Wednesday, March 14, 2012

Tay Za

Ahead of tomorrow's newsletter about this week's CJEU case law, there's a question I wanted to ask. Or rather, there's a point I wanted to make that may or may not be correct. It concerns the Grand Chamber's judgement in Tay Za v. Council.

Just to quickly line up the ingredients, Pye Phyo Tay Za is the 20-something son of the guy that owns whatever parts of the Burmese economy that aren't owned by the military. That is how both Tay Za sr. and Tay Za jr. ended up on the 2008 asset freeze list for Burma. As required by previous ECJ judgements, the legal basis for this Regulation was art. 60 and 301 EC.
Article 60
1. If, in the cases envisaged in Article 301, action by the Community is deemed necessary, the Council may, in accordance with the procedure provided for in Article 301, take the necessary urgent measures on the movement of capital and on payments as regards the third countries concerned.

Article 301
Where it is provided, in a common position or in a joint action adopted according to the provisions of the Treaty on European Union relating to the common foreign and security policy, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries, the Council shall take the necessary urgent measures. The Council shall act by a qualified majority on a proposal from the Commission.
In 2010, the General Court (8th Chamber, Judge Dittrich rapporteur) decided that this asset freeze was lawful. Case T-181/08 Tay Za v. Council

This week, on appeal, the Grand Chamber of the Court of Justice of the European Union (Judge Cunha Rodrigues rapporteur), held that the asset freeze was ultra vires because the relative of a prominent business man is one step too far removed to qualify under art. 301. Specifically, while Tay Za sr. has close enough ties to be covered under "economic relations with [Burma]", his son does not.

While this may be inconvenient for the Council, from a legal point of view I have very little objection. Ever since my LL.M. thesis I have a strong emotional attachment to the doctrine of conferred powers (cf. also last week's Hungary v. Slovakia opinion), and I always welcome it when the Judges in Luxembourg remember that it exists. Let's just say it's a welcome change from their usual default stance of promoting European integration.

Instead, my question is this: Does this line of reasoning still apply under the Lisbon Treaty?

Post-Lisbon, the key section in the Treaties is art. 215(2) TFEU, which for the first time explicitly authorises the Union to freeze the assets of individuals. Until now, this was read as implied in the power to impose sanctions against countries, hence the initial confusion about whether or not this required the additional use of art. 308 EC as a legal basis. That was murky because that article, while extremely broad in its potential scope, was limited to "the operation of the Common Market" and "the Objectives of the Community". Ultimately, in Yusuf and Kadi, the ECJ said that art. 60 and 301 EC alone were the only permissible legal basis. The Court argued that asset freezes were useful in order to attain the objectives of the European Union, but not the objectives of the European Communities as they were listed in art. 3 EC.

In order to fix all that murkiness, Jean-Claude Piris gave us art. 215(2) TFEU:
1. Where a decision, adopted in accordance with Chapter 2 of Title V of the Treaty on European Union, provides for the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries, the Council, acting by a qualified majority on a joint proposal from the High Representative of the Union for Foreign Affairs and Security Policy and the Commission, shall adopt the necessary measures. It shall inform the European Parliament thereof.
2. Where a decision adopted in accordance with Chapter 2 of Title V of the Treaty on European Union so provides, the Council may adopt restrictive measures under the procedure referred to in paragraph 1 against natural or legal persons and groups or non-State entities.
3. The acts referred to in this Article shall include necessary provisions on legal safeguards.
Now, unless I'm crazy, this allows for asset freezes quite unrelated to any policy towards a country. Chapter 2 of Title V of the EU Treaty is simply the stuff dealing with CFSP. I guess that means they have to link it to foreign policy somehow, but otherwise I'm not sure what the limitations would be. If the Council decides that Tay Za jr.'s assets must be frozen in order to prevent his father from circumventing his own asset freeze, that seems like a perfectly good reason for the purposes of legal basis. If the Council doesn't like how Fox News influences the US Presidential elections, art. 215(2) TFEU gives them a legal basis for freezing Rupert Murdoch's European assets. Fun huh?

Now obviously there are many other limits, most importantly the protection of property rights under art. 1 P 1 and art. 17 CFREU, which translates to an obligation not to freeze people's assets without an adequate reason. And freezing someone's assets for the speech they lawfully engage in abroad is almost certainly not a good reason. (And that's after I deliberately chose an example that did not involve using the asset freeze as a punishment for a crime, which would be even more out of bounds.) Still, it is fun to ponder...

In the end, it looks like this Tay Za judgement is one of those temporary judgements that appear in the history of EU law from time to time, cases that have already lost their relevance by the time they are handed down, overtaken by subsequent developments in the law. Am I wrong?


Anonymous said...

Martin, I think I completely agree with you, but doubt whether the treaty legislator implied this intentionally. In your interpetation there would hardly be any limits to the use of the new sanction competence. We may indeed have to wait for a new (post-Lisbon) case.
Ramses A. Wessel

martinned said...

From a legal basis point of view, the limitation would be that it would have to be about foreign policy. (Or defence policy.)

Beyond that, the normal limitations identified in the other cases still apply. The Council may not arbitrarily infringe on someone's right to property, must give a statement of reason, hear the "defendant" whenever possible, etc.