LEGAL ASPECTS OF THE EU SANCTION POLICY

1. LEGAL ASPECTS OF THE EU SANCTION POLICY Inge Govaere Professor of European Law at Ghent University Director of the European Legal Studies Department, College of Europe, Bruges ********* BELGIAN EU PRESIDENCY RELEX GROUP 02 JULY 2010

2. outline 1. EU sanctions policy in furtherance of UN Security Council Resolutions: - interconnecting (autonomous) legal systems - principles and standards of judicial review - The balancing trick in Kadi 2. Judicial review of EU sanctions targeting individuals: - smart sanctions v. fight against terrorism 3. Scope for Member States action - in furtherance of EU sanctions policy - possibilities for derogation from EU sanctions policy 4. Treaty of Lisbon modifications - codification of case-law - streamlining EU sanctions policy

3. EU sanctions policy in furtherance of UN Security Council Resolutions EU not member of UN: quid relation between those 2 IO ? 1.‘Exporting’ EU sanctions policy to UN level: Political aspects (CFSP) . EU (indirect) impact on decision making UN Security Council through its MS Art. 34(2) TEU: para 2: “Member States which are also members of the United Nations Security Council will concert and keep the other Member States and the High Representative fully informed. Member States which are members of the Security Council will, in the execution of their functions, defend the positions and the interests of the Union, without prejudice to their responsibilities under the provisions of the United Nations Charter.” • Para 3: “When the Union has defined a position on a subject which is on the United Nations Security Council agenda, those Member States which sit on the Security Council shall request that the High Representative be invited to present the Union’s position”. . Condition: Union position (CFSP) on basis of unanimity or constructive abstention . Compliance by Member States subject to political control only; no jurisdiction ECJ

4. 2. Implementing UN sanctions at EU level: (Political and) Legal aspects . Subject to judicial review ECJ (at least for part not covered by CFSP) . Quid: Reference frame: UN law or EU law ? . Quid: legal status UN obligations (MS) in EU law? . Where to look for answers ? . Importance of principles laid down in Kadi Case of 2008 . Sinds December 2009: New prism of Treaty of Lisbon 5 (cf. later)

5. Thorny issues in Kadi 1. Intra-EU issues: implications of - principle of attribution of competence (legal basis) - pillar structure and need for ‘bridge’ to CFSP (cf. later Lisbon Treaty) 2. Extra-EU issues: - Interconnecting EU autonomous legal system with international (UN) context - standards of judicial review At stake: EU level sanctions plain copy of UN level decisions (listing) Quid: respect for and standards of fundamental rights protection ? Dilemma: outward or inward-looking approach ?

6. CFI: theory of the unitary act • CFI: EU law subordinate to UN law • In casu no exercise of discretion by EU • impossibility of dissociation UN-EU • Therefore: immunity from jurisdiction EU courts (internal lawfulness) • Balancing trick: UNLESS: incompatibility with ius cogens Quid: would CFI then review the compatibility of UN or EU measure with jus cogens ? . Outwardlooking approach ?

7. ECJ: theory of dissociation • ECJ: CFI ‘erred in law’ • Need for full judicial review by EU courts: • “..the Community judicature must, in accordance with the powers conferred on it by the EC Treaty, ensure the review, in principle the full review, of the lawfulness of all Community acts in the light of the fundamental rights forming an integral part of the general principles of Community law, including review of Community measures which, like the contested regulation, are designed to give effect to the resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations”. • Theory of Dissociation • ECJ annuls EU sanctions regulations • Inwardlooking approach ?

8. Implications of Kadi for UN • Strictly legal perspective: ECJ ruling no effect on validity UN measures • But: reflects badly on HR standards UN • Quid: possibility for EU (and MS) to comply with UN obligations ? • ECJ response: . Principle versus pragmatism . Focus on interconnection of legal systems

9. Issues prior to Kadi . ECJ Sanctions case-law existed before Kadi . On EU implementation UN sanctions: eg. Racke, Centro-com . incl. human rights issues: eg. Ebony Maritime, Bosphorus (both ECJ & ECHR) . Common features: EU sanctions in implementation, but not copy, of UN sanctions

10. Reference frame: UN law or EU law ? . EU new and autonomous legal order (Van Gend & Loos) 1. Intra-EU relations: Inward-looking . Distinct from national (constitutional) law & PIL . Characteristics: Direct effect & Primacy 2. Extra-EU (international) relations: Outward-looking . EU needs to respect international law in its dealings with 3 states & IO (International Fruit co, Racke, ..)

11. Mutually supportive legal systems Before Kadi: . UN-conform interpretation: - EU sanctions regulations consistently interpreted in light of objectives of UN Security Council Resolutions - Individual rights balanced against international security (eg Bosphorus) - Express reference to ECHR and ICJ . Critics: ECJ cannot interpret UN objectives or PIL

12. Kadi specificity • Not issue of compatibility with UN • Conformity (identical) to UN = undisputed • Key issue: non-respect of basic fundamental rights • Quid: highly sensitive issue for survival EU legal system • 2 external constraints to acceptance of EU autonomous legal system

13. External constraints Only conditional acceptance of ‘niche’ for new and autonomous EU legal system • Constitutional court MS: acceptance as long as constitutional values are sufficiently protected at EU level (esp. BVG, solange cases) 2. ECHR: . legal presumption of equivalent protection . possibility of rebuttal in case of manifest deficiency HR protection in any given case (esp. Matthews and Bosphorus cases)

14. Autonomy versus sovereignty • Quid: what standards of HR protection in EU? • If constitutional values MS: which to prefer? • Increasingly: open reference to case-law ECHR as commonly accepted and non-discriminatory standard • Silent (constitutional) dialogue crucial to survival of autonomy EU legal order • ECJ has to be seen to enforce HR • Main difference with concept of state sovereignty • Kadi important test case for ECJ in this respect

15. Kadi: principle • ECJ very strong on principle • All EU law is subject to full judicial review (HR compliance), regardless of : - the (international) origin of the EU implementing measure - the margin of discretion in implementation • (reiterated in Hassan & Ayadi cases of 03 dec. 2009) • Reasoning developed in Kadi: • Not prohibited as such by UN law to review implementing measures • Also ECHR reviews sanctions implementing UN obligations (reference to ECHR Bosphorus)

16. ECJ balancing trick in Kadi • ECJ pragmatic approach to avoid open conflict with UN obligations: . limiting effect of judgment in time In concreto: Effect of contested sanctions regulation maintained for max. 3 months from date of judgment Rationale: should allow the Council at EU level to remedy the established deficit in terms of rights of defence (esp. right to be heard)

17. Principle versus pragmatism Quid: developments after Kadi ? 1. Consistent application of principle of full judicial review (cf. before) 2. Yet also survival of pragmatic approach? . Appears to be much more problematic . Less attention in legal doctrine . Less attention to balancing trick in later cases ECJ & CFI Before ECJ: Hassan & Ayadi cases (Joined cases C-399/06 P & C-403/06 P, 3 dec. 2009) . No limitation in time considered ? . Due to retroactive application new EU regulation?

18. Rejecting the balancing trick . Before CFI: Omar Mohammed Othman (case T-318/01, 11 June 2009) . Necessity of limitation in time expressly rejected 1. Reference to Kadi period of 3 months held to have had relevance also in this (and other ?) cases CFI: “ Although that period was determined by reference only to the case of the two persons involved in the cases giving rise to Kadi on appeal,..., the fact remains that the Council could not have been unaware that the applicant’s situation, which is in all respects comparable (..), necessarily called for the same response on its part” (para 97) 2. Reference to 2 months period for launching appeal before ECJ against annulment decision of CFI and during which that decision can anyhow not yet take effect (para 98, refering to Art. 60, para 2, Statutes ECJ) QUID ? . Balancing trick was crucial to avoid open conflict with UN obligations . Other remedies to comply with UN obligations?

19. Judicial review of EU sanctions • Compliance of EU sanctions with fundamental rights to avoid creating conflict situation • Freezing of assets alleged terrorists: • OMPI criteria (Case T-228/02) • Establishing lists (EU discretion) with MS input • Later applied to annul EU measure (eg. In Case T-253/94, Kongra Gel and Case T-341/07, Sison

20. Subject of judicial review • Lawfulness of contested decision: 1. Justification: assessment of facts and circumstances relied on as well as adduced information and evidence: marginal judicial review (esp. manifest error and misuse of powers) 2. Right to a fair hearing: notification either concomitantly with or as soon as possible after initial decision to freeze funds (+ need for individual notification, not only OJ publication, see Case T-390/08, Bank Melli Iran, of 14 Oct. 2009) 3. Requirement of a statement of reasons: essential procedural requirement 4. Well-foundedness overriding considerations in terms of confidentiality and security . ‘Touchy’ issue both for Council and ECJ . Refusal to disclose such sensitive info to ECJ: 1. prevents judicial review of compliance with HR standards 2. infringes the right to effective judicial protection (eg. Case T-284/08, OMPI, 4 Dec. 2008)

21. Smart sanctions v. terrorism • Logic: same judicial review for all sanctions freezing funds of individuals ? • Or rather dependent on type of sanctions : 1. OMPI et al.: freezing of funds alleged terrorists (or network) without link to specific country 2. Smart sanctions: freezing funds of rulers of a targeted country and individuals and entities associated with or controlled, directly or indirectly, by them • Different type of sanctions, different judicial protection ? • Yes: Recent case: Pye Phyo Tay Za, Case, T-181/08 of 19 May 2010

22. Pye Phyo Tay Za case • EU Smart sanctions targeting Myanmar (not UN) • Notice to attention of persons listed: inter alia: • Possibility to make application to MS competent authorities to obtain authorisation to use frozen funds for essential needs • Submit a request the Council to reconsider the inclusion of their name on the list • Possibility of challenging Council decision before the General Court of the EU (ex CFI) . Pye Phyo Tay Za listed because “son of Tay Za” (indirect link as family member) . Seeks to annul the decision to include his name before CFI

23. Issue 1: justification of smart sanction to family members • Justification? Criterion of ‘sufficient link’ to targeted country (para 63-69) • Presumption of sufficient indirect link applies to family members • Possibility of rebuttal in individual cases . ‘De facto’ reversal of burden of proof . High threshold proof required ? Rationale CFI (para 70-73): . EU may impose total embargo on targeted third country, concerning all persons and not just those associated to the regime . Hence also more selective and targeted sanctions may be applied . Consistent with humanitarian concerns in trade embargoes . Inclusion of family members for reasons of effectiveness

24. Issue 2: Right to a fair hearing ? CFI: . NOT OMPI criteria right to fair hearing: . Smart sanctions target third state and not individuals as such • CFI: “A regulation which contains sanctions against a third country applying to certain categories of its nationals is a general legislative act even if the persons concerned are identified by name. It is true that such a regulation adversely affects them directly and individually and they are entitled to bring an action to challenge it. However, in a legislative procedure culminating in the adoption of sanctions against a third country which apply to certain categories of its nationals, the rights of defence are not applicable to them. For the establishment of such a regulation, individuals do not have rights of participation, even if they are ultimately individually concerned” (para 123) All other issues conform to OMPI criteria . Statement of reasons: OMPI criteria for judicial review (para 93-96) . Right to effective judicial protection (action for annulment) (para 141-146) . Right to property: Bosphorus reasoning (para 156-164)

25. Scope for MS action MS compliance with UN sanctions: Art. 103 UN Charter Normally: MS act through and in furtherance of EU sanction policy . 3-level implementation of UN sanctions: - UN sanctions - adoption of (CFSP/EU) sanctions implementing UN sanctions - further national measures to reinforce sanctions • ECJ case law on 3-layer implementation: eg. Ebony Martime, Bosphorus cases • UN conform interpretations

26. MS derogations from EU sanctions Highly Exceptionally: MS act in derogation from EU sanctions policy When ? - In case of conflict between EU and UN obligations - UN conform interpretation EU law not possible remedy • 2 possibilities for MS to set aside EU obligations: 1. Prior Treaty obligations MS: art. 351 TFEU (ex 307 TEC) • eg. Centro-com case • Yet para 2: temporary nature 2. Security exceptions: Article 346-348 TFEU (ex 296-298 TEC) • Wholly exceptional circumstance • Specifically “”in order to carry out obligations (the MS) has accepted for the purpose of maintaining peace and international security” (Art. 347 TFEU) • Not yet used for MS compliance UN sanctions

27. Prior Treaty obligations Article 351 TFEU (ex Article 307 TEC) The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties. To the extent that such agreements are not compatible with the Treaties, the Member State or States concerned shall take all appropriate steps to eliminate the incompatibilities established. Member States shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude. In applying the agreements referred to in the first paragraph, Member States shall take into account the fact that the advantages accorded under the Treaties by each Member State form an integral part of the establishment of the Union and are thereby inseparably linked with the creation of common institutions, the conferring of powers upon them and the granting of the same advantages by all the other Member States. • Origin: Art. 30 Vienna Convention on Law of Treaties on successive treaties (para 1: reference to Art. 103 UN Charter (primacy UN) not copied)

28. Security exceptions/1 Article 346 TFEU (ex Article 296 TEC) • 1. The provisions of the Treaties shall not preclude the application of the following rules: (a) no Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security; (b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes. - 2. The Council may, acting unanimously on a proposal from the Commission, make changes to the list, which it drew up on 15 April 1958, of the products to which the provisions of paragraph 1(b) apply.

29. Security exceptions/2 • Article 347 TFEU (ex Article 297 TEC) • “Member States shall consult each other with a view to taking together the steps needed to prevent the functioning of the internal market being affected by measures which a Member State may be called upon to take in the event of serious internal disturbances affecting the maintenance of law and order, in the event of war, serious international tension constituting a threat of war, or in order to carry out obligations it has accepted for the purpose of maintaining peace and international security”. • Article 348 TFEU (ex Article 298 TEC) “If measures taken in the circumstances referred to in Articles 346 and 347 have the effect of distorting the conditions of competition in the internal market, the Commission shall, together with the State concerned, examine how these measures can be adjusted to the rules laid down in the Treaties. By way of derogation from the procedure laid down in Articles 258 and 259, the Commission or any Member State may bring the matter directly before the Court of Justice if it considers that another Member State is making improper use of the powers provided for in Articles 346 and 347. The Court of Justice shall give its ruling in camera.” Quid ? Marginal judicial review (misuse of powers): But MS must proof necessity of derogations for essential security (eg. Case C-284/05, Comm. V. Finland of 15 Dec. 2009)

30. Lisbon Treaty • Codification of Kadi case law: 1. Art. 215 & 75 TFEU (ex 301 & 60 TEC) on restrictive measures: . Express legal basis for adoption of restrictive measures against natural persons or legal persons and groups or non-state entities (Art. 215 (2) TFEU) . Inclusion of necessary provisions on legal safeguards (Art. 215 (3) TFEU) 2. Express jurisdiction ECJ to review the legality of all decisions providing for restrictive measures against natural or legal persons (in principle still not for other CFSP measures) (Art. 275 TFEU & Art. 24(1) TEU)

31. Jurisdiction ECJ Article 275 TFEU: “The Court of Justice of the European Union 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. • However, the Court shall have jurisdiction to monitor compliance with Article 40 of the Treaty on European Union and to rule on proceedings, brought in accordance with the conditions laid down in the fourth paragraph of Article 263 of this Treaty, reviewing the legality of decisions providing for restrictive measures against natural or legal persons adopted by the Council on the basis of Chapter 2 of Title V of the Treaty on European Union.”

32. Streamlining EU sanctions policy • Still need for double CFSP and other EU measure (Article 215 TFEU) • Yet no longer need for ‘bridge’ • All EU external relations now pursue same objectives (see art. 21(3) TEU & 205 TFEU) . incl. former CFSP obj. such as preserving international peace, prevent conflicts and strengthen international security (Art. 21(2)(c)TEU)

33. Clarification relation to UN • No provision on possible future accession of EU to UN • But clear (unilateral) positioning: • Objectives EU: Article 3(5) TEU: In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.” + increased visibility EU through High Representative (cf. before)

34. Thank you for your attention • For a more detailed analysis on Kadi: see • Govaere, I., “The importance of international developments in the case-law of the European Court of Justice: Kadi and the autonomy of the EC legal order”, College of Europe Research Papers in Law, N° 1/2009