Economy, Business And Markets

EU Court Annuls European Union CBI Ruling

EU Court Annuls European Union CBI Ruling
EU Court Annuls European Union CBI Ruling

A top European court on Thursday struck down restrictions imposed by the European Union against the Central Bank of Iran (CBI) on an alleged charge of circumventing US-led sanctions against Tehran.

The Court of Justice in Luxembourg ruled that the case against the Iranian central bank from January 2012 was based on confidential evidence from one unidentified member state, against which Tehran could not mount a defense, FT reported.

The court said it “annuls…the EU March 23, 2012 [ruling] concerning restrictive measures against Iran in so far as it listed Central Bank of Iran,” as quoted by Press TV.

“The reasons relied on are so vague and lacking in detail that the only possible response was in the form of a general denial,” the court ruled, adding that “those reasons therefore do not comply with the requirements of the case-law."

It said the charge leveled against the CBI is “insufficient in the sense that it does not enable either the applicant or the Court to understand the circumstances which led the [European] Council to adopt the contested act.”

The court also ordered the 28-nation European bloc to “bear one half of its own costs and to pay one half of the costs of Central Bank of Iran.”

However, FT said there would be "no practical consequences" because there were further later provisions against Iran that would remain in force, ensuring the embargo on the central bank remained.

Other provisions that the British newspaper was referring is that the central bank is not legally independent. The bank is required to follow government monetary policies in accordance with Article 12 of Iran's Monetary and Banking Law, a rule that partly triggered sanctions.

But the case shows that the basis for EU sanctions is coming under increasing pressure, analysts say. The European Council now has just over two months to appeal.

At the beginning of 2012, the US and EU imposed sanctions on Iran’s oil and financial sectors with the goal of preventing other countries from purchasing Iranian oil and conducting transactions with the CBI.

On October 15, 2012, the EU foreign ministers reached an agreement on another round of sanctions against Iran.

Western sanctions against Tehran have been partly aimed at ensuring that the central bank is unable to access its overseas accounts. It is estimated that Tehran currently has about $100 billion in frozen assets now, mainly in China and India. Europeans say only $10 billion in blocked assets are in European banks.

FT quoted a senior Iranian banker as saying that the court’s decision may also help persuade the US that the continuation of sanctions against Iran is difficult.

As a result of an interim deal Iran and the P5+1 – the five permanent members of the UN Security Council plus Germany – reached in Geneva last November, Tehran was offered a small measure of sanctions relief received. So it received $4.2 billion of its assets. The relief came after Iran agreed to limit certain aspects of its nuclear activities. The six month deal was extended before its July 20 deadline for four months until November 24, allowing the central bank to access another $2.8 billion of restricted funds.

The Iranian banking system is cut out of the Swift international currency clearing system so transfers would remain difficult. Western banks such as BNP Paribas and HSBC have also faced heavy fines for dealing with Tehran, and some bankers say they would be reticent about returning to business with the Iran.

Negotiators from both sides resumed their talks on Friday to reach a comprehensive deal and discuss removal of sanctions against Tehran.