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Daily Current Affairs 08.03.2022 (‘Sealed cover’ jurisprudence is appalling, The lists of the FATF and Pakistan’s position)

Daily Current Affairs 08.03.2022 (‘Sealed cover’ jurisprudence is appalling, The lists of the FATF and Pakistan’s position)

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1. ‘Sealed cover’ jurisprudence is appalling

As the MediaOne case shows, a judiciary that is a mute spectator to any executive action highlights democratic decay

A Division Bench of the Kerala High Court has dismissed the appeal filed by MediaOne, a television channel in Kerala, whose licence the Ministry of Information and Broadcasting has refused to renew. The Ministry had said that the licence could not be renewed for reasons related to national security. The stand of the Government was endorsed by both the Single and Division Benches of the High Court. In this context, the judgments set a dangerous precedent for free speech rights and procedural justice.

Suspended rights

A whole set of rights are directly hit by the ban. The first is the obvious one: the right to freedom of speech and expression of the television channel. The rights to association, occupation and business are also impacted. Moreover, the viewers also have a right to receive ideas and information. All these rights are altogether suspended by the executive. The only contingency in which these rights under Article 19(1) can be interfered with are reasonable restrictions under Article 19(2).

Among others like public order, incitement to an offence, it lists ‘security of the State’ as a ground. However, the trouble emanating from the MediaOne judgment is that the state need not even show that its security is threatened. It can conveniently choose the ‘sealed cover’ route.

The jurisprudence of ‘sealed cover’ is an appalling trend. The process of judicial review is significant since it holds the executive accountable. The executive must cogently answer its actions – especially when fundamental rights such as free speech are curtailed. India’s Constitution does not give a free hand to the executive to pass arbitrary orders violating such rights. The Supreme Court of India has repeatedly held that judicial review of executive action is the basic feature of the Constitution. The decisions in Minerva Mills vs Union of India (1980) and L. Chandra Kumar vs Union of India (1997) reiterated this fundamental principle. If the executive wishes to limit rights — in this case, censor or restrict speech — it must show that the test of reasonable restrictions is satisfied. This principle is the bedrock of judicial review.

The ‘sealed cover’ practice inverses this position. The moment the executive utters ‘national security’, courts often permit them to inform the justification in a ‘sealed cover’. These ‘reasons’ are not disclosed to the party whose rights are clearly at stake. The court satisfies itself of the defence of the state and dismisses the petition. MediaOne, the channel that has been censored, is completely in the dark over the reasons for the ban. It was never heard nor its version ascertained.

Endorsed yet blocked

The judgment creates a situation that endorses the breach of fundamental rights on the one hand, and blocks remedy for the victim through a court of law and a process known to law on the other hand. This is an emulation of the tenor in the judgment in ADM Jabalpur (1976). The majority said in this case that fundamental rights could be suspended during the Emergency, with no scope for assessment by the court. Unfortunately, the Kerala verdict revives the ghost of ADM Jabalpur.

Consider what the judgments say. The Single Judge said: “From the files produced before the court, it is discernible that the committee of officers took note of the inputs given by the intelligence agencies….” which “are of serious nature”. These inputs remain unknown. In the judgment of March 2, the Division Bench said: “It is true that the nature, impact, gravity and depth of the issue is not discernible from the files.” Still, the Bench chose to dismiss the appeals by bluntly saying that “there are clear and significant indications impacting the public order and security of the state”. All that is necessary to ban a news broadcaster are these ‘indications’ — which are never revealed to the broadcaster!

No recent trend in judicial review has been as opposed to the principles of natural justice as that of the ‘sealed cover’. At the High Court, national security came to mean absolute impunity for the Centre. The central government virtually wanted the constitutional court to abstain from its primary function of review of the legality of executive action, and the court did exactly that. The judgment, which accepted this proposition, has the potential to mark the beginning of the end of a free press in a working democracy.

When an action is alleged to have curtailed fundamental rights, the court is bound to examine the legality of the action through the lens of proportionality.

In Modern Dental College vs State of Madhya Pradesh (2016), the top court adopted the proportionality test proposed by Aharon Barak, the former Chief Justice, Supreme Court of Israel, “a limitation of a constitutional right will be constitutionally permissible if: (i) it is designated for a proper purpose; (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfillment of that purpose; (iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation; and finally (iv) there needs to be a proper relation (‘proportionality stricto sensu’ or ‘balancing’) between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right”. This was reiterated in K.S. Puttaswamy vs Union of India (2017). But this entire process of proportionality analysis is sidelined by the High Court.

For the top court to resolve

Yet, the MediaOne case might create a real problem area that needs resolution by the Supreme Court. The High Court relied on the Supreme Court judgment in Digi Cable Network vs Union of India (2019). In Digi Cable, the Court reiterated the principle in an earlier judgment called Ex-Armymen’s Protection Services Private Ltd. (2014). The High Court reiterated what the top court said in Digi Cable: “In a situation of national security, a party cannot insist for the strict observance of the principles of natural justice”.

There are two issues here. First, there was no examination of the national security plea based on the proportionality analysis, well established in our recent jurisprudence. Second, when a three-judge Bench in the Pegasus case (Manohar Lal Sharma vs Union of India, 2021) has categorically held that the state does not get a “free pass every time the spectre of ‘national security’ is raised” and that “national security cannot be the bugbear that the judiciary shies away from, by virtue of its mere mentioning”. In view of this subsequent law laid down by a larger Bench, the High Court could not have mechanically resorted to the earlier approach in Digi Cable. Therefore, the principle, if any in both Digi Cable and Ex-Armymen, is arguably implicitly overruled in the Pegasus judgment. No court can read and apply a previous judgment as if it is a statute. But this is what the Kerala High Court did, while relying on Digi Cable.

A deterioration

Today, we have a state that has succeeded in suppressing the voice of the dissenter, illegally and clandestinely. The current case will have an impact on any kind of dissent against an aggrandising regime, including political movements and academic criticism. A court that sits as a mute spectator to any executive action is a crude manifestation of democratic decay.

Justice Jackson of the U.S. Supreme Court famously said: “Those who begin coercive elimination of dissent soon find themselves exterminating dissenters. Compulsory unification of opinion achieves only the unanimity of the graveyard” (West Virginia State Board of Education vs Barnette et. al, 1943). Constitutional courts are expected to eradicate such possibilities instead of perpetuating them.

2. The lists of the FATF and Pakistan’s position

Why has the neighbouring country been repeatedly featured in the ‘grey list’ of the Financial Action Task Force?

The FATF is an international watchdog for financial crimes such as money laundering and terror financing. The FATF sets standards or recommendations for countries to achieve to make its financial system less vulnerable to illegal activities.

The ‘grey’ and ‘black’ lists designate countries that need to work on complying with FATF directives and those who are non-compliant, respectively.

In June 2021, Pakistan was given a seven-point action plan focused specifically on combating money laundering. The FATF appreciated Pakistan’s commitment to fight financial crimes and said that the country now aims to complete the 2021 action plan by January 2023.

The story so far: The global financial crime watchdog Financial Action Task Force (FATF) in its latest plenary meeting, decided to retain Pakistan on its terror financing ‘grey list’, asking the neighbouring country to expeditiously address the remaining deficiencies in its financial system. It has also added UAE to the list this time, which has promised to take “robust” actions in countering terror financing and money laundering.

What is the FATF? 

The Financial Action Task Force is an international watchdog for financial crimes such as money laundering and terror financing. As per the official definition, it is an inter-governmental body that sets international standards that aim to prevent these illegal activities and the harm they cause to society.

The FATF was established at the G7 Summit of 1989 in Paris, over concerns of the member countries about growing money laundering activities. The heads of G7 countries and the president of the European Commission brought together a Task Force after addressing loopholes in the global financial system.

Later, in the aftermath of the 9/11 terror attack on the United States, FATF also added terror financing as a main focus area. This was broadened In 2012, to include restricting the funding of weapons of mass destruction.

The FATF currently has 39 members. The decision making body of the FATF is known as its plenary, which meets thrice a year. Its meetings are attended by 206 countries of the global network, including members, and observer organisations, such as the World Bank, some offices of the United Nations and regional development banks.

How does the FATF do its work?

The FATF sets standards or recommendations for countries to achieve in order to plug the holes in its financial system and make it less vulnerable to illegal financial activities. According to the last update in 2012, FATF has 49 consolidated recommendations for countries to follow in order to set up an Anti-Money Laundering/Combating the Financing of Terrorism (AML/ CFT) regime.

The FATF conducts regular peer-reviewed evaluations called Mutual Evaluations (ME) of countries, starting with member countries, to check their performance on standards prescribed by it. The reviews are carried out by FATF and FATF-Style Regional Bodies (FSRBs), which then release Mutual Evaluation Reports (MERs). For the countries that don’t perform well on certain standards, the FATF and FSRBs draw up time-bound action plans to fight financial crimes.

The FATF recommendations for countries range from assessing risks of crimes to setting up legislative, investigative and judicial mechanisms to pursue cases of money laundering and terror funding.

What are FATF’s ‘grey’ and ‘black’ lists?

While the words ‘grey’ and ‘black’ list do not exist in the official FATF lexicon, they designate countries that need to work on complying with FATF directives and those who are non-compliant, respectively.

At the end of every plenary meeting, FATF comes out with two lists of countries.

Grey countries are those that are “actively working” with the FATF to counter criminal financial activities. In their cases , the watchdog does not tell other members to carry out due-diligence measures vis-a-vis the listed country but does tell them to take into account the risks such countries possess.

Currently, there are 23 countries on the grey list, with one new addition and one removal. The United Arab Emirates was added to the list at the end of this plenary meet while Zimbabwe was taken off it. Besides, some of the other countries on the list are Pakistan, Myanmar, Morocco, Philippines, Panama, Senegal, Albania, Jamaica and Turkey.

As for the black list, it means countries designated by the FATF as ‘high-risk jurisdictions subject to call for action’. In this case the countries have considerable deficiencies in their AML/CFT regimens. For such countries, the body calls on members and non-members to apply enhanced due-diligence and in the most serious cases, apply counter-measures such as sanctions. Currently, two countries- North Korea and Iran are on the black list.

Being listed under the FATF’s two lists makes it difficult for countries to get aid from organisations like the International Monetary Fund (IMF), Asian Development Bank (ADB) and the European Union. According to an IMF study, it may also affect capital inflows, foreign direct investments and portfolio flows in the country.

Why is Pakistan on the grey list?

The case of Pakistan is significant as it has found itself on the grey list frequently since 2008, for weaknesses in fighting terror financing and money laundering. Through 2009, the FATF reaffirmed its designation of Pakistan in the grey list, as the country began to cooperate with the FATF-like regional body, Asia Pacific Group (APG), for a Mutual Evaluation (ME) process.

On completion of the ME in June 2010, Pakistan made a “high level political commitment” to the FATF and APG to address its strategic AML/CFT deficiencies. At the time the country did come up with a permanent legislation against money laundering, but was prescribed an action plan which required demonstrating adequate criminalisation of money laundering and terrorist financing as well as showing adequate measures to identify, freeze and confiscate terrorist assets.

Due to significant progress made by the country, by early 2015, Pakistan was no longer on the grey list. However, it came back to the list in 2018, and was given an action plan to restrict terror financing activities and monitor the actions of UN designated terrorists in the country.

In October 2019, Pakistan was warned by FATF for addressing only five out of the 27 tasks given to it in controlling funding to terror groups like the Lashkar-e-Taiba, Jaish-e-Mohammad and Hizbul Mujahideen, responsible for a series of attacks in India. The country was then given a February 2020 deadline. It got two extensions in 2020 due to the coronavirus pandemic and by October 2021, it had checked off 26 of the 27 points. The remainder was about continuing to show that terror financing cases targeted commanders of UN designated terrorist groups, such as Jama’ at-ud-Da’ wah chief Hafiz Saeed and Jaish-e-Mohammad head Masood Azhar.

In June 2021, however, Pakistan was given another seven-point action plan by the APG, focused specifically on combating money laundering. During the latest meeting that concluded on March 4, Pakistan informed that it had completed 32 of the total 34 action items in the two plans and was told to complete the rest at the earliest. The FATF appreciated Pakistan’s commitment to fight financial crimes and said that the country now aims to complete the 2021 action plan by January 2023.

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