The Supreme Court of the United Kingdom has held that an Order made by HM Treasury in 2009 imposing financial restrictions on Bank Mellat was unlawful.  A link to the judgment is here: [2013] UKSC 39.

In 2009, HM Treasury made an Order, pursuant to the Counter Terrorism Act 2008, that ‘all persons operating in the financial sector’ should not to ‘enter into, or … continue to participate in, any transaction or business relationship’ with Bank Mellat.  The effect of this Order was to shut down the bank’s UK operations.

A majority of the Supreme Court (sitting in full formation, ie 9 judges) has quashed the Order on both substantive and procedural grounds, on the basis that:

(1)   (By majority of 5:4) The decision to make an Order against Bank Mellat was arbitrary, discriminatory and disproportionate to the statutory purpose of hindering Iran’s nuclear programme, because it singled out Bank Mellat but not other Iranian banks, yet the only reason accepted as valid was a general concern about the banking industry and not a particular concern about Bank Mellat.

(2)   (By a differently constituted majority of 5:4) The Order was vitiated by a unfair procedure because the Treasury failed to give the bank notice of its intention to make the Order or an opportunity to make representations. The Court found that common law fairness (which Parliament had not displaced) required that the Bank, as a body directly affected, should have had an opportunity to make representations before the Order was made.

All of the speeches make interesting reading. The following are some notable points.

First, in a separate judgment, the Court gave its reasons for holding (by a majority of 6-3) that it had jurisdiction to hold a closed hearing given that the statutory scheme did not expressly permit closed hearings in the Supreme Court, and for deciding (by a majority of 5-4) to exercise that jurisdiction in this case. See previous blog on this.  All of the judgments on this issue, which come hot on the heels of the Justice & Security Act, emphasis the crucial importance of open justice and the “obnoxious” exceptional nature of closed hearings.  All judges criticise the Government for not substantiating the need for a closed hearing in this case.  Lord Hope considered that by permitting a closed hearing without express Parliamentary approval the majority had “crossed the Rubicon” and that “secret justice at this level is not really justice at all”.

Second, on one view the Court’s reasoning goes further than the European courts in sanctions cases. For example, the European court has not said that it is discriminatory or disproportionate to single out one bank (if the criteria for designation are met), nor recognised that permitting the targets of restrictive measures to make representations in advance makes for better decisionmaking (good administration) as well as being fair.

Third, there are interesting dissents on all issues (whether the statutory scheme displaces common law fairness, whether the reasons were disproportionate, and so on), and a different majority of the Court on the substantive and procedural issues.

The Bank may now pursue an action for damages against HM Treasury.  The Order at issue in this case is distinct from the EU’s sanctions against Iranian nuclear proliferation which include Bank Mellat – the Bank won its case in Luxembourg (see previous blog) but remains listed in the EU because an appeal is pending to the ECJ.  HM Treasury has published a notice stating that this judgment does not affect the current EU asset freeze which remains in place against Bank Mellat.

This entry was posted in Court Procedure, English court cases, Iran, United Kingdom Sanctions and tagged by Maya Lester. Bookmark the permalink.

About Maya Lester

Maya Lester is recommended in the legal directories as a leading junior in the fields of Administrative & Public Law, Competition & European Law, Civil Liberties & Human Rights. She was selected by The Times as one of the 10 Future Stars of the Bar in 2008, and was nominated in 2010 and 2011 for Competition/EU Junior of the Year at Chambers Bar Awards. She has particular expertise in European Union and United Nations targeted sanctions, and has represented hundreds of designated individuals and companies in the European courts. She has extensive experience of all areas of Competition and European Union law, including in relation to regulatory investigations, abuse of dominance, cartels, free movement, fundamental rights and freedoms, actions for annulment in the General Court, and references to the Court of Justice. She is described as "stellar" (Chambers & Partners 2013), "fiercely bright and hardworking" (Legal 500 2012), and a "top-notch performer" (Chambers & Partners 2011). In her wide ranging Public Law, Human Rights and Public International Law practice, Maya Lester regularly appears for and advises individuals, companies, government departments, regulators and public interest groups. She is a member of the Attorney General's B Panel of Junior Counsel to the Crown and Freedom of Information Panel, and is vetted for National Security work. She is described as "a fantastic junior" in Administrative & Public Law, and "clearly very bright and focused" with "great attention to detail". Maya Lester is regularly involved in cases of an international nature, having been educated at Yale Law School (after Cambridge University), Columbia Law School (New York) as a Visiting Scholar, has spent time working at the European Court of Justice and is currently a Bingham Centre Fellow researching targeted sanctions regimes.


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