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 SIPDIS NOFORN SIPDIS 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 -------------- -- ¶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 -------------- ¶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 -------------- ¶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 SIPDIS 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. Visit London's Classified Website: http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom TUTTLE