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