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OO RUEHAG RUEHBC RUEHDE RUEHDF RUEHDIR RUEHIK RUEHKUK RUEHLZ RUEHROV
RUEHSR RUEHTRO
DE RUEHBS #0041/01 0131059
ZNR UUUUU ZZH
O 131059Z JAN 09 ZDK
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC PRIORITY
INFO RHEHNSC/NSC WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEAORC/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC
RUEADRO/HQ ICE DRO WASHINGTON DC
RHMFIUU/FBI WASHINGTON DC
RHMFIUU/HOMELAND SECURITY CENTER WASHINGTON DC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RUEKJCS/DOD WASHDC

UNCLAS SECTION 01 OF 04 BRUSSELS 000041 
 
SENSITIVE, FOR INTERNAL USG USE ONLY 
SIPDIS 
 
STATE FOR NEA/IR, EEB/ESC/TFS, S/CT, L, EUR/ERA, INL, AND TRANSITION 
TEAM 
TREASURY FOR TFFC, TFI 
 
E.O. 12958: N/A 
TAGS: ETTC KTFN PTER EFIN KCRM KJUS KHLS EUN UNSC IR
PREF, PINR, PHUM, FR 
SUBJECT:  EU TERRORISM FINANCE LISTINGS: TROUBLE AHEAD 
 
------------------------ 
SUMMARY AND INTRODUCTION 
------------------------ 
 
¶1.  (SBU) EU and Member State courts are rendering judgments that 
may hinder our ability to secure EU-wide designations of terrorist 
entities.  The new problem for us is higher standards of evidence, 
and judicial review of the sufficiency of that evidence, that will 
make the EU and its Member States less responsive to our requests 
for terrorist designations and accompanying asset freezes.  As we 
pursue the valuable foreign and security policy tool of terrorist 
designations, we may need to ramp up our intelligence sharing on 
terrorist entities against which we seek EU action.  These cases are 
already having some spillover effect on Council decision-making for 
all sanctions programs, not just counter-terrorism. 
 
 
¶2.  (U) Terrorist designations in the EU framework can follow along 
several possible paths.  All are important to us.  First is the 
UNSCR 1267 process, by which UN-level terrorism sanctions stemming 
from UNSCR 1267 and related resolutions regarding Usama bin Laden, 
al-Qaeda, and the Taliban are implemented directly on an EU basis. 
(This process is legislated by the EU's May 2002 Common Position 
2002/402/CFSP, February 2003 Common Position 2003/140/CFSP, and May 
2002 Council Regulation 881 2002.)  The second is the UNSCR 1373 
process, by which the EU makes autonomous designations of terrorists 
for EU-wide sanctions.  Some individual EU Member State designations 
follow from national laws.  Others rely on the EU-wide authorities 
cited above to stand in for a lack of corresponding national 
authorities. 
 
¶3.  (SBU) On December 4, 2008, the EU's Court of First Instance in 
Luxembourg struck the Mujahideen-e Khalq (MEK) from the EU's 
terrorist designation list for asset freezing.  This marked the 
third time the court has annulled an EU Council decision freezing 
the funds of the MEK.  The Court found that the EU Council had 
violated the rights of the MEK by adopting the decision without 
first informing the MEK of the new information or new material in 
the file which, according to the Council, justified maintaining it 
on the EU list of terrorist organizations.  The Court further found 
that the Council violated the rights of the MEK by refusing to 
communicate to the Court certain information about the case, and 
that in doing so, the Council had also infringed upon the MEK's 
fundamental rights to judicial protection. 
 
¶4.  (SBU) The MEK decision comes in the context of other judicial 
decisions on the terrorist financing designation programs, including 
the UNSCR 1267-related Kadi and al-Barakaat cases.  The latter 
turned in part on the principle that terrorism-related UN Security 
Council Resolutions do not preempt the EU judiciary's own 
interpretations of due process and fundamental rights.  Further, the 
EU judiciary will determine whether the EU Member State national 
laws comply with Community law.  The court in the MEK case also 
announced that in order to ensure the protection of fundamental 
rights of any listed person or entity, the court would need to 
determine the sufficiency of evidence supporting the designation by 
reviewing certain materials, including classified materials, upon 
which the Council had relied.  Taken together, the strands of these 
decisions suggest that:  (a) EU terrorist designations will be 
subject to higher standards of proof of terrorist-related activity, 
and (b) courts, and not simply national governments, may demand to 
see this evidence.  Most importantly, when the U.S. wants the EU to 
designate given terrorist entities, we need to understand that we 
may not succeed unless our follow-up action meets these newly 
evolving, and tougher, standards for terrorist asset freezes.  End 
Summary and Introduction. 
 
------------ 
The MEK Case 
------------ 
 
¶5.  (SBU) On December 4, 2008, the European Union's Court of First 
Instance (CFI) annulled the EU Council's July 15, 2008 designation 
of the organization under the Council Decision 2008/583/EC.  The 
 
BRUSSELS 00000041  002 OF 004 
 
 
Court's decision will in effect remove MEK from the EU's autonomous 
terrorist designations list for asset freezing, as it is highly 
unlikely the EU will find a new basis for listing when the 
designations are due for renewal by end the of January.  The court 
declined to issue guidance on the effective date of the annulment of 
the MEK's asset freeze, leaving it to each Member State to decide 
for itself when to release funds.  The court ruled that: 
 
--The Council had violated the MEK's rights of defense (for failing 
to communicate the new information that justified its listing), and 
the Council's refusal to share with the Court "certain information 
about the case" had infringed the MEK's "fundamental right . . . to 
effective judicial protection." 
 
The judgment upheld three of the MEK's six pleas in law, as 
plaintiff contesting the asset freeze.  These pleas were that the EU 
Council violated the MEK's rights in: 
 
--breaches of two national statutes and a failure to discharge 
burden of proof; 
 
--breach of the plaintiff's right to judicial review; 
and 
 
--breach of the rights of the defense and of the obligation to give 
reasons for a decision. 
 
(We note here that the Mujahideen-e Khalq or MEK is also known as 
the People's Mojahedin Organization of Iran or PMOI, and other names 
as well.  We refer to the organization in this message by the 
U.S.-recognized initials of "MEK."  In fact, the text of the Court's 
decision referred to the organization as the PMOI.) 
 
¶6.  (SBU) The December 4 MEK decision was a lengthy and complex set 
of rulings by the Court of First Instance.  The decision drew on 
interpretations of both fact and law.  It addressed not only the EU 
Council designation process, but also some underlying designation 
actions by the UK and French governments taken on the basis of their 
own national laws.  The decision spoke to the interplay between EU 
member state national laws and EU law on terrorist designations.  We 
highlight below what we see as the most substantively important 
rulings from a counter-terrorism policy standpoint. 
 
--  Perhaps most significantly, the CFI ruling asserts that "the 
Council is not entitled to base its funds-freezing decision on 
information or material in the file communicated by a Member State, 
if the said Member State is not willing to authorize its 
communication to the Community judicature whose task is to review 
the lawfulness of that decision."  Thus, EU courts may ask to see 
the evidence, however classified, of terrorist linkages before 
upholding any designation. 
 
--  The CFI judges expressed concern over the information taken from 
the French prosecutor, questioning whether it qualified as a 
decision by a competent national authority.  Embedded in this and 
other cautions in the MEK decision were repeated assertions that EU 
listings based on flawed national listings would not be upheld in an 
EU court. 
 
--  The CFI's Presiding Judge Nicholas Forwood focused on the 
difference between group versus individual behavior.  The MEK, not 
being a legal person, could not be subject to criminal proceedings. 
He questioned the freezing of assets of all alleged MEK associates, 
given that individuals may act differently than the intentions of 
the group.  Forwood noted that MEK had declared a ceasefire in 2002, 
and questioned whether any other European investigations and 
prosecutions had been initiated, or convictions had been entered 
against either the MEK or its alleged members.  (Comment:  We find 
such detailed judicial consideration of what constitutes involvement 
in terrorism an ominous sign for future EU listings, particularly in 
looking for prosecutions or convictions, which of course require a 
very high burden of proof, to test the sufficiency of a terrorist 
designation.  The decision noted that the Court cannot substitute 
its own assessment for that of the Council on what constitutes 
 
BRUSSELS 00000041  003 OF 004 
 
 
terrorism, but the Court can decide whether the evidence at hand 
substantiates the conclusion, i.e., involvement in terrorism, drawn 
from that evidence.  End Comment.) 
 
--  The decision held that the MEK's rights of defense, or due 
process, were breached when the EU Council retained the MEK on its 
asset-freeze list without offering the MEK an opportunity to contest 
recently-developed information that was used by the Council in its 
decision. 
 
¶7.  (SBU) The EU Council must decide by early February (simple 
majority) whether to appeal the CFI ruling to the higher court, the 
European Court of Justice (ECJ).  France may decide on its own 
whether to appeal.  The Council, in deciding whether or not to 
appeal, must weigh the risks of tempting the higher court to go even 
further than the lower court to find the Council had in fact abused 
its powers (as warned by the CFI judgment) and that the terrorist 
designation process is fundamentally flawed.  EU Member States will 
need to discuss their views on EU court judicial review of 
nationally-designated classified information.  The EU is already 
concerned with implications for future designations, and their 
concern is not limited to just the counter-terrorism sanctions 
regimes. 
 
¶8.  (SBU) No EU court case has ever fully examined the substantive 
merits of a terrorist designation -- only the decision-making 
process.  The CFI's December 4 decision on the MEK clearly signals 
this court's interpretation that it has an obligation to undertake 
substantive reviews.  The court in MEK, however, does not define the 
standard by which the Council's decision will be tested.  As one EU 
legal expert explains, their best guess on the court's standard 
derives from the first and original MEK case judgment of December 
12, 2006.  (The MEK case decision discussed here is actually the 
third to have come before an EU court.)  If the U.S. and EU courts 
ultimately take different approaches to the legal standard for our 
respective designations, we can expect some divergence in our 
overall sanctions policy and implementation, and thus some 
complications for promoting an effective multilateral sanctions 
regime. 
 
------------------------------ 
The Kadi and al-Barakaat Cases 
------------------------------ 
 
¶9.  (U) On September 3, 2008 the European Court of Justice (ECJ) 
issued a joint judgment on the appellant cases of Yassin Abdullah 
Kadi and al-Barakaat International Foundation.  Kadi and al-Barakaat 
were two designations made under EU law pursuant to UNSCR 
1267-related counterterrorism sanctions.  The ECJ ruled that Kadi 
and Al Barakaat's "rights of the defense, in particular the right to 
be heard, and the right to effective judicial review of those 
rights, were patently not respected."  The Court in effect rejected 
the idea that UN law had a "generalized immunity from jurisdiction 
within the internal legal order of the Community." 
 
¶10.  (U) The ECJ found that, "the Community judicature must, in 
accordance with the powers conferred on it by the European Community 
Treaty, ensure the review, in principle the full review, of the 
lawfulness of all Community acts in the light of the fundamental 
rights forming an integral part of the general principles of 
Community law, including review of Community measures which, like 
the contested regulation, are designed to give effect to the 
resolutions adopted by the Security Council under Chapter VII of the 
Charter of the United Nations.  The Court of First Instance erred in 
law, therefore, when it held, in paragraphs 212 to 231 of Kadi and 
263 to 282 of Yusuf and Al Barakaat, that it followed from the 
principles governing the relationship between the international 
legal order under the United Nations and the Community legal order 
that the contested regulation, since it is designed to give effect 
to a resolution adopted by the Security Council under Chapter VII of 
the Charter of the United Nations affording no latitude in that 
respect, must enjoy immunity from jurisdiction so far as concerns 
its internal lawfulness save with regard to its compatibility with 
the norms of jus cogens." 
 
BRUSSELS 00000041  004 OF 004 
 
 
 
¶11.  (SBU) We anticipate that the December 2008 MEK ruling, combined 
with the implications of the September 2008 Kadi and Al Barakaat 
ruling, could lead EU courts to take up more substantive judicial 
review of EU follow-up to UN sanctions decisions.  Ample 
opportunities for such an event may arise in the coming weeks to 
months.  On January 21 the CFI will hear the next UNSCR 1267-related 
EU judicial challenge brought by Omar Mohammed Othman.  Kadi and Al 
Barakaat are expected to launch new challenges against their 
November 28, 2008 re-designation by the EU.  Other upcoming 
1267-related cases include Al-Bashir Al-Faqih, Sanabel Relief Agency 
Ltd., Ghunia Abdrabbah, Taher Nasuf, Faraj Hassan, and Chafiq Ayadi. 
 
 
-------------------------------------- 
IMPLICATIONS AND QUESTIONS FOR THE USG 
-------------------------------------- 
 
Spillover for Other Sanctions 
----------------------------- 
 
¶12.  (SBU) The December 4 decision on the MEK is the first EU 
terrorist financing ruling to flat-out require a sharing of 
classified information in order to support the Court's substantive 
judicial review of the basis for designation.  The EU Council 
$ecretariat will try to discourage drawing implied linkages to the 
other sanctions regimes, but this is clearly in several Member 
States' minds with regard to future designations related to Iran, 
Zimbabwe, Burma, and other sanctions regimes. 
 
Impact on U.S. Efforts to Fight Terrorism 
----------------------------------------- 
 
¶13.  (SBU) If one assumes that the CFI's new requirements in the MEK 
decision could extend to third party-proposed designations, not just 
those proposed by EU member states, there are implications for USG 
proposals to the EU for listings and terrorist sanctions.  We must 
confront the possibility that working with the Council on 
designations may entail enabling the EU court to access unclassified 
or even classified information to review the legality of the EU 
listing by a standard yet to be fully determined.  This ruling may 
be construed to affect both the autonomous (UNSCR 1373) and UN-level 
(UNSCR 1267) listings. 
 
¶14.  (SBU) One channel to explore for mitigating the above risks 
would be the U.S.-EU classified information-sharing agreement.  This 
agreement is known formally as the "Security Arrangement between the 
EU Council General Secretariat Security Office (GSCSO) and the 
European Commission Security Directorate (ECSD) and the United 
States Department of State for the Protection of Classified 
Information Exchanged between the EU and the United States of 
America."  Assuming the U.S. classified material necessary to 
support an EU designation decision is not amenable to 
declassification, the agreement could perhaps be used to facilitate 
information sharing and provision of evidence in the event of 
anticipated EU judicial challenges.  However, the Council itself 
does not yet have a consensus view on whether its own classified 
information can be shared with the EU courts. 
 
¶15.  (SBU)  If the U.S. and EU courts ultimately take different 
approaches to the legal standard for our respective designations, 
and to the level of deference due the executive's decision, we can 
expect some divergence in our overall sanctions policy and 
implementation, and thus some complications for promoting an 
effective multilateral sanctions regime.  We are already sensing, as 
reported elsewhere, some falling off in the aggressiveness of UK 
prosecutors to seek terrorist designations. 
 
SILVERBERG