Thawing the Asset Freeze Regime

On 27 January 2010, the Supreme Court, the UK’s highest court, declared that the government had exceeded its powers in exercising control over the assets of five terrorist suspects.  The Terrorism (United Nations Measures) Order 2006 and the Al-Qaida and Taliban (United Measures) Order 2006 were condemned as oppressing and paralysing and effectively made the men “prisoners of the state”.  The orders had not been introduced with the approval of parliament but only as a result of ministerial decisions. Whilst the government’s original efforts were well intentioned, designed to implement Section 1 of the 1946 UN Act which followed UN Security Council resolutions designed to stop the financing of international terrorism, the judges ruled that if the Government “considers that such far-reaching measures are necessary or expedient for combating terrorism or honouring the United Kingdom’s international obligations it must obtain approval for them from Parliament.”

Faced with the prospect of returning assets to the terror suspects, the government fast tracked legislation which was introduced yesterday, in order to plug the gap potentially left by the judges’ decision.  The suspects’ assets remained frozen in the interim, pending the change in legislation.  The temporary legislation will remain in force until 31 December 2010, by which time the government will have introduced permanent legislation covering terrorist asset freezing.

Whilst the case is not the first judicial challenge to anti terrorist laws, it does highlight the tension between the judiciary and the executive’s desire to introduce measures which seek to ensure the UK meets its obligations under international law.  At its heart is the need for any measures which limit or otherwise restrict citizens’ rights to be fully scrutinised by parliament.  In an illuminating comment Lord Hope, as one of the judges said “Even in the face of the threat of international terrorism, the safety of the people is not the supreme law.”  Expect more challenges to legislation and practices which are rapidly introduced by the executive in response to the growing threat of international terrorism.

Ed Shorrock is the Director of Forensic & Regulatory Services at BakerPlatt ( www.bakerplatt.com ), an offshore law firm specialising in litigation, financial crime, regulatory and insolvency matters.  Ed has been heavily involved in a variety of regulatory, criminal and civil actions with a focus on the restraint, custody, realisation and confiscation of assets. Having qualified as a chartered accountant in 1998, Ed has managed a range of projects involving asset seizures under drug trafficking and criminal legislation and been involved in regulatory investigations and complex liquidations. He delivers on training programmes focusing on financial crime and compliance issues and is a regular speaker at conferences on these topics and how they affect offshore financial centres.

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