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Court of Justice of the European Union: Judgment in Terrorism Cases

(Sept. 15, 2008) On September 3, 2008, the European Court of Justice (ECJ) issued an important judgment on the appeal in the joined cases of Yassin Abdullah Kadi, a resident of Saudi Arabia, and Al Barakaat International Foundation, which was established in Sweden as an informal banking network used to send funds to Somalia (cases C-402/05 P & C-415/05/P, respectively). The significance of the ECJ's judgment lies primarily in its sending a clear and broad message to the EU institutions that in the fight against terrorism, they must respect and ensure application of fundamental rights; that those persons or legal entities listed in the EU registry as suspected of terrorist activities are entitled to the basic rights of a fair hearing and right to be informed; and that the legality of Community legislation is subject to judicial review by the European court system regardless of whether the legislation in question was enacted in implementation of an international treaty, in this case the Charter of the United Nations.

The two cases evolved as follows. In 2000, the United Nations Security Council adopted Resolution 1333, asking the Taliban to cease providing a sanctuary and a training facility for international terrorists and requesting that U.N. Members immediately freeze all funds and other financial assets of Osama bin Laden and individuals and organizations associated with Al-Qaeda, as designated by the Sanctions Committee. The Resolution also granted a mandate to the Sanctions Committee to draft a list of terrorist suspects, based on information provided by the Members. In March 2001, the Committee adopted the first list, which was updated regularly. The names Yassin Abdullah Kadi and Barakaat International Foundation, Sweden, were added to the list in October 2001. Through subsequent resolutions, the Security Council urged the Members to continue the restrictive measures on freezing of funds of those suspected of terrorist activities.

In 2001, in implementation of U.N. Resolution 1333, the EU adopted two legislative measures: a Common Position imposing additional restrictive measures and a Regulation banning the export of certain goods and services to Afghanistan and extending the freeze of funds. The Regulation, which was directly applicable in the legal systems of EU Members, stated that all funds and other financial assets belonging to any natural or legal person or body designated by the U.N. Sanctions Committee and listed in the Annex should be frozen. In 2002, Regulation No. 881 was adopted, calling for the freezing of funds and other assets of all individuals and organizations listed in the Annex. Among those listed were the two appellants. Only funds necessary to cover basic living expenditures, medical care, taxes, insurance premiums, public utility charges, payment of professional fees and expenses related to rendering of legal services, and fees for the maintenance of frozen funds or other economic resources were exempted from the freeze.

The appellants requested that the Court of First Instance (CFI) annul Regulation No. 881 based on lack of competence of the Council to adopt the Regulation and because the Regulation was in direct violation of their fundamental rights, in particular, the right to property, to a fair hearing, and to judicial review. The CFI, in its 2005 judgment, rejected the arguments of both parties and upheld the contested Regulation. In examining the relationship between the legal order under the United Nations and the Community legal order, the CFI held that it had no jurisdiction to review the validity of Regulation No. 881, which was adopted in order to give effect to the resolution adopted by the Security Council under Chapter VII of the U.N. Charter resolution; that the Charter as an international treaty prevails over Community law and Security Council resolutions are binding upon the Community institutions, including the Court; and that it had competence to review the compatibility of the contested Regulation only concerning jus cogens rules.

Subsequently, both parties appealed to the ECJ. On September 3, 2008, the ECJ issued a judgment in which it invalidated the earlier judgment of the CFI. On the question of judicial review, the ECJ stated that the Court's jurisdiction arises within the context of the internal and autonomous legal order of the Community, and it also reiterated the fundamental norm that the EU institutions are subject to judicial review to ensure the compatibility of their provisions with the EC Treaty. The ECJ held that the powers of the Community courts must ensure the full review, of 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, like the contested regulation, are designed to give effect to the resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations.

It also annulled the contested regulation as far as the appellants were concerned, on the grounds that the right to effective judicial review, the right to be heard, and the right to property were violated. It ordered that the effects of the Regulation, as they relate to the appellants, remain in force for a period of up to three months from the date of judgment, in order to permit the Council to remedy the violations of the appellants' rights. On the issue of allocation of costs, the ECJ ordered the Council and the Commission to pay their own costs and half of the cost incurred before the CFI and the ECJ by the two appellants. (Judgment of the Court, Grand Chamber, Sept. 3, 2008, available at http://curia.europa.eu/jurisp/cgi-bin/gettext.pl?where=&lang=en&num=79919096
C19050402&doc=T&ouvert=T&seance=ARRET
.)