Commercial Law International

By: Ainsley Brown

The safety of the people is not the supreme law

While terrorism, terror financing and constitutional principles such as the rule of law and Parliamentary supremacy are not the usual subjects covered here at Commercial Law International, this seeming break from tradition is in fact not such a stretch.

As our moniker indicates Commercial Awareness is Global – it is important to note and as will soon become clear, coverage of this case in no way departs from this.

This landmark ruling is instructive for the “normal” subjects covered on this blog because it illustrates the legal limits imposed on the state – read the government – as it pertains to its ability to interfere with the assets of an individual (natural or juridical). These limits are even justified, as their Lordships have ruled, when combating the scourge of international terrorism. As the Deputy President of the Court, Lord Hope of Craighead, put it: “Even in the face of the threat of international terrorism, the safety of the peoples is not the supreme law.” In other words the government of the day only has as much power as Parliament has allowed it to have; the will of Parliament being express of course in the laws its passes.

The offending powers struck down by their Lordships are the Terrorism (United Nations Measures) Order 2006 and the Al-Qaeda and Taleban (United Measures) Order 2006. The Orders were issued by the then Chancellor of the Exchequer and now Prime Minister Gordon Brown in response to United Nations (UN) Resolutions passed in response to the September 11th attracts. The Resolutions sought global co-operation on combating the financing of international terrorism.

Unlike in many other countries the United Kingdom under its UN obligations did not pass legislation in order to give effect to the Resolutions. Instead, the Chancellor issued these Orders, empowering Her Majesty’s Treasury (Treasury) to seize the assets of suspected terrorist, Al-Qaeda and or Taleban members or supporters. The seizures could take place on mere suspicion without an hearing and would not be under scrutiny of the courts through judicial review.

The case was the first to be heard in the newly minted Supreme Court when it opened last year. The appeal was brought by five men whom successfully argued their case in the High Court that the Orders were unfair and breached their fundamental right guaranteed by the laws of Britain; however, they were later over turned by the Court of Appeal.

The question before their Lordships though a simple one was non the less a profound one. And it was this when Parliament empowered the Treasury to make orders did it in turn give the Treasury the power to “interfere so profoundly with individuals fundamental rights without parliamentary scrutiny[?]”

With word such as “oppressive,” “paralysing” and “draconian” peppering the decision, their Lordships answered the question with a resounding NO!

In a nation such as Britain, with a “unwritten constitution” it must always be remembered that Parliament is supreme and it is only through Parliament that the government has the exercise power. Moreover, when such power involves the interference with an individual’s basic rights such authorization cannot be implied but must be explicit. In any democratic-capitalistic society access to the courts and property rights are sacrosanct. As Lord Phillips of Worth Matravers, the President of the court put it: “Access to the court to protect one’s rights is the foundation of the rule of law.” And without the rule of law there can be no liberal-democracy.

For those that would say that this ruling is just another example of judges legislating from the bench in breach of Parliamentary supremacy, Lord Philips has a stern rebuke. His Lordship countenanced with “on the contrary it upholds the supremacy of Parliament in deciding whether or not measures should be imposed that affect the fundamental rights of those in this country” without explicit grant by Parliament.

It is important to not that Supreme Court are not saying that these laws are in and of themselves illegal – not at all. However, what their Lordships are saying is that if the government of the day wants exercise such extensive powers they much first seek and then be granted Parliamentary approval. Lord Hope put it best: “If the Executive 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 form Parliament.”

In response to the judgment the Gordon Brown’s is rushing through Parliament the Terrorism Asset-Freeze (Temporary) Provision Bill which is expected to have retrospective effect and by and large mirror the quashed Orders. If all goes to plan the Bill will become law some time this week.

By: Ainsley Brown

The shareholders of Northern Rock, lead by hedge funds SRM Global and RAB Capital, have lost their judicial review appeal at the Court of Appeal this week.

This ruling should end the saga of the shareholders´ attempting to use human rights law in order to gain – to their mind – just compensation from the nationalization of the Bank by the UK government.  Well, not exactly, for now it’s only a maybe.

The shareholders, well at least it would seem SRM Global for now, intends to carry on the fight. They intend to seek permission to appeal to the House of Lords – oh sorry, that is the newly minted Supreme Court – or ultimately if that fails to the European Court of Human Rights (ECHR).

So the saga continues, there could be at least two more chapters to come.

By: Ainsley Brown

This is an update to Shareholders Fail in Human Rights Cases Against UK Government.

The Northern Rock shareholder group, lead by the Hedge Funds SRM Global and RAB Capital, last week launched their appeal of the decision reach in the High Court about the UK government’s nationalization compensations scheme.  The appeal comes in the form of judicial review and means that the group is not challenging the legality of the government´s right to nationalize the bank. However, they do object to the way in which this right was exercised.

In the High Court: What in fact the shareholders were seeking was a declaration that the Government’s compensation scheme upon nationalization was incompatible with the human rights principles that guide government expropriation. That is to say that the government ought to pay compensation; in reasonable amount of time;  and is to be as close as possible, taking account of the public interest, to the full and fair value of the property. Considering that the shareholders stand only to receive 5p a share, instead of the £3 – £4 per share based on their valuation of the company as a going concern, the above looks like a very sound argument.

However, Government lawyers countered by arguing that since Northern Rock received substantial government assistance, without which it would have gone into liquidation, the shares could not be valuated as if it were still a going concern. Instead, Northern rock would be valued as if it had indeed gone in to liquidation.

Both sides continue their respective arguments. However Lord Pannick, QC, acting for the group further elaborated on the group´s position in his opening. Lord Pannick made what I believe to be a brilliant attack on the government’s position by pointed out that the High Court in coming to its decision had failed to have any regard for the fact that “the government had repeatedly emphasized that Northern Rock was at all times a solvent business with a strong asset base. ” This point cannot be over emphasized. It is an important one because since the bank received an injection of funds to make it more liquid from the Bank of England as a bank of last resort – such funding by the way is only available to banks that the government believes are  sound – how could it be that receiving this funding makes the bank unsound?

A very interesting argument and it will be even more interesting to see how the government counters.