A House of Kadis? Recent Challenges to the UN Sanctions Regime and the Continuing Response to the ECJ Decision in Kadi

Devika Hovell is a DPhil Candidate in international law at the University of Oxford, and Associate Fellow  at Chatham House. She worked formerly as Director of the International Law Project and Lecturer in International Law at the University of New South Wales. Her doctoral thesis applies a procedural fairness framework to Security Council  decision-making on sanctions.

Recent developments following the decision of the European Court of Justice in Kadi indicate that the decision may require a more holistic response to due process by the Security Council than has been contemplated to date. The 11 June 2009 decision of the Court of First Instance in Othman v Council of the European Union, the European Commission’s proposal on 22 April 2009 to enact a regulation enabling it to second-guess Security Council sanctions listings and Mr Kadi’s initiation of new proceedings in the Court of First Instance on 26 February 2009 all provide potential new challenges to the ability of EU member states to comply with the Security Council sanctions regime. The leak sprung in the sanctions regime with the ECJ’s decision in Kadi threatens to assume a more sieve-like quality as more and more designations risk being overridden at the regional or domestic level on due process grounds. As the repercussions of the Kadi decision become increasingly pervasive, there is a sense that even the tectonic Permanent Five may be starting to shift on the issue.

The judgment of the European Court of Justice in Kadi was always going to impact upon the debate about due process in Security Council sanctions decision-making. Yet to date, this debate has taken place almost exclusively between academics and a smallish group of interested states. Some of the most diligent advocates for reform of the UN sanctions regime, such as Lichtenstein, have complained until recently that it has been very difficult even to get a conversation started on the issue among more heavyweight players, such as the Permanent Five, who are in the best position to instigate reform. Though the debate has now simmered for almost a decade, the P5 has shown little willingness to do more than tinker around the edges in addressing due process concerns. There is a sense that the issue has been dismissed as an intractable problem, strung between the poles of those who insist that independent review of sanctions listings is a pressing and necessary element of reform, and members of P5 that have threatened to stop submitting names to sanctions lists in the event full review is instituted. Among the highest reform achievements to date is the creation of the ‘focal point’, the person appointed to enable individuals to challenge their listings, but who – when the curtain is whipped away wizard-of-oz style – is revealed to be little more than a glorified switchboard operator. Under the present regime, even the raft of deceased individuals haunting the Al Qaeda and Taliban Consolidated List (estimated to be between 12 and 30 individuals) have failed to persuade the relevant sanctions committee of the case for their removal.

Though there have been several challenges to the UN sanctions regime in domestic and regional courts, one of the key distinguishing features of Mr Kadi’s appeal to the European Court of Justice was that it was successful. Throughout the history of the targeted sanctions regime, cases have been filed in domestic courts in Belgium, Germany, Italy, Pakistan, Switzerland, The Netherlands, Turkey, the United Kingdom and the United States. On the whole, domestic courts have shown a tendency to dismiss direct challenges to the Security Council’s authority, either on the basis that the combined effect of Articles 25 and 103 of the UN Charter render the Council’s authority irreproachable, or on the basis that the challenge fails to satisfy the stratospheric standard of violation of a jus cogens norm. However, in Kadi, the European Court of Justice relied on neither Article 103 nor jus cogens, and annulled the regulation implementing the Security Council sanctions regime on the basis it violated the basic constitutional Charter of the EU, by infringing the appellants’ rights of defence, right to an effective legal remedy and right to effective judicial protection and unjustifiably restricting the right to property.

The initial response to the Kadi decision on the part of the Security Council and the European Union was muted and surgical, restricted to an EU-based response to the specific cases of the appellants, Mr Kadi and the Al Barakaat International Foundation. On 21 October 2008, the 1267 Sanctions Committee provided the EU Presidency on a ‘no-precedent basis’ with the narrative summaries of reasons for listing the appellants. The Commission communicated these summaries to Mr Kadi and Al Barakaat, and provided them with the opportunity to comment ‘in order to make their point of view known’. After ‘carefully considering’ the response by Mr Kadi by letter dated 10 November 2008 and the response by Al Barakaat in a letter dated 9 November 2008, the Commission expressed its view that the listing of both was ‘justified for reasons of [their] association with the Al-Qaida network’, and re-listed Mr Kadi and Al Barakaat (with retrospective effect to the date of their initial listing in 2002) in Commission Regulation No 1190/2008 of 28 November 2008.

Yet the Grand Chamber’s decision in Kadi may ultimately have struck a deeper chord than the narrow focus of the response might otherwise suggest, with murmurings that even the P5 might be shifting on the issue. The Security Council itself has taken no direct response to the Kadi case, and certain members of the Council clearly consider the Kadi issue to be a European problem, reflecting little more than a need for Europe to reign in their unreasonable judges. However, the Al Qaeda and Taliban Monitoring Team described the decision as ‘the most significant legal development to affect the regime since its inception’. In relation to other members of the Council, including members of the P5, it seems that Kadi has concentrated minds, even if only to encourage greater internal thinking about the issue for the time being. There is a sense that the impact of Kadi on the credibility of the Security Council and the effectiveness of the sanctions regime would be unwise to ignore, and it may be that a review of resolution 1822 is in the offing. Certainly recent developments indicate that the repercussions of the Kadi decision may be more pervasive than might have been hoped, at least by members of the Security Council.

In particular, three recent developments indicate that the EU is moving toward a more comprehensive response to the Kadi decision, which will increase the capacity and potential for non-compliance by the EU with Security Council sanctions decision-making where such decision-making violates due process standards.

(1) Kadi Squared: Towards a Heightened Standard of Review

First, and perhaps unsurprisingly, Mr Kadi has challenged the enactment of Regulation No 1190/2008 in new proceedings before the Court of First Instance. The challenge repeats the procedural challenges arguing (1) that the new regulation continues to violate Mr Kadi’s rights of defence, including the right to an effective hearing and the right to effective judicial protection, but also calls on the court to engage in more substantive review of the foundations for the listing claiming that: (2) the Commission failed to provide compelling reasons for maintaining the asset freeze against the applicant; (3) the Commission manifestly erred in its assessment of relevant facts and circumstances in deciding whether to enact the contested regulation; and (4) the contested regulation constitutes an unjustified and disproportionate restriction on his right to property not justified by compelling evidence. These proceedings will test the extent to which the court is willing to uphold procedural standards in the Security Council context: is Security Council decision-making legitimated by ‘a superficial veneer of due process and administrative law talk’ (see Euan MacDonald’s comments over at the Global Administrative Law blog) or does procedural justice involve the court in more substantive review of the reasonableness and proportionality of decision-making? Whatever the Security Council thinks of the ultimate decision, the proceedings threaten to extend the scope of challenge to Security Council sanctions, taking decision-making further out of the hands of Security Council members and within the purview of domestic and regional courts.

(2) Kadi as Precedent: Othman v Council of European Union

Secondly, the decision in Kadi has created a precedent that that the Court of First Instance has already been called upon to follow. In Othman v Council of the European Union, the Court of First Instance held that the applicant’s rights of defence, including the right to be heard, right to effective judicial protection and right to an effective remedy, had been infringed, and that the restrictive measures constituted an unjustified restriction of his right to property. Significantly, the Court declined the Council’s request that, in the event of a decision in favour of annulment, the Court should maintain the regulation for a brief period as the ECJ did in Kadi. In explaining its refusal to do so, the Court clarified that it did not see the effects of the Kadi decision as necessarily restricted to the appellants in that case:  

Although [the period of three months considered reasonable by the Court of Justice in Kadi in order to allow the Council to remedy the infringements] was determined by reference only to the case of the two persons involved in the cases giving rise to Kadi on appeal, namely, Mr Kadi and the Al Barakaat International Foundation, the fact remains that the Council could not have been unaware that the applicant’s situation, which is in all respects comparable… necessarily called for the same response on its part.

It is clear that the effects of the Kadi decision will not be restricted to the appellants in that case, but will be extended to any European resident or citizen included on Security Council sanctions lists.  

(3) Kadi Writ Large: Proposed General Regulation

A third measure motivated by the Kadi decision, which indicates that the EU is shifting from its position of automatic compliance with Security Council sanctions to one of controlled compliance, is the European Commission’s recent proposal on 22 April 2009 of a new Council Regulation. The proposed regulation provides for ‘a listing procedure ensuring that the fundamental rights of defence and in particular the right to be heard are respected’ in the case of all individuals and entities listed by the UN. The proposed regulation would replace the current system of automatic listing with a duty upon the Commission to consider the appropriateness of the listing independently. It also provides for a method by which to consider classified information of the UN and other member states. Due in large part to the failure of the Security Council to provide satisfactory due process protections, this proposed measure threatens to take decision-making about sanctions out of the hands of the Security Council and into the hands of a regional body.

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The UN Security Council sanctions regime is uniquely vulnerable to non-compliance by member states. Any permanent or temporary hole in the sanctions net provides a location from which assets can be quickly recaptured, or to which assets can be shifted. If compliance by a grouping of states as large and influential as the European Union is compromised, this an issue of concern to all states with an interest in the continuing effectiveness of the Security Council sanctions regime. In the wake of Kadi, as control over the sanctions regime threatens to slip increasingly into the hands of domestic and regional courts, this may provide the much-needed impetus for the Security Council to itself pay heightened attention to the need to enhance due process protections in sanctions decision-making.