Case T‑434/11

(Publication by extracts)

Europäisch-Iranische Handelsbank AG

v

Council of the European Union

(Common foreign and security policy — Restrictive measures against Iran with the aim of preventing nuclear proliferation — Freezing of funds — Obligation to state reasons — Rights of the defence — Right to effective judicial protection — Manifest error of assessment — Right to property — Proportionality)

Summary — Judgment of the General Court (Fourth Chamber), 6 September 2013

1.      European Union — Common foreign and security policy — Restrictive measures against Iran — Freezing of funds of persons, entities or bodies engaged in or supporting nuclear proliferation — Competent national authorities not empowered to give general approval to a certain category of transactions — Council not empowered to base the adoption of restrictive measures that are to apply in the future on authorised transactions — Limits — Exceptional circumstances

(Council Regulations No 423/2007, Arts 8 to 10, and No 961/2010, Arts 17 to 19)

2.      European Union — Common foreign and security policy — Restrictive measures against Iran — Freezing of funds of persons, entities or bodies engaged in or supporting nuclear proliferation — Transactions carried out via a non-designated entity — Concept — Conditions under which permissible

(Council Regulations No 423/2007, Arts 7(1) to (3), and No 961/2010, Art. 16(1) to (3))

1.      In the area of the Common Foreign and Security Policy, and more particularly restrictive measures against Iran with the aim of preventing nuclear proliferation, Articles 8 to 10 of Regulation No 423/2007 concerning restrictive measures against Iran and Articles 17 to 19 of Regulation No 961/2010 do not allow the competent national authorities to give general approval to a certain category of transactions in respect of which the entities concerned by a fund-freezing measure would be relieved of the need to request authorisation on a case-by-case basis.

Such an authorisation, granted on a case-by-case basis by a competent national authority, attests to the lawfulness — with regard to Regulation No 423/2007 or Regulation No 961/2010, as appropriate — of the transaction authorised. Accordingly, the Council cannot, save in exceptional circumstances, which it is for the Council to demonstrate, base the adoption of restrictive measures that are to apply in the future on transactions authorised in accordance with Articles 8, 9 or 10 of Regulation No 423/2007 or with Articles 17, 18 or 19 of Regulation No 961/2010, as appropriate. By contrast, a mere general approval cannot, in the absence of authorisation on a case-by-case basis, bind the Council.

The general scheme of those regulations reinforces this textual analysis. Given their position in those regulations, those provisions constitute a modification of the freezing of funds principle. Lastly, the interpretation prompted by the textual and contextual analyses is in line with the objective of those regulations, namely the intent to prevent nuclear proliferation and, more generally, to maintain international peace and security, given the seriousness of the risk posed by nuclear proliferation.

(see paras 128-131)

2.      In the area of the Common Foreign and Security Policy, and more particularly restrictive measures against Iran with the aim of preventing nuclear proliferation, it is apparent from the provisions, the general scheme and the objective of Regulation No 423/2007 concerning restrictive measures against Iran and Regulation No 961/2010 that transactions carried out via a non-designated entity are not automatically lawful, and that, in order to ensure that Article 7 of Regulation No 423/2007 and Article 16 of Regulation No 961/2010 are effective, the entities concerned must satisfy themselves as to the lawfulness of such transactions by requesting authorisation from their competent national authorities where appropriate.

First of all, the provisions of Article7(1) to (3) of Regulation No 423/2007 and Article 16(1) to (3) of Regulation No 961/2010 constitute a prohibitory measure the infringement of which is of itself capable of independently forming the basis for the imposition of penalties, including criminal penalties, under the applicable national law. Furthermore, by referring in Article 7(4) of Regulation No 423/2007 and in Article 16(4) of Regulation No 961/2010 to the activities the object or effect of which is, directly or indirectly, to ‘circumvent’ the prohibitory measures set out in paragraphs 1 to 3 of each of those provisions, the EU legislature refers to activities which have the aim or result of enabling their author to avoid the application of that prohibition. The cumulative conditions of knowledge and intent set out in Article 7(4) of Regulation No 423/2007 and Article 16(4) of Regulation No 961/2010 are met where the person participating in an activity covered by those provisions deliberately seeks the object or the effect, direct or indirect, of circumvention connected therewith. They are also met where the person in question is aware that his participation in such an activity can have that object or effect and accepts that possibility. Accordingly, transactions carried out via a non-designated entity are capable of infringing the prohibition laid down in Article 7(4) of Regulation No 423/2007 and Article 16(4) of Regulation No 961/2010 respectively where they have the aim of carrying out financial transactions concerning a designated entity and the entities involved in such a transaction are in fact seeking to achieve that aim or know that their participation in that transaction can have that object or effect and accept that possibility. Moreover, it follows by contrary inference from Article 21 of Regulation No 961/2010 – which has no equivalent provision in Regulation No 423/2007 – that transfers of funds to and from Iranian persons, entities or bodies, including non-designated Iranian persons, entities or bodies, may, in principle, be carried out provided that the conditions of Article 21 are met. Consequently, Article 21 of Regulation No 961/2010 constitutes a modification of the freezing of funds principle. However, any transfers of funds that may be carried out in accordance with Article 21 cannot facilitate the circumvention of the prohibition under Article 16(4) of Regulation No 961/2010.

Secondly, Article 11a(1)(a) of Regulation No 423/2007 requires financial and credit institutions which come within the scope of Article 18 of Regulation No 423/2007 to ‘exercise continuous vigilance over account activity’ in their relations with the credit and financial institutions referred to in paragraph 2 of Article 11a, that is, inter alia, credit and financial institutions domiciled in Iran. Article 23(1)(a) of Regulation No 961/2010 imposes a similar obligation of vigilance over account activity on credit and financial institutions which fall within the scope of Article 39 of that regulation. Consequently, the effectiveness of the combined provisions of Articles 7 to 10 of Regulation No 423/2007 and of Articles 16 to 19 and 21 of Regulation No 961/2010 would be compromised if a non-designated entity were free to carry out transactions via a non-designated entity for the purpose of settling debts or making payments on behalf of a designated entity. It follows from this that a non-designated entity must always satisfy itself as to the legality of such transactions by requesting authorisation from the competent national authority where appropriate.

(see paras 133-136, 138-141, 150, 154)