M & Ors v Her Majesty's Treasury & Ors [2006] EWHC 2328 (Admin)

Case No CO/6156/2006[2006] EWCH 2328 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LL
22nd September 2006
Before
Kennth Parker QC, sitting as a Deputy Judge of the High Court
Between
MClaimantsAClaimantMMClaimantHer Majesty’s TreasuryDefendantCommissioners fro Her Majesty’s Revenue and CustomsInterested PartiesSecretary of State for Works and PensionsInterested PartyLondon Borough of Hammersmith and Fulham (6156/2006)Interested PartyBirmingham City Council (6329/2006)Interested PartyManchester City Council (6388/2006)Interested Party
(Transcript of the Handed Down Judgment ofSmith Bernal Wordwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Simon Cox (instructed by Birnberg Peirce and Partners, solicitors) for Claimants “M” and “MM” and (instructed by Public Law Solicitors) for the Claimant “A”.Jonathan Swift (instructed by Treasury Solicitors) for Defendant and for the Commissioners for Her Majesty’s Revenue and Customs and the Secretary of State for Work and PensionsIrene Sabic instructed by and for Manchester City Council for The other Interested Parties did not appear and were not represented.
JudgmentDate 2006-09-22
[1]Each of the claimants in these applications for judicial review is a housewife responsible for raising several children and is a person who qualifies under statutory criteria to receive some or all of certain social security benefits, namely, child benefit, child tax credit, income support, disability living allowance, carers allowance, housing benefit and council tax benefit. However, each of the claimants is the wife of, and lives together with, a person who is listed under United Nations Security Council Resolution 1390 (2002) (“the listed person”).[2]The defendant in these proceedings is Her Majesty’s Treasury (“the Treasury”). Under certain legislative provisions, to which I shall later refer, the Treasury has granted licences to HM Revenue and Customs and to the Secretary of State for Work and Pensions that permit them to continue to make payments of the relevant social security benefits to each of the claimants. Each licence granted by the Treasury also applies to the respective claimant, with a view to ensuring that the claimant does not engage in conduct which would offend the legislative provisions in question.[3]In essence the claimants contend that the Treasury was mistaken in concluding that the payment of the relevant social security benefits to the claimants fell within the scope of the applicable legislative provisions and in concluding that the continued payment of those benefits therefore required to be licensed in the manner which I have mentioned. It might be slightly more accurate to say that the claimants challenge the precise basis upon which the Treasury reached the foregoing conclusions, lest it be argued at some stage that the Treasury could lawfully have reached the same conclusions but by the adoption of different reasoning. That is the principal challenge. The claimants, however, also contend that an important term of the relevant licences is so vague and uncertain that it is unlawful.[4]In this judgment I shall first describe the background, setting out the relevant parts of the Charter of the United Nations and the various United Nations resolutions relevant to these applications. Then I shall set out the legislative provisions relating to listed persons, both under European Community law and domestic law. Finally, I shall analyse the respective submissions made by the parties.

Background

[5]Under Article 24(1) of the Charter of the United Nations the Members of the United Nations “confer on the Security Council primary responsibility for the maintenance of international peace and security, and agree that in carrying out its duties under this responsibility the Security Council acts on their behalf”.[6]Under Article 25 of the Charter of the United Nations, “[t]he Members of the [UN] agree to accept and carry out the decisions of the Security Council in accordance with the present Charter”.[7]According to Article 41 of the Charter of the United Nations: “The Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations”.[8]In accordance with Article 48(2) of the Charter of the United Nations, the decisions of the Security Council for the maintenance of international peace and security “shall be carried out by the Members of the United Nations directly and through their action in the appropriate international agencies of which they are members”.[9]On 15 October 1999 the Security Council of the United Nations (“the Security Council”) adopted Resolution 1267 (1999), in which it inter alia condemned the fact that Afghan territory continued to be used for the sheltering and training of terrorists and planning of terrorist acts, reaffirmed its conviction that the suppression of international terrorism was essential for the maintenance of international peace and security, deplored the fact that the Taliban continued to provide safe haven to Usama bin Laden and to allow him and others associated with him to operate a network of terrorist training camps from territory held by the Taliban and to use Afghanistan as a base from which to sponsor international terrorist operations. In the second paragraph of the resolution the Security Council demanded that the Taliban should without further delay turn Usama bin Laden over to the appropriate authorities. In order to ensure compliance with that demand, paragraph 4(b) of Resolution 1267 (1999) provides that all the States must, in particular, freeze funds and other financial resources, including funds derived or generated from property owned or controlled directly or indirectly by the Taliban, or by any undertaking owned or controlled by the Taliban, as designated by the Committee referred to in the next paragraph, and ensure that neither they nor any other funds or financial resources so designated are made available, by their nationals or by any persons within their territory, to or for the benefit of the Taliban or any undertaking owned or controlled, directly or indirectly, by the Taliban, except as may be authorised by the Committee on a case-by-case basis on the grounds of humanitarian need.[10]In paragraph 6 of Resolution 1267 (1999) the Security Council decided to establish, in accordance with rule 28 of its provisional rules of procedure, a committee of the Security Council composed of all its members (‘the Sanctions Committee’), responsible in particular for ensuring that the States implement the measures imposed by paragraph 4, designating the funds or other financial resources referred to in paragraph 4 and considering requests for exemptions from the measures imposed by paragraph 4.[11]On 19 December 2000 the Security Council adopted Resolution 1333 (2000), demanding, inter alia, that the Taliban should comply with Resolution 1267 (1999), and, in particular, that they should cease to provide sanctuary and training for international terrorists and their organisations and turn Usama bin Laden over to appropriate authorities to be brought to justice. The Security Council decided in particular to strengthen the flight ban and freezing of funds imposed under Resolution 1267 (1999). Accordingly paragraph 8(c) of Resolution 1333 (2000) provides that the States are, inter alia, “[t]o freeze without delay funds and other financial assets of Usama bin Laden and individuals and entities associated with him as designated by the [Sanctions Committee], including those in the Al-Qaeda organisation, and including funds derived or generated from property owned or controlled directly or indirectly by Usama bin Laden and individuals and entities associated with him, and to ensure that neither they nor any other funds or financial resources are made available, by their nationals or by any persons within their territory, directly or indirectly for the benefit of Usama bin Laden, his associates or any entities owned or controlled, directly or indirectly, by Usama bin Laden or individuals and entities associated with him including the Al-Qaeda organisation”.[12]In the same provision, the Security Council instructed the Sanctions Committee to maintain an updated list, based on information provided by the States and regional organisations, of the individuals and entities designated as associated with Usama bin Laden, including those in the Al-Qaeda organisation.[13]On 8 March 2001 the Sanctions Committee published a first consolidated list of the entities which and the persons who must be subjected to the freezing of funds pursuant to Security Council Resolutions 1267 (1999) and 1333 (2000). That list has since been amended and supplemented several times.[14]On 16 January 2002 the Security Council adopted Resolution 1390 (2002), which lays down the measures to be directed against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities. Articles 1 and 2 of that resolution provide, in essence, that the measures, in particular the freezing of funds, imposed by Article 4(b) of Resolution 1267 (1999) and by Article 8(c) of Resolution 1333 (2000) are to be maintained.[15]The precise injunction of Article 2(a) of Resolution 1390 (2002) is to: “freeze without delay the funds and other financial assets or economic resources of these individuals, groups, undertakings and entities, including funds derived from property owned or controlled, directly or indirectly, by them or by persons acting on their behalf or at their direction, and ensure that neither these nor any other funds, financial assets or economic resources are made available, directly or indirectly, for such persons’ benefit, by their nationals or by any persons within their territory”.[16]In accordance with paragraph 3 of Resolution 1390 (2002), the specified measures are to be reviewed by the Security Council 12 months after their adoption, at the end of which period the Council will either allow those measures to continue or decide to improve them.[17]On 20 December 2002 the Security Council adopted Resolution 1452 (2002), intended to facilitate the implementation of counter-terrorism obligations. Paragraph 1 of that Resolution provides for a number of derogations from and exceptions to the freezing of funds and economic resources imposed by Resolutions 1267 (1999), 1333 (2000) and 1390 (2002) which may be granted by the Member States on humanitarian grounds, on condition that the Sanctions Committee gives its consent.[18]On 17 January 2003, 30 January 2004 and 29 July 2005, the Security Council adopted further resolutions to maintain, and, where appropriate, to improve the measures in paragraph 4(b) of Resolution 1267 (1999), in paragraph 8(c) of Resolution 1333 (2000) and paragraphs 1 and 2 of Resolution 1390 (2002).

EU Legislation

[19]In my view it is appropriate to begin with the EU implementing legislation because that legislation is both directly applicable in the Member States of the European Union and within its legitimate field of application is superior to any other legal norm.[20]The relationship between Community law and obligations arising from membership of the United Nations is somewhat complex but the following points seem to be established.[21]The first paragraph of Article 307 of the EC Treaty gives precedence in principle to “[t]he rights and obligations arising from agreements concluded before the entry into force of this Treaty between one or more Member States on the one hand and one or more third countries, on the other” by providing that they “shall not be affected by the provisions of this Treaty”. This means that national courts must ensure that non-member countries’ rights under earlier agreements are honoured and the correlative obligations of Member States fulfilled (see Case 10/61 Commission v Italy [1962] ECR 1, at 10; Case C-324/93 Evans Medical andMacfarlan Smith [1995] ECR I-563, para 27; Case C-124/95 Centro-Com [1997] ECR I-81, para 56). A provision of national law which is necessary in order to ensure the performance by the Member State concerned of any international obligation falling within Article 307 must be applied even though it conflicts with a provision of Community law (see Case C-158/91 Levy [1993] ECR I- 4287, para 22).[22]After entry into force of the Community Treaties, agreements concluded by Member States did not become binding on the Community save where the Treaty referred thereto or, exceptionally, where the Communities substituted themselves for the Member States. The first paragraph of Article 307 refers only to obligations of Member States. However, “it would not achieve its purpose if it did not imply a duty on the part of the institutions of the Community not to impede the performance of the obligations of Member States which stem from a prior agreement” (Case 812/79 Burgoa [1980] ECR 2787, para 9).[23]So far as obligations arising from membership of the United Nations is concerned, first, “the Community may not infringe the obligations imposed on its Member States by the Charter of the United Nations or impede their performance and, second, in the exercise of its powers it is bound, by the very Treaty by which it was established, to adopt all the measures necessary to enable its Member States to fulfil those obligations” (Case T-253/02 Ayadi v Council of the EuropeanUnion, Judgment of 12 July 2006, para 116, 4th indent) (“Ayadi”). In particular, resolutions adopted by the Security Council are binding on all the Member States of the Community which must take all measures necessary to ensure that those resolutions are put into effect (Opinions of Advocate General Jacobs in Case C-84/95 Bosphorus [1996] ECR I-3953, at 3956, para 2, and Case C-177/95 EbonyMaritime and Loten Navigation [1997] ECR I-1111, at 1115, para 27).[24]Furthermore, Community measures giving effect to a resolution of the Security Council must be interpreted in accordance with the wording and aim of the resolution (see Case C-177/95 Ebony Maritime and Loten Navigation [1997] ECR I-1111, paras 20-21 and 31).[25]I now turn to the specific provisions of Community law that are relevant to the present application.[26]In accordance with Article 11(1) EU:
“The Union shall define and implement a common foreign and security policy covering all areas of foreign and security policy, the objectives of which shall be: to safeguard the common values, fundamental interests, independence and integrity of the Union in conformity with the principles of the United Nations Charter; to strengthen the security of the Union in all ways; to preserve peace and strengthen international security, in accordance with the principles of the United Nations Charter …”
[27]Under Article 301 EC: “Where it is provided, in a common position or in a joint action adopted according to the provisions of the Treaty on European Union relating to the common foreign and security policy, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries, the Council shall take the necessary urgent measures”.[28]Article 60 EC provides: “(1) If, in the cases envisaged in Article 301, action by the Community is deemed necessary, the Council may, in accordance with the procedure provided for in Article 301, take the necessary urgent measures on the movement of capital and on payments as regards the third countries concerned. (2) Without prejudice to Article 297 and as long as the Council has not taken measures pursuant to paragraph 1, a Member State may, for serious political reasons and on grounds of urgency, take unilateral measures against a third country with regard to capital movements and payments. The Commission and the other Member States shall be informed of such measures by the date of their entry into force at the latest. The Council may, acting by a qualified majority on a proposal from the Commission, decide that the Member State concerned shall amend or abolish such measures. The President of the Council shall inform the European Parliament of any such decision taken by the Council”.[29]Article 308 EC provides:
“If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community, and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.”
[30]The Community has taken the position that action by the Community was necessary to give effect to the various Resolutions of the Security Council to which I have referred. On 15 November 1999 and on 26 February 2001 the Council adopted Common Positions concerning the restrictive measures to be taken to give effect to certain Resolutions; and, on the basis of Articles 60 and 301, on 14 February 2000 the Council adopted Regulation (EC) No 337/2000 concerning a flight ban and a freeze of funds and other financial resources in respect of the Taliban of Afghanistan (OJ 2000 L 43, p.1). On 6 March 2001 the Council adopted Regulation (EC) No 467/2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation No 337/2000 (OJ 2001 L 67, p.1). Finally, on 27 May 2002 the Council adopted Common Position 2002/402/CFSP concerning restrictive measures against Usama bin Laden, members of the Al-Qaeda organisation and the Taliban and other individuals, groups, undertakings and entities associated with them and repealing earlier Common Positions. On the same day the Council adopted the currently applicable regulation, namely, Regulation (EC) No 881/2002 (“the Regulation”), imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Council Regulation (EC) No 467/2001 (OJ 2002 L 139, p. 9).[31]The Court of First Instance of the European Community (“the CFI”), in a judgment upholding the validity of the Regulation, has specifically held that, adopted in the light of Common Position 2002/402, it: “constitutes the implementation at Community level of the obligation placed on the Member States of the Community, as Members of the United Nations, to give effect, if appropriate by means of a Community act, to the sanctions against Usama bin Laden, members of the Al-Qaeda network and the Taliban, and other associated individuals, groups, undertakings and entities, which have been decided and later strengthened by several resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations” (Ayadi, cited at paragraph 23 above, para 116, 6th indent).[32]In Ayadi the CFI also recorded the statement of the United Kingdom government that the Member States “elected to fulfil their obligations under the Charter of the United Nations by means of a Community measure” (para 113). In its judgment in Case T-315/01 Kadi v Council of the European the CFI reached the same conclusions as it did in Ayadi. The appeal from that judgment is pending to the Court of Justice (C-402/05 P, OJ 2006 C 36 p 19). I have been told by Mr Cox, who was counsel for the applicant in Ayadi, that an appeal against the judgment is also to be made to the Court of Justice by Mr Ayadi.[33]I now turn to the provisions of the Regulation that are relevant to the present applications.[34]Article 2 provides: “1. All funds and economic resources belonging to, or owned or held by, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I shall be frozen. 2. No funds shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I. 3. No economic resources shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I, so as to enable that person, group or entity to obtain funds, goods or services”.[35]Article 4 provides: “1. The participation, knowingly and intentionally, in activities, the object or effect of which is, directly or indirectly, to circumvent Article 2 or to promote the transactions referred to in Article 3, shall be prohibited. 2. Any information that the provisions of this Regulation are being, or have been, circumvented shall be notified to the competent authorities of the Member States and, directly or through these competent authorities, to the Commission”.[36]Annex I to the applicable Regulation contains the list of persons, groups and entities affected by the freezing of funds imposed by Article 2.[37]Article 1 of the Regulation defines “funds”, “economic resources”, and “freezing” as follows: "funds" means financial assets and economic benefits of every kind, including but not limited to cash, cheques, claims on money, drafts, money orders and other payment instruments; deposits with financial institutions or other entities, balances on accounts, debts and debt obligations; publicly and privately traded securities and debt instruments, including stocks and shares, certificates presenting securities, bonds, notes, warrants, debentures, derivatives contracts; interest, dividends or other income on or value accruing from or generated by assets; credit, right of set-off, guarantees, performance bonds or other financial commitments; letters of credit, bills of lading, bills of sale; documents evidencing an interest in funds or financial resources, and any other instrument of export-financing; "economic resources" means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but can be used to obtain funds, goods or services; "freezing of funds" means preventing any move, transfer, alteration, use of or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or other change that would enable the use of the funds, including portfolio management; "freezing of economic resources" means preventing their use to obtain funds, goods or services in any way, including, but not limited to, by selling, hiring or mortgaging them.[38]At paragraph 17 above I noted that Security Resolution 1452 (2002) provided for a number of derogations and exceptions to the freezing of funds and economic resources which might be granted by the Member States on humanitarian grounds. To implement that Resolution on 27 February 2003 the Council adopted Common Position 2003/140/CFSP; and on 27 March 2003 the Council adopted Regulation (EC) No 561/2003 amending, as regards exceptions to the freezing of funds and economic resources, Regulation (EC) No 881/2002. Article 1 of the amending Regulation inserted a new Article 2a into Regulation No 881/2002, as follows (so far as is material): “1. Article 2 shall not apply to funds or economic resources where:(a) any of the competent authorities of the Member States, as listed in Annex II, has determined, upon a request made by an interested natural or legal person, that these funds or economic resources are: (i) necessary to cover basic expenses, including payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges; (ii) intended exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services; (iii) intended exclusively for payment of fees or service charges for the routine holding or maintenance of frozen funds or frozen economic resources; or (iv) necessary for extraordinary expenses; and(b) such determination has been notified to the Sanctions Committee; and(c) (i) in the case of a determination under point (a)(i), (ii) or (iii), the Sanctions Committee has not objected to the determination within 48 hours of notification; or (ii) in the case of a determination under point (a)(iv), the Sanctions Committee has approved the determination. 2. Any person wishing to benefit from the provisions referred to in paragraph 1 shall address its request to the relevant competent authority of the Member State as listed in Annex II. The competent authority listed in Annex II shall promptly notify both the person that made the request, and any other person, body or entity known to be directly concerned, in writing, whether the request has been granted. The competent authority shall also inform other Member States whether the request for such an exception has been granted. 3. Funds released and transferred within the Community in order to meet expenses or recognised by virtue of this Article shall not be subject to further restrictive measures pursuant to Article 2”. (i) necessary to cover basic expenses, including payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges; (ii) intended exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services; (iii) intended exclusively for payment of fees or service charges for the routine holding or maintenance of frozen funds or frozen economic resources; or (iv) necessary for extraordinary expenses; and[39]The Regulation, as amended by Regulation (EC) No 561/2003, has general application and is binding in its entirety and directly applicable in all the Member States, including, of course, the United Kingdom (EC Treaty, Article 249, second paragraph). It is generally not necessary to transpose a regulation into the legal order of a Member State by any national implementing measure. Indeed, formal incorporation of provisions of a regulation into the national legal order may be impermissible on the ground that it would bring into doubt “both the legal nature of the applicable provisions and the date of their coming into force” (see Case 39/72 Commission v Italy [1973] ECR 101 paras 16-17; Case 34/73 Variola [1973] ECR 981, para 11; Case 50/76 AmsterdamBulb [1977] ECR 137, paras 4-7).[40]However, national implementing measures may sometimes be required to ensure the effectiveness of a regulation. Member States are, therefore, empowered to take such measures (see Case 230/78 Eridania [1979] ECR 2749, para 35) and are even obliged to do so (see Case 30/70 Scheer [1970] ECR 1197, para 10; Case 137/80 Commission v Belgium [1981] ECR 2393, paras 3-9). Article 10 of the applicable Regulation specifically requires national measures to ensure that there are effective sanctions for the enforcement of the Regulation.

United Kingdom Legislation

[41]Although the Regulation is directly applicable in the United Kingdom and although it would not appear, save in relation to Article 10, to invite extensive national implementing measures, the United Kingdom has in fact adopted fairly detailed measures to give effect to the relevant United Nations Resolutions. Furthermore, it has done so by reference not to EU law but to national enabling legislation. At paragraph 31 above I mentioned that the validity of the Regulation has been challenged. The competence of the Community to take measures of this kind would not appear to be entirely free of doubt (see, for example, Case T-306/01 Yusuf v Council of the European Union, Judgment of the CFI of 21 September 2005, paras 78-171). It may be that the UK government decided, from an abundance of caution, that it should create a firm domestic base for the necessary implementing measures, to ensure their validity and enforceability, lest any challenge to the validity of the Regulation should succeed in whole or part.[42]In any event Section 1 of the United Nations Act 1946 provides, so far as is material:
“Measures under Article 41 If, under Article forty-one of the Charter of the United Nations signed at San Francisco on the twenty-sixth day of June, nineteen hundred and forty-five, (being the Article which relates to measures not involving the use of armed force) the Security Council of the United Nations call upon His Majesty's Government in the United Kingdom to apply any measures to give effect to any decision of that Council, His Majesty may by Order in Council make such provision as appears to Him necessary or expedient for enabling those measures to be effectively applied, including (without prejudice to the generality of the preceding words) provision for the apprehension, trial and punishment of persons offending against the Order…”
[43]Under the foregoing provision two Orders in Council were initially passed, namely, the Afghanistan (United Nations Sanctions) Order 2001 (S.I. 2001/396) and the Afghanistan (United Nations Sanctions) (Amendment) Order 2001 (S.I 2001/3365). These Orders were revoked and replaced by the currently applicable Order, namely, The Al-Qa’ida and Taliban (United Nations Measures) Order 2002 (S.I. 2002 no.111) (“the Order”). The Order came into force on 25 January 2002.[44]For present purposes the key provision in the Order is Article 7, which states as follows:
“FUNDS Making funds available to Usama bin Laden and associates 7. Any person who, except under the authority of a licence granted by the Treasury under this article, makes any funds available to or for the benefit of a listed person or any person acting on behalf of a listed person is guilty of an offence under this Order.”

Making funds available to Usama bin Laden and associates

[45]“Funds” are defined comprehensively to mean: “financial assets, economic benefits and economic resources of any kind, including (but not limited to ) gold coin, gold bullion, cash, cheques, claims on money, drafts, money orders and other payment instruments; deposits with financial institutions or other entities, balances on accounts, debts and debt obligations; securities and debt instruments (including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures, debenture stock and derivatives contracts); interest, dividends or other income on or value accruing from or generated by assets; credit, rights of set-off, guarantees, performance bonds or other financial commitments, letters of credit, bills of lading, bills of sale; documents evidencing an interest in funds or financial resources, and any other instrument of financing”.[46]“Listed person” is defined by the Order as: “(a) Usama bin Laden;(b) Any person designated by the Sanctions Committee in the list maintained by that Committee in accordance with resolution 1390 adopted by the Security Council on 16 January 2002 as: (i) a member of the Al-Qa’ida organisation (ii) a member of the Taliban;(c) an individual group, undertaking or entity associated with the persons covered by (a), (b)(i) or (b)(ii) above”. (i) a member of the Al-Qa’ida organisation (ii) a member of the Taliban;[47]It can be seen that there is a close, if not exact, correspondence between the language of the relevant provisions of the Regulation and of the Order. There appear to be three main points of difference.[48]First, Article 1 of the Regulation draws a distinction between “funds” and “economic resources”, and limits the latter to assets that can be used to obtain “funds, goods or services”. The Order simply includes “economic resources” within the definition of “funds”, and, unlike the Regulation, provides no separate definition of “economic resources”. The thrust of the definition of “funds” in the Regulation seems weighted, notwithstanding the reference to “economic benefits of any kind”, towards financial assets; “economic resources” appears wider, including any asset (not being a financial asset) that can be used to obtain funds, goods or services.[49]Secondly, Article 2.2 of the Regulation refers to the making available of funds directly or indirectly, whereas the Order does not expressly use the language of indirect availability. In that respect the language of the Regulation more closely reflects the express terms of the most recent relevant Resolution of the United Nations, namely, Resolution 1390 (2002) (see paragraph 15 above). Because the Order is plainly intended to implement Resolution 1390 (2002), I would have no hesitation in interpreting the Order to include, by necessary implication, the making available of funds indirectly as well as directly.[50]Thirdly, Article 2.3 of the Regulation prohibits the making available of “economic resources”, as does the Order, but, in line with the definition of “economic resources” in the Regulation, appears to limit the prohibition to circumstances where the provision of “economic resources” could enable the listed person to obtain funds, goods or services.[51]Neither Counsel addressed me specifically on these differences in the language of the Regulation and of the Order, nor as to how the texts should be reconciled, or as to which, if any, should have primacy in the event of conflict. However, in the light of the matters set out at paragraphs 31 and 32 above, I believe that I should concentrate primarily on the terms of the Regulation, as the definitive and binding collective implementation by the Member States of the EU of the relevant United Nations Resolutions. The CFI has upheld the validity of the Regulation (see paragraph 31 above) and I must proceed on the footing that the Regulation is valid. I should also bear in mind that the Regulation (as well as the Order) has in any event to be interpreted, so far as possible, to give proper effect to those Resolutions, in particular, Resolution 1390 (2002).

The main issue between the parties

[52]As indicated at the outset, each of the claimants, who is married to, and lives with, a listed person, contends that the payment to her by HM Revenue and Customs and the Secretary of State of the relevant social security benefits does not fall within the prohibition of Article 2 of the Regulation or Article 7 of the Order. The claimants naturally accept that funds (within the meaning of both the Regulation and the Order) are made available to them, but they argue that no funds or economic resources are made available through them to, or for the benefit of, any listed person.[53]In my view, this is not a case where, strictly speaking, HM Revenue and Customs or the Secretary of State is making funds directly available to any listed person. It is the claimant in each case who has the statutory entitlement to the relevant social security benefit and it is the claimant in each case who receives the relevant “funds”. These applications, therefore, raise the question: in what circumstances does one person, A, who makes funds (or economic resources) available to B (a non-listed person) indirectly make funds (or economic resources) available to, or for the benefit of, C (a listed person), so as to fall within the prohibition of Article 2 of the Regulation and/ or Article 7 of the Order?[54]On this main issue there is some common ground between the parties. It is accepted by the claimants that if A makes available funds to B, knowing or believing that B will, or might, pass the funds to C, then A has indirectly made funds available to C. Mr Simon Cox, who appeared for the claimants and put their case with admirable succinctness and clarity, did not wish to be drawn on the degree of probability that B might make funds available to C. However, he contended that the facts here do not fit this paradigm case, whatever degree of probability is assumed. That is because there is no reasonable basis for either HM Revenue and Customs or the Secretary of State to believe that the claimants would, or might, pass any funds to any listed person: the claimants are themselves prohibited from doing so by Article 2 of the Regulation and Article 7 of the Order, and in any event there are elaborate arrangements in place to ensure that funds are not passed on by the claimants to any listed person. Mr Jonathan Swift, who appeared for the Treasury, did not seek to challenge that contention, because he maintained that these cases fell within the prohibitions of the Regulation and the Order, whether or not the claimants could be expected (on the appropriate degree of probability) to pass on funds as such to any listed person.[55]Similarly the claimants accept that the prohibitions in the Regulation and the Order are engaged if A makes available funds to B, knowing or believing that B will, or might, use the funds to acquire economic resources and that B will, or might, transfer such resources to C, so enabling C to obtain funds, goods or services.[56]The contest between the parties concerns the case where A makes available funds to B knowing or believing that B will, or might, use the funds in a way that is likely to benefit C economically, but in a way that does not enable C to acquire funds, goods or services. Mr Cox says that the present applications fall within that scheme because, although the funds made available to the claimants will in all probability be used at least in part to benefit listed persons economically, the listed persons cannot use the economic benefits so conferred to obtain funds, goods or services.

The claimants’ submissions on the first issue

[57]The claimants submit specifically that: “Article 7 and Article 2 apply only to funds and/or economic resources where the relevant authority properly considers that the effect of their transfer to another person will be to provide (either directly, or through intermediate transfers) to the listed persons funds or economic resources or access to the same. These provisions do not apply to funds to be used to provide the listed person with services and items that are not economic resources” (claimants’ skeleton argument, para 29).[58]In support of that submission Mr Cox argued that any wider interpretation would lead to results which were absurd and went beyond any rational object of the prohibitions. He said that a wider interpretation would capture cases where, for example, wages were paid, or a gift made, to a child of the claimant, or free services (such as swimming sessions in a municipal pool) were provided to a listed person.[59]Furthermore, Mr Cox argued that the purpose of the United Nations Resolutions, particularly Resolution 1390 (2002), was: “to prevent listed persons from having access to or control over funds or economic resources, since these can be used to obtain items and services of use for terrorism (skeleton, para 24).[60]His narrower interpretation of the prohibitions met this objective, and was also supported by Article 2.3 of the Regulation that prohibited the making available of “economic resources” (as distinct from “funds”) to listed persons only if such resources would enable the listed person to obtain funds, goods or services.[61]Finally, Mr Cox submitted that in so far as the language of the prohibitions was ambiguous, the narrower interpretation should be preferred, taking account of the right recognised by the English common law (and also by Article 8 ECHR and Article 1 of Protocol 1 ECHR) of a person to deal freely with his property, referring to Clayton & Tomlinson, “The Law of Human Rights”, paragraphs 18.01, 18.04, 18.05, 18.15, 18.16, and the well known cases cited there.

Discussion on the main issue

[62]I reject Mr Cox’s narrower interpretation of the prohibitions for the following reasons.[63]First, the payment of the relevant social security benefits in the present applications falls squarely within the plain language of Article 2.2 of the Regulation. Funds are being made available indirectly for the benefit of listed persons, because significant funds are being paid by A on a regular basis to B, who is married to C, a listed person, and who lives in the same household with him, in circumstances where it can reasonably be expected that B will use the funds to confer significant economic benefits on C (such as payment of rent, utility charges and other normal household expenses for which C would otherwise be responsible, at least in part).[64]Secondly, and more importantly, the narrower interpretation would not give full and proper effect to the United Nations Resolutions or to the prohibitions that have been enacted to implement them. In my view, it is clear from the terms of the Resolutions that the intention of the Security Council was to remove, in principle and subject to humanitarian considerations, all economic support from listed persons, with a view to achieving public policy objectives of the highest importance, namely, combating international terrorism and promoting peace, security and safety. For that reason, the prohibitions are deliberately draconian, as is shown by Article 2.1 of the Regulation which freezes all funds and economic resources of listed persons and makes no exception for any purpose.[65]If Mr Cox were right, A (in my nomenclature) could, without the control or supervision of any competent authority, provide substantial funds to B, knowing full well that B would use the funds to meet all the expenses of C, a listed person, no matter how extensive those expenses might be, so long as C received from B no “economic resources” that would enable C to obtain funds, goods or services. However, on this scenario, C, being released from the need to fund any of his expenses, would remain ideally positioned to carry on his terrorist activities and to apply any funds or economic resources that he might have succeeded in secreting or that he subsequently contrived to acquire exclusively to the carrying on of such activities.[66]With respect it seems to me that such a result would make a mockery of the clear intent of the Resolutions and the legislative prohibitions that listed persons should be deprived of all economic support with a view to the suppression of terrorism.[67]Furthermore, if Mr Cox were right, it is difficult to see why there was any pressing need to amend the Regulation by including Article 2a (see paragraph 38 above). On his interpretation, it would be open to any person to pay the basic expenses of a listed person so long as that person did not make available “funds” (that is, financial assets) or “economic resources” (that is, other assets capable of conversion into funds, goods or services). That would have been a relatively simple expedient to enable the basic needs of a listed person to be met without offending the prohibitions. The fact that Article 2a was considered necessary strongly suggests that such an expedient would not have been effective because it would have been caught by the prohibitions.[68]Turning to the alleged absurdities implicit in rejecting the narrower interpretation, it seems to me that given the particular context and aims of the Regulation there are likely to be border line cases that would need to be addressed on a case-by- case basis taking account of all the relevant circumstances. Consider Mr Cox’s example of payments to a child of a listed person. Having regard to the plain language of Article 2.2 and the legislative intent, I see no reason why in principle such payments would not be capable of being treated as the making available of funds indirectly for the benefit of a listed person, if there were grounds for believing that the child would use the funds to confer economic benefits on his or her parent. If there was such a real risk, it might be possible to establish arrangements that would sufficiently ensure that the child could not so apply the funds and the prohibitions might not then be engaged.[69]The provision of free goods or services, short of being economic resources, to a listed person raises different considerations. In my view, for the prohibition to apply it would be necessary to show a sufficient nexus between the application of the funds and the benefit to the listed person. In Mr Cox’s example of the municipal swimming pool, I would seriously doubt whether such a sufficient nexus could be shown: the local authority applies funds to provide a general economic benefit to the whole community; the listed person is no more than an incidental, not a targeted, beneficiary and the benefit as such, being trivial and non-essential, would also not appear to create concerns under the Regulation. In argument I put a different example of a banker lending funds to B, knowing that B intended to create special and specific facilities for C, a listed person, and I suggested that there was no reason in principle why the banker’s conduct should not fall within the prohibition. In any event in the present applications the nexus is powerful for the reasons that I have explained.[70]As to Article 2.3 of the Regulation, I do not believe that it is in point in this case. Here A is making funds available to B in circumstances where A knows or believes that B will, or might, apply the funds for the benefit of C. Thus the case falls within Article 2.2. Article 2.3 is dealing with a different situation where A does not make any funds available to C, directly or indirectly, but makes “economic resources” available to C, directly or indirectly. For example, A may own a motor car which he gifts to C, or gifts to B, knowing or believing that B will, or might, transfer the car to C. In the absence of a provision such as Article 2.3, it might in such circumstances have been argued, in reliance on the language of Article 2.2, that no “funds” had been made available to, or for the benefit of, C, even indirectly. In my view, Article 2.3 is not a limiting provision, as Mr Cox’s argument implies, but is a belt-and-braces provision to ensure that the kind of example that I have given is without doubt captured by the prohibitions.[71]Finally, I see no ambiguity, either as regards language or intention, in Article 2 of the Regulation or Article 7 of the Order. Therefore, I gain no real assistance from the common law principle of interpretation relied upon by Mr Cox. In any event the cases referred to at paragraph 61 above arose in very different contexts from the present applications. In this case the intention is to impose measures of prohibition to promote the fight against terrorism, and it could properly be expected that the measures would be strict. Furthermore, I would seriously doubt whether the common law principle (or the provisions of the ECHR) could have any application at all in the present context. In Yusuf (cited at paragraph 41 above) the CFI refused to apply general principles of Community law in assessing the validity of the Regulation, holding that the Regulation implemented binding international law and its validity could therefore only be tested against fundamental peremptory provisions of iuscogens (see paras 260-284 of the judgment). Following the reasoning of the CFI I could not properly apply any common law principle for the purpose of interpreting the Regulation.[72]It is true that, as determined by the CFI (see Yusuf at paras 292-293), peremptory provisions of iuscogens include Article 17(2) of the Universal Declaration of Human Rights, under which “no one shall be arbitrarily deprived of his property”. However, for the reasons that I have given, there is no basis in this case for holding that the interpretation of the Regulation (and also of the Order) that I have reached would involve any arbitrary deprivation of property: on the contrary, that interpretation is necessary in order to give proper effect to a public policy goal of the highest importance.

The second ground

[73]The licences issued by the Treasury do not define “basic expenses”. The licences state only that basic expenses include payments for food, clothing, rent or mortgage, medicines and medical treatment, taxes, insurance premiums and public utility charges.[74]The claimants submit:(a) in order to impose a valid limitation on expenditure, the licence must define with sufficient clarity the expenditure each C is prohibited (or permitted) from making;(b) the licences in these cases do not define prohibited/permitted expenditure with sufficient clarity.[75]The claimants point out that it is a criminal offence for a person to act under the licence and to fail to comply with the conditions attached to the licence: Article 12(1) of the Order. The offence carries a maximum punishment of 2 years’ imprisonment: Article 20(3) of the Order. Discussion of the Second Ground.[76]I reject the claimants’ submissions on the second ground for the following reasons.[77]First, the concept of “basic expenses” used in the licences is directly derived from UN Resolution 1452 (2002) and is the very term used in the implementing EU Regulation, as amended (see paragraph 38 above). The claimants do not challenge the validity of the Regulation, as amended, on the grounds of the uncertainty of any of the provisions contained therein.[78]Secondly, the Regulation is directly applicable (see paragraph 39 above), and in my view the Community legislator did not intend to confer upon Member States the right to adopt national measures substituting for, adding to, or detracting from, the terms used in the Regulation. The language of Article 2a of the Regulation shows that the Community legislator intended that the competent authorities of the Member States should determine “upon a request made by an interested natural or legal person” whether the particular funds or economic resources were necessary to cover “basic expenses”, specifying certain items that would count as such expenses, but leaving to the competent authority of the Member State in question to determine in other cases whether the funds or economic resources did satisfy that requirement. The precise arrangements for determining in any particular case whether a putative item falls within a basic expense are left to the discretion of the competent authority.[79]On this basis there is in my view both sufficient certainty and sufficient flexibility. Certain basic expenses are specifically mentioned in the Regulation (and are adopted in the relevant licences issued by the Treasury), and this provides a reasonable indication of the general nature of the items that the derogation is intended to reach. They are items which, in a fairly developed society, are necessary to ensure a basic standard of living and no more. Most people will be able to agree whether a particular item that is not specifically mentioned in Article 2a and the licence can properly be considered as necessary for the relevant purpose. However, as generally with concepts of this nature, there may well be a penumbra of uncertainty where opinions could differ but where a final view can reasonably be reached having regard to the central purpose of the derogation.[80]The list of specific items is deliberately not made exhaustive, and, in cases of doubt, it is open to any person affected by measures taken under the Regulation to seek guidance from the competent authority as to whether a particular intended expenditure comes within the ambit of a basic expense This facility provides the derogation with a reasonable degree of flexibility. If, on the contrary, the licence had purported to enumerate all items that constituted basic expenses, it would have been vulnerable to legal challenge on the grounds that it might then have failed to include some items that could well be regarded as such expenses. The UK government has on occasion been tripped up by taking an unduly prescriptive approach to the implementation of EU regulations when it should have left, as it has done in the present instance, the regulation to be interpreted and applied on a case-by- case basis: for a good example see R v Ministry of Agriculture, Fisheries and Food, ex parte The National Farmers Union [1995] CMLR 116.[81]Furthermore, the concept of “basic expense” is sufficiently certain to enable an affected person to challenge a ruling by the competent authority that a particular expense did not come within the terms of the licence. In my view this is far from a case where a provision is so unspecific that a court on judicial review could not sensibly be expected to interpret and apply the provision to individual circumstances. Here I would envisage that the court would have little difficulty in doing so, although I leave open the precise approach to judicial review that the court would take in the event of an actual challenge. A reasonable degree of judicial protection is therefore assured.[82]Similarly, if an affected person were prosecuted for breach of licence, the criminal court, following the principles enunciated in Boddingtonv British Transport Police [1999] 2 AC 143,would have jurisdiction to decide, on the facts of the particular case, whether the challenged expenditure was necessary to cover a “basic expense”. This would ensure judicial protection against an unwarranted conviction for breach of the licence and the Order. Conclusions[83]For the reasons stated, I have reached the conclusion that neither ground is sustainable and in those circumstances I dismiss the substantive applications for judicial review.[84]I should also add finally that I have on my own motion considered whether this is a matter that should be referred to the Court of Justice. Neither counsel addressed me on the question of a reference, and neither urged me to make such a reference. However, on the approach that I have taken I have treated the Regulation as the primary legislative instrument, and at least the claimant’s first ground raises an issue of the correct interpretation of the Regulation which has potential significance throughout the EU. I do not have sufficient doubt on that issue (or on the second issue in so far as it might be thought to raise any question of interpretation of the Regulation) to justify making a reference. I also bear in mind that a reference would cause considerable delay and uncertainty. Furthermore, if these applications were to proceed further, it would in my view be far preferable for a higher court to consider, if it thought fit, the question of a reference to the Court of Justice.

Cited in 2 later judgments