Case T‑494/22

NKO AO National Settlement Depository (NSD)

v

Council of the European Union

Judgment of the General Court (First Chamber, Extended Composition) of 11 September 2024

(Common foreign and security policy – Restrictive measures adopted in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine – Freezing of funds – List of persons, entities and bodies subject to the freezing of funds and economic resources – Inclusion and maintenance of the applicant’s name on the list – Obligation to state reasons – Error of assessment – Definition of ‘supporting, materially or financially, the Government of the Russian Federation’ – Freedom to conduct a business – Right to property – Proportionality)

1. Judicial proceedings – Pleas in the application – Modification in the course of proceedings – Restrictive measures taken against natural or legal persons – Obligation to conduct a periodic review of the list of persons, entities or bodies subject to restrictive measures – Reconsideration of the situation of the person concerned – Adoption of an implementing regulation, further to the reconsideration of the situation of the person concerned, the effect of which is to extend the restrictive measures against that person – Admissibility of the statement of modification of the form of order seeking annulment of that implementing regulation

   (Art. 263 TFEU; Art. 86(1) of the Rules of Procedure of the General Court; Council Regulations Nos 269/2014, Art. 14(3) and (4) and Annex I, and 2023/1765)

   (see paragraphs 26-29, 31)

2. Acts of the institutions – Statement of reasons – Obligation – Scope – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds of certain persons and entities having regard to the situation in Ukraine – Obligation to identify in the statement of reasons the specific and concrete elements justifying the said measure – Decision falling within a context known to the person concerned, enabling him or her to understand the scope of the measure taken against him or her – Sufficiently clear and precise statement of reasons to enable the person concerned to understand the legal basis of and specific reasons for the adoption of restrictive measures against him or her

   (Art. 296, second para., TFEU; Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/883, (CFSP) 2023/572 and (CFSP) 2023/1767; Council Regulations Nos 269/2014, 2022/878, 2023/571 and 2023/1765)

   (see paragraphs 36-42)

3. European Union – Judicial review of the legality of the acts of the institutions – Restrictive measures taken in view of the situation in Ukraine – Scope of the review – Proof that the measure is well founded – Obligation on the competent EU authority to establish, in the event of challenge, that the reasons relied on against the persons or entities concerned are well founded – Inclusion on the lists based on a body of specific, precise and consistent evidence – No error of assessment

   (Charter of Fundamental Rights of the European Union, Art. 47; Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/883, (CFSP) 2023/572 and (CFSP) 2023/1767; Council Regulations Nos 269/2014, 2022/878, 2023/571 and 2023/1765)

   (see paragraphs 49-52, 83-86, 94-96, 101, 102, 106)

4. European Union – Judicial review of the legality of the acts of the institutions – Restrictive measures taken in view of the situation in Ukraine – Scope of the review – Proof that the measure is well founded – Obligation on the competent EU authority to establish, in the event of challenge, that the reasons relied on against the persons or entities concerned are well founded – Breadth of the discretion of that competent authority – Relevance of evidence produced on the basis of a previous inclusion where there are no amendments to the grounds for inclusion or changes in the applicant’s situation or in the context in Ukraine

   (Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/883, (CFSP) 2023/572 and (CFSP) 2023/1767; Council Regulations Nos 269/2014, 2022/878, 2023/571 and 2023/1765)

   (see paragraphs 53-54)

5. Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Criteria for adopting restrictive measures – Material or financial support to the Russian Government – Concept of material or financial support – Requirement that support be quantitatively or qualitatively important – No need to establish a link between that support and the annexation of Crimea or the destabilisation of Ukraine

   (Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/329, Art. 2(1)(f); Council Regulations Nos 269/2014, Art. 3(1)(f), and 2022/330)

   (see paragraph 57)

6. Judicial proceedings – Production of evidence – Time limit – Late submission of evidence and offers of evidence – Conditions – Evidence introduced in the course of proceedings in response to the arguments put forward by an intervener – Admissibility

   (Rules of Procedure of the General Court, Art. 85(1))

   (see paragraphs 65-71)

7. European Union – Judicial review of the legality of the acts of the institutions – Restrictive measures against certain persons and entities in view of the situation in Ukraine – Freezing of funds of persons, entities or bodies supporting, materially or financially, or benefitting from the Russian Government – Scope of the review – Assessment of the legality by reference to the information available at the time of adoption of the decision – Evidence not contained in the evidence file from the administrative procedure produced by the Council in the context of the judicial proceedings – Whether permissible – Conditions

   (Art. 275, second para., TFEU; Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/883, (CFSP) 2023/572 and (CFSP) 2023/1767; Council Regulations Nos 269/2014, 2022/878, 2023/571 and 2023/1765)

   (see paragraphs 73-75)

8. Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Criteria for adopting restrictive measures – Material or financial support to the Russian Government – Concept of material or financial support – No need to establish that that government controls the person, entity or body supporting it

   (Council Decision 2014/145/CFSP, as amended by Decisions (CFSP) 2022/329, Art. 2(1)(f); Council Regulations Nos 269/2014, Art. 3(1)(f), and 2022/330)

   (see paragraph 110)

9. Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds of certain persons and entities having regard to the situation in Ukraine – Restriction of the right to property and freedom of enterprise – Whether permissible – Conditions

   (Charter of Fundamental Rights of the European Union, Arts 16 and 17; Council Decision 2014/145/CFSP; Council Regulation No 269/2014)

   (see paragraphs 125, 126)

10. Action for annulment – Pleas in law – Action brought against a decision to freeze the funds of a financial institution – Plea relied upon by a financial institution alleging infringement of the right to property of its customers – No possibility for the financial institution concerned to rely on the right to property of its customers

    (Art. 263 TFEU)

    (see paragraph 129)

11. Action for annulment – Jurisdiction of the EU judicature – Review of the lawfulness of an act adopted by a national authority in the implementation of derogations to measures for the freezing of funds – Not included

    (Art. 263 TFEU)

    (see paragraph 131)

12. Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds of persons supporting, materially or financially, the Government of the Russian Federation – Application in derogation seeking the release of certain funds – Discretion of the competent national authority – Limits – Respect for fundamental rights

    (Charter of Fundamental Rights of the European Union, Arts 51(1) and 52; Council Decision 2014/145/CFSP; Council Regulation No 269/2014)

    (see paragraphs 132, 133)

13. Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds of certain persons and entities having regard to the situation in Ukraine – Restriction of the right to property and freedom of enterprise – No breach of the principle of proportionality

    (Charter of Fundamental Rights of the European Union, Arts 16, 17 and 52(1); Council Decision 2014/145/CFSP; Council Regulation No 269/2014)

    (see paragraphs 135-146)

Résumé

In its judgment, the General Court dismisses the action for annulment brought by the applicant, the company NKO AO National Settlement Depository (NSD), against the acts by way of which the name of that company was included, in June 2022, ( 1 ) then maintained, in March ( 2 ) and September 2023, ( 3 ) by the Council of the European Union, on the lists of persons and entities subject to restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (‘the lists at issue’). This case inter alia allows the Court to provide clarification as to the role of national authorities in the implementation of derogations to measures for the freezing of funds.

This judgment arises in the context of the restrictive measures adopted by the European Union following the military aggression launched by the Russian Federation against Ukraine on 24 February 2022. The applicant, a Russian non-bank financial institution and central securities depositary (‘CSD’) in Russia, had its funds and economic resources frozen on the basis of the criterion relating to natural or legal persons, entities or bodies supporting, materially or financially, the Russian Government, which is responsible for the annexation of Crimea and the destabilisation of Ukraine. ( 4 )

Findings of the Court

In the first place, in the context of the plea alleging error of assessment on the part of the Council, the Court examines, first of all, the admissibility of the evidence produced by the Council in annex to its defence and its rejoinder. In that connection, the Court recalls that the legality of an EU measure must be assessed on the basis of the facts and the law as they stood at the time when the measure was adopted, and that review of substantive legality thus incumbent on the Court must be carried out in the light not only of the material set out in the statements of reasons for the acts at issue, but also in the light of the material provided by the Council, in the event of challenge, to the Court in order to establish that the facts alleged in those statements are made out. The Court states, moreover, that in its earlier case-law, ( 5 ) it was not its intention to preclude any possibility of taking into account, when conducting its review of the legality of the contested acts, additional evidence that was not contained in the evidence file and which is produced to confirm that the facts alleged in the statement of reasons are made out as long as that evidence (i) substantiates material that the Council had at its disposal and (ii) relates to events prior to the adoption of the contested acts.

In the present case, the Court holds that some of the evidence produced by the Council in annex to its defence cannot be taken into consideration in ascertaining whether the initial acts are well founded, but finds, by contrast, that the evidence produced at the rejoinder stage is admissible.

Next, the Court rules that the Council could validly consider that, from both a quantitative and a qualitative perspective, the applicant was significantly supporting, materially or financially, the Russian Government, by enabling it in its financial resources with the aim of pursuing its actions to destabilise Ukraine. The Council in fact had, from the time when the initial acts were adopted, a sufficient factual basis for considering that the applicant was an important financial institution for Russia’s financial system and had connections to the international financial system. It could also find that, through the services that it offered to the Russian Government as a CSD in the issuing, custody and management of government bonds, the applicant enabled that government in its activities, policies and resources.

Finally, according to the Court, the finding that the applicant is under the control of the Russian Government cannot be decisive in justifying the inclusion of the applicant on the lists at issue. The criterion of material or financial support to the government does not require that it be established that that government controls the person, entity or body supporting it.

As regards, in the second place, the plea alleging breach of the applicant’s fundamental rights, the Court notes, first of all, that an applicant cannot rely, in support of his or her action for annulment, on a right to property that he or she does not hold. Furthermore, in the context of an action for annulment, the Court does not have jurisdiction to carry out a review of the lawfulness of decisions adopted by national authorities or of judgments delivered by national courts. The Court points out, however, that when deciding on a request for release of frozen funds pursuant to the derogations laid down by Decision 2014/145, as amended, and Regulation No 269/2014, as amended, the competent national authority is required to observe the Charter of Fundamental Rights of the European Union (‘the Charter’). ( 6 ) It follows that, for customers of the applicant who are not subject to any restrictive measures and whose funds or economic resources are frozen on account of the restrictive measures taken against the applicant, in the context of the examination of a request for release of frozen funds or economic resources, it is for the national authorities to ensure that the interference with the right to property of those customers is in compliance with the conditions laid down in Article 52 of the Charter.

Next, the Court considers that the applicant has no basis for claiming any additional infringement of its freedom to conduct a business inasmuch as the derogations provided for by Decision 2014/145, as amended, and Regulation No 269/2014, as amended, were not capable of enabling it to return its customers’ securities, which it held in its frozen accounts with depositories established in the European Union.

The Court recalls that the contested acts provide for derogations enabling the national authorities to authorise the release of certain of the applicant’s funds or economic resources. Thus, Decision 2014/145, as amended, and Regulation No 269/2014, as amended, provide, in particular, for the possibility of releasing certain frozen own funds or economic resources in order to satisfy the basic needs of legal persons, entities or bodies included on the lists at issue, in respect of the reimbursement of incurred expenses, ( 7 ) to make a payment due under a contract or agreement concluded before the date of inclusion on the lists at issue, ( 8 ) or to terminate operations, contracts or other agreements concluded with, or otherwise involving, the applicant. ( 9 ) Since the applicant does not dispute the lawfulness of the latter derogation, but rather the lawfulness of the measures taken by the national authorities in implementing it, the Court recalls that it does not have jurisdiction, under Article 263 TFEU, to examine the lawfulness of acts adopted by the national authorities in implementing EU law.

In the light of the foregoing, the Court dismisses the action in its entirety.

( 1 ) Council Decision (CFSP) 2022/883 of 3 June 2022 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2022 L 153, p. 92), and of Council Implementing Regulation (EU) 2022/878 of 3 June 2022 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2022 L 153, p. 15) (together, ‘the initial acts’).

( 2 ) Council Decision (CFSP) 2023/572 of 13 March 2023 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2023 L 75I, p. 134), and of Council Implementing Regulation (EU) 2023/571 of 13 March 2023 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2023 L 75I, p. 1) (together, ‘the maintaining acts of March 2023’).

( 3 ) Council Decision (CFSP) 2023/1767 of 13 September 2023 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2023 L 226, p. 104), and Council Implementing Regulation (EU) 2023/1765 of 13 September 2023 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2023 L 226, p. 3) (together, ‘the maintaining acts of September 2023’).

( 4 ) Article 2(1)(f) of Council Decision 2014/145/CFSP of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2014 L 78, p. 16), as amended by Council Decision (CFSP) 2022/329 of 25 February 2022 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2022 L 50, p. 1), and Article 3(1)(f) of Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2014 L 78, p. 6), as amended by Council Regulation (EU) 2022/330 of 25 February 2022 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2022 L 51, p. 1).

( 5 ) Judgment of 1 June 2022, Prigozhin v Council (T‑723/20, not published, EU:T:2022:317).

( 6 ) See Article 51(1) of the Charter.

( 7 ) See Article 4(1) of Regulation No 269/2014.

( 8 ) See Article 2(5) of Decision 2014/145 and Article 6(1) of Regulation No 269/2014.

( 9 ) By the adoption of Council Decision (CFSP) 2022/1907 of 6 October 2022 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (OJ 2022 L 259 I, p. 98), and of Council Regulation (EU) 2022/1905 of 6 October 2022 amending Regulation No 269/2014 (OJ 2022 L 259 I, p. 76). See Article 2(19) of Decision 2014/145, as amended, and Article 6b(5) of Regulation No 269/2014, as amended.