UPDATE 1-EU court annuls asset freeze on Syria International Islamic Bank

Wed Jun 11, 2014 12:03pm EDT

(Adds details)

By Justyna Pawlak

BRUSSELS, June 11 (Reuters) - The European Union's second highest court said on Wednesday it had annulled an EU asset freeze on Syria International Islamic Bank, dealing another blow to EU sanctions following legal victories last year by several Iranian companies.

The EU imposed sanctions on SIIB in 2012, alleging that it had acted on behalf of two other banks, Commercial Bank of Syria (CBS) and Syrian Lebanese Commercial Bank (SLCB), that were both under EU sanctions.

The EU also alleged that SIIB, owned by Qatari and Syrian shareholders, carried out financial transactions for people who, without being under sanctions themselves, had bank accounts with the two other banks.

But the court said the bloc's governments had failed to provide evidence that the bank's clients were "implicated in the violent repression of the civilian population in Syria" or that any proof was made available that transactions on behalf of clients were linked to the Syrian government.

"The fact that the applicant carried out financial transactions for persons who also have accounts with CBS or SLCB cannot be considered to be sufficient to justify its inclusion," the court said in a statement.

The bank has 20 branches and three offices in Syria and has also been sanctioned by the U.S. Treasury, which has accused it of helping Syria's state-owned Commercial Bank to evade U.S. counter-proliferation sanctions.

The EU made no immediate comment on the ruling, which is subject to appeal.

Instead of appealing, EU governments could also re-impose sanctions as they did with several Iranian companies last year to avoid a lengthy and complicated appeal process.

Such court challenges by people and companies targeted by EU sanctions have became a growing problem for European policymakers.

At the core of the issue is the governments' unwillingness to provide sufficient evidence of their targets' alleged wrongdoing because of concerns that making such information public would undermine western intelligence gathering.

UKRAINIANS LAUNCH LITIGATION

The U.S. government has also expressed concern over the growing body of litigation and pressed European politicians to find a way to allow judges to examine confidential information and avoid conflicts with courts.

The latest high-profile targets of EU sanctions to sue in court are former Ukrainian president Viktor Yanukovich, overthrown by pro-European protesters in February, and former Prime Minister Mykola Azarov.

Both have been accused by the EU of misappropriation of Ukrainian state funds and face an EU asset freeze.

In addition to targeting the Syria International Islamic Bank, the EU has imposed a broad range of sanctions against Syria over President Bashar al-Assad's conduct of a war with domestic opponents since 2011.

They include an embargo on purchases of Syrian oil, a ban on arms sales and investment in the Syrian oil industry as well as prohibition of European companies trading in Syria in gold and precious metals.

Nearly 180 Syrians are banned from travelling to the EU and roughly 50 companies have their assets in Europe frozen, including the Syrian central bank.

For the full court ruling, please click: here (Additional reporting by Adrian Croft; Editing by Ralph Boulton)

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