Judicial control of EU foreign policy: the ECJ judgment in Rosneft

Two takes on yesterday’s ECJ ruling in Rosneft, on the challenge to EU sanctions against the Russian oil company.

Stian Øby Johansen, PhD fellow at the University of Oslo Faculty of Law*

Yesterday the Court of Justice of the European Union (the CJEU) delivered its judgment in the long-awaited Rosneft case (C-72/15, ECLI:EU:C:2017:236). The judgment clarifies some aspects of the CJEU's jurisdiction over the Common Foreign and Security Policy (CFSP). Moreover, it is an important precedent in the field of EU sanctions law generally, and also resolve some questions of interpretation that are particular to the Russian sanctions.

In this blog post I will focus on what the judgment in Rosneft adds to the existing case-law on the review of CFSP decisions. Thus, I will not be discussing any of the more specific questions of EU sanctions law nor summarize the full 197 paragraph judgment. For those looking for a quick summary of the case, I refer to the succinct post by Maya Lester QC at the Sanctions Law blog.

CFSP sanctions: decisions and implementing regulations

I have already sketched out the background of the case in considerable detail in a blog post I wrote here following the oral hearing, and I co-wrote a blog post (with Alexander Arnesen) on Verfassungsblog on the Opinion of Advocate General Wathelet.  I will not repeat all this background here. But there is a couple of details that are essential to understanding the issue at hand here and the Rosneft judgment more broadly.

Recall that EU law sanctions (also known as "restrictive measures") are enacted through a two-step process. First, the Council adopts a decision under TEU Title V, Chapter 2. This decision is then implemented in Union law (and thus domestically in the EU member states) by virtue of a regulation adopted under TFEU article 215. In the case of the Russia sanctions, as in most sanctions regimes, the wording of the respective decisions and regulations are virtually identical.

The use of two legal instruments with different legal bases -- one decision with a CFSP legal basis, and one regulation with a legal basis in the TFEU -- complicates matters when it comes to the jurisdiction of the CJEU. With regard to the regulation, the judgment in Rosneft confirms the obvious: any regulation adopted on the basis of the TFEU article 215 is within the jurisdiction of the CJEU (Rosneft paras 105-106). That is so irrespective of whether the regulation merely restates the decision.

On the other hand, the decision is a act adopted under the CFSP. The CFSP treaty provisions and acts adopted under them are carved out of the CJEU's otherwise general jurisdiction over Union law (see TEU article 24 and TFEU article 275). To this carve-out there are two exceptions, a.k.a  claw-backs: the CJEU has jurisdiction to monitor compliance with TEU article 40 and to decide on the legality of decisions concerning "restrictive measures against natural or legal persons" (emphasis added). As I will come back to, both claw-backs were at play in Rosneft.

The remainder of this blog post focuses on the CJEU's jurisdiction over such CFSP decisions, notably on the clarifications and contributions the Rosneft judgment offers to the ever-expanding case law in this field. (Key judgments in the previous years that have discussed these issues include Case C-155/14 P H v. Council et al  [2016], Case C‑439/13 P Elitaliana SpA v. EULEX Kosovo [2015], and Opinion 2/13 EU Accession to the ECHR [2014].)

The general scope of the CJEU's jurisdiction over CFSP decisions

With regard to the general scope of the CJEU's jurisdiction over CFSP decisions, the Rosneft judgment further cements the approach that has emerged in the case-law over the last couple of years.

First, the limitations on the CJEU's jurisdiction and the two claw-backs explicitly provided for in TEU article 24(1) and TFEU article 275(2) have to be taken seriously. In relation to CFSP acts, the CJEU only has jurisdiction to (1) monitor compliance with TEU article 40, and (2) decide on the legality of restrictive measures against natural or legal persons. (Rosneft para 60.)

Second, while recognizing the explicit limitations on its jurisdiction in the treaties, the CJEU reiterates that those limitations must be interpreted narrowly (Rosneft para 74-75). Or, put differently, the provisions clawing back jurisdiction must be interpreted expansively.

What is new in Rosneft is the application of these starting points to a new issue: do the claw-backs apply in the context of preliminary rulings? This question must be answered separately for the each claw-back provision (Rosneft para 61).

Preliminary rulings and the legality of CFSP decisions in light of TEU article 40

One of the easier questions before the CJEU in Rosneft was whether the validity of CFSP decisions in light of TEU Article 40 could be determined in a preliminary ruling. The identical claw-back provisions in TEU Article 24(1) and TFEU Article 275(2) simply provide that the CJEU has jurisdiction to "monitor compliance with Article 40 [TEU]".

There is nothing to suggest that such monitoring may only happen e.g  in actions for annulment. In other fields of EU law, it has long been clear that the CJEU has jurisdiction to declare Union acts invalid in preliminary rulings (see e.g. Case 314/85 Foto-Frost [1987]). Thus, due to the lack of an express and specific limitation, the CJEU concluded that its jurisdiction extended also to monitoring compliance of CFSP decisions with TEU article 40 in preliminary rulings (Rosneft paras 62-63).

Preliminary rulings and the legality of CFSP decisions concerning restrictive measures

The key jurisdictional question that the Grand Chamber had to deal with in Rosneft was whether it had jurisdiction to decide on the validity of a CFSP targeted sanctions decision in a preliminary ruling procedure. Due to the CFSP carve-out and the peculiar wording of the claw-back provision for restrictive measures in TEU article 24(1) and TFEU article 275(2), there has been significant uncertainty as to the correct answer to this question.

The relevant part of TEU article 24(1) reads as follows (emphasis added):

"The [CJEU] shall not have jurisdiction [over the CFSP], with the exception of its jurisdiction [...] to review the legality of certain decisions as provided for by the second paragraph of Article 275 of the [TFEU]".

The relevant part of TFEU article 275(2) reads as follows (emphasis added):

"the Court shall have jurisdiction [...] to rule on proceedings, brought in accordance with the conditions laid down in the fourth paragraph of Article 263 of this Treaty, reviewing the legality of decisions providing for restrictive measures against natural or legal persons [adopted under the CFSP]"

In other words: TEU article 24(1) limits the jurisdiction to "certain decisions as provided for" by TFEU article 275(2), which in turn refers to "proceedings" that are "brought in accordance with the conditions laid down" in TFEU article 263(4). The latter provision provides that actions for annulment can be brought against acts of the EU institutions before the CJEU:

"Any natural or legal person may [...] institute proceedings against an act addressed to that person or which is of direct and individual concern to them and does not entail implementing measures."

The combined text of these provisions arguably suggests that the jurisdiction to determine the validity of CFSP targeted sanctions decisions only extends to actions for annulment brought by individuals. TFEU Article 263(4) ostensibly provides for the institution of proceedings for annulment; the types of acts that may be annulled are listed in TFEU Article 263(1)-(2). Conversely, then, the CJEU would lack jurisdiction to determine the validity of such a decision in a preliminary ruling. Against this, one may argue that jurisdiction to rule on the validity of Union acts is inherent to the complete system of legal remedies that the Union treaties establish.

How to solve this conundrum? AG Wathelet essentially suggested that the Court should interpret TFEU article 275(2) in the context of TEU article 24(1). In particular, he emphasized the use of the term "certain decisions" in TEU article 24(1), which suggest that the reference in TFEU article 275(2) to TFEU article 263(4) concerns the type of act (“restrictive measures”), and not the type of proceedings (i.e. actions for annulment). See AG Wathelet in Rosneft, para 61 et seq. Consequently, the validity of CFSP decisions can be determined in any kind of proceedings -- also in preliminary rulings.

A further point is that the French language version of TFEU article 275(2) differs from the English in a crucial respect. It provides that the CJEU has jurisdiction "pour controller la légalité de certaines decisions visées à l’article 275, second alinéa  [TFUE]". This seems to suggest an interpretation in line with that of AG Wathelet. Although  AG Wathelet does not discuss the language discrepancy directly, French is the "langue de travail" at the CJEU, and one may speculate that AG Wathelet relied more heavily on the French version of the treaty text than the English.

In Rosneft the CJEU reaches the same conclusion as AG Wathelet; the CJEU has jurisdiction to determine the validity of CFSP decisions in preliminary rulings. In doing so, the CJEU recognizes the textual discrepancy between the otherwise identical claw-back provisions in TFEU article 275(2) and TEU article 24(1), but not (explicitly) the linguistic discrepancy  However, it is slightly more careful than AG Wathelet in grounding its argument in other sources than (con)text -- perhaps because the Court is indeed aware of the discrepancy between the language versions.

There are in particular two supporting arguments that the CJEU relies on. First, it puts forward a systemic argument. According to the CJEU, it is "inherent" in the Union's "complete system of legal remedies or procedures that persons bringing proceedings must, when an action is brought before a national court or tribunal, have the right to challenge the legality of provisions contained in European Union acts" (Rosneft paras 67-68).

Second, the CJEU  emphasizes the fundamental rights dimension of judicial protection (Rosneft paras 69-75). As usual in cases on jurisdiction on CFSP acts, it refers in passing to the concept of the "rule of law" (Rosneft para 72). But it also refers extensively to article 47 of the Charter of Fundamental Rights (Rosneft paras 73-74). While the Charter has been mentioned in passing before in cases concerning CFSP decisions (notably in Case C-455/14 P H v. Council et al. [2016]), the emphasis has usually been on the nebulous concept of the rule of law. In Rosneft we see the reverse: an emphasis on the fundamental right of effective judicial protection, which is laid down in positive primary law in CFR article 47.

The conclusion that the CJEU draws is thus built on a principled and even more solid ground than that of AG Wathelet. The question of whether the validity of CFSP decisions can be determined in preliminary ruling proceedings must therefore be regarded as settled following the Rosneft judgment.

Graham Butler, Assistant Professor of Law, Aarhus University, Denmark

The Question

Can the Court of Justice of European Union (‘the Court’) assert jurisdiction and provide a national court with an interpretation of Union law in a case referred to it from a national court under an Article 267 TFEU preliminary reference, when the subject matter is in regard to the Common Foreign and Security Policy (CFSP)? This was one of a number of questions referred to the Court of Justice from the High Court of England and Wales in Rosneft (C-72/15). This week, the Court meeting in a Grand Chamber formation, answered this jurisdictional question in the affirmative. Given the significance of this judgment for the law of the Common Foreign and Security Policy (CFSP), and previous discussion of the Opinion of the Advocate General in 2016, yesterday’s judgment was hotly anticipated given its implications for the ‘specific rules and procedures’ that are applicable to the law of CFSP. As the Court continues in a line of case law to clarify its jurisdiction in CFSP, it is ultimately a question of constitutional importance for the Union’s external relations.

Ambiguity of the Treaties: Jurisdiction

Rosneft concerns the EU’s restrictive measure regime, more popularly known as sanctions. The governance scheme surrounding sanctions is a developed body of case law, in which individuals subject to them have the possibility to challenge them directly before the EU’s General Court, the administrative court of the Union. Given that the locus standi (standing) of taking actions to the Court is a narrow right, the use of preliminary references, otherwise known as referrals from national courts, also functions as an indirect means for legal entities to access the Court for adjudication on matters of Union law. What makes the Rosneft case noteworthy, in comparison to other aspects of CFSP and sanctions case law, is that it is the first case on the Court’s jurisdiction to rule on sanctions not taken directly to the EU General Court. Rather, the Rosneft case arrived at the Court of Justice through the preliminary reference procedure from a national court, in this case, the High Court of Justice (England and Wales) in the United Kingdom, upon the basis of Article 267 TFEU.

Sanctions have a peculiarity in their procedural sense. Firstly, it requires a CFSP Decision, done on an Article 29 TEU legal basis. Secondly, a subsequent Regulation is decided upon an Article 215 TFEU legal basis, which allows sanctions to be implemented throughout the Union. Accordingly, in Rosneft, on the table was Council Decision 2014/512/CFSP, Council Decision 2014/659/CFSP, and Council Decision 2014/872/CFSP (collectively, ‘the Decision’). Furthermore, there was Regulation 833/2014, Regulation 960/2014, and Regulation 129/2014 (collectively, ‘the Regulation’). The Decision taken by the Council, where Member States as a general rule act unanimously, were directly in response to the alleged actions of Russia in Ukraine. Substantively, the applicant contested the implementation measures by way of Regulation taken by the British Government as a result of the CFSP Decision, of which it too was part of, on the grounds that it contained ambiguities. Accordingly, the substantive question was whether the CFSP Decision was one the one hand sufficiently clear, or on the other, imprecise?

In Rosneft, both the Decision and accompanying Regulation were challenged. Yet, it is unclear whether the Court has the jurisdiction to fully answer the questions asked of it, given the first legal act is adopted on a CFSP legal basis (the Decision), and the second legal act on a non-CFSP legal basis (the Regulation). The Court’s jurisdiction in the latter is undisputed given its adoption on Article 215 TFEU, however, much more speculative and up for question is the Court’s jurisdiction on the Decision, given its adoption on a CFSP legal basis. Prior to recent treaty revision, questions surrounding the Court’s jurisdiction rumbled for decades. However, the Treaty of Lisbon, saw a flipping effect, in that jurisdiction of the Court was to be assumed, unless specifically derogated from by the Treaties. One of these derogations was acts adopted upon a CFSP legal basis, which is elaborated in Article 24(1) TEU and Article 275 TFEU.

Firstly, Article 24(1) TEU, inter alia, states that, ‘The Court of Justice of the European Union shall not have jurisdiction with respect to these provisions [CFSP], with the exception of its jurisdiction to monitor compliance with Article 40 of this Treaty and to review the legality of certain decisions as provided for by the second paragraph of Article 275 of the Treaty on the Functioning of the European Union.’ Secondly, Article 275 TFEU states that the Court has the jurisdiction to, ‘...rule on proceedings, brought in accordance with the conditions laid down in the fourth paragraph of Article 263 of this Treaty, reviewing the legality of decisions providing for restrictive measures against natural or legal persons adopted by the Council on the basis of Chapter 2 of Title V of the Treaty on European Union.’

This consequently points to Article 263 TFEU and its fourth paragraph stating, ‘Any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures.’ The first and second paragraphs in Article 263 TFEU do not appear to envisage the possibility for the Court to have the ability to answer questions on preliminary references from national courts. The leading academic material of EU procedural law previously acknowledged that the Court ‘may afford possibilities’ in this area (Lenaerts et al. 2014:458), recognising that it is by no means a settled question. This is, until the right opportunity arose to address it, which was Rosneft.

So what did the Advocate-General say firstly? AG Wathelet said the Court did have the jurisdiction to answer the substantive questions of it by the national court. Yet how did he reach this view in light of the treaties, and their apparent formulation to exclude the Court in such matters? Whilst acknowledging the Court’s jurisdiction in CFSP matters appears to be limited by Article 24(1) TEU and Article 275 TFEU ‘at first sight’ (para. 39), he skirted a narrow interpretation of Article 263 TFEU and its apparent lack of foresight for seeing preliminary references in the equation. For the aforementioned Article 24(1) TEU and Article 275 TFEU, it can be assumed there was there a need for them to have the intended same effect. However, they are worded differently, and thus, the Advocate-General said, might put out the ‘false impression’, that the Court had no jurisdiction. Thus, he said, the two articles enable the Court ‘to review the compliance with Article 40 TEU of all CFSP acts’, (para. 65), regardless of what way the question ends up at the Court, that is, through a direct action, or a preliminary reference.

The Opinion of the Advocate-General is a demonstrative example of how the restatement of certain constitutional provisions within primary law have the ability to be read differently, despite the intentions of the drafters may have been for such restatements to have the same meaning. Given this part of the Opinion of the Advocate-General on jurisdiction, which was non-binding, what did the Court say, and did it reach the same conclusion?

Judgment

In the judgment issued on 28 March 2017, the Grand Chamber, before going onto matters of substance, had to handle the important question of jurisdiction, and furthermore grapple with the admissibility of the question of jurisdiction. The Council had queried whether the questions referred by the national court could have been answered in respected of the Regulation alone (non-CFSP), rather than contesting the validity of Decision (CFSP) (para. 48). Thus, along this line of thinking, the Court would then not have to assert any jurisdiction on the CFSP legal basis, for which the Council has always viciously defended against any judicial incursion by the Court (Cases C-455/14 P, H v. Council; C-439/13 P Eulex Kosovo; C-263/13 Tanzania; Opinion 2/13; and C-658/11, Mauritius). The Court rejected this Council viewpoint, stating that it is up to national courts alone to ask questions of the Court on the interpretation of Union law (para. 49). The Court was therefore only in a position to not answer a reference when it fails to have a legal question in need of answering, or is only a hypothetical question (para. 50).

The Court furthermore in its judgment stated that only focusing on reviewing the legality of the Regulation (non-CFSP), and not the questions asked of it as a whole by the national court, which would not be adequately answering questions asked of it (para. 53). Moreover, despite the sharp distinction between a CFSP act and a non-CFSP act, in order to impose a sanction within the EU legal order, the Court noted that they are inextricably tied. Given how sanctions are imposed in the EU legal order, it is a perfect demonstration of the possibility of close-knit relations between CFSP and non-CFSP legal bases, given the Court in Kadi I said the link occurs when it has been made ‘explicitly’ (Joined Cases C-402/05 P and C-415/05 P, para. 202). The Court in Rosneft however hypothesized that even if the latter Regulation implementing a CFSP Decision was to be declared invalid, that would still mean that a Member State was to conform to a CFSP Decision. Thus, in order to invalidate a Regulation following a CFSP Decision, the Court would have to have jurisdiction to examine that CFSP Decision (para. 56).

 Once the admissibility of the question of jurisdiction was answered, the Court progressed onto answering the jurisdictional questions raised, in which it concluded that, ‘Articles 19, 24 and 40 TEU, Article 275 TFEU, and Article 47 of the Charter of Fundamental Rights of the European Union must be interpreted as meaning that the Court of Justice of the European Union has jurisdiction to give preliminary rulings, under Article 267 TFEU, on the validity of an act adopted on the basis of provisions relating to the Common Foreign and Security Policy (CFSP)...’ (Ruling 1 of 3). Yet, Court’s assertion of its jurisdiction was not completely unqualified. Rather, it must be meet one of two conditions. The first condition that it may meet, is that it must relate to Article 40 TEU on the Court having the jurisdiction to determine the boundary between CFSP and non-CFSP in its border-policing role. The second condition that the Court’s allows for the assertion of its jurisdiction, is when it involves the legality of restrictive measures against natural or legal persons.

 The remark on Article 40 TEU is significant from the Court (paras. 60-63). From some corners, the Court has been subject for some remarks for not properly utilising this Article for elucidating what the precise boundaries for a CFSP and non-CFSP. To date, it has shunned such possibilities provided to it to determine the fine lines of this providing, underling the fact that CFSP is an obscure area of the treaties, legally speaking. Rosneft perhaps elucidates some reasons why Article 40 TEU has not been used by the Court to date, namely that it does ‘not make provision for any particular means by which such judicial monitoring is to be carried out’ (para. 62). Thus, given this lack of guidance, the Court finds itself falling back on Article 19 TEU to, ‘ensure that in the interpretation and application of the Treaties the law is observed.’ (paras. 62 and 75).

It was advocated nearly a decade ago that rule of law concerns could be used to provide justification for the Court’s jurisdiction in CFSP cases upon a preliminary reference (De Baere 2008:186). Whilst this can be a common phrase with large recourse in a number of situations to justify Court actions, the Court instead of utilising this argument alone here (para. 72), went one-step further. alluded to the EU’s Charter on Fundamental Rights (CFR), selected Article 47 CFR, the right to an effective remedy and a fair trial, ensuring who has ‘rights and freedoms guaranteed by the law of the Union…the right to an effective remedy’. (para. 73), as a basis for clarifying this position on its jurisdiction.

From the Court’s perspective in CFSP-related cases, it certainly does not want the possibility for national courts to test the possibility for them to attempt and try invalidate Union legal acts in whatever form (paras. 78 and 79). It it long-standing jurisprudence of the Court stemming from Foto-Frost (314/85), that it alone has the ability to invalidate Union law, which the national courts cannot do. Thus, national courts only have the possibility to invalidate implementing national measures subject to their own constitutional requirements, and not the Union legal acts themselves. The most recent example of the Court clarifying (ie. extending) its jurisdiction into the CFSP arena was H v. Council (C-455/14 P). Unlike H v. Council however (Butler 2016:677 and on this blog), in which the Court asserted jurisdiction, it then proceeded to fling the substantive matter back to the General Court for adjudication. The Court here in Rosneft had to proceed and answer the substantive questions itself, which conclusively, upheld the sanctions in question.

Analysis

The Court and the Opinion of Advocate-General on its jurisdictional points can be commended for not allowing a legal lacuna to be created by further disenfranchising CFSP as a particular sub-set of Union law, and ensuring it was kept as close of the normal rules surround preliminary references as possible. Such a situation, where jurisdiction were not asserted, could have lead national courts to not send preliminary references to the Court in further questions seeking clarification on points of Union law. This potential chilling effect would most certainly hamper not just the nature of sanctions, but also the coherent interpretation of Union law as a whole, for which the Court is the ultimate adjudicator. By coming to the conclusion that the Court did have the jurisdiction, empowering itself with the ability to answer the substantive questions, AG Wathelet acknowledged he was breaking with the view of his colleague, AG Kokott, from her view provided in Opinion 2/13 on the EU’s accession to the ECHR. AG Wathelet said that without the Court having jurisdiction, it would undermine under Articles in the Treaties, namely, Article 23 TEU, which guarantees access to a Court and effective legal protection (para. 66), which albeit by an alternative method, the Court broadly arrived at the same conclusion.

Jurisdictional questions are not just inconsequential matters in the exercise of EU foreign policy, but have ramifications for EU procedural law, and the constitutional framework in which Union law operates. The Court’s judgment, clarifying jurisdiction for itself, when it was in doubt, further widens the potential for its scope for a role in EU foreign policy. Hence, how broad a deference is there at the Court to questions that ultimately hinge upon ‘sensitive’ areas of policy? Do Member States want the Court to have jurisdiction in CFSP? The Treaties do their best to prevent it, and five of the intervening six Member States and the Council in Rosneft pleaded that the Court did not have the ability to rule on the validity of CFSP acts. Yet the Court is no stranger to such questions, as it has dealt with jurisdictional questions on sensitive areas before, albeit in a slightly different context. The Area of Freedom, Security, and Justice (‘AFSJ’ or ‘Justice and Home Affairs’)). The Gestoras (C-354/04 P) and Segi(C-355/04 P) cases here provide us with suitable examples. In a pre-Lisbon context, the Court said to interpret the cases as falling outside the scope of the then Article 35(1) TEU because they were preliminary references would not be in ‘observance of the law’. Thus, the Court ruled in both Gestoras and Segi that jurisdiction for the Court in that field was permissible.

Given the Court’s judgment here in Rosneft, there is no doubt that it had to be slightly inventive to overall what was clearly a shortcoming in the drafting of the Treaties. For the Court to have not asserted jurisdiction in Rosneft would have seemed contrary to the overall premise upon which the Union is a ‘complete system of legal remedies’, which again it cited in Rosneft (para. 66), stemming from Les Verts (294/93). Do the Treaties allow vacuums to be created where judicial review is excluded, or does it by reasonable means provide for judicial review? The latter was not only an easy choice, but also the more logical one. Article 19(1) TEU states that the Court, ‘ensure that in the interpretation and application of the Treaties the law is observed’, and that, ‘Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law.’

This, coupled with the Court’s own ‘Declaration by the Court…on the occasion of the Judges’ Forum organised to celebrate the 60th anniversary of the signing of the Treaties of Rome’ made the day before the Rosneft judgment was published, commenced with restating the premise that the EU is, ‘is a union governed by the rule of law’. Yet such spirited measures are always dampened by other events, and it is hardly in fitting with recent developments at the General Court. The NF and Others v. European Council cases, and the Orders by the General Court on 28 February 2017 (T-192/16, T-193/16, and T-257/16), stated that it did not have jurisdiction on the question of the legal basis upon which an ‘EU-Turkey statement’ was reached. The likelihood is therefore that such questions about the scope of the Court’s jurisdiction in non-CFSP matters will rumble on.

Whilst this Rosneft judgment has clarified the scope of the Court’s jurisdiction on preliminary reference cases dealing with CFSP-related matters, one has to ask why the litigant did not instead seek to go straight to the EU’s General Court with an action for annulment claim, seeking the annulment of the sanctions applying Union-wide. The Court said that the basis for actions for annulment through direct actions from the treaties do not constitute the only means for which sanctions are challengeable (para. 70). Thus, from this, we can deduce that Rosneft opens the basis for future forum shopping when legal entities are subjected to the Union’s comprehensive sanctions regime under the auspices of CFSP in the future.

Remaining questions on the legal limits of CFSP as a special area of area are yet to be fully answered in a categorical way. One example of such is the doctrine of primacy, with lingering questions on its applicability to CFSP. Even with this, jurisdictional questions in CFSP remain. In a recent Order of the General Court in Jenkinson v. Council (T-602/15), it found it did have the jurisdiction to deal with a staffing case stemming from a CSDP, under the wing of CFSP. This demonstrates the caution of the General Court on leading the way on jurisdictional matters, preferring to let the Court of Justice lead the way.

Nonetheless, Rosneft clarifies that CFSP is one (small) step towards wider integration with the rest of the EU legal order. Former Judge at the Court, Federico Mancini said once in a speech at the Danish Supreme Court (Højesteret) in Copenhagen that without the system of preliminary references, that the ‘roof would collapse’ (Mancini and Keeling 1991:2). Indeed, this week’s Rosneft judgment, ensuring that Article 267 TFEU preliminary references in cases involving CFSP can be heard, upholds this notion rather tightly.

Barnard & Peers: chapter 10, chapter 24

Photo credit: The Hill 

EU sanctions against non-EU countries: the CJEU will soon address some key legal issues

Stian Øby Johansen, PhD fellow at the University of Oslo Faculty of Law*

This week I attended the hearing at the Court of Justice of the European Union (CJEU) in case C-71/15 (Rosneft). This is one of several cases brought by the Russian energy company Rosneft against the EU sanctions regime established following the Russian military intervention in Crimea. The case has its basis in a request for preliminary ruling by the High Court of Justice (England & Wales), Queen’s Bench Division. In the reference, the High Court of Justice asks the CJEU to determine the validity of several provisions of the EU economic sanctions against Russia.

As the legal issues in play in this case are very closely connected with the precise legal nature of the sanctions challenged, it is necessary to first describe the contested parts of the EU sanctions regime in some detail. Then I will go through the submissions of the parties, and offer some preliminary analysis of the arguments presented. My focus is the same as that of the oral hearing; on the issue of the jurisdiction of the CJEU to review sanctions adopted under the EU’s Common Foreign and Security Policy (CFSP). Before we start I must also add a small disclaimer: this report is based on my own notes and recollections, and there may thus be inaccuracies, misunderstandings, or plain errors.

THE CONTESTED PARTS OF THE EU SANCTIONS REGIME

The contested parts of the EU sanctions regime in this case are the measures “targeting sectoral cooperation and exchanges with Russia” – which I will refer to as the sectoral measures. These sectoral measures are laid down in Council decision 2014/512/CFSP and Council regulation 2014/833/EU (links to latest consolidated versions). Essentially, these provisions prohibit EU persons, natural or legal, from engaging in contractual relations with certain Russian state-owned companies and banks, and from providing such companies and banks access to financial markets.

Sectoral measures may be contrasted with the targeted sanctions laid down in Council decision 2014/145/CFSP and Council regulation 2014/269/EU (links to latest consolidated versions). Such targeted sanctions directly affect named Russian natural and legal persons (not including Rosneft) by inter alia obliging European financial institutions to freeze their assets. With regard to the sectoral measures, on the other hand, Rosneft primarily feels the sting of them through the lack of access to European suppliers, consultants, credit institutions, etc.

This distinction between targeted and sectoral sanctions is also reflected in TFEU Article 215. According to that provision the Union may in the form of a regulation adopt measures providing for ” the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries” (i.e. sectoral measures) or “restrictive measures […] against natural or legal persons” (i.e. targeted sanctions). Since sectoral measures are formulated as prohibitions on EU citizens and undertakings from engaging in such activities, they only seems to affect Rosneft indirectly; it is their EU partners that are now prohibited from doing business with Rosneft. Note the use of the word seems in the previous sentence. Rosneft argues that it is also directly affected by the sectoral measures, and that they should be regarded as targeted sanctions. Still, the following summary of the hearing more or less presupposes that the sanctions are sectoral measures – which was also generally presupposed during the hearing.

A final peculiarity concerning CFSP sanctions regimes is that they are enacted through the use of two separate legal instruments. First, by a Council foreign policy (CFSP) decision under TEU Article 29. Second, and following such a decision, the sanctions are implemented within the internal market by means of a Council regulation under just-mentioned TFEU Article 215. In the present case the relevant instruments are Council decision 2014/512/CFSP and Council regulation 2014/833/EU, which I will refer to in the following as “the CFSP decision” and “the regulation”, respectively. The relationship between the regulation and the CFSP decision was a key factor in relation to many of the issues discussed during the oral hearing in Rosneft.

The CFSP decision is adopted under a provision in the CFSP chapter of the TEU, namely Article 29. This has certain consequences. First, legislative acts are precluded under the CFSP: see TEU Article 31(1). Second, being adopted under the CFSP chapter the jurisdiction of the CJEU to review the decision is generally excluded according to TFEU Article 275(1). Third, while the EU member states “shall ensure that their national policies conform to” the CFSP decision, the decision is not binding upon persons (natural or legal).

The regulation adopted under TFEU Article 215 implements the CFSP decision within the internal market. That regulation is not a CFSP measure. This means that it is binding in its entirety, also on natural or legal persons, and directly applicable within the legal system of the EU member states (TFEU Article 288(2)). Moreover, the general jurisdiction of the CJEU to review acts of the Union institution should therefore apply. (But see the Commission’s arguments to the contrary discussed below.)

What kind of provisions the two instruments should contain when the Union imposes sanctions is less clear. The only guidance we seem to get from the constituent treaties is that (a) legislative acts cannot be enacted in the form of CFSP decisions, and that (b) when a CFSP decision “provides for the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries” the Council shall adopt “the necessary measures” in the form of a regulation under TFEU Article 215. In practice, the wording of the CFSP decision and the regulation is more or less identical. This is also the case here. The provisions Rosneft is challenging are almost word-for-word identical in the CFSP decision and the regulation.

Having mapped out the legal context of the dispute, I will now proceed to the case itself and the main arguments presented at the oral hearing.

PARTIES AND KEY MEMBERS OF THE COURT

The parties to the case before the CJEU are, on the one hand, Rosneft, and on the other, the United Kingdom and the UK’s Financial Conduct Authority – all of which submitted written pleadings and participated in the oral hearing. The Council and the Commission also submitted written pleadings and participated in the oral hearing. In addition, the following states also participated in the oral hearing: the Czech Republic, Germany, Estonia, France, and France. Most of the intervening states had submitted written pleadings as well, with Poland being the only exception I am aware of.

The CJEU is composed as a grand chamber, with President Koen Lenaerts as the presiding judge. The judge-rapporteur is Judge Allan Rosas. I did not make proper notes on who the Advocate General (AG) assigned to the case is, but judging from the pictures on the CJEU’s website I believe it is Melchior Wathelet. The AG promised to deliver his opinion by May 31st, 2016.

CFSP JURISDICTION OF THE CJEU – THE REGULATION

The first question referred to the CJEU is whether the latter is competent to review (a) the regulation and/or (b) the CFSP decision. While the CJEU has general jurisdiction over all matters of EU law under TEU Article 19(1), one significant exception is laid down in the TFEU Article 275(1). According to the latter provision the CJEU “shall not have jurisdiction with respect to the provisions relating to the common foreign and security policy nor with respect to acts adopted on the basis of those provisions”.

This carve-out from the otherwise general jurisdiction of the CJEU is, according to the text of TFEU Article 275(2), subject to a couple of exceptions. First, the CJEU shall have jurisdiction to monitor compliance with TEU article 40 (the dividing line between foreign policy and other EU measures). Second, the CJEU shall have jurisdiction to, “in accordance with the conditions laid down in TFEU Article 263(4)”, review “the legality of decisions providing for restrictive measures against natural or legal persons adopted by the Council”. In the cases where these two “exceptions from the exception” apply we are thus back to the default rule; the CJEU has jurisdiction.

There was a general agreement at the hearing that the CJEU generally has jurisdiction to review the regulation. This is not surprising. As described above, the regulation is not a CFSP measure and the CJEU should consequently have jurisdiction under TEU Article 19(1). So far, the participants at the oral hearing agreed.

There were, however, significant disagreements as to the extent of the CJEU’s jurisdiction to review the regulation. First, there were disagreement on whether the CJEU’s jurisdiction extended to preliminary ruling proceedings – an issue which I come back to later. Second, the Commission seemed to want to limit the CJEU’s jurisdiction to review CFSP regulations slightly, by introducing a “political questions” or “act of state” (french: “acte de gouvernement“) doctrine into EU law. The latter, highly unusual move by the Commission was the object of much debate during the oral hearing.

What the Commission essentially proposed was a way of delimiting the CJEU’s jurisdiction over CFSP measures that would focus on substance rather than form. According to the Commission TFEU Article 275(2) must be read as a clarification of the general principle that the CJEU will always have jurisdiction in connection with restrictive measures affecting individuals. While this should be the guiding principle, the CJEU should not have jurisdiction to review the “political choices” (Commission’s phrasing) underlying the restrictive measures.

In the present case the Commission considered that the CJEU would be precluded to review, inter alia, the choice to impose a trade embargo on Russia, the choice of targeting the petroleum sector, and whether the measures were necessary (proportionality). The Commission also provided some example of what the CJEU would have competences to do; to interpret the impugned regulation, and to consider its validity in light of other provisions of EU primary law.

Despite the apparent novelty of this argument, the Commission insisted that its use of the term “act of state” was merely a label it attached to the political choices that cannot be the object of CJEU review. It argued that it did not invite the court to reinvent the law, but rather to recognize the general principles upon which TFEU Article 275 is based.

The Council, Rosneft, and the member states strongly opposed the Commission’s “act of state” doctrine. They accused the Commission of going beyond both the text of the treaties, context, and purpose of the constituent treaties of the Union in an attempt to expand and reshape the CJEU’s jurisdiction. Several of them explicitly pointed to the fact that the text of the jurisdictional carve-out in TFEU article 275(1) makes no distinction among CFSP acts, and that it lacks any reference to an “act of state”/”political questions” doctrine. Some pointed to the1989 opinion of AG Darmond in Case C-241/87 Maclaine Watson (case later settled), where the existence of an “act of state doctrine” within EU law was discussed at length and rejected. France argued that the recently decided Elitaliana case (C-439/13 P) contained an implicit rejection of the Commission’s suggested general jurisdiction over CFSP measures (with only an “act of state” exception). Poland reminded the CJEU that under TEU article 40 it was only competent to draw a dividing line between what is and what is not a CFSP measure. This should be taken to imply, a contratio, that the CJEU is precluded from drawing distinctions within the CFSP. Rosneft supported the Council and the member states on this point, stating that it would be “dangerous to introduce such an imprecise and vague doctrine” into Union law. Rosneft also referred to AG Maduro’s Opinion in the Kadi case (paras 41-45).

Several members of the court seemed to have similar problems with the Commission’s “act of state” doctrine. President Lenaerts repeatedly questioned the Commission’s agent on the matter. He was particularly puzzled by the argument that the CJEU’s review of the regulation would be limited by the “act of state” doctrine. When the Commission’s agent confirmed that to be their argument, Lenaerts suggested that they should “think about that” and come back to it in its closing submission.

The attempt by the Commission to introduce an “act of state” doctrine is a really surprising move. It seems to directly contradict the wording of the treaties, as is particularly evident when it comes to the jurisdiction of the CJEU over the regulation. It also seems strange for the Commission, who has generally been welcoming judicial review in the CFSP field, to invite the CJEU to limit its jurisdiction. But its view on the CJEU’s jurisdiction to review the regulation is only half the story…

CFSP JURISDICTION OF THE CJEU – THE CFSP DECISION

Since it is the regulation that actually implements the sectoral measures, and everyone seem to agree that the CJEU in principle has jurisdiction over it, one might wonder why discuss the jurisdiction to review the CFSP decision at all? According to Rosneft it was necessary for the CJEU to also review the CFSP decision because even if the regulation was struck down the “member states would still be obliged to implement the decision” under TEU Article 29.

The legal basis for conducting such a review was, according to Rosneft, to be found in the general principles of EU law and the Charter of Fundamental Rights (CFR) Article 47. Rosneft submitted that the CJEU had jurisdiction to review any measure with legal effect for third parties.

Given the slightly restrictive stance on jurisdiction taken by the Commission with regard to the regulation, it might surprise some that the Commission argued that the CJEU does have jurisdiction to review the CFSP decision. However, this is actually a logical consequence of the “act of state” doctrine the Commission proposed: jurisdiction should be delimited according to substance, not form.

What matters is thus not whether the impugned provisions are contained in a CFSP decision or in a regulation implementing that decision, but whether the impugned provisions can be said to be “acts of state”. If they cannot be regarded as “acts of state”, then the CJEU will have jurisdiction to review them. Since the CFSP decision in the present case is almost word-for-word identical to the regulation, the Commission submitted that the CJEU would have jurisdiction to review significant parts of the CFSP decision.

The opposition to the “act of state” doctrine by the other parties applies equally to this context: neither the text, context, intention, or drafting history supports it. Compare to the limits on the Court’s jurisdiction on national police operations in Article 276 TFEU, and more clearly the limits on its review of sanctions against Member States in Article 269 TFEU, which indicate that where the drafters of the Treaties wanted to limit the Court’s jurisdiction to review the merits of measures, they did so expressly. Notably, TFEU Article 275(2) explicitly limits the review of restrictive measures “against natural or legal persons” – identical language to that found in TFEU Article 215(2), but not in 215(1). Sectoral measures, which are not against specific natural or legal persons, therefore seem to lie outside the ambit of CJEU jurisdiction. At least according to the treaty text. The Commission sought to get around this by arguing that TFEU Article 275(2) is only a reflection of a more general principle of EU law on access to justice.

While I personally agree that the Commission’s proposal is of a de lege ferenda nature, and should not be acted on by the CJEU, the idea of delimiting jurisdiction according to substance and not form is intriguing. It would alleviate the problem that is the (seemingly) very limited jurisdiction of the CJEU in CFSP matters, but at the same time give the member states something; a new doctrine to shield them from judicial scrutiny of the most sensitive foreign policy decisions. I think such a development should be considered when the constituent treaties of the Union are again revised (which might not be so far away, considering the recent #UKinEU deal). Although an “act of state” or “political questions” doctrine might be criticized for being vague, I am not sure whether the current delimitation of the CJEU’s jurisdiction is much clearer.

Finally, it is worth mentioning that the Commission also advanced an alternative argument, which it has also put forward in earlier, notably in its submissions in Opinion 2/13. There it suggested that the term “restrictive measures” must be read expansively, so as to cover all potential cases of human rights violations (similarly to what Rosneft argues in the present case). However, the CJEU might be read as rejecting that argument in Opinion 2/13, by stating that “it is sufficient to declare that, as EU law now stands, certain acts adopted in the context of the CFSP fall outside the ambit of judicial review” (para 252). In Rosneft the Commission is therefore presenting a new approach that leads to essentially the same result. It seems as if the Commission’s strategy is to argue for an expansion of the CJEU’s power over CFSP measures at every opportunity.

MAY THE CJEU REVIEW CFSP MEASURES IN PRELIMINARY RULING PROCEEDINGS?

If it is concluded that the CJEU has jurisdiction to review the CFSP decision, another jurisdiction snag appears. TFEU Article 275(2) – the Article one would presume that need to be interpreted expansively as to its field of application to cover CFSP decisions – only envisages actions for annulment, and makes explicit reference to the conditions laid down in TFEU Article 263(4). Textually this seems to preclude jurisdiction to give preliminary rulings. Rosneft argued that a “strained literal interpretation” was not necessary, and that the CJEU should take account of the underlying intention: to bestow upon it jurisdiction for (some) CFSP measures.

The Commission agreed with Rosneft as to the result, while also pushing its “act of state”-based theory of CFSP jurisdiction. Under the Commission’s theory the form of the proceedings does not matter. According to it TFEU Article 275(2) is merely an expression of (part of) a general principle of EU law. The consequence is that the CJEU also has jurisdiction to give preliminary rulings.

The Council and the member states disagreed firmly, and argued that the CJEU did not have jurisdiction to review CFSP measures in preliminary ruling proceedings. In doing so they mainly invoked the clear language of TFEU Article 275(2), and its unequivocal reference to TFEU Article 263(4).

Another question on the margins of this is the question of standing for Rosneft. If it brings an action for annulment under TFEU Article 263(4) it will probably be dismissed since the sectoral measures are not “of direct or individual concern” to Rosneft. This might sound strange, but EU lawyers will recognize that this language has been applied very restrictively by the CJEU since the judgment in Case 25/62 Plaumann v. Commission [1963]. While the Treaty of Lisbon introduced another ground of standing (regulatory acts of general application, if they were of direct concern and do not entail implementing measures), the CJEU has interpreted this narrowly too.

But one might question whether the standing rules in TFEU Article 263(4) actually do apply. Normally, litigants do not need to fulfill standing requirements in preliminary ruling proceedings, since the requests for a preliminary rulings are submitted by the domestic courts. Rosneft therefore argued that the standing requirements did not apply, while the member states and the Council argued that they did apply. I will not discuss this further here.

HOW SHOULD THE CJEU CONDUCT ITS JUDICIAL REVIEW?

If the CJEU finds that it has jurisdiction, whether to just review the regulation or also the CFSP decision, there are uncertainty as to how it should conduct its judicial review. Notably, the issue of judicial restraint was brought up by several parties, and also from the bench. The issue of judicial restraint is, conceptually speaking, clearly distinct from the issue of jurisdiction. Judicial restraint doctrines come into play when a court has decided that it has jurisdiction to conduct judicial review. It is a doctrine within substantive (usually administrative or constitutional) law laying down limitations on the intensity of the judicial review.

During the hearing this materialized in the form of a discussion of the scope of the CJEU’s review of the regulation, under the assumption that it lacks jurisdiction to review the CFSP decision. President Lenaerts and the AG pointed to the fact that under TFEU Article 215 it is a precondition for enacting sanctions regulations that a prior CFSP decision exists. They therefore wanted to know whether this meant that the CJEU could review the regulation in light of the CFSP decision – even if jurisdiction over the latter is lacking.

The Council at first did not provide a satisfactory answer, and only stated that there must be a “valid CFSP decision” before a regulation could be enacted. After much back and forth the Council finally admitted that its argument was that the CJEU should not conduct such a review, and that it understood TFEU Article 215 as only requiring a CFSP decision. The United Kingdom took a similar position, explicitly referring to the doctrine of judicial restraint as it has been developed in EU (case-)law. It should also be added that the Commission’s submission on jurisdiction – the “act of state” doctrine – could equally well function at the substantive level, as a norm of judicial restraint.

WHAT IS THE ROLE OF THE COURTS OF THE EU MEMBER STATES?

The role of the courts of the EU member states was a recurring topic throughout the hearing. That is because, if the CJEU lacks jurisdiction to review the CFSP decision, the relevant courts for settling such disputes are those of the Member States. This follows from TFEU Article 274, according to which the Union loses its jurisdictional immunity in cases where the CJEU lacks jurisdiction. A slew of issues may be, and was, raised in this regard. I will only touch upon a couple of them.

First, the Commission argued that its proposed “act of state” doctrine had to extend to Member State courts reviewing e.g. CFSP decisions. This was opposed by all the other parties that commented on the issue.

A second issue was the risk of diverging results in different member states’ courts. Most parties acknowledged this risk, but pointed out that this was a natural consequence of the system of jurisdiction laid down in the Treaties. Some also noted that it might be alleviated through judicial dialogue between the national courts. In addition, Germany made the surprising argument that the Commission could police diverging practices by initiating infringement proceedings. President Lenaerts reacted strongly to this suggestion, asking the German agent whether he “was serious” in suggesting this, and urged him to reconsider whether Germany really intended to make that argument. The agent for Germany promised to get back to the issue in his reply, but according to my notes he did not do so.

A third, interesting submission under this heading came from France. Despite being opposed to the Commission’s EU-level “act of state” doctrine, it suggested that domestic courts should be able to apply the “act of state” doctrine applicable within their jurisdiction when reviewing e.g. CFSP decisions. Such a doctrine does exist in French law (“acte de gouvernement“). Judge Rosas asked what the consequence of this argument would have for the right to effective legal protection, since it seems to suggest that a litigant may neither be able to challenge a CFSP decision before Union courts nor domestic courts of (some) member states. France replied that the ECtHR has accepted such restrictions in its case-law. The United Kingdom, on the other hand, submitted that domestic doctrines limiting legal protection must be set aside. When questioned on the matter, the Council took a stance in between these two extremes, stating that it was “reluctant to give direction to domestic courts” while at the same time pointing to the fact that Article 47 of the EU Charter requires access to a court.

As I was not aware of the French “acte de gouvernement” doctrine before this week’s hearing, some pieces of another puzzle clicked together for me. During the negotiations of the EU accession to the ECHR France was one of the key proponents of a rule in the accession agreement that would attribute all conduct in Common Security and Defence Policy (CSDP) missions to the troop-contributing countries – while excluding responsibility for the Union as an organization. At the time I found it a bit strange that France wanted to, essentially, increase its own responsibility in this manner. But this all makes more sense when one considers that the attribution of all conduct to French troops would make it possible for France to avoid judicial scrutiny of (military) CSDP missions altogether.

SUBSTANTIVE ISSUES

The hearing focused on questions of jurisdiction, standing, and the standard of review. This was because the CJEU had emphasized these points in its written questions to the parties before the hearing. Although the discussion of substantive issues was limited, two arguments presented by Rosneft deserve mention.

First, Rosneft submitted that the CFSP decision was legislative in nature, due to its detailed provisions that were generally identical to the regulation implementing the sanctions. As the adoption of legislative CFSP acts is prohibited under TEU Article 31(1) i.f., this would render the CFSP decision invalid. And since a valid CFSP decision is needed to enact a regulation under TFEU Article 215, the regulation would also be invalid. Against this it was argued that TEU Article 31(1) i.f. must be understood as dictating that no CFSP decision can be considered to be legislative. Consequently, even if it appears to be so, it is not a legislative act, and does not have the effects of a legislative act.

Second, Rosneft argued that the CFSP decision (and the regulation) violated international law – specifically the EU-Russia Partnership and Cooperation Agreement. In opposition to this argument the other parties submitted that the “essential security interests” exception in Article 99 of the agreement was triggered by the “serious international tension” following the situation in Ukraine. Indeed, the Council in its opening statement described the sanctions regime as “between words and war” and pointed out that Russia had chosen to enact its own restrictive measures instead of invoking Article 99 of the agreement.

Rosneft in turn attempted to counter this argument by pointing out that the Council did not state the reasons for why “essential security interests” exception applied, either in its original CFSP decision nor in any of the later amendments. In fact, even when questioned by the AG on this matter the Council failed to provide any real answer to why the Council found the provision to be triggered. The agent for Rosneft did a good job of pointing this out in his reply, and I think that there is a real chance that the failure to provide proper reasons may come back to haunt the Council when the judgment is announced.

CONCLUSION

As I have shown above, this case raises an array of interesting and important questions of EU law. That being said, it is usually so that a court confines itself to do what it is mandated to do: solve the dispute. A court generally avoids dealing with unnecessary, albeit interesting, questions. Particularly if they are difficult or disputed, as is the case here.

Still, I think the Rosneft case might provide a good opportunity for the CJEU to clarify some aspects of its CFSP jurisdiction. The way Rosneft has framed the case, and given the explicit question of CJEU jurisdiction over CFSP decisions in the referral from the High Court, the CJEU is left with little choice. As I see it the CJEU has three basic options: (1) to come out and say it has (some) jurisdiction over CFSP decisions; (2) review the regulation only, and in case of it being found invalid note that a CFSP decision cannot be legislative and thus need not be implemented in domestic law; or (3) reject jurisdiction over CFSP decisions altogether, only review the regulation, and say nothing about the consequences of its invalidity or the legal effects of the CFSP decision.

*Reblogged from: https://obykanalen.wordpress.com/2016/02/25/a-report-from-the-oral-hearing-in-case-c-7215-rosneft/

Barnard & Peers: chapter 5, chapter 25

Photo credit: carnegieeurope.eu