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)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Green |
| Judgment Date | 09 February 2015 |
| Neutral Citation | [2015] EWHC 248 (Admin) |
| Docket Number | Case No: CO/5379/2014 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 09 February 2015 |
[2015] EWHC 248 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Beatson AND Mr Justice Green
Case No: CO/5379/2014
and
and
Pushpinder Saini QC, Patrick Dunn-Walsh and Sarah Tulip (instructed by Joseph Hage Aaronson LLP) for the Claimant
Tim Ward QC, Gerry Facenna and Julianne Morrison (instructed by The Treasury Solicitor) for the 1 st and 2 nd Defendants
Sonia Tolaney QC and Jamie McClelland (instructed by Kingsley Napley) for the 3 rd Defendant
Hearing dates: 27 th and 29 th January 2015
A. Introduction
This is the judgment of the Court. In it we set out the reasons which have led us to make a reference to the Court of Justice of the European Union ("CJEU") of the Questions which are set out in the Schedule to this Judgment. We have also taken the chance to set out certain provisional views and observations about the issues arising.
The Claimant, OJSC Rosneft Oil Company ("Rosneft" or "the Claimant"), is a company incorporated in Russia. It specialises in oil and gas. The majority of its shares (69.5%) are owned by OJSC Rosneftegaz, an organisation owned by the Russian State. A minority of its shares (19.75%) are owned by BP Russian Investments Ltd., a subsidiary of BP plc, the British oil company. The residual 10.75% of the issued share capital is publicly traded. The activities of the Claimant, and its group companies, include hydrocarbon exploration and production, upstream offshore projects, hydrocarbon refining and crude oil, gas and product marketing in Russia and abroad. It conducts its exploration and production activities in the key hydrocarbon provinces of Russia including West Siberia, Southern and Central Russia, Timan-Pechora, East Siberia, the Far East, and the Russian Continental Shelf. The Claimant conducts geological exploration both independently but also as part of joint ventures with Russian and foreign partners. Its exploration activities include operations in waters deeper than 150 metres and in shale formations.
The First and Second Defendants (Her Majesty's Treasury, and the Secretary of State for Business, Innovation and Skills respectively) are the authorities within the United Kingdom responsible for implementation of the EU legislation which imposes sanctions on the Russian Federation in response to that country's actions in Ukraine.
The Third Defendant, the Financial Conduct Authority ("FCA"), is not the competent authority within the United Kingdom responsible for ensuring compliance with the EU sanctions legislation. The FCA is, however, bound by the relevant EU legislation and has to consider its effect upon its own statutory duties and objectives. The FCA has explained to the Court that it is not its role to "police" the EU legislation. Should it, however, appear that there is a risk that prohibited securities would be issued and that this would risk adversely affecting the integrity of the markets regulated by the FCA or consumer protection, the FCA would be required to consider what, if any, action it should take to pre-empt or address that risk. Accordingly, it has an immediate concern in a number of the issues raised by the Claimant.
In this litigation launched on 20 November 2014, the Claimant challenges certain measures adopted by the United Kingdom authorities to give effect to aspects of Council Regulation (EU) 833/2014 as amended by Council Regulation (EU) 960/2014 and Council Regulation 1290/2014 ("the Regulation") and other measures of EU law giving rise to the sanctions measures. The challenge is also as to these measures of EU law. On 9 October 2014, it had brought an application for annulment against the relevant 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 ordered.
The contested measures form components of a series of progressively escalating sanctions measures the express objective of which is to respond to, and condemn, the conduct of the Russian Federation in relation to Ukraine.
On 6 th March 2014 the Heads of State or Government of the Union's Member States ("the States") strongly condemned what it later described as the " unprovoked violation of Ukrainian sovereignty and territorial integrity by the Russian Federation". The States called upon the Russian Federation immediately to withdraw its armed forces to the areas of their permanent stationing, in accordance with relevant agreements. The States also decided to suspend bilateral talks with the Russian Federation on visa matters and on a new comprehensive agreement which would have replaced the existing Partnership and Cooperation Agreement ("the Partnership Agreement"). However, the States underlined that in their view a solution to the crisis should be found through negotiation between the Governments of Ukraine and the Russian Federation.
It was decided that in the circumstances travel restrictions and a freeze upon assets should be imposed upon persons responsible for actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine: See recitals (1)-(4) of Council Decision 2014/145/CFSP of 17 th March 2014.
In order to implement that decision the Council of Ministers, on 17 th March 2014, adopted Council Regulation 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. This imposed travel restrictions and froze the funds and other economic resources of certain persons listed in Annex I to the Regulation whom it was considered were responsible for threatening or undermining the territorial sovereignty and independence of Ukraine.
On 31 st July 2014, in response to the belief that the Russian Federation had failed to respond to EU demands, and to a continued undermining of the territorial integrity, sovereignty and independence of Ukraine the Council imposed " a package of further significant restrictive measures". Council Decision 2104/512/CFSP of 31 st July 2014 provided, in recitals (7)-(12):
"(7) In addition, the Council recalled the previous commitments by the European Council and expressed readiness to introduce without delay a package of further significant restrictive measures if full and immediate cooperation from Russia on the abovementioned demands failed to materialise. The Council requested the Commission and the EEAS to finalise their preparatory work on possible targeted measures and to present by 24 July proposals for taking action, including on access to capital markets, defence, dual-use goods, and sensitive technologies, including in the energy sector.
(8) In view of the gravity of the situation, the Council considers it appropriate to take restrictive measures in response to Russia's actions destabilising the situation in Ukraine.
(9) In this context, it is appropriate to prohibit transactions in or the provision of financing or investment services or dealing in new bonds or equity or similar financial instruments with a maturity exceeding 90 days issued by State-owned Russian financial institutions, excluding Russia-based institutions with international status established by intergovernmental agreements with Russia as one of the shareholders. These prohibitions do not affect the granting of loans to or by those state-owned Russian financial institutions independently of their maturity.
(10) In addition, Member States should prohibit the sale, supply, transfer or export to Russia of arms and related material of all types. The procurement from Russia of arms and related material of all types should also be prohibited.
(11) Furthermore, the sale, supply, transfer or export of dual-use items for military use or to military end-users in Russia should be prohibited. This prohibition should not affect the exports of dual-use goods and technology, including for aeronautics and for the space industry, for non-military use and/or for non-military end-users.
(12) The sale, supply, transfer or export of certain sensitive goods and technology should be prohibited when they are destined for deep water oil exploration and production, arctic oil exploration and production or shale oil projects".
The Council implemented this Decision by Council Regulation 833/2014. Article 3 provided, so far as is relevant, as follows:
"Article 3
1. A prior authorisation shall be required for the sale, supply, transfer or export, directly or indirectly, of technologies as listed in Annex II, whether or not originating in the Union, to any natural or legal person, entity or body in Russia or in any other country, if such equipment or technology is for use in Russia.
2. …
3. Annex II shall include certain technologies suited to the oil industry for use in deep water oil exploration and production, Arctic oil exploration and production, or shale oil projects in Russia.
4. …
5. The competent authorities shall not grant any authorisations for any sale, supply, transfer or export of the technologies included in Annex II, 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...
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