EU court awards damages for 1st time in a sanctions case

The General Court of the EU (First Chamber) has awarded damages today for the first time in a sanctions case, in Case T-384/11 Safa Nicu Sepahan v Council (25 November 2014).


The case follows the pattern of a number of recent sanctions cases in the European court that will be familiar to readers of this blog. The applicant, an Iranian company, was included in 2011 in the EU’s targeted sanctions concerning Iran. It said that the reasons given for its inclusion (that is a “communications firm that supplied equipment for the Fordow (Qom) facility built without being declared to the IAEA”) were incorrect, that it was not a communications firm and was not involved in the supply of equipment to that facility. The Council of the EU had no evidence, other than the listing proposal from a Member State, to support its reasons, and therefore the Court annulled the company’s designation on the grounds that the Council had “manifestly erred” in including the applicant and had not discharged its burden of proof. The Court ordered the Council to bear its own costs and pay half of the applicant’s costs.


In a number of previous cases summarised on this blog, the European court has annulled listings but declined to award damages under Article 340 of the Treaty on the Functioning of the European Union, either because the Court has not found the breach of EU law by the Council to be “sufficiently serious” (a precondition for damages) or because the applicant had not proved that its inclusion on an EU sanctions measure caused its loss.

However, in this case the Court allowed part of the applicant’s damages claim. It found that that Council’s error was sufficiently serious, had caused damage to the company’s reputation, affecting the way in which third parties, located mainly part outside the EU, behaved towards it, and that annulling the company’s listing was not enough to compensate it for the damage caused to its reputation. A few notable aspects of the judgment are as follows:

  1. The breach that the Court classified as “sufficiently serious” was the same breach that the Court has found in a large number of recent sanctions cases, namely that the Council had apparently failed to check its facts and gather evidence to prove the accuracy of reasons given for the listing.
  2. The damages awarded were modest. Safa Nicu Sepahan Co had claimed €7.66 million plus interest, including €2 million as damage to its reputation (and interest at 5% for a 3 year period), but the Court awarded it €50,000 plus default interest from the date of judgment until full payment of compensation, at the rate set by the European Central Bank for main refinancing operations, increased by 2%. There is no analysis by the Court as to how it reached this figure, except the statement that the Court had evaluated the harm suffered “ex aequo et bono” (i.e. according to what seemed just and fair).
  3. The Court made a number of remarks about the serious reputational damage that can result from being included in a sanctions measure that makes an official EU statement in the Official Journal that an entity is linked with nuclear proliferation.
  4. The Court rejected in its entirety the applicant’s claim for material damage arising from the closure of some of its bank accounts and the suspension of its payments in euros by European banks, the discontinuance of commercial relations by its European suppliers and the fact that it was impossible to perform 4 contracts entered into with its customers. The Court rejected those claims essentially because it found that the applicant had not made them out as a matter of evidence.

IranIran European UnionEuropean Union

About Maya Lester QC

Maya Lester QC

Maya Lester QC is a senior barrister (Queen’s Counsel) at Brick Court Chambers with a wide-ranging practice in public law, European law, competition law, international law, human rights & civil liberties. She has a particular expertise in sanctions. The legal directories say she is the...

See profile for Maya Lester QC >