High Court refers Rosneft's Russian sanctions challenge to EU

Out-Law News | 12 Feb 2015 | 4:41 pm | 2 min. read

A challenge to the legality of UK rules implementing sanctions against Russia set by the EU should be heard by the EU's highest court, the High Court of England and Wales has said.

Rosneft, the oil company that is 69% owned by the Russian state, is currently trying to have the EU regulations giving effect to the sanctions annulled by the EU's General Court. However, the High Court said that it was "appropriate" to refer Rosneft's separate UK judicial review to the Court of Justice of the European Union (CJEU) because it was not "confident" that every EU member state interpreted the rules in the same way.

"In a case such as the present, we consider it to be of real importance for there to be consistency and uniformity of application of the provisions of the sanctions regime," the High Court said. "HM Treasury and the [business secretary] have, quite properly, brought to our attention that there is a difference of view as to the meaning properly to be attributed to certain provisions of the [EU regulation] amongst the competent authorities of the different member states."

Although it did not consider Rosneft's arguments in detail ahead of the referral, the High Court said that the points raised by the oil company were "at least arguable". In particular, the High Court said that it was unable to conclude that questions relating to the meaning of 'financial assistance' under the sanctions regime were "not arguable or serious", given the different approaches that member states had already demonstrated.

The High Court gave particular weight to evidence from Christopher Chew, head of policy at the UK government's export control unit. Chew said that some member states had interpreted the phrase "more narrowly" than the UK had; excluding, for example, payment processing services. Part of the reason for this was that the term had never been defined by the EU, nor by other global bodies such as the United Nations, he told the court.

The EU and United States first introduced sanctions against Russia's energy, defence and financial services sectors in July 2014, in response to Russian intervention in Ukraine. Further sanctions were introduced in September. Measures particularly affecting the oil and gas industry include a ban on EU companies providing drilling, well testing and logging and completion services for deep water or arctic oil exploration and production and shale oil projects in Russia. The regulations also ban "financial assistance" for such projects.

As part of its legal challenge, Rosneft has claimed that the sanctions violate a 1994 partnership and cooperation agreement between the EU and Russia. It has also argued that parts of the sanctions legislation, particularly those in relation to shale and deep water projects, are "so unclear and uncertain that they violate general principles of law and in particular the principle of legal certainty", according to the terms of the High Court's referral to the CJEU.

Giving a provisional view on the interpretation questions, the High Court said that the terms at issue were "not sufficiently ambiguous to give rise to successful legal challenge". This was partly because there was no universally accepted "technical or geological definitions" of the terms at issue, meaning that it could be said to have been "perfectly reasonable" for the EU to avoid setting definitions of its own.

"Secondly, there is some evidence before the High Court that at least in the vast majority of cases experts in the field would understand the limits of these definitions and that the problems identified by [Rosneft] may hence be more hypothetical than real," the court said in its judgment.