Mirza Salman Ispahani (Plaintiff) v Bank Melli Iran
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE HARMAN,LORD JUSTICE HIRST |
| Judgment Date | 18 December 1997 |
| Neutral Citation | [1997] EWCA Civ J1218-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CHANI 97/0629/B |
| Date | 18 December 1997 |
Court of Appeal
Before Lord Justice Hirst, Lord Justice Robert Walker and Mr Justice Harman
Banking - illegal act in foreign country - court will not enforce
The Bretton Woods Agreements Order in Council (SR & O 1946 No 36) applied only to exchange contracts and did not affect the legality of banking arrangements allegedly entered into in contravention of Bangladesh exchange controls.
The common law only made such arrangements legally unenforceable when they necessarily involved the commission of prohibited acts within the territory of a friendly foreign country.
The Court of Appeal so held dismissing an appeal by the plaintiff, Mirza Salman Ispahani, from an order of Mr Justice Lindsay on February 4, 1997 giving leave for further reamendment of the defence of the defendant, Bank Melli Iran.
Article VIII, section 2(b) of the Schedule to the 1946 Order in Council provides: "Exchange contracts which involve the currency of any member (of the International Monetary Fund) and which are contrary to the exchange control regulations of any member maintained or imposed consistently with this agreement shall be unenforceable in the territories of any member."
Mr Ali Malek, QC and Mr David Quest for the plaintiff; Mr John Brisby, QC and Mr Richard Hill for the bank.
LORD JUSTICE ROBERT WALKER said the plaintiff was resident in Bangladesh and was a customer of the bank at its Kensington branch. It was claimed that he had signed a mandate giving authority to his cousin, a senior bank employee, to operate his accounts.
The plaintiff said the bank made unauthorised debits totalling £300,000. The bank claimed the payments were made with the plaintiff's actual or ostensible authority.
The amendments to the bank's defence pleaded that the arrangements between the plaintiff and his cousin were designed to enable him to transfer funds out of Bangladesh in contravention of exchange controls.
The amended defence pleaded that to allow recovery was contrary to public policy, in that it would require the court to enforce an obligation under a contract which was illegal in Bangladesh. It was also said that the cousin's actions were part of a conspiracy and could not be imputed to the bank.
Two associated principles were involved:
One was that where a contract was to be performed in a country where its performance was unlawful by the law of that country it would not be enforced by the...
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