European Court authority precedes United Nations Charter, says ECJ

Margarida Vaconcelos reports: On 3 September, the European Court of Justice annulled the Council regulation freezing the assets of Yassin Abdullah Kadi and the Al Barakaat International Foundation. In its ruling the ECJ affirmed the jurisdiction of the EU Courts to review the implementation of UN Security Council Resolutions and to guarantee their compliance with human rights. The ECJ ruled that the Council of Ministers must provide for a fair hearing and adequate judicial remedy for those which are on the list of persons considered to be associated to Usama bin Laden, Al-Qaeda or the Taleban of the Sanctions Committee of the United Nations Security Council.

According to several resolutions adopted by the UN Security Council, all members of the United Nations must freeze the funds and other financial resources controlled directly or indirectly by members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities. In May 2002 the Council adopted a Common Position and the regulation (EC) No 881/2002, the contested regulation, imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban. The regulation was adopted on the basis of Article 60, 301 and 308 EC. The names of persons, groups and entities affected by the freezing of funds are listed in Annex I of the contested regulation. The Commission was given the power to amend such annex, taking into account the Security Council Sanctions Committee determinations. In 2001, the Sanctions Committee included the claimants, Yassin Abdullah Kadi and Al Barakaat International Foundation in the list of persons and bodies associated with Usama bin Laden, Al-Qaeda or the Taliban. The Commission therefore added Mr Kadi and Al Barakaat to Annex I. Consequently, Mr Kadi and Al Barakaat brought actions before the Court of First Instance (CFI) seeking annulment of the Council regulations giving effect to the UN Sanctions Committee decision since those measures concerned them. The claimants argue that the Council was not competent to adopt the regulation and that it infringed their fundamental rights, the right to property and the rights of defence such as the right to be heard and the right to effective judicial review.

In September 2005 the Court of First Instance gave its judgments rejecting all the pleas in law raised by Mr Kadi and Al Barakaat and confirmed the validity of the Council regulation. Then, Mr Kadi and Al Barakaat brought appeals against those judgments before the Court of Justice. They asked the ECJ to set aside the judgments of the Court of First Instance and declare the contested regulation null and void. The appellants challenged the judgment on the grounds of lack of legal basis for the contested regulation, breach of several rules of international law by the Court of First Instance and infringement of their fundamental rights. The UK has brought a cross-appeal contending that the ECJ should dismiss the appeals.

The CFI has dismissed the applicants’ claim alleging that there was no legal basis for the contested regulation rejecting the argument that the Council regulation affected individuals while Articles 60 EC and 301 EC only allow the Council to take measures against third countries. In fact, Article 60 EC concerns measures against third countries with regard to capital movements and payments. This Article is amended by the Lisbon Treaty which would provide the Union with a clear legal base to impose financial sanctions such as freezing of funds, financial assets or economic gains against “natural or legal persons, groups or non-State entities” considered to be terrorists.

The ECJ upheld the CFI conclusion that there is no specific provision in the EC Treaty providing for the adoption of measures such as the ones provide in the contested regulation relating to the imposition of economic and financial sanctions to individuals and entities suspected of funding international terrorism, where no link has been established with the governing regime of a third State.

The ECJ has stressed that the conclusion reached by the Court of First Instance that the Council was competent to adopt that regulation on the joint basis of Articles 60 EC, 301 EC and 308 EC is justified but on other legal grounds. The aim of Article 308 EC is to confer on the Community institutions express or implied powers to act, if there are no specific provisions on the Treaty conferring such powers and they are necessary to enable the Community to carry out its functions with a view to attaining one of the objectives laid down by the Treaty.

According to the Court of First Instance, Articles 60 EC and 301 EC are special provisions of the EC Treaty and they contemplate situations in which action by the Community may prove to be necessary in order to achieve one of the objectives assigned to the European Union, i.e., the implementation of a common foreign and security policy.

The ECJ has held that the resource to Article 308 EC cannot be justified by the fact that that measure pursued a CFSP objective but that provision could be used as a legal basis because that regulation could be regarded as intended to attain an objective of the Community and as, in addition, linked to the operation of the common market within the meaning of Article 308 EC.

As regards the applicants allegation that the Council regulation infringes their fundamental rights the CFI has decided to first consider “the relationship between the international legal order under the United Nations and the domestic or Community legal order.” The CFI has stressed that the applicants’ challenging of the internal lawfulness of the contested regulation implied that it should review, directly or indirectly, the lawfulness of the resolutions put into effect by that regulation in the light of fundamental rights as protected by the Community legal order. The Court of First Instance has stressed that resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations are binding on all the Member States of the Community. It has held that under international law the Member States, as Members of the United Nations, are bound to respect the principle of the primacy of their obligations under the Charter of the United Nations, therefore, the obligation to carry out the decisions of the Security Council prevails over any other obligation they may have entered into under an international agreement. However, according to the Court of First Instance, the EC Treaty does not affect the Member States obligation to respect the principle of the primacy of obligations undertaken by virtue of the Charter of the United Nations as such obligation arises from an agreement concluded before the Treaty. The CFI concluded that the Community is bound by the Treaty to adopt all the measures necessary to allow its Member States to fulfil those obligations. The Court of First Instance recalled that the contested regulation constitutes the implementation at Community level of the EU Member States obligation, as Members of the United Nations, to give effect to the sanctions against Usama bin Laden, members of the Al-Qaeda network and other associated individuals or entities, which have been decided by several resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations.

According to the CFI, the Community Courts in principle had no jurisdiction to review the validity of the regulation at issue. The Court of First Instance held that the contested regulation, since it is intended to give effect to a resolution adopted by the Security Council under Chapter VII of the Charter of the United Nations could not be subject to judicial review of its internal lawfulness, with the exception of its compatibility with the norms of jus cogens, and then to that extent enjoyed immunity from jurisdiction.

The CFI has stressed that it is not for the Court to review whether the Security Council’s resolutions are compatible with fundamental rights as protected by the Community legal order as in doing so it would trespass the Security Council’s prerogatives under Chapter VII of the Charter of the United Nations in relation to determining if there is a threat to international peace and security and the appropriate measures for confronting such a threat.

However, the ECJ, unsurprisingly, has not agreed with this ruling. The CFI also held that the freezing of funds did not constitute an inappropriate interference with the right to private property of the persons concerned and therefore could not be considered as contrary to jus cogens. Moreover, according to the CFI “(…) the limitation of the applicant’s right of access to a court, as a result of the immunity from jurisdiction enjoyed as a rule, in the domestic legal order of the Member States of the United Nations, by resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations, in accordance with the relevant principles of international law (…), is inherent in that right as it is guaranteed by jus cogens.” The CFI has pointed out that the nonexistence of an international court with jurisdiction to determine whether acts of the Security Council are lawful is sorted by the creation of the Sanctions Committee as the opportunity of applying to that committee in order to have any individual case re-examined guarantees adequate protection of the applicant’s fundamental rights as recognised by jus cogens.’ Thus the Court of First Instance dismissed the pleas alleging breach of the right to effective judicial review and the actions in their entirety.

Although France, the Netherlands, the United Kingdom and the Council have endorsed the CFI conclusion that the contested regulation in principle escapes all review by the Community judicature, even concerning observance of fundamental rights, those Member States believe that no review of the internal lawfulness of resolutions of the Security Council may be pursued by the Community judicature.

In fact, the UK has brought a cross-appeal on a single ground related to the error of law allegedly committed by the Court of First Instance in concluding that it was competent to consider whether the Security Council’s resolutions at issue were compatible with the rules of jus cogens. The UK took the view that the resolutions of the Security Council at issue were adopted under Chapter VII of the Charter of the United Nations therefore defining what constitutes a threat to international peace and security and the measures required to maintain them is the responsibility of the Security Council alone therefore escapes the jurisdiction of national or Community authorities and courts. According to the UK the resolutions of the Security Council in question do not fall within the ambit of the Court’s judicial review therefore the Court has no authority to analyse, even indirectly, their lawfulness in the light of Community law. In fact, the Court is bound to interpret and apply Community law in a manner compatible with the obligations of the Member States under the Charter of the United Nations.

It is clear, the ECJ has not upheld these arguments. The ECJ has stressed “… that the obligations imposed by an international agreement cannot have the effect of prejudicing the constitutional principles of the EC Treaty, which include the principle that all Community acts must respect fundamental rights, that respect constituting a condition of their lawfulness which it is for the Court to review in the framework of the complete system of legal remedies established by the Treaty.” The ECJ made a distinction between reviewing the lawfulness of an international agreement and reviewing an EC measure intended to give effect to the international agreement at issue. The Court has stressed that the review of lawfulness ensured by the Community courts applies to the Community act intended to give effect to the international agreement at issue and not to the international agreement itself. Moreover, the Court held that a judgment given by the Community Courts deciding that a Community measure aimed at giving effect to a resolution of the UN Security Council is contrary to a higher rule of law in the Community legal order that would not entail any challenge to the primacy of that resolution in international law. The Court has held that “the review by the Court of the validity of any Community measure in the light of fundamental rights must be considered to be the expression, in a community based on the rule of law, of a constitutional guarantee stemming from the EC Treaty as an autonomous legal system which is not to be prejudiced by an international agreement.”

Moreover, the ECJ stressed that the UN system, of the re-examination procedure before the Sanctions Committee cannot justify a generalised immunity from jurisdiction within the internal legal order of the Community. In fact, according to the ECJ “such immunity, constituting a significant derogation from the scheme of judicial protection of fundamental rights laid down by the EC Treaty, appears unjustified, for clearly that re-examination procedure does not offer the guarantees of judicial protection.” The ECJ has concluded that the Community courts have jurisdiction, under the EC Treaty, to review the lawfulness of all Community acts in the light of the fundamental rights forming an integral part of the general principles of Community law, including review of Community measures which, such as the contested regulation, are intended to give effect to resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations. Consequently, the Court ruled that the judgments under appeal must be set aside in this regard. The ECJ found that there was no need to examine the UK cross-appeal on the review of the contested regulation on the basis of the rules of international law falling within the ambit of jus cogens. But it has decided to examine the claims made by Mr Kadi and Al Barakaat concerning the breach of the rights of the defence, particularly the right to be heard, and the right to effective judicial review, created by the measures for the freezing of funds as they were imposed on the appellants by the contested regulation. The ECJ held that the rights of the defence and the right to effective judicial review were clearly not respected. The Court has pointed out that in order to enable the persons subject to restrictive measures to defend their rights the Community authorities are bound to communicate the grounds of the restrictive measures to the persons or entities concerned. The ECJ has acknowledged that the Community authorities cannot be required to communicate the grounds of restrictive measures imposed by the contested regulation before the name of a person or entity is entered in that list for the first time as this would jeopardise the effectiveness of the freezing of funds and resources imposed by that regulation.

For the same reasons, the Court also stressed that the Community authorities were not bound to hear the appellants before their names were added to the list set out in Annex I of that regulation. Nevertheless, the Court has stressed “that does not mean, with regard to the principle of effective judicial protection, that restrictive measures such as those imposed by the contested regulation escape all review by the Community judicature once it has been claimed that the act laying them down concerns national security and terrorism.” The ECJ concluded that the Common Position 2002/402 as well as the contested regulation do not provide for a procedure for communicating the evidence justifying the inclusion of the names of the persons concerned in Annex I to that regulation and for hearing those persons therefore the contested regulation was adopted under a procedure in which the rights of defence of the appellants were not observed. The Court held that because the Council failed to communicate to the appellants the evidence used against them to justify the restrictive measures imposed on them the appellants’ rights of defence and the right to an effective legal remedy have been infringed. Moreover, the ECJ also held that the imposition of the restrictive measures established in the contested regulation such as freezing of funds constitutes an unjustified restriction of Mr Kadi’s right to property.

The ECJ has held that the EU implementation of UN Security Council’s Resolutions at issue breaches fundamental rights. Hence, the Court ruled that the contested regulation, so far as it concerns the appellants, must be annulled on the grounds of breach of principles applicable in the procedure pursue when the restrictive measures introduced by that regulation were adopted. However the Court has not excluded the possibility that, on the merits of the case, the imposition of such measures on the appellants may be justified. The Court acknowledged that an annulment with immediate effect would seriously prejudice the effectiveness of the restrictive measures imposed on the applicants as they might take steps in order to prevent measures freezing funds from being applied to them again. Hence, the Court order to the effects of regulation No 881/2002 to be maintained, so far as concerns Mr Kadi and the Al Barakaat International Foundation, for a period that may not exceed three months running from the date of delivery of this judgment in order to allow the Council to remedy the infringements found. According to EUobserver the Commission has said that it would “work together with other [European] community institutions to find a general framework on how to establish sufficient mechanisms, in which targeted persons can be heard and effective judicial review can be exercised by [European] Community courts.”