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Court of Justice of the European Union: Freezing of Funds Applies Only to Assets

(May 19, 2010) The Court of Justice of the European Union, in a judgment issued on April 29, 2010, held that Council Regulation (EC) 881/2002, which imposed a freezing of the funds and other economic resources of persons associated with Osama bin Laden and the Taliban, does not apply to social security or other social assistance benefits granted to the spouses of persons included on the list of persons whose funds must be frozen.

The facts of the case arose when the Treasury of the United Kingdom decided that the social security and assistance benefits, such as housing and child benefits, as well as disability allowances, granted to spouses of those persons on the list prepared by the United Nations, was prohibited based on the above Regulation, because these financial benefits could be used indirectly to assist the spouses on the list. The Treasury made an exception for the spouses under the following three conditions: a) any withdrawal from a bank account to which the benefits are sent must be in a small amount of up to ten pounds in cash for each member of the family; b) the person involved must forward a monthly account of expenditures to the Treasury, with receipts for products purchased and expenses, along with a copy of the monthly bank statement; and c) cashing financial resources available to their (listed) spouses would be a criminal offense.

The affected spouses challenged the decision of the British Treasury, on the grounds that the benefits in question were outside the scope of the Regulation. The House of Lords (at that time the U.K.'s highest court), on appeal, requested that the EU Court issue a preliminary ruling as to whether social security or social assistance benefits granted to the spouses of persons included on the list are prohibited from being made available, directly or indirectly, to persons on the list.

The Court interpreted the Regulation in light of the Regulation's purpose, which is to fight terrorism, domestic or international. Freezing of funds is ordered for the purpose of preventing persons on the list from having access to financial resources to support their terrorist activities. Thus, the Court opined that freezing can be ordered with regard to assets that can be turned into funds, goods, or services that could be used to finance the said activities. The Court further noted that the Treasury's interpretation that such funds could potentially end up available to the listed spouses was not based on any danger that they could be diverted to other purposes and that the funds in question were indeed used to cover household expenses, because the small amounts involved were likely used for necessities. Therefore, the Court concluded that the objective of Regulation 881/2002 was not undermined by the release of the allowances in question. (Press Release No 41/10, Court of Justice of the European Union, The Freezing of Funds of Persons with Suspected Links to Bin Laden, Al-Qaeda or the Taliban Does Not Apply to Certain Social Security Benefits Paid to Their Spouses, Judgment in Case C-340/08 M and Others (Apr. 29, 2010), available at