EU General Court Judgment NSD v. Council in Case T-494/22
On September 11, 2024, the General Court of the European Union ("GC" or the "Court") rejected the annulment action brought by the National Settlement Depository1 ("NSD") against the Council, challenging the asset freeze against the NSD (the "Judgment").2
Procedural background
On August 12, 2022, the NSD brought an action before the GC for annulment of the acts which included and maintained NSD's name on the list of designated persons subject to asset freeze measures. According to the Council, the NSD was designated inter alia because it played an essential role in Russia's financial system and provided material and financial support to the Russian government.
NSD put forward four pleas in law, one of which related to the alleged disproportionate infringement of NSD's and its customers' rights to property under Article 17 of the Charter of Fundamental Rights of the European Union3 ("Charter"). NSD asserted that, due to the measures against NSD, its customers cannot access their securities, which are held on a fiduciary basis on its frozen accounts with securities depositories in the European Union (e.g., Euroclear Bank S.A./N.V. and Clearstream Banking S.A.).4
The Court's findings
In addressing this argument that was advanced by NSD, the Court found that NSD could not rely on fundamental rights that it did not possess.5 Essentially, NSD could not challenge the restrictive measures applied to NSD on the basis of the effect of those measures on the assets (and therefore on the rights to property) of its customers.
In particular, the GC stated that: "According to the case-law, the infringement of a subjective right can, in principle, be relied upon solely by the person whose right has allegedly been infringed, and not by third parties." Therefore, GC expressly acknowledged that NSD's "customers have legal remedies available to them before the national courts, before which they may, inter alia, claim infringement of their right to property enshrined in Article 17 of the Charter"6 (emphasis added).
Moreover, the GC has noted that when evaluating a request for the release of frozen funds brought by the customers of NSD who are not subject to any restrictive measures, the National Competent Authorities are implementing EU law. Consequently, the National Competent Authorities must adhere to the Charter7 and shall ensure that, subject to the principle of proportionality, the interference with the right to property of those customers is necessary and genuinely meets objectives of general interest recognized by the Union or the need to protect the rights and freedoms of others.8
In rejecting the de-listing application of NSD, the Court has clarified that its customers are not left unprotected: right to property of non-sanctioned persons whose funds or securities are blocked on the correspondent accounts of NSD with one of depositories in the EU are protected under the Charter; National Competent Authorities must implement EU law with due regard to the protection of the right to property guaranteed under the Charter; and legal remedies before national courts are available to those whose right to property is violated.
The Judgment therefore demonstrates that when implementing EU national security measures, National Competent Authorities in the EU should make sure the right to property guaranteed under the Charter is not violated.
Based on the above, customers of NSD and their clients who themselves do not have a contractual relationship with NSD (e.g., persons holding title to securities through the chain of custodians involving NSD) may seek protection of their right to property under the Charter and refer to the above Judgment in their communications with National Competent Authorities in the EU as well as before national courts/tribunals.
Footnotes
1 NSD is a non-bank financial institution playing a key role in Russia's financial infrastructure, providing securities record keeping, custody services, and financial services as a central depository.
2 GC, Judgment of 11 September 2024, NSD v Council, T-494/22, EU:T:2024:607, available at: https://eurlex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62022TJ0494.
3 Article 17 of the Charter provides: 1. Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest. 2. Intellectual property shall be protected.
4 GC, Judgment of 11 September 2024, NSD v Council, T-494/22, EU:T:2024:607, paragraphs 32, 122 and 128.
5 Id., paragraphs 129 and 130.
6 Id., paragraph 129.
7 Article 51(1) of the Charter.
8 Article 52 of the Charter.
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