OJSC Rosneft Oil Company v HM Treasury and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Beatson,Mr Justice Simon |
| Judgment Date | 27 November 2014 |
| Neutral Citation | [2014] EWHC 4002 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 27 November 2014 |
| Docket Number | CO/5379/2014 |
2014 EWHC 4002 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Court No 3
Royal Courts of Justice
The Strand
London WC2 A2U
Lord Justice Beatson
and
Mr Justice Simon
CO/5379/2014
The Queen on the application of:
Mr Pushpinder Saini QC, Mr Patrick Dunn-Walsh and Ms Sarah Tulip (instructed by Joseph Hage Aaronson LLP) appeared on behalf of the Claimant.
Mr Gerry Facenna and Ms Julianne Morrison (instructed by the Treasury Solicitor) appeared on behalf of Defendants 1 and 2.
Ms Tetyana Nesterchuk (instructed by Kingsley Napley) appeared on behalf of Defendant 3.
Thursday, 27 November, 2014
(12.00 pm)
APPROVED JUDGMENT
This hearing has two purposes. The first is to decide the application of OJSC Rosneft Oil Company ("Rosneft") for interim relief pending the hearing of its application for judicial review. The challenge is to UK secondary legislation giving effect to the sanctions imposed by the EU by Council Regulation (EU) No. 833/2014 amended by Regulation 960/2014. The sanctions are imposed as the result of the Russian Federation's actions in Ukraine. The challenge is also to guidance given by the second and third defendants, the Secretary of State for Business, Innovation and Skills, and the Financial Conduct Authority concerning the interpretation of certain terms in the EU Regulation. The application for interim relief concerns the part of the secondary legislation prohibiting or restricting the supply of sensitive equipment and technology and services for types of oil exploration by Russian entities or entities operating in Russia. The second purpose of this hearing is for directions for the further conduct of these proceedings. The third defendant, the Financial Conduct Authority, took no part in the submissions on interim relief but provided helpful assistance to the court as to its position in relation to directions.
Proceedings were filed on Thursday, 20 November 2014 when urgent consideration and expedition were sought, and Rosneft stated that it might need to seek an interim injunction pending the substantive hearing. The first and second defendants, Her Majesty's Treasury and the Secretary of State, were sent a copy of the claim form, grounds and application by e-mail and later served with a printed copy and bundles, late on the afternoon of that day.
The application came before Collins J within 24 hours, i.e. on Friday, 21 November. That day he ordered an oral hearing of the application for interim relief and stated that further directions could be considered at the hearing. The speed at which all this has happened has had two unfortunate consequences. The first is that a letter from the Treasury Solicitor's Department indicating when it had received the application and stating that the first and second defendants wished to make observations on it and intended to do so by midday on Monday, 24 November, did not reach the judge before he made his order. The second is that the Treasury Solicitor's Department did not receive a copy of that order until the afternoon of Monday, 24 November, after they had filed their submissions. Those submissions were, in particular, that the application for directions, including expedition and urgent consideration, be refused. Underlying their position was the submission that this is, in reality, a challenge to the validity of the EU Regulation, a matter over which the courts of England and Wales have no jurisdiction, and in respect of which Rosneft has launched annulment proceedings in the EU's General Court.
The EU sanctions restrict: (a) the dealing in transferable securities and certain money market instruments; (b) dealing in and providing financial assistance in relation to various technologies relating to the oil industry; and (c) the provision of specified services for certain types of oil exploration and production. They were, as I have stated, imposed following a decision of the Council of Ministers by Council Regulation (EU) No. 833/2014, dated 31 July 2014, which, following another decision of the Council of Ministers, was amended on 8 September by Council Regulation (EU) No. 960/2014. I shall refer to this as "the EU Regulation". The amendment extended the sanctions to include the prohibition on the provision of certain services necessary for "deep water" and "arctic" oil exploration and production and for "shale oil projects" in Russia.
The UK has given effect to the financial services restrictions by the Ukraine (European Union Financial Sanctions) No. 3 Regulations 2014 SI 2014 No. 2054, which were made and came into force on 1 August 2014 and were amended by SI 2014 No. 2445. It has given effect to the oil and related restrictions by the Export Control (Russia, Crimea, Sevastopol) Sanctions Order 2014, SI 2014, No. 2357, made on 2 September 2014, in force since 26 September, and amended on 5 November by SI 2014, No. 2932 ("the Export Control Regulations"), which amendments are due to come into force this Saturday, 29 November 2014. The Export Control Regulations, as amended, impose criminal liability on persons dealing contrary to the prohibitions and restrictions in the EU Regulation.
Rosneft challenges the legality of the UK's implementing regulations, and guidance concerning the interpretation of certain terms in the EU Regulation by the Financial Conduct Authority and Secretary of State and seeks a reference to the CJEU on a number of questions. As the application for interim relief only concerns Article 5A of the Export Control Regulations, only the first item of the relief sought needs to be set out. It is that:
"Article 5A of the Export Control Regulations be quashed on the basis that it purports to impose criminal liability on an uncertain basis, and is thus unlawful both at common law and as a result of Article 7 of the European Convention of Human Rights as incorporated into the law of England and Wales by the Human Rights Act 1998."
I set Article 5A out later in this judgment. As to the form of interim relief sought, in its application Rosneft appeared to contemplate an interim injunction but now seeks a stay of Article 5A.
Rosneft is one of three entities subject to the prohibition in Article 5(2)(b) of the EU Regulation prohibiting the sale or provision of investment services, security and money market instruments with a legal person, entity or body established in Russia which is publicly controlled or with over 50 per cent public ownership and with estimated total assets above a certain amount and whose estimated revenues "originate for at least 50 per cent" from the sale or transportation of crude oil or petroleum products.
Rosneft is also affected by Article 3 which provides that prior authorisation by competent EU authorities is required for the supply of equipment or technologies to any person or entity in Russia, or if the equipment or technology is for use in Russia, to a person or entity in any other country.. Article 3(5) requires the competent authorities not to grant authorisation "if they have reasonable grounds to determine that the sale, supply, transfer or export of the technologies is for projects pertaining to deep water oil exploration and production, arctic oil exploration and production, or shale oil projects in Russia". By Article 4(3) "financing or financial assistance" related to the specified technologies must also be authorised by the competent EU authority. The amending Regulation extended the controls by inserting a new Article 3a, providing that it is prohibited to provide, directly or indirectly, services necessary for "deep water oil exploration and production, arctic oil exploration and production, or shale oil projects in Russia".
I have referred to Rosneft's application before the General Court of the European Union for the annulment of the EU Regulation. That was launched on 9 October 2014. One of the grounds on which annulment is sought is that the Regulation breaches the EU requirement of legal certainty because the terms "deep water", "arctic" and "shale oil projects" are vague, undefined and ambiguous. Rosneft submits in those proceedings that Article 3a is unlawful because it creates a criminal offence that depends for its commission on the meaning of these three uncertain legal terms and thus violates Article 7 of the European Convention of Human Rights. Its application for the expedition of those proceedings was rejected on 13 November 2014. Shortly after that, these proceedings were launched.
Article 8 of the EU Regulation requires Member States to lay down "the rules on penalties applicable to infringements" of the Regulation, and states that "the penalties provided for must be effective, proportionate and dissuasive". This is, as was common ground, a standard form provision which has been the subject of interpretation by the European courts in other cases. As I have stated, the UK Regulations implement Article 3 and Article 3a by making it a criminal offence to be knowingly concerned, without EU authorisation, in an activity for which such authorisation is required. Article 5A of the Export Control Regulations, in respect of which a stay is sought, implements Article 3a. It provides:
"Offences related to certain associated services necessary for deep water oil exploration, etc. in Russia.
"A person who is knowingly concerned in an activity prohibited by Article 3a of the Russian Sanctions...
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R OJSC Rosneft Oil Company v HM Treasury (1st Defendant) Secretary of State for Business, Innovation & Skills (2nd Defendant) The Financial Conduct Authority (3rd Defendant)
...EU Regulations which is pending before the General Court. The proceedings were last before this Court on 27 November 2014 when (see [2014] EWHC 4002 (Admin)) an action for interim relief was rejected by Beatson LJ and Simon J: but an expedited hearing was 6 The contested measures form comp......