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THE ILLEGALITY OF SANCTIONS – UK HIGH COURT SENDS ROSNEFT CLAIM TO EUROPEAN COURT

DWB 1621

By John Helmer, Moscow

The UK High Court has rejected a lawsuit by Rosneft challenging the legality of sanctions against its oilfield operations and international financing.

The court has ruled that for testing the legality of the sanctions British law and British courts are subordinate to the European Union, and that Rosneft must try its case in the European Court of Justice (CJEU) in Luxembourg. The ruling, which was issued on Monday, contradicts the judgement of the Supreme Court, the UK’s highest court, which decided last March [1] that sanctions against the Iranian bank, Bank Mellat, had violated British law. The new judgement makes no reference to this or any other case decided recently in London on the illegality of UK Government sanctions.

The ruling by Lord Justice Sir Jack Beatson (lead image) and Justice Sir Nicholas Green also flies in the face of the British Government’s promise to preserve the primacy of the British courts over the EU judiciary, and keep London’s market dominance for global litigation. Acknowledging that the issue will be tested in the parliamentary election due in three months’ time, embattled Prime Minister David Cameron has claimed [2]: “We want to make the Supreme Court supreme”. Cameron has promised to introduce a new Act of Parliament to establish the superior status in law of UK courts over the European Court.” That hasn’t happened.

The EU and UK sanctions against Rosneft were introduced on July 31; the implementing regulations followed in August and September. They have curtailed exports to Russia of oilfield technology and equipment for Rosneft’s deepwater and shale oil explorations. They have also banned new international bank financing for all of Rosneft’s business lines. Rosneft’s lawyers filed their case against the sanctions at the European Court on October 9. They followed with their case against the British Government in the High Court on November 20.

On November 27 [3] Beatson dismissed a preliminary application by Rosneft to suspend the effect of the UK sanctions until the High Court had time to hear argument and judge their legality in line with British law. Beatson claimed Rosneft wasn’t a victim under EU human rights law; and that the sanctions rules in the UK weren’t so vague or uncertain as to violate UK law. He ignored Rosneft’s argument that the domestic courts have jurisdiction over the sanctions regulations introduced by the UK Government, following the EU action. He dismissed the likelihood that UK violators might be criminally culpable if they continued to trade and bank with Rosneft.

The lawyers then argued their full case on January 27 and 29. Rosneft chief executive Igor Sechin (bottom left) selected Pushpinder Saini QC (right) as Rosneft’s principal advocate. For more on Sechin’s options, read on [4].

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Judge Green has written the new judgement. Read [5] it in full.

Green claims “the express objective of [the sanctions against Rosneft] …is to respond to, and condemn, the conduct of the Russian Federation in relation to Ukraine.” The additional measures introduced against Rosneft were based, Green reports, on “continued undermining of the territorial integrity, sovereignty and independence of Ukraine” and “the increasing inflows of soldiers and weapons from the territory of the Russian Federation into Eastern Ukraine and the aggression of Russian armed forces on Ukrainian soil.”

Green allows that the High Court has jurisdiction and authority to investigate the veracity of these claims, and of the lawfulness of their application against Rosneft. Green implies he would do so and dismiss Rosneft’s case. But for the benefit of doubt in Rosneft’s favour, he claims he should pass responsibility for deciding the matter to judges in Luxembourg. “We have the power to conclude that there are no grounds for concluding that the measures are invalid,” Green has written. “However, if we have doubts we have the jurisdiction to refer the question of validity to the CJEU.”

“That contorted double negative carries the implied judgement of the High Court that it is supporting the UK Government against Rosneft,” comments a London lawyer specializing in sanctions litigation. “At the same time, Judge Green is trying to protect the British Government from the political consequences of passing the buck to the EU. That’s political cowardice. Ignoring the new case law precedents set by other UK judges is judicial negligence.”

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Caricature by Peter Brookes of Prime Minister Cameron as Napoleon Crossing the Alps, from the painting by Jean-Louis David of 1801 [6]

Green, 57, is one of the High Court’s most junior judges; his appointment by the Cameron Government was issued in October 2013. London newspaper The Lawyer [7], reporting Green’s appointment, described him as a “speciali[st] in all aspects of competition, European and regulatory law”, but no case has been identified from media reporting of his practice before the Bar, or since his promotion to the Bench. Green is more camera-shy than other High Court judges; no photograph of him can be found.

According to The Lawyer’s review [8] last month of “the top 20 cases of 2015: global disputes in the English courts”, the first and most important is Rosneft’s sanctions challenge. “In the judicial review application to be heard at the end of this month Rosneft will argue that the delegated legislation introduced by the UK to implement the EU’s sanctions – as well as the underlying EU regulation – is unlawful…As well as being closely linked to an ongoing political crisis between Russia and the EU, the case examines questions over the Government’s obligations when implementing EU legislation.”

Baron Igor JudgeThat’s shorthand for the politically explosive issue of whether the UK should stay in the European Union (EU), or call a national referendum and leave. Four British judges have now issued public calls condemning what they are calling the “export” of sovereignty. In December 2013, the retired Lord Chief Justice, Baron Igor Judge (right), declared [9]: “we should beware of the danger of even an indirect importation of the slightest obligation on parliament to comply with the orders and directions of any court, let alone a foreign court.” For a review of the legal and political debate, which has so far focused more on human rights law than commercial and corporate law, read this [10].

This month Green has also been toeing the Cameron government’s line to avoid [11] the UK courts’ condemnation of Iran sanctions [12].

Green’s subservience to the European courts is the most explicit of any recent British judge. The only legal precedent he cites for his Rosneft judgement is a 1996 case, Cantoni v. France, in which a supermarket manager challenged criminal proceedings initiated by a pharmacists’ guild over the sale of Vitamin C and mineral supplements. The facts and the law were located in France; the court precedent came from the European Court of Human Rights [13].

According to Green, Rosneft’s case for the illegality of the sanctions is “arguable”. He says he is capable of making a judgement on the claims, but won’t in case European judges differ. “Although…we have views as to the merits of a number of the Claimant’s arguments, we cannot be confident that the same conclusions would be arrived at by all courts across the EU and we are conscious that already there are differences of view on some key issues between the competent authorities of the different Member States…even if this Court considered that it could form a clear conclusion on the matters arising, it would do so without the benefit of submissions provided to it by the institutions of the EU and by other Member States. The High Court has been provided with detailed submissions from the competent and other authorities from within the United Kingdom and from Rosneft but does not have the benefit of different perspectives which may be held by other authorities in other Member States and/or the European Commission or Council.”

Without hearing evidence, Green also ruled in defence of the procedures of the European Union’s decision-makers when they introduced the sanctions orders. “Given the urgency with which the legislation was drafted it might have been quite impossible for the [EU] Council to undertake the necessary research to be in a position to formulate precise definitions. We therefore have formed the provisional view that the drafting approach adopted by the Council was in the circumstances a proper one.”

“Beatson and Green are no Wellingtons”, a British lawyer comments, referring to the Battle of Waterloo whose 200th anniversary will be celebrated in London in June.

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“This time the British have run from the battlefield. Napoleon finally wins.”