M & Ors v Her Majesty's Treasury & Ors

Payments to a non-listed person may constitute funds made available indirectly for the benefit of a listed person where, in the circumstances, it can reasonably be expected that the recipient will confer significant economic benefits on the listed person. The prohibition is not confined to transfers of funds or economic resources which enable the listed person to obtain further funds, goods or services. Article 2.3 of Regulation (EC) No 881/2002 operates as an additional safeguard and does not restrict Article 2.2. Concepts such as “basic expenses” may be sufficiently certain even though they contain a penumbra of uncertainty, provided their central purpose is intelligible and affected persons have access to judicial protection.

The claimants were persons entitled to social security benefits who lived with spouses designated as listed persons under United Nations Security Council Resolution 1390 (2002). The Treasury licensed the continued payment of benefits under the domestic implementing Order. The claimants challenged the Treasury’s interpretation that the payments fell within the prohibitions in Article 2 of Regulation (EC) No 881/2002 and Article 7 of the Order. They also argued that licence conditions referring to “basic expenses” were unlawful for uncertainty. The central issues were whether household payments could indirectly benefit a listed person and whether the relevant expenditure restriction was sufficiently certain.

1. Indirect provision of funds. The substantive applications were dismissed. Regular payments by public authorities to a recipient living with a listed person fell within Article 2.2 of the Regulation because it could reasonably be expected that the recipient would use significant funds to confer economic benefits on the listed person, including rent, utilities and ordinary household expenses.
2. The prohibition was not limited to cases where the listed person received funds or resources capable of being used to obtain further funds, goods or services. That narrower construction would undermine the Security Council’s intention to remove economic support from listed persons, subject to humanitarian exceptions, and would make the prohibitions ineffective.
3. Article 2.3 was not a limiting provision. It addressed the distinct case where economic resources, rather than funds, were made available directly or indirectly to a listed person. It operated as an additional safeguard to ensure that gifts or transfers of assets such as a motor car were covered.
4. The prohibition required a sufficient nexus between the application of funds and the benefit to the listed person. Borderline cases required assessment of all the circumstances. A general, incidental and trivial community benefit would ordinarily lack the necessary nexus, whereas targeted and substantial household support could satisfy it.
5. Certainty of “basic expenses”. The licence terminology derived from Article 2a of the Regulation. The concept was sufficiently certain and flexible. Specified examples indicated the general nature of the exemption, while other cases could be assessed individually by the competent authority and challenged by judicial review or, in criminal proceedings, by the criminal court.
6. No reference to the Court of Justice was justified because the judge had insufficient doubt about the interpretation adopted, and a reference would cause delay and uncertainty.

First-instance judicial review proceedings. The High Court dismissed the substantive applications.