Bank Mellat v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lord Justice Lewison,The Master of the Rolls |
| Judgment Date | 23 October 2015 |
| Neutral Citation | [2015] EWCA Civ 1052 |
| Date | 23 October 2015 |
| Docket Number | Case No: T3/2014/3965 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 1052
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
The Hon Mr Justice Collins and The Hon Mr Justice Ouseley
[2014] EWHC 3631 (Admin)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master of the Rolls
Lord Justice Richards
and
Lord Justice Lewison
Case No: T3/2014/3965
Michael Brindle QC, Timothy OttyQC andAmy Rogers (instructed by Zaiwalla & Co. LLP) for the Appellant
Steven Kovats QC, Patrick GoodallQC andJulian Blake (instructed by The Government Legal Department) for the Respondent
Martin Chamberlain QC and Esther Schutzer-Weissmann (instructed by Special Advocates' Support Office) as Special Advocates
Hearing dates: 7–8 July 2015
The appellant, Bank Mellat, has applied under section 63 of the Counter-Terrorism Act 2008 ("the 2008 Act") to set aside the directions contained in two statutory instruments made by the respondent, Her Majesty's Treasury, in the exercise of powers conferred by Schedule 7 to the 2008 Act. The instruments under challenge are the Financial Restrictions (Iran) Order 2011 ("the 2011 Order") and the Financial Restrictions (Iran) Order 2012 ("the 2012 Order"). A challenge to an earlier instrument, the Financial Restrictions (Iran) Order 2009 ("the 2009 Order"), succeeded before the Supreme Court: see Bank Mellat v Her Majesty's Treasury (No.2) [2013] UKSC 39, [2014] AC 700 (" Bank Mellat (No.2)"). That decision is not, however, determinative of the present proceedings. An important point of distinction is that the 2009 Order was targeted at Bank Mellat alone, which led to a finding that it was irrational and disproportionate, whereas the 2011 and 2012 Orders apply to all Iranian banks.
The present appeal relates to interlocutory decisions concerning disclosure of closed material. Applications under section 63 of the 2008 Act are subject to the procedural rules in CPR Part 79, including provision for a closed material procedure for the protection of material the disclosure of which would be contrary to the public interest. The claimant and the claimant's legal representatives are unable to participate in that procedure but the claimant's interests are represented in it by a special advocate. Central questions for decision by the court in the course of the procedure are whether to give permission for closed material to be withheld from the claimant and the claimant's legal representatives and, if so, whether to direct the service of a summary (or gist) of that material on them: see rule 79.26.
In an open judgment handed down on 5 November 2014, Collins J held that the standard to be applied in determining what disclosure should be made in the present case was that laid down by the House of Lords (in the context of control orders) in Secretary of State for the Home Department v AF (No.3) [2009] UKHL 28, [2010] 2 AC 269 (" AF (No.3)"), which in turn applied the approach of the Grand Chamber of the ECtHR in A v United Kingdom (2009) 49 EHHR 625. As Lord Phillips put it at paragraph 59:
"… I am satisfied that the essence of the Grand Chamber's decision lies in para 220 and, in particular, in the last sentence of that paragraph. This establishes that the controlee must be given sufficient information about the allegations against him to enable him to give effective instructions in relation to those allegations. Provided that this requirement is satisfied there can be a fair trial notwithstanding that the controlee is not provided with the detail or the sources of the evidence forming the basis of the allegations. Where, however, the open material consists purely of general assertions and the case against the controlee is based solely or to a decisive degree on closed materials the requirement of a fair trial will not be satisfied, however cogent the case based on the closed materials may be."
The Treasury agreed to provide certain gists of the closed material to Bank Mellat but a closed hearing took place before Ouseley J on 18 November 2014 to determine whether any further disclosure should be made. In a closed judgment, Ouseley J said that he would apply the AF (No.3) test in accordance with Collins J's decision, but he held in the application of that test that no further disclosure was required.
Those decisions give rise to two issues for resolution by us. The first, raised by way of the Treasury's cross-appeal against Collins J's order, is whether the standard of disclosure in AF (No.3) is the correct standard to apply in the present context. The second, raised by Bank Mellat's appeal against Ouseley J's order, is whether the judge, in applying that standard to the closed material, was wrong to hold that no further disclosure was required.
The first issue was the subject of full argument before us in an open hearing and can be dealt with entirely in this open judgment. As to the second issue, Bank Mellat's open representatives were able to outline their general concerns in the open hearing but the detailed argument was addressed by the special advocates and by counsel for the Treasury in a closed hearing. This open judgment covers the second issue to the extent that it can without disclosing information contrary to the public interest. There is a separate closed judgment of the court covering matters disclosure of which would be contrary to the public interest. This approach accords with CPR rules 79.2 and 79.28.
After the hearing of the appeal, agreement was reached between the Treasury and the special advocates that parts of Ouseley J's closed judgment could be opened up. The opened content is attached as an annex to this judgment. The court allowed an exchange of short written submissions between Bank Mellat and the Treasury on that opened content. This did not, however, add materially to the arguments we had already heard in relation to Ouseley J's judgment in the course of the closed procedure.
The legislative and factual background
Part 1 of Schedule 7 to the 2008 Act (paragraphs 1–2) sets out the conditions for giving a direction. Paragraph 1 provides, so far as material:
"1(1) The Treasury may give a direction under this Schedule if one or more of the following conditions is met in relation to a country.
(2) The first condition is that the Financial Action Task Force has advised that the measures should be taken in relation to the country because of the risk of terrorist financing or money laundering activities being carried on — (a) in the country ….
…
(4) The third condition is that the Treasury reasonably believe that – (a) the development or production of nuclear, radiological, biological or chemical weapons in the country … poses a significant risk to the national interests of the United Kingdom."
The 2011 and 2012 Orders were based on the parts of the first and third conditions that I have quoted.
Part 2 of Schedule 7 (paragraphs 3–8) sets out the persons to whom a direction may be given, namely persons operating in the financial sector who are either United Kingdom persons or persons carrying on business in the United Kingdom. Part 3 (paragraphs 9–13) sets out the requirements that may be imposed, which include a requirement not to enter into or continue to participate in any transaction or business relationship with a "designated person": the 2011 and 2012 Orders imposed such a requirement in respect of dealings with the Central Bank of Iran, credit institutions incorporated in Iran and their branches and subsidiaries wherever located. Part 4 of Schedule 7 (paragraphs 14–17) contains procedural provisions.
The general effect of the provisions in Schedule 7 was summarised in this way by Lord Sumption in his judgment on the substantive appeal in Bank Mellat (No.2):
"5. If the conditions in paragraph 1 as to the existence of a relevant risk are satisfied, the Treasury may give a direction to one or more persons 'operating in the financial sector' (essentially credit and financial institutions) regarding their dealings with any 'designated person'. A 'designated person' includes any person carrying on business in or resident in the foreign country in question: see paragraph 9(1). The direction may require the financial institutions to whom it is addressed to exercise an enhanced customer due diligence so as to obtain information about the designated person and those of its activities which contribute to the risk: paragraph 10. It may require enhanced monitoring (paragraph 11) or systematic reporting (paragraph 12) to the same end. But the most draconian provision is paragraph 13, which provides that the direction may require those to whom it is addressed 'not to enter into or continue to participate in … any transaction or business relationship with a designated person'. Under paragraph 16(4), any direction made in the exercise of those powers expires a year after it is made. A direction made under Schedule 7 must be contained in an order: see paragraph 14(1). By section 96, any order under the Act must be made by statutory instrument.
6. It will be apparent that for designated persons with a substantial business in the United Kingdom, especially if they are banks, the exercise of the power conferred by paragraph 13 will have extremely serious and possibly irreversible consequences. The Act provides three relevant safeguards against the unwarranted use of this power. First, under Schedule 7, paragraph 14(2), if the direction contains requirements of a kind mentioned in paragraph 13 of Schedule 7 (limiting or ceasing business with a...
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