Niall Moran (DCU)
Since 21 February 2022, the EU and its Member States have adopted a mixture of sanctions against Russia. These sanctions have been far-reaching, covering the five main types of targeted sanctions including sanctions on the banking system, commodities, sectors such as aviation and luxury goods, as well as sanctions on high-profile individuals and entities including Rosneft and Gazprom Neft. The fifth category includes diplomatic sanctions and quite a few EU Member States have expelled Russian diplomats including Ireland, Belgium, the Netherlands, Poland, Slovakia, the Czech Republic, Bulgaria and the Baltic States.
This post briefly considers some of the legal questions relating to the sanctions imposed by the EU to date in the areas of 1) WTO law, and 2) EU law.
On 11 March, the EU announced a series of measures against Russia including ending its receipt of Most-Favored-Nation treatment at the WTO. This was announced with partners including the US, UK, Japan and Canada, a group making up more than half the global economy. The EU has justified this suspension under the “security exemptions of the WTO Agreement”, a first for the EU in the WTO era.
Ironically, it has been Russia that has most vigorously pursued flexibilities under this exception at the WTO. In Russia — Traffic in Transit (2019), Russia asserted that restrictions it had placed on the transit of goods were not inconsistent with the WTO Agreements as they related to an emergency in international relations, a situation covered under GATT Article XXI. The Panel found that such measures are not entirely self-judging and must be evaluated objectively by a panel, contrary to the position taken by Russia (and the US as a third party).
While Article XXI is not entirely self-judging, it does provide Members with broad discretion to adopt measures “which it considers” necessary for the protection of its essential security interests in times of war or during an emergency in international relations. If this measure were to be challenged at the WTO, the EU and its partners would be unlikely to have difficulties demonstrating this (see for example, UN General Assembly Resolution condemning Russia’s aggression in Ukraine).
On 2 March, Ukraine invoked security exceptions under the WTO Agreements to justify disapplying the Agreements in its relations with Russia. It listed exceptions under GATT Article XXI, GATS Article XIV bis and TRIPS Article 73.
Russia responded that the provisions in question related to a “limited number of the WTO Agreements” and as such could not justify disapplying all of the WTO Agreements in relations with Russia.
Most WTO substantive law is contained in the 15 Agreements found in Annex 1 of the WTO Agreement. The situation is relatively clear in relation to the three most well known of these Agreements (the GATT, GATS and TRIPS invoked by Ukraine as mentioned above), which all contain security exceptions that are similar to GATT Article XXI mutatis mutandis.
The situation is less clear in relation to some of the other agreements. TRIMS Article 3 incorporates GATT exceptions into the provisions of this Agreement on trade-related investment measures. Article 2.2 of the TBT Agreement explicitly lists national security requirements as a legitimate objective for technical regulations. The TBT Agreement’s preamble also recognises “that no country should be prevented from taking measures necessary for the protection of its essential security interest”.
However, not all of the Agreements in Annex 1 contain such references. As such there are questions around extending the withdrawal of MFN treatment to the areas covered by these Agreements.
There are currently travel restrictions, asset freezes as well as other sanctions applying to 877 individuals and 62 entities as a result of Russia’s military aggression against Ukraine. Sanctions moved from targeting whole economies to generally targeting individuals in the aftermath of the UN embargo of Iraq in the 1990s. This followed the humanitarian crisis that ensued in Iraq as a result of this embargo and the high mortality rate among children. While targeted sanctions are less likely to punish the population at large, they do give rise to concerns around breaches of due process and the fundamental rights of the blacklisted individuals.
EU sanctions against Russia are some of the most comprehensive sanctions that the EU has enacted against another state and those linked to its government. While there are differences in scale, and the profiles of those involved, this does not necessarily represent a new approach for the EU. EU sanctions on Iran and Syria consist of sector-wide measures and individual designations. There are currently 292 persons and 70 entities that have been designated under the Syria sanctions regime. The criteria for designating individuals and entities related to the Russian government have been expanded to include those supporting it and benefitting from a relationship with the government.
As these EU measures relate to security interests, their legal basis is the EU Common Foreign and Security Policy (CFSP) rather than the Common Commercial Policy (Art. 207 TFEU). The key provision is Article 29 TEU on restrictive measures. This provision affords wide discretion to the Council to take political decisions in the area of foreign and security policy. Decisions introducing sanctions on this basis require unanimity and so each Member State has a veto.
Where the Council takes restrictive measures on trade and investment with Russia, a EU legislative act is required to give effect to the political decision taken. These acts are adopted by qualified majority under Article 215 TFEU, requiring 55% of Member States (15/27) representing 65% of total EU population. In practice, this is a fait accompli once the unanimous Council Decision has been adopted. Nonetheless, this two-step procedure entails the obligatory adoption of two separate but connected legal acts for the enactment of economic sanctions regimes.
The CJEU has reduced scope to review decisions taken on the basis of Article 29 TEU. Article 275 TFEU provides that “The Court of Justice of the European Union shall not have jurisdiction with respect to the provisions relating to the common foreign and security policy nor with respect to acts adopted on the basis of those provisions.”
Article 275(2) introduces two exceptions to allow the court to intervene. These include exceptions 1) to ensure compliance with the separation of competences among the EU’s institutions, and 2) to review the legality of measures taken against natural or legal persons. However, the Court’s review of sanctions under Article 275 has been limited to procedural questions. Where the courts have struck down individual sanctions, they have only done so on due process grounds. The courts have not considered substantive questions such as whether the designation of an individual is necessary in terms of the ends pursued or whether the criteria for designation have been drawn up in an appropriate manner.
Consequently, there are questions surrounding the level of judicial scrutiny of EU sanctions, the broad powers of the Council, and lack of formal oversight from the EU Parliament or Commission even in this sensitive area of foreign policy. This is particularly the case where the Council relisted individuals in 57% of cases under the Iran and Syria sanctions regimes where the Court has struck down their original listing on procedural grounds (the Council kept them on sanctions lists in an additional 5% of cases).
Listings were overly vague in the past and this was remedied in the aftermath of the Kadi ruling. However there is a risk today that listings may be overly broad and that the Council wins more cases as a result of using broader listing criteria. Therefore, a greater level of oversight may also be called for where the Council broadens or introduces new listing criteria for individual designations.
Niall Moran is an Assistant Professor in Economic Law in the School of Law and Government. He is the author of ‘Engagement between trade and investment law: the role of PTIAs’ (Springer 2021). His research interests include EU law, International Trade Law, WTO law, International Investment Law, Company Law, and trade & investment in agriculture.
The views expressed in this blog reflect the position of the author and not necessarily that of the Brexit Institute Blog.
Image Credit: European Union, 2022