EU
EU prepares new powers to freeze the funds of internal terrorists
29.11.2012


Preparatory work is being undertaken for legislation which would give the EU the power to directly enforce the freezing of "funds, financial assets and economic gains of persons and entities suspected of terrorist activites inside the EU" - referred to as "internal terrorists" in a legislative 'roadmap' published last month. [1]

Although there are currently blacklists of persons suspected of taking part in terrorist activities both outside and inside the EU systems which have received sharp criticism from lawyers, academics, activists and the courts the EU does not yet have the power to directly implement the freezing of funds belonging to those deemed internal terrorists.

The current legislation on internal terrorists, Common Position 2001/930/CFSP, permits the introduction of travel bans and encourages increased information exchange, and states that funds should be frozen. However, it is left to Member States to take action themselves.

Assets inside the EU belonging to blacklisted groups and individuals outside the EU can be frozen directly following a decision by a secretive working party responsible for implementing Common Position 2001/931/CFSP (updated in recent years by 2009/67/CFSP), the legislation covering external terrorists.

Proposal for a new blacklist

New legislation would be based on Article 75 of the Lisbon Treaty, which permits the introduction of a framework for administrative measures with regard to capital movements and payments, such as the freezing of funds, financial assets or economic gains belonging to, or owned or held by, natural or legal persons, groups or non-State entities.

Natural and legal persons and entities will be affected if they are identified by the Council as being related to terrorist activities in the EUs common area of freedom, security and justice, and listed at a later stage, says the roadmap, published in October by the European Commission.

The roadmap continues: In addition, financial institutions and other institutions/professions offering financial services will also be affected as they will have the obligation to implement the freezing of relevant funds.

It seems that some of the impetus for new legislation has come following criticism of some EU Member States by the Financial Action Task Force (FATF), an inter-governmental organisation that developed out of a G7 initiative in 1990 and that works to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. [2]

It does this by demanding, overseeing and evaluating the implementation of specific criminal laws, law enforcement powers, surveillance and data retention systems, financial services industry regulations and international police co-operation arrangements. [http://www.statewatch.org/analyses/no-171-fafp-report.pdf]

The FATF was heavily criticised in a recent Statewatch and Transnational Institute report examining its regulation of non-profit and charity financing rules for legitimising coercion and repression, of civil society organisations by authoritarian states, particularly with regard to freedom of association and expression. [http://www.statewatch.org/analyses/no-171-fafp-report.pdf]

Fundamental rights considerations

The roadmap says that a very detailed analysis will be carried out of the impact of the measures on both natural and legal persons, taking into consideration recent European case law on the safeguarding of fundamental rights in comparable contexts.

Recent case law has not been too kind to the current European blacklisting regime, which is based on two United Nations Security Council Resolutions. In 2010, the European Court of Justice ruled in Kadi v European Commission that the freezing of the assets of Mr Kadi, a Saudi Arabian national accused of association with Al-Qaeda, was based on a regulation adopted without furnishing any real safeguard enabling the applicant to put his case to the competent atuhorities.

The imposition on the applicant of the restrictive measures laid down by Regulation No 881/2002, as a result of his inclusion on the list& constitutes an unjustified restriction of his right to property. [3]

The decision condemns the EU blacklisting system despite reforms brought in both before and after an initial 2008 decision in the Kadi case. Changes to the regime included the introduction of controlled rather than automatic compliance by the EU with the blacklisting decisions made at UN level in the Sanctions Committee; the provision of a statement of reasons to affected persons or entities; and six-monthly reviews of the EUs blacklist, amongst other things.

Despite these changes, the Court found that the contested regulation, so far as it concerns the applicant, must be annulled.

The Commission is appealing against the decision, and the Court is due to deliver its verdict at the end of January, based on a hearing that took place last month.

Drafting and scrutiny

IThree meetings involving Member States experts have taken place (in July and September 2010 and March 2011), led by the Commissions Directorate-General for Home Affairs (DGH HOME), and work on the impact assessment is continuing through meetings of representatives from the Directorate-Generals for Internal Market and Services (MARKT); Justice (JUST); the Secretariat-General (SG); as well as from the Service for Foreign Policy Instruments (FPI) and the Legal Service (SJ).

An external contractor, GHK consulting, is carrying out a preparatory study and is in the process of consulting stakeholders, not only from the public but also from the private sector.

Democratic scrutiny will only take place after the drafting of the legislation according to Article 75 of the Lisbon Treaty, the Council and the European Parliament are required to use the ordinary legislative procedure, formerly known as co-decision, to reach agreement on the measures.

Whether the Parliament will be given any oversight over the listing process remains to be seen. If the blacklisting process works in the same way for internal as it does for external terrorists, it is likely to be highly secretive all the meetings of the Working Party dealing with the blacklisting of external terrorists are held in a 'secure environment' where the date, agenda, organisational details and all of the proceedings are kept completely secret. [4]

Blacklisting: serious doubts over legality, effectiveness, and disproportionate impact

There is now an irrefutable body of expert legal opinion that views international proscription regimes as incompatible with the most basic standards of due process. The adverse and unacceptable impact of the sanctions on fundamental human rights is also abundantly clear and systemic violations have been recognised repeatedly in judicial proceedings, particularly in Europe, says a recent report published by the European Centre for Constitutional and Human Rights (ECCHR). [5]

In response to criticism, some reforms at both EU and UN level have been introduced in recent years, but in both cases the reforms have been considered piecemeal and of little real substance. Some of the EUs reforms, considered largely irrelevant by the ECJ in the Kadi case, have been noted above.

At the UN level, the Council of Europes Venice Commission on Human Rights has said that no independent observer can consider the creation of an Ombudsperson at UN level designed to mediate requests from indviduals, organisations and companies to be taken off the sanctions list [6] as being equivalent to having access to an independent and competent court. [7]

The in-depth report produced by the ECCHR concludes that however-well-intentioned the reasons for the hasty and ill-conceived adoption of the blacklisting regimes may have been at that time [largely post-11 September 2001], they cannot in our view be seen as effective, proportionate or necessary counter-terrorism measures a decade later. The need for radical reform is essential if the UN and EU are to maintain a meaningful commitment to the values upon which they are founded.

Preparatory work for the creation of the new legislation continues, with the Impact Assessment set to be finished by late January. The distribution of a legislative proposal could take place around late March/early April, according to a Commission spokesperson.


Sources
[1] http://ec.europa.eu/governance/impact/planned_ia/docs/2011_home_002_asset_freezing_en.pdf
[2] http://www.fatf-gafi.org/pages/aboutus/
[3] http://curia.europa.eu/juris/document/document.jsf?text=&docid=83733&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=190756
[4] http://www.statewatch.org/news/2010/dec/eu-ecchr-blacklisted-report.pdf, p.53
[5] http://www.tni.org/sites/www.tni.org/files/eu-ecchr-blacklisted-report.pdf, p.53
[6] http://www.un.org/News/Press/docs/2009/sc9825.doc.htm
[7] http://www.venice.coe.int/docs/2010/CDL-AD(2010)022-e.pdf, p.19

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