European court rejects VTB’s challenge to the EU’s sectoral sanctions on Russia
On 25 June 2020, the CJEU gave judgment in VTB Bank PAO v Council of the European Union C-729/18 P, dismissing VTB’s appeal against the General Court judgment upholding sanctions (“restrictive measures”) upon VTB imposed by Council Regulation (EC) 833/2014. VTB is the second largest bank in Russia, majority owned by the Russian state. On 31 July 2014, in response to the situation in Ukraine, the EU imposed sanctions including measures prohibiting a number of Russian banks, including VTB, from accessing EU capital markets. VTB challenged these measures on a number of grounds. The CJEU rejected its appeal and found that the measures were lawful and proportionate.
A few points to note:
- This is one of the only challenges to the EU’s “sectoral” sanctions of this kind as opposed to the targeted asset freezing measures that are often challenged in the European court.
- VTB argued that the measures were disproportionate because it had nothing to do with Russia’s actions in Ukraine, and the sanctions did not achieve the aim of imposing costs on the Russian government of its actions in Ukraine. The Court said it could only find that measures of this kind were disproportionate if they were “manifestly inappropriate” to achieving their aims, with a large degree of deference to the EU for what are essentially political decisions. The court said the measures were justified and proportionate because they were capable of imposing a cost on the Russian government (whether in fact they imposed a cost or not) because the government might have to bail out the banks in the last resort.
- The Court also rejected VTB’s argument that on a proper interpretation of the regulation, banks could only be included if they had “an explicit mandate to promote competitiveness of the Russian economy, its diversification and encouragement of investment” which VTB did not. The Court agreed that a number of language versions of the regulation suggested this was a requirement, and that other versions were ambiguous on this point. However, the Court said it was sufficient that there be ambiguity in some language versions for the Court to interpret the regulation by reference to the purpose of the regulation and the language of the decision preceding it. Accordingly, the judgment suggests that not only must regard be had to the meanings of different language versions of an EU instrument in determining its meaning, but that ambiguity in any version may be sufficient to allow the Court to select the meaning it considers best reflects the purpose and general scheme of the instrument, even if that appears contrary to other language versions.
The judgment is here