Law Report: Freeze on Serbian cash upheld: Regina v HM Treasury and another, ex parte CentroCom SRL - Queen's Bench Divisional Court (Lord Justice Watkins and Mr Justice Auld), 6 September 1993.

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A policy decision by the Bank of England, not to permit payment out of Serbian bank accounts, frozen under a United Nations sanctions resolution, for exports to Serbia and Montenegro even of authorised medical and humanitarian goods exempted from the sanctions, unless exported from the United Kingdom, was lawful notwithstanding that it was more restrictive than the UN resolution which it sought to enforce.

The Queen's Bench Divisional Court dismissed an application by Centro-Com SRL, an Italian company trading in pharmaceutical goods, for judicial review of a policy decision by the Bank of England, acting on behalf of the Treasury, only to permit payment out of Serbian accounts in the United Kingdom for goods exported from the UK to Serbia and Montenegro; and, pursuant to that policy, to deny permission for payments totalling pounds 200,000 to be made from an account held by the National Bank of Yugoslavia in London to the applicants for medical supplies exported from Italy.

The Bank of England's permission for the release of funds was required under article 10 of the Serbia and Montenegro (United Nations Sanctions) Order 1992 (SI 1302), made under section 1 of the United Nations Act 1946 to give effect to UN Resolution 757 of 30 May 1992. This introduced sanctions prohibiting, inter alia, exports to Serbia and Montenegro and the payment for them from Serbian and Montenegran funds held in other UN member states, except for exports of medical goods or foodstuffs approved by the UN Yugoslavia Sanctions Committee.

In the United Kingdom, the sanctions regime was governed by the 1992 Order and EEC Regulation 1432/92 as amended by EEC Regulation 2015/92. Until 25 February 1993, the Bank permitted payments for approved exports from any EC member state. But after that date, such permission was restricted to UK exports. This policy was adopted to prevent abuses of the humanitarian exception to the sanctions resolution.

As a result, Centro-Com, which had approval from the relevant authorities to export medical goods from Italy to Serbia and Montenegro, was unable to obtain payment for a number of the consignments, as authorised, from a deposit account held by the National Bank of Yugoslavia with Barclays Bank plc in Fenchurch St, London. They now challenged the legality of the Bank's policy.

Stuart Isaacs QC and Clive Lewis (Iliffes) for Centro-Com; Stephen Richards and Barbara Hewson (Treasury Solicitor) for the respondents.

LORD JUSTICE WATKINS, giving the judgment of the court, said the underlying question was whether the 1992 Order obliged or merely allowed the United Kingdom to permit medical and humanitarian exports to Serbia and Montenegro as exceptions from the UN sanctions.

Centro-Com argued that the refusal to permit payment was contrary to the UK's obligations under the UN Charter and UN Resolution 757 as implemented in the UK by section 1 of the 1946 Act and the 1992 order, and was contrary to its EEC obligations.

In their Lordships' judgment, articles 4(c) and 5 of UN Resolution 757 obliged member states to prevent the sale or supply to Serbia and Montenegro of goods other than medicines or food, and to freeze Serbian and Montenegran funds save for payments for such goods.

The effect of these provisions, as a matter of international obligation, was to allow, but not oblige, UN members states to permit the supply of medical or other excepted goods to Serbia and Montenegro and to permit the release of funds to pay for them.

Section 1 of the 1946 Act was an enabling provision which empowered, but did not oblige, the UK government to take measures in support of UN sanctions. The 1992 Order, like the UN Resolution, allowed but did not oblige the UK government to permit exceptions to the general prohibitions consistent with its UN obligations and the wide discretion given to it by section 1 of the 1964 Act.

The Bank's new policy had as it sole object an improvement in the effectiveness of UN sanctions by reducing the scope for their evasion. Looked at solely in the context of the UK's implementation of its obligations under the UN charter, the new policy was not ultra vires the 1946 Act or article 10 of the 1992 Order. Nor, to the extent that it was a different test, was it contrary, in the sense of Padfield v Minister of Agriculture, Fisheries and Food (1968) AC 997, to the policy and objects of UN Resolution 757 and the 1946 Act as implemented in the 1992 Order.

Their Lordships also rejected the applicant's arguments that the new policy conflicted with European law. Article 10 of the 1992 Order did not conflict with EEC Resolution 1432/92, the scheme of which was the same as that of UN Resolution 757 and the 1992 Order, namely to impose a general prohibition and to allow, but not to oblige, member states to permit specified exceptions to it.

Nor did the Bank's policy infringe article 7 of the EEC Treaty, which prohibited discrimination on the ground of nationality, or article 30, which prohibited quantitative restrictions on imports.

Finally, the fact that the application of sanctions might, where necessary, affect partically completed transactions, thus having retroactive effect, did not render them either unfair or unlawful. For these and other reasons the application was dismissed.

Paul Magrath, Barrister.