Bad omen for Russia's legal attack on EU sanctions

The first one, at the EU Court of Justice (ECJ) in Luxembourg, seeks to annul an EU Council decision in July 2014 to impose curbs on credit and on technology exports to Russian energy firms and banks.

The second one, at the English high court, seeks to stop UK authorities from implementing the EU decision. But the English court subsequently asked the ECJ to clarify legal issues before giving its verdict.

Both Rosneft cases object to the EU measures citing a laundry list of complaints.

Rosneft has said that the Council had overreached its powers and that the terms used in its decisions - for instance, on what is “shale” gas or which kinds of financial services are forbidden by the sanctions - were unclear.

It said that a 1994 EU-Russia agreement forced the EU to allow free movement of goods and capital to Russia.

It said the Council had failed to justify its targeting of Rosneft and failed to provide documents that it needed for its defence. It also said that it should be able to convert shares issued before the sanctions came into effect into debt and that two EU legal acts contradicted themselves.

In his opinion on Tuesday, one of the EU court’s advocate generals, Melchior Wathelet, said all of its complaints but one were invalid.

The one he upheld, on contradictory language in EU legal acts, did not serve Rosneft well.

Rosneft had noted that a Council decision said the sanctions covered contracts concluded before 1 August 2014. A subsequent EU regulation gave member states the discretion to decide whether to include old deals. But Wathelet said that the prior decision meant that the leeway given in the regulation was “invalid”.

Wathelet’s opinion pertains to the English court’s request for clarification.

But the ECJ has decided to stay the proceedings in Rosneft vs. the Council until that clarification is ready because, an ECJ source said, the points in dispute are so similar that the British clarification will have a strong bearing on the Council verdict.

An advocate general’s opinion is not binding on the court, but it is followed in most cases.

The final verdict on the English clarification is expected between September and December. The verdict on Rosneft vs. the Council is likely to come soon afterward.

In general terms, Wathelet said the EU “enjoys a broad discretion in the field of foreign and security policy, that must also apply whenever it concludes that there is serious international tension constituting a threat of war”.

He said the EU did not overstep “the bounds of what was necessary” to attain its “objective of increasing the costs of the action taken by the Russian Federation by targeting strategic sectors of the Russian economy, including the oil sector”.

He also said the case is of “great significance” because it will likely confirm that the Luxembourg tribunal has jurisdiction on EU foreign policy decisions.

The Council had, in the recent past, lost several cases in Luxembourg brought by Belarusians, Iranians, and Ukrainians who had been subjected to travel bans and asset seizures.

Many similar cases are ongoing but, unlike the Rosneft challenge, the personal cases would have little strategic impact even if the EU lost more of them.

Sanctions renewal

Meanwhile, EU states will decide, later this month, whether to extend the life of the economic sanctions for another six months.

According to one senior EU diplomat, speaking on condition of anonymity, the extension is a done deal despite attempts by some small states, such as Greece and Hungary, to cultivate closer Russia ties.

“There are some countries that want a review of the sanctions. But ultimately we will listen to what [German] chancellor Merkel and [French] president Hollande will say on whether the Minsk conditions have been fulfilled … my assessment and my prediction is that the conditions haven’t been fulfilled,” he said.

The Minsk ceasefire accord on Ukraine, which says all “foreign”, meaning Russian, troops should leave and that Kiev should get back control of its border, was negotiated by Merkel and Hollande in the Belarusian capital last year.

The diplomat said that if there was progress on Minsk over the summer then the sanctions would be reviewed in December.

He added that the EU would, in a forthcoming long-term strategy paper, designate Russia as a “strategic challenge - not a strategic partner or a strategic problem. It’s very diplomatic language”.

He said some EU states had wanted the EU paper to name Russia as an “aggressor” in Ukraine, but that this is unlikely to end up in the final draft.