R (on the application of M) (FC)(Appellant) v Her Majesty's Treasury (Respondents) and two other actions

The Appellate Committee referred to the Court of Justice the meaning of “for the benefit of” in article 2.2 of Council Regulation (EC) No 881/2002. Its provisional view was that funds are made available for a listed person’s benefit only where they are placed at that person’s disposal for use. Ordinary household expenditure by a spouse, although conferring a benefit in kind, does not itself satisfy that condition.

This narrower construction accords with the Regulation’s purpose, the treatment of economic resources in article 2.3 and the principle of proportionality. A person may nevertheless make funds available indirectly by knowingly providing money to another person who will place money or convertible assets at a listed person’s disposal.

These three appeals arose from the Treasury’s treatment of social security benefits payable to the spouses of persons listed under the international sanctions regime concerning the Taliban and Al-Qa’ida. The Treasury required such benefits to be licensed and subjected their expenditure to detailed controls because ordinary household spending might benefit a listed person.

The appeals came from the Court of Appeal, [2007] EWCA Civ 173. The House referred to the Court of Justice, under article 234 of the Treaty establishing the European Community, whether “for the benefit of” in article 2.2 of Council Regulation (EC) No 881/2002 covers any expenditure from which a listed person benefits, or only funds made available for that person to use.

1. Disposition. The Appellate Committee, consisting of Lord Bingham of Cornhill, Lord Hoffmann, Lord Walker of Gestingthorpe, Baroness Hale of Richmond and Lord Brown of Eaton-under-Heywood, decided in a joint opinion to refer the interpretation of article 2.2 of Council Regulation (EC) No 881/2002 to the Court of Justice under article 234 of the Treaty establishing the European Community.

2. The Committee’s provisional opinion was that article 2.2 does not require the intrusive licensing regime imposed on social security benefits paid to the spouse of a listed person. The object of the sanctions was to prevent funds from being used for terrorism. Spending money on ordinary domestic expenses, from which the listed person receives only a benefit in kind, creates no relevant capacity to divert funds to that purpose.

3. The Committee considered that articles 2.2 and 2.3 should be read coherently. Article 2.3 restricts economic resources only where their provision enables a listed person to obtain funds, goods or services. The absence of an equivalent express qualification in article 2.2 did not justify treating money as “made available” whenever it was merely applied or expended in a way which benefited the listed person. The expression instead indicated a benefit placed at the listed person’s disposal.

4. The Treasury’s wider construction was disproportionate and oppressive. It would require employers, banks and others paying money to a person who lived with someone listed to obtain a licence whenever some of that money might be spent for the household’s common benefit. It would also subject an unlisted person’s own income and private expenditure to comprehensive official supervision.

5. The Committee distinguished ordinary household spending from indirect provision. A person who provides funds to someone living with a listed person, knowing or having reason to suspect that the recipient will place money or convertible assets at the listed person’s disposal, may commit the offence of indirectly making funds available. Cohabitation alone supplies no basis for assuming that this will occur, particularly where state benefits provide only basic living expenses.

6. Article 2a remained necessary on the narrower construction because it governs payments to listed persons themselves. Möllendorf and Möllendorf-Niehuus, [2007] EUECJ C-117/06, concerned a transfer of property to a listed person and did not determine whether payments to another person required licensing merely because some expenditure might benefit a listed household member.

1. House of Lords: In [2008] UKHL 26, unanimously referred to the Court of Justice a question concerning the interpretation of article 2.2 of Council Regulation (EC) No 881/2002.
2. Court of Appeal: The appeals came from [2007] EWCA Civ 173. The judgment does not state the Court of Appeal’s precise orders.