Case T-390/08
Bank Melli Iran
v
Council of the European Union
(Common foreign and security policy – Restrictive measures against the Islamic Republic of Iran to prevent nuclear proliferation – Freezing of funds – Actions for annulment – Judicial review – Misuse of powers – Equal treatment – Proportionality – Right to property – Rights of the defence – Right to effective judicial protection – Obligation to state reasons – Competence of the Community)
Summary of the Judgment
1. European Communities – Judicial review of the legality of the acts of the institutions – Regulation concerning the adoption of restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Ambit of the review – Distinction between general rules and measures applying those rules to specific entities
(Arts 60 EC and 301 EC; Council Regulation No 423/2007)
2. Acts of the institutions – Validity – Community measures concerning the EU Treaty in the sphere of external relations – Assessment in the light of Community law alone
(Arts 60 EC and 301 EC; Art. 2 EU; Council Regulation No 423/2007)
3. European Union – Common foreign and security policy – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Council’s powers not limited to the implementing of restrictive measures adopted by the United Nations Security Council
(Arts 60 EC and 301 EC; Council Regulation No 423/2007, recital 6 and Art. 7(1) and (2))
4. European Union – Common foreign and security policy – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Decision to freeze the funds of an Iranian bank – Measures to freeze funds not adopted by the Council in respect of other entities in an identical situation – No breach of the principle of equal treatment
(Council Regulation No 423/2007, Art. 7(2); Council Decision 2008/475)
5. Acts of the institutions – Statement of reasons – Obligation – Scope – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Minimum requirements
(Art. 253 EC; Council Regulation No 423/2007, Arts 7(1) and (2) and 15(3))
6. Community law – Principles – Rights of the defence – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Obligation to communicate inculpatory evidence – Extent
(Council Regulation No 423/2007, Art. 7(2); Council Decision 2008/475)
7. Community law – Principles – Rights of the defence – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Right of access to documents – Right to be heard – Rights contingent upon the presentation of a request to that effect to the Council
(Council Regulation No 423/2007, Art. 7(2); Council Decision 2008/475)
8. European Union – Common foreign and security policy – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Action for annulment brought by an entity to which a fund-freezing decision applies – Burden of proof – No breach of the right to effective judicial protection
(Council Regulation No 423/2007, Art. 7(2); Council Decision 2008/475)
9. European Union – Common foreign and security policy – Restrictive measures against Iran – Freezing of funds of persons, entities or bodies engaging in or providing support for nuclear proliferation – Nature of those measures – No criminal character
(Council Regulation No 423/2007)
1. With regard to the extent of the judicial review, two kinds of matters must be distinguished within Regulation No 423/2007, concerning restrictive measures against Iran, in order to apply pressure on the latter to stop nuclear proliferation. On the one hand, the articles of that regulation lay down general rules defining the procedures for giving effect to the restrictive measures that it introduces. On the other hand, Annex V thereto, which lists the entities to which the fund-freezing measures adopted pursuant to Article 7(2) thereof apply, represents a body of measures applying those general rules to specific entities.
So far as the general rules defining the procedures for giving effect to the restrictive measures are concerned, the Council has broad discretion as to what to take into consideration for the purpose of adopting economic and financial sanctions on the basis of Articles 60 EC and 301 EC, consistent with a common position adopted on the basis of the common foreign and security policy. Because the Community judicature may not, in particular, substitute its assessment of the evidence, facts and circumstances justifying the adoption of such measures for that of the Council, its review must be restricted to checking that the rules governing procedure and the statement of reasons have been complied with, that the facts are materially accurate, and that there has been no manifest error of assessment of the facts or misuse of power. That limited review applies, especially, to the Council’s assessment of the considerations of appropriateness on which such decisions are based.
With regard to the review of the lawfulness of the decision by which an entity is entered in the list in Annex V to Regulation No 423/2007 by virtue of Article 7(2) thereof, it is for the Community judicature to ascertain whether, having regard to the pleas for annulment raised by the entity concerned or raised by the Court of its own motion, in particular, the case in point corresponds to one of the four situations covered by Article 7(2)(a) to (d). That implies that the judicial review of the lawfulness of the decision in question extends to the assessment of the facts and circumstances relied on as justifying it, and to the evidence and information on which that assessment is based. The Community judicature must likewise ensure that the rights of the defence are observed and that the requirement of a statement of reasons is satisfied and also, where applicable, that the overriding considerations relied on exceptionally by the Council in disregarding those rights are well founded.
(see paras 35-37)
2. Articles 60 EC and 301 EC concern the adoption of measures vis-à-vis third countries, since that concept may include the rulers of such a country and also individuals and entities associated with or controlled, directly or indirectly, by them. These articles of the EC Treaty have a special feature in that they form a bridge between the actions of the Community involving economic measures and the objectives of the EU Treaty in the sphere of external relations, including the common foreign and security policy. These provisions expressly envisage that action by the Community may prove necessary in order to attain one of the objectives specifically assigned to the Union by Article 2 EU, namely the implementation of a common foreign and security policy. That fact is, however, without prejudice to the coexistence of the Union and the Community as integrated but separate legal orders, or to the constitutional architecture of the pillars, as intended by the framers of the Treaties now in force. Consequently, even though an action by the Community under Articles 60 EC and 301 EC gives effect to one of the objectives of the Union, it is nevertheless undertaken on the basis of the Community pillar. The lawfulness of measures taken in that sphere, such as Regulation No 423/2007, concerning the adoption of restrictive measures against Iran, and the measures implementing it, must therefore be assessed in relation to the conditions laid down by the rules of that pillar, including the appropriate voting rule. Common Position 2007/140, which forms part of the second pillar of the Union, is not, therefore, a legal basis for Regulation No 423/2007 or for the measures implementing it, which means that the voting rule applicable to the adoption of that common position and to its amendment is irrelevant.
(see paras 44-47)
3. It is true that recital 6 in the preamble to Regulation No 423/2007, concerning the adoption of restrictive measures against Iran, requires the Council to exercise the power conferred on it by Article 7(2) of the regulation having regard to the objectives of Resolution 1737 (2006) of the United Nations Security Council. The obligation to pursue the objectives of Resolution 1737 (2006) does not, however, in any way imply that Article 7(2) is to be implemented only in respect of entities referred to in restrictive measures adopted by the Security Council pursuant to that resolution. Nothing in Article 60 EC or 301 EC permits the inference that the powers conferred on the Community by those provisions are limited to the implementing of measures decided by the Security Council. The Council was, therefore, competent to adopt not only Article 7(1) of Regulation No 423/2007, which gives effect to that resolution by ordering the freezing of the funds of the entities designated by it, but also Article 7(2) of that regulation, which permits the adoption of fund-freezing measures applying to other entities which, in the Council’s opinion, are directly associated with or provide support for nuclear proliferation.
The lack of any measures taken by the Security Council or a specific position taken by the latter may, at the very most, be taken into consideration, with other relevant matters, in connection with the determination whether or not the conditions laid down by Article 7(2) of Regulation No 423/2007 have been satisfied.
(see paras 51-52)
4. The determining criterion for the implementation of Article 7(2)(a) and (b) of Regulation No 423/2007, concerning the adoption of restrictive measures against Iran, and so the comparative criterion applicable in order to determine whether there has been any breach of the principle of equal treatment, is whether the entity in question is engaged in or directly associated with or provides support for nuclear proliferation.
Once an Iranian bank has been identified, in a decision implementing Article 7(2), as an entity providing support for nuclear proliferation and in its action against that decision it puts forward no admissible plea in law to challenge the substance of that finding, even if the Council has in fact omitted to adopt measures freezing the funds of certain other Iranian banks engaged in, directly associated with or providing support for nuclear proliferation, that fact cannot properly be put forward by the entity concerned, because the principle of equal treatment must be reconciled with the principle of legality, according to which no one may rely, to his own benefit, on an unlawful act committed in favour of another.
(see paras 57-59)
5. Unless overriding considerations to do with the security of the Community or of its Member States or with the conduct of their international relations militate against the communication of certain matters, the Council is bound, by virtue of Article 15(3) of Regulation No 423/2007, concerning the adoption of restrictive measures against Iran, to apprise the entity concerned of the actual specific reasons when it adopts a decision to freeze funds. It must thus state the facts and points of law on which the legal justification of the measure depend and the considerations which led it to adopt it. So far as may be, those reasons must be communicated, either concomitantly with or as soon as possible after its adoption. In order for Article 7(2)(a) and (b) of Regulation No 423/2007 to be set in motion, the entity concerned must be engaged in or directly associated with or must provide support for nuclear proliferation. In consequence, in addition to indicating the legal basis of the measure adopted, the obligation to state reasons by which the Council is bound relates precisely to that fact.
The statement of reasons must, however, be appropriate to the measure at issue and the context in which it was adopted. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons is sufficient must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the reasons given for a measure adversely affecting a person are sufficient if it was adopted in circumstances known to that person which enable him to understand the scope of the measure concerning him.
(see paras 81-83)
6. A decision such as Decision 2008/475, implementing Article 7(2) of Regulation No 423/2007 concerning restrictive measures against Iran, which adopts an amended version of Annex V to that regulation, produces its effects erga omnes, in that it is addressed to a body of addressees determined in a general and abstract manner, which are required to freeze the funds of the entities designated by name in the list in that annex. Such a decision, however, is not of an exclusively general nature, for the freezing of funds applies to entities designated by name, directly and individually concerned by the individual restrictive measures adopted in respect of them. Furthermore, the freezing of funds has considerable consequences for the entities concerned, for it may restrict the exercise of their fundamental rights. In the circumstances, given the need to ensure that those rights, both substantive and procedural, are respected, it must be considered that the Council is bound, in so far as may be possible, to apprise the entities concerned of the fund-freezing measures by making individual notification.
None the less, when, although the Council has not fulfilled its obligation to apprise the entity concerned of the grounds of the decision to freeze its funds and has not notified it individually, the entity to which that measure applies is informed, timeously and officially, of the adoption of that decision and that it may consult the statement of reasons for that decision in the Official Journal, the Council’s omission does not have the effect of preventing that entity from knowing, in good time, the reasons for that decision or from assessing the validity of the fund-freezing measure adopted in its regard.
Furthermore, inasmuch as an initial decision to freeze an entity’s funds, such as Decision 2008/475 in so far as it concerns the applicant, must be able to take advantage of a surprise effect, it is not a requirement, before the decision at issue was adopted, that the inculpatory evidence should have been communicated to the entity concerned or that the latter should be heard.
(see paras 86, 88-90, 93)
7. As regards a fund-freezing decision such as Decision 2008/475 implementing Article 7(2) of Regulation No 423/2007 concerning restrictive measures against Iran, when sufficiently precise information has been communicated, enabling the entity concerned to make its point of view on the evidence adduced against it by the Council known to advantage, the principle of respect for the rights of the defence does not mean that the institution is obliged spontaneously to grant access to the documents in its file. It is only on the request of the party concerned that the Council is required to provide access to all non-confidential official documents concerning the measure at issue.
That also applies to the right to a hearing. The entity to which an initial decision to freeze its funds applies has the right to be heard by the Council after the decision concerned has been adopted. The Council is not, however, required automatically to conduct a hearing, having regard to the opportunity the entities concerned also have of immediately bringing an action before the Court of First Instance.
(see paras 97-98)
8. In proceedings before the Court of First Instance for annulment of a decision to freeze funds adopted by virtue of Article 7(2) of Regulation No 423/2007 concerning restrictive measures against Iran brought by an entity to which that decision applies, it is necessary for the Council to adduce evidence in support of the grounds set out in the contested decision only if the applicant has raised an admissible plea challenging the validity of the finding that it lent support to nuclear proliferation. In such circumstances, and without any need for the applicant to prove a negative, the Council is bound to produce the evidence and information on which its assessment was based for them to be reviewed by the Community judicature. However, when no such plea in law has been raised by the applicant, the fact that the Council has not produced evidence cannot indicate a breach of the right to effective judicial protection.
(see para. 107)
9. Inasmuch as the funds of the entities to which the restrictive measures provided for by Regulation No 423/2007, concerning the adoption of restrictive measures against Iran, apply have not been confiscated as the proceeds of crime but rather frozen as a precautionary measure, those restrictive measures do not constitute criminal sanctions. Nor, likewise, do they imply any accusation of a criminal nature.
(see para. 111)