Europe News

Russia takes EU to court over Ukraine sanctions

Kathrin Hille and Christian Oliver
Moscow, with the Kremlin in the background.
Alexander Zemlianichenko | AP

Russia is taking the European Union (EU) to court over sanctions imposed on some of its biggest companies. The move is a sign of the pain that the companies' exclusion from global capital markets is inflicting on the Russian economy.

Rosneft, the state oil company, and Arkady Rotenberg, a long-time friend and former judo sparring partner of President Vladimir Putin, have both launched legal challenges to the sanctions, imposed over Russia's actions in Ukraine.

The EU bans, with similar measures adopted by the U.S., have all but frozen Russian companies and banks out of western capital markets, at a time when they have to refinance more than $130 billion of foreign debt due for redemption by the end of 2015.

Rosneft filed a case against the EU's European Council in the general court under the European Court of Justice on October 9, requesting an annulment of the council's July 31 decision that largely barred it and other Russian energy companies and state banks from raising funds on European capital markets.

Mr Rotenberg, who was hit with an EU visa ban and asset freeze in July, filed a legal case in the same court on October 10 challenging the move.

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The challenges follow verdicts that have gone against the council in relation to similar measures imposed on Iran and Syria. In particular, the court has ruled that in implementing sanctions, European states have been too reliant on confidential sources, which impair the targets' ability to mount an effective defense.

A Russian lawyer who advises one company on legal strategies over sanctions said the challenges by Rosneft and Mr Rotenberg might help sway some EU member states when the bloc begins to discuss whether to renew its sanctions against Russia next spring.

However, as the sanctions generally remain in place during the often lengthy appeals process, legal action does not promise quick relief from the economic pain such measures inflict.

Rosneft's request was filed on behalf of the company itself and other unidentified parties.

The capital markets sanctions that the company wants overturned also affect Russia's biggest state lenders Sberbank, VTB, VEB, Gazprombank and Rosselkhozbank, as well as Gazpromneft, the oil arm of the state gas monopoly, and Transneft, the state-owned pipeline monopoly.

Rosneft, Rosselkhozbank and Sberbank declined to comment. VTB said it had not made a final decision with regard to legal action over the sanctions. "We are carefully studying this issue and taking legal advice," the bank said.

Transneft said it was not involved in the case. Gazpromneft, Gazprombank and VEB did not respond to requests for comment.

When the EU imposed its travel ban and asset freeze on Mr Rotenberg, it said he had "developed his fortune during President Putin's tenure" and "been favoured by Russian decision makers in the award of important contracts by the Russian state or state-owned enterprises".

Some of the tycoon's assets, including a hotel, property and a bank account, were frozen in Italy last month.

A spokesman for Mr Rotenberg was unavailable for comment.

The EU said the council would defend the sanctions in court. "The council takes great care to ensure legal robustness when adopting restrictive measures and takes due account of relevant case law of the court," it said.

"The fact that court proceedings are brought does not mean that the restrictive measures will be suspended during those proceedings."

Additional reporting by Courtney Weaver, Jack Farchy and Jane Croft