BANK SADERAT IRAN WINS IN THE EUROPEAN COURT

The General Court of the European Union has recently annulled the designations of Iranian banks Sina Bank and Bank Mellat on the EU Iranian sanctions list.  Now Bank Saderat Iran has won its case, although it remains on the EU list for now; Case T-494/10 Bank Saderat Iran v Council (5 February 2013).

The judgment is similar to last week’s judgment in the Bank Mellat case in some respects: the Court rejected similar arguments made by the Council and Commission that the Bank was not entitled to rely on fundamental rights because it is partly State owned, and because it was listed because it was part of a “category” rather than because of its own conduct. And as in Bank Mellat, the Court said if the Council is going to rely on listing proposals by Member States as its evidence, it must give access to its file and disclose them to applicants in good time to enable them to respond (which it did not do here).

The Court found that one of the reasons given for designating the Bank was “excessively vague” because it gave no details of the entities on whose behalf the Bank was alleged to have provided financial services.  It also found that the Council had failed to undertake its own checking of the “relevance and validity” of the evidence against the Bank, illustrated by the fact that it had not checked the accuracy of the Bank’s share capital (the sanctions say the Bank is 95% owned by the Iranian State when in fact the State is a minority shareholder).

There are three particularly interesting features of the judgment.

First, the Bank had pointed to cables disclosed by Wikileaks showing that the United Kingdom and other Member States had been subject to pressure from the United States of America to ensure the adoption of sanctions against Iranian entities.  The Court said that this did not imply that pressure of that kind had affected the Council’s adoption of the sanctions.

Second, the Court found that the Council’s reasons did not justify listing the Bank, because (importantly) the Court said that the fact that the Bank is partly owned by the Iranian State does not imply, by itself, that the applicant is providing support for nuclear proliferation. Moreover, the Council had no evidence that the Bank was providing services to a company that was itself in proliferation, and the Council was acting on a mistaken factual premise (the Bank’s share capital).

Third, the Court (unusually) had asked for detailed information about the letters of credit that the Council said were linked to nuclear proliferation.  The Council failed to provide any evidence, saying it was for the Bank to do so.  The Court said that the absence of evidence should not be held against the Bank because the burden of proof is on the Council to provide evidence to justify designations.

Fourth, the Court rejected the Bank’s argument that the rule of procedure suspending the effect of an annulment until expiry of the period for bring an appeal has expired should not apply. That means that the Bank remains listed for now, and the Council has two to remedy the infringements in new improved restrictive measures against the Bank if it can do so consistently with this judgment.

EU AFGHANISTAN SANCTIONS LIST AMENDED

On 1 February 2013, Council Regulation (EU) No 86/2013 of 31 January 2013 came into force. This amended the Annex to Council Regulation (EU) No 753/2011, concerning restrictive measures directed against certain individuals, groups, undertakings and entities in view of the situation in Afghanistan.

The amendment to the Annex reflected decisions made on 28 December 2012, and 15 January 2013, by the United Nations Security Council Sanctions Committee, to remove the names of three individuals from the list of persons made subject to targeted sanctions. The entry for a fourth person, Badruddin Haqqani (alias Atiqullah), was amended to reflect further information made available to the UN Sanctions Committee.

UK REVOKES FINANCIAL RESTRICTIONS (IRAN) ORDER 2012 TO AVOID DUPLICATION

On 31 January 2013, the UK’s Financial Restrictions (Iran) Order 2012 was revoked. The 2012 Order, made pursuant to Schedule 7 of the UK Counter-Terrorism Act 2008, prohibited transactions and business relationships between UK credit and financial institutions and Iranian banks.

Following the enactment of Council Regulation (EU) 1263/2012 (21 December 2012), EU Regulations prohibited transactions and business relationships between all EU credit and financial institutions, and Iranian banks. The 2012 Order was therefore duplicative, and revoked to avoid confusion. Restrictions including the requirement to notify the HM Treasury and / or seek authorisation from the Treasury in respect of certain transfers of funds to or from any Iranian person remain in place.