration) or by nationals. Here it would apply also to habitual residents, and the territory is further defined as including a Member State’s airspace or any aircraft or vessel under its jurisdiction.

Unusually, there would be rules on limitation periods, ie when Member States would be out of time to bring a prosecution or enforce a sentence. In most cases the limitation period would be five years, with a possibility for derogation. Previously Member States have only agreed to regulate this issue via EU law as regards fraud against the EU budget (although the pending proposals on environmental crime and violence against women would also address it).

Finally, there would be links to other EU law (besides, obviously, the sanctions laws themselves). The proposal would link up with EU law on money laundering and confiscation, plus there is a novel link to the EU legislation on whistleblowers: that law must also apply to protect those in a company or organization who tip off the authorities about breaches of sanctions. Conversely, there is no proposed amendment of the law on the European Arrest Warrant – even though breach of EU foreign policy sanctions is not on the list of crimes where the dual criminality condition for extradition must be waived. However, prosecution or sentences for sanctions breaches will sometimes fall within areas where dual criminality has to be waived (like terrorism or organized crime); and the dual criminality condition is more likely to be met as a result of the harmonization Directive anyway (it may even be met already, simply by virtue of the foreign policy sanctions measures themselves). 

The legislative process

Opt-outs will apply to the proposed Directive: again, Denmark is entirely opted out of EU criminal law adopted after the Treaty of Lisbon, while Ireland can choose to opt in or not. (Update, March 8 2023: Ireland has opted in). Again, we can only speculate whether the UK would have chosen to opt in or out.

Other Member States have a form of protection for their interests too. Although the ‘ordinary legislative procedure’ applies to the adoption of laws in this area (see the text of Article 83(1) above), which means only a qualified majority of Member States in the Council is necessary to adopt a law (along with agreement of the European Parliament), Article 83(3) TFEU provides that if a Member State believes that a Directive ‘would affect fundamental aspects of its criminal justice system’, it can effectively pull an ‘emergency brake’ and ask EU leaders to discuss the issue. If there’s no agreement at that level, if at least nine Member States still want to participate in the proposed law, they can trigger ‘enhanced cooperation’ to go ahead – without the objecting Member State(s) – on a fast-track basis. To date, Article 83(3) has not been used, although its mere existence may have meant that any concerns Member States have raised about their criminal justice systems received particular attention during negotiations.

Comments

It’s difficult to see what impact the extension of competence, in conjunction with the proposal to harmonize the law (if adopted), would have in practice, without more detail on what changes would be made to national law as a consequence of its adoption. One issue with criminal law – just as with non-criminal forms of regulation of conduct – is of course the resources and expertise necessary to investigate and bring prosecutions. On this point, the prospect of extending competence to the European Public Prosecutor’s Office to include breaches of EU foreign policy sanctions has been raised by the German and French justice ministers. This would certainly be a big development if it happens (extensions of EPPO competence need unanimous agreement of Member States, although some Member States have opted out of the EPPO; the Commission’s proposal to extend its competence to terrorism has not been agreed so far).

Is this extension of EU competence an example of the endless EU power-grabs so feared by the EU’s critics? On this, it’s notable that the extension came on the eve of the thirteenth anniversary of the Lisbon Treaty entering into force – and yet it’s the first such extension of competence in that whole time. By contrast, Member States have not yet agreed an earlier proposal to extend the list of Eurocrimes to cover hate speech and hate crimes. Nor, as noted above, have they agreed the proposal to drop unanimous voting for some foreign policy measures – or to drop unanimity in a number of other areas which the Commission proposed years ago.  

The extension of competence is better understood as part of the EU’s response to the Russian invasion of Ukraine – which has also prompted developments in the use of EU defence powers, and the first-ever use of the long-dormant temporary protection Directive. By itself, the extension of EU competence and the use of those new powers will not end the invasion – and, as noted already, it applies to other EU sanctions too. Nor does it address the criticism that that those sanctions are too little and too late. But it may make some contribution to the effective implementation of those sanctions which have been established to oppose the invasion, and in any event it sends a political message that the EU is stepping up their enforcement.

 

Can a Member State be expelled or suspended from the EU? Updated overview of Article 7 TEU

 

Professor Steve Peers, University of Essex

With the re-election of the Orban government in Hungary, some of its critics are calling for Hungary to be expelled from the EU. But is that even possible? And if not, what other sanctions can be imposed against a Member State by the EU?

Back in 2019, I wrote two blog posts on this theme: first, on the ‘Article 7’ process for sanctioning Member States for breach of the rule of law or other EU values; second, on the alternative processes (ie other than Article 7) for sanctioning Member States. This is an update of the first of those blog posts; I hope to update the second one at some point too.

The legal framework for sanctions

Although many people refer to Article 7 TEU, there are other Treaty provisions which are inextricably linked: Article 2 TEU sets out the values which Article 7 is used to enforce; Article 354 TFEU describes voting rules for the EU institutions; and Article 269 TFEU provides for limited jurisdiction for the CJEU over the sanctions procedure.  All of this must be distinguished from the normal rules of EU law, discussed in the second blog post.

First of all then, what are the values of the EU, legally speaking? Article 2 TEU states:

The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.

Article 7 then sets out the process of enforcing those values. It begins with Article 7(1), which provides for a kind of ‘yellow card’ – a warning if there is there is ‘a clear risk of a serious breach’ of those EU values:  

1. On a reasoned proposal by one third of the Member States, by the European Parliament or by the European Commission, the Council, acting by a majority of four fifths of its members after obtaining the consent of the European Parliament, may determine that there is a clear risk of a serious breach by a Member State of the values referred to in Article 2. Before making such a determination, the Council shall hear the Member State in question and may address recommendations to it, acting in accordance with the same procedure.

The Council shall regularly verify that the grounds on which such a determination was made continue to apply.

Notice that the ‘yellow card’ process can be triggered by the European Parliament, or a group of Member States, or the Commission. There is no requirement of unanimity of Member States to approve a Council decision to issue a ‘yellow card’ (this is a common misunderstanding), but the threshold of four-fifths of Member States’ governments in the Council is nevertheless fairly high. 

In practice, this process has been triggered both against Poland (by the European Commission) and Hungary (by the European Parliament). So far neither has resulted in any action by the Council, despite holding a number of the hearings referred to in Article 7(1).. So obviously triggering the process does not, as some think, mean that the Council will agree to issue a ‘yellow card’, or has done so already. If the Council ever did issue a ‘yellow card’, note that this does not entail a sanction as such: it is only a finding of a risk to EU values, with possible recommendations. Nevertheless, the issue of a ‘yellow card’ is perceived as extremely politically serious.

This brings us to Article 7(2), which is the ‘red card’ of the process:

2. The European Council, acting by unanimity on a proposal by one third of the Member States or by the Commission and after obtaining the consent of the European Parliament, may determine the existence of a serious and persistent breach by a Member State of the values referred to in Article 2, after inviting the Member State in question to submit its observations.

The procedure here is even tougher: unanimity of the Member States. The European Parliament cannot trigger the process, but could veto it if the Commission or a group of Member States trigger it. The threshold to be met is higher: not just the risk of a serious breach, but the ‘existence of a serious and persistent breach’ of those values. It’s likely that the EU would get to the ‘red card’ stage after issuing a ‘yellow card’, but that’s not a legal requirement: a ‘straight red’, for (say) a country which had suddenly undergone a military coup, is also conceivable.

What are the consequences of a ‘red card’? Article 7(3) sets them out:

…the Council, acting by a qualified majority, may decide to suspend certain of the rights deriving from the application of the Treaties to the Member State in question, including the voting rights of the representative of the government of that Member State in the Council. In doing so, the Council shall take into account the possible consequences of such a suspension on the rights and obligations of natural and legal persons.

The obligations of the Member State in question under the Treaties shall in any case continue to be binding on that State.

Note that Member States don’t have to act unanimously in the Council when deciding exactly what sanctions to apply to the black sheep amongst them. The unanimity threshold only applies when taking the previous step of deciding whether there’s a serious and persistent breach of the EU values.  As for the specific sanctions which might be imposed, the Treaty mentions suspension of voting rights, but that’s just one example. The Council might instead (or additionally) impose other sanctions, such as suspension of MEPs’ voting rights (which raises the awkward question of whether they might also end up sanctioning any opposition MEPs from the Member State in question – whose voices would ideally need to be heard). However, there’s an obligation to consider the rights of individuals and businesses, which suggests that trade sanctions might be problematic. It might also be hard to justify restricting free movement rights, but in any event note that there are specific rules on asylum for EU citizens fleeing from a Member State subject to a ‘red card’. (see the second blog post).

Most significantly, there’s no provision to expel a Member State from the EU as such. Having said that, a Member State subject to suspension might be so outraged to be in that position that it triggers the process of leaving the EU under Article 50. The UK’s withdrawal process was complicated and controversial enough; now imagine the legal and political complexities of a Member State subject to an Article 7 ‘red card’ triggering Article 50. Should its political authorities’ actions be considered legally and morally valid? What if a group of exiles claim to be the legitimate government of that Member State (a la the USSR-era Baltic States), and that purported government does not wish to leave the EU?  What if a part of that Member State, at odds with the government in power over EU membership and its violation of EU values, attempts to secede?

Of course, the possibility of withdrawal (alongside concerns about sovereignty, and the workings of partisan politics) may also have influenced the pronounced reluctance of the EU to use the Article 7 process.

It’s sometimes suggested that the large bulk of Member States could just leave the EU, forming an “EU 2.0” copy of it among themselves, with only Poland and Hungary left in the original EU. Such a move would be risky for those who support EU membership in the departing Member States, as the critics of the EU would be given an opportunity to prevent their countries signing up to the new EU, or to demand renegotiation of the current terms of membership.

Article 7(4) TEU then provides that the Council, again by qualified majority, may ‘vary or revoke’ its sanctions against a Member State ‘in response to changes in the situation which led to their being imposed’. Article 7(5) notes that the rules on voting within the institutions when Article 7 is being applied are set out in Article 354 TFEU. The latter provides that the Member State which is the subject of potential sanctions has no vote at any stage of Article 7, as otherwise this would obviously have made the adoption of any decision on breach of EU values impossible. Abstentions cannot prevent the adoption of a ‘red card’ decision. Where the Council votes to implement a ‘red card’ decision, a higher threshold for adopting EU laws applies (72% of participating Member States in favour, instead of the usual 55%). If a Member State’s voting rights are suspended, the usual rules on Council voting with only some Member States participating apply. For its part, the EP ‘shall act by a two-thirds majority of the votes cast, representing the majority of its component Members’.

Finally, Article 269 TFEU significantly limits the role of the CJEU over the sanctions procedure:

The Court of Justice shall have jurisdiction to decide on the legality of an act adopted by the European Council or by the Council pursuant to Article 7 of the Treaty on European Union solely at the request of the Member State concerned by a determination of the European Council or of the Council and in respect solely of the procedural stipulations contained in that Article.

 Such a request must be made within one month from the date of such determination. The Court shall rule within one month from the date of the request.

The legal issues

Given the limit on judicial control of the Article 7 process, it is almost entirely political. So the legal questions arising from it may be largely hypothetical in practice. However, they do exist.

The first important point is the wide scope of issues which can be the subject of the Article 7 process. It is sometimes claimed that the process can only be used to sanction Member States for breaches of EU law, but this is clearly false. There is no reference to EU law breaches in Articles 2 or 7. Indeed, such a limit on the scope of Article 7 would be odd, given that Article 269 TFEU limits the Court’s jurisdiction, yet other provisions of the Treaties (discussed further in the second blog post) give the Court extensive jurisdiction over the enforcement of ordinary EU law.

This claim about the limited scope of Article 7 is also absurd if you consider the broader context. Imagine, for instance, a Member State placing LGBT citizens in concentration camps. A narrow interpretation of Article 7 would mean that the EU could only complain about this to the extent that being locked up in camps would have a discriminatory effect on the detainees’ access to employment (ie, an issue definitely within the scope of EU law). Yes it would; but that would hardly be the most outrageous aspect of detaining LGBT people in camps because of their sexual orientation. (EU law is also relevant to LGBT refugees, but the Article 7 process would have to be triggered first for it to be relevant to refugees who are EU citizens).

So obviously Article 7 is not intended to be limited in this way. Indeed, its broad scope partly explains why the CJEU’s jurisdiction is limited – to avoid giving it jurisdiction to rule on issues which are not normally within the scope of EU law. (Another reason is the intention to keep the Article 7 process in the hands of politicians, not judges).

On the other hand, the Article 7 process and ordinary EU law can overlap. The Court can use its ordinary jurisdiction to rule on an issue being discussed in the Article 7 process, and vice versa – for example, in the string of rule of law judgments regarding the Polish courts.

Exactly how does the Court’s limited jurisdiction over Article 7 work? The wording of Article 269 TFEU definitely covers the decisions on the ‘yellow card’ or the ‘red card’. At first sight, it also applies to the implementation of sanctions, since the text refers to any Council actions pursuant to Article 7 TEU. But on this point, the use of the word ‘determination’ is confusing, as Article 7 doesn’t use that word to refer to the implementation of sanctions,  but only the decisions on whether EU values have been (or might be) breached.

Note also that the only possible challenger is the Member State sanctioned under Article 7 – not any other Member State, an EU institution, or an individual or business. If individuals are barred from challenging the validity of Article 7 implementation decisions, even indirectly via national courts to the CJEU, how else can the Council’s obligation to ‘take into account the possible consequences of such a suspension on the rights and obligations of natural and legal persons’ be enforced? At any rate, there’s no limit on the Court being asked by national courts to interpret the decisions implementing sanctions, which could be significant in working out the impact of sanctions on individuals. In particular, if Council decisions under Article 7 disapply ordinary EU law in some way, there should be no objection to the Court’s ordinary jurisdiction to interpret such ordinary EU law applying.

A Court judgment under Article 269 TFEU can only address procedural issues, not substance. In other words, the Court cannot be asked to rule on the question of whether the Member State concerned has actually breached EU values (or seriously risks breaching them). As we will see in the second blog post, however, the developing case law on the overlap between Article 7 and ‘ordinary’ EU law renders this firewall a little diffuse. Also, one can imagine that a Member State may make arguments about the fairness of the hearings, even where (as in the case of Poland and Hungary) some hearings have been held (note that the Council's internal rules on Article 7 hearings have been published). Finally, the time limits in Article 269 require significant fast-tracking: the challenge must be made one month after the determination (the usual deadline to bring an action to challenge an EU act is two months after publication) and (uniquely in EU law) one month for the Court to give its ruling.  

Even though Article 7 has not resulted in any sanctions decision yet, the CJEU did address some issues about its scope in 2021, when it ruled on a legal challenge by Hungary to the European Parliament’s decision merely to trigger Article 7. In the Court’s view, the special rules in Article 269 did not exclude a legal challenge to the decision to trigger the process, because those special rules only apply to acts of the Council or European Council. The European Parliament’s resolution had legal effect, because it also triggered the protocol on asylum for EU citizens; therefore it could be challenged (non-binding EU acts, ie with no legal effect, cannot be challenged). Nor did the Court agree with the European Parliament that its resolution was a purely intermediate step.

However, the Court ruled that some aspects of Article 269 did apply to legal actions against the triggering of an Article 7 procedure: only the Member State concerned could bring a challenge, and it could only raise the procedural issues referred to in Article 269, not the substance of whether the body which started the process had wrongly claimed that the Member State was breaching (or risked breaching) EU values to the thresholds set out in Article 7. However, that Member State was entitled to the usual two months to bring the legal action, not the one month referred to in Article 269. Ultimately the Court rejected the Hungarian government’s argument on the merits, finding that European Parliament correctly counted the votes cast (and abstentions) to trigger the Article 7 process.

One key legal and political question is the interpretation of the unanimity requirement to issue a ‘red card’ determination of a serious breach of EU values. Some have suggested that since two Member States are facing Article 7 procedures, and they would have a natural tendency to stick together and vote for each other, unanimity can never be reached. Therefore, for the ‘red card’ procedure to be effective, it must be interpreted to mean that any Member State facing an Article 7 procedure must lose its vote even as regards issuing a ‘red card’ against another Member State.

With respect, this interpretation is untenable. Article 354 TFEU refers to ‘the Member State in question’ not voting in its own case – clearly using the singular, as well as the definite article. There is no way to stretch the canons of interpretation for this to refer to multiple Member States. Such wild leaps of legal fancy are particularly inappropriate when a main point of the process is to ensure protection of the rule of law in the European Union.

Conclusions

Article 7 TEU was conceived as a political process par excellence, and it remains supremely political. Due to its impact on national sovereignty, and the web of transnational partisan politics in which the governments concerned are embedded, Article 7 has long been seen as a ‘nuclear weapon’ – only to be used as a last resort, in a political emergency such as a military coup. Although the attempt to nuance Article 7, by adding a ‘yellow card’ process, dates from 2003, in practice this version of the process is perceived as politically ‘nuclear’ too.

The obvious problem here – which the ‘yellow card’ reform sought but failed to address – is that democracy rarely collapses overnight. In the famous words of Michael Rosen, ‘people think that fascism arrives in fancy dress’, but in fact ‘it arrives as your friend’ – promising to:

…restore your honour, 

make you feel proud, 

protect your house, 

give you a job, 

clean up the neighbourhood, 

remind you of how great you once were, 

clear out the venal and the corrupt, 

remove anything you feel is unlike you...

And to that end, and for those reasons, it often gains a foothold through the democratic process. Yet the values of the EU to be protected also include democracy – and the Article 7 process is in the hands of the governments of fellow Member States. All have some skeletons in their own closet; and all have backs that might need some scratching by the governments of the States being criticised. While recent Hungarian elections have been criticised as undemocratic, Member States seem reluctant to pursue the route of defining what they consider to be acceptable democratic standards and sanctioning other Member States for breaching them.

So is the Article 7 process doomed? In fact, the expansion of EU law in areas with significant relevance to human rights, the willingness of the CJEU to rule on the judicial independence of national courts in general, and the creation of new means to address ‘rule of law’ concerns within the EU budget system means that recourse to the nuclear option may arguably not be necessary. In effect, the conflict over the protection of human rights and the rule of law in Member States can also be fought by conventional means: the ordinary EU law system, discussed in the second blog post.

 

Barnard & Peers: chapter 9

Photo credit: Steve Peers