Case T-306/01

Ahmed Ali Yusuf and Al Barakaat International Foundation

v

Council of the European Union and Commission of the European Communities

(Common foreign and security policy – Restrictive measures taken against persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Competence of the Community – Freezing of funds – Fundamental rights – Jus cogens – Review by the Court – Action for annulment)

Summary of the Judgment

1. Procedure – Regulation replacing the contested regulation during the proceedings – New factor – Extension of the original claims and pleas in law

2. Acts of the institutions – Choice of legal basis – Regulation imposing on certain persons and entities sanctions intended to interrupt or reduce economic relations with a third country – Articles 60 EC and 301 EC – Whether permissible

(Arts 60 EC and 301 EC; Council Regulation No 467/2001)

3. Acts of the institutions – Choice of legal basis – Regulation imposing sanctions on certain persons and entities in no way connected with a third State – Articles 60 EC, 301 EC and 308 EC in combination – Whether permissible

(Arts 60 EC, 301 EC and 308 EC; Art. 3 EU; Council Regulation No 881/2002)

4. Free movement of capital and freedom to make payments – Restrictions – National measures relating to the fight against international terrorism and the imposition for that purpose of economic and financial sanctions on individuals in no way connected with a third State –Whether permissible – Conditions

(Art. 58 EC)

5. Acts of the institutions – Legal nature – Regulation or decision – Distinction – Criteria – Concept of addressee of an act – Object of an act – Immaterial criterion

(Art. 230 EC, fourth para., and Art. 249 EC; Council Regulation No 881/2002)

6. Public international law – Charter of the United Nations – Decisions of the Security Council – Obligations resulting therefrom for the Member States – Primacy over domestic law and Community law – Obligations under that Charter – Binding on the Community

7. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Indirect review of the lawfulness of decisions of the Security Council – Review in light of Community law – Excluded – Review in light of jus cogens – Whether permissible

(Arts 5 EC, 10 EC, 230 EC, 297 EC, 307, first para., EC; Art. 5 EU; Council Regulation No 881/2002)

8. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Fundamental rights of the persons concerned – Freezing of funds – Review in light of jus cogens – Right to property of the persons concerned – Principle of proportionality – No breach

(Council Regulation No 881/2002, as amended by Council Regulation No 561/2003)

9. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Right of the persons concerned to be heard – No breach

(Council Regulation No 881/2002)

10. Actions for annulment – Community act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Judicial review – Limits – Lacuna in the judicial protection of the applicants – Review in light of jus cogens – Right to an effective judicial remedy – No breach

(Art. 226 EC; Council Regulation No 881/2002)

1. In an action for annulment, when a regulation of direct and individual concern to a person is replaced, during the proceedings, by another regulation having the same subject-matter, the latter must be considered a new factor allowing the applicant to adapt its pleas in law and claims for relief. It would indeed be contrary to the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application. Moreover, it would be inequitable if the Commission were able, in order to counter criticisms of a regulation contained in an application made to the Community judicature, to amend the contested regulation or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original claims and pleas in law to the later regulation or of submitting supplementary claims and pleas in law directed against that regulation.

(see paras 72-73)

2. The Council was competent to adopt Regulation No 467/2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, on the basis of Articles 60 EC and 301 EC.

Nothing in the wording of those provisions makes it possible to exclude the adoption of restrictive measures affecting specifically the rulers of a third country, rather than the country as such, and also the individuals and entities associated with those rulers or directly or indirectly controlled by them, wherever they may be, in so far as such measures actually seek to reduce, in part or completely, economic relations with one or more third countries. That interpretation, which is not contrary to the letter of Article 60 EC or 301 EC, is justified both by considerations of effectiveness and by humanitarian concerns.

The measures laid down by Regulation No 467/2001 were intended to interrupt or reduce economic relations with Afghanistan, in connection with the international community’s fight against international terrorism and, more specifically, against Usama bin Laden and the Al-Qaeda network.

What is more, those measures, intended to exert effective pressure on the rulers of the country concerned, while restricting as far as possible the impact of those measures on the population of that country, in particular by confining their personal ambit to a certain number of individuals referred to by name, were in keeping with the principle of proportionality, according to which sanctions may not go beyond what is appropriate and necessary to the attainment of the objective pursued by the Community legislation imposing them.

(see paras 108, 112, 115-116, 121-122, 124)

3. Articles 60 EC and 301 EC do not constitute in themselves a sufficient legal basis on which to adopt a Community regulation concerning the fight against international terrorism and the imposition to that end of economic and financial sanctions, such as the freezing of funds, on individuals, when there is no link whatsoever between those individuals and a non-member country.

Likewise, Article 308 EC does not, taken in isolation, constitute of itself a sufficient legal basis for adoption of such a regulation. Although no provision of the Treaty gives the Community institutions the necessary power to impose sanctions on individuals or entities in no way linked to a non-member country, the fight against international terrorism, more particularly the imposition of economic and financial sanctions, in respect of individuals and entities suspected of contributing to the funding of terrorism, cannot be made to refer to one of the objects which Articles 2 EC and 3 EC expressly entrust to the Community. Furthermore, nowhere in the preamble to the EC Treaty is it stated that that act pursues a wider object of safeguarding international peace and security. The latter falls exclusively within the objects of the Treaty on European Union. While, admittedly, it may be asserted that that objective of the Union must inspire action by the Community in the sphere of its own competence, it is not however a sufficient basis for the adoption of measures under Article 308 EC. It appears impossible to interpret Article 308 EC as giving the institutions general authority to use that provision as a basis with a view to attaining one of the objectives of the EU Treaty.

Nevertheless, the Council was competent to adopt Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, which sets in motion in the Community the economic and financial sanctions provided for by Common Position 2002/402, in the absence of any link with the territory or rulers of a non-member country, on the joint basis of Articles 60 EC, 301 EC and 308 EC.

In the circumstances, account has to be taken of the bridge explicitly established at the time of the Maastricht revision between Community actions imposing economic sanctions under Articles 60 EC and 301 EC and the objectives of the Treaty on European Union in the sphere of external relations. On this score, it must be held that Articles 60 EC and 301 EC are quite special provisions of the EC Treaty, in that they expressly contemplate situations in which action by the Community may be proved to be necessary in order to achieve not one of the objects of the Community as fixed by the EC Treaty but rather one of the objectives specifically assigned to the Union by Article 2 of the Treaty on European Union, viz., the implementation of a common foreign and security policy. So, when the powers to impose economic and financial sanctions provided for by Articles 60 EC and 301 EC, namely, the interruption or reduction of economic relations with one or more third countries, especially in respect of movements of capital and payments, may be proved insufficient to allow the institutions to attain the objective of the CFSP, recourse to the additional legal basis of Article 308 EC is justified in the specific context of those two articles for the sake of the requirement of consistency laid down in Article 3 EU. Thus, recourse to the cumulative legal bases of Articles 60 EC, 301 EC and 308 EC makes it possible to attain, in the sphere of economic and financial sanctions, the objective pursued under the CFSP by the Union and its Member States, as it is expressed in a common position or joint action, despite the lack of any express attribution to the Community of powers to impose economic and financial sanctions on individuals or entities with no sufficient connection to a given third country.

(see paras 132-133, 136, 152, 154-157, 159-160, 163-166, 170)

4. The Community has no express power to impose restrictions on the movement of capital and payments. On the other hand, Article 58 EC allows the Member States to adopt measures having such an effect to the extent to which this is, and remains, justified in order to achieve the objectives set out in the article, in particular, on grounds of public policy or public security. The concept of public security covering both the State’s internal and external security, the Member States are therefore as a rule entitled to adopt under Article 58(1)(b) EC measures relating to the fight against international terrorism and the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals where no connection whatsoever has been established with the territory or the governing regime of a third State. In so far as those measures are in keeping with Article 58(3) EC and do not go beyond what is necessary in order to attain the objective pursued, they are compatible with the rules on free movement of capital and payments and with the rules on free competition laid down by the Treaty.

(see para. 146)

5. Article 249 EC, in that it provides that a regulation has general application, whereas a decision is binding only upon those to whom it is addressed, contemplates only the concept of the addressee of an act. By contrast, the object of an act is immaterial as a criterion for its classification as a regulation or a decision.

Consequently, Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban has general application, since it prohibits anyone to make available funds or economic resources to certain persons. The fact that those persons are expressly named in Annex I to the regulation, so that they appear to be directly and individually concerned by it, within the meaning of the fourth paragraph of Article 230 EC, in no way affects the general nature of that prohibition.

(see paras 186-187)

6. From the standpoint of international law, the obligations of the Member States of the United Nations under the Charter of the United Nations clearly prevail over every other obligation of domestic law or of international treaty law including, for those of them that are members of the Council of Europe, their obligations under the European Convention for the Protection of Human Rights and Fundamental Freedoms and, for those that are also members of the Community, their obligations under the EC Treaty. That primacy extends to decisions contained in a resolution of the Security Council, in accordance with Article 25 of the Charter of the United Nations, under which the Members of the United Nations are bound to accept and carry out the decisions of the Security Council.

Although it is not a member of the United Nations, the Community must be considered to be bound by the obligations under the Charter of the United Nations in the same way as its Member States, by virtue of the Treaty establishing it. First, it may not infringe the obligations imposed on its Member States by that charter or impede their performance. Second, in the exercise of its powers it is bound, by the very Treaty by which it was established, to adopt all the measures necessary to enable its Member States to fulfil those obligations.

(see paras 231, 234, 242-243, 254)

7. Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, adopted in the light of Common Position 2002/402, constitutes the implementation at Community level of the obligation placed on the Member States of the Community, as Members of the United Nations, to give effect, if appropriate by means of a Community act, to the sanctions against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, which have been decided and later strengthened by several resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations.

In that situation, the institutions acted under circumscribed powers, with the result that they had no autonomous discretion. In particular, they could neither directly alter the content of the resolutions at issue nor set up any mechanism capable of giving rise to such alteration. Any review of the internal lawfulness of Regulation 881/2002 would therefore imply that the Court is to consider, indirectly, the lawfulness of those resolutions.

In light of the principle of the primacy of UN law over Community law, the claim that the Court of First Instance has jurisdiction to review indirectly the lawfulness of decisions of the Security Council according to the standard of protection of fundamental rights as recognised by the Community legal order, cannot be justified either on the basis of international law or on the basis of Community law. First, such jurisdiction would be incompatible with the undertakings of the Member States under the Charter of the United Nations, especially Articles 25, 48 and 103 thereof, and also with Article 27 of the Vienna Convention on the Law of Treaties. Second, it would be contrary to provisions both of the EC Treaty, especially Articles 5 EC, 10 EC, 297 EC and the first paragraph of Article 307 EC, and of the Treaty on European Union, in particular Article 5 EU. It would, what is more, be incompatible with the principle that the Community’s powers and, therefore, those of the Court of First Instance, must be exercised in compliance with international law.

Resolutions of the Security Council, adopted under Chapter VII of the Charter of the United Nations, therefore fall, in principle, outside the ambit of the Court’s judicial review and the Court has no authority to call in question, even indirectly, their lawfulness in the light of Community law. On the contrary, the Court is bound, so far as possible, to interpret and apply that law in a manner compatible with the obligations of the Member States under the Charter of the United Nations.

None the less, the Court is empowered to check, indirectly, the lawfulness of such resolutions with regard to jus cogens, understood as a body of higher rules of public international law binding on all subjects of international law, including the bodies of the United Nations, and from which no derogation is possible.

(see paras 264-266, 272-274, 276-277)

8. The freezing of funds provided for by Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, as amended by Regulation No 561/2003, and, indirectly, by the resolutions of the Security Council put into effect by those regulations, does not infringe the fundamental rights of the persons concerned, measured by the standard of universal protection of the fundamental rights of the human person covered by jus cogens.

In that regard, the express provision of possible exemptions and derogations attaching to the freezing of the funds of the persons in the Sanctions Committee’s list clearly shows that it is neither the purpose nor the effect of that measure to submit those persons to inhuman or degrading treatment.

In addition, in so far as respect for the right to property must be regarded as forming part of the mandatory rules of general international law, it is only an arbitrary deprivation of that right that might, in any case, be regarded as contrary to jus cogens. Such is not the case here.

In the first place, the freezing of their funds constitutes an aspect of the sanctions decided by the Security Council against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, having regard to the importance of the fight against international terrorism and the legitimacy of the protection of the United Nations against the actions of terrorist organisations. In the second place, freezing of funds is a precautionary measure which, unlike confiscation, does not affect the very substance of the right of the persons concerned to property in their financial assets but only the use thereof. In the third place, the resolutions of the Security Council provide for a means of reviewing, after certain periods, the overall system of sanctions. Finally, the legislation at issue settles a procedure enabling the persons concerned to present their case at any time to the Sanctions Committee for review, through the Member State of their nationality or that of their residence.

Having regard to those facts, the freezing of the funds of persons and entities suspected, on the basis of information communicated by the Member States of the United Nations and checked by the Security Council, of being linked to Usama bin Laden, the Al-Qaeda network or the Taliban and of having participated in the financing, planning, preparation or perpetration of terrorist acts cannot be held to constitute an arbitrary, inappropriate or disproportionate interference with the fundamental rights of the persons concerned.

(see paras 289, 291, 293-296, 299-302)

9. The right of the persons concerned to be heard has been infringed neither by the Sanctions Committee before their inclusion in the list of persons whose funds must be frozen pursuant to the Security Council’s resolutions at issue nor by the Community institutions before the adoption of Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban.

First, the right of the persons concerned to be heard by the Sanctions Committee before their inclusion in the list of persons suspected of contributing to the funding of terrorism whose funds must be frozen pursuant to the resolutions of the Security Council in question is not provided for by those resolutions, and it appears that no mandatory rule of public law requires such a prior hearing. In particular, when what is at issue is a temporary precautionary measure restricting the availability of the property of the persons concerned, observance of their fundamental rights does not require the facts and evidence adduced against them to be communicated to them, once the Security Council or its Sanctions Committee is of the view that there are grounds concerning the international community’s security that militate against it.

Second, the Community institutions were not obliged to hear the persons concerned before the contested regulation was adopted either, because they had no discretion in the transposition into the Community legal order of resolutions of the Security Council or decisions of the Sanctions Committee, with the result that to hear the person concerned could not in any case lead the institution to review its position.

(see paras 306-307, 320, 328-329, 331)

10. In dealing with an action for annulment directed at Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, the Court carries out a complete review of the lawfulness of that regulation with regard to observance by the Community institutions of the rules of jurisdiction and the rules of external lawfulness and the essential procedural requirements which bind their actions. The Court also reviews the lawfulness of that regulation having regard to the Security Council’s regulations which that act is supposed to put into effect, in particular from the viewpoints of procedural and substantive appropriateness, internal consistency and whether the regulation is proportionate to the resolutions. What is more, it reviews the lawfulness of that regulation and, indirectly, the lawfulness of the resolutions of the Security Council at issue, in the light of the higher rules of international law falling within the ambit of jus cogens, in particular the mandatory prescriptions concerning the universal protection of the rights of the human person.

On the other hand, it is not for the Court to review indirectly whether the Security Council’s resolutions in question are themselves compatible with fundamental rights as protected by the Community legal order. Nor does it fall to the Court to verify that there has been no error of assessment of the facts and evidence relied on by the Security Council in support of the measures it has taken or, subject to the limited extent of the review carried out in light of jus cogens, to check indirectly the appropriateness and proportionality of those measures. To that extent, there is no judicial remedy available to the applicants, the Security Council not having thought it advisable to establish an independent international court responsible for ruling, in law and on the facts, in actions brought against individual decisions taken by the Sanctions Committee.

However, that lacuna in the judicial protection available to the applicants is not in itself contrary to jus cogens. As a matter of fact, the right of access to the courts is not absolute. The limitation of the applicants’ right of access to a court, as a result of the immunity from jurisdiction enjoyed as a rule by resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations, is inherent in that right as it is guaranteed by jus cogens. The applicants’ interest in having a court hear their case on its merits is not enough to outweigh the essential public interest in the maintenance of international peace and security in the face of a threat clearly identified by the Security Council in accordance with the Charter of the United Nations. Consequently, there has been no breach of the applicants’ right to an effective judicial remedy.

(see paras 334-335, 337-344, 346)

JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition)

21 September 2005( )

(Common foreign and security policy – Restrictive measures taken against persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Competence of the Community – Freezing of funds –Fundamental rights – Jus cogens – Review by the Court – Action for annulment)

In Case T-306/01,

Ahmed Ali Yusuf, residing at Spånga (Sweden),

Al Barakaat International Foundation, established at Spånga,

represented by L. Silbersky and T. Olsson, lawyers,

applicants,

v

Council of the European Union, represented by M. Vitsentzatos, I. Rådestad, E. Karlsson and M. Bishop, acting as Agents,

and

Commission of the European Communities, represented by A. Van Solinge, J. Enegren and C. Brown, acting as Agents, with an address for service in Luxembourg,

defendants,

supported by

United Kingdom of Great Britain and Northern Ireland, originally represented by J. Collins, and then by R. Caudwell, acting as Agents, and by S. Moore, Barrister, with an address for service in Luxembourg,

intervener,

APPLICATION, originally, for annulment of, first, Council Regulation (EC) No 467/2001 of 6 March 2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation (EC) No 337/2000 (OJ 2001 L 67, p. 1) and, second, Commission Regulation (EC) No 2199/2001 of 12 November 2001 amending, for the fourth time, Regulation No 467/2001 (OJ 2001 L 295, p. 16) and, subsequently, an application for annulment of Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Regulation No 467/2001 (OJ 2002 L 139, p. 9),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),

composed of N.J. Forwood, President, J. Pirrung, P. Mengozzi, A.W.H. Meij and M. Vilaras, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 14 October 2003,

gives the following

Judgment

Legal framework

1 Under Article 24(1) of the Charter of the United Nations, signed at San Francisco (United States of America) on 26 June 1945, the members of the United Nations ‘confer on the Security Council primary responsibility for the maintenance of international peace and security, and agree that in carrying out its duties under this responsibility the Security Council acts on their behalf’.

2 Under Article 25 of the Charter of the United Nations, ‘[t]he Members of the [UN] agree to accept and carry out the decisions of the Security Council in accordance with the present Charter’.

3 In accordance with Article 48(2) of the Charter of the United Nations, the decisions of the Security Council for the maintenance of international peace and security ‘shall be carried out by the Members of the United Nations directly and through their action in the appropriate international agencies of which they are members’.

4 According to Article 103 of the Charter of the United Nations, ‘[i]n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail.’

5 In accordance with Article 11(1) EU:

‘The Union shall define and implement a common foreign and security policy covering all areas of foreign and security policy, the objectives of which shall be:

– to safeguard the common values, fundamental interests, independence and integrity of the Union in conformity with the principles of the United Nations Charter,

– to strengthen the security of the Union in all ways,

– to preserve peace and strengthen international security, in accordance with the principles of the United Nations Charter …

– …’

6 Under Article 301 EC:

‘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.’

7 Article 60(1) EC provides:

‘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.’

8 In accordance with the first paragraph of Article 307 EC:

‘The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this Treaty.’

9 Lastly, Article 308 EC provides:

‘If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community, and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.’

Background to the dispute

10 On 15 October 1999 the Security Council of the United Nations (‘the Security Council’) adopted Resolution 1267 (1999), in which it inter alia condemned the fact that Afghan territory continued to be used for the sheltering and training of terrorists and planning of terrorist acts, reaffirmed its conviction that the suppression of international terrorism was essential for the maintenance of international peace and security, deplored the fact that the Taliban continued to provide safe haven to Usama bin Laden and to allow him and others associated with him to operate a network of terrorist training camps from territory held by the Taliban and to use Afghanistan as a base from which to sponsor international terrorist operations. In the second paragraph of the resolution the Security Council demanded that the Taliban should without further delay turn Usama bin Laden over to the appropriate authorities. In order to ensure compliance with that demand, paragraph 4(b) of Resolution 1267 (1999) provides that all the States must, in particular, ‘freeze funds and other financial resources, including funds derived or generated from property owned or controlled directly or indirectly by the Taliban, or by any undertaking owned or controlled by the Taliban, as designated by the Committee established by paragraph 6 below, and ensure that neither they nor any other funds or financial resources so designated are made available, by their nationals or by any persons within their territory, to or for the benefit of the Taliban or any undertaking owned or controlled, directly or indirectly, by the Taliban, except as may be authorised by the Committee on a case-by-case basis on the grounds of humanitarian need.’

11 In paragraph 6 of Resolution 1267 (1999) the Security Council decided to establish, in accordance with rule 28 of its provisional rules of procedure, a committee of the Security Council composed of all its members (‘the Sanctions Committee’), responsible in particular for ensuring that the States implement the measures imposed by paragraph 4, designating the funds or other financial resources referred to in paragraph 4 and considering requests for exemptions from the measures imposed by paragraph 4.

12 Taking the view that action by the Community was necessary in order to implement that resolution, on 15 November 1999 the Council adopted Common Position 1999/727/CFSP concerning restrictive measures against the Taliban (OJ 1999 L 294, p. 1). Article 2 of that Common Position prescribes the freezing of funds and other financial resources held abroad by the Taliban under the conditions set out in Security Council Resolution 1267 (1999).

13 On 14 February 2000, on the basis of Articles 60 EC and 301 EC, the Council adopted Regulation (EC) No 337/2000 concerning a flight ban and a freeze of funds and other financial resources in respect of the Taliban of Afghanistan (OJ 2000 L 43, p. 1).

14 On 19 December 2000 the Security Council adopted Resolution 1333 (2000), demanding, inter alia, that the Taliban should comply with Resolution 1267 (1999), and, in particular, that they should cease to provide sanctuary and training for international terrorists and their organisations and turn Usama bin Laden over to appropriate authorities to be brought to justice. The Security Council decided in particular to strengthen the flight ban and freezing of funds imposed under Resolution 1267 (1999). Accordingly paragraph 8(c) of Resolution 1333 (2000) provides that the States are, inter alia, ‘[t]o freeze without delay funds and other financial assets of Usama bin Laden and individuals and entities associated with him as designated by the [Sanctions Committee], including those in the Al-Qaeda organisation, and including funds derived or generated from property owned or controlled directly or indirectly by Usama bin Laden and individuals and entities associated with him, and to ensure that neither they nor any other funds or financial resources are made available, by their nationals or by any persons within their territory, directly or indirectly for the benefit of Usama bin Laden, his associates or any entities owned or controlled, directly or indirectly, by Usama bin Laden or individuals and entities associated with him including the Al-Qaeda organisation.’

15 In the same provision, the Security Council instructed the Sanctions Committee to maintain an updated list, based on information provided by the States and regional organisations, of the individuals and entities designated as associated with Usama bin Laden, including those in the Al-Qaeda organisation.

16 In paragraph 23 of Resolution 1333 (2000), the Security Council decided that the measures imposed inter alia by paragraph 8 were to be established for 12 months and that, at the end of that period, it would decide whether to extend them for a further period on the same conditions.

17 Taking the view that action by the Community was necessary in order to implement that resolution, on 26 February 2001 the Council adopted Common Position 2001/154/CFSP concerning additional restrictive measures against the Taliban and amending Common Position 96/746/CFSP (OJ 2001 L 57, p. 1). Article 4 of that Common Position provides:

‘Funds and other financial assets of Usama bin Laden and individuals and entities associated with him, as designated by the Sanctions Committee, will be frozen, and funds or other financial resources will not be made available to Usama bin Laden and individuals or entities associated with him as designated by the Sanctions Committee, under the conditions set out in [Resolution 1333 (2000)].

18 On 6 March 2001, on the basis of Articles 60 EC and 301 EC, the Council adopted Regulation (EC) No 467/2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation No 337/2000 (OJ 2001 L 67, p. 1).

19 The third recital in the preamble to that regulation states that the measures provided for by Resolution 1333 (2000) ‘fall under the scope of the Treaty and, therefore, notably with a view to avoiding distortion of competition, Community legislation is necessary to implement the relevant decisions of the Security Council as far as the territory of the Community is concerned.’

20 Article 1 of Regulation No 467/2001 defines what is meant by ‘funds’ and ‘freezing of funds’.

21 Under Article 2 of Regulation No 467/2001:

‘All funds and other financial resources belonging to any natural or legal person, entity or body designated by the … Sanctions Committee and listed in Annex I shall be frozen.

No funds or other financial resources shall be made available, directly or indirectly, to or for the benefit of, persons, entities or bodies designated by the Taliban Sanctions Committee and listed in Annex I.

Paragraphs 1 and 2 shall not apply to funds and financial resources for which the Taliban Sanctions Committee has granted an exemption. Such exemptions shall be obtained through the competent authorities of the Member States listed in Annex II.’

22 Annex I to Regulation No 467/2001 contains the list of persons, entities and bodies affected by the freezing of funds imposed by Article 2. Under Article 10(1) of Regulation No 467/2001, the Commission is empowered to amend or supplement Annex I on the basis of determinations made by either the Security Council or the Sanctions Committee.

23 On 8 March 2001 the Sanctions Committee published a first consolidated list of the entities which and the persons who must be subjected to the freezing of funds pursuant to Security Council Resolutions 1267 (1999) and 1333 (2000). That list has since been amended and supplemented several times. The Commission has therefore adopted various regulations pursuant to Article 10 of Regulation No 467/2001, in which it has amended or supplemented Annex I to that regulation.

24 On 9 November 2001 the Sanctions Committee published a new addendum to its list of 8 March 2001, including in particular the names of the following body and three individuals:

– ‘Barakaat International Foundation, Box 4036, Spånga, Stockholm, Sweden; Rinkebytorget 1, 04 Spånga, Sweden’;

– ‘Aden, Abdirisak; Akaftingebacken 8, 16367 Spånga, Sweden; DOB 01 June 1968;

– ‘Ali, Abdi Abdulaziz, Drabantvagen 21, 17750 Spånga, Sweden; DOB 01 January 1955’;

– ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spånga, Sweden; DOB: 20 November 1974’.

25 By Commission Regulation (EC) No 2199/2001 of 12 November 2001 amending, for the fourth time, Regulation No 467/2001 (OJ 2001 L 295, p. 16), the names of the entity and the three natural persons in question were added, with others, to Annex I to that regulation.

26 On 16 January 2002 the Security Council adopted Resolution 1390 (2002), which lays down the measures to be directed against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities. Articles 1 and 2 of that resolution provide, in essence, that the measures, in particular the freezing of funds, imposed by Article 4(b) of Resolution 1267 (1999) and by Article 8(c) of Resolution 1333 (2000) are to be maintained. In accordance with paragraph 3 of Resolution 1390 (2002), those measures are to be reviewed by the Security Council 12 months after their adoption, at the end of which period the Council will either allow those measures to continue or decide to improve them.

27 Considering that action by the Community was necessary in order to implement that resolution, on 27 May 2002 the Council adopted Common Position 2002/402/CFSP concerning restrictive measures against Usama bin Laden, members of the Al-Qaeda organisation and the Taliban and other individuals, groups, undertakings and entities associated with them and repealing Common Positions 96/746, 1999/727, 2001/154 and 2001/771/CFSP (OJ 2002 L 139, p. 4). Article 3 of that Common Position prescribes, inter alia, the continuation of the freezing of the funds and other financial assets or economic resources of the individuals, groups, undertakings and entities referred to in the list drawn up by the Sanctions Committee in accordance with Security Council Resolutions 1267 (1999) and 1333 (2000).

28 On 27 May 2002, on the basis of Articles 60 EC, 301 EC and 308 EC, the Council adopted Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Council Regulation (EC) No 467/2001 (OJ 2002 L 139, p. 9).

29 According to the fourth recital in the preamble to that regulation, the measures laid down by, inter alia, Security Council Resolution 1390 (2002) fall within the scope of the Treaty and, ‘therefore, notably with a view to avoiding distortion of competition, Community legislation is necessary to implement the relevant decisions of the Security Council as far as the territory of the Community is concerned.’

30 Article 1 of Regulation No 881/2002 defines ‘funds’ and ‘freezing of funds’ in terms which are essentially identical to those used in Article 1 of Regulation No 467/2001.

31 Under Article 2 of Regulation No 881/2002:

‘All funds and economic resources belonging to, or owned or held by, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I shall be frozen.

No funds shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I.

No economic resources shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I, so as to enable that person, group or entity to obtain funds, goods or services.’

32 Annex I to Regulation No 881/2002 contains the list of persons, groups and entities affected by the freezing of funds imposed by Article 2. That list includes, inter alia, the name of the following entity and persons:

– ‘Al Barakaat International Foundation; Box 4036, Spånga, Stockholm, Sweden; Rinkebytorget 1, 04, Spånga, Sweden’;

– ‘Aden, Adirisak; Skaftingebacken 8, 16367 Spånga, Sweden, DOB 1.6.1968’;

– ‘Ali, Abdi Abdulaziz, Drabantvagen 21, 17750 Spånga, Sweden, DOB 1.1.1955’;

– ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spånga, Sweden, DOB 20.11.1974’.

33 On 26 August 2002 the Sanctions Committee decided to remove the persons known as ‘Abdi Abdulaziz Ali’ and ‘Abdirisak Aden’ from the list of persons to whom and groups and entities to which the freezing of funds and other economic resources must apply.

34 In consequence, on 4 September 2002 the Commission adopted Regulation (EC) No 1580/2002 amending for the second time Council Regulation (EC) No 881/2002 (OJ 2002 L 237, p. 3).

35 In accordance with Article 1(2) of Regulation No 1580/2002, the following persons are removed from the list at Annex I to Regulation No 881/2002:

– ‘Ali, Abdi Abdulaziz, Drabantvägen 21, 17750 Spånga, Sweden, date of birth 1 January 1955’;

– ‘Aden, Adirisak, Skäftingebacken 8, 16367 Spånga, Sweden, date of birth 1 June 1968’.

36 On 20 December 2002 the Security Council adopted Resolution 1452 (2002), intended to facilitate the implementation of counter-terrorism obligations. Paragraph 1 of that resolution provides for a number of derogations from and exceptions to the freezing of funds and economic resources imposed by Resolutions 1267 (1999), 1333 (2000) and 1390 (2002) which may be granted by the Member States on humanitarian grounds, on condition that the Sanctions Committee gives its consent.

37 On 17 January 2003 the Security Council adopted Resolution 1455 (2003), intended to improve the implementation of the measures imposed in paragraph 4(b) of Resolution 1267 (1999), paragraph 8(c) of Resolution 1333 (2000) and paragraphs 1 and 2 of Resolution 1390 (2002). In accordance with paragraph 2 of Resolution 1455 (2003), those measures are again to be improved after 12 months or earlier if necessary.

38 Taking the view that action by the Community was necessary in order to implement Security Council Resolution 1452 (2002), on 27 February 2003 the Council adopted Common Position 2003/140/CFSP concerning exceptions to the restrictive measures imposed by Common Position 2002/402/CFSP (OJ 2003 L 53, p. 62). Article 1 of that Common Position provides that, when implementing the measures set out in Article 3 of Common Position 2002/402/CFSP, the European Community is to provide for the exceptions permitted by United Nations Security Council Resolution 1452 (2002).

39 On 27 March 2003 the Council adopted Regulation (EC) No 561/2003 amending, as regards exceptions to the freezing of funds and economic resources, Regulation (EC) No 881/2002 (OJ 2003 L 82, p. 1). In the fourth recital in the preamble to that regulation, the Council states that it is necessary, in view of the Security Council’s Resolution 1452 (2002), to adjust the measures imposed by the Community.

40 Under Article 1 of Regulation No 561/2003:

‘The following Article shall be inserted in Regulation (EC) No 881/2002:

“Article 2a

1. Article 2 shall not apply to funds or economic resources where:

(a) any of the competent authorities of the Member States, as listed in Annex II, has determined, upon a request made by an interested natural or legal person, that these funds or economic resources are:

(i) necessary to cover basic expenses, including payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges;

(ii) intended exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services;

(iii) intended exclusively for payment of fees or service charges for the routine holding or maintenance of frozen funds or frozen economic resources; or

(iv) necessary for extraordinary expenses; and

(b) such determination has been notified to the Sanctions Committee; and

(c) (i) in the case of a determination under point (a)(i), (ii) or (iii), the Sanctions Committee has not objected to the determination within 48 hours of notification; or

(ii) in the case of a determination under point (a)(iv), the Sanctions Committee has approved the determination.

2. Any person wishing to benefit from the provisions referred to in paragraph 1 shall address its request to the relevant competent authority of the Member State as listed in Annex II.

The competent authority listed in Annex II shall promptly notify both the person that made the request, and any other person, body or entity known to be directly concerned, in writing, whether the request has been granted.

The competent authority shall also inform other Member States whether the request for such an exception has been granted.

3. Funds released and transferred within the Community in order to meet expenses or recognised by virtue of this Article shall not be subject to further restrictive measures pursuant to Article 2.

…”’.

41 On 19 May 2003 the Commission adopted Regulation (EC) No 866/2003 of 19 May 2003 amending for the 18th time Council Regulation (EC) No 881/2002 (OJ 2003 L 124, p. 19). Under Article 1 of, and paragraph 1 of the Annex to, that regulation, Annex I to Regulation No 881/2002 are amended to the effect that the entry ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spanga, Sweden, date of birth 20 November 1974’ under the heading ‘natural persons’ is replaced with the following:

‘Ali Ahmed Yusaf (alias Ali Galoul), Krälingegränd 33, S-16362 Spånga, Sweden; date of birth 20 November 1974; place of birth: Garbaharey, Somalia; nationality: Swedish; passport No: Swedish passport 1041635; national identification No: 741120-1093’.

Procedure and forms of order sought by the parties

42 By application lodged at the Registry of the Court of First Instance on 10 December 2001, registered under number T-306/01, Messrs Abdirisak Aden, Abdulaziz Ali and Ahmed Yusuf, and the Al Barakaat International Foundation (‘Al Barakaat’), brought an action against the Council and the Commission under Article 230 EC, claiming that the Court should:

– annul Regulation No 2199/2001;

– annul Regulation No 467/2001 and, as a subsidiary claim, declare it inapplicable pursuant to Article 241 EC;

– make an order as to costs in an amount to be specified later.

43 The applicants also applied in that document for suspension of the operation of Regulation No 2199/2001 pursuant to Article 243 EC.

44 By separate document lodged at the Court Registry on 10 December 2001, the applicants applied for adjudication under an expedited procedure, in accordance with Article 76a of the Court of First Instance’s Rules of Procedure. Having heard the defendants, the Court of First Instance (First Chamber) rejected that application by decision of 22 January 2002, on the grounds of the complicated and delicate legal issues raised by the case.

45 By letter of the Court Registry of 24 January 2002, the applicants were told that the Court could not rule on the application for suspension of operation of Regulation No 2199/2001, because it had not been made by separate document in accordance with the Rules of Procedure. It was, however, stated in that letter that it remained possible to make a subsequent application for interim measures in compliance with the provisions of those Rules.

46 In their defences, lodged at the Registry of the Court of First Instance on 19 February 2002, the Council and the Commission contend that the Court should:

– dismiss the application;

– order the applicant to pay the costs.

47 By document lodged at the Registry of the Court of First Instance on 8 March 2002, the applicants requested suspension of the operation of Regulations Nos 467/2001 and 2199/2001, in so far as the regulations concerned them, until judgment should have been given in the main proceedings.

48 The President of the Court of First Instance heard the parties’ oral arguments on 22 March 2002, the Kingdom of Sweden being represented at the hearing.

49 By order of 7 May 2002 (Case T-306/01 R Aden and Others v Council and Commission [2002] ECR II‑2387), the President of the Court of First Instance rejected the application for interim relief on the ground that the condition of urgency had not been satisfied, reserving costs.

50 By letter from the Court Registry of 27 June 2002 the parties were invited to submit their observations on the consequences of repeal of Regulation No 467/2001 and of its replacement by Regulation No 881/2002.

51 In their observations, lodged at the Court Registry on 29 July 2002, the applicants declared that they adapted the forms of order they sought, their pleas in law and arguments so that those were thenceforth directed to the annulment of Regulation No 881/2002 (‘the contested regulation’), adopted in the light of the resolution of the Security Council 1390 (2002) maintaining the sanctions against them. They pointed out that the original action brought against Regulation No 467/2001 must be regarded as having become devoid of purpose, because of its repeal by the contested regulation.

52 In its observations, lodged at the Registry on 12 July 2002, the Council acknowledged that the applicants were entitled to extend or adapt the original claims in their action so that those claims henceforth sought the annulment of the contested regulation.

53 In its observations, lodged at the Court Registry on 10 July 2002, the Commission, in view of the fact that the legal effects of Regulation No 2199/2001 are continued in the contested regulation, stated that it had no objection to the applicants’ amending their original claims so that the latter referred to the contested regulation.

54 Furthermore, the Commission asks the Court to declare, in accordance with Article 113 of its Rules of Procedure, that the action has become devoid of purpose in so far as it is directed against Regulation No 2199/2001 and that there is no need to adjudicate on it so far as that institution is concerned.

55 In addition, the Commission requests, pursuant to Articles 115(1) and 116(6) of the Rules of Procedure, that it should be granted the status of intervener in support of the forms of order sought by the Council. None the less, it states that it maintains its contention that the applicants should pay the costs incurred by the Commission in the period during which they challenged Regulation No 2199/2001.

56 By order of the President of the First Chamber of the Court of First Instance of 12 July 2002, the United Kingdom of Great Britain and Northern Ireland was given leave to intervene in support of the forms of order sought by the defendants.

57 By letter from the Court Registry of 11 September 2002, the applicants were requested to submit their observations on the possible consequences of the adoption of Regulation No 1580/2002 for the continued conduct of the action.

58 As a result of the changes to the composition of the chambers of the Court of First Instance in the new judicial year beginning 1 October 2002, the Judge-Rapporteur was attached to the Second Chamber to which this case has, in consequence, been assigned.

59 In their observations on the consequences of the adoption of Regulation No 1580/2002, lodged at the Court Registry on 11 November 2002, the applicants state, first, that their action is no longer directed against the Commission and, second, that Messrs Abdirisak Aden and Abdulaziz Ali no longer have any particular and individual interest in pursuing their action, except so far as the payment of costs is concerned.

60 By decision of 20 November 2002 the Registrar of the Court refused to add to the file the comments made by the applicants in those observations on the Council and Commission’s rejoinders, on the ground that no provision is made in the Rules of Procedure for such comments.

61 In its statement in intervention, lodged at the Court Registry on 27 February 2003, the United Kingdom contended that the Court should dismiss the application.

62 By letter from the Court Registry of 13 June 2003, Mr Yusuf was requested to submit his observations on the possible consequences of the adoption of Regulation No 866/2003 for the continued conduct of the action.

63 In his observations, lodged at the Registry on 7 July 2003, Mr Yusuf indicated, essentially, that the amendments made by Regulation No 866/2003 were merely of a drafting nature and that they would have no effect on the future conduct of the proceedings.

64 After hearing the parties the Court referred the case to a Chamber composed of five Judges, in accordance with Article 51 of its Rules of Procedure.

65 Upon hearing the Report of the Judge-Rapporteur, the Court of First Instance (Second Chamber, Extended Composition) decided to open the oral procedure and, in respect of the measures of organisation of procedure provided for in Article 64 of the Rules of Procedure, put a written question to the Council and the Commission, which answered it within the period prescribed.

66 By order of the President of the Second Chamber (Extended Composition) of 18 September 2003, this case and Case T-315/01 Kadi v Council and Commission were joined for the purposes of the oral procedure, in accordance with Article 50 of the Rules of Procedure.

67 By letter of 8 October 2003 the Commission asked the Court of First Instance to add to the file the ‘Guidelines of the [Sanctions] Committee for the conduct of its work’, as adopted by that Committee on 7 November 2002 and amended on 10 April 2003. That request was granted by the President of the Second Chamber (Extended Composition) of the Court of First Instance on 9 October 2003.

68 Messrs Aden and Ali having informed the Court, in accordance with Article 99 of the Rules of Procedure, that they wished to discontinue their action and that they had concluded an agreement with the defendants as to costs, the President of the Second Chamber (Extended Composition) of the Court of First Instance, by order of 9 October 2003, ordered the names of those two applicants to be removed from the register in Case T-306/01 and ruled on the costs in accordance with the agreement reached by the parties.

69 By separate documents lodged at the Registry on 13 October 2003, Mr Yusuf and Al Barakaat applied for legal aid. Those applications were dismissed by two orders of the President of the Second Chamber (Extended Composition) of the Court of First Instance of 3 May 2004.

70 The oral arguments of the parties were heard, and their replies to the questions asked by the Court of First Instance were given, at the hearing of 14 October 2003.

On the procedural consequences of the adoption of the contested regulation

71 The main parties in the proceedings are at one in acknowledging that the applicants are entitled to alter their claims, pleas in law and arguments so as to seek annulment of the contested regulation that repeals and replaces Regulation No 467/2001, as amended by Regulation No 2199/2001. In their observations lodged at the Registry on 29 July 2002, the applicants announced the alteration of the original claims and pleas in law in their action to that effect.

72 On this point, it must be borne in mind that where, during the proceedings, one decision is replaced by another having the same subject-matter, this must be considered a new factor allowing the applicant to adapt its pleas in law and claims for relief. It would indeed be contrary to the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application. Moreover, it would be inequitable if the Commission were able, in order to counter criticisms of a decision contained in an application made to the Community judicature, to amend the contested decision or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original pleadings to the later decision or of submitting supplementary pleadings directed against that decision (Case 14/81 Alpha Steel v Commission [1982] ECR 749, paragraph 8; Joined Cases 351/85 and 360/85 Fabrique de Fer de Charleroi and Dillinger Huttenwerke v Commission [1987] ECR 3639, paragraph 11; Case 103/85 Stahlwerke Peine-Salzgitter v Commission [1988] ECR 4131, paragraphs 11 and 12, and Joined Cases T-46/98 and T-151/98 CEMR v Commission [2000] ECR II-167, paragraph 33).

73 That case-law may be applied to a situation in which a regulation of direct and individual concern to a person is replaced, during the proceedings, by another regulation having the same subject-matter.

74 That hypothesis corresponding on all points to that at issue in this case, the applicants’ request that their action should be regarded as seeking annulment of the contested regulation, in so far as it concerns them, must be allowed, and the parties must be permitted to redraft their claims for relief, pleas in law and arguments in the light of that new factor.

75 Furthermore, the applicants argue that their application for annulment of Regulation No 467/2001 must be considered to have become devoid of purpose on account of the repeal of that act by the contested regulation (see paragraph 51 above). In those circumstances, there is no longer any need to give a decision on that application or, consequently, on the application for annulment of Regulation No 2199/2001, that too having been rendered devoid of purpose.

76 It follows from the foregoing that there are no longer any grounds for ruling on the action in so far as it is directed against the Commission. In the circumstances of the case, however, the principle of proper administration of justice and the requirements of procedural economy on which the decisions cited in paragraph 72 above are based provide justification for account to be taken also of the Commission’s claims, pleas in law and arguments, redrafted as mentioned in paragraph 74 above, but without its being necessary formally to readmit that institution to the proceedings under Articles 115(1) and 116(6) of the Rules of Procedure, as intervening in support of the forms of order sought by the Council.

77 Having regard to the foregoing, this action must be regarded as being directed henceforth against the Council alone, supported by the Commission and the United Kingdom, and its sole object must be considered to be a claim for annulment of the contested regulation, in so far as it concerns Mr Yusuf and Al Barakaat.

On the substance

78 In support of their claims, the applicants have put forward three grounds of annulment: the first alleges that the Council was incompetent to adopt the contested regulation, the second alleges infringement of Article 249 EC and the third alleges breach of their fundamental rights.

1. Concerning the first ground, alleging that the Council was incompetent to adopt the contested regulation

79 This ground may be broken down into three parts.

The first part

Arguments of the parties

80 In their application originally directed against Regulation No 467/2001, the applicants argued that Articles 60 EC and 301 EC, on the basis of which that regulation had been adopted, authorise the Council solely to take measures against third countries and not, as it did in this case, against nationals of a Member State residing in that Member State.

81 On this point, the applicants denied the allegation that sanctions were imposed on them on account of their association with the regime of the Taliban in Afghanistan. In their view, the sanctions were not imposed on them because there existed any link with that regime but because of the Security Council’s desire to combat international terrorism, regarded as a threat to international peace and security. The applicants also argued that the list mentioned in Paragraph 8(c) of Security Council Resolution 1333 (2000), in which they were included by decision of the Sanctions Committee of 9 November 2001 (see paragraph 24 above), referred to Usama bin Laden and the entities and individuals associated with him, rather than the Taliban.

82 Since the sanctions adopted by the Community institutions must correspond on all points to those adopted by the Security Council, the applicants argued that Regulation No 467/2001 was no longer aimed at a third country but at individuals, with the object of combating international terrorism. In their view, such measures did not fall within the competence of the Community, unlike the trade embargo measures against Iraq examined by the Court of First Instance in Case T-184/95 Dorsch Consult v Council and Commission [1998] ECR II-667.

83 The applicants also maintained that an interpretation of Articles 60 EC and 301 EC that amounted to treating Community nationals like third countries is contrary to the principle of lawfulness as expressed in Articles 5 EC and 7 EC, and to the principle that Community legislation must be certain and its application foreseeable by those subject to it (Case 348/85 Denmark v Commission [1987] ECR 5225).

84 In their observations on the consequences of repeal of Regulation No 467/2001, and its replacement by the contested regulation, adopted on the basis of Articles 60 EC, 301 EC and 308 EC, the applicants add that Article 308 EC, taken alone or together with Articles 60 EC and 301 EC, does not confer on the Council the power to impose sanctions, direct or indirect, on citizens of the Union. Indeed, such a power could not be considered as either implied or necessary in order to attain one of the objectives of the Community for the purposes of Article 308 EC. In particular, the freezing of the applicants’ funds has nothing to do with ‘notably … avoiding distortion of competition’ as referred to in the fourth recital in the preamble to the contested regulation.

85 In their defences and statement in intervention, the institutions and the United Kingdom have maintained, first, that nothing in the wording of Articles 60 EC and 301 EC gives grounds for excluding the adoption of economic sanctions directed at individuals or organisations established in the Community, provided that such measures are intended to interrupt or to reduce, in part or completely, economic relations with one or more third countries. It must be recognised, as a matter of fact, that citizens of the Member States may, individually or jointly, supply funds and resources to third countries or to factions within them, so that measures intended to control those citizens’ economic resources will have the effect of interrupting or reducing economic relations with those countries. The Community judicature has moreover implicitly recognised the lawfulness of that practice (order of the President of the Second Chamber of the Court of First Instance of 2 August 2000 in Case T-189/00 R ‘Invest’ Import und Export and Invest Commerce v Commission [2000] ECR II-2993, paragraph 34, upheld on appeal by order of the President of the Court of Justice in Case C-317/00 P(R) ‘Invest’ Import und Export and Invest Commerce v Commission [2000] ECR I-9541, paragraphs 26 and 27).

86 Second, those parties have disproved the applicants’ argument that there was no link between the measures laid down by Regulation No 467/2001 and Afghanistan, by pointing to the links that existed at the time between Usama bin Laden, Al-Qaeda and the Taliban regime.

87 In its rejoinder and its observations on the consequences of repeal of Regulation No 467/2001 and its replacement by the contested regulation, the Council has however noted that the latter regulation applied to terrorists or terrorist groups in general, without further establishing a connection with a particular country or territory. That reflects the difference between Security Council Resolution 1333 (2000), which referred to the Taliban and the individuals and entities associated with them, and Resolution 1390 (2002) which, because of the disappearance of the ‘Islamic Emirate of Afghanistan’, no longer confines the sanctions it imposes to a country or specific territory, but refers also to terrorist groups and individuals generally.

88 In the first case, the Council considered that Regulation No 467/2001 did in fact fall within the ambit of Articles 60 EC and 301 EC, since there was an obvious link to Afghanistan. No such link existing any longer in the case of the contested regulation, the Council considered it necessary to supplement its legal basis by adding Article 308 EC. The Council argued that that alteration of the contested regulation’s legal basis made the first part of the first ground of annulment irrelevant.

89 On being requested, in a written question asked by the Court of First Instance, to express a view, in the light of Opinion 2/94 of the Court of Justice of 28 March 1996 (ECR I-1759, paragraphs 29 and 30), on the applicants’ argument set out in paragraph 84 above and, more particularly, to state what Community objectives under the EC Treaty it sought to attain by means of the provisions laid down in the contested regulation, the Council answered, in essence, that those provisions pursue an objective of economic and financial coercion which is, in its view, an objective of the EC Treaty.

90 On this point, the Council argues that the Community’s objectives are not only those defined in Article 3 EC, but that they may also flow from more specific provisions.

91 Since the revision under the Maastricht Treaty, Articles 60 EC and 301 EC have defined the tasks and activities of the Community in the domain of economic and financial sanctions and have offered a legal basis for an express transfer of powers to the Community in order to attain them. Those powers are expressly linked to and actually depend on the adoption of an act pursuant to the provisions of the Treaty on European Union in the field of the common foreign and security policy (CFSP). Now, one of the objectives of the CFSP is, under the third indent of Article 11(1), ‘to preserve peace and strengthen international security, in accordance with the principles of the United Nations Charter’.

92 It has therefore to be admitted that economic and financial coercion for reasons of policy, especially in the implementing of a binding decision of the Security Council, constitutes an express and legitimate objective of the EC Treaty, even if that objective is marginal, linked only indirectly to the chief objectives of that Treaty, in particular those concerned with the free movement of capital (Article 3(1)(c) EC) and the establishment of a system ensuring that competition in the internal market is not distorted (Article 3(1)(g) EC), and linked to the Treaty on European Union.

93 The Council submits that, in the circumstances of this case, Article 308 EC was included as a legal basis for the contested regulation in order to supplement the base supplied by Articles 60 EC and 301 EC, so as to make it possible to adopt measures not only in respect of third countries but also in respect of individuals who and non-State bodies which are not necessarily linked to the governments or regimes of those countries, in cases where the EC Treaty does not provide the powers of action necessary to that end.

94 By so doing, the Community has been able, continues the Council, to keep up with the development of international practice, which has been to adopt ‘smart sanctions’ aimed at individuals who pose a threat to international security rather than at innocent populations.

95 The Council maintains that the conditions in which it had recourse to Article 308 EC are no different from those in which that provision has been used in the past in order to attain one of the objects of the EC Treaty in the course of the operation of the common market, where the Treaty has not provided the powers of action necessary to that end. To that effect it refers:

– in the sphere of social policy, to the various directives which, on the basis of Article 235 of the EC Treaty (now Article 308 EC), sometimes supplemented by Article 100 of the EC Treaty (now Article 94 EC), have extended the principle of equal pay for male and female workers, as laid down in Article 119 of the EC Treaty (Articles 117 to 120 of the EC Treaty have been replaced by Articles 136 EC to 143 EC), to convert it into a general principle of equal treatment in all areas in which potential discrimination might subsist and to allow self-employed workers, including those in the agricultural sector, to benefit from it too, in particular Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (OJ 1976 L 39, p. 40); Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ 1979 L 6, p. 24); Council Directive 86/378/EEC of 24 July 1986 on the implementation of the principle of equal treatment for men and women in occupational social security schemes (OJ 1986 L 225, p. 40) and Council Directive 86/613/EEC of 11 December 1986 on the application of the principle of equal treatment between men and women engaged in an activity, including agriculture, in a self-employed capacity, and on the protection of self-employed women during pregnancy and motherhood (OJ 1986 L 359, p. 56);

– in the sphere of free movement of persons, the several acts which, on the basis of Article 235 of the EC Treaty and Article 51 of the EC Treaty (now, after amendment, Article 42 EC), have extended to self-employed persons, to members of their families and to students the rights enjoyed by employed persons moving within the Community, in particular Council Regulation (EEC) No 1390/81 of 12 May 1981 extending to self-employed persons and members of their families Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community (OJ 1981 L 143, p. 1);

– and, more recently, Council Regulation (EC) No 1035/97 of 2 June 1997 establishing a European Monitoring Centre on Racism and Xenophobia (OJ 1997 L 151, p. 1), adopted on the basis of Article 213 of the EC Treaty (now Article 284 EC) and Article 235 of the EC Treaty.

96 The Court of Justice itself has confirmed that this practice is lawful (Case C‑114/88 Delbar [1989] ECR 4067).

97 What is more, the Community legislature has in the past resorted to the legal basis of Article 235 of the EC Treaty in the field of sanctions. On this point, the Council explains that before Articles 301 EC and 60 EC were added to the EC Treaty various Council regulations imposing commercial sanctions were based on Article 113 of the EC Treaty (now, after amendment, Article 133 EC) (see, for example, Council Regulation (EEC) No 596/82 of 15 March 1982 amending the import arrangements for certain products originating in the USSR (OJ 1982 L 72, p. 15); Council Regulation (EEC) No 877/82 of 16 April 1982 suspending imports of all products originating in Argentina (OJ 1982 L 102, p. 1) and Council Regulation (EEC) No 3302/86 of 27 October 1986 suspending imports of gold coins from the Republic of South Africa (OJ 1986 L 305, p. 11)). However, when those measures went beyond the ambit of the common commercial policy or concerned natural or legal persons within the Community, they were also based on Article 235 of the EC Treaty. Such was the case in particular of Council Regulation (EEC) No 3541/92 of 7 December 1992 prohibiting the satisfying of Iraqi claims with regard to contracts and transactions, the performance of which was affected by United Nations Security Council Resolution 661 (1990) and related resolutions (OJ 1992 L 361, p. 1), Article 2 of which provides that ‘[i]t shall be prohibited to satisfy or to take any step to satisfy a claim made by … any person or body acting, directly or indirectly, on behalf of or for the benefit of one or more persons or bodies in Iraq’.

98 In answer to that same written question asked by the Court of First Instance, the Commission has argued that implementation of sanctions imposed by the Security Council could fall, in whole or in part, within the scope of the EC Treaty, either under the common commercial policy or in connection with the internal market.

99 In this instance, the Commission maintains, referring to the fourth recital in the preamble to the contested regulation, that the measures at issue were necessary to ensure uniform implementation and application of the restrictions on the movement of capital introduced in accordance with the resolutions concerned of the Security Council, so as to preserve the free movement of capital within the Community and to avoid distortions of competition.

100 Furthermore, the Commission considers that the promotion of international security, both within the Union and without, must be regarded as forming part of the general framework of the provisions of the EC Treaty. In that regard, it refers first to Articles 3 EU and 11 EU and second to the preamble to the EC Treaty, in which the Contracting Parties confirmed ‘the solidarity which binds Europe and the overseas countries … in accordance with the principles of the Charter of the United Nations’ and declared themselves resolved to ‘strengthen peace and liberty’. The Commission infers therefrom a ‘general objective which the Community has to ensure peace and security’, of which Articles 60 EC and 301 EC are specific emanations, while at the same time they are also specific emanations of the Community’s competence in regulating the movement of capital, internally and externally.

101 Title III, Chapter 4, of the EC Treaty on the movement of capital not conferring any specific powers on the Community, Article 308 EC has been used, in this instance, as an additional legal basis in order to ensure that the Community should be able to impose the restrictions in question, especially those vis-à-vis individuals, in accordance with the common position adopted by the Council.

102 At the hearing the United Kingdom described the Community objective sought by adoption of the contested regulation as being the uniform implementation across the Community of obligations as regards restrictions on capital movement imposed on Member States by the Security Council.

103 The United Kingdom emphasises that the creation of an internal market in the sphere of capital movements is one of the objectives of the Community identified in Article 3 EC. It submits that it is an essential part of the creation of an internal market that any restrictions on the free movement of capital on the market should be applied uniformly.

104 If, however, action at Community level had not been taken to implement the resolutions of the Security Council concerned, that would, according to the United Kingdom, have created a danger of differences in the application of the freezing of assets from one Member State to another. Had the Member States implemented those resolutions individually, then differences of interpretation as regards the scope of the obligation imposed upon them would have been inevitable and would have created disparities in the sphere of free movement of capital between Member States, thus creating a risk of distortion of competition.

105 Furthermore, the United Kingdom submits that action freezing the funds of individuals with a view to interrupting economic relations with international terrorist organisations, rather than with third countries, cannot be regarded as widening ‘the scope of Community powers beyond the general framework created by the Treaty’, as stated in Opinion 2/94 (paragraph 89 above). Under the general framework of the Treaty the Community has competence to take action to regulate capital movements and, moreover, to do this by taking action against individuals. It follows that whilst action regulating capital movements by individuals with a view to interrupting economic relations with international terrorist organisations is a matter for which the EC Treaty has not provided specific powers and whilst such action requires resort to Article 308 EC, it cannot be considered to go beyond the general framework of the Treaty.

106 The United Kingdom maintains that the use of Article 308 EC in the circumstances of the present case is no different from its use in situations, especially in the sphere of social policy, in which that article has been relied upon in order to attain other Community objectives, where the Treaty had not provided a specific legal basis (see paragraph 95 above).

Findings of the Court

107 Regulation No 467/2001 and the contested regulation were adopted on partly different legal bases: Articles 60 EC and 301 EC for the former, and Articles 60 EC, 301 EC and 308 EC for the latter. Although the applicants’ original arguments alleging the lack of a legal basis for Regulation No 467/2001 have become devoid of purpose because of the repeal of that act by the contested regulation, the Court considers it appropriate to set out first the grounds on which it judges them to be unfounded on any view, since those grounds constitute one of the premisses of its reasoning applied to the examination of the legal basis of the contested regulation.

– Concerning the legal basis of Regulation No 467/2001

108 Regulation No 467/2001 was adopted on the basis of Articles 60 EC and 301 EC, provisions which empower the Council to take the necessary urgent measures, particularly with regard to movements of capital and payments, where it is provided, in a common position or a joint action adopted according to the provisions of the Treaty on European Union relating to the CFSP, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries.

109 Now, as is clear from the preamble thereto, Regulation No 467/2001 orchestrated the action by the Community provided for by common position 2001/154, which had been adopted under the CFSP and demonstrated the intention of the Union and of its Member States to implement certain facets of the sanctions taken by the Security Council against the Taliban of Afghanistan.

110 Nevertheless, the applicants maintained, first, that the measures at issue in this case affected individuals who were, moreover, nationals of a Member State, whereas Articles 60 EC and 301 EC authorise the Council to take measures against third countries only; second, that the measures at issue were not intended to interrupt or reduce economic relations with a third country but to combat international terrorism and, more particularly, Usama bin Laden and, third, that those measures were on any view disproportionate to the objective pursued by Articles 60 EC and 301 EC.

111 None of those arguments could have succeeded.

112 With regard, first, to the kind of measures that the Council is empowered to take under Articles 60 EC and 301 EC, the Court considers that nothing in the wording of those provisions makes it possible to exclude the adoption of restrictive measures directly affecting individuals or organisations, whether or not established in the Community, in so far as such measures actually seek to reduce, in part or completely, economic relations with one or more third countries.

113 As the Council has correctly observed, the measures at issue in this case were among what are conventionally known as ‘smart sanctions’, which appeared in United Nations practice during the 1990s. Those sanctions replace classic general trade embargos aimed at a country with more targeted and selective measures, such as economic and financial sanctions, prohibition of travel, embargos on arms or specific goods, so as to reduce the suffering endured by the civilian population of the country concerned, while none the less imposing genuine sanctions on the targeted regime and those in charge of it.

114 The practice of the institutions has developed in the same way, the Council having successively considered that Articles 60 EC and 301 EC allowed it to take restrictive measures against entities which or persons who physically controlled part of the territory of a third country (see, for example, Council Regulation (EC) No 1705/98 of 28 July 1998 concerning the interruption of certain economic relations with Angola in order to induce the ‘União Nacional para a Independência Total de Angola’ (UNITA) to fulfil its obligations in the peace process, and repealing Council Regulation (EC) No 2229/97 (OJ 1998 L 215, p. 1)) and against entities which or persons who effectively controlled the government apparatus of a third country and also against persons and entities associated with them and who or which provided them with financial support (see, for example, Council Regulation (EC) No 1294/1999 of 15 June 1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia (FRY) and repealing Regulations (EC) No 1295/98 and (EC) No 1607/98 (OJ 1999 L 153, p. 63), and Council Regulation (EC) No 2488/2000 of 10 November 2000 maintaining a freeze of funds in relation to Mr Milosevic and those persons associated with him and repealing Regulations (EC) Nos 1294/1999 and 607/2000 and Article 2 of Regulation (EC) No 926/98 (OJ 2000 L 287, p. 19)). That development is fully compatible with the measures provided for in Articles 60 EC and 301 EC.

115 In fact, just as economic or financial sanctions may legitimately be directed specifically at the rulers of a third country, rather than at the country as such, they may be directed at the persons or entities associated with those rulers or directly or indirectly controlled by them, wherever they may be. As the Commission has rightly pointed out, Articles 60 EC and 301 EC would not provide an efficient means of applying pressure to the rulers with influence over the policy of a third country if the Community could not, on the basis of those provisions, adopt measures against individuals who, although not resident in the third country in question, are sufficiently connected to the regime against which the sanctions are directed. Furthermore, as the Council has emphasised, the fact that some of those individuals so targeted happen to be nationals of a Member State is irrelevant, for, if they are to be effective in the context of the free movement of capital, financial sanctions cannot be confined solely to nationals of the third country concerned.

116 That interpretation, which is not contrary to the letter of Article 60 EC or Article 301 EC, is justified both by considerations of effectiveness and by humanitarian concerns.

117 With regard, second, to the objective pursued by Regulation No 467/2001, the Council has argued, referring to Security Council Resolutions 1267 (1999) and 1333 (2000), Common Position 2001/154 and to the first and second recitals in the preamble to that regulation and to its actual title, that the measures at issue were directed essentially against the Taliban regime which, at the time, effectively controlled 80% of Afghan territory and called itself the ‘Islamic Emirate of Afghanistan’ and, incidentally, against persons who and entities which, by means of economic or financial transactions, assisted that regime by providing sanctuary and training for international terrorists and their organisations, thus in fact acting as agents of that regime or being closely connected to it.

118 In so far as the applicants complained that Regulation No 467/2001 was directed at Usama bin Laden and not the Taliban regime, the Council has added that Usama bin Laden was in fact the head and ‘éminence grise’ of the Taliban and that he wielded the real power in Afghanistan. His temporal and spiritual titles of ‘Sheikh’ (head) and ‘Emir’ (prince, governor or commander) and the rank he held beside the other Taliban religious dignitaries can leave little doubt on that score. Moreover, even before 11 September 2001, Usama bin Laden had sworn an oath of allegiance (‘Bay’a’) making a formal religious bond between him and the Taliban theocracy. He was thus in a situation comparable to that of Mr Milosevic and the members of the Yugoslav Government at the time of the economic and financial sanctions taken by the Council against the Federal Republic of Yugoslavia (see paragraph 114 above). With regard to Al-Qaeda, the Council has observed that it was common knowledge that it had many military training camps in Afghanistan and that thousands of its members had fought beside the Taliban between October 2001 and January 2002, during the intervention of the international coalition.

119 There are no grounds for challenging the validity of those considerations as to which there exists, within the international community, a broad consensus expressed, inter alia, by the several resolutions adopted unanimously by the Security Council and which have not been specifically rebutted or even challenged by the applicants.

120 More particularly, the chief object of the sanctions at issue in this case was to prevent the Taliban regime from obtaining financial support from any source whatsoever, as is apparent from Paragraph 4(b) of Resolution 1287 (1999). The sanctions might have been circumvented if the individuals who were thought to maintain that regime had not been affected by them. As regards the relations between the former Taliban regime and Usama bin Laden, the Security Council considered that the latter, during the period in question, received assistance, at this point crucial, from the regime of which he could be regarded as forming part. Thus it is that, in the 10th recital in the preamble to Resolution 1333 (2000), the Security Council deplored the fact that the Taliban continued to provide safe haven to Usama bin Laden and to allow him and others associated with him to operate a network of terrorist training camps from Taliban-controlled territory and to use Afghanistan as a base from which to sponsor international terrorist operations. Furthermore, in the seventh recital in the preamble to Resolution 1333 (2000), the Security Council reaffirmed its conviction that the suppression of international terrorism was essential for the maintenance of international peace and security.

121 Thus, contrary to what the applicants maintained, the measures at issue were indeed intended to interrupt or reduce economic relations with a third country, in connection with the international community’s fight against international terrorism and, more specifically, against Usama bin Laden and the Al-Qaeda network.

122 With regard, third, to the proportionality of the measures at issue, that must be assessed in the light of the purpose of Regulation No 467/2001. As has been explained above, the imposing of ‘smart’ sanctions is intended precisely to exert effective pressure on the rulers of the country concerned, while restricting as far as possible the impact of those measures on the population of that country, in particular by confining their personal ambit to a certain number of individuals referred to by name. Now, in the circumstances of this case, Regulation No 467/2001 tended to increase the pressure on the Taliban regime, inter alia by freezing the funds and other financial assets of Usama bin Laden and the individuals and entities associated with him, as identified by the Sanctions Committee. Such measures are in keeping with the principle of proportionality, according to which sanctions may not go beyond what is appropriate and necessary to the attainment of the objective pursued by the Community legislation imposing them.

123 By contrast, the fact that the measures at issue also affected transactions having no cross-border element is not relevant. If it was the legitimate object of those measures to cause the sources of funding for the Taliban and international terrorism operating out of Afghanistan to dry up, they necessarily had to affect both international and purely internal transactions, given that the latter were just as likely as the former to supply such funding, having regard in particular to the free movement of persons and capital and the lack of transparency in international financial channels.

124 It follows from the foregoing that, contrary to what the applicants claimed, the Council was indeed competent to adopt Regulation No 467/2001 on the basis of Articles 60 EC and 301 EC.

– Concerning the legal basis of the contested regulation

125 Unlike Regulation No 467/2001, the contested regulation has for its legal basis not only Articles 60 EC and 301 EC but also Article 308 EC. That reflects the development of the international situation of which the sanctions decreed by the Security Council and implemented by the Community successively form part.

126 Adopted in connection with the actions taken for the purpose of suppressing international terrorism, considered essential for the maintenance of international peace and security (see the seventh recital in the preamble), Resolution 1333 (2000) of the Security Council none the less specifically referred to the Taliban regime which at the time controlled the greater part of Afghan territory and offered refuge and assistance to Usama bin Laden and his associates.

127 As has been stated above, it is just that expressly established link with the territory and governing regime of a third country which made it possible for the Council to base Regulation No 467/2001 on Articles 60 EC and 301 EC.

128 On the other hand, Security Council Resolution 1390 (2002) was adopted on 16 January 2002 after the collapse of the Taliban regime following the armed intervention of the international coalition in Afghanistan, launched in October 2001. As a result, and although it still expressly refers to the Taliban, the resolution is no longer aimed at their fallen regime, but rather directly at Usama bin Laden, the Al-Qaeda network and the persons and entities associated with them.

129 The fact that there is nothing to link the sanctions to be taken under that resolution with the territory or governing regime of a third country, as pointed out in paragraph 2 of the statement of reasons for the proposal for a Council regulation presented by the Commission on 6 March 2002, which is the source of the contested regulation [document COM (2002) 117 final], was explicitly acknowledged by the Council in paragraphs 4 and 5 of its rejoinder.

130 In the absence of such a connection, the Council and the Commission considered that Articles 60 EC and 301 EC did not, in themselves, constitute an adequate legal basis allowing for the adoption of the contested regulation. Those considerations must be upheld.

131 Indeed, Article 60(1) EC provides that the Council, in accordance with the procedure provided for in Article 301 EC, may ‘as regards the third countries concerned’ take the necessary urgent measures on the movement of capital and payments. Article 301 EC expressly permits action by the Community to interrupt or reduce, in part or completely, economic relations ‘with one or more third countries’.

132 Furthermore, the fact that those provisions authorise the adoption of ‘smart sanctions’ against individuals and entities associated with the rulers of a third country or controlled by them, directly or indirectly (see paragraphs 115 and 116 above) does not give grounds for considering that those individuals and entities may still be targeted when the governing regime of the third country in question has disappeared. In such circumstances, there in fact exists no sufficient link between those individuals or entities and a third country.

133 It follows that on any view Articles 60 EC and 301 EC did not constitute in themselves a sufficient legal basis for the contested regulation.

134 Moreover, contrary to the view expressed by the Commission in the proposal for a Council regulation which is the source of the contested regulation (see paragraph 129 above), the Council considered that Article 308 EC did not on its own constitute an adequate legal basis for the adoption of the regulation either. Those considerations must also be approved.

135 On this point, according to the case-law (Case 45/86 Commission v Council [1987] ECR 1493, paragraph 13), it follows from the very wording of Article 308 EC that recourse to that provision as the legal basis for a measure is justified only where no other provision of the Treaty gives the Community institutions the necessary power to adopt the measure in question. In such a situation, Article 308 EC allows the institutions to act with a view to attaining one of the objectives of the Community, despite the lack of a provision conferring on them the necessary power to do so.

136 As regards the first condition for the applicability of Article 308 EC, it is not disputed that no provision of the EC Treaty provides for the adoption of measures of the kind laid down in the contested regulation relating to the fight against international terrorism and, more particularly, to the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of terrorism, where no connection whatsoever has been established with the territory or governing regime of a third state. The first condition is therefore satisfied in the instant case.

137 In order for the second condition of the applicability of Article 308 EC to be satisfied in the instant case, it is necessary, in accordance with the case-law cited in paragraph 135 above, that it should be possible to connect the fight against international terrorism and, more particularly, the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of terrorism, to one of the objects which the Treaty entrusts to the Community.

138 In this instance, the preamble to the contested regulation wastes very few words on that point. At the very most, the Council has stated in the fourth recital of the preamble to that regulation that the measures necessary under Resolution 1390 (2002) and Common Position 2002/402 fell ‘under [sic] the scope of the Treaty’ and that Community legislation had therefore to be adopted, ‘notably with a view to avoiding distortion of competition’.

139 With regard to the statement that the measures at issue fall within the scope of the Treaty, which begs the question, it must on the contrary be held straight away that none of the objectives of the Treaty, as expressly set out in Articles 2 EC and 3 EC, appears capable of being attained by the measures at issue.

140 In particular, unlike the measures provided for by Regulation No 3541/92 against certain natural or legal persons established in the Community, relied on by the Council in support of its arguments (see paragraph 97 above), the measures provided for by the contested regulation could not be authorised by the object of establishing a common commercial policy (Article 3(1)(b) EC), in connection with which it has been held that the Community has the power to adopt trade embargo measures under Article 133 EC, since the Community’s commercial relations with a third country are not at issue in this case.

141 As regards the objective of creating a system ensuring that competition in the internal market is not distorted (Article 3(1)(g) EC), the assertion that there is a risk of competition’s being distorted, which according to its preamble the contested regulation seeks to prevent, fails to persuade.

142 The competition rules of the EC Treaty are addressed to undertakings and Member States when they disturb equal competition between undertakings (see, with regard to Article 87 EC, Case 173/73 Italy v Commission [1974] ECR 709, paragraph 13, and with regard to Article 81 EC, Case 170/83 Hydrotherm [1984] ECR 2999, paragraph 11).

143 Now, in this case, it has not been alleged that the reference to individuals or entities by the contested regulation is made to them as undertakings for the purposes of the EC Treaty rules on competition.

144 Nor has any explanation been put forward that might make it possible to understand how competition between undertakings could be affected by the implementation, whether at Community level or at the level of its Member States, of the specific restrictive measures against certain persons and entities prescribed by Security Council Resolution 1390 (2002).

145 The foregoing considerations are not called in question by the connection made by the United Kingdom and the Commission in their written pleadings between the objective sought in Article 3(1)(g) EC and the objective seeking to create an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of capital (Article 3(1)(c) EC) (see, inter alia, paragra