Bank Mellat v HM Treasury
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Flaux |
| Judgment Date | 06 May 2015 |
| Neutral Citation | [2015] EWHC 1258 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2014 FOLIO 194 |
| Date | 06 May 2015 |
[2015] EWHC 1258 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
The Honourable Mr Justice Flaux
Case No: 2014 FOLIO 194
Mr Michael Brindle QC, Mr Timothy Otty QC & Ms Amy Rogers (instructed by Zaiwalla & Co Solicitors) for the Claimant
Mr Steven Kovats QC, Mr Patrick Goodall QC & Mr Julian Blake (instructed by Government Legal Department) for the Defendant
Hearing dates: 24 and 25 March 2015
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction and background
This is the judgment following the trial of three preliminary issues in the claim by Bank Mellat (to which I will refer as "the Bank") for damages under section 8 of the Human Rights Act 1998 ("the HRA") for loss and damage caused by the Financial Restrictions (Iran) Order 2009 ("the 2009 Order") made under section 62 and Schedule 7 of the Counter-Terrorism Act 2008. The 2009 Order came into force on 12 October 2009 and expired by effluxion of time on 11 October 2010. The effect of the 2009 Order was to shut the Bank out from the United Kingdom financial sector. As Lord Sumption put it in the Supreme Court in Bank Mellat v HM Treasury (No. 2) [2013] UKSC 39; [2014] 1 AC 700 at [9]:
"The object of the direction, as the Treasury acknowledges, was to shut the Bank out of the UK financial sector, and that has been its effect. Before the direction, the Bank had a substantial international business, much of it international trade finance transacted through London. In the year to March 2009, it issued letters of credit with an aggregate value of about US$11 billion, of which about a quarter represents letters of credit in respect of business transacted through the United Kingdom. The Bank's own estimate of its revenue losses is about US$25 million a year. In addition, the Bank has been prevented from drawing on 183 million euros of call and time deposits with its part-owned subsidiary in London. Important banking relationships have been lost to other banks. The judge found that since the direction, the bank has been unable to make profitable use of the goodwill which it had established in the United Kingdom, which was a "possession" for the purpose of article 1 of the First Protocol to the European Convention on Human Rights. He held that "on any view the effect has been substantial, and suffices to require all of the Bank's challenges to the Order to be addressed and determined." This much is not in dispute."
Section 63(2) of the Counter-Terrorism Act permits any person affected by the decision of the Treasury to make the Order to apply to the High Court to set it aside. By a Claim Form with attached Grounds of Complaint dated 20 November 2009, the Bank applied to set aside the 2009 Order. The Bank's challenge to the 2009 Order was both procedural and substantive. The basis for the procedural challenge was that the Treasury was required by domestic law and by the procedural requirements of Article 1 of the First Protocol to the European Convention on Human Rights (hereafter referred to as "A1P1") to give the Bank an opportunity to make representations before making the 2009 Order, but had failed to give the Bank that opportunity. The basis for the substantive challenge was that the 2009 Order was unlawful (i) because the statutory conditions for a direction requiring relevant persons to cease business with the Bank were not fulfilled and/or (ii) because it was incompatible with the Bank's rights under A1P1 and so unlawful under section 6 of the HRA. The Bank sought an Order setting aside the 2009 Order and damages for breach of the Bank's rights under the Human Rights Act. Mitting J ( [2010] EWHC 1332 (QB); [2010] Lloyd's Rep (FC) 504) and a majority of the Court of Appeal ( [2011] EWCA Civ 1; [2012] QB 101) refused the Bank's application to set aside the 2009 Order, holding both that it was lawful and that any procedural requirements had been satisfied (although Elias LJ dissented on the latter point).
Following a hearing before a nine judge Supreme Court, a majority of the Supreme Court held that the 2009 Order was unlawful and that the Treasury had failed to comply with the procedural requirements. For present purposes, it is not necessary to examine the procedural issue further, but the basis upon which the majority upheld the Bank's substantive challenge is relevant to the first preliminary issue, so I propose to set out a few passages from the judgment of Lord Sumption JSC (with whom Lady Hale, Lord Kerr, Lord Clarke and Lord Carnwath agreed on the substantive issue). At [19] of his judgment, Lord Sumption formulated the essential question raised by the Bank's substantive challenge in these terms:
"…the essential question raised by the Bank's substantive objections to the direction is whether the interruption of commercial dealings with Bank Mellat in the United Kingdom's financial markets bore some rational and proportionate relationship to the statutory purpose of hindering the pursuit by Iran of its weapons programmes."
Lord Sumption went on to discuss these requirements of rationality and proportionality at [20]–[21] in these terms:
20. The requirements of rationality and proportionality, as applied to decisions engaging the human rights of applicants, inevitably overlap. The classic formulation of the test is to be found in the advice of the Privy Council, delivered by Lord Clyde, in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 80. But this decision, although it was a milestone in the development of the law, is now more important for the way in which it has been adapted and applied in the subsequent case-law, notably R (Daly) v Secretary of State for the Home Department [2001] 2 AC 532 (in particular the speech of Lord Steyn), R v Shayler [2003] 1 AC 247 at paras 57–59 (Lord Hope of Craighead), Huang v Secretary of State for the Home Department [2007] 2 AC 167 at para 19 (Lord Bingham of Cornhill) and R (Quila) v Secretary of State for the Home Department [2012] 1 AC 621 at para 45. Their effect can be sufficiently summarised for present purposes by saying that the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community. These four requirements are logically separate, but in practice they inevitably overlap because the same facts are likely to be relevant to more than one of them. Before us, the only issue about them concerned (iii), since it was suggested that a measure would be disproportionate if any more limited measure was capable of achieving the objective…
21. None of this means that the court is to take over the function of the decision-maker, least of all in a case like this one. As Maurice Kay LJ observed in the Court of Appeal, this case lies in the area of foreign policy and national security which would once have been regarded as unsuitable for judicial scrutiny. The measures have been opened up to judicial scrutiny by the express terms of the Act because they may engage the rights of designated persons or others under the European Human Rights Convention. Even so, any assessment of the rationality and proportionality of a Schedule 7 direction must recognise that the nature of the issue requires the Treasury to be allowed a large margin of judgment. It is difficult to think of a public interest as important as nuclear non-proliferation. The potential consequences of nuclear proliferation are quite serious enough to justify a precautionary approach."
The core reasoning of his conclusion that the 2009 Order was irrational and disproportionate is to be found in passages at [25]–[27]:
"25. A measure may respond to a real problem but nevertheless be irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification. The classic illustration is A v Secretary of State for the Home Department [2005] 2 AC 68, another case in which the executive was entitled to a wide margin of judgment for reasons very similar to those which I have acknowledged apply in the present case. The House of Lords was concerned with a derogation from the Convention permitting the detention of non-nationals whose presence in the United Kingdom was considered by the Home Secretary to be a risk to national security and who could not be deported. The House held that this was not a proportionate response to the terrorist threat which provoked it: see in particular paras 31, 43–44 (Lord Bingham of Cornhill), 132 (Lord Hope of Craighead), and 228 (Baroness Hale of Richmond)…
26. Every case turns on its own facts, and analogies with other decided cases can be misleading. The suppression of terrorism and the prevention of nuclear proliferation are comparable public interests, but the individual right to liberty engaged in A v Secretary of State for the Home Department can fairly be regarded as the most fundamental of all human rights other than the right to life and limb. The right to the peaceful enjoyment of business assets protected by article 1 of the First Protocol, is not in the same category of human...
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