In a series of recent rulings, the European Court of Justice
overturned economic sanctions issued by the Council of the European
Union (EU) on several Iranian banks and shipping lines. On
September 6 and 16, 2013, the Court halted sanctions on Persia
International Bank plc, Bank Refah Kargaran, Export Development
Bank of Iran, Post Bank Iran, Iranian Offshore Engineering &
Construction Co., Iran Insurance Company, Islamic Republic of Iran
Shipping Lines (IRISL), Khazar Shipping Lines, and Good Luck
Shipping. The EU had sanctioned these entities for their
support of nuclear proliferation activities in Iran, but the Court
determined that the EU lacked sufficient evidence to introduce such
sanctions. The cases are notable for their effect on global
sanctions against Iran, although it seems unlikely that U.S.
sanctions against Iran would be lifted on similar grounds.
While a full review of the developments in each case would be
beyond the scope of this blog article, a few representative matters
bear closer scrutiny. In the case against IRISL, the Court
noted that the imposition of sanctions was only permitted where a
party had allegedly supported nuclear proliferation. The
Court indicated that sanctions could not be imposed simply based on
a risk that IRISL might provide support for nuclear
proliferation in the future. In particular, the Court
determined that, while the EU established that IRISL had been
involved in exports of arms from Iran, that activity was not alone
sufficient to support the imposition of nuclear sanctions. As
a result, the Court struck down the sanctions against IRISL.
Similarly, in considering sanctions against Iran Insurance
Company, the Court noted that the EU had sanctioned the company for
insuring the purchase of helicopter spare parts, electronics, and
computers with applications in aircraft and missile navigation,
which the EU alleged could be used in violation of nuclear
proliferation sanctions. The Court ruled that the EU had
relied on "mere unsubstantiated allegations" regarding
the provision of insurance services, and annulled the
We think these two matters are noteworthy for the types of
evidence used to link the activities of the entities to nuclear
proliferation. When viewed in the light of a formal court
proceeding, it seems somewhat remarkable that the EU sought to tie
the insuring of items including helicopter spare parts to nuclear
proliferation at all. But, as we have discussed previously in
this blog, [
see May 2013 sanctions article] economic sanctions
against Iran have been broadly construed and applied by the United
States and the EU to target industries integral to the functioning
of the Iranian economy. Insofar as a functioning Iranian
economy also supports the nuclear development efforts of its
government, it may make political sense for the EU and the United
States to impose leverage through sanctions. As a legal
matter, however, the European Court of Justice rulings suggest that
Court will be loathe to tie restrictions on general economic
activity to a statute focused on the specific activity of nuclear
In other words, the European Court of Justice seems unlikely to
defer to the EU, even where European security is at stake.
This stands in relatively stark contrast to U.S. courts, which have
generally shown deference to government activity on issues of
national security. 1
For the time being, U.S. sanctions on Iran and key entities
within the Iranian banking and shipping sectors remain in place,
with far reaching consequences that will continue to deter Western
business from even considering business in Iran. And
ultimately, any warming in diplomatic relations between the United
States and Iran will likely be more momentous than judicially
vacated sanctions. But at a minimum, the European Court of
Justice has signaled that EU sanctions are subject to standards of
proof that cannot be broadly construed to incorporate all types of
1 At least one U.S. court has overturned criminal sanctions
charges on individuals by reading regulatory provisions in the
accused's favor due to issues of vagueness in the sanctions
regulations. [see Clarity Required: US V. Banki]
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