Prisoners of the State

John RWD Jones and Dr Misa Zgonec-Rozej discuss the UN asset-freezing regime which recently came under the scrutiny of the Supreme Court.

The first case heard by the Supreme Court, A v HM Treasury [2010]UKSC 2, [2010]2WLR 378, dealt with the UN Security Council’s (“UNSC”) counter-terrorism measures – namely (a) the sanctions regime against Al-Qaida, the Taliban and associated persons and entities and (b) measures of a general nature provided in UNSC resolution 1373 (2001) to prevent and suppress any acts of terrorism.

At issue was the constitutional means by which the government had decided to implement UNSC Resolutions. The Supreme Court noted the Anti-terrorism, Crime and Security Act 2001 which also allows for freezing of terrorist assets but where orders must be kept under Treasury review, are time limited, and must be approved by both Houses of Parliament.

In contrast, the draconian UNSC resolutions were brought into English law by Orders in Council, which means that they are laid before Parliament for information alone; decisions remain entirely with the Executive. This is lawful under s 1 of the United Nations Act 1946 (“the 1946 Act”), but when the Act was passed it was assumed that Security Council resolutions would be used to deter aggression between States. This time the Orders in Council brought in a regime which required the British government to impose restrictions on British citizens and residents in their own country. The Orders made the five suspects in the case (in the words of Sedley LJ in the Court of Appeal ([2008] EWCA Civ 1187, [2009] 3 WLR 25 at [60])) “effectively prisoners of the state” by criminalising the making of any payments or the passing of funds directly or indirectly for the benefit of a designated person – in other words, if he paid a bus fare or his wife paid the rent for their house. In the Supreme Court, Lord Hope said (at [7]):“Even in the face of the threat of international terrorism, the safety of the people is not the supreme law. We must be just as careful to guard against unrestrained encroachments in personal liberty”.

The Supreme Court ruling raises serious questions as to how the UK is to give effect to UNSC resolutions, particularly at a time when
the Security Council is becoming increasing active in relation to considering economic sanctions as a response to international peace and security concerns. Plainly the answer lies in primary legislation that is subject to parliamentary scrutiny as opposed to Executive Orders in Council.

The background 

Prior to the attacks on 9/11, the UNSC imposed financial sanctions, travel bans and an arms embargo on Usama bin Laden, Al-Qaida, the Taliban and associated individuals and entities. The UNSC established the Sanctions Committee to oversee the implementation of these sanctions and to maintain a regularly updated list of those designated individuals and entities (“the Consolidated List”) whose assets are subject to the asset freeze. The Sanctions Committee, a political body made up of all UNSC members considers, by consensus, listing and de-listing requests submitted by States or designated individuals or entities. However, the sanctions regime affords no right to those designated to challenge these decisions before an independent and impartial judicial body.

In 2001, following the 9/11 terrorist attacks against the United States, the UNSC, acting under Ch VII of the UN Charter, broadened its approach to the problem and adopted resolution 1373 which provides framework legislation with the aim of preventing terrorism worldwide. The resolution obliges all UN Member States to take a number of measures to prevent terrorist activities, including freezing the assets of individuals and entities involved in terrorist acts, and to criminalise various forms of terrorist actions.

The Al-Qaida and Taliban sanctions regime was transposed into UK domestic law by the Al-Qaida and Taliban (United Nations Measures) Order 2006 (“AQO”), while the Terrorism (United Nations Measures) Order 2006 (“TO”) (now replaced by the new Terrorism (United Nations Measures) Order 2009, SI 2009/1747 (“TO 2009”)), implements the UNSC resolution 1373 (2001). Both Orders in Council also provided for enforcement of the EU legislation which implements the relevant UNSC counter-terrorism resolutions. The AQO and the TO are in substance very similar as they both require, inter alia, that the assets of those involved in terrorism are to be frozen, without time limit, and that no funds are to be made available to them. However, the AQO only concerns persons and entities designated by the Sanctions Committee as being associated with Al-Qaida and the Taliban and whose names are consequently listed in the Consolidated List. The Sanctions Committee operates by consensus. The individuals have no rights to challenge their designation before the court.

In A v HM Treasury  one appellant, referred to in the judgment as G, was on the list at the request of the United Kingdom. The other, referred to as HAY, was added at the request of an undisclosed other UN Member State. The UK did not oppose this at the time but in June 2009 made an application to have his name removed which was denied. In contrast, under the TO, the designated persons are persons identified in Council Regulation 2580/2001 and those identified by the Treasury, if the Treasury has “reasonable grounds for suspecting that the person is or may be a person who commits, attempts to commit … acts of terrorism”. Under the TO a designated person may apply to the High Court under s 63(2) of the Counter-Terrorism Act 2008 to have the direction set aside.

The judgment

Lord Hope (with whom Lord Walker and Lady Hale agreed) giving the leading judgment in the Supreme Court, noted at the outset the far-reaching and serious effects of the asset freezing measures on the individuals concerned and their families (see at [4], [38], [39], and [60]). The legislative history of the 1946 Act demonstrates that Parliament did not intend that the Act should be used to introduce restraining or coercive measures which interfere with UK citizens’ fundamental rights. In accordance with the principle of legality, Orders made under s 1(1) of the 1946 Act do not permit “interference with the basic rights of the individual any more than is necessary and unavoidable to give effect to the SCR and is consistent with the principle of legality” (see at [47]).

The Supreme Court’s unanimous ruling was that the TO should be quashed as ultra vires s 1(1) of the 1946 Act. The court observed (at [58]) that UNSC resolution referred to persons “who commit, or attempt to commit, terrorist acts”; the standard of proof was left to the Member States but it was not necessary in order to reproduce what the UNSC resolution requires to introduce the reasonable suspicion test. Widening the scope of the order in that way was not just a “drafting exercise” and left the exercise of judgment entirely to the Executive.

By majority of six to one (Lord Brown dissenting), the Supreme Court held that art 3(1)(b) of the AQO also had to be quashed as ultra vires. The test there was merely whether someone’s name was on the list, but the court accepted (at [76]) that the 1946 Act did not “give authority for overriding the fundamental rights of the individual”, either expressly or by necessary implication. Someone on the list has no remedy available to have his or her name removed, and no way of discovering what caused him to be placed on the list.

Lord Brown, dissenting, would have upheld the AQO on the basis that the features of the AQO characterised as objectionable were the ineluctable consequence of giving effect to the relevant UNSC resolutions and that the same deficiency would apply to primary legislation (see [203]–[204]).

What may be of particular significance for the future is that the decision was based on common law principles, not the Human Rights Act 1998; an approach echoed in a recent speech by the Lord Chief Justice in which he said that the courts should use more English common law in their decisions, and rely less on European human rights law. Here the common law assumed that certain issues can only be dealt with by primary legislation. It also leaves open the question of the future working of s 1 of the 1946 Act: to what extent can UNSC resolutions which mandate this country to take actions be brought into effect by Orders in Council?

Conclusion

After the delivery of the judgment, on 4 February 2010, the Supreme Court decided to deny the Treasury’s request to stay the execution of the judgment but made the orders quashing TO and AQO. However, the assets of the appellants have not been released. TO 2009, which replaced TO 2006, remained in effect, and the appellants known as G and HAY remained subject to the asset freeze on the basis of EU Council Regulation 881/2002 which is directly applicable in the UK. On 7 April 2010, the Treasury adopted the Al-Qaida and Taliban (Asset-Freezing) Regulations 2010, SI 2010/1197 which formally revokes the AQO and makes provisions for enforcement of Council Regulation 881/2002.

In December 2009, Council Regulation 881/2002 was amended by Council Regulation 1286/2009 which provides for a listing procedure attempting to ensure that the fundamental rights of the defence and in particular the right to be heard are respected. The amendments have been introduced following the ruling of the Court of Justice of the European Communities in Kadi and Al Barakaat International Foundation v Council of the European Union and Commission of the European Communities (Joined Cases C-402/05 P and C-415/05 P) that the Council Regulation 881/2002 infringed fundamental rights under the EU law, including the right to be heard, the right to effective judicial review, and the right to respect for property. The EU Courts have not yet pronounced upon the compatibility of these amendments with fundamental rights.

The only effective way to terminate the freezing of the assets imposed under the Al-Qaida and Taliban sanctions regime is to secure the individual’s removal from the UN list. However, even if the UK requested the delisting of the individuals concerned, there is no guarantee that such a request would be successful due to the political nature of the decision-making at the Sanctions Committee. It remains to be seen whether the introduction of the Ombudsperson in UNSC Resolution 1904 in December 2009 will bring the necessary elements of impartiality and independence which have so far been lacking in the consideration of delisting requests.

In response to the Supreme Court judgment, the government introduced fresh legislation and on 10 February 2010, the Terrorist Asset-Freezing (Temporary Provisions) Act 2010 was passed. It validates on a temporary basis the 2001, 2006 and 2009 TO in order to ensure a continued freeze on the assets of those designated under these Orders. The Act will expire on 31 December 2010 as it is expected that the permanent legislation, namely the Terrorist Asset Freezing Bill, will be passed and enter into force before the end of the year.

John RWD Jones is a barrister at Doughty Street Chambers and Dr Misa Zgonec-Rozej is an international law consultant.

A v HM Treasury: the issues

The appellants were made the subject of freezing orders over their assets under the Terrorism (United Nations Measures) Order 2006 (“TO”), and, in the case of one of them, also under the Al-Qaida and Taliban (United Nations Measures) Order 2006 (“AQO”). They applied to the court to set aside their designations. The issue before the Supreme Court was whether s 1(1) of the United Nations Act 1946 gave the Treasury the power to make the TO and the AQO having regard to:
(a) the gravity of the interference with fundamental rights which the asset freeze brings about;
(b) the fact that the TO allowed asset freezing on grounds of “reasonable suspicion” that the person is or may be a person who commits or attempts to commit acts of terrorism; and
(c) the fact that the AQO entirely deprived those named in the Consolidated List of any rights of access to a court.

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