Op-Ed: “Non-contractual liability and actions for damages regarding restrictive measures through CFSP Decisions: Jurisdiction of the CJEU confirmed” by Graham Butler

Introduction

On Tuesday 6 October 2020, the Court of Justice of the European Union (the CJEU) in Grand Chamber formation delivered its judgment in Bank Refah Kargaran v Council (Case C-134/19 P). The case marks another landmark in the sphere of judicial protection guaranteed under EU law. At issue was a question of EU constitutional law – the jurisdiction of the CJEU to rule on the non-contractual liability of the Union and actions for damages relating to Common Foreign and Security Policy (CFSP) Decisions based on Article 29 TEU, entailing restrictive measures, otherwise popularly known as sanctions.

The case, noted on EU Law Live on the date of its delivery, covered the thrust and essence of what the CJEU found, on appeal from a judgment of the General Court. Given this primer, this contribution will instead focus on the place of Bank Refah Kargaran in its greater constitutional context of both the law governing, generally, the EU legal order, and more specifically, the law concerning the CFSP. It will also remark on the implication of the judgment in the overall scheme of judicial protection with EU law, focusing on four arising matters, whilst praising the correct, albeit predictable outcome.

Jurisdiction of the EU Courts in the CFSP

To understand why Bank Refah Kargaran is of constitutional significance, a brief overview of the CJEU’s jurisdiction in the CFSP is needed. Article 24(1) TEU, second paragraph, states that the CFSP is subject to ‘specific rules and procedures’, and that the CFSP ‘shall not have jurisdiction with respect to…[the CFSP]…provisions’. In addition, Article 275 TFEU, first paragraph, repeats a similar formula. These two differently formulated carve-outs of the CJEU’s jurisdiction are, however, carved back in by two provisions – Article 40 TEU and Article 275 TFEU, second paragraph – the latter of which permits the EU Courts to review restrictive measures adopted under the CFSP.

Yet, this supposed limited jurisdiction of the EU Courts pursuant to the CFSP, if taken at purely face value, would be a profound misreading of the state of the law given the consistent and growing line of case law from the CJEU since the Treaty of Lisbon. The Grand Chamber of the CJEU, in particular, has been making major strides in ensuring that judicial protection is not absent in the EU legal order for a variety of actors – institutions and private actors alike – with regard to the CFSP.

For example, in Mauritius (C-658/11) and Tanzania (C-263/14), key information rights for the Parliament for international agreements concluded on a CFSP legal basis was stated by the CJEU in light of Article 218(10) TFEU. In H v Council (C-455/14 P), the CJEU confirmed that acts of staff management within the CFSP came within the scope of judicial review. And in Rosneft (C-72/15), the CJEU confirmed that it had jurisdiction to hear restrictive measures cases through the preliminary reference procedure in Article 267 TFEU, rather than just a direct action on the basis of Article 263 TFEU. Cases that were not heard by the Grand Chamber, such as Elitaliana (C-439/13 P), Jenkinson (C-43/17 P), and SatCen v KF (C-14/19 P) and others have also played their respective roles in expanding the scope of judicial protection, trying to encapsulate the entirety of the policy sphere.

Judgment of the Grand Chamber of the CJEU in Bank Refah Kargaran

Many questions remain unanswered about the true extent of the scope of judicial review of the EU court in the CFSP. The CJEU itself, infamously, but correctly, stated that ‘the [CJEU] has not yet had the opportunity to define the extent to which its jurisdiction is limited in CFSP matters as a result of those provisions’ (Opinion 2/13, paragraph 251). Consequently, Bank Refah Kargaran afforded the opportunity for the CJEU to clarify another question. In essence, the question can be summarised as follows: do the EU courts have the necessary jurisdiction to determine whether the Union can be held non-contractually liable, and hear actions for damages pleas against restrictive measures imposed through a CFSP Decision made on the basis of Article 29 TEU?

Given this opportunity, and in light of the aforementioned case law, the CJEU unequivocally said yes. This in itself is not that surprising, for the case even being referred to the Grand Chamber, and the affirmative Opinion of Advocate General Gerard Hogan meant the CJEU was only ever really going to go in one direction. But whilst the outcome is not surprising itself, what is striking is how easily the CJEU reached its determination, without much hesitancy. In its own words, ‘the consistency of the system of judicial protection in EU law requires that…in order to avoid a gap for natural or legal persons…[the CJEU] is competent to rule on damages allegedly suffered on foot of restrictive measures provided for by CFSP [D]ecisions’ (C-136/19 P, Bank Refah Kargaran, paragraph 39, author’s own translation*).

Moreover, the CJEU made abundantly clear that merely having judicial review of an accompanying non-CFSP Regulation on the basis of Article 215 TFEU is not sufficient in itself to guarantee sufficient judicial review (C-136/19 P, Bank Refah Kargaran, paragraph 40). Both CFSP Decisions on the basis of Article 29 TEU, and accompanying non-CFSP Regulations on the basis of Article 215 TFEU, come within the scope of judicial review for non-contractual liability and action for damages at the EU Courts. Given that non-CFSP Regulations through Article 215 TFEU can only be utilised after a CFSP Decision has been made under Article 29 TEU, this conclusion is entirely sensible.

The Opinion of Advocate General Hogan took the same view as the CJEU – that jurisdiction was indeed well-founded (Opinion in C-136/19 P, Bank Refah Kargaran, paragraphs 35-71), noting in particular that any other result would ‘lead to indefensible anomalies which would not only be at odds with fundamental principles relating to the protection of the rule of law — itself a founding principle of EU law — but would also impair the effectiveness, as well as the necessary coherence of the system of remedies provided for in the Treaties’ (paragraph 67 of the Opinion). Yet another view was always possible. For example, Advocate General Wathelet in another case, Rosneft, took a different view. There, it was argued that ‘actions for damages which relate to a CFSP act are covered by the ‘carve-out’ provision[s]’ and ‘not by the ‘claw-back’ provision[s]’. (Opinion in C-72/15, Rosneft, footnote 36). Thankfully, the CJEU in Bank Refah Kargaran followed Advocate General Hogan in confirming the jurisdiction of the EU courts.

Ramifications of Bank Refah Kargaran

The effects of Bank Refah Kargaran, confirming the EU court’s jurisdiction, are manifold. Four matters in particular stand out.

Firstly, non-contractual liability and actions for damages can be immensely powerful remedies in the EU legal order. Yet in order for non-contractual liability to be found, jurisdiction must be recognised in the first place. With Bank Refah Kargaran, the CJEU has now enabled at least the possibility for private actors to allege non-contractual liability of the Union for CFSP Decisions on restrictive measures. Prior to Bank Refah Kargaran, the existence of a possibility to bring such actions under the CFSP was not quite clear. This judgment has now shed some light on this, and confirmed that non-contractual liability and actions for damages can be heard with regard to CFSP Decisions concerning restrictive measures, at the very least.

But what about damages actions regarding CFSP Decisions concerning CFSP matters that are not restrictive measures, say, for example, actions taken by the Union in the form of their activities in Common Security and Defence Policy (CSDP) missions outside of the Union? The judgment in Bank Refah Kargaran concerned non-contractual liability on the basis of Article 29 TFEU – the basis for decisions on restrictive measures only. Yet by doing so, the CJEU has pierced the veil of the EU Court’s jurisdiction more generally on non-contractual liability of the Union on the basis of the CFSP. It left open the question about the broader scope of non-contractual liability and actions for damages for other matters within the CFSP. This, it is submitted, remains to be clarified in future case law.

Secondly, the Bank Refah Kargaran judgment is also a blow to the Council’s restrictive measures regime. Because non-contractual liability of the Union can now be found for restrictive measures, this may impact the behaviour of the Council on whom and for how long the restrictive measures are imposed. From a potential effectiveness perspective, the Council’s behaviour, in the future, might be more cautious. This may contribute to the Council second-guessing each individual use of its immense powers in restrictive measures, notwithstanding the normal procedural safeguards of unanimity in the Council.

Yet from the opposing perspective, that of protection of the rights of private actors, the judgment in Bank Refah Kargaran can be welcomed in that more certainty on the Council’s part will be required when it continues to list entities for prolonged periods of time. In time, and with the sheer extensiveness of the use of restrictive measures today, will in time lead to non-contractual liability and actions for damages taken by private actors being successful, even if the threshold was not met in this individual case.

Thirdly, the Bank Refah Kargaran judgment is another affirmation that the Gestoras (C-354/04 P), and Segi (C-355/04 P) case law on lack of jurisdiction of the EU Courts is well and truly dead. The Council’s barrel-scraping arguments of continuously trying to present the CFSP as a ‘pillar’ to the world, including to the EU courts, is beyond laughable in a time when it is now over ten years since the constitutional framework was ‘Lisbonised’. Pillarisation, thankfully, is now just a detail of EU legal history. The correct way to look at the CFSP, as it has been for over a decade, quite counterintuitively for the Council, is to understand that judicial review of the CFSP is the norm, and only exceptionally should there not be judicial review, such as, for example, where the political question doctrine might come into play.

Fourthly, a slew of General Court judgments over the years have explicitly rejected jurisdiction of the EU Courts for non-contractual liability and actions for damages on the foot of EU legal acts adopted within the CFSP. In a line of case law, a few jump to mind, including Trabelsi and Others (T-187/11), Dagher (T-218/11), Georgias and Others (T-168/12), and Jannatian (T-328/14). These, and others in the same vein, can no longer be understood as good law on points concerning non-contractual liability and actions for damages on CFSP Decisions. This fourth matter however gives rise to a linked conundrum.

With so many restrictive measures cases before the EU Courts, a particular question can rightly be asked to the practitioner community: why did it take so long for this question in this case to be adjudicated upon at the CJEU (on appeal from the General Court)? A regretful hypothesis one arrives at is that lawyers appearing for private parties, non-privileged applicants, might not be sufficiently specialised in the law of restrictive measures, which translate, in reality, into incomplete pleadings lodged before the EU Courts. Insufficiently informed lawyers, without the necessary expertise in restrictive measures or the constitutional nuances of the jurisdiction of the EU courts, can find it difficult to put forth sufficiently reasoned pleas that are capable of winning the arguments. Moreover, opposing the highly-skilled lawyers of the Council – who are repeat players before the EU courts in this exceptionally complicated area of EU law – is a formidable and daunting task. There is much to be said for the subjects of restrictive measures to choose their legal counsel before the EU courts wisely, and to include experts in the EU external relations law, to ensure the full array of potential pleas are made use of.

Conclusion

The judgment of the CJEU in Bank Refah Kargaran can be welcomed for its clear assertion of a wide breadth of judicial protection on a specific question that was unclear, a jurisdiction which the General Court in a line of prior cases had denied. Private actors that are the subject of restrictive measures now have an additional legal remedy at their disposal, ensuring that the Council acts in accordance with the rule of law. The Grand Chamber judgments of the CJEU are the law of the land; and thus, the direction of the jurisdiction of the EU Courts on CFSP matters is clearer than ever.

The Bank Refah Kargaran ruling will be particularly important in light of the recently resumed negotiations concerning the EU’s accession to the European Convention on Human Rights (ECHR), in which the CFSP will be a key sticking point to overcome following Opinion 2/13. What is clearly apparent from Bank Refah Kargaran, as well as many of the recent CFSP case before the CJEU, is that the Les Verts (C-294/83) doctrine of a ‘complete system of legal remedies and procedures’ is alive and well, and living in current EU external relations case law.

* At the time of writing, the English-language version of the Bank Refah Kargaran judgment was not available.

Graham Butler is Associate Professor of Law at Aarhus University, Denmark, where he researches and teaches on various aspects of European Union law. He is the author of Constitutional Law of the EU’s Common Foreign and Security Policy (Oxford: Hart Publishing, 2019), and is a co-editor (with Ramses A. Wessel) of EU External Relations Law: The Cases in Context (Oxford: Hart Publishing, 2021). This latter forthcoming book will feature contributions from over 80 academics, civil servants, judges, lawyers, and practitioners to mark the fiftieth anniversary of the ERTA doctrine.