After the annexation of Crimea and Sevastopol by the Russian Federation, the European Union decided to introduce sanctions1 as a response to such events.
Such so-‐called “restrictive” EU sanctions, particularly affecting the oil and gas industry, include the prohibition for EU companies to provide drilling, well testing, logging, services for deep water or artic oil exploration and production and shale oil projects in Russia2.
Rosneft, one of Russia’s state-‐controlled oil companies, deeming to have been hard and unfairly hit as a result of such EU-‐wide sanctions, decided to bring the case before the High Court in the UK maintaining that sanctions imposed by the EU were invalid because in breach of the 1994 Partnership and co-‐operation agreement still in force between the EU and Russia.
Rosneft’s plea was based on the fact that the UK has implemented the oil and related restrictions by means of the Export Control (Sanctions) Order 20143 . Exportation rules, as amended, impose criminal liability on entities carrying out their activities in contrast with the provisions of the EU Regulation.
Rosneft argued that such Regulation, amended several times, must be quashed on the basis that the provisions contained therein would presume the attribution of criminal liability with no certain juridical basis, and is thus unlawful both based on common law and pursuant to Article 7 of the European Convention of Human Rights.
In particular, in its plea to the High Court of Justice, Rosneft stated that the sanction provisions on «financial assistance» are contrary to Article 52 of the Partnership Agreement, which provides for the free movement of payments and capital between the Russian Federation and the EU. Likewise, according to Rosneft, also the Oil Sector Provisions could contravene the Partnership Agreement. Indeed, none of the relevant measures could be said to fall within or to be appropriate to the narrow exceptions set out in Article 19 and Article 99 of the Partnership Agreement governing, respectively, “public security” and “essential security interests”. Rosneft asserted, moreover, that the restrictive measures do not relate to goods or services pertaining to the military sector and thus no safety issue exists.
Rosneft denounced the failure of the European Council to provide the reasons that are behind the restrictive measures adopted, thus breaching the principle of equal treatment, which prohibits comparable situations from being treated differently unless such treatment is objectively justified.
It was argued that, in the case at issue, there is no evidence that the businesses affected are in a different position than any other business that is economically important to the Russian Federation. As a matter of fact the ECJ has consistently required that a person/company targeted by sanctions should have a sufficient connection with the third country regime and/or the aims pursued by the measure taken.
Rosneft, finally, maintained that businesses in a sector with no connection to the events in Ukraine cannot properly be targeted simply because the sector is economically important to Russia. Rosneft argued that the restrictive measures are disproportionate to what is necessary to achieve their stated general aim, that is the defense of Ukraine state sovereignty.
In fact, as stated in Case T-‐8/11 Bank Kargoshaei and Others v. Council and Commission: where there is a choice between several appropriate measures, recourse must be had to the least onerous. As Igor Sechin, managing director of Rosneft, said in a recent interview and in relation to the case involving the company: «Sanctions have reverse effects: they damage international shareholders and international stakeholders, they damage partners manufacturing equipment, they damage banks and investment funds which will not be able to invest in the development of industries in Russia. All of them will have to face severe consequences».
Rosneft also argued that sections of the sanctions legislation are ambiguous, uncertain and subject to divergent interpretations and therefore violated basic principles of law, particularly “the principle of legal certainty”.
The High Court decided, after a prima facie examination, to refer the case to the ECJ1 stating that «in a case such as the present, we consider it to be of real importance for there to be consistency and uniformity of application of the provisions of the sanctions regime». In fact the HM Treasury has brought to the Court’s attention that there is a remarkable difference in the positions of the competent authorities in the application of the restrictive measures in the different EU States as well as in the interpretation of certain provisions of the relevant EU regulation.
Christopher Chew, Head of policy at the UK government’s export control unit, stated that some member states gave a more narrow interpretation to certain prohibitions, than the UK did.
Before referring the case to the ECJ, the High Court in the UK rated the points brought up by Rosneft as “at least arguable”.
In the meantime, in response to the restrictive sanctions imposed by the EU, the Russian Federation, adopted a decree “On the use of specific economic measures” banning importation of fruit, vegetables, meat, fish, milk and other basic necessities from EU, USA, Canada and Australia.
The consequences of the sanctions and of the counter-‐sanctions adopted by the Russian Federation inevitably concern and affect trading activities and maritime services.
From a strictly juridical point of view, it is difficult to prognosticate what will be the ECJ decision.
With regard to the reasons leading the High Court to refer this case pursuant to Article 267 of TFUE, Lord Justice Beatson stated that: «The reason that we consider that a reference is necessary of all issues is that although … we have views as to the merits of a number of the Claimant’s arguments, we cannot be confident that the same conclusions would be arrived at by all courts across the EU and we are conscious that already there are differences of view on some key issues».