CELEX: 62017CJ0530
Appeal
Restrictive measures taken in view of the situation in Ukraine
Freezing of funds and economic resources
List of persons, entities and bodies covered by the freezing of funds and economic resources
Inclusion of the appellant’s name
Decision by an authority of a third State
Council’s obligation to verify that that decision was taken in accordance with the rights of the defence and the right to effective judicial protection

By his appeal, Mr Mykola Yanovych Azarov asks the Court to set aside the judgment of the General Court of the European Union of 7 July 2017, Azarov v Council (
T‑215/15
, the judgment under appeal,
EU:T:2017:479
), by which the General Court dismissed his action for annulment of Council Decision (CFSP) 2015/364 of 5 March 2015 amending Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2015 L 62, p. 25
), and Council Implementing Regulation (EU) 2015/357 of 5 March 2015 implementing Regulation (EU) No 208/2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2015 L 62, p. 1
), in so far as they concern him (‘the contested acts’).
Background to the dispute
On 5 March 2014, the Council adopted Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2014 L 66, p. 26
). Article 1(1) and (2) of that decision provides:
‘1.   All funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.
2.   No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural or legal persons, entities or bodies listed in the Annex.’
Also on 5 March 2014, the Council adopted Regulation (EU) No 208/2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2014 L 66, p. 1
) which implements, as regards the European Union, the restrictive measures set out in Decision 2014/119.
Under Article 2(1) of that regulation:
‘All funds and economic resources belonging to, owned, held or controlled by any natural or legal person, entity or body as listed in Annex I shall be frozen.’
Article 3(1) of that regulation provides:
‘Annex I shall include persons who, in accordance with Article 1 of Decision 2014/119/CFSP, have been identified by the Council as being responsible for the misappropriation of Ukrainian State funds, and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them.’
The appellant, identified as the ‘Prime Minister of Ukraine until January 2014’, was included on the lists of persons, entities and bodies whose funds and economic resources were frozen, set out respectively in the Annex to Decision 2014/119 and in Annex I to Regulation No 208/2014. The grounds for his listing were identical and were worded as follows:
‘Person subject to investigation in Ukraine for involvement in crimes in connection with the embezzlement of Ukrainian State funds and their illegal transfer outside Ukraine.’
By Decision (CFSP) 2015/143 of 29 January 2015 amending Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2015 L 24, p. 16
), the Council amended the wording of Article 1(1) of the latter decision as follows:
‘All funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.
For the purpose of this Decision, persons identified as responsible for the misappropriation of Ukrainian State funds include persons subject to investigation by the Ukrainian authorities:
(a)
for the misappropriation of Ukrainian public funds or assets, or being an accomplice thereto; or
(b)
for the abuse of office as a public office-holder in order to procure an unjustified advantage for him- or herself or for a third party, and thereby causing a loss to Ukrainian public funds or assets, or being an accomplice thereto.’
By Regulation (EU) 2015/138 of 29 January 2015 amending Regulation (EU) No 208/2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (
OJ 2015 L 24, p. 1
), the Council amended the wording of Article 3 of the latter regulation in similar terms.
By the contested acts, the Council maintained the appellant’s name on those lists following a review and extended the application of the restrictive measures against him until 6 March 2016 for the following reasons:
‘Person subject to criminal proceedings by the Ukrainian authorities for the misappropriation of public funds or assets.’
The action before the General Court and the judgment under appeal
By application lodged at the General Court Registry on 29 April 2015, the appellant brought an action for annulment of the contested acts, relying upon five pleas in law, alleging (i) infringement of the obligation to state reasons, (ii) infringement of his fundamental rights, (iii) misuse of powers, (iv) breach of the principle of good administration, and (v) manifest error of assessment.
The General Court rejected each of those pleas and consequently dismissed the action in its entirety.
Procedure before the Court of Justice and forms of order sought
The appellant claims that the Court should:
–
set aside the judgment under appeal;
–
itself give final judgment in the case, annulling the contested acts in so far as they concern him and ordering the Council to pay the costs of the proceedings before the Court of Justice and the General Court;
–
in the alternative, refer the case back to the General Court for judgment, in line with the legal assessment of the Court of Justice, and reserve the costs.
The Council contends that the Court should:
–
dismiss the appeal;
–
in the alternative, dismiss the action; and
–
order the appellant to pay the costs of the whole proceedings.
The appeal
The appellant relies on five grounds of appeal. By his first ground of appeal, he alleges that the General Court infringed Article 296 TFEU and Article 41 of the Charter of Fundamental Rights of the European Union (‘the Charter’). By his second ground of appeal, which is divided into four parts, he claims that the General Court wrongly concluded that there was no infringement of his fundamental rights. By his third ground of appeal, he criticises the General Court for having held that there was no misuse of powers by the Council. The fourth ground of appeal alleges an infringement of Article 41 of the Charter. Finally, by his fifth ground of appeal, which is divided into six parts, the appellant submits that the General Court erred in finding that the Council had not made a manifest error of assessment in adopting the contested acts.
It is appropriate to start by examining the third part of the fifth ground of appeal.
Arguments of the parties
The appellant claims that the General Court erred in law in considering, in paragraph 166 et seq. of the judgment under appeal, that the judgment of the General Court of 16 October 2014, LTTE v Council (
T‑208/11 and T‑508/11
,
EU:T:2014:885
) –– then subject to an appeal and under which it falls to the Council, before acting on the basis of a decision of an authority of a third State, to verify that the relevant legislation of that State ensures protection of the rights of defence and of the right to effective judicial protection equivalent to that guaranteed at EU level –– could not be applied to the present case because the contested acts are different in their wording and their purpose from those at issue in the case which gave rise to that judgment.
In that regard, the appellant submits that the differences between the two categories of act are not conclusive and refers to the judgment of the Court of Justice of 26 July 2017, Council v LTTE (
C‑599/14 P
,
EU:C:2017:583
), which had been delivered in the meantime. First, he claims that the adoption of the restrictive measures against him was subject to there being a decision of a competent authority before the Council could, on the basis of such a decision, identify him as being responsible for misappropriation of State funds. He argues that the requirements laid down by the Court are therefore applicable to this listing criterion, which is formulated in broader terms than that examined in the case giving rise to that judgment. Secondly, the reasoning of the General Court, according to which the fight against terrorism at issue in those judgments does not necessarily form part of cooperation with a third State which the Council has decided to support, as in the present case, is also misconceived.
In response, the Council submits that the third part of the fifth ground of appeal is unfounded. It maintains, as the General Court held in the judgment under appeal, that the difference between the model of restrictive measures at issue in the case which gave rise to the judgment of 26 July 2017, Council v LTTE (
C‑599/14 P
,
EU:C:2017:583
), and that at issue in the present case, in terms of their wording and structure, as well as in the objectives and general conditions on which they are based, is considerable. In particular, the European Union’s political decision to support the Ukrainian regime, notably in its reforms aimed at strengthening the rule of law in Ukraine, constitutes a relevant factor, the Court having stated, in the judgment of 19 October 2017, Yanukovych v Council (
C‑598/16 P
, not published,
EU:C:2017:786
, paragraph
), that the restrictive measures aimed at fighting the misappropriation of State funds in that country formed part of a policy of supporting a third State, intended to promote both the economic and political stability of that State.
The Council adds that the conclusion reached by the General Court in paragraphs 64 and 75 of that judgment is applicable to the present case, taking into account the factual findings of the General Court in paragraphs 175 and 176 of the judgment under appeal, not under review by this Court, from which it follows that the evidence adduced by the appellant was insufficient to demonstrate that his particular situation would have been affected by the problems he identifies in the Ukrainian judicial system.
Findings of the Court
According to the Court’s case-law, in a review of restrictive measures, the Courts of the European Union must ensure the review, in principle the full review, of the lawfulness of all Union acts in the light of the fundamental rights forming an integral part of the EU legal order (see, to that effect, judgments of 18 July 2013, Commission and Others v Kadi,
C‑584/10 P, C‑593/10 P and C‑595/10 P
,
EU:C:2013:518
, paragraph
; of 28 November 2013, Council v Fulmen and Mahmoudian,
C‑280/12 P
,
EU:C:2013:775
, paragraph
; and of 28 March 2017, Rosneft,
C‑72/15
,
EU:C:2017:236
, paragraph
).
Those fundamental rights include, inter alia, respect for the rights of the defence and the right to effective judicial protection (judgments of 28 November 2013, Council v Fulmen and Mahmoudian,
C‑280/12 P
,
EU:C:2013:775
, paragraph
and the case-law cited, and of 28 November 2013, Council v Manufacturing Support & Procurement Kala Naft,
C‑348/12 P
,
EU:C:2013:776
, paragraph
).
The effectiveness of the judicial review guaranteed by Article 47 of the Charter requires, as the General Court correctly pointed out in paragraph 136 of the judgment under appeal, that, as part of the review of the lawfulness of the grounds which are the basis of the decision to include or to maintain a person’s name on the lists of persons subject to restrictive measures, the Courts of the European Union are to ensure that that decision, which affects that person individually, is taken on a sufficiently solid factual basis. That entails a verification of the factual allegations in the summary of reasons underpinning that decision, with the consequence that judicial review cannot be restricted to an assessment of the cogency in the abstract of the reasons relied on, but must concern whether those reasons, or, at the very least, one of those reasons, deemed sufficient in itself to support that decision, are substantiated (judgments of 18 July 2013, Commission and Others v Kadi,
C‑584/10 P, C‑593/10 P and C‑595/10 P
,
EU:C:2013:518
, paragraph
; of 18 June 2015, Ipatau v Council,
C‑535/14 P
,
EU:C:2015:407
, paragraph
; and of 18 February 2016, Council v Bank Mellat,
C‑176/13 P
,
EU:C:2016:96
, paragraph
).
In the present case, as the General Court observed in paragraphs 132 to 134 of the judgment under appeal, the restrictive measures against the appellant were maintained by the contested acts on the basis of the listing criterion in Article 1(1) of Decision 2014/119, as amended by Decision 2015/143, and Article 2(1), in conjunction with Article 3(1), of Regulation No 208/2014, as amended by Regulation 2015/138. This criterion provides for the freezing of funds of persons who have been identified as responsible for the misappropriation of State funds, including persons subject to investigation by the Ukrainian authorities.
In that regard, it is apparent from paragraphs 134, 149 and 150 of the judgment under appeal that, in adopting those restrictive measures, the Council relied on the fact that the appellant was subject to ‘criminal proceedings by the Ukrainian authorities for the misappropriation of public funds or assets’, as was established from a letter dated 10 October 2014, issued by the Ukrainian judicial authorities, which referred to an investigation instituted against the appellant by those authorities.
It follows that the maintenance, by the contested acts, of the restrictive measures taken against the appellant is based on the decision of an authority of a third State, which was competent to make it, to initiate and conduct criminal investigation proceedings concerning an offence of misappropriation of public funds. In this respect, it is irrelevant, as noted in paragraph 169 of the judgment under appeal, that the existence of such a decision constitutes not the listing criterion laid down in Article 1(1) of Decision 2014/119, as amended by Decision 2015/143, but rather the factual basis for the restrictive measures at issue.
In the case of such a decision, the Council must, before acting on the basis of a decision of an authority of a third State, verify whether that decision was adopted in accordance with the rights of the defence and the right to effective judicial protection (judgment of 26 July 2017, Council v LTTE,
C‑599/14 P
,
EU:C:2017:583
, paragraph
).
According to settled case-law, the Council is obliged, when adopting restrictive measures, to respect the fundamental rights that form an integral part of the EU legal order, which include, as has been pointed out in paragraph 21 of the present judgment, respect for the rights of the defence and the right to effective judicial protection (see, to that effect, judgments of 18 July 2013, Commission and Others v Kadi,
C‑584/10 P, C‑593/10 P and C‑595/10 P
,
EU:C:2013:518
, paragraphs
and
; of 28 November 2013, Council v Manufacturing Support & Procurement Kala Naft,
C‑348/12 P
,
EU:C:2013:776
, paragraphs
and
; and of 26 July 2017, Council v LTTE,
C‑599/14 P
,
EU:C:2017:583
, paragraph
).
In that regard, the requirement for the Council to verify that the decisions of third States on which it bases the entry of a person or entity on a list of persons or entities whose assets are to be frozen have been taken in accordance with those rights is designed to ensure that they are included on that list only on a sufficiently solid factual basis and, thus, to protect the persons or entities concerned (see, to that effect, judgment of 26 July 2017, Council v LTTE,
C‑599/14 P
,
EU:C:2017:583
, paragraph
).
The Court has also held that the Council must refer, if only briefly, in the statement of reasons relating to a decision to include a person or entity on a list of persons or entities whose assets are to be frozen and to subsequent decisions, to the reasons why it considers the decision of the third State on which it intends to rely to have been adopted in accordance with the rights of the defence and the right to effective judicial protection (see, to that effect, judgment of 26 July 2017, Council v LTTE,
C‑599/14 P
,
EU:C:2017:583
, paragraphs
and
).
Thus it is for the Council, in order to fulfil its obligation to state reasons, to show, in the decision imposing the restrictive measures, that it has verified that the decision of the third State on which those measures are based was taken in accordance with those rights (see, to that effect, judgment of 26 July 2017, Council v LTTE,
C‑599/14 P
,
EU:C:2017:583
, paragraph
).
In the present case, it should be noted that, in paragraph 167 of the judgment under appeal, the General Court held that the approach taken in the judgment of 16 October 2014, LTTE v Council (
T‑208/11 and T‑508/11
,
EU:T:2014:885
) could not be applied to the present case.
The General Court further indicated, in paragraph 175 of the judgment under appeal, that ‘only if the Council’s political decision to support the new Ukrainian regime … proved to be erroneous … could any inconsistency between the protection of fundamental rights in Ukraine and that in place in the European Union have a bearing on the legality of [the contested acts]’. In order to reach that conclusion, the General Court relied, as is apparent from paragraphs 173 and 174 of the judgment under appeal, on the case-law stemming from the judgment of 21 April 2015, Anbouba v Council (
C‑630/13 P
,
EU:C:2015:247
, paragraph
), in which the Court acknowledges that the EU legislature has a broad discretion when it comes to defining the general listing criteria which must be taken into account when applying restrictive measures.
That reasoning is vitiated by an error of law.
The Council cannot conclude that a listing decision is taken on a sufficiently solid factual basis before having itself verified that the rights of the defence and the right to effective judicial protection were respected at the time of the adoption of the decision by the third State in question on which it intends to base the adoption of restrictive measures.
In the present case, although it is true that the listing criterion referred to in paragraph 23 of the present judgment allows the Council to base restrictive measures on a decision of a third State, such as that referred to in the letter of 10 October 2014 mentioned in paragraph 24 of the present judgment, the fact remains that the obligation, on that institution, to respect the rights of the defence and the right to effective judicial protection means that it must satisfy itself that those rights were respected by the authorities of the third State which adopted that decision.
Admittedly, as the General Court observed in paragraph 173 of the judgment under appeal, Ukraine is among those States that have acceded to the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950. However, although a circumstance of that nature entails review, by the European Court of Human Rights, of the fundamental rights guaranteed by that convention, which, in accordance with Article 6(3) TEU, form part of EU law as general principles, it cannot render superfluous verification, by the Council, that the decision of a third State on which it bases its restrictive measures has been taken in compliance with fundamental rights and in particular the rights of the defence and the right to effective judicial protection.
The fact that that case-law arose in the context of restrictive measures based on Council Common Position 2001/931/CFSP of 27 December 2001 on the application of specific measures to combat terrorism (
OJ 2001 L 344, p. 93
), which, according to Article 1(4) thereof, expressly refers to a decision taken by a competent authority, cannot call that conclusion into question. Indeed, the differences in the wording, structure and objective identified by the General Court, in paragraphs 168 to 172 of the judgment under appeal, between, on the one hand, the model of restrictive measures provided for by that common position and, on the other, the model of restrictive measures provided for in Decision 2014/119, as amended by Decision 2015/143, and in Regulation No 208/2014, as amended by Regulation 2015/138, cannot have the effect of limiting the application of the guarantees arising from that same case-law only to restrictive measures adopted in the fight against terrorism, along the lines of that common position, and excluding those adopted in the context of cooperation with a third State decided on by the Council as a result of a political decision.
It should be added, with regard to the General Court’s reasoning which is summarised in paragraph 32 of the present judgment, that the definition of general listing criteria permitting the adoption of restrictive measures is not at issue in the present case. By contrast, what is at issue is the decision to maintain, by the contested acts, the freezing of the appellant’s assets, which affects him individually. Pursuant to the case-law cited in paragraph 22 of the present judgment, in the context of its review of the legality of the grounds on which such a decision is based, the Courts of the European Union must ensure that, at the very least, one of those reasons is sufficiently detailed and specific, that it is substantiated and that it constitutes in itself sufficient basis to support that decision (see, to that effect, judgment of 28 November 2013, Council v Manufacturing Support & Procurement Kala Naft,
C‑348/12 P
,
EU:C:2013:776
, paragraph
).
Moreover, it is the task of the competent EU authority to establish, in the event of challenge, that the reasons relied on against the person concerned are well founded, and not the task of that person to adduce evidence of the negative, that those reasons are not well founded (judgments of 18 July 2013, Commission and Others v Kadi,
C‑584/10 P, C‑593/10 P and C‑595/10 P
,
EU:C:2013:518
, paragraph
, and of 28 November 2013, Council v Fulmen and Mahmoudian,
C‑280/12 P
,
EU:C:2013:775
, paragraph
).
As regards the judgments of 19 October 2017, Yanukovych v Council (
C‑598/16 P
, not published,
EU:C:2017:786
), and of 19 October 2017, Yanukovych v Council (
C‑599/16 P
, not published,
EU:C:2017:785
), referred to by the Council, it should be noted that, in the context of the appeals leading to these judgments, the question whether the case-law resulting from the judgment of 26 July 2017, Council v LTTE (
C‑599/14 P
,
EU:C:2017:583
) covered the case of restrictive measures adopted in view of the situation in Ukraine was not put before the Court. Furthermore, it must be held that, having regard to the settled case-law cited in paragraphs 27, 28 and 39 of the present judgment, it cannot be inferred from those judgments that the Council is not required to verify that the decision of a third State on which it intends to base the adoption of restrictive measures was taken in accordance with the rights of the defence and the right to effective judicial protection. Such a conclusion would be contrary to that settled case-law. Thus, the conclusions drawn in those judgments have no bearing on the present appeal.
It follows from the foregoing that the General Court erred in law by considering, contrary to what the Court of Justice held in its judgment of 26 July 2017, Council v LTTE (
C‑599/14 P
,
EU:C:2017:583
), that the Council was not required to verify that the decision of a third State, on which it intends to base the adoption of restrictive measures, was taken in accordance with the rights of the defence and the right to effective judicial protection, and thus that the plea alleging manifest error of assessment raised before it had to be rejected.
Since the third part of the fifth ground of appeal must, therefore, be upheld, the judgment under appeal must on that basis be set aside in its entirety, without it being necessary to rule on the other parts of that ground of appeal or on the other grounds of appeal.
The action before the General Court
In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, if the appeal is well founded, the Court of Justice is to quash the decision of the General Court. It may itself give final judgment in the matter, where the state of the proceedings so permits.
In the present case, the Court has the necessary information to give final judgment on the action for annulment of the contested acts brought by the appellant before the General Court.
In that regard, it is in no way apparent from the statement of reasons for the contested acts that the Council verified that the Ukrainian judicial authorities had respected the appellant’s rights of defence and his right to judicial protection.
Accordingly, it is sufficient to find that, on the grounds set out in paragraphs 25 to 30 and 34 to 42 of the present judgment, the action is well founded and the contested acts must be annulled, in so far as they concern the appellant.
Costs
Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to the costs.
Under Article 138(1) of those rules, made applicable to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the appellant has applied for costs and the Council has been unsuccessful, it must be ordered to pay the costs of both sets of proceedings.

On those grounds, the Court (Fourth Chamber) hereby:

1.
Sets aside the judgment of the General Court of the European Union of 7 July 2017, Azarov v Council (
T‑215/15
,
EU:T:2017:479
);

2.
Annuls Council Decision (CFSP) 2015/364 of 5 March 2015 amending Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine, and Council Implementing Regulation (EU) 2015/357 of 5 March 2015 implementing Regulation (EU) No 208/2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine, in so far as they concern Mr Mykola Yanovych Azarov;

3.
Orders the Council of the European Union to pay the costs incurred both in the proceedings at first instance and in the present appeal.

[Signatures]
(
*1
)	Language of the case: German.