Eva Kassoti* and Alina Carrozzini**

*Senior Researcher, CLEER academic co-ordinator, T.M.C. Asser Institute. E-mail: E.Kassoti@asser.nl

**MPhil/PhD Candidate, Dickson Poon School of Law, King’s College London. Email: alina.carrozzini@kcl.ac.uk

A June 22, 2021, ruling by the Grand Chamber of the Court of Justice determined that Venezuela can legally challenge a set of European Union restrictive measures if it meets the remaining conditions outlined in Article 263 (4) TFEU. (Previous analyses of this judgment can be found here and here). This decision carries significant weight in three key areas: (a) challenging restrictive measures within EU courts; (b) EU procedural law in general, as it clarifies whether third-party states can challenge EU court actions; and (c) judicial review concerning international sanctions levied against Venezuela (in December 2018, Venezuela filed a WTO complaint against comparable US economic sanctions, which remains pending).

This case is an appeal of a General Court judgment issued on September 20, 2019. The General Court found that Venezuela was not directly impacted by these measures and lacked standing under Art. 263(4) TFEU. However, it did not consider whether Venezuela qualified as a legal entity according to the same provision. Conversely, the Grand Chamber of the Court of Justice, aligning with AG Hogan’s Opinion (see analysis here), determined that Venezuela is a legal entity under Art. 263(4) TFEU and is directly affected by the restrictive measures. Consequently, the Court of Justice remanded the case to the General Court for a decision on its merits.

This blog post aims to: a) summarize the Court’s reasoning and findings on a crucial part of the judgment: whether third-party states qualify as legal entities according to Art. 263(4) TFEU; and b) examine the judgment’s wider ramifications.

The CJEU’s stance on the legal personhood of third-party states within the context of Art. 263(4) TFEU: A Summary

The Court initially highlighted that a ‘legal person’ under Art. 263(4) TFEU is defined by EU law. Therefore, interpreting this provision requires considering not only its text but also its context and purpose (para. 42). Using a textual analysis, the Court emphasized that the provision’s language implies that no ‘legal person’ category is inherently excluded from initiating proceedings in EU courts (para. 43). Based on this, it argued against a strict interpretation of this concept (para. 44). The Court cited past case law to demonstrate that various entities, including local or regional entities (e.g., Nederlandse Antillen v Council); public entities (e.g., Deutsche Bahn and Others v Commission); and even organizations without legal personhood that are subject to restrictive measures (e.g., PKK and KNK v Council)), are eligible to pursue action under Art. 263(4) TFEU (paras. 45-47).

When interpreting the provision contextually and teleologically, the Court determined that Art. 263(4) TFEU should be viewed considering EU values and principles guiding its external actions. The Court asserted that the principle of effective judicial protection is fundamental to the rule of law. The rule of law, in turn, represents a core EU value and a guiding principle for its external actions (Art. 21 TEU), including the CFSP (Art. 23 TEU) (paras. 48-49). Consequently, the Court deduced that interpreting Art. 263(4) TFEU “in light of the principles of effective judicial review and the rule of law supports the finding that a third-party State should be able to initiate legal proceedings as a legal person" – as long as all other conditions stipulated within are satisfied (para. 50). The Court promptly rejected the argument that granting third-party states standing before EU courts to challenge EU actions might jeopardize reciprocity between the EU and these states, as there’s no guarantee that the EU could challenge similar national measures adopted by those states. It maintained that the EU’s obligation to uphold the rule of law cannot hinge on reciprocity (paras. 51-52). Therefore, the Court concluded that Venezuela, as a state with international legal personhood, must be recognized as a legal person according to Art. 263(4) TFEU.

Observations on the Venezuela Judgment

This judgment is particularly noteworthy because it conclusively resolves the significant procedural issue of whether third-party states have the legal capacity to pursue annulment actions against restrictive measures. Although the General Court has acknowledged this possibility in the past, those rulings did not involve restrictive measures, unlike the current case (Cambodia and CRF v Commission, para. 51; Poland v Commission, paras. 51,52; Switzerland v Commission, para. 22). Concerning restrictive measures, the ruling highlights the Court’s increasing willingness to permit judicial review of these measures within EU courts. This line of case law affirms that the Union’s dedication to the rule of law and effective judicial protection extends to the CFSP (H v Council, para. 41; Bank Refah Kargaran v Council, para. 35). This ruling could significantly impact future EU sanctions. Firstly, it may lead to third-party states filing lawsuits for damages in EU courts. Secondly, it might make the Council more hesitant to impose restrictive measures in the future.

The Court chose not to extensively address the reciprocity argument. Nevertheless, the parties involved in the appeal relied on this argument, warranting further discussion. The argument presumes that international law governs the relationship between the EU and third-party states in this specific context (paras. 29, 30). One fundamental principle of international law is reciprocity; therefore, permitting third-party states to bring actions against EU legislation in EU courts—without confirming reciprocal access for the EU to the third-party state’s courts—could potentially undermine this principle (para. 30). However, this argument’s premise is inherently flawed because international law does not govern the issue in question. While it’s true that reciprocity is a fundamental principle of international law and a structural principle within EU external relations law, as AG Bot pointed out in Opinion 1/17 regarding CETA (para. 77), this principle pertains to the EU’s external treaty relations. Crucially, the matter at hand doesn’t concern an international agreement between a third-party state and the EU. Instead, it revolves around whether a state permits another state to file suits in its domestic courts. Public international law does not govern this matter; as previously discussed, comity is a domestic law doctrine that affords deference to foreign states, enabling them to participate as plaintiffs in domestic court cases. Hence, the principle of reciprocity does not apply in this situation. US court precedents demonstrate additional reasons against extending the principle of comity to the question of standing for third-party states to sue (Banco National de Cuba v Sabbatino judgment by the US Supreme Court, p. 376). Firstly, rejecting a lawsuit based on reciprocity would essentially prevent judicial review of an act impacting a third-party state’s interests, making it impossible for a court to assess if the dispute has been fairly settled. Secondly, making standing dependent on reciprocity would necessitate examining the EU’s precise legal standing before foreign courts – a complex task requiring intricate determinations about the structural formalities of foreign judicial systems.

Similarly, the Court did not address the Commission’s argument that defining a ‘legal person’ under Art. 263(4) TFEU, and thus the question of third-party state access to EU courts, hinges on the nature of the state’s actions (para. 37). The Commission, citing the distinction between acts performed in a private capacity (acta jure gestionis) and those performed in the exercise of state sovereignty (acta jure imperii), argued that under international law, a state cannot be subjected to the jurisdiction of another state for acts performed in a sovereign capacity—a consequence of the principle of sovereign equality among states (para. 37). It is valuable to briefly address this point. This argument is flawed because it assumes that the issue at hand concerns state immunity under public international law. To be more precise, the differentiation between acta jure gestionis and acta jure imperii aims to define the scope and limitations of a state’s immunity from legal action under public international law (ICJ, Jurisdictional Immunities of the State, para. 60). However, state immunity is an international legal principle stating that a state cannot be sued in another sovereign state’s courts without consent. As such, it does not mean that third-party states are prohibited from being claimants in foreign courts—as explicitly stated in Art. 8 of the 2004 UN Convention on Jurisdictional Immunities of States and their Property, which is a matter of domestic law.

Fundamentally, this judgment is significant for the EU’s international standing. By directly linking third-party state access to EU courts with the principles of effective judicial protection and the rule of law, the judgment strengthens the image of the EU as a confident global entity unequivocally committed to upholding its core values while shaping its relationships with the rest of the world.

Barnard & Peers: chapter 24

Photo credit: JunCTionS, via Wikimedia Commons