In Feature Articles, John Helmer, Ukraine

By John Helmer, published on his website ‘Dances With Bears’, June 5, 2016  (go to original article for all photos)

Court of Justice of the European Union, in Luxembourg

Court of Justice of the European Union, in Luxembourg

MOSCOW – European Union officials and German Chancellor Angela Merkel are so determined to wage sanctions war against Russia, they are refusing to obey judgements of the European Court in Luxembourg that sanctions are illegal if they lack reason and evidence.

After 20 months of proceedings, presentation of case papers and oral argument, the Court of Justice of the European Union (CJEU) has ruled that since the Ukraine conflict started in February of 2014, sanctions imposed on the demand of the government in Kiev without evidence to substantiate their reason, purpose and effect are illegal and must be lifted.

Serhiy Klyuyev

Serhiy Klyuyev

Judgement in the case of Ukrainian politician Serhiy Klyuyev was issued by a 3-judge panel, headed by the Italian Guido Berardis on January 28, 2016. The court ruled to dismiss European Union (EU) sanctions against Klyuyev, a Ukrainian citizen formerly living in Donetsk and Kiev, who is the brother of Andriy Klyuyev, head of the presidential administration for President Victor Yanukovich when the elected president was overthrown on February 23, 2014. Before that, Andriy Klyuyev had been head of the president’s security and defense council for two years, and before that, a government minister and political campaign advisor to Yanukovich.

Related article by John Helmer: The quality of Euroepan Union justice: How to dismiss Rosneft’s challenge to the legality of sanctions, June 1, 2016

Brother Serhiy started as a Donetsk region businessman and politician. From 2006 he was an elected deputy in the Verkohvna Rada, as well as a board member of the National Bank of Ukraine. Re-elected in October 2014, he was stripped of his parliamentary immunity in June 2015, and he left the country. A dossier of his solar energy business interests, prepared by the new regime and his political rivals, can be read here. It claims “the business activities of the Kliuyev brothers are closely linked; it is precisely for this reason that their wealth and business capital are usually regarded as joint assets in Ukraine.” The dossier concludes by claiming: “the law enforcement authorities in Austria, Cyprus, the Netherlands, Luxembourg and the United States have sufficient grounds to institute criminal proceedings on money laundering charges.”

On March 5, 2014, while Klyuyev was still in the Ukraine and an elected deputy, the EU Council, which includes the heads of state or government of the 28 EU member states, imposed sanctions against several Ukrainians from the Yanukovich side. Serhiy Klyuyev was identified on Tusk’s proscription list as a “businessman, brother of Mr Andrii Kliuiev’” with the claim he was a “person subject to investigation in Ukraine for involvement in crimes in connection with the embezzlement of Ukrainian State funds and their illegal transfer outside Ukraine.”

The sanction announced was this: “all funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.”

In January 2015, the EU reissued this order against Serhiy Klyuyev, but changed the accusation against him. The human rights violations were dropped. In the intervening ten months, the Ukrainian prosecutors for the new regime had submitted no evidence of their investigation of misappropriation, nor had they filed formal charges against Klyuyev in the national courts. But he remained his brother’s brother and was still a “person subject [sic] to investigation by the Ukrainian authorities for involvement in the misappropriation of public funds or assets and in the abuse of public office as a public office-holder in order to procure an unjustified advantage for himself or for a third party and thereby causing a loss to Ukrainian public funds or assets.”

Figures in EU court challenge of sanctions by Ukraine

Figures in EU court challenge of sanctions by Ukraine

Klyuyev commenced his action in the European court in May of 2014. As the EU sanctions were reissued and modified, he filed fresh challenges to annul them. Three judges were appointed to preside in the case – Guido Berardis (left, in photo), an Italian; Otto Czucz (centre), a Hungarian; and Andrei Popescu, a Romanian. Klyuyev’s legal team from London was directed by Roger Gherson (right, in photo), a specialist in human rights and political victimization cases.

Both Tusk’s Council and the European Commission headed by Jean-Claude Juncker were represented by lawyers in court.

In its 17-page judgement, the CJEU summarized the Klyuyev’s case this way. “In support of the action, the applicant relies on seven pleas in law. The first alleges lack of a legal basis. The second alleges failure to comply with the listing criteria. The third alleges infringement of the rights of the defence and of the right to effective judicial protection. The fourth alleges a failure to state adequate reasons. The fifth alleges infringement of the right to property and the right to reputation. The sixth alleges an error of fact and a manifest error of assessment, while the seventh alleges an error in the assessment of the evidence” (par 34). Read the judgement in full here.

European Council President Donald Tusk (R) with then-Ukrainian prime minister ArsenIy Yatseniuk on Dec 1, 2014

European Council President Donald Tusk (R) with then-Ukrainian prime minister ArsenIy Yatseniuk on Dec 1, 2014

The lawyers for Tusk and Juncker claimed that naming Klyuyev was enough for sanctions, even though “identification of a person as responsible for an offence did not necessarily imply that that person had been convicted of that offence.” The only document presented in evidence was a letter from an acting Ukrainian prosecutor-general to the EU’s foreign minister, Catherine Ashton. Dated March 3, 2014, the letter was sent less than a week into the government which had replaced Yanukovich. According to that letter, “law enforcement agencies of Ukraine have launched a number of criminal proceedings to investigate criminal acts committed by former senior officials.” Klyuyev’s name was on an attached list. According to the letter, it was “planned to notify them shortly of suspicion” (par 43).

The three judges found this was the only piece of evidence to justify the naming of Klyuyev and the imposition of sanctions. It then rejected the letter as inadmissible, noting it “contains only a general and generic statement linking the applicant’s name, among those of other former senior officials, to an investigation which essentially sought to establish the involvement of those persons in acts of misappropriation of public funds. The letter does not provide any details as to the establishment of the acts under investigation by the Ukrainian authorities and, still less, as to the applicant’s individual liability , even if presumed, in respect of those acts” (par 46).

European Commission president Jean-Claude Juncker and German Chancellor Angela Merkel in May 2014

European Commission president Jean-Claude Juncker and German Chancellor Angela Merkel in May 2014

Ashton, Tusk, Juncker and other officials have accepted the allegations of the Ukrainians in Kiev at face value. By doing, the European court has ruled, the officials failed in their duty to substantiate the claims against Klyuyev and violated the EU’s human rights charter.

“The Court finds, first, that the Council did not have any information regarding the acts or conduct specifically attributed to the applicant by the Ukrainian authorities and, secondly, that, even if it is examined in its context, the letter of 3 March 2014 on which it relies cannot constitute a sufficiently solid factual basis within the meaning of the case-law…for inclusion of the applicant’s name on the list on the ground that he had been ‘identified as responsible’ for the misappropriation of State funds” (par 49).

The onus in imposing sanctions, Judge Berardis added for emphasis, is on EU officials to substantiate their actions in evidence. “It is for the competent European Union authority to establish, in the event of challenge, that the reasons relied on against the person concerned are well founded, and not the task of that person to adduce evidence of the negative, that those reasons are not well founded” (par 51).

The court also dismissed the claim that when deciding in secret, the EU can justify its Ukrainian sanctions on the ground that the EU and its member governments have broad discretionary powers for security and foreign policy. “It should be noted that, although the Council has a broad discretion as regards 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 form 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 must ensure that that decision, which affects that person individually, is taken on a sufficiently solid factual basis. This entails a verification of the factual allegations in the summary of reasons underpinning that decision” (par 38).

Last week, the Advocate-General of the European court, Melchior Wathelet, had argued his case for upholding EU sanctions against the Russian state oil company Rosneft on the ground that “in this particular sphere, which involves diplomacy and foreign and security policy, the Council must be allowed a broad discretion.” Wathelet ignored the court’s judgement of four months earlier. In 137 footnotes citing case law, CJEU judgements, member country statutes and case law, Wathelet’s paper failed to cite the Klyuyev case or any of precedents cited by Judge Berardis. For more on the Wathelet paper, read this.

There was a further sting in the tail for EU officials in the Klyuyev judgement. The court “orders the Council of the European Union to bear its own costs, and to pay those incurred by Mr Klyuyev, in relation to the claim for annulment made in the application” (par 81).

EU officials have reacted in revenge. On March 10, less than two months after the court had ruled their action was illegal, the EU announced it is extending the sanction against Serhiy Klyuyev until September. The reason announced was that he was no longer suspected but guilty, and had been “identified as responsible for the misappropriation of Ukrainian state funds”.

A lawyer close to the case commented: “There has been no improvement in terms of the ‘evidence’ relied upon by the Council of the EU.”

Author’s note:
A court source adds there have been several other successful applications by Ukrainians to remove their names from the EU sanctions list. In a judgement of October 26, 2015, Andriy Portnov, a deputy chief of Yanukovich’s staff, won against the EU after the court ruled there was insufficient evidence. See this court announcement. Then on January 28, 2016, at the same time as Klyuyev won his annulment, the court also ordered the lifting of sanctions for Mykola Azarov and Serhiy Arbuzov, former Ukrainian prime ministers under Yanukovich, together with Azarov’s son. Oleksii Azarov, and Edward Stavytskyi, a former Energy Minister; for details, see this announcement.

According to the court source, “whilst these individuals won in the court I believe that all except Portnov and Oleksiy Azarov have been re-listed again, and so remain sanctioned. The problem in these cases is that regardless of whether you win in court, the Council re-imposes similar measures again and again, and you are forced to go through same costly and time-consuming process to challenge. Your court judgement becomes practically meaningless.”


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