Does A Third State Have Legal Standing To Challenge EU Restrictive Measures? The Court Of Justice Says ‘Yes’

 

 

Francesca Finelli, PhD student, University of Luxembourg

 

In case C-872/19 P, Venezuela v Council, the Court of Justice sets aside the judgment under appeal of the General Court and holds that Venezuela has standing to bring proceedings against EU acts which introduce restrictive measures (namely economic sanctions) against it. This judgement represents an unprecedented ruling of the CJEU. In fact, for the first time, the Court has decided to expand the category of potential applicants as to include any third State in respect of which the Union decides (as a matter of Common Foreign and Security Policy) to interrupt or reduce economic and financial relations. Those States, even if non-EU countries, are now empowered to challenge the validity of EU restrictive measures before EU Courts.

 

Background to the dispute

 

Since November 2017, the EU has imposed restrictive measures in view of the situation in Venezuela, more precisely, in view of the continuing deterioration of democracy, the rule of law and human rights in Venezuela. First, the EU sanctioning regime against Venezuela imposes export bans on the sale, supply, transfer or export of equipment which might be used for internal repression (mainly military and surveillance equipment, technology and software, as listed in Annex I and II of the Council Regulation). Second, the regime also provides for individualized asset-freezing measures against natural or legal persons, entities and bodies (i) responsible for serious human rights violations or abuses or the repression of civil society and democratic opposition; (ii) whose actions, policies or activities otherwise undermine democracy or the rule of law in Venezuela; and (iii) natural or legal persons, entities and bodies associated with them (see Article 8 of the Council Regulation).

 

In the past four years, no individual application has been submitted to EU Courts by any (of the more than 120) targeted individuals, seeking to challenge the validity of their listing decisions. Nevertheless, in February 2018, the Bolivarian Republic of Venezuela brought an action for annulment before the General Court, asking to annul several EU acts which impose restrictive measures in that State.

 

The question of admissibility

 

The central legal question in the Venezuela v Council case is whether the application made by Venezuela may be considered admissible before EU Courts. Accordingly, the central legal provision to take into consideration is Article 263(4) TFEU, which lays down the conditions for natural and legal persons (the so-called ‘non-privileged applicants’) to bring action before the Court. Article 263 provides for standing for legal or natural persons to challenge EU measures directly in the EU Courts, provided either that the EU measure is addressed to them, or that they have direct and individual concern, or that they are challenging a non-regulatory act, have direct concern, and that act does not entail implementing measures. This case turned on the interpretation of the last of these three possibilities.  

 

In the case at hand, the preconditions of admissibility of the action are as follows: Venezuela must prove its ‘direct concern’, which requires the fulfilment of two cumulative criteria, namely that (1) the contested EU acts directly affect its legal situation and (2) the same acts leave no discretion to the addresses who are responsible for their implementation, making the implementation of those acts automatic, and without the involvement of intermediate (domestic) rules. Moreover, the Council also claimed two additional grounds for inadmissibility: it added that Venezuela has no legal interest in bringing proceedings; and it is not even a ‘natural or legal person’ within the meaning of Article 263(4) TFEU (see § 23 of the judgement under appeal).

 

On 20 September 2019, the General Court (GC) firstly ruled on the Venezuela v Council case (see Case T‑65/18). In line with the Council’s claims, the GC held that EU restrictive measures do not directly affect Venezuela. ‘At most, the contested provisions are likely to have indirect effects’ on the third State (§ 33). The Court stressed the fact that Venezuela is not ‘explicitly and specifically referred to’ in the restrictive measures (§ 36). Those measures (taken ‘in view of the situation in Venezuela’ and not ‘against Venezuela’) simply have the effect of limiting the availability of the certain goods and services in that State, but the applicant cannot be considered as ‘directly concerned’ - since it is not directly targeted. It follows that, according to the Court of first instance, Venezuela lacked the necessary locus standi (as provided for in the fourth paragraph of Article 263 TFEU) and the proceedings were considered inadmissible on that basis.

 

Nonetheless, on 22 June 2021 (see Case C-872/19 P), the Court of Justice, before which Venezuela lodged an appeal, overturned the previous judgement and ruled that the General Court erred in law in dismissing the action.

 

Firstly, the Court of Justice analysed (as preliminary observations) the concept of ‘legal person’ – which was not addressed by the GC. The Court affirmed that Article 263(4) TFEU ‘cannot be interpreted restrictively’ (§ 44). On the contrary, it shall be read in the light of the principles of effective judicial review and the rule of law, which represent EU founding values (see Article 2 TEU) and shall guide the European Union’s external action (see Article 21 TEU and the relevant case-law, inter alia Rosneft and Bank Refah Kargaran, discussed here and here). Such a broad interpretation of the fourth paragraph of Article 263 TFEU (in light of the above-mentioned EU founding values) ‘militates in favour of finding that a third State should have standing to bring proceedings’ (§ 50). Accordingly, the Court ruled that Venezuela, although it is a third State and a legal person governed by public international law, ‘is equally likely as any another person or entity to have its rights or interests adversely affected by an act of the European Union and must therefore be able, in compliance with those conditions, to seek the annulment of that act’ (§ 50).

 

Following AG Hogan's Opinion, the Court held that Article 263(4) TFEU does not strictly apply to private actors or individuals. On the contrary, the obligation to ensure compliance with the principles of effective judicial review and the rule of law requires the EU to allow Venezuela to challenge the restrictive measures adopted by the Council that are prejudicial to that State. This is an expression of the ubi ius ibi remedium principle, which is a general principle of EU law, and is enshrined in Article 47 of the EU Charter of Fundamental Rights (see § 32 AG Opinion).

 

Secondly, the Court evaluated the notion of ‘direct concern’. Once again, it followed AG Hogan’s reasoning and considered the EU restrictive measures to directly concern Venezuela. Contrary to the GC, the final decision of the Court of Justice advocates ‘a holistic and pragmatic approach’ when assessing the effects of EU restrictive measures, and ‘favours substance over form’ (see § 105 AG Opinion). Thus, even if the regime does not refer to Venezuela as an explicit target, the Court reached the conclusion that EU restrictive measures directly affect the legal situation of the State, since those provisions prevent Venezuela from obtaining numerous goods and services (§ 69 and § 117 AG Opinion). 

 

Thirdly, the Court examined the alleged absence of an interest in bringing proceedings (claimed by the Council as a ground for inadmissibility for the action). The Court clarified that the EU restrictive measures are liable to harm the interests, in particular the economic interests, of Venezuela (§ 83). It follows that the action for annulment is capable of procuring an advantage for the State. Such advantage presupposes Venezuela’s interests in in bringing proceedings before the Court.  

 

Lastly, the Court had to analyse whether the contested EU provisions entail implementing measures or apply without leaving any discretion to its addressees. The Court clarified that the contested act (namely Council Regulation (EU) 2017/2063) constitutes a ‘regulatory act’ (see § 92), adopted in accordance with Article 215 TFEU, under the non-legislative procedure. Hence, its provisions do not entail further implementing measures.

 

The Court concluded that all the conditions laid down in the third limb of the fourth paragraph of Article 263 TFEU are fulfilled. As a result, the action for annulment brought by Venezuela before the General Court is admissible. Finally, it referred back the dispute to the General Court which is now responsible for giving its judgment on the merits (§ 95).

 

Critical assessment

 

Ruling in favour of admissibility of the action brought by Venezuela is quite striking and leaves us puzzling. Is it a dangerous move for the CJEU? Now it is hard to predict. Nonetheless, it is worth noticing that the Venezuela v Council ruling leads to a strong expansion of potential applicants before the Luxembourg judges, meaning a potentially dangerous proliferation of judicial challenges against EU restrictive measures (by affected third countries, such as Russia, Belarus, Turkey). This aspect was emphasised by the Council in the dispute at stake. In fact, the Council was concerned that empowering third States to bring actions for annulment against EU restrictive measures could put the EU at a disadvantage (§ 32 of the appeal), particularly because the Union does not enjoy an equivalent right to judicial review before foreign courts as to challenge third countries’ foreign policy (sanctioning) decisions. This lack of reciprocity leaves the EU without any judicial guarantee before non-EU courts.

 

Moreover, EU restrictive measures already represent a topic of abundant litigation, and consequent vulnerability for the Union, before the EU Courts. That is why I was expecting a more cautious approach from the Court of Justice (with the view of protecting its autonomous legal order).

 

Lastly, will this generous interpretation of the Court of Justice bring to a shift from geographic to thematic restrictive measures (such as the new EU human rights sanctions regime)? Surely the Union (and the Council) has now to rethink about third-countries sanctions regimes. A possible solution to avoid the proliferation of judicial challenges before the CJEU by non-EU countries could be to rapidly shift to EU thematic sanctions regimes.

 

Barnard & Peers: chapter 24

Photo credit: Wiflredor, via Wikicommons

State Immunity, Comity and the Question of Legal Standing of a Third Country before the CJEU: The Opinion of AG Hogan in Case C‑872/19 P Venezuela v Council

 

 

Eva Kassoti, Senior Researcher, CLEER academic co-ordinator, T.M.C. Asser Institute. E-mail: E.Kassoti@asser.nl

 

In his Opinion delivered on 20 February 2021, A.G. Hogan tackled an important procedural question: Does a third State have legal standing to challenge EU acts before the CJEU? The question at bar is significant not only because the Court has never addressed it directly before in the context of sanctions, but also because it involves enquiring into the principles that mediate the relationship between the EU legal system and other subjects of international law.

 

The case is an appeal against the General Court’s judgment of 20 September 2019, in which that Court was asked to rule on whether Venezuela could challenge a series of restrictive measures prohibiting the provision of arms, military as well as surveillance equipment to any natural or legal person, entity or body in, or for use in, Venezuela.

 

Answering this question necessitates examining whether the conditions of Art. 263(4) TFEU (on standing to bring direct actions for annulment of EU law, if the challenger is not a Member State or EU entity) to have been met. In casu, the answer is contingent on examining whether Venezuela is a legal person that is directly and individually concerned by the measures at hand, or, in the case that the measures are considered as regulatory acts, it is sufficient to show that these measures are of direct concern to Venezuela and do not entail implementing measures. The General Court found that Venezuela was not directly concerned by those measures, and thus, that it lacked standing under Art. 263(4) TFEU – without however addressing the question of whether Venezuela is a legal person within the meaning of the same provision.

 

In his Opinion, the AG focused on two main issues in order to answer the question of legal standing: (i) whether Venezuela is a legal person within the meaning of 263(4) TFEU; (ii) whether Venezuela is directly concerned by the measures in question within the meaning of 263(4) TFEU. The A.G. proposed that the CJEU answers both questions to the affirmative. If the Court follows the A.G.’s line, this could reinforce the image of the EU as a global actor committed to the rule of law and to effective judicial protection by recognising in essence that third States have a right to challenge EU law measures them before EU courts, provided that the conditions set out in Art. 263(4) TFEU are satisfied – even in the absence of reciprocity. This blogpost focuses on the AG’s analysis of the question of ‘legal personhood’ as the question of direct concern has been discussed elsewhere.

 

Is Venezuela a legal person within the meaning of Art. 263(4) TFEU?

 

According to the A.G., both international and EU law considerations buttress the finding that Venezuela should be considered as a legal person for the purposes of Art. 263(4) TFEU.

 

International Law Considerations

In relation to the international law arguments supporting this finding, the A.G. (correctly) rejected the Council’s assertion that Venezuela is barred from bringing a suit before the CJEU on the basis of the doctrine of State immunity.  The AG argued that the law of immunities cannot limit the legal standing of Venezuela since this action is brought by Venezuela and not against Venezuela. Indeed, State immunity under international law is aimed at facilitating the performance of public functions by the State and its representatives by preventing actions being brought against them before foreign courts. It does not however imply that third States are barred themselves from appearing as claimants before foreign courts – as Art. 8 of the 2004 UN Convention on Jurisdictional Immunities of States and their Property makes abundantly clear.

 

However, the rest of his line of argumentation on the basis of international law seems rather weak and convoluted. The A.G. argued that the international law principle of comity should inform the interpretation of what constitutes a legal person for the purposes of Art. 263(4) TFEU and that, on the basis of comity, the CJEU should be open to challenges brought by States in their sovereign capacity as international legal persons. It is interesting to note at this juncture that if the Court chooses to take up this point it would be the first that it will rule directly on the question of whether international legal personality implies that an entity is a ‘legal person’ also for the purposes of an action of annulment. This argument has been expressly made before by Front Polisario, a national liberation movement with (arguably) a measure of international legal personality, in the context of the Front Polisario v Council case, but the General Court eschewed engagement therewith and ruled on Polisario’s legal personality solely from the standpoint of EU law.

 

However, from an international law point of view, the argument made by the A.G. is rather unconvincing. In fact, there seems to be no rule of customary international law requiring one State to allow another State to bring suit in its courts. Rather, comity is a domestic law doctrine (that has been mainly employed by US courts) under which deference is afforded to foreign states to bring suits before domestic courts as plaintiffs. The practice relied on by the AG (the Banco National de Cuba v Sabbatino judgment by the US Supreme Court) as well as a survey of other relevant case-law (the Sapphire; the Hilton v Guyot; the Santissima Trinidad – all judgments by the US Supreme Court) attest to the domestic law pedigree of the principle of comity. The AG failed to show how this domestic law principle has entered the corpus of international law. Overall, great caution needs to be exercised in using domestic cases in order to make propositions about general international law. The very notion of ‘comity’ in international law is linked to practices of a discretionary character; this runs counter to the modern understanding of customary international law “as evidence of a general practice accepted as law” (Art. 38(1)(b) ICJ Statute).

 

The international law blunder aside, the question arises as to whether there are good reasons to adopt the relevant doctrine as a matter of EU law. While the principle of comity is distinct from international law, it undoubtedly remains an internationally oriented principle that is important in shaping a State’s relations with the outside world. Showing deference to third States as litigants before the CJEU would certainly be within the spirit of Art. 3(5) and 21 TEU and it would consolidate the external projection of the EU as a confident and internationally engaged polity committed to the ethos of the rule of law.

 

EU Law considerations

 

The A.G. also relied on a number of EU law precedents where the CJEU had (en passant) accepted that third States have legal standing to bring an action for annulment under Art. 263(4) TFEU – although, admittedly, the context in which these rulings were made was not that of restrictive measures as is the present one (Cambodia and CRF v Commission, para. 51; Poland v Commission, paras. 51,52; Switzerland v Commission, para. 22). In the context of restrictive measures, the A.G. found the Court’s judgment in PKK and NKK v Council of particular importance since it implies that, even in the absence of legal personality, an entity that is directly and individually affected by restrictive measures must have access to EU courts in order to protect its rights. On the basis of these EU law precedents and taking into account that respect for the rule of law and the principle of effective judicial protection are core EU law principles, the A.G. concluded that Venezuela must be regarded as a legal person within the meaning of Art. 263(4) TFEU – even in the absence of reciprocity since “respect for the rule of law and the principle of effective judicial protection is not based on any notion of reciprocity and they cannot be traded or compromised in diplomatic exchanges or made subject to reciprocal treaty obligations.”

 

This part of the A.G.’s Opinion is particularly convincing – especially in the light of the Court’s relevant case-law. In PKK and NKK v Council, the Court emphasised that the procedural rules governing the admissibility of an action for annulment must be read with a view to “avoiding excessive formalism” – something that would amount to denying to an entity against which restrictive measures have been taken the possibility of applying for annulment. One may add that it would at least raise an eyebrow if the Court denied Venezuela - a sovereign State and as such, the example par excellence of an international legal person - capacity to bring annulment proceedings, while it has recognised such capacity for entities such as the Western Saharan Front Polisario and the Sri Lankan Liberation of Tigers of Tamil Eelan.

 

While one may concede that there are good reasons to adopt the A.G.’s approach to legal personhood, the question arises as to whether there may be far-reaching implications for the conduct of the EU’s foreign relations. Would allowing third States to challenge EU law measures before the CJEU open the floodgates for a number of politically charged questions of recognition of entities (such as Kosovo and Palestine) to be decided by the Court? This fear seems to be exaggerated. As the doctrine of comity has been applied by US courts, exceptions are accepted in case of States not recognised by the US. This would ensure that, while the CJEU shows a great degree of openness to review measures affecting third States, it would not be used to make determinations regarding (often politically charged) issues of recognition.

 

Barnard & Peers: chapter 24

Photo credit: Archilider, via WikiCommons Media

So long, and thanks for all the fish: the CJEU clarifies international law and institutional issues applying to fisheries

 

Steve Peers

The EU’s fisheries policy is controversial both within the EU and outside it, due to its impact on both fish stocks and the livelihoods of fishing communities. Until the Treaty of Lisbon, its application was essentially the sole preserve of the Council. The European Parliament (EP) tried to obtain joint control of some of the external aspects of the policy by claiming that its consent was needed for international fisheries treaties that impacted the EU budget significantly, but the CJEU rejected this challenge.

Following the Treaty of Lisbon, however, the EP has joint decision-making power internally over agriculture and fisheries policies, since Article 43(2) TFEU states that the ordinary legislative procedure now applies to the adoption of legislation in this field. However, certain aspects are still reserved to the Council, with the European Parliament only consulted, namely ‘measures on fixing prices, levies, aid and quantitative limitations and on the fixing and allocation of fishing opportunities’ (Article 43(3)).

As regards fishing, this provision is used each year just before Christmas, to determine the annual allocation of fish between Member States. It’s safe to say that the tone of these usually bitter negotiations never induces fisheries ministers to kiss each other under the mistletoe.  

What exactly is the dividing line between the areas where the EP shares power with the Council, and where fisheries ministers are left to hold acrimonious discussions among themselves? There are pending cases on the dividing line as regards internal EU measures. But today the CJEU ruled on the division of powers externally, in a case which also raised interesting issues of international law.

The judgment

Today’s judgment concerned a Council Decision which awarded Venezuelan fishermen the possibility to fish in the waters of French Guiana (which is a constituent part of French territory). This confirmed what those fishermen had been doing for some time before. The EU had felt it was necessary to put this practice on a more formal footing, but the rather left-wing Venezuelan government did not want to sign a treaty with such dastardly agents of global capitalism.

So the EU adopted an apparently unilateral Decision on this issue. The Council believed that it fell within the scope of Article 43(3), so the EP only had to be consulted, while the EP and the Commission argued that it fell within the scope of Article 43(2), so that the EP had the power of consent. The rules on the EP’s role in the approval of international treaties to which the EU becomes a party are set out in Article 218 TFEU. Basically the EP has the power of consent whenever a treaty concerns an issue regulated by the ordinary legislative procedure (ie fisheries law generally), but is only consulted when a treaty falls within the scope of other decision-making rules internally (ie the non-legislative procedure that applies when the EU fixes and allocates fishing opportunities). (In fact, the rules on the EP’s role in approving international treaties are slightly more complicated, but only this basic distinction is relevant to today’s judgment).

But was the Council Decision an international agreement in the first place? The Advocate-General’s opinion argued that it was not. Rather, it was a unilaterally binding declaration, an interesting form of international law. In fact such legal creatures are so rare that international law had not yet clarified whether international organisations like the EU could adopt them. In the Advocate-General’s view, they could. But that left the awkward question of how exactly the EU could adopt one as a matter of its internal law, since Article 218 clearly only refers to agreements concluded by the EU (or on behalf of the EU by its Member States). She considered various options, but ultimately argued that the relevant provisions of Article 218, including the powers of the EP to give its consent and receive information on negotiations, as well as the special jurisdiction of the CJEU, applied by analogy.

In the Court’s view, however, the Decision did constitute an international agreement. It based itself on the relevant rules of the UN Convention on the law of the sea, to which the EU and its Member States (but not Venezuela) are parties, and confirmed its position in the recent ruling on the Hague Convention on child abduction (discussed here), that treaties could be concluded in two steps. In this case, the EU had extended an offer, which Venezuela was free to accept, reject or suggest changes to. It had chosen to accept.  

As for the internal division of powers, both the Advocate-General and the Court reached the same conclusion: the Parliament’s argument was correct. In the Court’s view, the main powers relating to agriculture and fisheries set out in Article 43(2) concerned ‘policy decision[s] that must be reserved to the EU legislature’. In contrast, Article 43(3) provided for ‘measures of a primarily technical nature’ to implement the legislation adopted in the field. Applying that distinction to this case, the ‘treaty’ with Venezuela set out only a general framework, which had then been implemented by further measures based on Article 43(3). So that ‘treaty’ could not itself be based on Article 43(3); rather it was subject to the consent of the European Parliament, as it was based on Article 43(2).

Comments

On the international law issue, the Advocate-General’s analysis is more convincing than the Court’s, given the clear unwillingness of Venezuela to engage in any formal negotiations along its failure to ratify the UN Convention on the law of the sea, which the CJEU relied on so heavily. Nor is the Court’s use of the language of contract law very convincing. True, Venezuela’s application for fisheries authorisations might be described as the acceptance of an offer, but what is the consideration? Why should Venezuela’s actions be characterised in light of a treaty it had not ratified? Possibly the relevant rules reflect customary international law on the law of the sea which apply to Venezuela, but the Court does not make that argument.

Nor is its analysis of the text of the Law of the Sea Convention very convincing. The relevant clause refers to making ‘agreements or other arrangements’ regarding surplus fish. Could not a unilateral binding declaration constitute a form of ‘other arrangement’? Possibly that interpretation has been rejected by the Law of the Sea tribunal or by experts in that field of law (I confess that I’m not one), in accordance with the sources of international law as defined in the UN Charter. But if that is the case, the Court needs to bolster its interpretation by citing such evidence.

The distinction between the forms of international obligation matters mainly as regards the EU’s internal law. If the Decision was a unilateral binding declaration, the CJEU would have the awkward job of deciding whether the EU can adopt such measures, and if so how. Since the Court didn’t have to address these issues today, they must be considered open. But if it is every necessary to consider them in future, there is much to recommend the Advocate-General’s very thorough analysis of both of these points.

As for the internal decision-making rules, the judgment is more convincing, particularly in light of the Advocate-General’s arguments that Article 43(3) cannot apply to everything concerning fishing opportunities, since that would render the main legislative powers set out in Article 43(2) superfluous.

The broader implications of this judgment remain to be seen. But it’s an early indication that the Court is inclined to tilt in favour of a broad interpretation of the scope of the EP’s legislative and treaty approval powers over agriculture and fisheries following the entry into force of the Treaty of Lisbon.

 

Barnard & Peers: chapter 5