by Ariadne Fatsi, researcher of the unit «International & European Law»

This analysis focuses on the sanctions imposed on the Russian Federation from the part of the European Union, the legislation regarding their implementation and the implications which have arised with corporations which act in the Russian territory. Such is the Rosneft case, which is the main discussion of this research. The issue of sanctions against the Russian Federation is very closely related to the Ukrainian Crisis. On the one hand, the United Nations Security Council is unable to function properly, due to Russia being one of the Permanent 5 members and using the veto power against any measures which do not serve its interests. The General Assembly, on the other hand, did manage to pass a resolution characterizing the referendum of Crimea as illegitimate (68/262) in 2014; however, as its resolutions are not legally binding, this very important document was only effective to a certain extent. Therefore, the sanctions imposed cοme mostly from the European Union and the United States of America.

1. Introduction to the Ukrainian crisis

The Ukrainian Crisis dates back to 2013 and the events which took place after the “Euromaidan” demonstrations against President Yanukovich, which led to his ousting in the same year, as well as the annexation of the Crimean peninsula in 2014 after a referendum which has not been recognized as legitimate by the United Nations or the European governments. Hostilities kept taking place in the region of Donbass and namely in the cities Donetsk and Luhansk, where it seemed that Russian separatist groups had taken over the area and were constantly backed by Russian troops, despite the Russian government never admitting to sending troops or artillery in the area. Control of the region shuffled between the Ukrainian government troops and the insurgent groups, which -apparently backed by Russian officials- fought back and kept their territory. The peace negotiations facilitated by the EU resulted in the fragile Minsk ceasefire, which was constantly violated from both sides. In 2015, the second Minsk agreement was signed, but that one was not implemented properly either. The crisis caused a huge dent in the destabilised Ukrainian economy and its results can even be seen today, especially as the Russian Federation is actively seized on causing more problems in the affected areas. In 2016, there were equally many complaints for violations of international law, the presence of Russian troops in the Ukraine and the deaths of servicemen and civilians. Russia claimed that some of its own troops were attacked by Ukrainian troops without even entering the Ukrainian borders, but there has been no substantial evidence for that. President Poroshenko called the allegations of the Russian side “crazy and cynical” and left a message for the European Union, stating that Russia could be planning a full-scale invasion in the Ukraine and the Union itself was not powerful enough to prevent or combat such a development.

In 2017, the casualties from acts of violence directly related to the events of the past three years were more than they had ever been after the Minsk agreement of 2015, which was never actually fulfilled.It was only months ago in May of 2018, when the President of Russia, Mr Vladimir Putin was beyond himself with joy in the very symbolic grand opening of the Kerch Strait bridge, which connects the mainland of Russia with the Crimean peninsula. Asked about the possibility of a return of Crimea, Mr Putin was adamant in saying that there will never be such circumstances. This brings us to November of 2018 and the Kerch Strait, where Russian warships opened fire on three Ukrainian vessels and seized them. The Ukrainian parliament replied to this by voting in favour of martial law for the duration of one month from voting as far as the coastal areas and areas neighbouring Russia are concerned. The measure was deemed necessary and its was finally voted upon on the 28th of November 2018.

The sanctions imposed by the European Union on the Russian Federation at the moment are applicable to specific economic sectors. Sanctions were imposed for the first time because of the Ukrainian Crisis in July 2014, while in September of the same year, the sanctions became harsher, with more restrictions for the banking and energy sectors. In March 2015, the EU leaders decided to see to the completion of the sanctions regime along with the implementation of the Minsk agreement, but since it was never properly implemented, the sanctions were extended until July 2016. The sectors most targeted were energy, weapons and access to primary and secondary capital markets within the EU. Specifically for the regions of Crimea and Sevastopol, the sanctions forbid Russia from supplying tourism services in the areas. Furthermore, they impose an import ban from both regions, restrictions on investments and export ban on certain items and technologies. On 18th of June 2018, these sanctions were extended until 23rd June 2019. The corporations most affected by these sanctions have in many cases, the most well known of which is Rosneft, attempted to challenge the decision of the Council of the EU and request compensations for damage taken as a result of the restrictions imposed on the Russian Federation. The jurisdiction of the Court of Justice of the European Union (CJEU) on the matter is, however, a complex issue, because of the legislation concerning sanctions.

2. EU Regulations on Sanctions

The process which is required for the implementation of sanctions from the EU takes place in two phases according to the Treaty on European Union (TEU), the Treaty on the Functioning of European Union (TFEU) and the regulations relevant to the Common Foreign and Security Policy (CFSP). First, the Council reaches its decision under TEU title V, chapter 2. Then, the measures become Union law under article 215 TFEU. The two natures of legal bases used in this procedure create a few complications. For the first phase of the decision, the legislation used is mostly the CFSP, while for the second phase, the one which actually leads to the adoption of a Regulation, the legal basis is the TFEU. However, the treaties pertaining to the CFSP and the acts under them are, according to TEU article 24 and TFEU article 275, not within the jurisdiction of the CJE), apart from two exceptions, both crucial in the Rosneft case, which will be examined in the next chapter. These are namely the following: the CJEU can monitor whether the decisions taken within the CFSP comply with TEU Article 40 and has also jurisdiction to make judgments on the legality of decisions which impose “restrictive measures against natural or legal persons”.

On the issue, there has been case law before the Rosneft case. In Opinion 2/13 (2014) about the EU Accession to the ECHR, the position of the Council is that the CJEU only has jurisdiction in the specific case of restrictive measures against natural or legal person and does not have jurisdiction to examine claims of “non-contractual liability, in which compensation is sought for damage resulting from a CFSP act or measure”[1]. Similarly, in its Order T-213/12 in the case Elitaliana v. Eulex Kosovo, the General Court of the EU accepted a plea of inadmissibility and ruled that it had no jurisdiction on decisions relevant to the CFSP. However, the Court of Justice ruled on appeal (case C-439/13P) that in fact there was jurisdiction of the CJEU to hear the case, as “the scope of the limitation, by way of derogation, on the Court’s jurisdiction, which is provided for in the final sentence of the second subparagraph of Article 24(1) TEU and in Article 275 TFEU, cannot be considered to be so extensive as to exclude the Court’s jurisdiction to interpret and apply the provisions of the Financial Regulation with regard to public procurement”[2] .

3. Legal implications of EU sanctions against Russia – Rosneft case

The measures especially on the oil, gas, banking and energy industries are allegedly becoming an impediment against the growth of Russian companies, with Russian President Vladimir Putin speaking openly about a contemporary “iron curtain” against the Russian economy. Such was the case of Rosneft, a state-controlled oil corporation, which addressed the High Court of the United Kingdom with the claim that the sanctions of the EU violate the rights of corporations based in Russia. The High Court brought the case to the CJEU via the preliminary reference procedure (article 267 TFEU). The judgement delivered created a strong precedent both for the judicial control of the EU Common Foreign and Security Policy and for the interpretation of many aspects of the sanctions, and especially the ones against the Russian Federation. In Rosneft, not only the Regulation but also the Decision were challenged through the national court’s preliminary reference. The Court’s jurisdiction on the Regulation phase is undisputed, however on the Decision, the CJEU has no express jurisdiction apart from the specific provisions mentioned in Article 24(1) TEU and in Article 275 TFEU. The Grand Chamber pointed out that the distinction of CFSP and non- CFSP acts may be sharp in theory, but in cases like Rosneft the Court noted that the Regulation (non-CFSP) and the Decision (CFSP) act were very closely tied.. Τf the Regulation act was to be declared invalid, the Member States would still have to abide by the Decision. Therefore, in order to invalidate the Regulation following a CFPS decision, the Court would need to have jurisdiction over the Decision itself. Through careful examination of the related Articles of the TEU and the TFEU, the Court ruled that Article 40 TEU about the monitoring of the decisions has not been used to date, therefore there is no guidance for such cases. Thus, the Court fell back on TEU Article 19, “to ensure that in the interpretation and application of the Treaties the law is observed.”[3] Based on this premise, it concluded that it has jurisdiction to review the validity of acts imposing sanctions not only through an action for annulment (263 TFEU) but also through the preliminary reference procedure of 267 TFEU.

4. Concluding Remarks

It is only natural that corporations are threatened by the sanction regimes and will attempt to fight back by appealing to judicial organs. However, as previously seen by case law, the EU regulations concerning the implementation of sanctions make jurisdiction a matter which has been open to interpretation. Within the two processes of a CFSP related decision and a non – CFSP related regulation, the Court only has jurisdiction for the latter, except in the two mentioned above specific cases in which it can also rule on the CFSP Decision itself. Therefore, the issue of whether the criteria for the jurisdiction are met can be seen in many of the cases discussed and also in the case of Rosneft.

However, this specific case is particularly interesting because the Court did not fail to note the connection between the Regulation and the Decision, and even went a step further to determine that invalidating the former would only be possible if there was jurisdiction for the latter, or otherwise there would be an anomaly between an invalid regulation act and a valid CFSP decision. Moreover, the Court took specific note of the fact that TEU Article 40 has never actually been used to date and there is no guidance whatsoever for this monitoring procedure by the Court. Therefore, the CJEU made the choice to fall back on TEU Article 19. This is an important aspect of this judgment, because the Court managed to create a strong precedent on similar issues, which will most definitely arise as the sanctions on the Russian Federation are becoming increasingly harsh

[1] Opinion 2/13, paragraph 133.

[2] C-439/13 P Elitaliana v. Eulex Kosovo, paragraph 49.

[3] C-72/15, ECLI:EU:C:2017:236, paragraph 62 and 75.

References

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