Case T‑215/15

Mykola Yanovych Azarov

v

Council of the European Union

(Common foreign and security policy — Restrictive measures taken in view of the situation in Ukraine — Freezing of funds — List of persons, entities and bodies subject to the freezing of funds and economic resources — Maintaining the applicant’s name on the list — Obligation to state reasons — Rights of defence — Right to property — Right to pursue an economic activity — Proportionality — Misuse of powers — Principle of good administration — Manifest error of assessment)

Summary — Judgment of the General Court (Sixth Chamber), 7 July 2017

1. Acts of the institutions — Statement of reasons — Obligation — Scope — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Decision falling within a context known to the person concerned, enabling him to understand the scope of the measure taken against him — Whether summary statement of reasons sufficient — Limits — Statement of reasons not capable of consisting of a general and stereotyped formulation

   (Art. 296 TFEU; Charter of Fundamental Rights of the European Union, Art. 41(2)(c); Council Decision (CFSP) 2015/143; Council Regulation 2015/357)

2. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Decision to freeze funds — Rights of defence — Notification of inculpatory evidence — Subsequent decision maintaining the name of the applicant on the list of persons covered by those measures — That decision based on new factors not appearing in the initial decision — Infringement of the right to be heard — None

   (Charter of Fundamental Rights of the European Union, Art. 41(2)(a); Council Decision 2014/119/CFSP, as amended by decisions (CFSP) 2015/143 and (CFSP) 2015/364; Council Regulation No 208/2014, as amended by regulations 2015/138 and 2015/357)

3. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Restriction of the right to property — Breach of principle of proportionality — None

   (Art. 21(2) TEU; Charter of Fundamental Rights of the European Union, Arts 17(1) and 52(1); Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

4. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Restriction of the right to property and the free exercise of an economic activity — Breach of principle of proportionality — None

   (Charter of Fundamental Rights of the European Union, Art. 16; Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

5. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Misappropriation of public funds — Concept — Acts of misappropriation of public funds or assets capable of undermining the institutional and legal foundations of Ukraine and respect for the rule of law in that country

   (Council Decision 2014/119/CFSP, Art. 1(1), as amended by decision (CFSP) 2015/143)

6. European Union — Judicial review of the legality of the acts of the institutions — Restrictive measures taken having regard to the situation in Ukraine — Ambit of the review — Proof the measure well-founded — Obligation on the competent EU authority to establish, in the event of challenge, that the grounds held against the persons or entities concerned well-founded

   (Charter of Fundamental Rights of the European Union, Art. 47; Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

7. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Nature of those measures — Purely protective measures — No criminal character

   (Art. 21(2)(b) TEU; Council Decision 2014/119/CFSP, first and second recitals)

8. 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 involved in the misappropriation of public funds — Ambit of the review — Proof the measure well-founded — Obligation on the Council systematically to verify evidence submitted by the authorities of a non-Member country — None — Obligation, for the Council, to carry out additional checks in the event of insufficient or unclear evidence provided by the authorities of a country

   (Art. 6(1), first para. TEU; Charter of Fundamental Rights of the European Union, Art. 51(1); Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

9. Common foreign and security policy — Restrictive measures against certain persons and entities in view of the situation in Ukraine — Freezing of funds of persons involved in the misappropriation of public funds — Assessment of the legality by reference to the information available at the time of adoption of the decision

   (Art. 263 TFEU; Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

10. European Union — Judicial review of the legality of the acts of the institutions — Restrictive measures taken having regard to the situation in Ukraine — Ambit of the review — Proof the measure well-founded — Obligation on the competent EU authority to establish, in the event of challenge, that the grounds held against the persons or entities concerned well-founded — Breadth of the discretion of that competent authority

    (Council Decision (CFSP) 2015/364; Council Regulation 2015/357)

1.  The statement of reasons required by Article 296 TFEU and Article 41(2)(c) of the Charter of Fundamental Rights of the European Union must be appropriate to the nature of the contested act and to the context in which it was adopted. It must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the person concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case.

   It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 296 TFEU and Article 41(2)(c) of the Charter must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. Accordingly, the reasons given for a measure adversely affecting a person are sufficient if that measure was adopted in a context which was known to that person and which enables him to understand the scope of the measure concerning him. Moreover, the degree of precision of the statement of the reasons for a measure must be weighed against practical realities and the time and technical facilities available for taking the measure. In particular, the statement of reasons for an asset-freezing measure cannot, in principle, consist merely of a general, stereotypical formulation. Subject to the qualifications stated above, such a measure must, on the contrary, indicate the actual and specific reasons why the Council considers that the relevant legislation is applicable to the person concerned.

   (see paras 39-41)

2.  The fundamental right to respect for the rights of defence during a procedure preceding the adoption of a restrictive measure is expressly affirmed in Article 41(2)(a) of the Charter of Fundamental Rights of the European Union.

   In the case of a subsequent decision to freeze funds by which the inclusion of the name of a person or entity already appearing on the list of persons and entities whose funds are frozen is maintained, the adoption of such a decision must, in principle, be preceded by notification of the incriminating evidence and by allowing the person or entity concerned an opportunity of being heard.

   That right to be heard beforehand must be respected where the Council has relied on new evidence against a person covered by the restrictive measure whose name is maintained on the list at issue.

   (see paras 56-58)

3.  A measure freezing funds undeniably entails a restriction of the exercise of the right to property.

   However, the right to property, as protected by Article 17(1) of the Charter of Fundamental Rights of the European Union, does not constitute an unfettered prerogative and may therefore have limitations attached to it, under the conditions laid down in Article 52(1) of the Charter.

   As is clear from Article 52(1) of the Charter, a limitation on the exercise of that right must, in order to comply with EU law, satisfy three conditions.

   First, the limitation must be ‘provided for by law’. In other words, the measure must have a legal basis. Secondly, it must refer to an objective of general interest, recognised as such by the European Union. Those objectives include those pursued under the Common Foreign and Security Policy and referred to in Article 21(2) TEU. Thirdly, the limitation must not be excessive: it must be necessary and proportional to the aim sought and the ‘essential content’, that is, the substance, of the right or freedom at issue must not be impaired.

   So far as concerns the proportionality of the interference in the applicant’s right to property, it should be recalled that the principle of proportionality, as one of the general principles of EU law, requires that measures adopted by the EU institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives pursued by the legislation in question. Consequently, when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.

   The disadvantages caused by the restrictive measures are not disproportionate to the objectives pursued, bearing mind, first, that those measures are by nature temporary and reversible and do not therefore infringe the ‘essential content’ of the right to property, and, secondly, that they may be derogated from in order to cover the basic needs, the legal costs or even the extraordinary expenses of the persons concerned.

   (see paras 76, 78-80, 84, 85)

4.  Although a restrictive measure may have considerable adverse consequences and a substantial impact on the business life of the person concerned, it is intended only to freeze his assets on a precautionary basis. Its immediate purpose is thus not to prevent the person concerned from pursuing industrial or commercial activities for profit within the European Union.

   So far as concerns the freedom to pursue an economic activity, in the light of the wording of Article 16 of the Charter of Fundamental Rights of the European Union, that freedom may be subject to a broad range of interventions on the part of public authorities which may limit the exercise of economic activity in the public interest.

   (see paras 91, 92)

5.  The listing criterion set out in Article 1(1) of Decision 2014/119 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine, as clarified by Decision 2015/143, provides that restrictive measures are to be adopted against persons ‘identified as responsible’ for acts of misappropriation of public funds — including persons ‘subject to investigation by the Ukrainian authorities’ for the misappropriation of Ukrainian public funds or assets. That criterion is to be interpreted as meaning that it does not concern, in abstract terms, any act classifiable as misappropriation of public funds, but rather acts classifiable as misappropriation of public funds or assets which are such as to undermine respect for the rule of law in Ukraine.

   (see para. 133)

6.  Although the Council has a broad discretion when it comes to the general criteria to be taken into consideration for the purpose of adopting restrictive measures, the effectiveness of the judicial review guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union requires that, as part of the review of the lawfulness of the grounds which are the basis of the decision to include or to maintain a person’s name on the list of persons subject to restrictive measures, the Courts of the European Union are to ensure that that decision, which affects that person individually, is taken on a sufficiently solid factual basis. That entails a verification of the factual allegations in the summary of reasons underpinning that decision, with the result that the judicial review is not confined to an assessment of the abstract plausibility of the reasons relied on, but looks at whether those reasons, or, at the very least, one of those reasons, deemed sufficient in itself to support that decision, are substantiated by sufficiently precise and concrete evidence.

   Moreover, when comments are made by the individual or the entity concerned on the summary of reasons, the competent EU authority is under an obligation to examine, carefully and impartially, whether the alleged reasons are well founded, in the light of those comments and any exculpatory evidence provided with those comments.

   (see paras 136, 137)

7.  In order to assess the nature, form and degree of the proof that the Council may be required to provide, it is necessary to take account of the specific nature and scope of the restrictive measures, as well as of their objective.

   As is apparent from recitals 1 and 2 of Decision 2014/119 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine, that decision forms part of a more general EU policy of support for the Ukrainian authorities which is intended to promote the political stability of Ukraine. It thus satisfies the objectives of the Common Foreign and Security Policy, which are defined, in particular, in Article 21(2)(b) TEU, pursuant to which the European Union is to engage in international cooperation with a view to consolidating and supporting democracy, the rule of law, human rights and the principles of international law.

   It follows that the restrictive measures forming part of such a framework which are not intended to penalise any misconduct in which the persons concerned may have engaged, or to deter them, by coercion, from engaging in such conduct, but their sole purpose is to facilitate the Ukrainian authorities’ identification of any misappropriation of public funds that has taken place and to protect the possibility of the authorities recovering misappropriated public funds, are purely precautionary. Such measures, which were imposed by the Council on the basis of the powers conferred on it by Articles 21 and 29 TEU, have no criminal-law aspect.

   (see paras 138, 139, 141, 142)

8.  The Council is not required to carry out, systematically and on its own initiative, its own investigations or checks for the purpose of obtaining additional information, when it already has information provided by the authorities of a third country in taking restrictive measures against nationals of that country who are the subject of judicial proceedings in that country.

   Furthermore, in the context of the cooperation governed by the contested acts, it is not, in principle, for the Council itself to examine and assess the accuracy and relevance of the information relied on by the Ukrainian authorities in conducting criminal proceedings in respect of the applicant for conduct that could be characterised as misappropriation of public funds. In adopting the contested acts, the Council does not seek itself to punish the misappropriation of public funds being investigated by the Ukrainian authorities, but to protect the possibility of the authorities identifying such misappropriation and recovering the funds thus misappropriated. It is therefore for those authorities, in the context of those proceedings, to verify the information on which they are relying and, where appropriate, to draw the appropriate conclusions as regards the outcome of those proceedings.

   That interpretation is confirmed by the case-law to the effect that it is not for the Council to verify whether the investigations of which the person concerned is the subject are well founded, but only to verify whether that is the case as regards the decision to freeze funds in the light of those investigations.

   Admittedly, the Council cannot, in all circumstances, adopt the findings of the Ukrainian authorities. Such conduct would not be consistent with the principle of good administration nor, generally, with the obligation on the part of the EU institutions to respect fundamental rights in the application of EU law, under the combined provisions of the first subparagraph of Article 6(1) TEU and Article 51(1) of the Charter of Fundamental Rights of the European Union. However, it is for the Council to assess, on the basis of the circumstances of the case, whether it is necessary to investigate further, in particular to seek the disclosure of additional evidence from the Ukrainian authorities if it transpires that the evidence already supplied is insufficient or inconsistent. Information communicated to the Council, either by the Ukrainian authorities themselves or in some other way, might conceivably lead that institution to doubt the adequacy of the evidence already supplied by those authorities. Furthermore, when availing themselves of the opportunity which the persons concerned must be given to submit their comments on the reasons which the Council intends to use to maintain their names on the list at issue, those persons may submit such information, or even exculpatory evidence, which would require the Council to investigate further. In particular, while it is not for the Council to take the place of the Ukrainian judicial authorities in assessing whether the criminal proceedings are well founded, it is not inconceivable that, in the light, in particular, of the applicant’s observations, the Council might be obliged to seek clarification from those Ukrainian authorities with regard to the material on which those proceedings are based.

   (see paras 143, 145-148)

9.  A decision to freeze assets is to be assessed in the light of the information available to the Council when the decision was adopted. The legality of a European Union measure is assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted.

   (see para. 162)

10.  If the Council’s eminently political decision to cooperate with the new Ukrainian authorities – which it considers to be trustworthy – so as to enable them in particular to recover any misappropriated public funds ‘with a view to consolidating and supporting the rule of law’ in Ukraine were subject to the condition that, notwithstanding the fact that that country is a member of the Council of Europe and has ratified the European Convention on Human Rights, the Ukrainian State should, immediately after the change of regime, guarantee a level of protection of fundamental rights equivalent to that offered by the European Union and its Member States, the broad discretion enjoyed by the Council when it comes to defining the general criteria for identifying the category of persons capable of forming the subject of restrictive measures to support those new authorities would in effect be undermined.

    In exercising that broad discretion, the Council must therefore be free to take the view that, following the change of regime, the Ukrainian authorities deserve to be supported in so far as they are improving democratic life and respect for the rule of law in Ukraine as compared with the state of affairs obtaining there previously, and that one way of consolidating and supporting the rule of law is to freeze the assets of persons having been identified as responsible for the misappropriation of Ukrainian State funds, a category which, following the January 2015 acts, includes persons under investigation by the Ukrainian authorities for misappropriation of public funds or complicity therein, and for abuse of office or complicity therein.

    Consequently, only if the Council’s political decision to support the new Ukrainian regime, including by way of cooperation in the form of the restrictive measures at issue, proved to be manifestly erroneous, in particular because fundamental rights are being systematically violated in that country following the change of regime, could any inconsistency between the protection of fundamental rights in Ukraine and that in place in the European Union have a bearing on the legality of maintaining those measures against the applicant.

    (see paras 173-175)