The European Court of Justice prohibits real property transactions for designated terrorists

On October 11, the European Court of Justice issued an important ruling regarding the interpretation and scope of the international sanctions mechanism of assets freezing for real property transactions.

UN resolution 1390 (2002) adopting sanctions against individuals and entities designated as associated to Al Qaeda and the Taliban decided that States shall freeze without delay the funds and other financial assets or economic resources of the individuals whose names appear on the list, including “funds derived from property owned or controlled, directly or indirectly, by them or by persons acting on their behalf or at their direction”.

But the UN Monitoring Group reported in November 2003 that several states have been reluctant to freeze tangible assets such as business or property. In October 2003, The FAFT also issued an interpretative note regarding the property to be seized and the procedures to be used. It made it clear that the obligation to freeze funds and other assets, pursuant to various UN resolutions, included “those [assets] wholly or jointly owned or controlled, directly or indirectly, by designated persons”. All these efforts have failed until now to prohibit physical, including real property assets, as part of the UN sanctions mechanism.

We first reported in June 2006 that Youssef Nada, former manager of Al Taqwa Bank, was in the process of selling his property located in the Italian enclave of Campione d’Italia in Switzerland, despite his designation under the UN sanctions regime

The case before the ECJ (Möllendorf and others, Case #C-117/06) was brought after Aqeel Al Aqeel, founder of the Al Haramain Islamic Foundation and designated by the US, UN and EU, was due to acquire a real property in Germany. The Court had to resolve the question of whether a transfer of ownership implies that an economic resource is made available, directly or indirectly, to natural or legal persons, groups or entities designated by the Sanctions Committee so as to enable them to obtain funds, goods or services.

The Court ruled that under the sanctions regime a real property transaction is “prohibited” if, “in consequence of that transaction, were it to be allowed, an economic resource is made available to a person listed (…), which would enable the latter to obtain funds, goods or services.”

Although the case before the Court specifically relates to a designated buyer, the wording used by the European judges in their ruling now makes it clear to any State within the territory of the European Union that any real property transaction is prohibited when it involves an individual or an entity designated as terrorist if, as a consequence of that transaction, economic resources, funds, goods or services are made available to such an individual or entity.

This ruling provides an important precedent and a good example of how regional and local Courts may enforce UN regulations when this organization still lacks the proper mandate and tools to do so. We can only hope that this ruling will be followed in other jurisdictions.

Posted in Legal Issues, Sanctions, Terrorist Tagged with: , , ,

About JC Brisard

Jean-Charles Brisard

Jean-Charles Brisard is an international consultant, specialized in the financing of terrorist organizations.
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