England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QB DIVISION (MR KENNETH PARKER QC)
[2006] EWCH 2328 (ADMIN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/03/2007

Lord Justice Maurice Kay :

1. Modern legislation designed to counter terrorism takes many different forms. These three appeals are concerned with the interpretation of legislation, the purpose of which is to prevent the funding of terrorism. None of the three appellants is a suspected terrorist. However, each is married to a man listed under United Nations Security Council Resolution 1390 as a person associated with Usama Bin Laden, Al Qaida or the Taliban. M and her husband are Egyptian citizens. She has leave to remain in the United Kingdom. They have five children. M and her husband are both severely disabled. The family is dependent upon social security benefits. M's entitlement amounts to £353.82 per week. A and her husband are British citizens. They have seven children, one of whom suffers from Down's Syndrome and is severely disabled. A is in receipt of a number of social security benefits which total £548.14 per week. MM is a Bosnian national and her husband is Tunisian. They have four children. All members of the family have indefinite leave to remain in the United Kingdom. MM's entitlement to social security benefits totals £313.17 per week.
2. The appellants provide their husbands with food, accommodation and essential living items. The important issue in this case is whether, under the relevant legislation, HM Treasury has power to control and license the payment of social security benefits to the appellants. On 22 September 2006 Mr Kenneth Parker QC, sitting as a Deputy Judge of the High Court, held that HM Treasury has such a power: [2006] EWHC 2328 (Admin). However he granted permission to appeal on the basis that there is "a serious question on the proper interpretation of the [legislation] which … is fit for the Court of Appeal to consider".

The international and domestic statutory context

3. Since 1999 the Security Council of the United Nations, acting pursuant to powers conferred by the UN Charter, has adopted a number of resolutions directed against the activities of the Taliban, Usama Bin Laden and Al Qaida. Even before the events of 11 September 2001, the Security Council resolutions required states to freeze funds and financial assets of listed individuals and entities and to ensure that funds and financial resources were not made available to such individuals and entities. On 8 March 2001 the Sanctions Committee, which had been established as a committee of the Security Council by Resolution 1267 of 1999, published a first consolidated list of named individuals and entities. On 16 January 2002 the Security Council adopted Resolution 1390 which specifically referred to Usama Bin Laden, members of the Al Qaida network and the Taliban. It maintained the provisions of the earlier resolutions by reference to the list. Article 2(a) of Resolution 1390 requires states 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."

The Security Council adopted further relevant Resolutions in 2003, 2004 and 2005.

4. It is an established principle of European Union law that resolutions adopted by the UN Security Council are binding on all member states which must in turn take all measures necessary to ensure that those resolutions are put into effect. Moreover, European measures giving effect to a resolution of the Security Council must be interpreted in accordance with the wording and aim of that resolution: see Ebony Maritime and Loten Navigation [1997] ECR I-1111. These principles, which are not disputed, are carefully and fully set out in the judgment of the Deputy Judge at paragraphs 20 – 24. Acting under Treaty powers, the Council of the European Union has promulgated a series of Regulations to give effect to the various resolutions of the Security Council. The Regulation which is central to the present case is Regulation (EC) 881/2002.
5. Article 2 of Regulation (EC) 881/2002 ("the Regulation") provides:

"1. All funds and economic resources belonging to, or owned by 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."

6. 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."

7. In 2002 the UN Security Council passed a further Resolution 1452 permitting a number of derogations and exceptions which might be granted by states on humanitarian grounds. In due course this led to the adoption of Regulation (EC) No.561/2003 which amended the Regulation by inserting the following as a new Article 2a:

"1. Article 2 shall not apply to funds or economic resources where:

(a) any of the competent authorities of the Member States … 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 …

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 … "

8. The Regulation as amended is binding and directly applicable in all Member States. Nevertheless, in this country the Crown has proceeded to enact detailed domestic legislation by Orders in Council pursuant to the authority arising under section 1 of the United Nations Act 1946. As at the time the licensing arrangements that are the subject of this appeal were made, and as at the time of the hearing before the Deputy Judge, the relevant Order in Council was the Al-Qaida and Taliban (United Nations Measures) Order 2002. Article 7, which appears under the heading "Making funds available to Usama Bin Laden and associates", provides:

"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."

9. With effect from 16 November 2006 the provisions of Article 7 of the 2002 Order were superseded by those of Article 8 of the Al-Qaida and Taliban (United Nations Measures) Order 2006. However, that change has no material effect either on the issues arising on this appeal or their determination.
10. It is plain to see that the Order resembles the Regulation, but there are differences in the drafting. In his judgment, the Deputy Judge explained that he was concentrating 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" (paragraph 51). He observed that in the European Union the Court of First Instance has upheld the validity of the Regulation in Ayadi v Council of the European Union, case T – 253/02, 12 July 2006. He further observed that the Regulation and, for that matter the Order, must be interpreted, so far as possible, to give proper effect to the United Nations Resolutions, in particular Resolution 1390. None of this is in dispute in these appeals. It is agreed that it is necessary to concentrate primarily on the terms of the Regulation.

The issue on these appeals

11. It is common ground that, by the payment of the relevant social security benefits, the paying public authorities make funds available to the appellants. That does not involve the making of funds directly available to any listed person because the appellants are not listed persons. The question is whether, by making funds directly available to the appellants, the paying public authorities are making funds or economic resources indirectly available to, or for the benefit of, the husbands of the appellants, who are listed persons. That question was put in this way by the Deputy Judge in paragraph 53 of his judgment:

"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?"

12. Inevitably, the appellants provide their husbands with accommodation, food and essentially living items. It is not suggested that, by so doing, the appellants offend the Regulation. What precipitated the dispute in this case was a written statement made to the House of Commons by the Economic Secretary to the Treasury on 3 July 2006. He said:

"… given the fact that household income is generally pooled, state benefits paid to individuals sharing the same household with a listed person would be, directly or indirectly, for the listed person's benefit and should therefore be subject to appropriate restrictions and conditions."

13. Consequently, HM Treasury decided that the payment of the relevant social security benefits to the appellants would be prohibited by the Regulation unless made under specific licence from HM Treasury. This has resulted in licensing arrangements under which the benefits are paid into specified bank accounts with strict conditions as to withdrawals and accountability. Inevitably, these are intrusive and inconvenient so far as the appellants are concerned. They still receive benefits but they are controlled as to how they draw and may use them.

The case for the appellants

14. On behalf of the appellants, Mr Simon Cox accepts that (using the lettering of the Deputy Judge), 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. He further accepts the same consequence 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. However, he submits that the Regulation is not breached in a 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 by, for example, the provision of accommodation, food and other essential living items, but in a way that does not enable B himself to obtain funds, goods or services.

Discussion

15. In his skeleton arguments for the hearing before the Deputy Judge and in this court Mr Cox has persuasively demonstrated that the paying public authorities do not make funds available to the husbands of the appellants, nor do they make economic resources available to them so as to enable them to obtain funds, goods or services. So far, so good. However, what Mr Cox does not grapple with is that the prohibitions contained in Article 2 of the Regulation extend not only to funds made available to the listed persons; they also extend to the making available of funds for the benefit of the listed persons. In paragraph 63 of his judgment, the Deputy Judge said:

"…the payment of the relevant social security benefits … 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)."

16. I entirely agree with that analysis. Moreover, it is fortified by the fact that the actual amounts received by the appellants as benefits are conditioned by, and indeed increased by, the expectation underlying the analysis.
17. The Deputy Judge then considered the construction of Regulation 2 in the light of the language and objective of the United Nations Resolutions. He said (paragraph 64) that the construction contended for by Mr Cox

"would not give full and proper effect to the United Nations Resolutions or to the prohibitions that had 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 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."

18. Once again, I agree with the reasoning of the Deputy Judge. Indeed, as he went on to point out (paragraph 67), if Mr Cox's construction were correct, it would not have been necessary to amend Regulation 2 by the addition of Article 2a. All this points to the more draconian construction being the right one.
19. In my judgment, the meaning of Article 2.2 is abundantly clear. If there had been ambiguities then, of course, the task of construction would have had to have been tempered by the fact that breach of the Regulation or the Order is punishable as a criminal offence (see Article 4 of the Regulation and Article 7 of the Order). However, in the absence of ambiguities, no presumptive rule of construction accrues to the benefit of the appellants.
20. In the course of his submissions, Mr Cox postulated some hypothetical situations which, he said, would be treated absurdly if the construction which found favour with the Deputy Judge were correct. He had made similar submissions to the Deputy Judge. However, like the Deputy Judge, I conclude that with any legislation of this sort there are likely to be borderline cases that would need to be addressed on a case by case basis taking account of all the relevant circumstances. I do not accept that the hypothetical examples militate against the wider construction. It is not necessary to address them in detail. The Deputy Judge considered them, in my view correctly, in paragraphs 68 and 69 of his judgment.
21. Mr Cox also submitted that it is anomalous and contradictory if it is permissible for the appellants to provide for their husbands in kind but it is impermissible for the appellants to be provided with the funds to enable them to do so. He urged us to adopt his construction to avoid such a tension. For my part, I find no anomaly or contradiction. Funds have an inherent liquidity which gives them a greater potential for misuse. That is surely why Article 2.2 seeks to control them more rigorously than Article 2.3 seeks to control "economic resources" which are only controlled to the extent to which they are convertible. In any event, the simple answer to Mr Cox's submission is, once again, that the language of Article 2.2 is absolutely clear as to its meaning.

Conclusion

22. For the reasons I have given, I would dismiss these appeals. I am entirely satisfied that the construction decided upon by the Deputy Judge was correct. As I indicated earlier, although the Regulation is draconian, it does not have the result of withholding a single penny of the benefits to which the appellants are entitled. What it does is to saddle them with the intrusion and inconvenience to which I have referred. Of course, licensing conditions are themselves susceptible to judicial review on public law grounds. Indeed, there was a challenge to the conditions at first instance in this case. It was rejected by the Deputy Judge and it has not been pursued in these appeals. Before leaving the case it is appropriate to pay tribute to the judgment of the Deputy Judge. I consider it to be thorough, clear, erudite and right.

Lord Justice Wilson:

23. I agree.

Sir Peter Gibson:

24. I also agree.