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CJEU upholds sanctions against Rosneft

The Court of Justice of the European Union (CJEU) has upheld sanctions against Russian oil group Rosneft.29 Mar 2017

The CJEU, Europe's highest court, said sanctions imposed on Rosneft after Russia’s illegal annexation in 2014 of Crimea were valid.

The Court 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.

Rosneft, which is 69% owned by the Russian state, is trying to have the EU regulations giving effect to the sanctions annulled. 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. 

In its judgment the Court found, first, that it has the jurisdiction to rule on the validity of decisions adopted by EU member states under the EU's Common Foreign and Security Policy (CFSP).

It also found that there is a reasonable relationship between the sanctions and the objectives underpinning them, it said, "in so far as that objective is, inter alia, to increase the costs to be borne by the Russian Federation for its actions to undermine Ukraine’s territorial integrity, sovereignty and independence, the approach of targeting a major player in the oil sector, which is moreover predominantly owned by the Russian State, is consistent with that objective and cannot, in any event, be considered to be manifestly inappropriate with respect to the objective pursued".

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.

The terms of the CFSP do not preclude a member state imposing criminal penalties in the event of an infringement of the regulation, the CJEU said.

The Court also said that the restrictive measures in place do not relate to the processing of payments by banks. The EU legislature would have used a term other than "financial assistance" if it had wanted the processing of all bank transfers to be subject to an additional authorisation request, it said. Further, "it is not the aim of the regulation to establish a freezing of assets or restrictions on the transfer of funds", it said.

Finally, the court found that the measures prohibit the issuance of Global Depositary Receipts representing shares issued before the adoption of those measures.

Advocate general Melchior Wathelet found against Rosneft on all but one of the points raised by the UK High Court in June 2016.