EU sanctions against Russian oil company 'in the main valid', says legal adviser

The Court of Justice of the European Union (CJEU) had been asked to rule on a number of points related to the sanctions programme by the UK courts, as part of a legal challenge brought by Rosneft, the Russian oil company.

In his opinion to the court, advocate general Melchior Wathelet said firstly that the court had the jurisdiction to rule on the validity of decisions adopted by EU member states under the EU's Common Foreign and Security Policy (CFSP). Secondly, he found against Rosneft on all but one of the points raised by the UK High Court, which related to a provision in the regulation giving effect to the sanctions which contradicted a provision in the European Council's decision.

Rosneft, which is 69% owned by the Russian state, is currently trying to have the EU regulations giving effect to the sanctions annulled by the EU's General Court. It has also begun a separate judicial review of the way in which the UK is implementing the sanctions in the High Court of England and Wales.

Last year, the High Court decided to refer the judicial review to the CJEU because it was not "confident" that every EU member state interpreted the rules in the same way. The case will now proceed to the CJEU, which is not bound by the opinion of the advocate general, for full judgment.

The EU and US first introduced sanctions against Russia's energy, defence and financial services sectors in July 2014, in response to Russian intervention in Ukraine. Further sanctions were introduced in the following September. Measures particularly affecting the oil and gas industry include a ban on EU companies providing drilling, well testing and logging and completion services for deep water or arctic oil exploration and production and shale oil projects in Russia. The regulations also ban "financial assistance" for such projects.

As part of its legal challenge, Rosneft has claimed that the sanctions violate a 1994 'partnership and cooperation' agreement between the EU and Russia. It has also argued that parts of the sanctions legislation, particularly those in relation to shale and deep water projects, are "so unclear and uncertain that they violate general principles of law and in particular the principle of legal certainty". Questions referred by the UK court also include whether the UK was right to include payment processing services and services relating to the issuing of shares in the definition of 'financial assistance', and whether the UK was entitled to impose criminal penalties before the scope of the relevant offences has been "sufficiently defined" by the CJEU.

After a close reading of the relevant legislation, the advocate general said that the EU courts clearly had the power to "review the legality of decisions providing for measure against natural or legal persons" adopted by the European Council. That being the case, they could also "certainly perform the narrower task, which is to interpret the terms of such decisions, in particular so that they can avoid annulling or declaring invalid an act relating to the CFSP which they could otherwise have preserved by giving it a different interpretation".

He also found that the decision and regulation giving effect to the sanctions were not "legislative acts". This meant that the Council did not misuse its powers, as argued by Rosneft, he said.

The advocate general also backed the UK government, as well as the Estonian and French governments which had intervened in the case, in their argument that interference with the partnership agreement between the EU and Russia was justified on the grounds of the EU's "essential security interests". In addition, the sanctions did not interfere with the freedom of passage through the EU for goods "originating in the customs territory or destined for the customs territory of the Russian Federation", as guaranteed by that agreement, he said.

"If ... the Council enjoys a broad discretion in the field of foreign and security policy, that must also apply whenever it concludes that there is serious international tension constituting a threat of war," he said. "I consider that the Council made no manifest error in its assessment of the seriousness of the international tension that existed at the time when [the decision and regulation] were adopted."

He also rejected the uncertainty arguments, finding that although the terms at issue were "indisputably broad", this itself was not sufficient to give rise to legal uncertainty.

"It is clear ... that the mere fact that there are various possible interpretations of a provision of criminal law does not automatically render that provision contrary to the principles of legal certainty," he said.

"As [the UK government] observed before the referring court, in cases where there is real doubt as to the interpretation to be given to the terms at issue, 'it [is] always open to the company affected to seek guidance from the prosecutorial authorities and thereby obviate any risk of prosecution for otherwise innocent violations of the provisions in question'," he said.

In any event, domestic courts could always request a preliminary ruling from the CJEU if they considered that the terms of a regulation or decision were not sufficiently clear, he said.