Kadi Showdown: Substantive Review of (UN) Sanctions by the ECJ

I. Introduction

After more than a decade on the UN 1267 sanctions list, Yassin Abdullah Kadi was delisted by the UN 1267 Committee on 5 October 2012, following review of a delisting request he had submitted through the Office of Ombudsperson: a mechanism established by Security Council Resolution 1904 (2009) and enhanced by Security Council Resolution 1989 (2011)—and a mechanism which the Kadi cases before the European Union courts (along with some others in domestic courts, such as Nada, Abdelrazik, Hay, Ahmed, etc) pushed to create.

Kadi’s delisting came at a time when the European Commission, the Council of the EU, and the UK were pursuing an appeal against the General Court’s decision in Kadi II. This was the decision striking down Kadi’s re-listing by the EU following the annulment of the Regulation listing him for the first time by the ECJ in Kadi I (for comment see here). And yet the appellants did not give up their appeal. It was not just that the delisting came shortly after oral argument before the ECJ had been concluded; they also wanted a decision on the serious issues raised in Kadi II, in particular the question of the standard of review that EU courts will apply in reviewing UN-imposed terrorist sanctions against named individuals and legal entities. The importance of this jurisprudence for future cases is obvious.

The Grand Chamber of the ECJ delivered its decision on the Kadi II appeal on 18 July 2013. It upheld the decision of the GC striking down the Regulation relisting Kadi, even if it did overturn part of the GC reasoning. Most notably, it affirmed that it will continue to review EU listings implementing strict Security Council obligations in the face of lack of equivalent control at UN level, it insisted on a rather strict standard of review of such listings, and it undertook—for the first time—substantive review of the reasons for listing offered by the EU (which were in fact merely those offered in the terse ‘narrative summary of reasons for listing’ that the Security Council released).

II. The Grounds of Appeal and the ECJ’s Decision in Brief

The Commission, the Council, and the UK challenged the GC’s decision in Kadi II essentially on three grounds, which the ECJ dealt with in two sets. The first ground was that the GC erred in law in not granting judicial immunity to Kadi’s listing by the EU: the EU was under a strict obligation to impose sanctions on Kadi, flowing from the relevant decisions of the Security Council. The EU was allowed no discretion in implementing the measure, and thus the relevant act should be immune from review by the Union’s judicature, lest it purport to review (indirectly) the decisions of the Security Council. In effect, the appellants launched a direct challenge to Kadi I, calling on the Court to reverse the precedent. Notably, the GC had indicated some discomfort with the reasoning in Kadi I (see paras 113-121 GC Kadi II), but insisted that it fell to the ECJ to take the radical step of reversal (see para 123 of GC Kadi II). Well, it didn’t (see section III below).

Perhaps the first ground of appeal was a long shot for the appellants. It was on the basis of the second and third grounds where the Commission, the Council, and the UK, supported by numerous interveners, were probably hoping to limit the effects of Kadi I, all the while allowing the ECJ to ‘save face’ by pretending the precedent still held good (see also the Opinion of AG Bot, and the comment by Asier Garrido Muñoz on this blog). The challenge related to the applicable standard of review of the impugned listing. In Kadi I, the ECJ had indicated that the Union judicature must ensure ‘in principle the full review’ of EU listings, but it had struck down Kadi’s listing merely on the basis that no reasons for his listing were communicated to him, and that he had been afforded no opportunity to be heard: there was no substantive justification of the listing for the ECJ to review. The EU promptly ‘complied’ with the ECJ ruling by transmitting to Kadi the narrative summary of the reasons for listing released by the Security Council (and published online), and allowing him to present whatever case he could make against the relatively vague narrative summary, only to quickly dismiss Kadi’s comments ‘after careful consideration’ and to subsequently re-list him.

The GC in Kadi II found that this was not sufficient under Kadi I, because the reasons given to Kadi were too vague to allow for any sort of meaningful rebuttal, and because the Union at no point seriously envisaged removing him from the list, irrespective of whatever evidence he could adduce against the vague ‘charges’. And since Kadi I demanded ‘in principle the full review’, no such review was possible and the listing had to be struck down again. It was this interpretation of the term ‘full review’ as ‘full merits review’ that the appellants wished the ECJ to pronounce upon for the first time, in the hope that it would moderate the approach of the GC, and that it would apply a less intense standard in its review of the listing (see section IV below).

III. The EU and the UN

In essence the first ground of appeal was a direct challenge to Kadi I, the Council and Ireland going as far as to formally request the ECJ to revisit its reasoning (see para 60). The appellants again raised the issue that the effect of Kadi I was the (indirect) review by EU courts of measures imposed by the Security Council, in the implementation of which the EU had no discretion. The ECJ dismissed those arguments in a handful of short paragraphs and found that the GC had not erred in law in applying the (now reaffirmed) reasoning of the ECJ in Kadi I (see paras 65–69). To recall, the ECJ disassociated the EU measures from the Security Council measures conditioning them by claiming that review and annulment of EU measures do not ‘call into question’ the primacy of Security Council resolutions at the international level.

Of course, formally, the ECJ is right: the Security Council measures cannot be affected by EU courts’ review of EU implementing measures. The EU court has no competence to pronounce on these measures, its decision cannot affect them, and EU law cannot serve as a basis to justify non-compliance with the UN Charter. But the ECJ decision does force the EU member states to violate their obligations under the Charter of the UN: it forces them to disobey the Security Council, lest they disobey the EU court. This puts the member states in a difficult position. They must now either seek to reform the procedures at the UN level (see notably the GC argument in paras 127 seq that full review must remain the case as long as there is no procedure at UN level offering guarantees of judicial protection), which they have done so far with some success (the establishment and later enhancement of the Office of the Ombudsperson); or they must find some way to justify their disobedience under international law (see for an argument Disobeying the Security Council, chapter 7).

IV. Standard of Review and Substantive Review

The appellants challenged both the standard of review applied by the GC, and the manner of its application on the substantive claims by Kadi (violation of the rights of defence, the right of effective judicial protection, and the principle of proportionality as it relates to the protection of property) (see paras 70 seq). The ECJ dealt with these two grounds in one go. In essence, the appellants and interveners tried to mitigate the impact of EU judicial review of (in effect) Security Council measures, by arguing for a rather lax standard of review, taking into account the ‘international context’ of adoption of the measure (para 72) and the fact that EU institutions have no discretion under the 1267 regime (para 73).

It is worth discussing this argument in some detail. The position taken by the ECJ in Kadi I is premised on the formality that EU judicial review does not affect the UN measure (see section III, above). True as that might be, we must bear in mind that this move was justified in the first instance by the ECJ by seemingly claiming that there is still some discretion in the method in which the EU will implement the sanctions imposed by the Security Council. See in context para 298 ECJ Kadi I, emphasis added:

… the Charter of the United Nations does not impose the choice of a particular model for the implementation of resolutions adopted by the Security Council under Chapter VII of the Charter, since they are to be given effect in accordance with the procedure applicable in that respect in the domestic legal order of each Member of the United Nations. The Charter of the United Nations leaves the Members of the United Nations a free choice among the various possible models for transposition of those resolutions into their domestic legal order.

Ibid para 299, emphasis added:

It follows from all those considerations that it is not a consequence of the principles governing the international legal order under the United Nations that any judicial review of the internal lawfulness of the contested regulation in the light of fundamental freedoms is excluded by virtue of the fact that that measure is intended to give effect to a resolution of the Security Council adopted under Chapter VII of the Charter of the United Nations.

This is simply wrong if it is read to mean that the UN legal order necessarily allows discretion in implementing strict obligations: under the 1267 (and now 1989) regime, the EU has no discretion whatsoever. When the Security Council demands the listing of Kadi, all the EU can do is list Kadi. Should the EU afford Kadi any meaningful opportunity to challenge the listing, the challenge, if accepted, will lead to the member states disobeying the Security Council.

The GC (then still as the CFI) had clearly seen the difference when it compared the 1267 regime with the 1373 regime in OMPI in 2006. The 1373 regime demands the imposition of measures, but allows UN member states significant discretion as to the identification of those to be sanctioned. This discretion, the GC held, must be exercised in accordance with EU law. When there’s no discretion, however, there’s nothing to review (except compliance with the only law the CFI found binding on the Security Council, ie peremptory norms of international law: see CFI Kadi I). When the ECJ demolished the distinction between the two regimes in its own Kadi I, the GC assumed, basing itself also on the language of the ECJ in Kadi I, that the ECJ wished to apply to 1267 measures a standard of review akin to that applied to 1373 measures (full review, and in fact even stricter than under the 1373 regime, where judicial safeguards also applied at the level of member states: see comment on GC Kadi II, section IV). This is what it did in Kadi II, and this was what the appellants were challenging in the case at hand: they argued that the GC erred in applying such a stringent standard of review; and it did, because it did not take into consideration that the EU institutions had no discretion in implementing 1267 measures. In effect then, the appellants were hoping that the same argument that failed on formal grounds in securing immunity of EU measures from EU judicial scrutiny would now succeed in at least limiting that scrutiny as much as possible.

One of the main arguments of the appellants was that the EU institutions did transmit to Kadi all the evidence in their possession, in casu the summary of reasons for listing. This was all they had, so that they could not meaningfully be required to adduce evidence they were not in possession of. The Court accepted as much (para 111) but went on to clarify that this does not discharge the obligations of the institutions under EU law: it is the obligation of the competent authority to seek cooperation on the part of the UN and its member states if it appears that further information is required to allow the authority to discharge its duty of stating the specific and concrete reasons which justify subjection to restrictive measures (paras 114–116). As such, the standard of review applied by EU courts will not only cover the procedural aspects of EU obligations, ie the obligation to transmit reasons for listing and to allow the targeted individual an opportunity to be heard, but will also extend to a substantive review of the reasons offered, ie whether these are sufficiently detailed and specific, whether they rest on a solid factual basis, and generally whether the reasons offered, or at least one of them, is substantiated (paras 118–119). If the EU institutions cannot adduce additional evidence, then review will take place on the evidence at hand—since it is for Union to prove that the reasons are well-founded, not for the individual to prove that they are not (paras 120–124). If even one of the reasons stated, albeit in summary form, is substantiated, then the ECJ will not annul the listing (para 130).

This rather stringent (level of) review is required, according to the Court, not just because it is ‘indispensable to ensure a fair balance between the maintenance of international peace and security and the protection of fundamental rights and freedoms, those being shared values of the UN and the EU’ (para 130), but ‘all the more’ so because, ‘despite the improvements added’ by Resolutions 1904 and 1989, the procedures at UN level, including the Office of the Ombudsperson, still do not provide the guarantees of ‘effective judicial protection’ (para 133). In this assessment, the ECJ not only explicitly endorses the ECtHR’s decision in Nada, but also reiterates its Solange approach by intimating that it may tone down its intensity of review should even more robust procedures be adopted at UN level. But it also goes on to tell the UN what the essence of that concept of ‘judicial protection’ must be: not ex officio review, not Ombudspersons, no half-baked measures (para 134, emphasis added):

The essence of effective judicial protection must be that it should enable the person concerned to obtain a declaration from a court, by means of a judgment ordering annulment whereby the contested measure is retroactively erased from the legal order and is deemed never to have existed, that the listing of his name, or the continued listing of his name, on the list concerned was vitiated by illegality, the recognition of which may re-establish the reputation of that person or constitute for him a form of reparation for the non-material harm he has suffered.

The Court then applies these principles to the reasons adduced for Kadi’s listing, such as they are (paras 137, 140 seq). In this, it finds that the GC erred when it found that the non-disclosure of evidence by EU institutions of evidence they did not have themselves was enough to violate Kadi’s rights (paras 138–139). The ECJ thus takes each of the reasons adduced by the EU (cf, the Security Council), reviews them in substance, and in light of the comments submitted by Kadi in response, and proceeds to find all of them either too vague to be assessed or lacking in substantiation, so as not to be able to justify the restrictive measures (paras 141 seq). It thus upholds the annulment of the listing, even if it does substitute part of the GC’s reasoning for its own (paras 163–164).

V. What Now?

Kadi’s adventures are presumably at an end: he is no longer listed by the Security Council, and he has won his case in the EU courts, though at the time of writing he remains on the US Specially Designated Nationals and Blocked Persons list maintained by the Office of Foreign Assets Control. But the adventure for the UN Security Council is continuing. Despite significant improvements to the 1267/1989 sanctions regime, and especially the delisting procedures, national and regional international courts remain unconvinced and are keeping the pressure up. Indeed the ECJ can be seen to have raised the bar extremely high: it seems that nothing short of a full-blown court procedure will be enough to solicit the EU courts’ deference in favour of review at UN level. No doubt this should be a welcome development—and a justified one at that. It seems however that all this pressure, after procuring some progress, is now sending the Security Council into regression and may end up being counterproductive. Indeed, in order to avoid challenges in domestic and other courts, the Security Council has started to make its sanctions regimes less and less targeted: in blunting the identification of those targeted, the Security Council makes it more difficult for those affected to challenge the measures in domestic or regional international fora. The Council re-situates the game on the intergovernmental level, where it is much stronger, no less so on account of Article 103 UN Charter. It remains to be seen what balance will be struck in the end. If there is an end—it may be showdown for Kadi, but showdown for UN Security Council ‘terrorist’ sanctions it is definitely not.