Case T‑644/22

Gennady Nikolayevich Timchenko
and
Elena Petrovna Timchenko

Council of the European Union

Judgment (Grand Chamber) of 11 September 2024

(Common foreign and security policy – Restrictive measures 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 of the applicants’ names on the list – Obligation to report funds or economic resources belonging to or owned, held or controlled by the applicants – Obligation to cooperate with the competent national authority – Participation in activities the object or effect of which is to circumvent restrictive measures – Article 9(2) and (3) of Regulation (EU) No 269/2014 – Action for annulment – Locus standi – Direct concern – Regulatory act not entailing implementing measures – Interest in bringing proceedings – Admissibility – Misuse of powers – Power of the Council – Proportionality – Legal certainty)

Action for annulment – Natural or legal persons – Acts that are of direct and individual concern to them – Direct concern – Criteria – Restrictive measures taken in view of the situation in Ukraine – Regulation requiring persons included on the lists of persons subject to restrictive measures to report their funds or economic resources and to cooperate with the competent national authorities – Action brought by persons appearing on those lists – Admissibility

(Art. 263, fourth para., TFEU; Council Decision 2014/145/CFSP, Annex; Council Regulations No 269/2014, Art. 9(2) and (3) and Annex I, and 2022/1273, Art. 1, point 4)

(see paragraphs 25, 31, 32, 34)
Action for annulment – Natural or legal persons – Interest in bringing proceedings – Need for a vested and present interest – Assessment at the time when the action was brought – Action against an act requiring persons included on the lists of persons subject to restrictive measures to report their funds or economic resources and to cooperate with the competent national authorities – Action brought by persons appearing on those lists – Existence of an interest in bringing proceedings on the part of those persons without it being necessary to demonstrate infringement of the reporting and cooperation obligations

(Art. 263, fourth para., TFEU; Council Regulations No 269/2014, Art. 9(2) and (3), and 2022/1273)

(see paragraphs 38-41)
Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds – Obligations to report funds and to cooperate with the competent national authorities – Provisions laying down those obligations being such as to ensure the effective and uniform implementation of the restrictive measures provided for in Decision 2014/145 – Legal basis – Article 215 TFEU – Whether permissible

(Arts 24(2), 29 and 40 TEU; Art. 215(2) TFEU; Council Decision 2014/145/CFSP; Council Regulations No 269/2014, Art. 9(2), and 2022/1273)

(see paragraphs 53-55, 59-63, 65)
Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds – Obligations to report funds and to cooperate with the competent national authorities – Infringement – Treated as a circumvention of restrictive measures – Not classified as a criminal offence – Legal basis – Article 215 TFEU – Whether permissible

(Art. 40 TEU; Arts 83(1) and 215(2) TFEU; Council Regulations No 269/2014, Arts 9(3) and 15(1), 2022/880 and 2022/1273)

(see paragraphs 76-81, 84, 85)
Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds – Obligations to report funds and to cooperate with the competent national authorities – Whether appropriate – Infringement of those obligations – Penalties – Breach of principle of proportionality – None

(Council Decision 2014/145/CFSP; Council Regulations No 269/2014, Art. 9(2) and (3), and 2022/1273)

(see paragraphs 101-104)
Common foreign and security policy – Restrictive measures taken in view of the situation in Ukraine – Freezing of funds – Obligations to report funds and to cooperate with the competent national authorities – Concepts of funds belonging to, owned, held or controlled – Sufficiently clear and precise concepts – Compliance with the principle of legal certainty requiring clarity, precision and foreseeability of the effects of legal rules

(Council Regulations No 269/2014, Art. 9(2), and 2022/1273)

(see paragraphs 114, 117-122)

Résumé

In its judgment, the General Court, sitting as the Grand Chamber, confirms that the Council of the European Union has the power (i) to impose obligations to report funds and cooperate with the competent national authorities on persons subject to restrictive measures, and (ii) to treat non-compliance with those obligations as a circumvention of fund-freezing measures.

That judgment arises in the context of a package of restrictive measures adopted by the European Union in response to the war operations that the Russian Federation has been conducting against Ukraine since March 2014. In 2022, Mr Timchenko, a businessman with Russian and Finnish nationality, and his wife were included on the lists of persons, entities and bodies subject to restrictive measures set out in the annex to Decision 2014/145 ( 1 ) and Annex I to Regulation No 269/2014. ( 2 )

In the present case, they ask the Court to annul Article 9(2) and (3) of Regulation No 269/2014, as amended by Article 1, point 4, of Regulation 2022/1273. ( 3 ) Those paragraphs, respectively, lay down obligations to report funds and to cooperate with the competent national authorities and provide that failure to comply with those obligations is to be treated as participation in the circumvention of fund-freezing measures.

According to the applicants, by adopting those provisions, the Council exceeded the powers conferred on it by Article 215(2) TFEU and acted in the stead of the Member States in deciding how the restrictive measures should be implemented and what penalties should apply in the territory of the Member States. They also claim that the reporting obligation infringes the principle of legal certainty in so far as it is based on concepts that are imprecise.

The Court dismisses the action.

Findings of the Court

In the first place, concerning the Council’s power to adopt the contested provisions on the basis of Article 215(2) TFEU, the Court recalls, first, that under Articles 24 and 29 TEU, the Council has a broad discretion in determining, in decisions taken unanimously in the field of the CFSP, the persons and entities that are to be subject to the restrictive measures that the European Union adopts in that field. Article 215 TFEU allows the Council to adopt regulations in order to implement or give effect to restrictive measures and to ensure their uniform application in all Member States. Such measures are not limited to obligations not to act.

Thus, decisions adopted under Article 29 TEU declare the position of the European Union with respect to the restrictive measures to be adopted, while regulations adopted on the basis of Article 215 TFEU relate to those decisions and constitute the instrument giving effect to them at EU level.

In the present case, the reporting and cooperation obligations laid down in Article 9(2) of Regulation No 269/2014, as amended, were established in order to ensure the uniform application of that regulation in the territory of the European Union and to thwart strategies to circumvent restrictive measures, strategies made possible, in particular, by recourse to complex legal and financial arrangements. Consequently, those obligations are such as to ensure the effective and uniform implementation of the restrictive measures for the freezing of funds provided for in Decision 2014/145, to which they relate.

For those reasons, the Council was entitled, on the basis of Article 215(2) TFEU and without infringing Article 29 TEU, to adopt such obligations by means of an EU regulation, irrespective of the fact that those obligations were not expressly provided for in the related decision.

Secondly, the Court takes the view that both Article 9(3) of Regulation No 269/2014, as amended, and Article 15(1) thereof, as amended by Regulation 2022/880, ( 4 ) could be adopted by the Council under Article 215(2) TFEU and that the Council cannot thus be accused of having improperly acted in the stead of the Member States in the exercise of their legislative powers. Those provisions cannot be regarded as constituting an offence of a criminal nature and, therefore, as having been adopted in breach of Article 83 TFEU.

The characterisation of participation in circumvention activities cannot, as such, be considered to constitute an offence of a criminal nature. Furthermore, it follows from the wording of Article 15(1) of Regulation No 269/2014, as amended, and from the last sentence of recital 5 of Regulation 2022/880 that the decision as to whether the applicable penalties for infringing Regulation No 269/2014 are to be of a civil, administrative or criminal nature falls within the power conferred on the Member States, including where the penalty of confiscation of the proceeds of an infringement is imposed.

Since the legal rules governing the reporting and cooperation obligations and the penalties provided for in the event of infringement of those obligations do not fall within the scope of criminal law, with the result that Article 83 TFEU has not been infringed, the Council has also not infringed Article 40 TEU.

In the second place, the Court clarifies the concept of restrictive measures by distinguishing it from the penalty of confiscation of the proceeds of infringements in the event of failure to comply with the reporting and cooperation obligations laid down in Article 15(1) of Regulation No 269/2014. Such a penalty applies only to ‘the proceeds of … infringements’, whereas the subject matter of the restrictive measures, which retain their precautionary and temporary nature, is concerned with funds and economic resources as determined by Article 2(1) of Regulation No 269/2014. Accordingly, the penalties attached to the circumvention referred to in Article 9(3) of Regulation No 269/2014, as amended, do not alter the nature of the restrictive measures.

In the third place, concerning the precision of the concepts used as the basis for the reporting obligation at issue, the Court recalls that the principle of legal certainty requires that EU legislation be clear and precise and that its application be foreseeable for all interested parties.

In the present case, the wording used in Article 9(2) of Regulation No 269/2014, as amended, refers to the concepts of ‘belonging to, owned, held or controlled’, which are autonomous concepts of EU law and, as such, must be interpreted in a uniform manner throughout the territory of the European Union, taking into account the wording of that provision and the context in which it occurs and also the objectives pursued by the rules of which it is part.

In that regard, at the time of the adoption of Article 9(2) of Regulation No 269/2014, as amended, the Council’s objective was to exert pressure on the persons and entities subject to restrictive measures, pressure that has a knock-on effect on the Russian authorities and is intended, in particular, to increase the costs of the Russian Federation’s actions to undermine Ukraine’s territorial integrity, sovereignty and independence. Against that background, it must be held that, by employing the concepts of ‘belonging to, owned, held or controlled’, the Council was referring to the right to dispose of or to use funds or economic resources, as defined in Article 1(d) and (g) of Regulation No 269/2014.

Those concepts do not therefore display any ambiguity capable of establishing the existence of legal uncertainty as to their scope or meaning for the persons subject to fund-freezing measures. In that regard, the fact that the Council organised a conference or had recourse to a best practice guide aimed at national authorities, with a view to clarifying the concepts used in the field of restrictive measures, is not in itself capable of establishing the existence of such legal uncertainty.

( 1 ) 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) 2022/337 of 28 February 2022 (OJ 2022 L 59, p. 1) and by Council Decision (CFSP) 2022/582 of 8 April 2022 (OJ 2022 L 110, p. 55).

( 2 ) Council Regulation (EU) No 269/2014 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. 6), as amended by Council Implementing Regulation (EU) 2022/336 of 28 February 2022 (OJ 2022 L 58, p. 1) and by Council Implementing Regulation (EU) 2022/581 of 8 April 2022 (OJ 2022 L 110, p. 3).

( 3 ) Council Regulation (EU) 2022/1273 of 21 July 2022 amending 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 194, p. 1).

( 4 ) Council Regulation (EU) 2022/880 of 3 June 2022 amending Regulation 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. 75). Article 15(1) of Regulation No 269/2014 now provides that ‘Member States shall lay down the rules on penalties, including as appropriate criminal penalties, applicable to infringements of the provisions of this Regulation and shall take all measures necessary to ensure that they are implemented’. It adds that ‘Member States shall also provide for appropriate measures of confiscation of the proceeds of such infringements’.