Reasons and evidence in Europe

22 March 2012 by David Hart KC

Cases T-439/10 and T-440/10, Fulmen & Mahmoudian v. Council of the European Union, read judgment

Fulmen, as many of you will know, means thunderbolt in Latin. So it must have seemed when this Iranian company had its assets frozen. This case is a good example of how general principles of European law were applied to annul measures taken against these Iranian applicants. The measures were part of EU policy to apply pressure on Iran to end nuclear proliferation. Fulmen was said to have supplied electrical equipment on the Qom/Fordoo nuclear site and Mr Mahmoudian is a director of Fulmen. Hence they were both listed in Council Decision 2010/413/CFSP. The upshot was that all of their assets were frozen by the EU.

Fulmen and Mr Mahmoudian brought proceedings in the EU General Court  (known as the CFI until 2009) seeking annulment of the various measures taken against them. They raised various complaints, of which one was successful. In so ruling the General Court gave a helpful summary of the requirement for reasons in EU Courts at [48]-[50]

48      The purpose of the obligation to state the reasons for an act adversely affecting a person, as provided for by the second paragraph of Article 296 TFEU and, more particularly in this case, by [the relevant provisions] is, first, to provide the person concerned with sufficient information to make it possible to determine whether the act is well founded or whether it is vitiated by an error which may permit its validity to be contested before the European Union courts and, secondly, to enable those courts to review the lawfulness of that act. The obligation to state reasons thus laid down constitutes an essential principle of European Union law which may be derogated from only for overriding reasons. The statement of reasons must therefore in principle be notified to the person concerned at the same time as the act adversely affecting him and a failure to state the reasons cannot be remedied by the fact that the person concerned learns the reasons for the act during the proceedings before the Courts of the European Union (see, to that effect, Case T-390/08 Bank Melli Iran v Council….

49      Unless, therefore, overriding considerations to do with the security of the European Union or of its Member States or with the conduct of their international relations militate against the communication of certain matters the Council is bound…..to apprise the entity concerned…of the actual specific reasons why the Council considers that provision to be applicable to it. It must therefore state the facts and points of law on which the legal justification of the measure depend and the considerations which led the Council to adopt it (see, to that effect, Case T-390/08 Bank Melli Iran v Council …).

50      Further, the statement of reasons must 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 that the statement of reasons specify all the relevant matters of fact and law, inasmuch as the adequacy or otherwise of the reasons is to be evaluated 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 measure adversely affecting a person are sufficient if it was adopted in circumstances known to that person which enable him to understand the scope of the measure concerning him (see Case T-390/08 Bank Melli Iran v Council, paragraph 82…).

On analysis, the Court found that the reasons given by the EU were sufficient.

The annulment was in fact achieved on the basis of what sounds at first blush a rather unpromising ground of complaint, namely that the EU Council had made “an error in assessment” regarding the applicants’ involvement. Both Fulmen and Mr Mahmoudian denied that they were active on the Qom/Fordoo site and maintained that the Council had not adduced evidence of its claims on that point.

The Council supported the inclusion of the applicants in the list but

 95     ….added that it could not be expected to adduce evidence of that claim. According to the Council, review by the courts of the European Union must be limited to determining that the reasons relied on to justify the adoption of the restrictive measures are ‘probable’. That applies to the present case, given that Fulmen is a company which has long been active in the Iranian electrical equipment market and has a substantial workforce.

This did not go down well with the Court

 96      In that regard, it must be recalled that the judicial review of the lawfulness of a measure whereby restrictive measures are imposed on an entity extends to the assessment of the facts and circumstances relied on as justifying it, and to the evidence and information on which that assessment is based. In the event of challenge, it is for the Council to present that evidence for review by courts of the European Union (see, to that effect, Case T-390/08 Bank Melli Iran v Council, paragraphs 37 and 107).

Hence, and unsurprisingly given what courts do, the Court ruled that the review of lawfulness which must be carried out was not limited to an appraisal of the abstract ‘probability’ of the grounds relied on, but must include the question whether those grounds are supported, to the requisite legal standard, by concrete evidence and information.

What lay behind this coyness emerged in [100]

Secondly, the Council cannot rely on a claim that the evidence concerned comes from confidential sources and cannot, consequently, be disclosed. While that circumstance might, possibly, justify restrictions in relation to the communication of that evidence to the applicants or their lawyers, the fact remains that, taking into consideration the essential role of judicial review in the context of adoption of restrictive measures, the courts of the European Union must be able to review the lawfulness and merits of such measures without it being possible to raise objections that the evidence and information used by the Council is secret or confidential (see, by analogy, OMPI, paragraph 155). Further, the Council is not entitled to base an act adopting restrictive measures on information or evidence in the file communicated by a Member State, if that Member State is not willing to authorise its communication to the courts of the European Union whose task is to review the lawfulness of that decision (see, by analogy, Case T-284/08 People’s Mojahedin Organization of Iran v Council [2008] ECR II-3487, paragraph 73).

And no special measures could be taken by the Council, given the subject-matter and the fact that Iran’s nuclear programme was clandestine. The difficulties which may be encountered by the Council when attempting to prove involvement may, in some cases, have an effect on the standard of proof required of it. But

On the other hand, the effect of such difficulties cannot be that the Council is entirely relieved of the burden of proof which rests on it.

Just so. And then the real story emerged:

As regards the assessment in the present case, the Council has produced no information or evidence in support of the reasons relied on in the contested measures. As the Council itself admits, in essence, it has relied on mere unsubstantiated allegations that Fulmen installed electrical equipment on the Qom/Fordoo site before the existence of that site was discovered.

And so that was that. An interesting outcome, given that most of us probably think that those named in these proscribed lists are as guilty as hell because the EU institutions would not have named them, would they?

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