Anti-terrorism legislation was condemned as poorly thought-out by a senior High Court judge yesterday as he declared that the Treasury’s powers to freeze suspects’ bank accounts were unlawful.

Mr Justice Collins said that terrorist financial orders — introduced by Gordon Brown when he was Chancellor — were absurd,unfair and a breach of fundamental rights.

The judge, who has lengthy experience of dealing with terrorism cases, said: “It was, frankly, another example of an immediate reaction without it being thought through properly — which is rather the pattern with the anti-terrorism measures.”

The Times revealed this week that the judge was preparing to criticise the asset-freezing regime in the latest of a series of rulings that have exacerbated tensions between the judiciary and the Government.

There are now 59 people living in Britain on the Treasury sanctions list, including the radical clerics Abu Hamza al-Masri and Abu Qatada, who are both in jail. The Bank of England has frozen 274 accounts, containing £656,000.

Abu Qatada had £180,000 cash in his home when it was raided in 2001 and, despite the sanctions, Abu Hamza made £120,000 on a property transaction while in prison.

Ruling on an appeal brought by five terrorist suspects — referred to in court as A, K, M, Q and G — the judge said that the sanctions had had “the most drastic effect” on them and their families.

People on the terrorist list have to apply to the Treasury for a licence to spend money on groceries and anyone who provides them with “an economic resource” is liable to a criminal conviction and a jail sentence.

The judge said the situation was “an absurdity” and recommended that two measures — the Terrorism Order and the al-Qaeda and Taleban Order — should be quashed. They will, however, remain in place pending an appeal that the ministers said the Government would pursue urgently.

The measures were adopted to give effect in British law to two United Nations Security Council resolutions imposing sanctions on people alleged to be funding terrorism.

The judge was critical that they were introduced as Orders in Council rather than through an Act of Parliament and were therefore not subject to debate by MPs and peers. He also criticised the absence of a procedure for suspects who wanted to challenge their listing as terrorists.

The Government, he added, should consider introducing measures in the Counter-terrorism Bill to provide for a tribunal at which people on the Treasury’s list could challenge the financial sanctions. The judge told government lawyers: “You are going to have to legislate at some stage, otherwise the State will not be able to put before the court the incriminating or allegedly incriminating material.”

He said he had “real concerns” that the orders had introduced a criminal offence, of assisting a listed person, without consulting Parliament.

David Davis, the Shadow Home Secretary, said that the High Court had left Mr Brown’s asset-freezing regime “in tatters”. He added: “When you make laws in a hurry that are unfocused and arbitrary, the result is neither firm nor fair — just fragile.”

Jacqui Smith, the Home Secretary, said that she was “very disappointed” with the ruling.

Jane Kennedy, the Financial Secretary to the Treasury, said: “The Government continues to be fully committed to defending and maintaining our asset-freezing regime which makes an important contribution to our national security by helping to prevent funds being used for terrorist purposes and is central to our obligations under successive UN Security Council Resolutions to combat global terrorism.”

But Jules Carey, solicitor for G, said that the importance of the judgment could not be overstated. He said: “It is the sovereignty of Parliament that is at stake here, the foundation block of the British constitution. If Government can, without consulting Parliament, give itself powers to create criminal offences and take away fundamental rights then we are watching the sun set on democracy.”

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