Bank Mellat v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Mr Justice Holroyde |
| Judgment Date | 20 November 2017 |
| Neutral Citation | [2017] EWHC 2931 (Admin) |
| Docket Number | Case No: PTA/7/2012 & PTA/4/2013 |
| Date | 20 November 2017 |
| Court | Queen's Bench Division (Administrative Court) |
[2017] EWHC 2931 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Holroyde
Case No: PTA/7/2012 & PTA/4/2013
Mr Steven Kovats QC & Mr Julian Blake (instructed by Government Legal Department) for the Defendant
Mr Ashley Underwood QC (instructed by Special Advocates' Support Office) as Special Advocate
Hearing date: 18 th July 2017
The claimant Bank Mellat ("the Bank") is a financial institution affected by the Financial Restrictions (Iran) Order 2011 (SI 2011/2775) and the Financial Restrictions (Iran) Order 2012 (SI 2012/2904). By Part 8 claims filed on 20 th February 2012 and 21 st February 2013, and subsequently consolidated, the Bank has applied pursuant to section 63 of the Counter-Terrorism Act 2008 to set aside the financial restrictions decisions by which it is affected. By an application notice issued on 11 th April 2014 pursuant to CPR 79.25, the defendant Her Majesty's Treasury ("the Treasury") has sought the permission of the court to withhold from disclosure certain closed material on which it relies in defence of the claim. In response to formal requests by the Bank, the Treasury has provided open gists of some of the closed material; but it is contended on behalf of the Bank that the gists do not provide sufficient open information to enable the Bank to know and meet the Treasury's case. I therefore have to determine the Treasury's application for permission to withhold closed material.
At a closed hearing (at which neither the legal representatives of the Bank, nor any officer of the Bank, were present), I heard submissions from Mr Kovats QC and Mr Blake on behalf of the Treasury, and from Mr Underhill QC who has been appointed as a Special Advocate for this purpose. I am grateful to them all for their written and oral submissions, and for the work which they have undertaken in narrowing the issues between them.
The issues which remain to be resolved require detailed consideration of closed material. It is therefore not possible to give details of the submissions, or of the reasons for my decision, in an open judgment. This judgment accordingly falls into two sections. In this open section, I set out the legal framework and the principles which I have applied. In a separate, closed, section I will summarise the arguments and explain the reasons for my decision.
The background to this application:
The background to the present application can be summarised as follows. The Financial Restrictions (Iran) Order 2009 (SI 2009/2725) came into force on 9 th October 2009, with immediate effect. It specifically applied to the Bank. The Order had a severe impact on the Bank's business both in the UK and internationally. It was challenged in proceedings brought by the Bank, and in June 2013 the Supreme Court determined that the 2009 Order was both procedurally and substantively unlawful. There are ongoing proceedings between the Bank and the Treasury in which the Bank claims damages for the financial loss which it suffered as a result of the 2009 Order.
The 2011 Order came into force on 21 st November 2011. The 2012 Order came into force a year later, on 20 th November 2012. It was revoked on 31 st January 2013, when new EU restrictions came into effect.
The 2011 and 2012 Orders are in materially identical terms. In contrast to the 2009 Order, they were aimed, not at a small number of specific financial institutions, but rather at all credit institutions incorporated in Iran and their subsidiaries, wherever located and wherever carrying on business.
The material which has been disclosed by the Treasury to the Bank includes gists of information submitted to the Chancellor in support of the making of each of the 2011 and 2012 Orders. In addition, a number of relevant documents have been exhibited to statements made by Mr Matthew Taylor, Deputy Director of the Sanctions and Illicit Finance Team in the International and EU Group of HM Treasury. He indicates that the objective of the 2011 Order was –
"to minimise the threat to the UK's national interests posed by Iran's proliferation-sensitive activities and reduce the risk of the UK financial sector being unwittingly used to facilitate Iran's proliferation-sensitive activities."
When the 2011 Order expired, it was replaced by the 2012 Order which had a similar objective. At the time the 2012 Order was made it was known that EU-wide measures with a similar effect would soon be introduced. The 2012 Order was therefore intended the bridge the gap before that happened. When Council Regulation EU 1263/2012 came into force (in December 2012), the 2012 Order was revoked with effect from 31 st January 2013 by the Financial Restrictions (Iran)(Revocation) Order 2013.
In the present proceedings, the Bank contends that both the 2011 and the 2012 Orders were unlawful. It contends that both Orders were irrational; were ultra vires the powers conferred on the Treasury by the Counter-Terrorism Act 2008; and were an unjustified interference with the Bank's rights under Article 6 of, and Article 1, Protocol 1 to, the European Convention on Human Rights, and with the free movement of capital. It is alleged that both Orders were irrational, discriminatory and disproportionate; tainted by irrelevant considerations and material errors of fact; made for an improper purpose; and procedurally unfair and in breach of the principles of good administration. In its Defence, the Treasury denies all those allegations. It contends that the Orders were lawfully made, being proportionate to the risk to the national interests of the UK of activity in Iran facilitating the development or production of nuclear weapons. It further contends that the Orders were necessary because of the risk of Iranian banks being used to provide financial services to entities and persons involved in Iran's nuclear and ballistic missiles programmes, and denies that they were vitiated by any of the errors and faults which the Bank alleges.
The statutory framework:
By section 62 of the Counter-Terrorism Act 2008, Schedule 7 to that Act confers on the Treasury powers to act against terrorist financing and money laundering. In essence, Schedule 7 empowers the Treasury to give a direction which imposes upon designated financial institutions requirements as to the circumstances in which they may carry on business with certain other persons, or prohibits them from carrying on business with those persons at all.
The conditions which must be met before such a direction can be given are set out as follows in paragraph 1 of Schedule 7:
" 1. Conditions for giving a direction
(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 measures should be taken in relation to the country because of the risk of terrorist financing or money laundering being carried on –
a. in the country,
b. by the government of the country, or
c. by persons resident or incorporated in the country.
(3) The second condition is that the Treasury reasonably believe that there is a risk that terrorist financing or money laundering activities are being carried on –
a. in the country,
b. by the government of the country, or
c. by persons resident or incorporated in the country,
and that this poses a significant risk to the national interests of the United Kingdom.
(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, or
b. the doing in the country of anything that facilitates the development or production of any such weapons,
poses a significant risk to the national interests of the United Kingdom.
(5) The power to give a direction is not exercisable in relation to an EEA state."
It may be noted that the recitals to both the 2011 Order and the 2012 Order stated that the first and third conditions were met.
The persons to whom a direction may be given are identified as follows in paragraph 3 of Schedule 7:
" 3. Persons to whom a direction may be given
(1) A direction under this Schedule may be given to –
a. a particular person operating in the financial sector,
b. any description of persons operating in that sector, or
c. all persons operating in that sector.
(2) In this Schedule, "relevant person", in relation to a direction, means any of the persons to whom the direction is given.
(3) A direction may make different provision in relation to different description of relevant person."
Both the 2011 Order and the 2012 Order gave a direction to "all persons operating in the financial sector".
As to the requirements which may be imposed by a direction, paragraph 9 of Schedule 7, so far as is material for present purposes, provides as follows:
" 9. Requirements that may be imposed by a direction
(1) A direction under this Schedule may impose requirements in relation to transactions or business relationships with –
a. a person carrying on business in the country;
b. the government of the country;
c. a person resident or incorporated in the country;
d. a company that is a subsidiary of a company within paragraph (a) or (c).
(2) The direction may impose requirements in relation to –
a. a particular person within sub-paragraph (1),
b. any description of persons within that sub-paragraph, or
c. all persons within that sub-paragraph.
(3) In this Schedule "designated person", in relation to a direction, means any of the persons in relation to whom the direction is given.
(4) The kinds of requirement that may be imposed by a direction under this Schedule are...
To continue reading
Request your trial