EU High Court Invalidates Sanctions Against Al Qaeda

By Jonathan Winer

In a devastating blow to existing international financial sanctions against terrorist groups, the EU's highest court has today overturned the sanctions program imposed by the European Union on Osama bin Laden, Al-Qaeda and the Taliban. The ruling by the European Court of Justice annulled the EU's freezing of the funds of Yassin Al-Kadi, a Saudi businessman who has been on terrorist financier black-lists since his listing as a "Specially Designated Global Terrorist" by the U.S. Treasury in October 2001.

The ruling only immediately affects Al-Kadi and the charity Al Barakaat, also alleged to have funded Al-Qaeda, and defers the release of their assets 90 days to give the EU the opportunity to come up with a new sanctions regime that provides the due process rights which the Court were not present in the existing EU regulation. But at first reading, it appears essentially to end the ability of the EU to impose economic sanctions against terrorists -- or anyone else -- in the absence of providing the designated person the opportunity to be heard in some kind of contested proceeding, followed by a process of judicial review. What would be required in such a proceeding to make an asset freeze lawful in the EU, and the extent to which assets may be held temporarily prior to such a hearing or process is not spelled out.

The allegations against Al-Kadi are very serious. He has been alleged to have financed Osama bin Laden, Hamas and other terrorist groups by funneling funds through the charities, and has been described in formal testimony by U.S. officials as a key terrorist financier and facilitator. At the request of the U.S, and supported by Saudi Arabia, the United Nations Security Council placed Al-Kadi on its global terrorist list in 2001. In turn, the EU imposed the UN sanctions on Al-Kadi on the basis of the UN Security Council resolution. It is that process that the EU's high court has now invalidated, stating that before the EU may impose sanctions that take away someone's property, the EU must afford the person "a reasonable opportunity fo putting his case to the competent authorities."

How much "due process" is due an alleged terrorist before assets may be frozen is not articulated by the court. But the Court said the EU did not need to unfreeze the funds immediately, as giving the ruling immediate effect could "seriously and irreversibly prejudicing the effectiveness of the restrictive measures imposed by the regulation" by allowing Al-Kadi and Al Barakaat to move their funds out of the EU. Accordingly, it invited the EU to develop a new sanctions regulation that provides due process to the targets within the 90 day period, acknowledging that on the merits of the case the EU might have the right to impose sanctions on Al-Kadi and Al Barakaat.

The ruling was not unexpected. It follows closely the logic and reasoning of the recommendation made by the EU courts Advocate General, Poiares Maduro, in January. The result, however, represents a damaging outcome for efforts to curtail terrorist financing, in practice, wiping out the existing international sanctions regime, not only against Al Qaeda, but against any and all individuals subject to economic sanctions. The EU (and the UN) will need to act urgently to develop a system capable of meeting the court's due process tests. The U.S., for its part, should have seen this coming, giving last January's ruling. A new system needs to be developed to provide an efficient, effective, and legally sustainable way on a global basis of combining a vital couinter-terrorism objective with sufficient oversight and process to meet the baseline human rights and rule of law requirements now demanded throughout the EU as the result of this decision.

The immediate practical impact of this ruling remains fuzzy indeed, even if the medium-term implications are clear. Each EU member state has independent obligations to enforce UN Security Council Resolutions. Despite the Court of Justice ruling breaks, the UN order continues to require U.N. member states to freeze assets of people and entities designated by the UN for funding terror groups. The contradiction between the UN resolution requiring asset freezes, and the EU ruling, finding the EU sanctions invalid given the lack of due process, provides a further reason the countries that are part of the EU will need to develop a process solution promptly.

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