The Court of Justice has handed down a major judgment in Joined Cases C-402/05 P and C-415/05 P Yassin Abdullah Kadi and Al Barakaat Foundation v. Council and Commission on the right to have measures adopted by the EC to implement UN Security Council resolutions reviewed by the EC courts. In its judgment, the Court of Justice not only quashes the judgments of the Court of First Instance in Case T-306/01 Yusuf and Al Barakaat International Foundation v. Counciland Commission and in Case T-315/01 Kadi v. Council and Commission (that we had noted here) but also annuls the EC measures because the right to be heard, the right to effective judicial review and the right to property were infringed by the Council and the Commission when they implemented the UN Security Council resolutions.
The Sanctions Committee of the United Nations placed Yassin Abdullah Kadi, of Saudi Arabia, and Al Barakaat International Foundation, established in Sweden, on a list of persons and bodies associated with Usama bin Laden, Al-Qaeda or the Taleban. All States that are members of the United Nations were thus under an obligation to freeze the funds and other financial resources controlled directly or indirectly by such persons or bodies. The Council adopted Regulation 881/2002 to implement those resolutions in the EC, freezing the funds and assets of those on the list annexed. That list is updated regularly to take account of changes in the summary list drawn up by the UN Sanctions Committee.
Mr Kadi and Al Barakaat asked the the Court of First Instance to annul that regulation. They claimed that the Council was not competent to adopt the regulation and that it infringed several of their fundamental rights, in particular, the right to property and the rights of the defence. In its judgments of September 21st 2005 in Case T-306/01 Yusuf and Al Barakaat International Foundation v. Counciland Commission and in Case T-315/01 Kadi v. Council and Commission the Court of First Instance rejected all the pleas in law raised by Mr Kadi and Al Barakaat and upheld the regulation. The Court of First Instance held, in particular, that the Community courts had, in principle, no jurisdiction (except in respect of certain overriding rules of international law - jus cogens) to review the validity of the regulation at issue, given that the member States are bound to comply with the resolutions of the Security Council according to the terms of the Charter of the United Nations, an international treaty that prevails over Community law.
Mr Kadi and Al Barakaat then appealed to the Court of Justice.
First the Court of Justice holds that First, the Court confirms that the Council was competent to adopt the regulation on the basis of Articles 60, 301 and 308 EC Treaty.
But then the Court of Justice finds that the Court of First Instance was wrong to rule that it had no jurisdiction to review the lawfulness of the contested regulation. It made clear that a distinction could and should be drawn between reviewing the lawfulness of an international agreement (which the EC courts can't do) and reviewing an EC measure intended to give effect to the international agreement at issue (which the EC courts can and should do). It added that a judgment handed down by the EC courts deciding that an EC measure intended to give effect to a resolution of the Security Council is contrary to a higher rule of law in the EC legal order would not entail any challenge to the primacy of that resolution in international law.
The Court of Justice affirmed as a matter of principle that the review of the validity of any EC measure in the light of fundamental rights must be considered to be the expression, in a community based on the rule of law, of a constitutional guarantee stemming from the EC Treaty as an autonomous legal system which may not be prejudiced by an international agreement. As a consequence, the Court of First Instance must ensure the full review of the lawfulness of all EC 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 resolutions adopted by the Security Council. It thus quashed the judgments of the Court of First Instance for failing to do so.
As a result, the Court of Justice asserts rather neatly that the EC legal order is a distinct from international law, just as EC law is distinct from national law.
The Court of Justice went on to examine the legality of the regulation itself, rather than refer the case back to the Court of First Instance.
It held that, in the light of the actual circumstances surrounding the inclusion of the appellants’ names in the list of persons and entities whose funds are to be frozen, the rights of the defence, in particular the right to be heard, and the right to effective judicial review of those rights, were patently not respected.
It pointed out that the effectiveness of judicial review means that the EC institution is required to communicate to the person or entity concerned the grounds on which the measure at issue is based, so far as possible, either when that measure is decided on or, at the very least, as swiftly as possible after that decision in order to enable those persons or entities to exercise, within the periods prescribed, their right to bring an action.
The Court conceded that prior communication of the grounds could jeopardize the effectiveness of the measures freezing funds as would hearing the persons concerned before their names were included in the list. But the Court pointed out that the regulation at issue provides no procedure for communicating the evidence justifying the inclusion of the names of the persons concerned in the list, either at the same time as, or after, that inclusion. The Council never even informed Mr Kadi and Al Barakaat of the evidence adduced against them in order to justify the initial inclusion of their names in the list. That meant that Mr Kadi and Al Barakaat were also denied the right to a legal remedy.
The Court also held the freezing of funds constitutes an unjustified restriction of Mr Kadi’s right to property but which could be justified if he had had the opportunity to make representations to the Council about it.
The upshot is that the Court annulled the Council regulation in so far as it freezes Mr Kadi and Al Barakaat’s funds. Yet, the Court maintains the effects of the regulation for a period of three months running from judgment, to allow the Council to remedy the infringements found. The Court recognized that annulling the regulation with immediate effect could seriously and irreversibly prejudice the effectiveness of the restrictive measures, because in the period before the regulation is replaced, the person and entity concerned might take steps to prevent measures freezing funds from being applied to them again.