On Wednesday 11 September, the General Court ruled (cases T-635/22 and T-644/22), that the Council of the EU has the right to establish reporting and cooperation obligations to ensure the effectiveness of measures to freeze funds.
The decision comes in the context of economic sanctions against Russia and the obligation to prevent the use of legal and financial arrangements that facilitate the circumvention of restrictive measures.
The case concerns Elena Petrovna Timchenko, Gennady Nikolayevich Timchenko, Mikhail Fridman, Petr Aven and German Khan, who are on the lists of persons, entities and bodies subject to restrictive measures in connection with Russia’s invasion of Ukraine.
On 21 July 2022, the Council adopted a regulation laying down obligations to declare funds and cooperate with the competent authorities in order to guard against complex legal and financial arrangements making it possible to evade this sanctions regime.
The interested parties brought an action before the Court of First Instance challenging these obligations to declare their funds or economic resources before 1 September 2022, on the grounds that these obligations were not included in the decision taken by the Council and constituted a misuse of the Member States’ powers.
In its two rulings, the Court of First Instance asserted that EU law allows for the adoption of regulations by the Council to implement or give effect to restrictive measures in order to ensure their uniform application in all Member States.
In this way, the Council can adopt declaration and cooperation obligations, even if they have not been expressly provided for in the decision to which they relate.
“Even though, as the applicants state, the Council does not have unlimited freedom to impose any measures it wishes to impose in respect of the CFSP, Article 215 TFEU [on which the regulation is based] is not exhaustive”, explains the Court.
The General Court also considers that the Council has not replaced the Member States, since the latter retain competence to determine the criminal, civil or administrative nature of the offence of participating in circumvention activities and the penalties attached to that offence.
Nor have the applicants demonstrated the possibility of alternative and less restrictive measures that would have made it possible to achieve the objectives pursued just as effectively. The reporting and cooperation obligations thus appear to be the “appropriate and necessary” implementation of measures to freeze funds.
Links to judgments: https://aeur.eu/f/dez ; https://aeur.eu/f/dex (Original version in French by Solenn Paulic)