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

JUDGMENT OF THE GENERAL COURT (Seventh Chamber)

26 November 2015 (*)

(Common foreign and security policy — Restrictive measures against Iran with the aim of preventing nuclear proliferation — Freezing of funds — Obligation to state reasons — Manifest error of assessment)

In Case T‑371/14,

Naftiran Intertrade Co. (NICO) Sàrl, established in Pully (Switzerland), represented by J. Grayston, Solicitor, P. Gjørtler, G. Pandey, D. Rovetta and N. Pilkington, lawyers,

applicant,

v

Council of the European Union, represented by M. Bishop and I. Rodios, acting as Agents,

defendant,

APPLICATION for annulment of the Council decision contained in the letter of 14 March 2014 by which the applicant’s name was maintained on the list of person and entities subject to restrictive measures set out in Annex II to 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), as amended by Council Decision 2012/635/CFSP of 15 October 2012 (OJ 2012 L 282, p. 58), and in Annex IX to Council Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran and repealing Regulation (EU) No 961/2010 (OJ 2012 L 88, p. 1), as implemented by Council Implementing Regulation (EU) No 945/2012 of 15 October 2012 (OJ 2012 L 282, p. 16),

THE GENERAL COURT (Seventh Chamber),

composed of M. van der Woude (Rapporteur), President, I. Wiszniewska-Białecka and I. Ulloa Rubio, Judges,

Registrar: L. Grzegorczyk, Administrator,

having regard to the written procedure and further to the hearing on 11 June 2015,

gives the following

Judgment

 Background to the dispute

1        The applicant, Naftiran Intertrade Co. (NICO) Sàrl, is a services company established in Pully (Switzerland) providing technical assistance to companies operating in the gas and oil sectors.

2        The present case has been brought in connection with the restrictive measures introduced in order to apply pressure on the Islamic Republic of Iran to end proliferation-sensitive nuclear activities and the development of nuclear weapon delivery systems.

3        On 9 June 2010, the United Nations Security Council (‘the Security Council’) adopted UNSCR 1929 (2010) (‘UNSCR 1929’), which widened the scope of the restrictive measures imposed by UNSCR 1737 (2006), UNSCR 1747 (2007) and UNSCR 1803 (2008) and introduced additional restrictive measures against the Islamic Republic of Iran.

4        On 17 June 2010, the European Council underlined its deepening concern about Iran’s nuclear programme and welcomed the adoption of UNSCR 1929. Recalling its Declaration of 11 December 2009, the European Council invited the Council of the European Union to adopt measures implementing those contained in UNSCR 1929 as well as accompanying measures, with a view to supporting the resolution of all outstanding concerns regarding the Islamic Republic of Iran’s development of sensitive technologies in support of its nuclear and missile programmes, through negotiation. These measures were to focus on the areas of trade, the financial sector, the Iranian transport sector, key sectors in the oil and gas industry and additional designations, in particular for the Islamic Revolutionary Guards Corps.

5        On 26 July 2010, the Council adopted Decision 2010/413/CFSP concerning restrictive measures against Iran and repealing Common Position 2007/140/CFSP (OJ 2010 L 195, p. 39), Annex II to which decision lists the names of the persons and entities — other than those designated by the Security Council or by the Sanctions Committee created by Resolution 1737 (2006), mentioned in Annex I — whose assets are to be frozen. Recital 22 in the preamble to that decision refers to UNSCR 1929 and states that that resolution notes the potential connection between the revenue derived by the Islamic Republic of Iran from its energy sector and the funding of its proliferation-sensitive nuclear activities.

6        On 23 January 2012, the Council adopted Decision 2012/35/CFSP amending Decision 2010/413/CFSP (OJ 2012 L 19, p. 22). According to recital 13 in the preamble to that decision, the restrictions on admission and the freezing of funds and economic resources should be applied to additional persons and entities providing support to the Iranian Government allowing it to pursue proliferation-sensitive nuclear activities or the development of nuclear weapon delivery systems, in particular persons and entities providing financial, logistical or material support to that government.

7        Article 1(7)(a)(ii) of Decision 2012/35 added a point to Article 20(1) of Decision 2010/413 providing for the freezing of funds belonging to the following persons and entities:

‘(c) other persons and entities not covered by Annex I that provide support to the Government of Iran, and persons and entities associated with them, as listed in Annex II.’

8        As a result, the Council adopted, on 23 March 2012, Regulation (EU) No 267/2012 concerning restrictive measures against Iran and repealing Regulation (EU) No 961/2010 (OJ 2012 L 88, p. 1). In order to implement Article 20(1)(c) of Decision 2010/413, Article 23(2) of Regulation No 267/2012 provides for the freezing of funds, in particular, of persons, entities and bodies listed in Annex IX thereto, identified as:

‘(d) being other persons, entities or bodies that provide support, such as material, logistical or financial support, to the Government of Iran, and persons and entities associated with them [.]’

9        On 15 October 2012, the Council adopted Decision 2012/635/CFSP amending Decision 2010/413 (OJ 2012 L 282, p. 58). According to recital 16 in the preamble to that decision, additional persons and entities were to be included in the list of persons and entities subject to restrictive measures as set out in Annex II to Decision 2010/413, in particular Iranian State-owned entities engaged in the oil and gas sector, since they provide a substantial source of revenue for the Iranian Government.

10      Article 1(8)(a) of Decision 2012/635 amended Article 20(1)(c) of Decision 2010/413, which consequently provides that restrictive measures are to be imposed on:

‘(c) other persons and entities not covered by Annex I that provide support to the Government of Iran and entities owned or controlled by them or persons and entities associated with them, as listed in Annex II.’

11      Under Article 2 of Decision 2012/635, the applicant’s name was included on the list set out in Annex II to Decision 2010/413 on the ground that that entity was a ‘[s]ubsidiary (100%) of the Naftiran Intertrade Company Ltd’. By that act, the Council also included in the abovementioned annex the name of the National Iranian Oil Company (NIOC), on the ground that that entity, owned and operated by the Iranian State, provided financial resources to the Iranian Government, and the name of Naftiran Intertrade Company (alias Naftiran Trade Company) (NICO), on the ground that that entity was a subsidiary (100%) of NIOC. 

12      Consequently, on the same day, 15 October 2012, the Council adopted Implementing Regulation (EU) No 945/2012 implementing Regulation No 267/2012 (OJ 2012 L 282, p. 16). Article 1 of that implementing regulation included the applicant’s name and the names of NICO and NIOC in the list set out in Annex IX to Regulation No 267/2012, for the same reasons as those set out in Decision 2012/635.

13      By letter of 16 October 2012, the Council informed the applicant of the decision to include its name on the lists in Annex II to Decision 2010/413 and in Annex IX to Regulation No 267/2012 (‘the lists at issue’), attaching thereto a copy of Decision 2012/635 and of Implementing Regulation No 945/2012, which set out the grounds for that inclusion.

14      By letter of 11 December 2012, the Council informed the applicant of its right to submit observations concerning its designation, which would be taken into consideration during the periodic review.

15      By letter of 20 December 2012, the applicant requested the Council to send it the full grounds for its inclusion and to grant it access to the documents on which it had relied in taking its decision.

16      On 21 December 2012, the Council adopted Regulation (EU) No 1263/2012 amending Regulation No 267/2012 (OJ 2012 L 356, p. 34). Article 1(11) of that regulation amended Article 23(2)(d) of Regulation No 267/2012, which thus provides for the freezing of funds of the persons, entities and bodies listed in Annex IX thereto, identified as:

‘(d) being other persons, entities or bodies that provide support, such as material, logistical or financial support, to the Government of Iran and entities owned or controlled by them, or persons and entities associated with them [.]’

17      On 8 January 2013, the applicant brought an action before the General Court, registered under reference T‑6/13, for annulment of Decision 2012/635 and Implementing Regulation No 945/2012, in so far as those acts concern it.

18      By letter of 12 April 2013, the applicant submitted observations to the Council concerning the inclusion of its name on the lists at issue. It indicated, inter alia, that its parent company had been transferred to Labuan, Malaysia, in January 2012 and that the company designated as NICO and described by the Council as being established in Jersey therefore no longer exists.

19      By letter of 14 March 2014, the Council responded to the observations submitted by the applicant in its letter of 12 April 2013 and informed it of its decision to maintain its name on the lists at issue (‘the contested decision’) because the evidence put forward by the latter did not support the claim that it was no longer owned by NICO, itself a subsidiary of NIOC. 

 Procedure and forms of order sought by the parties

20      By application lodged at the Registry of the General Court on 26 May 2014, the applicant brought the present action.

21      The applicant claims that the Court should:

–        annul the contested decision, in so far as that decision constitutes a refusal to remove its name from the lists at issue;

–        join the present proceedings with Case T‑6/13, in accordance with Article 50(1) of the Rules of Procedure of the General Court of 2 May 1991;

–        order the Council to pay the costs.

22      The Council contends that the Court should:

–        dismiss the action as unfounded;

–        order the applicant to pay the costs.

23      By order of 20 January 2015, the Court dismissed the action in Case T‑6/13 (order in NICO v Council, ECR, under appeal, EU:T:2015:60) as manifestly inadmissible.

24      Accordingly, the application to join the present case with Case T‑6/13 has become devoid of purpose. There is therefore no longer any need to adjudicate on the applicant’s second head of claim.

 Law

25      In support of its application, the applicant puts forward two pleas in law. The first plea alleges infringement of the obligation to state reasons and the second plea an error of assessment.

 The first plea, alleging infringement of the obligation to state reasons

26      First, the applicant explains that NICO, its parent company, has since 2012 no longer been registered in Jersey, but continues to exist in the jurisdiction of Labuan in Malaysia. It considers therefore that, first, by stating that it was a subsidiary of NICO, which was designated as a company established in Jersey, the Council made reference to a company which no longer existed and, second, that there were no grounds for inferring that that company should be regarded as being one and the same as its current parent company.

27      Second, the applicant claims that the statement of reasons does not provide any explanation as to how the chain of ownership alleged to exist between it and the Iranian State should provide an economic benefit for that State. It was therefore not possible for it to understand, on the basis of the original statement of reasons for the inclusion of its name on the lists at issue, that it was targeted on the ground that it was providing economic support to the Iranian Government.

28      Third, the applicant claims that, in this case, the Council should have provided a more detailed statement of reasons than that required in terrorist cases, since it is a private company which operates openly and transparently under Swiss law.

29      First of all, it must be borne in mind that, according to a consistent body of case-law, the purpose of the obligation to state the reasons on which an act adversely affecting an individual is based, which is a corollary of the principle of respect for the rights of the defence, is, first, to provide the person concerned with sufficient information to make it possible to ascertain whether the act is well founded or whether it is vitiated by a defect which may permit its legality to be contested before the Courts of the European Union and, secondly, to enable those Courts to review the legality of that act (see judgment of 15 November 2012 in Council v Bamba, C‑417/11 P, ECR, EU:C:2012:718, paragraph 49 and the case-law cited).

30      The statement of reasons required by Article 296 TFEU must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the court with jurisdiction to exercise its power of review (judgment in Council v Bamba, paragraph 29 above, EU:C:2012:718, paragraph 50).

31      Next, as regards restrictive measures adopted under the common foreign and security policy, it should be noted that, where the person concerned is not afforded the opportunity to be heard before the adoption of an initial decision to include his name on the list, compliance with the obligation to state reasons is all the more important because it constitutes the sole safeguard enabling the person concerned, at least after the adoption of that decision, to make effective use of the legal remedies available to him in order to challenge the lawfulness of that decision (judgments in Council v Bamba, paragraph 29 above, EU:C:2012:718, paragraph 51, and of 12 December 2006 in Organisation des Modjahedines du peuple d’Iran v Council, T‑228/02, ECR, (‘judgment in OMPI I’), EU:T:2006:384, paragraph 140).

32      Therefore, the statement of reasons for an act of the Council which imposes a restrictive measure must not only identify the legal basis for that measure but also the actual and specific reasons why the Council considers, in the exercise of its discretion, that that measure must be adopted in respect of the person concerned (see, to that effect, judgments in Council v Bamba, paragraph 29 above, EU:C:2012:718, paragraph 52; OMPI I, paragraph 31 above, EU:T:2006:384, paragraph 146, and of 14 October 2009 in Bank Melli Iran v Council, T‑390/08, ECR, EU:T:2009:401, paragraph 83).

33      The statement of reasons must, however, be appropriate to the measure at issue and the context in which it was adopted. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the statement of reasons to specify all the relevant matters of fact and law, since the question whether the statement of reasons is adequate must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the reasons given for a decision are sufficient if it was adopted in circumstances known to the party concerned which enable him to understand the scope of the measure concerning him (judgments in Council v Bamba, paragraph 29 above, EU:C:2012:718, paragraphs 53 and 54; OMPI I, paragraph 31 above, EU:T:2006:384, paragraph 141, and Bank Melli Iran v Council, paragraph 32 above, EU:T:2009:401, paragraph 82).

34      Lastly, it should be noted that the principles underpinning the case-law cited in paragraphs 29 to 33 above are equally applicable to any decision to freeze funds, whatever the entity affected by the decision. As those principles are bound up with respect for fundamental rights, they must also be applied when reviewing the lawfulness of a decision imposing restrictive measures with a view to combating terrorism (see, to that effect, judgment of 18 July 2013 in Commission and Others v Kadi, C‑584/10 P, C‑593/10 P and C‑595/10 P, ECR, (‘judgment in Kadi II’), EU:C:2013:518, paragraph 116). Therefore, it cannot be argued that a limited statement of reasons is acceptable where sanctions are to be imposed on persons or entities involved in terrorist acts and a more detailed statement is required in other cases.

35      In the present case, first of all, it should be recalled that the applicant was originally included on the lists at issue on the ground that it was a subsidiary (100%) of NICO. The Council included NICO on those lists on the ground that that entity was a subsidiary (100%) of NIOC, which was also designated because of the support it provided to the Iranian Government. Therefore, the statement of reasons for the original inclusion of the applicant’s name on the lists at issue, considered in the light of the reasons relied on against NICO and NIOC, made it possible to identify the holding chain linking NIOC and the applicant.

36      Next, it should be noted that the reason relied on against the applicant had already been the subject of a detailed explanation by the Council when it informed the applicant of the contested decision to maintain its name on the lists at issue for that very same reason. In its letter of 14 March 2014, the Council clearly indicated that it was due to its membership of the NIOC group that it was necessary for the applicant, in the same way as all the other companies belonging to that group, to be subject to restrictive measures. The Council explained in that regard that the companies owned by NIOC contributed to the support provided by NIOC to the Iranian Government and that it was necessary to freeze their funds to prevent NIOC circumventing the restrictive measures imposed on it.

37      Lastly, with regard to the error in the data identifying NICO, describing it as being established in Jersey, whereas the applicant’s parent company is established in Labuan in Malaysia, that error did not in any way prevent the applicant from understanding the reason for its continuing inclusion on the lists at issue. First, the explanations provided by the Council in its letter of 14 March 2014 left no room for any reasonable doubt that the company NICO, referred to in the statement of reasons, was the applicant’s parent company. Second, it is clear from the applicant’s written pleadings that it had identified the holding chain linking it to NICO and NIOC as the reason for the restrictive measures taken against it.

38      Accordingly, the Court considers that the contested decision contains an adequate statement of reasons since it made it possible for the applicant to understand that its name had been maintained on the lists at issue because it was indirectly owned by a company providing support to the Iranian Government, namely NIOC, pursuant to Article 20(1)(c) of Decision 2010/413 and Article 23(2)(d) of Regulation No 267/2012. It should be noted that, in addition to the legal criterion based on provision of support to the Iranian Government, those measures also include a criterion based on ownership or control, which requires the Council to freeze the funds of entities owned or controlled by an entity providing support to that government. Contrary to what is claimed by the applicant, the Council was not, therefore, required to provide any further explanation in that regard.

39      In those circumstances, the first plea must be rejected as unfounded.

 The second plea, alleging an error of assessment

40      First, the applicant states that the de-registration of its previous parent company took place in Jersey before the inclusion of its name on the lists at issue, which shows that the Council failed to verify the information relating to that company. According to the applicant, that error of assessment cannot be remedied by a subsequent explanation from the Council that the company referred to in the statement of reasons for the measures taken in relation to it should be regarded as its parent company.

41      Second, the applicant considers that the Council did not undertake any analysis of the real relations between the companies belonging to the NICO group. It has therefore not established how the applicant is a source of revenue for the Iranian Government.

42      Moreover, in the reply, the applicant claims that the Council infringed its rights of defence. In its view, the Council should have informed it of the reasons for maintaining its name on the lists at issue and have granted it a reasonable period of time for presenting observations on those reasons before adopting the contested decision.

43      As a preliminary point, it must be pointed out that Article 48(2) of the Rules of Procedure of 2 May 1991 provides that no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure.

44      In the present case, the Court finds that the applicant’s argument in the reply to the effect that the Council infringed its rights of defence in adopting the decision to maintain its name of the lists at issue cannot be regarded as an amplification of a submission previously made in the application and is not based on any new matter of law or of fact which has come to light in the course of the procedure. Accordingly, the new submission must be rejected as time-barred and therefore inadmissible

45      Furthermore, since the applicant’s argument alleging infringement of its rights of defence cannot, in the context of the second plea in law, establish that the Council made an error of assessment, that argument must, in any event, be rejected as ineffective.

46      First, it should be noted that the effectiveness of the judicial review guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union requires, inter alia, that, as part of the review of the lawfulness of the grounds which are the basis of the decision to list or to maintain the listing of a given person, the Courts of the European Union are to ensure that that decision has been 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, is substantiated (judgment in Kadi II, paragraph 34 above, EU:C:2013:518, paragraph 119).

47      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. It is necessary that the information or evidence produced should support the reasons relied on against the person concerned. If that material is insufficient to allow a finding that a reason is well founded, the Courts of the European Union are to disregard that reason as a possible basis for the contested decision to list or maintain a listing (judgment in Kadi II, paragraph 34 above, EU:C:2013:518, paragraphs 121 to 123).

48      Next, according to case-law, when the funds of an entity identified as providing support to the Iranian Government 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, required of the Council by Article 20(1)(c) of Decision 2010/413 and Article 23(2)(d) 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, judgment of 13 March 2012 in Melli Bank v Council, C‑380/09 P, ECR, EU:C:2012:137, paragraphs 39 and 58).

49      Accordingly, when adopting a decision under the provisions referred to above, the Council must carry out an assessment of the circumstances of the individual case in order to determine which entities may be classified as entities ‘owned or controlled’. On the other hand, the nature of the activity of the entity concerned and the fact that there may be no connection between that activity and the provision of support to the Iranian Government are not relevant criteria in that context, as the grounds for the adoption of a measure freezing the funds of an entity that is owned or controlled do not have to include the fact that the entity itself directly provides support to that government (see, to that effect, judgment in Melli Bank v Council, paragraph 48 above, EU:C:2012:137, paragraphs 40 to 42).

50      Lastly, it is also settled case-law that, where the capital of an entity is entirely owned by an entity providing support to the Iranian Government, the criterion for inclusion laid down in Article 20(1)(c) of Decision 2010/413 and in Article 23(2)(d) of Regulation No 267/2012 is satisfied (see, to that effect and by analogy, judgment in Melli Bank v Council, paragraph 48 above, EU:C:2012:137, paragraph 79). That criterion is also satisfied where the capital of an entity is indirectly owned by an entity providing support to the Iranian Government, provided that each of the intermediary entities in the holding chain is entirely owned by its respective direct parent company (judgment of 5 May 2015 in Petropars Iran and Others v Council, T‑433/13, ECR, EU:T:2015:255, paragraph 69).

51      In the present case, as the applicant does not dispute that there is justification for the inclusion of NIOC on the lists at issue, the Court considers that the arguments put forward by the applicant in support of its second plea cannot justify the annulment of the contested decision.

52      In the first place, as regards the argument that the applicant’s parent company, as described by Decision 2012/635 and Implementing Regulation No 945/2012, no longer exists, that argument is based solely on the error in the information identifying NICO. That error, which did not prevent the applicant from understanding the reason relied on against it (see paragraph 37 above), cannot call into question the soundness of that reason, namely that the applicant is owned by NICO, or the fact that NICO is owned by NIOC. 

53      It is true that the transfer of NICO to Labuan changed the law governing that company. None the less, that transfer had no effect whatsoever on the actual existence of that company, as shown, inter alia, by the certificate of continuity produced by the Registry of the Commercial Court, Jersey, or on the bonds of ownership linking that company to the applicant, on the one hand, and to NIOC on the other.

54      In the second place, in accordance with the case-law cited in paragraph 50 above, the fact that the applicant is entirely owned by NICO, which is in turn entirely owned by NIOC, which was designated on the ground that it provided support to the Iranian Government, means that the criterion for inclusion laid down in Article 20(1)(c) of Decision 2010/413 and in Article 23(2)(d) of Regulation No 267/2012 is satisfied. Contrary to what is claimed by the applicant, the Council was not, therefore, required to undertake a more detailed analysis of the relations between those different companies in order to determine whether the applicant itself constituted a source of revenue for the Iranian Government.

55      In the light of all the foregoing, the second plea in law must be rejected and, in consequence, the action must be dismissed in its entirety.

 Costs

56      Under Article 134(1) of the Rules of Procedure of the General Court, 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 applicant has been unsuccessful, it must be ordered to pay the costs in accordance with the form of order sought by the Council.

On those grounds,

THE GENERAL COURT (Seventh Chamber)

hereby:

1.      Dismisses the action;

2.      Orders Naftiran Intertrade Co. (NICO) Sàrl to bear its own costs and to pay the costs incurred by the Council of the European Union.

Delivered in open court in Luxembourg on 26 November 2015.

[Signatures]

* Language of the case: English.

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