In the name of the rule of law: ECJ further extends jurisdiction in CFSP (Bank Refah Kargaran)

By Thomas Verellen

On 8 October 2020 the Grand Chamber of the European Court of Justice (ECJ) rendered judgment in an appeal procedure against the General Court judgment in the case of  Bank Refah Kargaran (T‑552/15 and C-134/19 P). The case concerned an appeal, by the Iranian Refah Kargaran bank, against a number of Council decisions and regulations imposing restrictive measures (sanctions) on the Iranian bank. Some of these decisions had been adopted on the basis of Article 29 TEU, and others on the basis of Article 215 TFEU (the latter served to implement the former, as is customary in the field of restrictive measures). Bank Refah Kargaran challenged the Council’s decision inter alia on the grounds that the Council had not properly motivated its decisions. In a judgment issued on 6 September 2013, the General Court had agreed with that argument and had proceeded to annul the above decisions and regulations in so far as they concerned the Iranian bank. 

On 25 September 2015, Bank Refah Kargaran brought a new action against the Council, this time to obtain damages in reparation of the injury caused to the bank by the annulled decisions and regulations. In so doing, the Iranian bank invited the General Court (and subsequently the ECJ) to address a jurisdictional question: does the Court of Justice of the EU (CJEU) have jurisdiction to award damages for non-contractual liability incurred by the EU in the exercise of its powers to impose restrictive measures on the basis of Article 29 TEU? Article 29 TEU is a CFSP legal basis. Jurisdiction of the CJEU in this area is limited, as set out in Articles 24 TEU and 275 TFEU. 

Since the entry into force of the Lisbon Treaty, now over ten years ago, the ECJ has been invited on several occasions to interpret the jurisdictional ‘carve-outs’ set out in the above Treaty provisions. The ECJ has been generous towards itself: it has interpreted its jurisdiction broadly in the name of the rule of law and the requirement that the EU Treaties provide for a ‘complete system of legal remedies and procedures’—a notion first introduced in the Les Verts judgment of 1986. Most notably, the ECJ decided in Rosneft that the CJEU has jurisdiction to assess the legality of decisions providing for restrictive measures not only in the framework of an annulment action (Article 263 TFEU), as mentioned expressly in Article 275 TFEU, but also in the framework of a preliminary ruling procedure (Article 267 TFEU). In addition, the Court has proceeded to a piecemeal expansion of its jurisdiction in specific areas. For example, in H v Council, a case I discussed in European Papers, the Court decided it had jurisdiction to rule on the legality of a decision to redeploy an officer in the context of a CFSP mission. 

In Bank Refah Kargaran, the Court continued in the same vein. It concluded that the CJEU has jurisdiction to award damages on the basis of Article 268 TFEU for non-contractual liability incurred by the EU in the context of Article 29 TEU decisions imposing restrictive measures. The Court considered that the above-mentioned ‘carve-outs’ are exceptions to the general rule that the CJEU does have jurisdiction. This general rule, the Court explained, is set out in Article 19 TEU, which holds that ‘the [CJEU] shall ensure that in the interpretation and application of the Treaties the law is observed.’ It follows that these carve-outs are to be interpreted narrowly. 

The Court added that every individual whose rights protected by EU law have been violated has the right to an effective remedy, as provided for in Article 47 of the Charter of Fundamental Rights of the EU as well as, ultimately, by the principle of the rule of law itself—a principle which figures amongst the founding principles of the EU, listed in Article 2 TEU. Since individuals do have the possibility to claim damages caused by the EU in adopting Article 215 TFEU regulations, the coherence of the above system of remedies and procedures requires that the same opportunity exist also for decisions adopted on the basis of Article 29 TEU, the Court concluded. Consequently, the CJEU has jurisdiction to award damages on the basis of Article 268 TFEU (non-contractual liability) for damage caused by the EU in the exercise of competence to impose restrictive measures on the basis of Article 29 TEU (CFSP). 

It is interesting to note the ease by which the Court reached its conclusion on the jurisdictional issue. In contrast to Advocate-general Hogan who had appeared more hesitant, contrasting arguments in favour and arguments against recognising CJEU jurisdiction (in particular the need to take into account the wishes of the Treaty framers to limit the CJEU’s jurisdiction in the area of the CFSP), the Court presented the above-mentioned line of reasoning as the only viable option. Council efforts to ‘ringfence’ the CFSP by invoking pre-Lisbon case law on the lack of CJEU jurisdiction on the now defunct third ‘pillar’ on police and judicial cooperation in criminal matters (Gestoras Pro Amnistía and Segi) were firmly rebuked by the Court. The Court emphasised how the Lisbon Treaty changed the very structure of the EU Treaties: the CFSP had been integrated into the ‘general framework’ of EU law, and the EU had been endowed with a single legal personality (Article 47 TEU). For this reason, pre-Lisbon case law and Treaty provisions were no longer relevant, the Court concluded.

Is all of this persuasive? One could respond to the Court that it is a bit selective in its reading of the Lisbon Treaty. Surely the Treaty framers ‘normalised’ the CFSP in certain ways, including by doing away with CFSP-specific objectives and, indeed, by merging the pre-Lisbon European Community and Union into an EU endowed with a single legal personality. There are, however, many indications that the Lisbon Treaty framers simultaneously wished to constitutionalise a policy of keeping the CJEU out of a policy area perceived as being too closely related to national sovereignty and ‘high politics’ such as the CFSP. The text of Articles 24 TEU and Articles 275 TFEU could arguably not have been clearer in this regard. 

Does this observation make Bank Refah Kargaran a case of judicial activism whereby the Court pushes its teleological approach to Treaty interpretation too far? I do not think so. To accept that the EU Treaties exclude CJEU jurisdiction on this issue, would, in some instances, imply that individuals have no remedy against an infringement of their rights. As AG Hogan had mentioned in paragraph 64 of his opinion, national courts are not the appropriate forum for individuals to obtain damages, since Member States are obliged to enforce CFSP decisions. Furthermore, courts in some Member States may very well refuse to exercise jurisdiction on the basis of doctrines such as that of acte de gouvernement which exist in several Member States and preclude courts from deciding what are considered ‘political’ questions (the doctrine was mentioned in the opinion of AG Wathelet in Rosneft). There is thus no guarantee that Member State courts will fill the jurisdictional gap left by the EU Treaties. This creates a potential gap in the EU’s complete system of remedies and procedures which, in a Union governed by the rule of law, should indeed be unbearable.