Introduction

On 30 September 2009, the European Union’s Court of First Instance (the CFI) handed down yet another[1] important judgment concerning the freezing of funds of individuals suspected of terrorism[2]. The CFI decided that the Council of Ministers of the European Union (the Council) acted unlawfully, when it froze the funds of Mr. Jose Maria Sison, a national of the Philippines. In the Court’s opinion, the Council’s fund freezing measures were based on national decisions, which did not relate either to the ‘instigation of investigations or prosecution or to a conviction for terrorist activity’ in relation to Mr. Sison. National decisions, which rule only incidentally and indirectly on the possible involvement of a person in terrorist activities, are insufficient for the Council to go ahead and freeze the funds of that person.

The Facts

By way of background, Mr. Sison originally had applied in the Netherlands for refugee status and a residence permit. The Dutch Secretary of State for Justice rejected his application three times. The rejections stated consistently that Mr. Sison was the head of the Communist Party of the Philippines (the CPP) and that he directed the military wing of the CPP, the New People’s Army (the NPA). The NPA allegedly was responsible for a large number of acts of terrorism in the Philippines.

The first two decisions refusing the application were annulled by two judgments of the Council of State of 1992 and 1995, but the third was upheld in 1997 by decision of The Hague District Court.

Subsequently, the Council adopted a decision ordering the freezing of Mr. Sison’s assets. On 11 July 2007, the CFI annulled the Council decision ordering the freezing of Mr. Sison’s funds, on the grounds that the Council had acted in breach of Mr. Sison’s rights of defense, the obligation to state reasons and the right to effective judicial protection[3].

Before that judgment was delivered, the Council adopted, in June 2007, a new decision maintaining the freezing of Mr. Sison’s funds. The Council stated, inter alia, that the judgments of the Dutch authorities and courts in connection with Mr. Sison’s refugee status and residency permits constituted decisions taken by competent national authorities to instigate investigations or prosecution for terrorist activities.

Since then the Council has adopted several acts maintaining the freezing of Mr. Sison’s funds, the latest being a Regulation of June 2009[4]. On each occasion, the Council provided a statement of reasons similar to that of June 2007. The Council maintained Mr. Sison in the list in the Annex to Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism[5].

On 10 September 2007, Mr. Sison brought an action before the CFI seeking annulment of the decision of June 2007 and compensation. In November 2007, the Court stayed proceedings concerning the claim for compensation. Accordingly, the judgment of 30 September 2009 relates only to the claim for annulment.

The Law

Fund freezing measures to a person, group or entity suspected of engaging in terrorist activities are determined by Article 2(3) of Regulation No 2580/2001[6]. According to the relevant governing rules surrounding Regulation No 2580/2001, persons or entities may be included on the restricted parties list only ‘on the basis of precise information or material in the relevant file which indicates that a decision has been taken by a competent authority in respect of the persons, groups and entities concerned,’ including ’the instigation of investigations or prosecution for a terrorist act, an attempt to perpetrate, participate in or facilitate such an act based on serious and credible evidence or clues, or condemnation for such deeds’[7].

In accordance with Article 1(6) of Common Position 2001/931, the names of the persons and entities appearing in that list must be reviewed at regular intervals and at least once every six months to ensure that there are still grounds for keeping them on the list.

The CFI Ruling

The Court held that a decision to ‘instigate investigations or prosecute’ must, if the Council is to be able validly to invoke it, form part of national proceedings. Those national proceedings have to seek, directly and chiefly, the imposition on the person concerned of measures of a preventive or punitive nature, in connection with the combating of terrorism and by reason of that person’s involvement in terrorism. However, the Court found that this requirement was not satisfied by a decision of a national judicial authority that rules only ‘incidentally and indirectly’ on the possible involvement of the person concerned in such activity, in relation to a dispute concerning, for example, rights and duties of a civil nature.

The Court found that the procedures before the Council of State and The Hague District Court did not involve any ‘conviction’ of Mr. Sison, nor did they amount to decisions to ‘instigate investigations or prosecute for a terrorist act’. In fact, they were solely concerned with the review of the lawfulness of the decision of the Secretary of State for Justice refusing to grant him refugee status and a residence permit in the Netherlands.

While it was true that the Council of State and The Hague District Court, in the course of those procedures, studied the file of the Netherlands internal security service, relating to Mr. Sison’s alleged involvement in certain terrorist activities in the Philippines, neither of those judicial bodies nor the Netherlands prosecuting authority decided to open an investigation in respect of Mr. Sison in the Netherlands in connection with those activities.

Therefore, the Court concluded that neither the judgments of the Council of State nor the decision of The Hague District Court constituted national decisions capable of serving as a basis for an EU decision to freeze funds. Consequently, the Court annulled the contested decisions and regulation in so far as they concerned Mr. Sison’s funds.

Remarks

This judgment does not come as a surprise. The CFI has already in earlier rulings clarified: First, the conditions for implementing Article 1(4) of Common Position 2001/931 and Article 2(3) of Regulation No 2580/2001; second, the burden of proof incumbent on the Council in that context; and, third, the scope of judicial review is such matters[8].

However, the ruling highlights the importance of national procedures and decisions for the validity of EU fund freezing measures. As a prerequisite, a competent national authority has to take first a decision to initiate investigations or to prosecute, based on serious and credible evidence or clues. Verification that there is a decision of a national authority meeting that definition is an essential precondition for the adoption, by the Council, of an initial decision to freeze funds.