R v HM Treasury and the bank of England ex parte Centro-Com Srl
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WATKINS |
| Judgment Date | 06 September 1993 |
| Judgment citation (vLex) | [1993] EWHC J0906-1 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | No: CO-965-93 |
| Date | 06 September 1993 |
[1993] EWHC J0906-1
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(DIVISIONAL COURT)
CROWN OFFICE LIST
Before: Lord Justice Watkins and Mr Justice Auld
No: CO-965-93
MR S ISAACS QC and MR C LEWIS (7-13/7/93 only) (instructed by Iliffes, DX 50302, Chesham, Buckinghamshire) appeared on behalf of the Applicant.
MR S RICHARDS QC and MISS B HEWSON (7-13/7/93 only) (instructed by Treasury Solicitors, DX 2318, Victoria, London) appeared on behalf of both Respondents.
Monday, 6th September 1993
This is the judgment of the Court. The application concerns the operation of Article 10 of the Serbia and Montenegro (United Nations Sanctions) Order 1992 (1992 No. 1302), made under Section 1 of the United Nations Act 1946 to give effect to United Nations Resolution 757 of 30th May 1992. In summary, the applicant, Centro- Com SRL, challenges:
1. The policy adopted by the Bank of England, acting on behalf of H.M. Treasury, with effect from 25th February 1993, to grant permission under Article 10 of the 1992 Order for payment from Serbian accounts in the United Kingdom only in respect of goods exported from the United Kingdom to Serbia and Montenegro;
and
2. The Bank of England's application of that policy to four applications of Barclays Bank made between 18th and 29th January 1993 for the release of funds totalling about £200,000 from the account of the National Bank of Yugoslavia held with it for payment to Centro- Com in respect of four consignments of goods exported from Italy to Serbia and Montenegro.
The sanctions introduced by UN Resolution 757 prohibited, 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 notified to the UN Yugoslavia Sanctions Committee established by UN Resolution 724 (1991) and except for payments for such goods. In the United Kingdom the sanctions regime was at all material times governed by the 1992 Order, and an EEC Council Regulation, EEC Regulation 1432/92, as amended by EEC Regulation 2015/92. Before 25th February 1993 the Bank of England, on behalf of the Treasury, operated an unpublished policy of permitting payment from Serbian and Montenegran funds in the United Kingdom for excepted exports from any EEC Member State if the exports had been approved by the UN Yugoslavia Sanctions Committee and authorised by the competent authorities of the exporting Member State.
Centro- Com is a trading company incorporated in Italy. Its headquarters are in Udine. Its main business is the supply of pharmaceutical goods. On 10th July 1992 it entered into a written contract with Sanitas, a Montenegran public wholesaler of medical goods, to supply it with pharmaceutical goods. At about the same time it also contracted with Montefarm, another Montenegran public wholesaler of medical goods, to supply it with blood testing equipment.
Between 28th July 1992 and 16th December 1992 Centro- Com, in accordance with UN Resolution 757, applied for and was granted, through the medium of the competent Italian authorities, United Nations approval to export from Italy to Serbia and Montenegro 14 consignments of medical goods for Sanitas and 1 consignment of the blood testing equipment for Montefarm. Over about the same period Centro- Com, pursuant to EEC Regulation 1432/92, as amended, also obtained prior export authorization for the 15 consignments from the competent Italian authorities. Between 15th October 1992 and 6th January 1993 Centro- Com, pursuant to those UN approvals and the Italian authorizations, exported the 15 consignments from Italy to Serbia and Montenegro. The consignments passed through the Italian customs control at Trieste.
The National Bank of Yugoslavia had a deposit account at Barclays Bank PLC, l68 Fenchurch Street, London. The funds in that account were frozen by Article 10 of the 1992 Order, implementing Article 5 of UN Resolution 757, subject to the Treasury, acting through the Bank of England, permitting release for payment for medical or humanitarian purposes or for foodstuffs.
The National Bank of Yugoslavia authorised payment to Centro- Com from its account with Barclays Bank for each of the 15 consignments. Barclays Bank then applied, under Article 10 of the 1992 Order, to the Bank of England for permission to debit the National Bank of Yugoslavia's account in favour of Centro- Com for the money due for each consignment. It did so by a separate letter for each consignment. By letters dated 18th January 1993, but submitted separately over the succeeding eleven days, it made 6 such applications, including the 4 which are the subject of these proceedings. They were all received by the Bank of England by 29th January 1993. The dates on which Barclays Bank made the other 9 applications are not known, though Centro- Com believes that at least 3 were not made until after 18th January 1993 because the National Bank of Yugoslavia did not authorize payment in respect of them until after that date.
Of the 6 applications dated 18th January 1993 the Bank of England granted 2, on 12th and 15th February 1993 respectively, and refused 4, the subject of these proceedings, 1 on 25th February 1993 and 3 on 1st March 1993. It also granted the other 9 applications, at least 3 of which it is likely to have received after its receipt of the 6 applications dated 18th January 1993, and Barclays Bank paid Centro- Com the sums due in respect of them on 27th January 1993 and 24th February 1993.
In late January and in February 1993, while the Bank of England was processing the 15 applications, the Foreign and Commonwealth Office had begun to receive reports that abuse of the system of approvals granted by the UN Sanctions Committee was permitting goods to reach Serbia and Montenegro in breach of the UN sanctions. In particular it received a report of the Sanctions Assistance Mission to Hungary dated 15th February 1993 referring, inter alia, to widespread misdescription of goods and the unreliability of documentation issued by the UN Sanctions Committee. The report contained the following passages:
14.01 It is the view of all SAM Hungary officers that the major problem during the period of this report has been the system of issue, lack of control procedures and proliferation of documents issued by the Sanctions Committee of the UN and other quasi UN authorities for goods to enter or transit Serbia and Montenegro. Such is the disrepute into which the system has fallen with traders and enforcement officers alike that unless urgent action is taken to give the system credibility it is likely to make the whole sanctions regime ineffectual.
…
14.06 If the exemption authority system is to continue [on the] present scale then urgent reconsideration of the method of control is required. An accountable document providing a clear audit trail should be introduced along the lines of the EC licensing systems.
…"
The same Mission also copied to the British Embassy in Budapest a note of 23rd January 1993 commenting:
"The system is impossible to control effectively at the border in its current form."
In addition to this worrying information there had been a considerable increase over the previous three months in the use of the United Kingdom as a conduit for payment for goods exported with UN approval from other countries to Serbia and Montenegro. Applications, through Barclays Bank in London, to the Bank of England for release of Serbian funds in payment for such exports had more than doubled in the first half of February 1993.
At about the same time the Bank of England became aware of similar concern in other Western countries about the inadequacy of the sanctions in practice. France and the United States of America had introduced a policy prohibiting the release of frozen funds to pay for any humanitarian exports to Serbia and Montenegro.
The Treasury and the Bank of England decided that, with a view to reducing the scope for evasion of the sort described in SAM Report where payment was to be made in the United Kingdom and to improving the effectiveness of the United Kingdom's application of the UN sanctions, they should revise their policy so as to permit payment from Serbian funds in the United Kingdom for excepted exports to Serbia and Montenegro only in respect of exports from the United Kingdom. Their view was that such a restriction, because of the strict physical and documentary controls operating in the United Kingdom, would enable them more effectively to ensure that the goods for which payment is sought here are truly excepted goods for which UN approval has been given.
On 25th February 1993, the day that the Bank of England notified Barclays Bank of the refusal of the first of the four applications, the subject of these proceedings, it also notified Barclays Bank of its change of policy in the following terms:
This letter confirms current United Kingdom policy concerning access to Serbian Accounts with banks in the United Kingdom which are subject to the terms of above named statutory instrument.
…
Henceforth, favourable consideration will not be given to applications for permission to debit Serbian accounts with banks in the United Kingdom in payment for the export of goods of any description to Serbia from any country other than the United Kingdom."
Barclays Bank communicated that information to Centro- Com on 27th February...
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