Daley Birkett and Dini Sejko on "Challenging UN Security Council - and International Criminal Court-Requested Asset Freezes in Domestic Courts: Views from the United Kingdom and Italy"

 

Pix Credit: Libya Tribune

 
Daley Birkett (Macquarie Law School (Sydney, Australia)) and Dini Sejko (The Chinese University of Hong Kong, Faculty of Law, Centre for Comparative and Transnational Law; Tufts University - The Fletcher School of Law and Diplomacy) have recently posted a most interesting essay to the SSRN website: Challenging UN Security Council - and International Criminal Court-Requested Asset Freezes in Domestic Courts: Views from the United Kingdom and Italy.  Their abstract describes the essay in these terms:

This article analyses attempts by the Libyan Investment Authority (LIA), the sovereign wealth fund of Libya, to challenge the domestic implementation of asset freezing measures requested by the United Nations Security Council (UNSC) and the International Criminal Court (ICC) in the United Kingdom and Italy. The UNSC requested states to freeze the LIA’s assets in early 2011 before partially easing the restrictions imposed in September of the same year, while the ICC requested the freezing of assets belonging to the then Libyan leader, Muammar Gaddafi, and two further accused persons shortly thereafter. The article scrutinises how these measures were incorporated into the legal orders of the United Kingdom and Italy before analysing how the LIA has challenged these actions in the Italian courts and those of England and Wales. In so doing, it aims to demonstrate that domestic courts offer additional fora in which individuals (and entities) might seek to enforce the legal protections to which they are entitled when faced with their assets having been frozen by states at the request of the UNSC and/or ICC.

The essay provides an important contribution to the way that legal discourse is evolving to meet the sometimes conflicting aims of actors in transnational space where the object of the action are large aggregations of national wealth organized in the form of Sovereign Wealth Funds (SWFs).  In many cases these SWFs are themselves odd creatures--separately constituted domestically, managed either by national banks or by a private investment manager (or institution), the funds for which may or may not be domesticated, and the character of which may be in  the form of holdings in foreign private enterprises or in joint ventures (sometimes domestic and sometimes foreign) between the SWF and other SWFs, other states, or other private actors. The pots of wealth represented by SWFs are tempting targets--either by corrupt national leaders (or their families and cronies), or by international actors who see in the funds and te revenues they produce a source of leverage for the advancement of some form of policy objectives. (see, eg here, here). 

The essay is particularly important for the way it highlights and seeks to examine a number of important contradictions at the intersection of formal and informal international law, of the mediation between public and private law spaces, and most important, in the quite well hidden (hidden in the way 19th century Europeans hid psychiatrically challenged family members) contradiction between ideologies of human rights as international, non-waivable and incapable of measure and the realities of balancing human rights and sustainability consequences of public and private policy, the consequences of which never cut entirely in one direction.  This has been a problem that has haunted the debate about the naturalization of human rights (and now sustainability including climate change) within both the discourse and the risk (legal and business) of public and private actors.  I have written about this in the context of COVID measures and private enterprise complicity where actions produce both human rights benefits and harms (see eg HERE).   More specifically, the essay touches on several current challenges.

Pix Credit HERE

1. The reconciliation of sanctions regimes with human rights.  Here the issues tend to revolve around those that several generations ago were at the center of efforts to "civilize" war--that is the detachment of conflict and contests for control from their objects.  I have written about this is terms of the management and cultivation of productive forces (people, capital, resources) where distinctions are made between elites (who have the right and power to control) and the "masses (including the objects with which they interact to develop resources for the collective) who must remain protected as elites fight over their "ownership (The Fuhrer Principle of International Law).  Here one understands the issues as a form of transposition of principles of animal husbandry to non-violent battles over resources and those who control them. 

2. Ironically in the process it denies agency to any of the masses who appear reduced to a fragile and servile state. The role of popular control and of democracy (whether in its liberal democratic, development, or Marxist Leninist variants) underlies much of the analysis and its presumptions tend to shape the discourse and approach to sanctions and the mechanics of resource control at the international level. This, of course, produces  the problem of the reconciliation of international governance principles with external expectations among the community of nations (now international actors with clout).

3. The reconciliation of the trajectories toward legalization of politics and the politics of legalization especially as practiced within the organs of the United Nations and the ICC. The great conceit of the liberal democratic camp after the disintegration of the Soviet ideological-territorial empire (and now a rising conceit among the members of the new Communist International) is that they can exercise politics through law, or that they might use law to domesticate politics. But it is becoming clear that legalization of politics changes the form but not the character of politics. It changes its discursive forms and the institutional structures through which it is manifested but it remains political nonetheless.  In either case it is to the control of the manufacture, interpretation, and application of the underlying normative structures of law (its politics of principle and of the defining of collective taboo) that remains very much in play.  Thus one might starve Israeli settlements but one feels strongly for the individual ramifications of the US Cuban embargo.

4. The challenge of the contradiction of human rights (and sustainability) absolutism with the political use of human rights and sustainability to advance political (and normative) agendas has created another battleground where reconciliation is proving difficult.  I have mentioned a COVID related case--that of the use of drones to enhance health related safety protocols but which also have the potential of infringing on civil and political rights.  Consider that on " 27 July 2021, the Centre for Research on Multinational Corporations (SOMO) on behalf of 474 Myanmar-based civil society organisations submitted a complaint against Telenor ASA to the Norwegian NCP. The complaint contends that Telenor’s sale of its Myanmar business to the Lebanese company M1 Group fails to meet the standards of responsible disengagement set out in the OECD Guidelines" (OECD Watch).  Here the human rights harms of complicity with the political structures of Myanmar appear to require balancing with the consequences of harm for enterprises that choose to protect themselves against such potential by exiting. 

5. It is not the balancing but the recognition of that reality that drives not just ordinary course  decisions but also those that touch on the existence and operation of sovereign mechanisms, like SWFs, that serve both as instruments of (eventually) unpopular (and therefor discredited) leadership collectives (recall that the elites who condemned him and his adherents once dined happily with him) and as a vehicle for the welfare of important segments of the local population. Here the collateral effects of targeted sanctions may not be as targeted as suits the tastes of all elites. For a discussion in the Libyan context see HERE.

6. More important, the issues here through legalization back in the face of those who would bend legalization to suit their political or normative objectives (and int he process weaken the integrity of law as a system, and corrupt politics). One sees this, of course, in the easy way in which human rights advocates would use a fast and loose interpretation of corporate law principles to undermine the principles and laws of asset partitioning in the legal aggregation of productive forces (labor and capital) to suit their political aims (not to suggest that the aims are unworthy, but rather that there is an ironical use f legality to undermine the legality necessary to further their aims) by effectively ignoring principles of legal personality to project (usually domestic) law that is particularly appealing through the ownership and contract relations that constitute a supply chain. In this case the collapse of the legal distinctions between a group constituting a ruling family no longer in favor and the legal entities  that form part of the government apparatus serves as a point of departure for such consideration.  In the SWF context this is particularly important given the great liberal democratic project of the Great Recission of 2007 to re-imagine the SWF as an autonomous actor and thus a legitimate institutional investor authorized to project domestic public funds into other states and markets (subject to its core principles of course but that was never the issue in the context of sanctions).

7. Here of course the tensions are intra-legal and normative. The constitution of SWFs are both a matter of law (usually internal) and of a normative construct that has found expression in instruments like the Santiago principles. Sanctions regimes must either conform to these or threaten their viability.  Libya is an easy case--but the opening created thereby may make it easier to disregard law in the pursuit of other legal objectives in ways that might eventually undermine further the edifice of law on which this complex of actions is built and justified.  But again, the issue ultimately centers on the mechanisms for the control and management of assets that"belong" to public collectives--ad that contest for control invokes a polycentric set of legal forms in the service of the political aims of the actors  for whose benefit they are invoked. The sanctions actions against the Libyan SWF thus sits at the crossroads of human rights, sanctions, international and private law.

8. The SWF provides an immensely useful structure within which it is possible to examine the issue of sanctions targeting closes the loop between the legalization of international politics, the issue of human rights absolutism and balancing, the role of private law and markets, international criminality regimes, individual and institutional agency, and the structures through which these trajectories are applied (as well as the discursive forms in which such reconciliation will be framed). The rationalization through national legal orders of host states (the courts of the UK and Italy) make for fascinating reading. As the authors' nicely conclude: "In so doing, we have sought to demonstrate that the use of national courts as fora in which the execution of such measures can be contested might be an effective, albeit cumbersome, strategy for the SWF to embrace in order to reclaim full control over the assets it was entrusted to administer on behalf of the Libyan people. The case for the adoption of such a strategy is made even stronger when considered in view of the difficulties encountered by the LIA at the UN level when seeking to restore its access to frozen accounts in order to act to prevent further losses to assets under its management." (Birkett and Sejko, p. 23). In the process a more interesting public polycentric transnational space has been created, but one in which there appears to be little normative coherence yet. Within it human rights, sustainability, sanctions, corruption, financial regulation, markets, national security, humanitarian legal regimes will  continue to engage and in the process shape the way that reality on the ground is managed and in the process then perhaps moving either toward greater coordination or fracture of these systems. In the process the authors provide an important window on policy and legal incoherence in the spaces where markets and public power collide.

Full contribution forthcoming in Israel Law Review, published by Cambridge University Press Challenging UN Security Council- and International Criminal Court-Requested Asset Freezes

in Domestic Courts: Views from the United Kingdom and Italy

Daley J. Birkett and Dini Sejko*

This article analyses attempts by the Libyan Investment Authority (LIA), the sovereign wealth fund of Libya, to challenge the domestic implementation of asset freezing measures requested by the United Nations Security Council (UNSC) and the International Criminal Court (ICC) in the United Kingdom and Italy. The UNSC requested states to freeze the LIA’s assets in early 2011 before partially easing the restrictions imposed in September of the same year, while the ICC requested the freezing of assets belonging to the then Libyan leader, Muammar Gaddafi, and two further accused persons shortly thereafter. The article scrutinises how these measures were incorporated into the legal orders of the United Kingdom and Italy before analysing how the LIA has challenged these actions in the Italian courts and those of England and Wales. In so doing, it aims to demonstrate that domestic courts offer additional fora in which individuals (and entities) might seek to enforce the legal protections to which they are entitled when faced with their assets having been frozen by states at the request of the UNSC and/or ICC.

Keywords: United Nations Security Council targeted sanctions, International Criminal Court, asset freeze, sovereign wealth funds, Libya.

1. INTRODUCTION

In early 2011, responding to the outbreak of the Libyan civil war, the United Nations Security Council (UNSC) requested UN member states to freeze the assets of Muammar Gaddafi and five members of his immediate family.1 Less than one month later, the UNSC adopted further measures, expanding the freeze to cover the assets of the Libyan Investment Authority (LIA), Libya’s sovereign wealth fund (SWF), among other individuals and entities.2 The freeze was,

* Dr Daley J Birkett is Senior Lecturer, Macquarie Law School, Macquarie University, Australia and Research Fellow, War Reparations Centre, Amsterdam Center for International Law, University of Amsterdam, Netherlands; daley.birkett@mq.edu.au. Dr Dini Sejko is Research Associate, Centre for Comparative and Transnational Law, Faculty of Law, The Chinese University of Hong Kong, Hong Kong SAR and Research Affiliate, SoverigNet, The Fletcher School, Tufts University, USA; dinisejko@cuhk.edu.hk. The authors are grateful to Annalisa Ciampi, the anonymous peer reviewers, and Yaël Ronen and the Israel Law Review editorial team for their feedback on earlier drafts of this article.

1 UNSC Res 1970 (26 February 2011), UN Doc S/RES/1970, para 17. 2 UNSC Res 1973 (17 March 2011), UN Doc S/RES/1973.

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Electronic copy available at: https://ssrn.com/abstract=3894724

Full contribution forthcoming in Israel Law Review, published by Cambridge University Press

in turn, implemented in the domestic legal orders of multiple states in which the SWF and its subsidiaries had a significant presence. These included, inter alia, the United Kingdom (UK) and Italy. The European Union (EU) also implemented the measures at a supranational level. In September 2011, the UNSC passed measures to partially relax the freeze against the SWF.3 In 2012, Italy froze assets allegedly belonging to Gaddafi and two others at the request of the International Criminal Court (ICC), to whom the UNSC had referred the situation in Libya in the same resolution as that in which it decided that states were to freeze the assets of the then Libyan leader.4 In fact, however, these assets belonged to the LIA and its subsidiary body, the Libyan Arab Foreign Investment Company (LAFICO).

This article explores how the LIA has sought to contest the application of the foregoing restrictions in the domestic courts of England and Wales and Italy, two jurisdictions in which the fund had made sizeable investments at the time the asset freezing measures were imposed (and in which it continues to hold substantial financial resources). In so doing, we aim to show that national courts have been sympathetic to the claims brought by the LIA, interpreting the easing of the measures in their favour. The novelty of the article therefore not only lies in our examination of asset freezing measures directed at an entity (as opposed to an individual), but also in the comparative perspective adopted in respect of both the domestic jurisdictions (i.e., England and Wales and Italy) and legal regimes (i.e., UNSC and ICC) under scrutiny.

The article is divided into four sections. First, we offer a brief introduction to the LIA, focusing particularly on how it was established to serve the people of Libya and its investment strategy in the UK and Italy. We also consider the events in Libya that led to the UNSC- and ICC-requested asset freezing measures (Section 2). We then examine the general question of how UNSC-requested asset freezing measures are given supranational and domestic effect in the EU and UK legal orders, respectively, before reviewing the legal framework that governs the satisfaction of ICC-issued cooperation requests in Italy. Additionally, we explore how the competent authorities in the UK and Italy (and, again only with respect to the former, the EU) sought to give domestic (and supranational) effect to the measures (Section 3). Our focus then shifts to how the LIA has attempted to contest the asset freeze at the UN, before the courts of England and Wales, and in the Italian court system, demonstrating that success has been more forthcoming at the national than at the international level (Section 4). In the final part of the article, we assert that domestic courts might, in certain cases, serve as additional fora in which individuals (and entities) might contest asset freezing measures imposed against them by the responsible national authorities pursuant to a request by the UNSC and/or ICC (Section 5).