The ECJ and (Mis)interpretation of Security Council Resolutions: The Case of Sanctions Against Iran

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On 28 November 2013, the ECJ set aside the judgment of the General Court of the EU in case T‑509/10, Manufacturing Support & Procurement Kala Naft v Council, which had annulled, in so far as they concerned the applicant (an Iranian company owned by the National Iranian Oil Company), the various EU restrictive measures targeting persons and entities listed as being engaged in nuclear proliferation (including Council Decision 2010/413/CFSP). However, in my view, the ECJ was wrong in considering that the UNSC Resolution 1929 (2010) provided a basis for the challenged EU measures as the Court wrongly interpreted the SC resolution as enabling the European Council to conclude that trading in key equipment and technology for the gas and oil industry was ‘capable of being regarded as support for the nuclear activities of [Iran]’.

In its judgment, the ECJ, recalls that the effectiveness of judicial review requires that the Courts of the EU are to ensure that the decision challenged ‘is taken on a sufficiently solid factual basis’ (at para. 73), and observes that in order to assess the lawfulness of the General Court’s review of the measures, it shall examine ‘the way in which the General Court identified and interpreted the general rules of the relevant legislation’ (para. 74). The ECJ held that “there is nothing in the judgment under appeal to indicate that the General Court took into account the changes in European Union legislation after Security Council Resolution 1929 (2010) (para. 75, emphasis mine). In its interpretation of that legislation, the ECJ held (at para. 80) that:

Article 7(2)(a) of Regulation No 423/2007 covers engagement in, direct association with, or the provision of support for, Iran’s proliferation-sensitive nuclear activities. It must be noted that ‘support’ implies a lesser degree of connection to Iran’s nuclear activities than ‘engagement’ or ‘direct association’, and that it is capable of covering the procurement of or trade in goods and technology linked to the gas and oil industry (emphasis mine).

It then observed that:

[t]hat interpretation is supported by the adoption – after the adoption of Regulation No 423/2007 – of Security Council Resolution 1929 (2010), of the European Council Declaration of 17 June 2010 and of Decision 2010/413, which mention the revenues derived from the energy sector and the risk attached to material intended for the oil and gas industry (para. 81, emphasis mine).

Indeed, Security Council Resolution 1929 (2010), to which recital 22 in the preamble to Decision 2010/413 refers, notes the potential connection between the Islamic Republic of Iran’s revenues derived from its energy sector and the funding of its proliferation-sensitive nuclear activities (para. 82, emphasis mine).

In the light of that Security Council resolution […], the European Council Declaration and Decision 2010/413, which mention the revenues derived from the energy sector and the risk attached to material intended for the oil and gas industry, Article 7(2) of Regulation No 423/2007 had to be interpreted […], as meaning that trading in key equipment and technology for the gas and oil industry was capable of being regarded as support for the nuclear activities of the Islamic Republic of Iran (para. 83, emphasis mine).

Thus it appears that the Court, as it makes clear at para. 108 of its judgment, referred to SC Res. 1929 (2010) as a tool for interpretation of the measures under review. At the same time, in so doing, it engaged in an exercise of interpretation of the resolution itself. Such exercise is a complex one, as the ICJ observed when it stated, in the Namibia Advisory Opinion, that ‘[t]he language of a resolution of the Security Council should be carefully analysed before a conclusion can be made as to its binding effect (Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports 1971, p. 16, para. 114). The ICJ recently restated several factors relevant in the interpretation of SC resolutions, when it recalled that the rules found in Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties ‘may provide guidance’, although ‘differences between Security Council resolutions and treaties mean that the interpretation of Security Council resolutions also require that other factors be taken into account’, among which ‘statements by representatives of members of the Security Council made at the time of their adoption, other resolutions of the Security Council on the same issue, as well as the subsequent practice of relevant United Nations organs and of States affected by those given resolutions’ (see Accordance with international law of the unilateral declaration of independence in respect of Kosovo, Advisory Opinion, 22 July 2010, para. 94).

The main problem with the interpretation retained by the Court is that, as the defendant had (correctly) pointed out, Res. 1929 (2010) does not contain measures relating to the Iranian oil and gas industry. In Res. 1929 (2010), the Security Council did not regard such trading activities as support for the nuclear activities; nor did it enact any measures in that respect; it merely ‘noted’ the ‘potential connection’ between the Islamic Republic of Iran’s revenues derived from its energy sector and the funding of its proliferation-sensitive nuclear activities.

In other words, it is legally incorrect to assume that an assertion in the preamble of a Security Council resolution, which the Security Council itself has decided to refrain from enacting in the operative part of the same resolution specific measures related to this assertion, could be relied upon as supporting the (re)interpretation of a provision forming part of the pre-existing EU sanctions legislation as extending to other fields than previously assumed, so that trading in key equipment and technology for the Iranian gas and oil industry would become a posteriori covered by the sanctions regime, being subsequently regarded as support for the nuclear activities.

The reason for this conclusion is quite simple. It is  admitted that the preamble to a Security Council resolution may in fact be used as a tool of interpretation of the operative part of the resolution. However, they carry no operative force per se, and thus cannot be relied upon to authorise action of any kind (see eg C. Ahlström, ‘United Nations Security Council Resolution 1540: non-proliferation by means of international legislation’, in SIPRI Yearbook 2007, Oxford: Oxford University Press, 2007, 460-473, at 464-465).

One may also observe that the Court, while putting emphasis on one specific provision in a recital of the resolution, failed to take into account various relevant provisions, found  in the preamble (‘Stressing that nothing in this resolution compels States to take measures or actions exceeding the scope of this resolution, including the use of force or the threat of force’), or in the operative parts, (such as OP 37) where the Security Council makes clear that additional sanctions would have to be agreed upon by the Council.

Another issue lies in the fact that the ECJ failed to apply the interpretative method prescribed by the ICJ in the Kosovo Advisory Opinion (see abstract above), The ECJ did not take into account statements made by representatives of several members of the Security Council made at the time of adoption of Res. 1929 (2010), namely Russia and China, which made clear that they opposed the imposition of any additional sanctions against Iran (especially unilateral). Those states  have consistently held their legal position against the lawfulness of unilateral sanctions in general since then (as may be seen for instance here and here).

There is another conceptual problem with the application by the Court of the ‘potential connection’ standard. This standard is so low that, if retained, it may allow the application of sanctions to any person or entity that, directly or indirectly, provides financial resources to the Iranian government, or contributes to its funding. Under this standard, any Iranian taxpayers, any foreign companies or sovereign States dealing with Iran, could be deemed to contribute to the funding of Iran’s ‘proliferation-sensitive nuclear activities’. In other words, applying this standard, one could argue that there is a ‘potential connection’ between Iran’s revenues derived from its foreign trade, or its tax system, and the funding of its proliferation-sensitive nuclear activities. This may lead to sanctions on any financial transactions with Iran, which is precisely what the Security Council – and the EU – refrained from doing so far. On the contrary, the P5+1 actually agreed with Iran in the recent Joint Plan of Action, signed in Tehran on 24 November 2013, to suspend the application of certain restrictive measures in force, pending the resolution of outstanding ‘concerns’ on the peaceful nature of Iran’s nuclear program and the lifting of all sanctions on Iran.

On a more general plane, the Court affirmed (at para. 109) that the decisions at issue were based on the relevant provisions of the TEU (Article 29) and the TFEU  (Articles 215 and 291(2), and stated that:

[t]hose provisions of the Treaties gave the Council the power to adopt the acts at issue, containing independent restrictive measures, distinct from the measures specifically recommended by the Security Council (emphasis mine).

While it can be admitted that this statement is correct per se, it may also reasonably be argued that in the case of the measures considered, since the Security Council has already decided on measures in the framework of Chapter VII of the UN Charter and remains so far seized of the matter, it could reasonably be assumed that States are no longer free to decide as they wish on measures of their own, going beyond those mandated or authorized by the Security Council. I have addressed this issue recently in the Journal of Conflict & Security Law.

Ironically, the Court’s judgment was rendered just two days after the Council of the EU adopted Regulation (EU) No 1203/2013 of 26 November 2013, re-listing several Iranian companies which had just obtained before the EU General Court a judgment of de-listing on 16 September 2013 (Case T-489/10). From the layman’s perspective, it is difficult not to make a link between this trend, and the external pressure put recently on the EU institutions – including the judiciary, as reported by the press (see e.g. here). And it is equally difficult to reconcile this re-listing decision with the undertakings in the recent Joint Plan of Action, under which the E3/EU+3 made inter alia the following pledge: ‘No new EU nuclear-related sanctions’. Now from a legal perspective, the general impression given is that these steps are hardly compatible with the assertion by the EU institutions that ‘[t]he introduction and implementation of restrictive measures must always be in accordance with international law’ (‘Guidelines on implementation and evaluation of restrictive measures (sanctions) in the framework of the EU Common Foreign and Security Policy’, 2 Dec. 2005, para. 9). Should the ECJ’s position in Kala Naft v Council be applied to other similar cases, currently under appeal by the EU Council, the rule of law, which the EU judicature is in principle bound to uphold, would suffer a severe blow.

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Dan Joyner says

December 24, 2013

Thank you for this excellent piece, Pierre. I think it demonstrates exemplary legal analysis and a persuasive conclusion.