Professor Dr. Peter Van Elsuwege and Joyce De Coninck (PhD Researcher), Ghent European Law Institute

The recent Grand Chamber judgment in the case of Bank Refah Kargaran v Council, issued on October 6, 2020, sheds further light on the Court of Justice of the European Union’s (CJEU) jurisdiction concerning the EU’s Common Foreign and Security Policy (CFSP). Drawing on previous judgments such as Elitaliana, H v. Council, Rosneft, and SatCen vs. KF, the CJEU determined that EU courts have the authority to hear and decide cases seeking damages for harm allegedly caused by the enactment of CFSP decisions under Article 29 TEU. This decision overturns the General Court’s prior stance, which had consistently rejected this possibility due to the CJEU’s limited jurisdiction in CFSP matters. The full implications of the Bank Refah Kargaran judgment beyond the specific context of restrictive measures remain to be seen. However, it reaffirms that the CJEU’s role in CFSP is not as constrained as a superficial reading of the Treaties might imply.

Context of the Grand Chamber Ruling

Restrictive measures are implemented through Council Decisions based on Article 29 TEU. To ensure consistent application of these CFSP Council Decisions, the Council usually adopts corresponding regulations based on Article 215 TFEU, typically mirroring the content of the underlying Council Decision. The CJEU has consistently affirmed its jurisdiction over the substance of regulations based on Article 215 TFEU, including in cases concerning damages. However, until now, it remained unclear whether such claims for damages could be brought against the underlying CFSP Council Decisions regarding restrictive measures.

Bank Refah Kargaran had previously succeeded in obtaining the annulment of restrictive measures against it, based on Council Decisions 2010/664 and 2011/783 and subsequent Council Regulations 961/2010 and 1245/2011, due to insufficient reasoning. After securing the annulment of these decisions and regulations, Bank Refah Kargaran filed a claim for damages with the General Court, seeking compensation for losses incurred due to both the underlying Council Decisions and Council Regulations 961/2010 and 1245/2011, without distinguishing between them or their legal bases.

The General Court, in its judgment, acknowledged that this distinction between the Council Decisions (based on CFSP law) and the Council Regulations 961/2010 and 1245/2011 (based on Article 215 TFEU) had not been previously raised. Taking this into account, the General Court asserted its lack of jurisdiction to rule on a claim for damages concerning the Council Decisions. It emphasized its limited jurisdiction in CFSP matters, which primarily involve ensuring compliance with Article 40 TEU (delineating the boundary between CFSP and other EU law areas) and the legality of restrictive measures under Article 275(2) TFEU. Since Article 275(2) TFEU does not explicitly grant jurisdiction over damage claims related to restrictive measures, the General Court concluded that it lacked jurisdiction in the case at hand. However, it upheld its jurisdiction over Council Regulations 961/2010 and 1245/2011, as these measures were enacted based on Article 215 TFEU. The General Court then evaluated the requirements for a successful damage claim, emphasizing their cumulative nature, ultimately determining that these conditions had not been met.

The CJEU’s Grand Chamber ruling addresses the appeal against the General Court’s judgment and garnered significant attention, as it provided an opportunity to clarify the scope and limitations of its jurisdiction in CFSP matters. Specifically, the case raised the question of whether Article 275(2) TFEU should be interpreted teleologically, aligning with the approach in the Rosneft ruling, or textually, following the opinions presented by AG Wahl in H v Council and AG Kokott in Opinion 2/13.

Advocate General Hogan’s Opinion: Advocating a ‘Holistic and Harmonious’ Interpretation of the Treaties

AG Hogan’s opinion delves into the CJEU’s case law on jurisdiction in CFSP-related matters. It starts with the general jurisdiction outlined in Article 19 TEU and the exceptional and limited nature of jurisdiction in CFSP matters due to Article 24 TEU and Article 275(1) TFEU. AG Hogan argues that this limited jurisdiction stems from the understanding of the Treaties’ drafters that decisions of a purely political nature should be exempt from judicial scrutiny. However, he emphasizes that this exemption doesn’t apply to all foreign policy matters but only to “high-level politics and diplomacy, which by their very nature are inapt for judicial resolution.”

Based on this, AG Hogan identifies three key factors for determining whether the CJEU holds jurisdiction in foreign policy matters. Firstly, only acts adopted under Articles 23–46 TEU are shielded from judicial review. Secondly, certain acts, by their nature, are not immune from judicial scrutiny (e.g., staff management, as seen in H v. Council). Thirdly, the jurisdiction exclusions in Article 24 TEU and Article 275(1) TFEU are exceptions to the broader jurisdiction rule established in Article 19 TEU, thus requiring a narrow interpretation.

Within this framework, AG Hogan addresses the most debated aspect of the case: the treaty-based exceptions to the CJEU’s limited jurisdiction in CFSP matters, specifically those outlined in Article 40 TEU and Article 275(2) TFEU. Article 275(2) TFEU grants the CJEU jurisdiction to assess the legality of restrictive measures enacted within the CFSP framework “…in accordance with the conditions laid down in the fourth paragraph of Article 263 [TFEU],” linking CFSP jurisdiction to the legality review within annulment proceedings. This raises two interpretations: a strict reading suggesting the CJEU’s jurisdiction is limited to reviewing legality within annulment procedures, and a teleological interpretation.

This latter view posits that referencing Article 263(4) TFEU in Article 275 TFEU is merely referencing “…types of decisions which may be subject to judicial review by the EU judicature and not to a particular procedure of judicial review.” The landmark Rosneft judgment, relying on Article 19 TEU and Article 47 of the EU Charter of Fundamental Rights, leans towards this interpretation, asserting that a restrictive reading of Article 275(2) TFEU that excludes the CJEU’s indirect jurisdiction through preliminary rulings would be inappropriate.

AG Hogan concludes that excluding damage claims against successfully annulled CFSP decisions on restrictive measures is illogical, as measures based on Article 215 TFEU essentially duplicate the original CFSP-based restrictive measures. According to AG Hogan, any other interpretation of Article 275(2) TFEU would create untenable inconsistencies and hinder the effectiveness and coherence of the judicial remedies established within the Treaties. He emphasizes that a “holistic and harmonious manner” is crucial when interpreting the Treaties, arguing that excluding damage claims against CFSP-adopted restrictive measures was never the intention.

The Court’s Judgment: Reaffirming the Unity of the EU Legal Order Based on the Rule of Law

The CJEU directly addressed the issue, recognizing that while Article 275(2) TFEU doesn’t explicitly grant jurisdiction over damage claims related to CFSP-based restrictive measures, it laid out the groundwork for why this jurisdiction is implicit. Echoing its Rosneft approach, the CJEU reiterated that the limited jurisdiction in CFSP matters is an exception to its general jurisdiction under Article 19 TEU and should be interpreted narrowly. Second, it emphasized that while conceptually distinct from legality reviews, actions for damages are integral to the EU’s system of legal remedies and the right to an effective remedy. Lastly, the CJEU highlighted the rule of law underpinning the EU and the right to an effective remedy enshrined in Article 47 CFR, both requiring effective judicial protection for affected parties. Based on these observations, the Court concurred with AG Hogan, concluding that Article 275(2) TFEU implicitly provides jurisdiction over damage claims against annulled CFSP-adopted restrictive measures to maintain the coherence and effectiveness of the EU’s system of remedies and prevent legal gaps.

Significantly, the Court explicitly rejected the Council’s arguments based on pre-Lisbon judgments in Segi and Gestorias Pro Amnestia. The introduction of a single legal personality for the EU, as stated in Article 47 TEU, signifies that CFSP is no longer separate but an integral part of the EU legal order. This means provisions related to CFSP, including limitations on the Court’s jurisdiction, cannot be interpreted in isolation but must be considered within the broader framework of the Treaties. The Grand Chamber judgment in Bank Refah Kargaran reinforces this approach, previously adopted in Rosneft. The General Court, therefore, erred in excluding its jurisdiction over damage claims related to CFSP decisions imposing restrictive measures.

Finally, the Court of Justice dismissed Bank Refah Kargaran’s appeal regarding the substance of the action. It upheld the General Court’s view that the insufficient reasoning behind the annulled legal acts imposing restrictive measures doesn’t inherently trigger the EU’s non-contractual liability. The obligation to provide reasons is a crucial procedural requirement distinct from whether the reasons are well-founded. Therefore, the EU is liable only when the measure’s substantive legality is in question.

Interpreting the Intention of the Treaty Drafters

Given the paramount importance of the rule of law as a cornerstone of the EU legal order, the Court’s deliberate choice for a broad interpretation of its general jurisdiction isn’t unexpected. This approach aligns with the Les Verts tradition, ensuring, as much as possible, an effective system of judicial protection within a Union founded on respect for the rule of law. Post-Lisbon, the CJEU consistently applied this logic to cases concerning its jurisdiction in CFSP matters. The question remains: how far can this approach be extended, given the limitations stipulated under Article 24 TEU? AG Wahl, in H v. Council, noted that the CFSP judicial review system is a “…result of a conscious choice made by the drafters of the Treaties,” implying that the Court’s jurisdiction can’t exceed the Treaty’s defined limits.

Therefore, the debate concerning the precise limitations of the CJEU’s jurisdiction boils down to the Treaty drafters’ intent. Did they intend to maintain a separate constitutional status for CFSP, shielded from judicial review by EU courts with exceptions defined in Article 24 (1) TEU and 275 (2) TFEU? Or was the aim to exclude CJEU jurisdiction due to the highly political nature of CFSP decisions? This latter approach aligns with the established practice in EU Member States, where foreign policy decisions are traditionally beyond judicial review. AG Hogan, in his opinion on the Bank Refah Kargaran judgment, argues for this view. He highlights the intention to exclude CJEU jurisdiction over CFSP decisions of a purely political nature without excluding specific types of foreign policy decisions amenable to judicial review. AG Bobek presented a similar perspective in SatCen v. KF, noting that “…the fact that an act is formally based on CFSP provisions or adopted in that context simply is not enough to trigger the CFSP derogation. The act must also have genuine CFSP content.”

The Bank Refah Kargaran judgment reaffirms that a measure’s form isn’t the sole determinant of jurisdiction. As highlighted by AG Hogan and upheld by the Court, such a formalistic approach would create untenable anomalies in a Union grounded in the rule of law. This case involved the specific context of CFSP decisions on restrictive measures. Actions for damages are possible for acts adopted under Article 215 TFEU. It would be counterintuitive if this option were unavailable for underlying CFSP decisions based on Article 29 TEU.

Unresolved Matters

While this case significantly clarifies a crucial aspect of the CJEU’s jurisdiction in CFSP matters, several questions remain unanswered, including the broader implications of the judgment. One could argue that by building on the Rosneft reasoning and the fundamental principles of the rule of law and the right to an effective remedy, the Court paves the way for greater jurisdiction within the CFSP realm. Conversely, one could contend that the current judgment’s implications are relatively limited.

The present case involves restrictive measures already subjected to a successful annulment procedure for both Article 215 TFEU-based regulations and Council Decisions listing Bank Refah Kargaran under EU restrictive measures. However, the declaratory nature of an annulment proceeding is insufficient to fulfill the right to an effective remedy under Article 47 CFR, necessitating additional remedial action. Therefore, it’s logical for the CJEU to find that an action for damages resulting from an annulled CFSP-based restrictive measure is inherently part of the remedies system under Article 275(2) TFEU. In essence, since Article 275(2) TFEU embodies one aspect of the right to an effective remedy, it’s reasonable for the CJEU to confirm that legality reviews for CFSP-based restrictive measures also encompass the complementary right to damages in case of unlawful measures. This reasoning suggests that the ruling’s impact on CJEU jurisdiction in CFSP is confined to restrictive measures already subject to the Court’s legal scrutiny.

However, given the increasing emphasis on overarching principles inherent to the rule of law and the coherence and effectiveness of the Union’s remedies system, a question arises: Could the Court’s judgment have broader implications beyond CFSP decisions on restrictive measures? If the Treaty drafters solely intended to exclude political CFSP decisions from the Court’s jurisdiction, non-political decisions would logically fall under CJEU jurisdiction.

The reference to the encompassing right to an effective remedy within the EU legal order, including the right to damages under specific conditions, could potentially be invoked in the context of EU Common Security and Defence Policy (CSDP) military missions for alleged human rights violations. The increased emphasis on such principles intrinsic to the rule of law makes it increasingly difficult to argue that a mission’s CSDP nature inherently precludes CJEU scrutiny. The CJEU seems to be actively defining the contours of its jurisdiction in CFSP. This is evident in the expanding jurisdiction over cross-policy CFSP matters, as seen in the Mauritius case on criminal cooperation, the Elitaliana case on the Financial Regulation, and H. v. Council and SatCen v. KF on staff management. The increasing jurisdiction in different procedures related to restrictive measures, as seen in the Rosneft and Bank Refah Kargaran cases, further supports this observation. This evolution in the Court’s case law could be pivotal in the ongoing negotiations for the EU’s accession to the European Convention on Human Rights (ECHR). The lack of clear CJEU jurisdiction in CFSP matters has been a major hurdle in these negotiations. While the Court, in Opinion 2/13, stated it hadn’t had the opportunity to define its jurisdictional limitations within CFSP, the recent series of judgments suggest that its role is less restricted than a literal interpretation of Article 24 TEU might imply.

Conclusion

The CJEU’s judgment in Bank Refah Kargaran v Council marks a significant contribution to the ongoing discourse on the CJEU’s jurisdiction within the CFSP domain. It ends the General Court’s practice of rejecting actions for damages concerning restrictive measures adopted under Article 29 TEU. In line with precedents like Rosneft, this judgment suggests that the EU’s complete system of legal remedies now applies to restrictive measures against individuals or entities. This effectively eliminates any difference between this area and other EU law domains.

While this particular case focuses on restrictive measures, the Court’s reasoning, based on the integration of CFSP into the post-Lisbon EU legal order and the application of general EU law principles, has broader implications for EU constitutional law. The Court emphasized the paramount importance of upholding the rule of law and the corresponding right to an effective judicial remedy, thereby supporting a broad interpretation of its own jurisdiction. While the precise boundaries regarding CFSP matters remain undefined, the Bank Refah Kargaran judgment reflects a growing trend in the Court’s post-Lisbon case law. This trend aims to maximize the possibility of judicial review for non-political matters within the CFSP.

Barnard & Peers: chapter 24

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