Case C-380/09 P

Melli Bank plc

v

Council of the European Union

‛Appeal — Common foreign and security policy — Restrictive measures against the Islamic Republic of Iran to prevent nuclear proliferation — Freezing the funds of a bank’s subsidiary — Principle of proportionality — Ownership or control of the entity’

Summary of the Judgment

European Union — Common foreign and security policy — Regulation concerning restrictive measures against Iran — Freezing of the funds of entities owned or controlled by an entity identified as taking part in nuclear proliferation — Restriction of the right to property and of the freedom to carry on economic activity — No breach of the principle of proportionality

European Union — Common foreign and security policy — Regulation concerning restrictive measures against Iran — Freezing of the funds of persons, entities or bodies identified by the Council as taking part in nuclear proliferation — Obligation to extend that measure to entities owned or controlled by such an entity — Classification as an entity owned or controlled

The General Court did not err in law in holding, on the basis of the wording of Article 7(2)(d) of Regulation No 423/2007 concerning restrictive measures against Iran, that that provision required the Council to freeze the funds of an entity owned or controlled by an entity identified as engaged in nuclear proliferation, as provided for in Article 7(2)(a) or (b) of that regulation, the Council assessing case by case whether an entity is ‘owned or controlled’ by the entities concerned. It follows from a literal reading of Article 7(2) of that regulation, having regard to the words ‘have been identified’ appearing in the introductory part thereof, that classification as an entity ‘owned or controlled’ must be the subject of a case-by-case evaluation by the Council, by reference, inter alia, to the degree to which the entities concerned are owned or controlled. In contrast, with regard to the use of the words ‘shall be frozen’ in that same provision, a fund-freezing measure must be adopted in respect of an entity identified by the Council as being owned or controlled by an entity itself identified as being engaged in nuclear proliferation, and the reason for the adoption of that measure need not be that the entity owned or controlled is itself engaged in nuclear proliferation. Those two findings by the General Court are not contradictory, for the first covers the obligation to determine, with a certain amount of discretion, whether the entity concerned is ‘owned or controlled’, whilst the second relates to the obligation to freeze the funds of such an entity without determining whether it is itself engaged in nuclear proliferation. In those circumstances, it may not be inferred from the fact that the Council has discretion as to whether the entity concerned is owned or controlled that the Council also has discretion to assess whether that entity plays a part in nuclear proliferation in order to decide whether its funds should be frozen. (see paras 39-42)

Security Council resolutions, on the one hand, and Council common positions and regulations, on the other hand, originate from distinct legal orders. Measures within the framework of the United Nations and the European Union are adopted by organs with autonomous powers, granted to them by their basic charters, that is to say, the treaties that created them. In drawing up Community measures aimed at giving effect to a Security Council resolution envisaged in a common position, the Union is to take due account of the terms and objectives of the resolution concerned. Similarly, account must be taken of the wording and purpose of a Security Council resolution when interpreting the regulation which seeks to implement that resolution. (see paras 54, 55)

The General Court did not err in law in holding that, 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 in order to circumvent the effect of the measures applying to it and that the freezing of the funds of those entities is necessary and appropriate in order to ensure the effectiveness of the measures adopted and to ensure that those measures are not circumvented, and that, given the prime importance of the preservation of international peace and security, the restrictions of the freedom to carry on economic activity and the right to property of a bank occasioned by the fund-freezing measures were not disproportionate to the ends sought. The same holds for the findings of the General Court that the Council could legitimately not apply Article 7(2)(d) of Regulation No 423/2007 concerning the adoption of restrictive measures against Iran to entities which, in its opinion, did not fulfil the conditions for the application of that provision; that it was impossible to identify, in every case, all the entities owned or controlled by an entity identified as engaged in nuclear proliferation and that any divergent practice on the part of the Council, assuming it to be unlawful, cannot give rise to any legitimate expectations on the part of the entities concerned, or the right to rely, to their own benefit, on an unlawful act committed in favour of another It is clear from those considerations that the General Court did not infringe the principle of proportionality either in its interpretation of Article 7(2)(d) of Regulation No 423/2007 or in its review of the application of that provision to the case in point. (see paras 58, 61, 62, 64)