Case T‑340/14

Andriy Klyuyev

v

Council of the European Union

‛Common foreign and security policy — Restrictive measures taken in view of the situation in Ukraine — Freezing of funds — List of persons, entities and bodies subject to the freezing of funds and economic resources — Inclusion of the applicant’s name — Rights of the defence — Obligation to state reasons — Legal basis — Right to effective judicial protection — Failure to comply with the listing criteria — Manifest error of assessment — Right to property — Right to reputation) — Judgment of the General Court (Ninth Chamber, Extended Composition), 15 September 2016 ?II - 0000’

Summary — Judgment of the General Court (Ninth Chamber, Extended Composition), 15 September 2016

Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in misappropriations of public funds — Restriction of the right to property — No breach of principle of proportionality — No infringement of right to reputation

Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in misappropriations of public funds belonging to the Ukrainian State — Misappropriation of public funds — Concept — Acts of misappropriation of public funds or assets capable of undermining the institutional and legal foundations of Ukraine and respect for the rule of law in that country

Acts of the institutions — Statement of reasons — Obligation — Scope — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in misappropriations of public funds — Decision falling within a context known to the person concerned, enabling him to understand the scope of the measure taken against him — Whether summary statement of reasons sufficient — Limits — Statement of reasons not capable of consisting of a general and stereotyped formulation

Common foreign and security policy — Restrictive measures taken having regard to the situation in Ukraine — Decision to freeze funds — Rights of defence — Notification of inculpatory evidence — Subsequent decision maintaining the name of the applicant on the list of persons covered by those measures — That decision based on new factors not appearing in the initial decision — No infringement of defence rights and the right to effective judicial protection

European Union — Judicial review of the legality of the acts of the institutions — Restrictive measures taken having regard to the situation in Ukraine — Ambit of the review — Proof the measure well-founded — Obligation on the competent EU authority to establish, in the event of challenge, that the grounds held against the persons or entities concerned well-founded

Although the Council has a broad discretion as regards the general criteria to be taken into consideration for the purpose of adopting restrictive measures, the effectiveness of the judicial review guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union requires that, as part of the review of the lawfulness of the grounds which form the basis of the decision to include or to maintain a person’s name on the list of persons subject to restrictive measures, the Courts of the European Union must 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 by sufficiently specific and concrete evidence. In that regard, the opening of judicial proceedings under the national code of criminal procedure and the possible adoption of interim measures at national level may constitute significant evidence to establish the existence of facts that justify the adoption of restrictive measures at Union level and to allow an assessment of the need to adopt such measures in order to ensure that action taken by the national authorities is effective. The fact remains that it is the Council that is responsible for the adoption of restrictive measures, and that the Council must decide independently whether it is necessary and appropriate to adopt such measures, in the light of the objectives of the common foreign and security policy (CFSP), irrespective of whether a request for such measures is made by the authorities of the third country concerned and irrespective of other measures taken by those authorities at national level, provided that the Council relies on a solid factual basis. Moreover, it is for the competent European Union 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. (see paras 36, 44, 99, 119, 120)

Respect for the rights of the defence, which is affirmed in Article 41(2)(a) of the Charter of Fundamental Rights of the European Union, to which the EU Treaty attaches the same legal value as the treaties, includes the right to be heard and the right to have access to the file, whereas the right to effective judicial protection, which is affirmed in Article 47 of the Charter, requires that the person concerned must be able to ascertain the reasons upon which the decision taken in relation to him is based. It follows that, in the context of the adoption of a decision maintaining a person, entity or body in a list of persons, entities or bodies subject to restrictive measures, the Council must respect the right of that person, entity or body to a prior hearing where new evidence, namely evidence which was not included in the initial listing decision, is admitted against him or it, in the decision maintaining his or its listing. Where the applicant has had access to the information and evidence that led the Council to maintain the restrictive measures against him and was in a position to formulate observations in good time, he cannot be regarded as having been deprived of his rights of defence and his right to effective judicial protection. (see paras 55, 56, 59, 61)

See the text of the decision. (see paras 65-71)

Respect for the rule of law is one of the primary values on which the European Union is founded, as is stated in Article 2 TEU, and in the preambles of the EU Treaty and of the Charter of Fundamental Rights. Respect for the rule of law constitutes, moreover, a prerequisite of accession to the European Union, pursuant to Article 49 TEU. The concept of the rule of law is also enshrined in the preamble of the Convention for the Protection of Human Rights and Fundamental Freedoms. The case-law of the Court and of the European Court of Human Rights, and the work of the Council of Europe, by means of the European Commission for Democracy through Law, provide a non-exhaustive list of principles and standards which may fall within the concept of the rule of law. That list includes: the principles of legality and legal certainty and the prohibition of arbitrary exercise of power by the executive; independent and impartial courts; effective judicial review, extending to respect for fundamental rights and equality before the law. Further, in the context of European Union external action, a number of legal instruments, such as Regulation No 1638/2006 laying down general provisions establishing a European Neighbourhood and Partnership Instrument, include reference to the fight against corruption as a principle within the scope of the concept of the rule of law. (see paras 87, 88)

Whilst it is conceivable that certain conduct pertaining to acts classifiable as misappropriation of public funds may be capable of undermining the rule of law, it cannot be accepted that any act classifiable as misappropriation of public funds, committed in a third country, justifies European Union action with the objective of consolidating and supporting the rule of law in that country, using the powers of the Union under the CFSP. Before it can be established that a misappropriation of public funds is capable of justifying European Union action under the CFSP, based on the objective of consolidating and supporting the rule of law, it is, at the very least, necessary that the disputed acts should be such as to undermine the legal and institutional foundations of the country concerned. In the case of a listing criterion such as that set out in Article 1(1)(a) of Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine, as amended by Decision 2015/143/CFSP, concerning in particular persons having been identified as responsible for misappropriation of funds belonging to the Ukrainian State, such a criterion can be considered to be compatible with the European Union legal order only to the extent that it is possible to attribute to it a meaning that is compatible with the requirements of the higher rules with which it must comply, and more specifically with the objective of consolidating and supporting the rule of law in Ukraine. Further, a consequence of that interpretation is that the broad discretion enjoyed by the Council in relation to the definition of the general listing criteria can be respected, while review, in principle full review, of the lawfulness of European Union acts in the light of fundamental rights is ensured. Consequently, that criterion must be interpreted as not concerning, in abstract terms, any act classifiable as misappropriation of State funds, but rather as concerning acts classifiable as misappropriation of State funds or public assets which, having regard to the amount or the type of funds or assets misappropriated or to the context in which the offence took place, are, at the very least, such as to undermine the legal and institutional foundations of Ukraine, and in particular the principles of legality, prohibition of arbitrary exercise of power by the executive, effective judicial review and equality before the law and, ultimately, to undermine respect for the rule of law in that country. As thus interpreted, the listing criterion is compatible with and proportionate to the relevant objectives of the EU Treaty. (see paras 89-91)