Case T-85/09, Kadi II

Guest post by Tim Stahlberg, Lawyer at CMS Hasche Sigle in Hamburg

The General Court of the EU quashes the regulation freezing terror suspect Yassin Abdullah Kadi's funds. The judgment of 30 September 2010 – it is the sequel to the seminal Kadi decision of the Court of Justice – deals with fundamental rights and EU anti-terror sanctions based on UN Security Council resolutions.

On 20 October 2001, following a European regulation giving effect to UN Security Council resolutions, Mr Kadi's funds and other economic resources were frozen. The Sanctions Committee, a sub-organ of the Security Council, had designated Mr Kadi as being associated with Usama Bin Laden.

The General Court found clear words to describe this situation. 'Such measures are particularly draconian ... All the applicant's funds and other assets have been indefinitely frozen for nearly 10 years now and he cannot gain access to them without first obtaining an exemption from the Sanctions Committee … the UK Supreme Court took the view that it was no exaggeration to say that persons designated in this way are effectively “prisoners” of the State: their freedom of movement is severely restricted without access to their funds and the effect of the freeze on both them and their families can be devastating.' (para. 149)

Mr Kadi denies having ever supported terrorist organisations. He maintains that he has never been tried for or convicted of any criminal offence relating to terrorism anywhere in the world.

The Kadi judgment of the Court of First Instance (2005)

The legal odyssey of Mr Kadi in Europe began with the proceedings he initiated in December 2001 before the Court of First Instance (now the General Court). The applicant's case was dismissed in September 2005. Community courts must not review the lawfulness of the EU regulation at issue, the Court said, because resolutions of the UN Security Council have primacy over Community law. Except with regard to certain mandatory fundamental rights, recognised under international law as jus cogens, the regulation therefore enjoys immunity from jurisdiction.

The Kadi judgment of the Court of Justice (2008)

Mr Kadi appealed and the Court of Justice set aside the judgment of the Court of First Instance in September 2008 (see this comment on ECJBlog regarding Joined Cases C-402/05 P and C-415/05 P, C-402 Kadi and Al Barakaat). The Court of Justice asserted that 'an international agreement cannot affect the allocation of powers fixed by the Treaties or, consequently, the autonomy of the Community legal system'; 'the obligations imposed by an international agreement cannot have the effect of prejudicing the constitutional principles of the EC Treaty'; the European Community is an 'internal' and 'autonomous legal system'.

Thus, the Court of Justice examined the regulation and found a breach of fundamental rights. Since the Council had not communicated any evidence to the applicant, the rights of defence and the right to effective judicial review had been infringed.

With regard to the right to property the Court of Justice held that the restrictive measures might, in principle, be justified. However, without any meaningful opportunity to make his position heard, the applicant's right to property was disproportionately restricted.

In the aftermath of the judgment, the Commission sent a summary of reasons provided by the Sanctions Committee to Mr Kadi and informed the applicant that it intended to keep his assets frozen. Mr Kadi asked for evidence. The Commission did not reply and adopted a new regulation maintaining the freeze. Mr Kadi again took legal action.

The Kadi II judgment of the General Court (2010)

In the judgment of 30 September 2010, the General Court seized the occasion to criticise the Court of Justice's understanding of the relationship between the EU and the UN order (although the criticism was wrapped up as 'certain doubts voiced in legal circles'):

Even though the Court of Justice stated that it was not for the Community judicature to review the legality of a UN resolution, the fact remains that examining the legality of a Community act which merely implements a resolution necessarily amounts to a review of such a resolution, the General Court said.

The Court of Justice in fact scrutinised the UN system; and 'such judicial review is liable to encroach on the Security Council’s prerogatives.' (para. 114)

Nevertheless, the General Court grudgingly followed the path of the higher court and considered that it must, in principle, ensure a full and rigorous review of the European regulation; it may only decline to do so if sufficient judicial guarantees are already in place at UN level.

The General Court therefore read into the Court of Justice's Kadi decision an element of potential deference, reminiscent of the first 'Solange' ('so long as') jurisprudence of the German Federal Constitutional Court: So long as the UN system does not offer effective judicial protection, the EU has to do so.

And judicial protection in the UN system is still not good enough: 'In essence, the Security Council has still not deemed it appropriate to establish an independent and impartial body responsible for hearing and determining, as regards matters of law and fact, actions against individual decisions taken by the Sanctions Committee ... Moreover, the evidence which may be disclosed to the person concerned continues to be a matter entirely at the discretion of the State which proposed that he be included on the Sanctions Committee’s list and there is no mechanism to ensure that sufficient information be made available to the person concerned in order to allow him to defend himself effectively (he need not even be informed of the identity of the State which has requested his inclusion on the Sanctions Committee’s list).' (para. 128)

Having found so, it was clear that sending the applicant a summary of reasons, containing 'general, unsubstantiated, vague and unparticularised allegations,' would hardly remedy these deficiencies. (paras. 177, 157) 'The applicant's rights of defence have been “observed” only in the most formal and superficial sense,' the General Court lambasted. (para. 171) The Commission 'failed to take due account of the applicant's comments' and 'did not grant him even the most minimal access to the evidence against him.' (paras. 172 – 173) As a consequence, the right to effective judicial review and the right to property were also infringed.

The Kadi saga, however, does not end with this judgment. An appeal by the Commission is most likely. This means that it might take even more than ten years until Mr Kadi will ever know the evidence against him.

'In the scale of a human life,' the General Court said, '10 years in fact represent a substantial period of time and the question of the classification of the measures in question as preventative or punitive, protective or confiscatory, civil or criminal seems now to be an open one.' (para. 150)

The Court also cited the UN High Commissioner for Human Rights:

‘Because individual listings are currently open-ended in duration, they may result in a temporary freeze of assets becoming permanent which, in turn, may amount to criminal punishment due to the severity of the sanction. This threatens to go well beyond the purpose of the United Nations to combat the terrorist threat posed by an individual case. In addition, there is no uniformity in relation to evidentiary standards and procedures. This poses serious human rights issues, as all punitive decisions should be either judicial or subject to judicial review.’ (para. 150)

Indeed, 'smart sanctions', as the listings are called in comparison to traditional sanctions like embargoes, is a strange formula of newspeak: A decision not to trade with a particular state is one thing, freezing all financial means of an individual is quite another.

Moreover, the substantive criteria for listing a person are still unclear. The Kadi judgments of the Court of Justice and the General Court vindicate procedural rights (until today unsuccessfully), but do not elucidate what 'associated' with Usama Bin Laden or a terrorist organisation actually means.

In some respects, this parallels legal developments in the US, where judicial rights have been defended by the US Supreme Court without however clarifying the definition of an 'enemy combatant' in the war on terror (see, for instance, the Hamdi and Boumediene judgments).

Text of Judgment