European Union: Annulment Of EU Asset Freeze On Two Iranian Banks

THE ANNULMENTS

In two separate rulings during the last 2 weeks, the General Court of the European Union has ruled that the Council of the EU's designation of Bank Saderat and Bank Mellat on the EU asset freeze list should be annulled. Those banks were first designated in 2010 on the basis of links to nuclear proliferation. When the EU Council designate individuals or entities, this usually follows a proposal by a particular Member State, who ought to provide reasons and information to the Council of the EU.

WHY DID THE GENERAL COURT RULE THAT THE DESIGNATIONS BE ANNULLED?

The Annulments were ordered for a number of reasons. One of the most relevant reasons is that the General Court considered that that the Council of the EU did not comply with its obligations at the time the decision was made to designate the banks. It held that the Council of the EU must assess the relevance and validity of the information submitted by the particular Member State(s) proposing the designation before the designation occurs. Further the Council of the EU must provide sufficiently detailed reasons for the designation and be in a position to provide the information to the designated person in order that representations may be made.

BANK SADERAT

In the case of Bank Saderat, the General Court ruled that the Council of the EU had failed to provide sufficient evidence that Bank Saderat was involved in Iran's nuclear programme when they targeted it in July 2010.

BANK MELLAT

In the case of Bank Mellat, the General Court ruled that the Council of the EU's basis for the original designation was flawed. Bank Mellat had apparently supplied services to one of its customers who was at the time subject to a United Nations designation. However, the General Court ruled that the provision of these services did not constitute support for the nuclear proliferation. Further, the General Court took account of Bank Mellat's obligations towards its customer under Iranian law.

WHAT HAPPENS NOW?

We may see an appeal although that must be lodged within 2 months from the rulings.

General prohibitions on dealings between EU banks on the one hand and Bank Mellat and Bank Saderat on the other hand are still in force. In practical terms, very little has changed.

We are unlikely to see more challenges brought by others who have been designated since they may be time barred from doing so.

One interesting question is whether a claim for damages will now be brought.

LESSONS

Moving forward, these rulings are welcome since they set a precedent as to what must happen before designations are made by the Council of the EU. The Council of the EU will tread more carefully in future. But that does not mean we will necessarily witness a reduction in designations.

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