Persia International Bank plc v Council of the European Union, [2013] EUECJ T-493/10 (06 September 2013)

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(Common foreign and security policy – Restrictive measures against Iran with the aim of preventing nuclear proliferation – Freezing of funds – Obligation to state reasons – Rights of the defence – Right to effective judicial protection – Error of assessment)

Persia International Bank plc, established in London (United Kingdom), represented initially by S. Gadhia and S. Ashley, Solicitors, D. Anderson QC and R. Blakeley, Barrister, and subsequently by S. Ashley and by S. Jeffrey and A. Irvine, Solicitors, D. Wyatt QC and R. Blakeley,

Council of the European Union, represented by M. Bishop and A. Vitro, acting as Agents,

European Commission, represented by S. Boelaert and M. Konstantinidis, acting as Agents,

APPLICATION, first, for annulment of Council Decision 2010/413/CFSP of 26 July 2010 concerning restrictive measures against Iran and repealing Common Position 2007/140/CFSP (OJ 2010 L 195, p. 39), Council Implementing Regulation (EU) No 668/2010 of 26 July 2010 implementing Article 7(2) of Regulation (EC) No 423/2007 concerning restrictive measures against Iran (OJ 2010 L 195, p. 25), Council Decision 2010/644/CFSP of 25 October 2010 amending Decision 2010/413 (OJ 2010 L 281, p. 81), Council Regulation (EU) No 961/2010 of 25 October 2010 on restrictive measures against Iran and repealing Regulation (EC) No 423/2007 (OJ 2010 L 281, p. 1), Council Decision 2011/783/CFSP of 1 December 2011 amending Decision 2010/413 (OJ 2011 L 319, p. 71), Council Implementing Regulation (EU) No 1245/2011 of 1 December 2011 implementing Regulation No 961/2010 (OJ 2011 L 319, p. 11), and Council Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran and repealing Regulation No 961/2010 (OJ 2012 L 88, p. 1), in so far as those acts concern the applicant; and, secondly, for a declaration that Article 7(2)(d) of Council Regulation (EC) No 423/2007 of 19 April 2007 concerning restrictive measures against Iran (OJ 2007 L 103, p. 1), Article 16(2)(a) of Regulation No 961/2010 and Article 23(2) of Regulation No 267/2012 are inapplicable to the applicant,

22 By application lodged at the Court Registry on 7 October 2010, the applicant brought the present action.

23 By document lodged at the Court Registry on 5 November 2010, the applicant amended its heads of claim following the adoption on 25 October 2010 of Decision 2010/644 and Regulation No 961/2010.

24 By document lodged at the Court Registry on 14 January 2011, the European Commission sought leave to intervene in the present proceedings in support of the form of order sought by the Council. By order of 8 March 2011 the President of the Fourth Chamber of the General Court granted leave to intervene.

25 By document lodged at the Court Registry on 24 January 2012, the applicant amended its heads of claim following the adoption on 1 December 2011 of Decision 2011/783 and Implementing Regulation No 1245/2011, and requested that, if appropriate, the contested measures be annulled with immediate effect.

26 By document lodged at the Court Registry on 23 April 2012, the applicant amended its heads of claim following the adoption on 23 March 2012 of Regulation No 267/2012.

27 Upon hearing the report of the Judge-Rapporteur, the Court (Fourth Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure provided for under Article 64 of the Rules of Procedure of the General Court, put questions to the parties in writing concerning the implications for the present case of the judgment in Case C-380/09 P Melli Bank v Council [2012] ECR I-0000, the number of directors of the applicant and how they are appointed, and the admissibility of the applicant’s fourth plea in law. The parties replied to the Court’s questions.

28 In its reply to the Court’s questions, lodged at the Court Registry on 8 June 2012, the applicant stated that it was no longer pursuing the third plea in law, by which it had claimed that Article 20(1)(b) of Decision 2010/413, Article 7(2)(d) of Regulation No 423/2007, Article 16(2)(a) of Regulation No 961/2010 and Article 23(2) of Regulation No 267/2012 were disproportionate and, therefore, unlawful.

29 The parties presented oral argument and answered the questions put by the Court at the hearing on 3 July 2012.

30 By order of the Court (Fourth Chamber) of 4 September 2012, the oral procedure was reopened in order to place in the file the applicant’s observations on the order of the President of the Court of Justice of 19 July 2012 in Case C-110/12 P(R) Akhras v Council, not published in the ECR, and to obtain the observations of the other parties. The oral procedure was again closed on 4 October 2012.

– annul, with immediate effect, point 4 of Table B of Annex II to Decision 2010/413, point 2 of Table B of the annex to Implementing Regulation No 668/2010, point 4 of Table I.B of the annex to Decision 2010/644, point 4 of Table B of Annex VIII to Regulation No 961/2010, Decision 2011/783, Implementing Regulation No 1245/2011 and point 4 of Table I.B of Annex IX to Regulation No 267/2012, in so far as those acts concern the applicant;

– declare that Article 7(2)(d) of Regulation No 423/2007, Article 16(2)(a) of Regulation No 961/2010 and Article 23(2) of Regulation No 267/2012 are inapplicable to the applicant;

The first plea: breach of the obligation to state reasons, of the principle of respect for the rights of the defence and of the right to effective judicial protection

– Breach of the applicant’s rights of defence and of its right to effective judicial protection as a consequence of the fact that it was not given sufficient information concerning the adoption of restrictive measures against it

78 The applicant claims that, notwithstanding repeated requests for information, it did not receive sufficient information concerning the adoption of restrictive measures against the applicant and against Bank Mellat, nor, in particular, did it receive any evidence relating to the alleged involvement of Bank Mellat in nuclear proliferation. It emphasises in that context the inadequacy of the proposals for the adoption of restrictive measures notified by the letter of 13 September 2010 and of that disclosed in the annex to the rejoinder, as well as the delay in the disclosure of the latter proposal.

79 The applicant concludes that the disclosure of that information did not allow it to make effective representations on the adoption of restrictive measures against it and against Bank Mellat, and was not such as to afford it a fair hearing.

80 The Council, supported by the Commission, contests the merits of the applicant’s arguments. It states, in particular, that it disclosed the proposals for the adoption of restrictive measures to the applicant as soon as it had obtained the agreement of the Member States from which they originated.

81 In the first place, it is apparent from the review carried out in paragraphs 62 to 77 above that the first, fourth and fifth reasons on which the Council relied with respect to Bank Mellat, and the statement of reasons concerning the applicant itself, as evidenced by the contested measures and the proposals for the adoption of restrictive measures disclosed to the applicant, are sufficiently detailed. By contrast, the vagueness of the second, third, sixth and seventh reasons given by the Council with respect to Bank Mellat constitutes a breach of the applicant’s rights of defence and of its right to effective judicial protection.

82 In the second place, it must be observed that the proposals for the adoption of restrictive measures notified on 13 September 2010 were notified before the deadline of 25 September 2010 which the Council gave the applicant for the submission of observations, and therefore no breach of the rights of the defence can be established as regards those proposals.

83 On the other hand, the proposal annexed to the rejoinder was disclosed after the deadline mentioned in paragraph 82 above.

84 In that regard the Council’s argument concerning the need to obtain the agreement of the Member State concerned cannot be accepted. Where the Council intends to rely on information provided by a Member State in order to adopt restrictive measures affecting an entity, it is obliged to ensure, before adopting those measures, that the entity concerned can be notified of the information in question in good time so that it is able effectively to make known its point of view.

85 However, it must be held that the belated disclosure of a document on which the Council relied in order to adopt or maintain the restrictive measures concerning an entity does not constitute a breach of the rights of the defence that would justify the annulment of acts adopted previously unless it is established that the restrictive measures concerned could not have been lawfully adopted or maintained if the document belatedly disclosed had to be excluded as inculpatory evidence.

86 As is apparent from paragraphs 70 and 76 above, the proposal annexed to the rejoinder contains no additional information as compared with the contested measures and the proposals notified on 13 September 2010, which means that its exclusion as inculpatory evidence is not capable of affecting the validity of the adoption and maintenance of the restrictive measures concerning the applicant. In those circumstances, the belated disclosure of that proposal does not justify the annulment of Decision 2010/413, Implementing Regulation No 668/2010, Decision 2010/644 and Regulation No 961/2010.

87 In the third place, as regards the failure to disclose evidence, it must be observed that, according to the principle of respect for the rights of the defence, the Council is not required to disclose information other than that contained in its file. In the present case, the Council states, without contradiction by the applicant, that its file contains no additional evidence concerning Bank Mellat’s involvement in nuclear proliferation or concerning the applicant itself. That being the case, the Council cannot be accused of having breached the applicant’s rights of defence and its right to effective judicial protection by its failure to disclose such evidence.

The second plea: error of assessment as to whether the applicant is owned or controlled by Bank Mellat

101 The applicant claims that it is not owned by Bank Mellat and that it does not belong to Bank Mellat for the purposes of Article 7(2)(d) of Regulation No 423/2007, Article 20(1)(b) of Decision 2010/413, Article 16(2) of Regulation No 961/2010 and Article 23(2) of Regulation No 267/2012.

102 As a preliminary point, it must be observed that the Court’s examination is confined to the fact that Bank Mellat holds 60% of the applicant’s share capital. It is true that, since 24 January 2012, Bank Tejarat, the applicant’s other shareholder, has also been subject to the restrictive measures adopted pursuant to Decision 2010/413, Regulation No 961/2010 and Regulation No 267/2012. However, the Council pleaded that point for the first time at the hearing, and in particular it is not included in the statement of reasons for the contested measures. Consequently, it cannot be taken into consideration in the review of the lawfulness of those measures.

103 According to the case-law, when the funds of an entity identified as being engaged in nuclear proliferation are frozen, there is a not insignificant danger that that entity may exert pressure on the entities it owns or controls or which belong to it, in order to circumvent the effect of the measures applying to it. Consequently, the freezing of the funds of such entities, as imposed by the Council by Article 7(2)(d) of Regulation No 423/2007, Article 20(1)(b) of Decision 2010/413, Article 16(2) of Regulation No 961/2010 and Article 23(2)(a) of Regulation No 267/2012, is necessary and appropriate in order to ensure the effectiveness of the measures adopted and to ensure that those measures are not circumvented (see, to that effect and by analogy, Melli Bank v Council, paragraph 27 above, paragraphs 39 and 58).

104 Likewise, where an entity is wholly owned by an entity regarded as being engaged in nuclear proliferation, the ownership test contained in Article 20(1)(b) of Decision 2010/413 and in Article 16(2)(a) of Regulation No 961/2010 is satisfied (see, by analogy, Melli Bank v Council, paragraph 27 above, paragraph 79). The same conclusion must apply to the concept, to be found in Article 23(2)(a) of Regulation No 267/2012, of an entity ‘belonging’ to an entity considered to be involved in nuclear proliferation.

105 That said, it is not disputed that Bank Mellat holds only 60% of the applicant’s share capital.

106 In those circumstances, contrary to the Council’s and the Commission’s contention, the rule developed in the case-law cited in paragraph 104 above is not applicable, since a 60% holding in the applicant’s share capital does not mean, by itself, that the test of ‘ownership’ or of ‘belonging’ laid down in the provisions referred to in paragraph 104 above is satisfied.

107 Consequently, the Court must examine whether, in the light of the circumstances of this case, and in particular of the degree of ownership by Bank Mellat, there is a not insignificant danger that the applicant may be led to circumvent the effect of the restrictive measures applying to it (see, to that effect and by analogy, Melli Bank v Council, paragraph 27 above, paragraph 40).

108 The Council, supported by the Commission, contends that that is the case, since, as the majority shareholder holding 60% of the applicant’s share capital, Bank Mellat can appoint and dismiss the applicant’s directors.

109 In that regard, it is evident from the information in the file that the applicant has seven directors, two of whom are independent non-executive directors.

110 It is true that, in accordance with the applicable legislation of the United Kingdom and the applicant’s articles of association, the applicant’s directors are appointed by ordinary resolution in a general meeting, adopted by a simple majority of the votes.

111 However, in the first place, it is clear from the evidence provided by the applicant, the accuracy of which is not disputed by the other parties, that, in accordance with an agreement between its shareholders, only four of the applicant’s current directors were nominated by Bank Mellat, the other three having been nominated by Bank Tejarat.

112 Furthermore, one of the four directors nominated by Bank Mellat is an independent non-executive director. As is apparent from the evidence adduced by the applicant, the condition of independence – compliance with which is checked by the FSA under the procedure for the approval of a company’s directors – means, inter alia, that that director is not associated in any way with the applicant’s shareholders, including Bank Mellat.

113 In those circumstances, it must be held that Bank Mellat is capable of exerting influence over, at most, three of the applicant’s seven current directors, that is to say, over a minority of them.

114 At the hearing the Council also contended in that regard that the independent directors did not take part in the day-to-day management of the applicant, since they did not carry out executive functions.

115 However, it must be observed that, so far as the collective decisions taken by the directors are concerned, the applicant’s articles of association make no distinction between the executive and non-executive directors as regards the conditions for a quorum or voting rights. Accordingly, in that context, the position of the non-executive directors is equivalent to that of the executive directors.

116 Moreover, in so far as the Council’s arguments must be construed as relating to the influence that may be exerted individually by certain directors of the applicant nominated by Bank Mellat in the context of their executive functions, they cannot be taken into consideration for two reasons. First, that point was not raised in the statement of reasons of the contested measures. Secondly, the arguments in question are not sufficiently detailed, the Council having neither identified the directors concerned nor their precise functions, nor the specific danger thereby represented with respect to the effectiveness of the restrictive measures affecting Bank Mellat.

117 In the second place, it must be observed that it is clear from the information in the file that the appointment of any new director of the applicant is subject to approval by the FSA. Accordingly, Bank Mellat is not in a position freely to alter the number or nature of the applicant’s directors, inter alia by removing the posts of the independent directors.

118 In the light of all the foregoing, it must be held that, in the particular circumstances of the present case, it cannot be concluded from the fact that Bank Mellat holds 60% of the applicant’s share capital that the test of ‘ownership’ or of ‘belonging’ laid down in Article 7(2)(d) of Regulation No 423/2007, Article 20(1)(b) of Decision 2010/413, Article 16(2) of Regulation No 961/2010 and Article 23(2)(a) of Regulation No 267/2012 is satisfied.

119 Consequently, Bank Mellat’s ownership of 60% of the applicant’s share capital does not, by itself, justify the adoption and maintenance of the restrictive measures concerning the applicant.

120 Since Bank Mellat’s ownership of 60% of the applicant’s share capital is the only fact which the Court may take into consideration (see paragraph 102 above), the Court must uphold the second plea and, accordingly, annul Decision 2010/644, Regulation No 961/2010, Decision 2011/783, Implementing Regulation No 1245/2011 and Regulation No 267/2012 in so far as they concern the applicant, and there is no need to examine the other arguments relied on by the applicant in the context of the second plea or, moreover, the fifth plea.

1. Annuls the following measures, in so far as they concern Persia International Bank plc:

– point 4 of Table B of Annex II to Council Decision 2010/413/CFSP of 26 July 2010 concerning restrictive measures against Iran and repealing Common Position 2007/140/CFSP;

– point 2 of Table B of the annex to Council Implementing Regulation (EU) No 668/2010 of 26 July 2010 implementing Article 7(2) of Regulation (EC) No 423/2007 concerning restrictive measures against Iran;

– point 4 of Table I.B of the annex to Council Decision 2010/644/CFSP of 25 October 2010 amending Decision 2010/413;

– point 4 of Table B of Annex VIII to Council Regulation (EU) No 961/2010 of 25 October 2010 on restrictive measures against Iran and repealing Regulation No 423/2007;

– Council Decision 2011/783/CFSP of 1 December 2011 amending Decision 2010/413;

– Council Implementing Regulation (EU) No 1245/2011 of 1 December 2011 implementing Regulation No 961/2010;

– point 4 of Table I.B of Annex IX to Council Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran and repealing Regulation No 961/2010;

2. Orders the effects of Decision 2010/413, as amended by Decision 2010/644 and Decision 2011/783, to be maintained as regards Persia International Bank until the annulment of Regulation No 267/2012 takes effect;

4. Orders the Council of the European Union to bear its own costs and to pay those incurred by Persia International Bank;

1 – Only the paragraphs of the present judgment which the Court considers it appropriate to publish are reproduced here.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Persia International Bank plc v Council of the European Union, [2013] EUECJ T-493/10 (06 September 2013) URL: http://www.bailii.org/eu/cases/EUECJ/2013/T49310.html Cite as: EU:T:2013:398, [2013] EUECJ T-493/10, ECLI:EU:T:2013:398

Court of Justice of the European Communities (including Court of First Instance Decisions)