By Dominic Casciani
European Court of Justice: Rules on EU laws
European judges say the wives of suspected terrorists in the UK should not face controls on benefits because their husband's assets are frozen.
The case, referred up to European Court of Justice by the former Law Lords, involved three families who appealed against Treasury restrictions.
The court, which rules on EU law, said that basic social aid was unlikely to be used to fund terrorist activities.
The challenge will now return to the UK's Supreme Court for a final ruling.
The case involved three anonymous families living in the UK where, in each case, the husband was suspected of having links to Osama Bin Laden, al-Qaeda or the Taliban.
The men had been placed on an international list of suspects drawn up at the United Nations following the 9/11 attacks.
The first woman, M, and her husband are Egyptian citizens with a legal right to live in the UK. The pair are severely disabled, have five children and are entirely dependent on benefits. At the time of the original challenge their benefits amounted to more than £350 a week.
The second woman, A, had seven children with her husband, one of whom has Down's Syndrome. Their benefits before the restrictions were almost £540 a week.
The final suspect is a Tunisian man and was legally resident in the UK with his Bosnian wife. They and their four children were entitled to some £310 in weekly benefits.
Under the asset freezing regimes, terrorism suspects can only receive funds under a strict licensing regime to cover basic expenses. This means they need to account for all of their spending by providing receipts for everything they buy.
HM Treasury officials feared the benefits including income support, disability, living allowance, and child, housing and council tax benefits could be used by the suspects themselves.
The Treasury said EU rules meant the benefits paid to the family rather than the suspect should also be monitored just as closely. The spouses were told they would need a licence to spend the benefits and had to provide monthly accounts to be scrutinised by officials.
In one particular case, the licence meant a spouse was allowed to withdraw £10 a week in cash for each family member and other spending had to be by debit card.
The families objected to the licensing and monitoring regime - but lost their challenge in both the High Court and the Court of Appeal. Judges said that although the monitoring scheme was "draconian", the families had not been denied any of the benefits they were due.
The Law Lords then asked the European Court of Justice to clarify the EU regulations.
In its judgement on Thursday, the European Court of Justice ruled against the Treasury's interpretation of the regulations.
"The freezing of funds of persons with suspected links to Bin Laden, al-Qaeda or the Taliban does not apply to certain social security benefits paid to their spouses," it said.
"The interpretation used by the Treasury... is not based on any danger whatsoever that the funds in question may be diverted in order to support terrorist activities.
"The funds in question are in fact used by the spouses concerned to meet the essential needs of the households to which the persons included in the list belong.
"It is hard to imagine how those funds could be turned into means that could be used to support terrorist activities, for the benefits are fixed at a level intended to meet only the strictly vital needs of the persons concerned."