COURT KNOCKS DOWN TERRORIST ASSET-FREEZING POWERS:

C O N F I D E N T I A L SECTION 01 OF 02 LONDON 001170

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NOFORN
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E.O. 12958: DECL: 04/24/2018
TAGS: ECON KTFN UK
SUBJECT: COURT KNOCKS DOWN TERRORIST ASSET-FREEZING POWERS:
GOVERNMENT COMMITTED TO MAINTAINING REGIME

Classified By: ECONOMIC COUNSELOR, JOHN MCNAMARA FOR REASONS 1.4 B AND
D


1. (C/NF) SUMMARY: A UK court ruled on April 24 that the UK
had illegally frozen the assets of five individuals accused
of terrorism finance. The ruling found fault with the fact
that the UK did not engage in parliamentary debate in its
implementation of UN Security Council Resolutions on
Al-Qaeda/Taliban and Terrorism Finance. The current asset
freezes will stay in place until an appeal process can begin
in 21 days, and will likely remain for the several month-long
appeal period. The British government has reassured us that
they are committed to a strong asset-freezing regime and are
considering contingencies, such as modifying the existing
Counter Terrorism Bill or creating a stand-alone one. END
SUMMARY

HIGH COURT CALLS TERROR ASSET-FREEZING UNLAWFUL
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2. (C/NF) The British High Court ruled on April 24 that HM
Treasury (HMT) had illegally frozen the assets of five
individuals under powers derived from UN Security Council
Resolutions. Four individuals had been designated under UK
Terrorist Finance (TF) domestic designations, and one was
listed under both domestic rules and the UN (and therefore
automatically designated under EU and UK rules.) Justice
Collins of the High Court claimed that HMT bypassed the
Parliamentary process by using "Orders in Council" (Orders)
instead of primary legislation to implement UNSCRs 1373 and
1267 authorizing asset-freezing against terrorist financiers
and Al Qaeda/Taliban, respectively. The use of orders to
implement UNSCRs was created under the UK's UN Authorizing
Act of 1946. UNSCRs also come into effect in the UK through
EC regulations. Patrick Guthrie, Head of the Financial
Sanctions Unit at HM Treasury (HMT),who sought us out to
explain the UK's next steps, likened the Orders in Council to
U.S. Executive Orders. Justice Collins ruled that the Orders
in Council were not subject to the same legal scrutiny as
parliamentary legislation, and therefore were
unconstitutional.


3. (C/NF) Guthrie, who was one of the HMT witnesses at the
hearing, described Justice Collins' main concerns as: 1) the
Orders in Council, which were "intrusive on human rights" did
not go through the parliamentary process; 2) the orders used
loose language allowing for asset freezing where terrorist
financing "may be" involved; 3) the appeals process did not
afford designated individuals enough rights in challenging
their listing; 4) the domestic designations involved closed
sources and intercept material without allowance for special
advocates for the designated parties; and 5) some of the
criminal offenses in the UK process were not sufficiently
clear (i.e., "providing (undefined) economic resources to
listed people") and the "proportionality" of the government
being able to impose stiff criminal penalties of up to seven
years on people who might not be aware they were committing
an offense.

IMMEDIATE EFFECTS MINIMAL; BUT UK WILL NOT DESIGNATE
DOMESTICALLY FOR TIME BEING
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4. (C/NF) The current regime remains in place for now. HMT
was granted a stay of the court decision until the Court of
Appeals takes the case in 21 days. The Appeals Court then
will take at least four to six weeks to render a decision.
The High Court's ruling pertains only to these five
individuals - identified only by the initials A, K, M, Q and
G - but can, if upheld on appeal, be used by other designated
individuals as precedent to unfreeze their assets. HMT will
have to make a few minor changes immediately to allow the
designated individuals to receive "economic resources" (i.e,
a car) from third parties, but would still require a license
if they were to try to sell that resource. The individuals
will also now not have to report all expenditures to the HMT
made with state benefits.


5. (C/NF) Justice Collins wrote several paragraphs about
ongoing cases against the European Commission's asset
freezing regime, making clear he sided with the Advocate
General's brief in the EU trial called the Kadi case, but
ultimately decided the UK must follow the current EU
designation process. Guthrie complained that the ruling
leaves many issues unclear. The UK will still be able to
freeze assets of individuals designated by the UN, but will
put on hold for now all domestic-only asset freezing cases,
Guthrie said. The UK has 112 domestically-listed
individuals, 64 of whom are also listed by the UN/EC process.
Of the other 48, 44 are resident in the UK.

LONDON 00001170 002.2 OF 002



HMT TO FIGHT DECISION; CONTINGENCY PLANS INCLUDE NEW
LEGISLATION OR MODIFYING CURRENT BILL
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6. (C/NF) Guthrie said HMT has three weeks to prepare its
case to the Court of Appeals and predicted the court will
certainly hear the case. He also said the court could not be
less-sympathetic than Justice Collins, whom he described as a
"liberal judge, well-known for his rulings against the
government on security issues" (Please protect). Former Home
Secretary Blunkett apparently referred repeatedly to Collins

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as "bonkers" after several of the latters' rulings against
the government's security measures. HMT is hoping for full
support from the three-judge Court of Appeals, or at least
more clarity, but expects to get a decision that only
partially supports the government.


7. (C/NF) Guthrie stressed that the UK is committed first and
foremost to its operational needs. HMT will meet and defend
its asset-freezing regime in order to comply with both its
international obligations and due to important national
security implications. If the Court of Appeals overturns
Justice Collins' ruling, HMT will probably just slightly
amend the current Orders in Council and continue the regime.
If the decision is adverse, the UK will likely pursue primary
authorizing legislation. Primary legislation could take
several forms: stand alone legislation; amending the current
Counter Terrorism bill; and modifying the original 1946 UN
authorizing legislation.


8. (C/NF) Each legislative approach has its pros and cons.
The current draft Counter Terrorism (CT) bill is already in
train in the House of Commons, and contains key elements that
upset Justice Collins: legislative authority to use
classified material and provisions to establish court
advocates on behalf of designated individuals who are
qualified to handle that material. That bill, however,
already has a controversial provision extending the detention
period from 28 to 42 days, which is causing political
difficulties for the government, and will not be ready until
November, Guthrie told us. HMT is concerned about a
potential gap. A stand-alone bill addressing all these
problems would be the cleanest (and could include certain
parts now in the CT bill),but would have to be imposed under
emergency legislation. COMMENT: In an uncertain
parliamentary environment where the government is suffering
tax revolts and concerns about extending the detention
period, Ministers may be hesitant to move any legislation -
stand alone emergency legislation or amendments to existing
bills - without fully assessing its likelihood of success.
END COMMENT


9. (C/NF) Guthrie pointed out how this case showed that UK
hesitation to push the envelope too far on listing
individuals without airtight evidence was justified. He
claimed HMG is working hard to close down terrorist
financing, but must consider at all stages of their process
whether government action is "proportional" to the alleged
crime and how far they can go in using sensitive or closed
source material without risking losing an entire case in
court. He pointed to bank regulators' inability to go beyond
their strict red-lines when investigating Iranian banks, for
example.


10. (C/NF) COMMENT: This case exemplifies what the UK feared
could happen: a British court would try to upend the entire
UK asset-freezing regime by questioning not just a specific
case, but the legal framework for taking that action. The
picture will become clearer over the next few weeks as the
government tries to sort out the High Court decision, awaits
a decision from the Court of Appeals, and assesses its
options for pursuing either stand-alone legislation or
re-working the pending Counter-Terrorism Bill. HMT was eager
to let us know they were not going to back down, and we
believe the UK is committed to maintaining a strong
asset-freezing regime. In fact, the UK could have an even
stronger framework if they go to stand-alone legislation that
puts into primary legislation their current program. This
may take some time, and could cause the UK to be even more
cautious. In the meantime, the USG should watch closely, and
be prepared to provide legal/expert assistance in drafting
legislation if necessary. Post believes active lobbying or
public statements would be counterproductive at this stage.

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