What happened was this. The Mölendorfs owned buildings and land in Berlin. In December 2000, they agreed by notarially authorised instrument to sell that property to a group of three buyers. The agreement also provided that the sale price had to be paid to the sellers before final registration of the transfer of ownership in the Land Register. But then, final registration of the transfer of ownership was refused by the competent authority in Germany because one of the three buyers was on the list of persons subject to freezing of funds in accordance with Regulation 881/2002 because of their association with Usama bin Laden, the Al-Qaida network or the Taliban.
The question was posed whether Regulation No 881/2002 and in particular its Article 2 §3 prohibits registration of the transfer of ownership to a buyer who, after conclusion of the contract of sale, has been placed on the list set out in the Annex to that regulation.
The Court of Justice held that the Regulation does indeed prohibit the registration of the transfer of the land.
The Court referred to German property law which was applicable to the transaction in question. It found that under that law ownership of real property cannot be acquired directly as a result of a contract recorded by a notary of sale between the seller and the purchaser. The two parties must conclude an agreement that ownership is to be transferred and for that transfer to be registered in the Land Register for title to the property to pass to the purchaser. Without that registration title does not pass.
The Court of Justice held that real property is an economic resource which, under Regulation 881/2002, must not be made available to persons on the list. Final registration in the Land Register means, under German law, that the property is made available to the buyer, since, according to the applicable law, it is only after final registration that the buyer acquires title to the property and can mortgage it.
The practical consequence is that the sellers, who have received the purchase price, must reimburse the purchasers in accordance with German law. The Court held that the reimbursement in those circumstances was not caught by Regulation 881/2002.
Finally, the Court pointed out any issue of fundamental rights concerned the indirect effect of Regulation 881/2002 and the reimbursement under national law of the purchase price. Thus, as regards the application of Regulation No 881/2002, in accordance with settled case-law, the requirements flowing from the protection of fundamental rights within the EC legal order are also binding on member States when they implement EC rules. Consequently they are bound, as far as possible, to apply the rules in accordance with those requirements (see, Joined Cases C‑20/00 and C‑64/00, Booker Aquaculture and Hydro Seafood, paragraph 88).