CJEU sets itself against secret “nod and a wink” justice

2 December 2013 by David Hart KC

Fulmen & Mahmoudian v. Council of the European Union,28 November 2013,  read judgment

I posted last year on a decision by the General Court in Luxembourg, in which Fulmen successfully challenged sanctions taken against it as 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 was said to be a director of Fulmen. Hence all of their assets were frozen by the EU.

The CJEU has now roundly dismissed the appeal by the EU Council from the ruling of the General Court. The sanctions order has been annulled – over 3 years after it was made. The Council has been told that if it wants to uphold such orders, it must adduce evidence to the Court, however sensitive the subject matter, and even if not all of that evidence is passed on to those affected.

The Council’s position was that all it had to tell Fulmen and the Court was that

Fulmen was involved in the installation of electrical equipment on the Qom/Fordoo site before its existence was revealed.

..er, that’s it.

All it had to show (it said) was that this claim was “probable”, and it sought to show that by proving that

Fulmen is a company which has long been active in the Iranian electrical equipment market and has a substantial workforce

Hmm. By that logic every long-active electrical equipment company with a substantial workforce in Iran could be sanctioned, even if in all truth only one of them was in fact involved.

The Council’s attempt to uphold this was based on the fact that it said it had secret information upon which it had formed its view. But it was not willing to share this with either the Court or the company. Nor did it even volunteer the gist of the allegations.

On this ground alone, the Council’s appeal failed.

The Council (supported by the UK and France – surprise, surprise) sought to say that because the rules of procedure of the General Court do not currently provide for the communication of confidential information to the Court, without passing it on to the opposing litigants, it could do no more than it did. Fulmen objected that this argument had only surfaced at a very late stage, and earlier the Council had never mentioned that it had confidential information which it was withholding. Fulmen and Mr Mahmoudian also pointed out that the Council had made basic errors about Mr Mahmoudian’s status as director in what they had produced. In any event, one has to be sceptical about this line of argument, given that the Council did not even try to get the Court’s agreement to such a procedure, which, as is apparent from the judgment of both General Court and CJEU, would have been open to it.

Paragraphs [58]-[74] confirm a recent re-statement of the law applicable to these sanctions challenges, and derived principally from the Kadi II decision this July, covering the right to be heard, the right to the file, the provision of proper reasons, and effectiveness of judicial review of the decision. The Council must produce what it wants to rely on. The Court must strike a balance between the right to effective judicial protection and security interests [74]. It may consider ordering the disclosure of a summary of the information or of the evidence which the Council relies on. The Court must also consider whether the failure to disclose information or evidence to the person concerned and his consequential inability to respond is such as to effect the probative value of the evidence.

Turning to the present case, the Court concluded that the limited material produced meant that Fulmen and Mr Mahmoudian

were not in a position to defend themselves against the allegations and that the Courts of the European Union are not in a position to determine whether the acts at issue were well founded.

Comment

It is a fairly extraordinary position for the Council and its informant member states (given the interveners, I just wonder who they were?) to take. We, the Council, are going to make a measure with severe implications for those affected; we know that those affected can challenge it in the Courts (that is what Article 275 TFEU says), but we are not going to share anything with anybody as to why we say what we say. It is the ultimate case of – trust us, we know best.

The problem is that it is utterly inconsistent with effective judicial review – indeed it does not recognise the rule of law other than in form. And it also means that those affected have sanctions in place whilst the appeals rumble through the system.

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Read more

• Reasons and evidence in Europe
• Supreme Court: measures against Iranian Bank unlawful, and the secret hearing ruling 
• An ABC on proportionality, with Bank Mellat as our primer
• EU Court annuls EU freezing order on Iranian Bank – and Wikileaks again
• Another control order ruled unlawful for breach of right to fair trial