Documents considered by the Committee on 18 March 2015 - European Scrutiny Contents

14 Restrictive measures against Iran: nuclear issues

Committee's assessment Legally and politically important
Committee's decisionNot cleared from scrutiny; further information requested
Document detailsCouncil Decision concerning restrictive measures against Iran
Legal baseArticle 29 TEU; unanimity

Document number

Foreign and Commonwealth Office

(36568), —

Summary and Committee's conclusions

14.1 As well as implementing the measures contained in UNSCR 1929 of 9 June 2010, Council Decision 2010/413/CFSP imposed additional EU sanctions in the energy sector, the financial sector, trade, the Iranian transport sector in particular the Islamic Republic of Iran Shipping Line (IRISL) and its subsidiaries and air cargo; and new visa bans and asset freezes, especially on the Islamic Revolutionary Guard Corps.

14.2 Council Decision 2014/829/CFSP of 25 November 2014, amending Decision 2010/413/CFSP concerning restrictive measures against Iran, extended the suspension of restrictive measures specified in the Joint Plan of Action, agreed between the E3+3 and Iran, from 24 November 2014 until 30 June 2015.

14.3 This Council Decision relists one individual, Gholam Hossein Golparvar (Golparvar) and one entity, the National Iranian Tanker Company (NITC). Their original listings had been annulled by the General Court.[38] Solicitors acting for both entities have expressed objections to the relisting of their clients direct to the Committee. Further challenge to any relisting is likely and indeed it is understood that NTIC has been given leave to bring domestic judicial review proceedings in the United Kingdom.

14.4 When we last considered this proposal at our meeting of 21 January 2015 we held the matter under scrutiny, and in doing so:

·  Noted that a lack of urgency on the part of the Council in relisting resulted in the original listings expiring and therefore the risk of asset flight;

·  Sought an explanation why open-source information provided to Golparvar and NITC could not be provided to Parliament; and

·  In the light of the sensitive history of these listings sought confirmation from the Minister for Europe (Mr David Lidington) that he considered the reasons for the relisting and the underlying evidence sufficiently robust to deter or withstand further legal challenge. We specifically did not seek to put ourselves in the place of a court in judging the detailed evidence supplied direct by the entities.

14.5 The Minister wrote on 4 February 2015 in response to our questions and others posed by the European Select Committee of the House of Lords.

14.6 On 12 February the Council adopted a Decision relisting Golparvar and NITC.[39] It also adopted two Regulations coving the same ground in respect of matters falling within the TFEU: one extending until 30 June 2015 the exceptions to the restrictive measures originally granted by Regulation 267/2012 until 31 December 2014[40]; and another relisting Golparvar and NITC.[41] We therefore held back consideration of his letter of 4 February in order to deal with an anticipated letter from the Minister addressing the override of scrutiny. This was forthcoming on 12 March.

14.7 In his letter of 12 March the Minister says, "the responsibility to keep your Committee informed on issues concerning Iran sanctions is something I take seriously and the need for the override of scrutiny on this occasion was regrettably unavoidable". We do not accept that the override of scrutiny was unavoidable or justified, and we consider that he Minister's engagement with this Committee is below the standard that this House should expect. It has been characterised by mistakes, omissions, and unsatisfactory responses as set out in more detail in this chapter. We therefore ask that the handling of this matter be reviewed in the light of this chapter and the outcome, particularly steps taken to improve the engagement with Parliament, be reported to our successor Committee in the new Parliament. In the meantime we hold this matter under scrutiny.

14.8 As we indicated in our Report of 21 January 2015 it is important that a relisting of an entity or individual should be legally robust as multiple failures to withstand legal challenge undermines the credibility of the sanctions regime.

14.9 The Minister has expressed his belief that these relistings are "proportionate, adequately supported by open-source evidence, and consistent with the broader Government policy towards Iran". In contrast to his response concerning Syria which report at chapter 29, this falls short of providing the confirmation he was invited to give.

14.10 Unfortunately, the history of this matter does not inspire confidence in the handling of this matter by either the Government or the Council.

14.11 We strongly doubt that the Council or the Government will be able to enforce the confidentiality of open source material or sustain it if challenged.

14.12 We consider that the Minister's statement in his original Explanatory Memorandum that no fundamental rights issues apply was an inadequate assessment and we welcome the Minister's assurance, in his letter of 4 February, that future Explanatory Memoranda concerning the imposition of restrictive measures will include a more expansive description of why it is felt that fundamental rights are not breached.

14.13 We do not invite the Minister to deposit retrospectively drafts or provide Explanatory Memoranda in respect of Regulations 2015/229 and 2015/230 as they do not add, in substance, to Decision 2015/236 which is the subject of the present scrutiny. The Minister's letter of 12 March fails to mention Regulation 2015/229 and offers no explanation or apology for the fact that neither of these Regulations had been mentioned in his Explanatory Memorandum or previous correspondence. We therefore ask that the review we have requested to include why these matters were not made subject to scrutiny. We also ask for an analysis of the effect of allowing the exceptions to the restrictive measures to expire on 31 December 2014 until the extension adopted by Regulation 2015/ 229.

Full details of the document: Council Decision amending Council Decision 2010/413/CFSP concerning restrictive measures against Iran: (36568), —.

The Minister's letter of 4 February 2015

14.14 The substance of this letter is set out in full as the responses to issues raised by the European Select Committee of the House of Lords provide a full picture of the Government's approach to restrictive measures:

    "In your letters, a number of questions were posed which I seek to address below. In summary, I believe that the relistings of NITC and Mr Golparvar are appropriate, proportionate, adequately supported by open-source evidence, and consistent with our broader Government policy towards Iran. Whilst I understand the desire for the Parliamentary Scrutiny Committees to have access to the open-source evidence which supports relisting proposals, I am unfortunately not in a position to share such information. This is a consistent position which is taken in respect to all such requests, the reasons for which I set out below.

    "I will first elaborate the processes both within Her Majesty's Government and the EU, by which individuals or entities are proposed for listing or relisting under an EU restrictive measures regime, with a focus on Parliamentary Scrutiny.


    "It is clearly desirable for Government processes to be as transparent as possible, and I confirmed my intention in this regard during my recent evidence session in the Commons on scrutiny reform. However, as the Committees are aware, there are particular sensitivities with regard to EU restrictive measures whic limit the instances in which the normal Parliamentary Scrutiny process may be followed. By way of example, the risk of asset flight, if a designated individual or entity becomes aware that they are being proposed for listing under a sanctions regime, precludes scrutiny in most instances of new listings; the use of a Ministerial override is well established in this scenario.

    "It is not unusual for the decision to relist an individual or entity to be the subject of a scrutiny override. This may be due to time pressures (often dictated by EU business) involved in negotiating and adopting a revised Statement of Reasons, which will also need to be supported by evidence for the relisting. It is preferable for agreement to have been reached before the effect of any annulment by the Court is realised (usually two months and ten days post notification of judgment). Failure to relist the individual or entity within this timeframe risks asset flight and can undermine the effectiveness of restrictive measures.

    "With regards to the scrutiny history for NITC and Mr Golparvar, the situation is unusual for two reasons. First, the risk of asset flight was considerably reduced (both had been delisted since the Court's annulment decisions had taken effect). Second, the sensitivity and timing of nuclear negotiations between the E3 + 3 and Iran were significant factors in considering proposals for relisting, and when proposals could be negotiated and adopted by the Council.

    "EU processes

    "I recall my previous letter of 20 January 2015 to the European Union Committee, copied to the European Scrutiny Committee, in which I elaborated on the EU process for sanctions listings and reviews.

    "I should here like to clarify a particular point. Listing decisions require unanimity by the Council. Agreement may be reached at meetings of the Foreign Affairs Committee (FAC) but agreement may also be reached at any time by way of the Council's written procedure. In circumstances where Ministers judge it appropriate to do so, for example where there are pressures of timing, a scrutiny override may be used in conjunction with the written procedure at any time. For the avoidance of doubt that option is available in the case of NITC and/or Mr Golparvar.

    "Information sharing

    "The Committees have asked for access to the open-source evidence which supports the relisting proposals for certain individuals and entities. The Government adopts a consistent policy of declining to provide the evidence which supports listing, or relisting, proposals to the Parliamentary Scrutiny Committees. The reasons for this I set out below.

    "The listing proposals which the Parliamentary Scrutiny Committees scrutinise may be put forward by the UK or one of the other EU Member States, or the EEAS. The underlying evidence is made available to the Council and held on file. Information that forms part of the Council's internal decision making can be shared between Member States, however the Council decides collectively on the sharing of information externally.

    "Member States are bound by a duty of professional secrecy with respect to Council documents unless they have been made publicly available, as set out in the Council's Rules of Procedure. Article 6 (1) states "...the deliberations of the Council shall be covered by the obligation of professional secrecy, except in so far as the Council decides otherwise". Professional secrecy maintains non-disclosure of the identity of the proposing Member State, and limits the scope for third countries to play divide and rule with the EU's sanctions policy.

    "There are specific procedures for sharing information with the designated individual or entity. All open-source evidence is disclosed to them, upon their request, by the Council. They may share this information with their legal representatives in preparing their defence.

    "The sharing of information externally with other actors is a collective decision for the Council. The Council Secretariat holds the responsibility to disclose such documents, or not, in accordance with applicable EU law.

    "Fundamental rights

    "In its letter of 22 January 2015, the European Union Committee of the House of Lords note that Explanatory Memoranda on EU restrictive measures commonly conclude that 'no fundamental rights issues apply'. The designation of an individual under a regime of restrictive measures may engage fundamental rights, however any interference with those rights is considered to be proportionate which is why, on analysis, no fundamental rights issues apply. Consideration is given to this during the process of targeting an individual or entity and gathering the evidence to support their listing.

    "Restrictive measures against an individual often include a travel ban and an asset freeze. It is standard practice to make exemptions to both of these constraints in order to address humanitarian needs, such as travel for medical treatment or access to funds to pay for basic expenses.

    "The fundamental right of defence has been the focus of many sanction related court cases; notably Kadi II, OMPI I and OMPI II. The Kadi II judgment created the requirement for a listing to be supported by open-source evidence in order to provide for the individual's right of defence. I consider that current practice does not breach the fundamental rights of a designated individual.

    "Future Explanatory Memoranda will include a more expansive description of why it is felt that fundamental rights are not breached.

    "NITC open-source evidence

    "You ask us to explain the extent to which listings and relistings are based on open- source versus confidential information. Specifically you enquire whether the relisting of NITC is supported exclusively by open-source material.

    "The European Court of Justice's (ECJ) judgment in Kadi II made clear that the relevant EU institution must substantiate at least one of the reasons for listing with open-source material. There is, however, no requirement for all supporting evidence to be open-source. I am unable to go into the details of specific cases.

    "NITC financial support

    "You note that 'a significant burden rests on the Council to ensure that evidence exists to show that the shareholders... provide financial support to the Iranian Government'. On this point, the Statement of Reasons reads, 'The National Iranian Tanker Company provides financial support to the Government of Iran through its shareholders the Iranian State Retirement Fund, the Iranian Social Security Organization, and the Oil Industry Employees Retirement and Savings Fund, which are State-controlled entities'. The Council takes its responsibilities with regard to relisting individuals and entities extremely seriously.

    "Consistency of NITC relisting with Joint Plan of Action

    "The Joint Plan of Action (JPoA) agreed between the E3+3 and Iran in November 2013 does not have the effect of suspending in their entirety U.S. and EU sanctions on oil exports and related sectors; it allows Iran to maintain, at current levels, oil exports to existing customers, consistent with U.S. measures under the National Defense Authorisation Act (NDAA). In support of that, the EU suspended articles of the EU Regulation related to transport, insurance, and related finance. This was, however, entirely without prejudice to listings, or relistings, where an individual or entity meets the criteria for designation under Article 23 of the Council EU Regulation 267/2012, as amended. JPoA suspensions do not apply to designated persons or entities, unless an explicit exemption is made in the legislation. The relisting of NITC is therefore consistent with the JPoA.

    "Mr Golparvar's evidence to the Council

    "I understand, from your letter, that you have been made aware by Mr Golparvar's solicitor that he has provided documents to the Council explaining that the proposed reason for his relisting is factually incorrect and that a link with the Islamic Republic of Iran Shipping Lines (IRISL) is out of date.

    "The Council takes all material provided to them into consideration when determining the evidential basis supporting an individual's relisting. When an individual is proposed for relisting, a pre-notification letter is sent to them; the Council usually provides some supporting documents to the individual at this time. If an individual asks for access to their file, all open-source evidence held by the Council will be provided to them, upon their request, in order that they may prepare their defence.

    "EU full time sanctions staff

    "With regard to your query on staffing, we have been informed that there are eight staff in the EEAS sanctions unit who work full-time on sanctions. There are no staff in the CLS / Council Secretariat who work full time on sanctions. There are three CLS lawyers and two Council Secretariat (RELEX) staff who work mainly but not exclusively on sanctions, with an additional three CLS lawyers (including a Director) who work partly on sanctions and a further five lawyers whose work focuses partly on sanctions litigation. These figures we understand do not include secretarial assistants.

    "Smarter Sanctions Policy and other Member States

    "The UK's Smarter Sanctions Policy codifies our desire to use appropriately targeted and legally robust restrictive measures as a foreign policy tool. The views of the CLS, which demonstrate great awareness of legal risk, weigh heavily in decision making. EU sanction regimes are usually subject to annual review and decisions are adopted by unanimity; the UK can, and has, significantly influenced proceedings where necessary. The evolving jurisprudence around EU sanctions regimes have necessitated all Member States to adhere to similar best practices. Elements of the UK's approach to sanctions are followed by other Member States.

    "'Controversial' listings

    "You note that where the UK proposes a listing or relisting, the decision is taken by FCO Ministers if it is 'controversial', and ask for clarification of what is meant by this term. I will illustrate by way of example. Decisions pertaining to listings or re-listings under the Iran sanctions regime are taken by FCO Ministers, in view of the sensitivity of the nuclear talks and the effects of considering a listing or relisting on the negotiations process at a given moment. Further examples may be where a proposed listing carries a small risk of unintended, detrimental humanitarian impact for instance. In clear cut cases, where broader political considerations are not in play, the decision to propose a listing is made by a Civil Servant at a senior level; Head, or Deputy Head of Department.

    "There is extensive Ministerial involvement in decisions relating to sanctions, I am unable, however, to provide a clear indication as to the actual proportion of UK listing proposals directly considered by FCO Ministers. Listing proposals are worked up by a range of officials across the FCO and data on Ministerial involvement is not centrally held nor systematically collected at present."

The Minister's letter of 12 March 2015

14.15 This letter deals with the override of scrutiny:

    "The Council Decision and Regulation relisting NITC and Mr Golparvar were adopted by written procedure on 12 February 2015 and published in the Official Journal of the EU on 14 February 2015. I regret that it was not possible to complete parliamentary scrutiny.

    "Following the annulment of the listings by the General Court the Council decided not to appeal the judgments but opted instead to relist both. The relistings were not considered within the EU process until November 2014 due to other pressures on the Council, most obviously the Ukraine crisis, which had worsened in the preceding months.

    "Political considerations regarding the E3+3 negotiations on the Iranian nuclear programme also informed thinking about timing of relisting. We had argued for delaying the relisting to avoid getting in the way of the E3+3 talks. After those talks concluded in November, the issue was revisited by the EU. The initial Explanatory Memorandum relating to the relisting of NITC and Mr Golparvar was submitted for Parliamentary Scrutiny on 15 December 2014 once we had the draft EU texts required for Parliamentary Scrutiny. The document was under scrutiny for ten weeks prior to adoption. During this time we came under increasingly significant pressure from other Member States to agree the listings for the following reasons.

    "The increasing time gap between annulment and relisting risked opening the possibility of other parties portraying the imposition of restrictive measures against NITC and Mr Golparvar as new listings, rather than relistings. Any claim that new listings were being imposed could have negatively impacted on the Iran nuclear negotiations. Furthermore, it was desirable to relist NITC and Mr Golparvar before negotiations reached a more sensitive stage.

    "This explains why I felt I had to agree these relistings without completing the scrutiny process. However, be in no doubt that the UK only agreed to relisting of this individual and entity following careful consideration of the relevant judgments of the General Court and a thorough assessment of the evidence presented by the proposing Member State. We can only disclose that it was not the UK that proposed these two listings following a court hearing on 06 February 2015."

Our Analysis

Engagement with Parliament

14.16 The engagement with Parliament has been characterised by mistakes, omissions and unsatisfactory responses.

14.17 The Minister's original Explanatory Memorandum was inaccurate as to the date of the judgment in respect of Gholan Golparvar. This was a significant mistake as it helped obscure the fact that the failure to relist either Golpavar or NTIC had led to a gap in the restrictive measures and therefore the risk of asset flight. The Minister failed to mention this important risk at all in his Explanatory Memorandum, although in a letter to Lord Boswell of 19 January 2015, copied to our Chairman, he erroneously suggested that the delay in relisting NITC had been raised in his Explanatory Memorandum, when in fact he had only provided this explanation when asked to do so by this Committee. He has since declined to indicate whether this risk has materialised.

14.18 In his letter of 4 February the Minister said 'The Kadi II judgment created the requirement for a listing to be supported by open-source evidence in order to provide for the individual's right of defence" and The European Court of Justice's (ECJ) judgment in Kadi II made clear that the relevant EU institutions must substantiate at least one of the reasons for listing with open source information. There is no requirement for all supporting evidence to be open-sourced. Both these statements are incorrect. Whilst it is true that this judgment[42] requires a listing to be supported by evidence if challenged (which need justify only one of the reasons given for the listing), it is not the case that the Court has required this evidence to be open source information. That is the choice of the Council.

14.19 The Minister declines to provide Parliament with the open source information used to justify the relistings, on the basis that it would be contrary to the Council Rules of Procedure preventing disclosure of the "deliberations of the Council". In particular it might disclose which Member State has requested the restrictive measures. However our request did not seek information as to which Member State proposed restricted measures, nor the deliberations of the Council in respect such information. As it happens, we understand from the Minister's correspondence with Lord Boswell, which he copied to our Chairman, that during proceedings brought by NTIC against the Government on 6 February, it was disclosed that the UK was not the proposing Member State. In any event, it lacks credibility that information available to the public should become clothed in confidentiality simply because it is included in a document considered by the Council. We strongly doubt that the Council or the Government will be able to enforce the confidentiality of open source material or sustain it if challenged.

14.20 The correspondence of the Minister perpetuates the uncertainty as to the status of the open source information provided to Golparvar and NTIC. In his letter of 14 January he indicated that the EU Council can share with the individual or entity concerned information which has informed the decision-making process but that "this information is not for public consumption. This is why the underlying evidence for these relistings cannot be shared with either the ESC or the House of Lords Select Committee". However in a letter to Lord Boswell of 4 March 2015, copied to our Chairman, he has indicated that "Where there is additional open source evidence, which does not form an integral part of the listing proposal then it may be disclosed by the listed person without any caveat" and that "Some additional information on the Council file on NITC was shared without that caveat so has effectively now been made publicly available".

The scrutiny override

14.21 The background is that Council acted throughout 2014 with a notable lack of urgency, allowing the risk of asset flight. The reasons given for not pursing these relistings in 2014 were given by the Minister in his letter of 14 January 2015 as (a) that the Council prioritised other business, (b) that the summer break intervened and (c) that decision was taken not to pursue relisting until the end of the E3+3 negotiations with Iran.

14.22 In his letter of 12 March the Minister asserts that the document was held under scrutiny for ten weeks from 15 December to its adoption on 12 February. This is another incorrect statement. This period amounts to eight weeks and three days and included the Christmas break. The reason why this matter could not be cleared sooner was the poor quality of the Explanatory Memorandum he originally provided and the lack of credibility in his subsequent explanations. Having written to the Committee on 4 February he left it to the Committee to discover for itself that the Decision (and Regulations) had been adopted on 12 February. Neither the Explanatory Memorandum nor the letters from the Minister of 14 January or 4 February indicate any urgency. This is not surprising given the failure of the Council to act with any urgency throughout 2014.

14.23 The reason given in the letter of 12 March for the override, being pressure from other Member States, lacks credibility given the previous lengthy period of inaction - in Golpavar's case over a year since the judgment annulling his original listing. Furthermore these relistings had already been delayed so as not to get in the way of E3+3 talks. During 2014 it was clearly regarded as beneficial to negotiations to delay these relistings. However by February 2015 the Minister indicates that the opposite was the case. It is therefore not clear to us why waiting a short while longer to complete Parliamentary scrutiny would have significant adverse impact on negotiations.

14.24 The Minister's explanation that the matter had become urgent enough to override Parliamentary scrutiny because further delay may have changed perception of this matter from a being a "relisting" to a "new listing" is not, in our opinion, significant. These are simply labels making an unhelpful distinction. As the original listings had ended, the reality was that listing them again was both "relisting" them and imposing "new listings."

Previous Committee Reports

Thirtieth Report HC 219-xxix (2014-15), chapter 4 (21 January 2015), Twenty-eighth Report HC 219-xxvii (2014-15), chapter 6 (7 January 2015).

38   Cases T-58/12, judgment of the 12 December 2013 and T-565/12, judgment of 3 July 2014. Back

39   Decision 2015/236. Back

40   Regulation 2015/229. Back

41   Regulation 2015/230 Back

42   Kadi II, Joined cases C-584/10 P, C-593/10 P and C-595/10 P. Back

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