How sanctions against russian entities improved our understanding of the EU sectoral restrictive measures

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How sanctions against russian entities improved our understanding of the EU sectoral restrictive measures

Afanasev Evgenii Gennadevich



Afanasev Evgenii Gennadevich, Master's Student, 2nd year, Lomonosov Moscow State University

Abstract. Due to the Russian-Ukrainian conflict over Crimea, the EU imposed sectoral sanctions against banking, defense, and oil industries. Major Russian corporates challenged their designation under the EU sectoral sanctions program. The article presents the analysis of this ECJ case-law over the period of the last six years. Russian entities did not succeed in the claiming, nevertheless, the legal positions from these cases are valuable for the future practice by virtue of the res judicata. The author highlighted the legal positions and demonstrated how they develop the EU sectoral restrictive measures' comprehension.

Keywords: law; European Union; European Court of Justice; sectoral sanctions; restrictive measures; appeal; Crimea; Russia.



КАК САНКЦИИ ПРОТИВ РОССИЙСКИХ ОРГАНИЗАЦИЙ УЛУЧШИЛИ ПОНИМАНИЕ СЕКТОРАЛЬНЫЙ ХАРАКТЕР ОГРАНИЧИТЕЛЬНЫХ МЕР ЕВРОПЕЙСКОГО СОЮЗА

Е. Г. Афанасьев, аспирант, Московский государственный Университет имени М. В. Ломоносова

Аннотация. Вследствие российско-украинского конфликта из-за Крыма ЕС ввел секторальные санкции против банковской, оборонной и нефтяной отраслей. Крупные российские корпорации оспорили свое назначение в рамках программы секторальных санкций ЕС. В статье представлен анализ данной судебной практики Европейского Суда за последние шесть лет. Российские субъекты не преуспели в иске, тем не менее правовые позиции из этих дел ценны для будущей практики в силу resjudicata. Автор выделил правовые позиции и продемонстрировал, как они развивают понимание секторальных ограничительных мер ЕС.

Ключевые слова: право; Европейский Союз; Европейский Суд; секторальные санкции; ограничительные меры; апелляция; Крым; Россия.



INTRODUCTION

On September 17, 2020, the European Court of Justice (ECJ) has dismissed the Rosneft appeal challenging the General Court judgment to uphold EU sectoral sanctions. Over the period of the last six years, the ECJ disposed more than a dozen cases, whereby found sectoral restrictive measures against Russia's banking, oil, and defense sectors valid and lawful. The Court's legal positions in these cases have broadened and deepened the understanding of such a phenomenon as EU sectoral sanctions.

The phenomenon is poorly developed in both foreign and domestic legal science. A particular surge of interest occurred due to the introduction of restrictive sectoral measures related to Ukraine's crisis in 2014, which led to the publication of several works dealing with that issue. As an example, we could mention the papers of V. Voynikov Voinikov V. V.EU restrictive measures against Russia: the legal nature and the problem of implementation. BalticRegion. 2015 ; (1): 89-100. (InRuss.). (Войников В. В. Ограничительные меры ЕС в отношении России: правовая природа и проблема имплементации. Балтийскийрегион. 2015 ; 1: 89-100)., S. Glandin Glandin S. V.European sanctions law on the fact of the first Russian cases in the Court of the European Union. InternationalJustice. 2017 ; (2): 80-93. (InRuss.). (Гландин С. В. Европейское санкционное право по факту первых российских дел в Суде Европейского Союза. Международное правосудие. 2017 ; 2: 80-93)., B. Santangelo with colleagues Santangelo B., Stein G., Prager L., Marchant N.Sanctions Update: Sectoral Sanctions Against Russia Escalate. Westlaw Journal. 2014 ; 20 (12). 1-5., a group of scientists led by F. Giumelli Giumelli F., HoffmannF., Ksiqzczakovв A. The when, what, where and why of European Union sanctions.European security.2020 ; 1 -- 23. and some others. Nevertheless, an analysis of the EU sectoral restrictive measures regarding the ECJ legal positions formulated in the Russian legal entities' cases has not yet been carried out.

The interest in that topic is significant since the total number of EU sanctions regimes is steadily growing, which means that there will be more sectoral restrictive measures in the upcoming future. Notably, the High Representative of the Union for Foreign Affairs and Security Policy (HR/VP) noted that sectoral sanctions might be implemented against Turkey due to unauthorized drilling activities in Cyprus's continental shelf BrzozowskiA.,Michalopoulos.S. EU to sanction Turkey's energy sector, pushes for de-escalation, EURACTIV, available at: URL: https://www.euractiv.com/section/giobai-europe/news/eu- to-sanction-turkeys-energy-sector-pushes-for-de-escaiation/(accessed 6 March 2021).. Moreover, by virtue of res judicata, the Russian cases' legal positions will be binding in the future practice of the ECJ. For this reason, anyone claiming against such restrictive measures should be familiar with these positions.

The sectoral sanctions were issued on July 31, 2014, by Council Decision 2014/512 / CFSP (Decision 2014/512) Council Decision 2014/512/CFSP of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (OJ L 229. 31.7.2014, P. 13-17). and EU Regulation 833/2014 (Regulation 833/2014) Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (OJ L 229. 31.7.2014, P. 1-11). as a consequence of Russia's actions destabilizing the situation in Ukraine. Subsequently, the Russian legal entities challenged them in the ECJ. This paper attempts to analyze these judgments and identify legal positions affecting the understanding of EU sectoral restrictive measures.



SECTORAL RESTRICTIVE MEASURES AS A VARIETY OF UNILATERAL SANCTIONS

Legality of Unilateral Sanctions

Sectoral restrictive measures are a type of unilateral economic sanctions. However, the concept of autonomous sanctions is controversial due to an ongoing discussion about their legality.

Some researchers believe that the introduction of unilateral restrictive measures violates the fundamental principles of international law enshrined in the UN Charter, especially sovereign equality Mohamad R. Unilateral Sanctions in International Law: A Quest for Legality. Economic Sanctions under International Law.2015 ; 80.. A few opponents claim the illegality of unilateral sanctions since the UN Charter and international treaties do not contain regulations allowing their imposition BakhinS. V., Eremenko I.Iu. Unilateral economic «sanctions» and international law.Law. 2017 ; (11). 162. (InRuss.). (Бахин С. В., Еременко И. Ю. Односторонние экономические «санкции» и международное право. Закон. 2017 ; 11. 162).. Others refer to such measures' inconsistency with GATT, GATS, and documents regulating international trade law Shevtsova L. A. Unilateral measures in terms of international law. 2018 ; 49. (InRuss.). (Шевцова Л. А. Односторонние экономические меры с точки зрения международного права. 2018 ; 49).. Moreover, there is a position stating that autonomous restrictive measures are illegal since they lead to infringement of human rights Jazairy I. Unilateral Economic Sanctions, International Law, and Human Rights. Ethics & International Affairs.2019 ; 33 (3). 291-302..

Proponents of the legality argue that international law lacks rules prohibiting its implementation MaleevIu.N., Rachkov I. V., Iaryshev S. N. Sanctions in international law: no point has been put. Moscow Journal of International Law. 2016 ; (2). 89. (InRuss.) (Малеев Ю. Н., Рачков И. В., Ярышев С. Н. Санкции в международном праве: точка не поставлена. Московский журнал международного права. 2016 ; 2. 89).. Unilateral sanctions manifest state sovereignty GevorgyanK. G.«Unilateral Sanctions» and International Law. International Affairs.2012; (8). 94-95. (InRuss.) (Геворгян К. Г. «Односторонние санкции» и международное право. Международная жизнь. 2012 ; 8. 94-95). and do not lead to extraterritoriality; thus, they only generate legal consequences within their jurisdiction Alexander K. Economic Sanctions: Law and Public Policy. 2009 ; 225.. Some scientists point out the lack of constant and continuous protests from most states that, instead, conform to such measures rather than condemn. For example, L. Borlini and S. Silingardi insisted on the legality of the EU's unilateral restrictive measures by providing such an argument Borlini L., Silingardi S. Defining Elements and Emerging Legal Issues of EU sanctions. The Italian Yearbook of International Law Online Online Publication Date: 2018 ; 27 (1). 33-52.. Moreover, they illustrated it by showing the support for such measures from the European Neighbourhood Policy and some other countries.

In this discussion, researchers representing the European Union, such as a group led by F. Giumelli, tend to claim autonomous sanctions' legality Giumelli F., Hoffmann F., Ksiqzczakovв A. The when, what, where and why of European Union sanctions. Ibid..

European Union Legal Basis for Imposing Autonomous Sanctions

The European Union imposes unilateral economic sanctions within the Common Foreign and Security Policy (CFSP). According to Articles 29, 31 of the Treaty on European Union (TEU) Consolidated version of the Treaty on European Union (OJ C 326. 26.10.2012, P. 13-390)., The European Council makes decisions in the CFSP, including the ones related to the imposition of restrictive measures. Such a decision is based on a proposal from a member country or a joint proposal HR/VP and the European Commission (Commission). Subsequently, each proposal is examined by the Foreign Relations Counsellors Working Group and the Political and Security Committee, after which the Committee of Permanent

Representatives, taking into account all comments and amendments, prepares a final proposal.

Considering Article 215 of the Treaty on the Functioning of the European Union (TFEU) Consolidated version of the Treaty on the Functioning of the European Union (OJ C 326. 26.10.2012, P. 47-390)., the European Council may decide to introduce any measures even the complete termination of economic relations with a third state. Besides, the authority may decide to impose targeted sanctions, i.e., against certain individuals and legal entities. Regardless of the specific restriction imposed, imposition should be based on the principles established by Article 21 TEU and adopted to achieve publicly essential goals such as promoting democracy, international law principles, preserving peace, preventing conflicts, etc.

The Council's decision (CFSP) is not a legislative act as it is addressed to member countries and does not oblige these countries' residents. Accordingly, only member states control the conformity of their national policies with the decisions.

For decisions (CFSP) on the imposition of sanctions to be implemented at the national level, the Council, guided by Articles 215, 288 TFEU, adopts regulations. The regulation is not an instrument of the CFSP; otherwise, it would be contrary to Article 31 TEU. In contrast to judgments, each regulation is mandatory and applies to individuals and legal entities, directly affecting them. They are adopted only based on a joint proposal by the HR/VP and Commission. In addition, the regulations include legal guarantees, i.e., sanctions' addressee has the right to challenge them.

Characteristic of European Union Sectoral Restrictive Measures Many theorists emphasize two types of restrictive measures: blocking and sectoral. The blocking sanctions ban enjoyment of certain rights and interaction with the targeted addressee, whereas the sectoral ones do not have such an effect. Their goal is to reduce a business activity in some economic sectors by restricting specific transactions with persons being subject to sanctions. This comparison demonstrates less burdensome of sectoral ones. However, such an approach is appropriate to use in papers dedicated to the economic impact.

For the present research, a teleological approach is more suitable as it makes it possible to identify the differences between sectoral restrictive measures and comprehensive and targeted sanctions. The aim of introducing sectoral ones is to influence state actions through restrictions issued on critical economic sectors, including financial, military, and oil industries.

Despite the specific features, sectoral restrictions can be identified as unilateral restrictive measures. In 2016, Nils Wahl, as Advocate General of the ECJ, interpreted the term «restrictive measures» in case C-455/14 P Opinion in Case C-455/14 H P ECLI:EU:C:2016:212, para 73-80., based on which we can distinguish the following attributes.

Not all acts negatively affecting the rights of persons should be considered as the autonomous restrictive measures;

Unilateral sanctions are introduced within the CFSP;

They are used as a reaction to state's, legal entity's, or individual's behavior that is illegal in respect of the European Union;

These measures are aimed at encouraging the subject committing illegal actions to stop or alter them;

The nature of unilateral sanctions is similar to the punishment since, in both cases, an addressee could not enjoy the rights;

The list of measures is broad, including diplomatic, financial, economic, trade, and travel restrictions.

In addition to the above, several features should be added considering the Sanctions Guidelines approved by the Council Guidelines on implementation and evaluation of restrictive measures (sanctions) in the framework of the EU Common Foreign and Security Policy (doc. 5664/18).. Firstly, autonomous sanctions must be imposed pursuant to Article 21 TEU. Secondly, they are temporary and subject to review.

All of these features lie in the definition of sectoral sanctions.

sectoral restrictive measure international

SECTORAL RESTRICTIVE MEASURES AGAINST THE RUSSIAN ENTITIES DUE TO THE DESTABILISATION OF UKRAINE

The emergence of the separate EU sanctions program against Russia was due to Crimea's entry into Russia in March 2014. According to the United Nations General Assembly Resolution 68/262 UN General Assembly Resolution 68/262, Territorial Integrity of Ukraine, A/RES/68/262., Crimea is an administrative-territorial unit of Ukraine and was annexed by Russia. The Russian Federation was accused of violating international law's fundamental principles such as sovereign equality, territorial integrity, and nonintervention in internal affairs. This resolution was voted for by hundred States and recognized the Crimean referendum as devoid of legal force.

At this time, the Security Council has met several times to adopt an official resolution condemning the Russian Federation's actions to violate Ukraine's territorial integrity. However, as a permanent member, Russia vetoed each attempt Security Council Draft Resolution.Territorial Integrity of Ukraine.S/2014/189.. As a response, the Russian official representatives continued to declare realization of the right to self-determination in accordance with the UN Charter, the United Nations International Covenant of Civil and Political Rights The United Nations General Assembly (1966) International Covenant on Civil and Political Rights.Treaty Series, 999, 171., and the Declaration on Principles of International Law concerning Friendly Relations and Cooperation among States The United Nations General Assembly (1970) Declaration on Principles of International Law concerning Friendly Relations and Cooperation among States in accordance with the Charter of the United Nations. A/RES/2625(XXV). In addition, they referred to the Advisory Opinion of the International Court of Justice (ICJ) on the Kosovo case Accordance with International Law of the Unilateral Declaration of Independence in Respect of Kosovo, ICJ Advisory Opinion of 22 July 2010, General List No 141. and the contradictory behavior of Western States in the same situation Legal aspects of the entry of Crimea into the Russian Federation, Russian Embassy in the Czech Republic, available at: URL: https://czech.mid.ru/pravovye-aspekty-vhozdenia-res- publiki-krym-v-sostav-rossijskoj-federacii(accessed 8 March 2021). (InRuss.). Правовые аспекты вхождения Республики Крым в состав Российской Федерации. Посольство Российской Федерации в Чешской Республике, доступ по ссылке: URL: https://czech. mid.ru/pravovye-aspekty-vhozdenia-respubliki-krym-v-sostav-rossijskoj-federacii (дата доступа 8 марта 2021 года)..

The whole international community condemned Russia's behavior. The States, such as Australia, Canada, Japan, Switzerland, the United States, and many others have adopted unilateral restrictive measures based on domestic legislation Timeline of the imposition of sanctions and Russia's response in 2014-2015, RIA, available at: URL: https://ria.ru/20151125/1328470681 .html(accessed 9 March 2021). Хронология введения санкций и ответные меры России в 2014-2015 годах. РИА Новости, доступ по ссылке: URL: https://ria.ru/20151125/1328470681 .html(дата доступа 9 марта 2021 года)..

Before the European Council issued sanctions, the member states' Heads of State and Government had called a few times for a peaceful settlement of the Russian-Ukrainian dispute over Crimea. On March 17, 2014, the Council adopted the first sanctions acts concerning Ukraine's situation, specifically Council Decision 2014/145 /CFSP Council Decision 2014/145/CFSP of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ L 78. 17.3.2014, P. 16-21). (Decision 2014/145) and EU Regulation 269/2014 Council Regulation (EU) No 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ L 78. 17.3.2014, P. 6-15). (Regulation 269/2014). According to the Decision 2014/145 preamble, the Russian Federation's actions were contrary to international law's fundamental principles enshrined in Ukraine's UN Charter and domestic legislation.

Subsequently, the situation worsened due to the conflict in Eastern Ukraine, during which self-proclaimed republics, specifically the Donetsk People's Republic and Lugansk People's Republic, appeared. Another reason -- the Boeing 777 crashed in the Donetsk region. After that, some EU institutions stated that the Russian Federation supported the self-proclaimed republics, provided weapons, and military equipment for rebels. Moreover, in their opinion, the divisions of Russian armed forces were located in the Donetsk and Lugansk regions. All this led to the EU Council adopting Decision 2014/512 and Regulation 833/2014, which served as the basis for introducing sectoral sanctions against Russia.

The sectoral sanctions were applied to the Russian economy's banking, defense, and oil industries. Such restrictions affected Sberbank, VTB, Vnesheconombank (VEB), Gazprom Neft, and other Russian legal entities as well as their foreign subsidiaries such as DenizBank.

The Council formulated two goals of introducing sectoral restrictive measures. Firstly, to increase the Russian Federation's costs for continuing its destabilization policy in Ukraine. Secondly, the sanctions should facilitate the peaceful resolution of the conflict in Eastern Ukraine.

For convenience, further research of restrictions will be divided into sectors.

Banking Sector

In accordance with Regulation 833/2014, the following items were prohibited:

The maturity period for brokerage, sell, purchase, and other operations with transferable securities and money-market instruments was set within 90 days.

These restrictions affected entities included in the sanctions list and enterprises in which the designated entities owned more than 50 % shares. Besides, companies acting on behalf of the persons were sanctioned. The sanctions list included GazprombankRosselkhozbank, Sberbank, VEB, and VTB.

In September 2014, EU Regulation 960/2014 Council Regulation (EU) No 960/2014 of 8 September 2014 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (OJ L 271. 12.9.2014, P. 3-7). (Regulation 960/2014) was adopted, which amended Regulation 833/2014.

The number of restrictions in the banking sector was exposed:

The maturity period for operations with transferable securities and money-market instruments has been reduced to 30 days;

A ban on providing loans or credits with a maturity exceeding 30 days.

The second time Regulation 833/2014 was amended by adopting EU Regulation 1290/20 14 Council Regulation (EU) No 1290/2014 of 4 December 2014 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine, and amending Regulation (EU) No 960/2014 amending Regulation (EU) No 833/2014 (OJ L 349. 5.12.2014, P. 20-24). (Regulation 1290/2014). However, it provides only a few exceptions to the restrictions imposed on the banking sector.

Oil Sector

Initially, the Annexes to Regulation 833/2014 specified only the names of banks. Subsequently, Regulation 960/2014 included representatives of the gas sector: Gazprom Neft, Rosneft, and Transneft.

The following restriction was imposed:

The maturity period for brokerage, sell, purchase, and other operations with transferable securities and money-market instruments was set within 30 days.

Regulation 833/2014 prohibited exports, sales, supplies, or transfers of listed technologies that could be used for deep-water, Arctic oil, and shale projects. This ban was not related to the designated oil entities; however, they were primarily concerned, given the business interests. Afterwards, Regulation 960/2014 expanded this measure by prohibiting several services due to the projects.

Regulation 1290/2014 also introduced changes. The sales, supplies, transfers, or exports of listed were prohibited if they could be used in the following projects:

oil exploration and production in waters on the territory of Russia, including its Exclusive Economic Zone and Continental Shelf, which are carried out deeper than 150 meters;

oil exploration and production in the North of the Arctic Circle;

oil exploration and production through hydraulic fracturing of shale formations on the Russian territory.

Furthermore, the Council modified several positions of prohibited technologies included in the second Annex.

Defense Sector

Specific defense sector representatives were included in the annexes to Regulation 960/2014. The most well-known Russian addressees were Kalashnikov Concern, Concern VKO «Almaz-Antey» (Almaz-Antey), and Tula Arms Plant, nevertheless, the list is not limited to these enterprises.

Regulation 833/2014 established a ban on the export, sale, supply, and transfer of goods and technologies used for military purposes as well as dual-use ones. After adopting Regulation 960/2014, this restriction should be applied only to Russian defense enterprises in the sanctions list. Additionally, Almaz-Antey and other addressees were limited in:

Technical assistance and other services for the provision, production, and maintenance of the designated goods and technologies;

Financial assistance related to the designated goods and technologies.

Regulation 1290/2014 did not provide additional restrictive measures on the defense sector.

The introduction of sectoral sanctions affected the Russian legal corporates, therefore they claimed to the General Court to recognize the imposition of the restrictive measures as illegal.

THE EUROPEAN UNION LEGAL BASIS FOR CLAIMS IN REGARD TO THE SECTORAL RESTRICTIVE MEASURES

Within the European Union, there is a judicial procedure for appealing EU institutions' acts, including the Council's, which can be used by foreign natural and legal persons.

The judicial procedure is regulated by Articles 263 and 275 TFEU. These provisions correspond to the right to an effective remedy and a fair trial enshrined in Article 47 of the Charter of Fundamental Rights of the European Union Charter of Fundamental Rights of the European Union (OJ C 326. 26.10.2012, P. 391-407). (Charter) and Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms Council of Europe.(1950). Convention for the Protection of Human Rights and Fundamental Freedoms.In Council of Europe Treaty Series 005. (ECHR).

The TFEU articles stipulate that the ECJ checks the legality of EU institutions' normative acts. Applicants must apply to the ECJ within two months of the measure's publication in the European Union's Official Journal. Article 263 TFEU provides grounds for declaring the act unlawful. The grounds contain a lack of competence, misuse of powers, violation of the application rules, infringement of a significant procedural requirement. The ECJ does not have the power to control CFSP acts as a whole, but it can declare the challenged act unlawful towards the applicant. This decision will not affect other persons who are subject to restrictive measures.

Within the two months, eight Russian legal entities applied to the ECJ to cancel EU sanctions acts in the part which affected them. The following applicants filed the lawsuits: Almaz-Antey, Gazpromneft, Rosneft, Sberbank, VEB, VTB, and foreign subsidiaries of Russian banks -- DenizBank (Turkey) and Proiminvestbank (Ukraine).

Rosneft did not limit itself to one trial and applied to the High Court of Justice (England & Wales), claiming the United Kingdom's acts on implementing sanctions regulation R (OJSC Rosneft Oil Company) v Her Majesty's Treasury and ors [2015] EWHC 248 (Admin).. This case ended up in the ECJ as a preliminary ruling request under Article 267 TFEU Case C-72/15 PJSC Rosneft Oil Company v Her Majesty's Treasury and others. Judgment of 28 March 2017.. After that, the ECJ suspended Russian sectoral cases until the Grand Chamber issued a judgment.

JUDGMENT IN CASE C-72/15

By virtue of res judicata, the judgment in case С-72/15 (Judgment) became a key for sectoral cases. Res judicata, according to the former Advocate General of the ECJ, Jan Mazak, should be understood as a principle that prevents a second trial over the same issue or dispute Opinion in Case C-2/08 ECLI:EU:C:2009:180 par.63.. Its effect is caused by the requirement to create legal certainty and uniformity of judicial practice. This leads the ECJ to consider itself bound by legal positions in similar cases.

As already mentioned, Rosneft claimed to the High Court of Justice. Afterwards, the Court handed it over as a preliminary request under Article 267 TFEU. The purpose of prejudicial jurisdiction is that an international Court responds to a national Court request requiring an authoritative assessment of how to apply legislation in a particular case. Prejudicial jurisdiction should be distinguished from advisory jurisdiction, whereas the latter involves the preparation of opinions at the request of States or international organizations concerning the interpretation and application of international legal norms. Additionally, advisory opinions are consultary, while prejudicial acts are mandatory for national judicial institutions.

In accordance with Article 267 TFEU, any jurisdictional authority of an EU member country can submit a request for the preliminary ruling if it is necessary for resolving. In respect of submitting, the ECJ is entitled to interpret the provisions of TEU, TFEU, Charter, and other EU institutions' acts.

As the preliminary request, the High Court of Justice raised succeeding questions:

Whether the ECJ has the competence to make preliminary rulings in respect of sectoral sanctions lawsuits;

Whether certain provisions of the sectoral acts challenged by Rosneft are unlawful. If they are legal, whether the contested provisions violate the principle of legal certainty and nullapoena sine legecerta;

Interpretation of specific terms, especially «financial assistance», «shale», and «waters deeper than 150 meters».

Under Article 96 of the Rules of Procedure of the Court of Justice Rules of Procedure of the Court of Justice of 25 September 2012 (OJ L 265. 29.9.2012, P. 1-41), as amended on 18 June 2013 (OJ L 173. 26.6.2013, P. 65) and on 19 July 2016 (OJ L 217. 12.8.2016, P. 69)., the parties to the main proceedings are entitled to submit their arguments. Rosneft used this right, but the lawyers representing the Russian legal corporate did not take into account that the preliminary judgment did not intend to resolve the case.

Without having in mind the nature of the prejudicial ruling, Rosneft provided the following tenets:

the contested sanctions acts are incompatible with the EU-Russia Partnership and Cooperation Agreement (1994) Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part -- Protocol 1 on the establishment of a coal and steel contact group -- Protocol 2 on mutual administrative assistance for the correct application of customs legislation -- Final Act -- Exchanges of letters -- Minutes of signing (OJ L 327. 28.11.1997, P. 3-69).;

in accordance with Article 296 TFEU, the Council did not correctly state the reasons on which inclusion of Rosneft in the sanctions list is based;

the Council misused the power because sanctions do not comply with the principle of equal treatment;

the contested sanctions acts violate the right to property and freedom to conduct a business guaranteed by the Charter;

the contested sanctions acts infringe right to an effective remedy and to a fair trial guaranteed by the Charter;

the contested sanctions acts are internally contradictory and inconsistent;

the contested sanctions acts are contrary to the principle of legal certainty and nullapoena sine legecerta.

On March 28, 2017, the Grand Chamber of the ECJ issued a Judgment. The Chamber formulated the subsequent positions, which were repeated time and again in Russian legal corporates' cases.

Pursuant to Articles 19, 24, 40 TEU and Articles 267 and 275 TFEU, the ECJ has the competence to issue prejudicial rulings towards decisions (CFSP). However, it is required that the jurisdictional authority of a member state make a preliminary request related to the verification of compliance with Article 40 TEU or aimed at considering the legality of restrictive measures against persons;

EU constituent documents provide for the possibility of complete economic and financial relations termination with third countries or their residents. Thus, EU sectoral restrictive measures related to Russian entities are lawful. However, they should be adopted within granted competence with considering adoption procedure;

In accordance with Articles 3, 21, 24, 29, 31 TEU, the Council has broad discretion in determining imposed restrictive measures and persons to be put on the sanctions list. Nevertheless, they should provide validity and expediency; otherwise, the principle of equal treatment will suffer;

The Court confirmed that restrictive measures, including sectoral ones, are administered by two acts: decision and regulation. Decisions apply to States, while regulations are addressed to persons. The latter is aimed at implementing restrictive measures at the Union level;

Imposed sectoral measures are not directed against specific individuals and legal entities. In other words, sanctions are issued by non-individual normative acts and based on objective criteria;

Article 99 of the EU-Russia Partnership and Cooperation Agreement confirm the legitimacy of sectoral restrictions as long as their introduction ensures the security of the Union and maintenance of international peace;

The Council identified the following restrictive measures objectives:

To increase the Russian Federation's costs of actions undermining the territorial integrity, sovereignty, and independence of Ukraine;

To promote a peaceful resolution of the conflict in Eastern Ukraine.

These goals correlate with Article 21 TEU because sectoral sanctions seek to preserve peace, strengthen international security, and comply with fundamental principles of international law;

Depending on the imposed restrictions, the degree of their justification is determined. If non-individual measures are introduced, it is sufficient for the Council to indicate the situation that led to implementing the restrictions and the goal pursued. Individualized restrictions should also be justified by providing evidence known to the authority being the basis for implementing sanctions against the addressee;

Article 296 TFEU requires that the justification for sanctions should be clear and unambiguous. However, it is necessary to consider the nature of the restriction, as mentioned above, and the context of adopting measures. The Council is not required to disclose all factual and legal circumstances surrounding the sanction's adoption;

Council' misuse of powers is established on the basis of objective, relevant and consistent evidence that confirm procedural infringements when deciding on restrictions imposition for purposes other than those indicated;

In accordance with Article 215 TFEU, the provisions of regulations must be interpreted in terms of the decision (CFSP). Such an approach will eliminate possible misinterpretations between these two acts;

Right to property and freedom to conduct a business is not absolute, and they could be restricted. These limitations should meet the subsequent criteria: legality, proportionality, acceptable interference, and pursued publicly significant goal (Article 21TEU);

The principle of legal certainty and nullapoena sine legecerta do not contradict the establishment of criminal liability by member countries for violation of restrictions to ensure its effective implementation.

Thus, the Grand Chamber answered the High Court of Justice's questions and replied to Rosneft's arguments. They formulated several legal positions that affected all claiming Russian legal corporates. In the main Rosneft's proceeding, the ECJ stated it was impossible to ignore legal positions from Judgment as far as the legal issues under consideration were similar T-715/14 Rosneft and Others v Council. Judgment of 13 September 2018.. Besides, the General Court emphasized that the Grand Chamber had a clear intention to draw out stable positions for future proceedings.

GENERAL COURTS' JUDGMENTS ON SECTORAL CASES

Eight legal corporates that were subject to sectoral restrictions submitted suits to the General Court. They claimed to the Council's acts that issued sectoral sanctions. Each of the applicants can be attributed to one of the subsequent sectors: banking, oil, and defense. For convenience, this paragraph will be divided according to the designated sectors.

All the Russian legal entities' submissions were admissible, so we will not return to this issue in the future.

Banking Sector

Sberbank T-732/14 Sberbank of Russia v Council. Action brought on 23 October 2014., VEB T-737/14Vnesheconombank v Council. Action brought on 24 October 2014., VTB T-734/14 VTB Bank v Council. Action brought on 24 October 2014., and their foreign subsidiaries -- DenizBank (Turkey) T-798/14 DenizBank v Council. Action brought on 5 December 2014. and Proiminvestbank (Ukraine) T-739/14 PSC Prominvestbank v Council. Action brought on 24 October 2014. -- used the right to claim the restrictive measures.

Each applicant put forward a different number of arguments; however, all tenets can be stated as follows:

The Council violated its obligation to state the reasons behind the inclusion of applicants in the sanctions list;

The Council misused its powers because they had errored in assessing the applicants as persons who destabilize the situation in Ukraine;

The applicants ' right to an effective remedy and a fair trial was violated;

The applicants ' rights guaranteed by Articles 16 and 17 Charter and Article 1 of Protocol 1 to the ECHR are infringed;

Restrictive measures against applicants are not necessary to achieve the goal of increasing the Russian Federation' costs in connection with the situation in Ukraine;

The Council abused its powers by specifying the purpose of introducing restrictive measures that does not correspond to the actual one;

The principle of equal treatment in respect of the applicants has been infringed;

The introduction of sanctions contradicts the Agreement Creating An Association Between The Republic of Turkey and the European Economic Community (1963) 64/732/EEC: Council Decision of 23 December 1963 on the conclusion of the Agreement establishing an Association between the European Economic Community and Turkey (OJ 217, 29.12.1964, P. 3685-3686). and its Additional Protocol (1970) Additional Protocol and Financial Protocol signed on 23 November 1970, annexed to the Agreement establishing the Association between the European Economic Community and Turkey and on measures to be taken for their entry into force -- Final Act -- Declarations (OJ L 293. 29.12.1972, P. 3-56)..

None of these arguments were successful. The General Court rejected them based on the following legal positions See: T-732/14 Sberbank of Russia v Council, T-734/14 VTB Bank v Council, T-737/14 Vnesheconombank v Council, T-739/14 PSC Prominvestbank v Council, T-798/14 DenizBank v Council. Judgments of 13 September 2018.:

The contested sectoral restrictions were derived from the Russian Federation's actions destabilizing Ukraine's situation. The purpose of sanctions implementation is to increase Russia's costs for actions that violate international law's fundamental principles and to promote a peaceful settlement of the conflict in Eastern Ukraine. The companies are primarily owned by the Russian government; therefore, the reasons for including their names in the sanctions list must be evident;

Decision 2014/512 and Regulation 833/2014 provisions are interpreted uniformly, for this reason, textual contradictions referred by the applicants have no legal significance;

An infringement of the applicants' right to an effective remedy and a fair trial may terminate the normative legal act only if such violation leads to a divergent Court decision. The banks exercised their right without any limitations because they did not provide evidence to the contrary. For example, VTB could not prove that the absence of individual addressee notification violates the right to an effective remedy and a fair trial. In another instance, Denizbank referred to the requirement to inform about the blocking of assets; nonetheless, the General Court did not support this argument due to a lack of relevant evidence.

Article 52 Charter may restrict the right to property and freedom to conduct a business. There is a causal relationship between the measure and the goals pursued by their introduction. The goals declared by the Council are publically significant and therefore comply with Article 21 TEU. At the same time, the established sanctions did not lead to damage to the essence of the rights;

Unilateral restrictive measures are a legitimate way of exerting pressure on the Russian Federation to promote the principles in accordance with Article 21 TEU. The applicants did not provide evidence to the contrary;

The principle of equal treatment prohibits discrimination in comparable situations. Given the purposes of the restrictive measures and the Council's discretion, the applicants were not discriminated;

The principle of proportionality requires that EU restrictive measures be appropriate, necessary to achieve publicly essential goals, and do not go beyond them. Having this in mind, the Council has broad discretion towards imposing unilateral sanctions. The proportionality could be violated if the chosen measure is inappropriate, given the intended purpose. In this connection, applicants should prove the inconsistency of the measures.

Influence on subsidiaries contributes to achieving the goals of the imposed restrictive measures. For example, VEB suffers a financial loss because of its Ukrainian subsidiary, Prominvestbank. Such a situation increases the Russian Federation's costs due to Ukraine's situation because Vnesheconombank is a state-owned company. Moreover, restrictions on subsidiaries were not assessed by the General Court as clearly inappropriate;

The introduction of restrictive measures contradicts the Agreement Creating An Association Between The Republic of Turkey and the European Economic Community, and its Additional Protocol is an integral part of EU law. This international treaty takes precedence over secondary EU law, notwithstanding it must comply with primary law. Considering Articles 29 TEU and 215 TFEU, even the absence of an explicit provision in the international treaty on the possibility of imposing restrictive measures does not prevent their adoption by the Council. Such restrictions must be non-discriminatory, proportionate, and in line with the publicly significant objectives (Article 21 TEU).

It should be noted that VEB is the single Russian applicant who has tried to obtain interim measures from the ECJ T-737/14 Vnesheconombank v Council. Order of the President of the General Court of 28 September 2017.. However, the authority, guided by Articles 256, 278, 279 TFEU, refused to establish them, since the corporate did not prove urgency, severe and irreparable damage the Bank will be subject to if the requested interim measures are not taken.

Oil Sector

Gazprom Neft T-735/14 Gazprom Neft v Council. Action brought on 24 October 2014. and Rosneft T-715/14 Rosneft and Others v Council. Action brought on 9 October 2014. filed lawsuits challenging the restrictive sectoral measures. Moreover, Gazprom Neft filed the Court's office accepted two applications, one of them on October 24, 2014, and the second -- on December 5, 2014 T-799/14 Gazprom Neft v Council. Action brought on 5 December 2014.. Afterward, based on Gazprom Neft's application, the General Court merged two proceedings.

The arguments presented by Rosneft were indicated earlier in relation to the preliminary ruling. Gazprom Neft stated the subsequent arguments:

The Council violated its obligation to state the reasons behind the inclusion of applicants in the sanctions list;

The Council misused its power because they had errored in assessing the applicants as persons who destabilize the situation in Ukraine;

The introduction of restrictive measures contradicts to the EU-Russia Partnership and Cooperation Agreement;

The principle of proportionality was infringed by the Council.

As in the banking sector, the Russian oil companies' arguments were rejected by the General Court. In most cases, they disagreed with the arguments concerning the legal positions from Judgment. In order not to repeat the previously outlined legal positions, the other ones could be highlighted See: T-715/14 Rosneft and Others v Council, T-735/14 Gazprom Neft v Council. Judgments of 13 September 2018.:

Sectoral sanctions are not inconsistent with the General Agreement on Trade in Services (1994) GATS: General Agreement on Trade in Services, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 1869 U.N.T.S. 183, 33 I.L.M. 1167.; particularly, the Council may impose sanctions for security purposes under Article XIV bis. This shall apply to the General Agreement on Tariffs and Trade (1994) GATT 1994:General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 18б7 U.N.T.S. 187, 33 I.L.M. 1153. because Article XXI establishes the same mechanism;

Reasons' accuracy, technical capabilities, and timing must be considered for determining whether the Council has adequately fulfilled its duty to state reasons. Such an explanation should be viewed in addition to an understanding of context and the objectives being pursued;

Sectoral sanctions are imposed against significant sectors of the state's economy. Any measures directed against them are reasonable, as far as the state's costs increase;

The introduction of restrictions on state-owned enterprises (more than 50 % of shares) can not be regarded as clearly inappropriate because of such companies' economic importance. They lack an established legally significant connection between Russian companies and state actions towards Ukraine's crisis.

Restrictions on access to the financial market are aimed, among other things, at industries' future revenues. It also meets the goal of increasing the Russian costs on destabilizing the situation in Ukraine;

EU unilateral restrictive measures, including the sectoral ones, can be imposed by the Council and do not call for approval by the UN Security Council. The sanctions imposed by the EU are autonomous and independent. Thus, they differ from the international sanctions provided by Article 41 of the UN Charter;

The ECJ judicial control over sanctions acts is limited to check:

- the established procedure;

- whether motives are justified properly;

- whether the decisions are relevant to the actual circumstances;

- whether abuse of power took place.

Defense Sector

Even though about ten defense companies were on the sanctions list, only Almaz-Antey claimed the sectoral restrictive measures T-515/15 Almaz-Antey v Council. Action brought on 1 September 2015.. However, this case was not the first for them because they challenged unilateral sanctions established by the acts that amended Decision 2014/145 and Regulation 269/2014. On January 25, 2017, the General Court published the decision, in which it confirmed the validity of autonomous restrictions towards the applicant T-255/15 Almaz-Antey v Council. Judgment of 25 January 2017.. Therefore, Almaz-Antey did not limit itself to a single trial and submitted a lawsuit about the unlawful nature of sectoral sanctions regarding them.

Almaz-Antey's representatives stated three arguments previously mentioned regarding the above cases:

The Council misused its powers because they had errored in assessing the applicants as persons who destabilize the situation in Ukraine;

The applicants ' rights guaranteed by Articles 16 and 17 Charter are infringed;

The Council infringed the principle of proportionality.

Indeed, most conclusions of the General Court were based on the already mentioned legal positions; however, some others can be identified T-515/15 Almaz-Antey v Council. Judgment of 13 September 2018.:

Restrictive measures, including sectoral ones, have consequences not only for the persons included in the sanctions list since they can harm those who are not responsible for the situation that led to the adoption of restrictive measures. Such a situation is legitimate due to the achievement of publically significant objectives provided by Article 21 TEU.

The applicant's right to an effective remedy and a fair trial does not mean that the Council is obligated to grant access to all non-confidential materials related to the challenged restrictive measure without a request from the applicant. At the applicant's request, the materials must be sent within a reasonable time and be sufficient; otherwise, the addressee's right would be violated;

The purpose of restrictive measures is not to punish listed Russian persons or hold them liable.

ECJ JUDGMENTS ON SECTORAL CASES

Of the eight enterprises that challenged the sectoral sanctions, only three used the right to appeal against the General Court judgment. The Rosneft and VEB immediately announced their intention to enjoy this opportunity. For example, a representative of the oil company mentioned: «Although the company's convincing argument for the sanctions measures illegality presented in the General Court was ignored, Rosneft will continue to consistently protect the interests of its shareholders from the influence of illegal unilateral sanctions...» The EU Court rejects the claims of the Russian companies on the groundlessness of the sanctions, Interfax,.available at: URL: https://www.interfax.ru/world/629128(accessed 8 October 2020) (In Russ.) (Суд ЕС отклонил иски компаний РФ о необоснованности санкций, Интерфакс, доступ по ссылке:URL: https://www.interfax.ru/world/629128(дата доступа 8 октября 2020 года).. In contrast, VTB did not publish any statement. Nevertheless, these legal persons appealed following the established procedure and in compliance with stipulated timing.

Banking Sector

As already mentioned, VEB C-731/18 P Vnesheconombank v Council. Appeal brought on 23 November 2018. and VTB C-729/18 P VTB Bank v Council. Appeal brought on 23 November 2018. claimed the General Court's judgments. The banks stated that the following conclusions of the jurisdictional authority were erroneous:

Applicants meet the criteria for inclusion in the sanctions list;

The VTB inclusion in the sanctions list is proportional and corresponds to the goals set by the Council;

The rights guaranteed by Articles 16 and 17 Charter have not been violated. The intervention was proportionate;

The Council has fulfilled its duty to explain the reasons for the imposition of restrictive measures;

The applicant's right to an effective remedy and a fair trial was respected.

In many respects, these applicants' arguments turned out to be a continuation of the unsuccessful tenets used. In this regard, the appellate body exercised the formed legal positions, especially those fixed by the Judgment. Nevertheless, certain conclusions of the ECJ require our attention See: C-729/18 P VTB Bank v Council, C-731/18 P Vnesheconombank v Council. Judgments of 25 June 2020.:

Different wording of the provisions in decisions and regulations does not violate the principle of legal certainty. A uniform understanding, including of terms, is achieved by interpreting regulations through the decisions;

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