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Russia state institutions lose at the European Court of Justice

Rosneft, VTB and VEB sanctions appeals dismissed – EU listings still stand

Rosneft, VTB and VEB were all subjected to sectoral sanctions by the EU in 2014 following the conflict between Ukraine and Russia under Council Regulation (EU) 2014/833 (Regulation 833). For more on Regulation 833 please see our previous post here.

Rosneft

Rosneft appealed to the European Court of Justice (ECJ) following the General Court’s decision to uphold its inclusion in the 2014 list of legal persons, entities and bodies against which European Union (EU) restrictive measures have been imposed under Regulation 833.

In dismissing the appeal on 17 September 2020, the ECJ concluded in summary that:

  • The EU measures contributed to achieving the objective of increasing the costs of the Russian Federation’s actions to undermine Ukraine’s territorial integrity, sovereignty and independence, as well as promoting the peaceful settlement of the crisis.
  • The court found a rational connection between the targeting of particular undertakings in the Russian oil sector, including Rosneft, therefore undermining the investment and future revenues of active entities, bearing in mind the importance of the oil sector for the Russian economy and putting political pressure on the Russian Government.
  • Rosneft’s arguments that the listing was manifestly inappropriate were dismissed and instead the court emphasised that the EU restrictive measures in question were necessary for the protection of the essential security interests of the EU and for the maintenance of peace and public security.

VTB and VEB

The dismissal of Rosneft’s appeal came on the tails of similar dismissals by the ECJ of appeals brought by VTB Bank and Vnesheconombank (VEB) in June 2020.

In VTB’s case an appeal was brought against the General Court’s decision to uphold its inclusion in Regulation 833. The ECJ ruled in that case that:

  • Since the objective of the EU Council in passing Regulation 833 was to increase the costs on Russia of undermining Ukraine’s territorial sovereignty, the court found that the listing of one of its major state-owned credit institutions would increase costs on the state and would therefore be justifiable.
  • The ECJ importantly stated that fundamental rights, such as the freedom to conduct a business or the right to property, are not absolute and their exercise may be subject to restrictions justified by objectives of public interest pursued by the EU, provided that such restrictions do not constitute a disproportionate and intolerable interference.

The General Court’s decision on Rosneft’s listing can be found here.

The ECJ’s decision on Rosneft listings can be found here.

The ECJ’s decision on VTB listing can be found here.