How competent are competent national authorities? Court of Justice upholds sanctions imposed on German bank despite regulatory approval

12/03/15

On 5 March 2015, the European Court of Justice handed down its judgment in Europäisch-Iranische Handelsbank AG v Council, dismissing the bank’s appeal against the General Court’s judgment upholding the sanctions imposed upon it. This is an important judgment in defining the limits of approvals and licences granted by national competent authorities, such as HM Treasury in the UK.

EIH was listed by the EU for allegedly assisting designated Iranian entities in evading sanctions. EIH had however relied throughout on approvals given to EIH by the German Bundesbank, being the competent national authority in the Member State in which EIH was based.  Some approvals were given on a transaction by transaction basis, some were general approvals in that the Bundesbank had provided a blanket authorisation for the so-called Third Way procedure (being a method by which designated Iranian entities had sought to discharge debts owed in Europe that pre-dated the sanctions against them).

The Court of Justice held that it did not matter that the Bundesbank had given EIH a general licence to carry out transactions involving listed entities under. The relevant legislation was said to be clear and to require individual authorisation on a case-by-case basis.  The Court rejected EIH’s claim that it had a legitimate expectation that it would not be sanctioned on the basis of the approved transactions and that any contrary interpretation violated the principle of legal certainty. Despite the Bundesbank’s approvals, it was held that EIH ought to have known that the specific approvals were required and the principle of legitimate expectations could not render lawful transactions that were not.  Again despite the fact that the Court was aware that the Bundesbank and at least one other national regulator took a different view, the Court upheld the General Court’s assessment that the legislation was clear and precise in requiring specific case-by-case approvals.

The judgment is here.