(Common foreign and security policy Restrictive measures taken against persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban Freezing of funds and economic resources Regulation (EC) No 881/2002 Article 2(2) Prohibition of making funds available to the persons listed in Annex I to that regulation Scope Social security and social assistance benefits paid to the spouse of a person included in Annex I)
In Case C-340/08,
REFERENCE for a preliminary ruling under Article 234 EC from the House of Lords (United Kingdom), made by decision of 30 April 2008, received at the Court on 23 July 2008, in the proceedings
The Queen, on the application of:
M and Others
Her Majesty's Treasury,
composed of J.-C. Bonichot, President of the Chamber, C. Toader, C.W.A. Timmermans (Rapporteur), K. Schiemann and P. Klūris, Judges,
Advocate General: P. Mengozzi,
Registrar: M.-A. Gaudissart, Head of Unit,
having regard to the written procedure and further to the hearing on 11 November 2009,
after considering the observations submitted on behalf of:
M and Others, represented by B. Emerson QC, S. Cox, Barrister, and by H. Miller and K. Ashton, Solicitors,
the United Kingdom Government, by I. Rao, acting as Agent, assisted by J. Swift, Barrister,
the Estonian Government, by L. Uibo, acting as Agent,
the Commission of the European Communities, by S. Boelaert and P. Aalto, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 14 January 2010,
gives the following
The resolutions of the Security Council
'[The Security Council] [d]ecides that all States shall take the following measures with respect to Usama bin Laden, members of the Al-Qaeda organisation and the Taliban and other individuals, groups, undertakings and entities associated with them, as referred to in the list created pursuant to resolutions 1267 (1999) and 1333 (2000), to be updated regularly by the [Sanctions] Committee:
(a) 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;
'[The Security Council decides that] the provisions of ... paragraph 2(a) of Resolution 1390 (2002) do not apply to funds and other financial assets or economic resources that have been determined by the relevant State(s) to be:
(a) necessary for basic expenses, including payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges, ... after notification by the relevant State(s) to the [Sanctions] Committee of the intention to authorise, where appropriate, access to such funds, assets or resources and in the absence of a negative decision by the Committee within 48 hours of such notification; ...'
European Union law
'For the purpose of this Regulation, the following definitions shall apply:
(1) 'funds' means financial assets and economic benefits of every kind ...;
(2) '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;
'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.'
'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;
(b) such determination has been notified to the Sanctions Committee; and
(c) (i) in the case of a determination under point (a)(i) ..., the Sanctions Committee has not objected to the determination within 48 hours of notification;
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.
'1. Each Member State shall determine the sanctions to be imposed where the provisions of this Regulation are infringed. Such sanctions shall be effective, proportionate and dissuasive.
3. Each Member State shall be responsible for bringing proceedings against any natural or legal person, group or entity under its jurisdiction, in cases of violation of any of the prohibitions laid down in this Regulation by any such person, group or entity.'
'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 or an offence under this Order.'
'Any person guilty of an offence under article ... 7 ... shall be liable:
(a) on conviction on indictment to imprisonment for a term not exceeding seven years or to a fine or to both; or
(b) on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both.'
'1. A person (including the designated person) must not deal with funds or economic resources belonging to, owned or held by a person referred to in paragraph (2) unless he does so under the authority of a licence granted under article 11.
2. The prohibition in paragraph (1) applies in respect of:
(a) any designated person,
(b) any person owned or controlled, directly or indirectly, by a designated person; and
(c) any person acting on behalf or at the direction of a designated person.
3. A person who contravenes the prohibition in paragraph (1) is guilty of an offence.'
'1. A person must not make funds or economic resources available, directly or indirectly, to or for the benefit of a person referred to in article 7(2) unless he does so under the authority of a licence granted under article 11.
2. A person who contravenes the prohibition in paragraph (1) is guilty of an offence.
'1. The Treasury may grant a licence to exempt acts specified in the licence from the prohibition in article 7(1) or 8(1).
2. A licence may be
(a) general or granted to a category of persons or to a particular person;
(b) subject to conditions;
(c) of indefinite duration or subject to an expiry date.
3. The Treasury may vary or revoke a licence at any time.
6. Any person who has done any act under the authority of a licence and who fails to comply with any conditions attaching to that licence is guilty of an offence.'
The disputes in the main proceedings and the question referred for a preliminary ruling
the benefits in question must be paid into a bank account from which the spouse concerned can draw only GBP 10 in cash for each member of the household; other payments from that account must be made by debit card;
the spouse concerned must send a monthly account to the Treasury detailing all her expenditure in the previous month, enclosing receipts for the goods purchased and a copy of her monthly bank statement. Those receipts may be checked by the Treasury in order to ascertain that the purchases do not exceed basic expenses, and
the licence includes a warning to the spouse that it is a criminal offence to make cash, financial assets or economic resources available to her husband, a designated person.
that regime is not required in order to give effect to the purpose of Resolution 1390 (2002), which is to stop funds being used for terrorist ends. It is hard to see how the expenditure of sums on current domestic expenses, such as the purchase of food, from which a designated person derives a benefit in kind, could create any risk that funds might be diverted to terrorist ends, the amounts of the social benefits in question being carefully calculated so as not to exceed the vital needs of the recipients;
a broad interpretation of the words 'for the benefit of' in Article 2(2) of Regulation No 881/2002 is inconsistent with Article 2(3) of that regulation, which prohibits making economic resources available to a designated person only when that enables such a person 'to obtain funds, goods or services';
the Treasury construes the words used in Article 2(2) of Regulation No 881/2002 as meaning 'applied' or 'expended for the benefit of'. It seems more likely, however, having regard to the objective pursued by that regulation, that the drafters of that regulation intended those words to mean funds made available to or used for the benefit of a designated person that the latter could use for the purposes of terrorism, and
the Treasury's construction produces a disproportionate and oppressive result. It means that any person paying money to the spouse of a designated person, such as her employer or her bank, must seek a licence simply because she lives with a designated person and some part of her expenditure may be used for his benefit. Furthermore, the terms of the licence are such that she is unable to spend her own money, however large her income, without accounting to the Treasury for every item of her expenditure. That constitutes an extraordinary invasion of the privacy of a person who is not included in the list in question.
'Does Article 2(2) of ... Regulation ... No 881/2002 apply to the provision by the State of social security or social assistance benefits to the spouse of a designated [person] ... on the ground only that the spouse lives with the designated person and will or may use some of the money to pay for goods and services which the latter will consume or from which he will benefit?'
Consideration of the question referred for a preliminary ruling
On those grounds, the Court (Fourth Chamber) hereby rules:
Article 2(2) of Council Regulation (EC) No 881/2002 of 27 May 2002 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 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, as amended by Council Regulation (EC) No 561/2003 of 27 March 2003, must be construed as not applying to the provision by the State of social security or social assistance benefits to the spouse of a person designated by the committee created pursuant to Paragraph 6 of Resolution 1267 (1999) of the Security Council of the United Nations and included in the list in Annex I to that regulation, as amended, on the grounds only that the spouse lives with that person and will or may use some of those payments to pay for goods and services which the designated person also will consume or from which he also will benefit.
* Language of the case: English.