Case Preview: Bank Mellat v Her Majesty’s Treasury
03 Wednesday Apr 2013
The Supreme Court recently heard the case of Bank Mellat v Her Majesty’s Treasury, where the Bank appealed the decision given in the Court of Appeal. The case arises out of an Order made by the Treasury under Schedule 7 of the Counter-Terrorism Act 2008 (CTA), something that the Bank alleges to breach the rules of natural justice, and/or Article 6 ECHR, and/or Article 1 Protocol 1 ECHR. In addition to the issues arising in the substantive appeal, the case is the first instance where the Supreme Court has sat in closed session in order to hear sensitive evidence in support of the Treasury’s case.
Bank Mellat is a large, privately owned, Iranian commercial bank. On 9 October 2009, the Treasury created the Financial Restrictions (Iran) Order 2009 (SI 2009 No 2725) under powers conferred to it by Schedule 7 to the Counter-Terrorism Act 2008 (CTA). This Order came into force on 12 October 2009, stipulating that all persons operating in the UK financial sector must not enter into or continue with any transaction or business relationship with the Bank, with immediate effect. The Order was made in the context of nuclear proliferation activities in Iran, and investigations into those that finance such activities. The Order inflicted damage upon the Bank’s reputation and existing business activities, prompting it to challenge the Order under Section 63(2) CTA. Bank Mellat lost at the High Court, and on appeal at the Court of Appeal.
The decisions of the High Court and Court of Appeal
In the High Court, The Honourable Mr Justice Mitting heard both a procedural and substantive challenge to the Order. The procedural challenge involved the Bank claiming that it had not been able to make representations prior to the Order’s coming into force, something that breaches the requirements of natural justice; A1P1 ECHR; and Article 6(1) ECHR. Mitting J rejected this argument, holding that the Bank had the opportunity to make representations prior to Parliament’s affirmation of the Order, and through their ability to challenge the Order under s63 CTA. The substantive challenge was made through allegations that the statutory requirements for making the Order were not met, and that the Order breached A1P1 ECHR; this involved an assessment of proportionality. These arguments were also rejected, with the Treasury being found to have “reasonably believed that the development of nuclear weapons or the doing of anything facilitating their development by Iran posed and poses a significant threat to the national interests of the United Kingdom”, and that the Order was proportionate to meet the aim of protecting these interests. During the course of the proceedings, Mr Justice Mitting heard evidence presented by the Treasury in closed session, although this evidence was stated not to have been determinative on the proportionality issue. A closed judgment was produced specifically dealing with the closed evidence presented.
The Bank lost its subsequent appeal in The Court of Appeal. There, the Court unanimously dismissed the appeal on the substantive challenge, holding that, where the legitimate aim is of such high value and there is a wide discretion had by the decision-maker, such a decision should be afforded “ample protection against undue judicial interference”, with the Treasury being said to have looked for less intrusive measures that do not significantly compromise the legitimate aim. The Court of Appeal also dismissed the procedural challenge by majority (Elias LJ dissenting), for the reasons given by Mr Justice Mitting. Elias LJ’s dissent on this matter included distinguishing the BAPIO case (relied on by Mitting J and Kay LJ) on the grounds that the Order in the present case “is not a typical act of subordinate legislation laying down rules which affect a broad and amorphous class or classes of persons”
Before the Supreme Court
In addition to the substantive appeal regarding the substantive and procedural legality of the Treasury’s decision, the Supreme Court was also asked to consider:
1) whether it has jurisdiction to consider the closed judgment delivered by Mitting J at first instance; and
2) whether it will consider the closed judgment, with brief submissions being provided on it by the Treasury, and on behalf of the Bank, by the Special Advocate.
The Court answered yes to both of these questions, “for reasons, to be given later” in relation to jurisdiction, and with “great reluctance” in considering the closed judgment.
It is interesting that the Supreme Court decided it to be “absolutely necessary” to consider the closed judgment where Mitting J stated that the evidence within that judgment was not determinative of the proportionality issue, and that the Court of Appeal did not consider it necessary to go further than the evidence available in open court. In the Court of Appeal, Lord Justice Kay held that “whilst it is true that the Treasury’s case would be stronger if it had proved such a state of affairs [that the Bank had either knowingly or unknowingly provided trade finance for a proliferation transaction], such proof is not a prerequisite to the making of an order”, given that the Bank was “well placed” to facilitate the development of nuclear weapons. The fact that the Supreme Court did decide to consider the closed judgment suggests that their Lordships did not share this view (this is, of course, speculation). Before reaching the decision to sit in closed, the Justices of the Supreme Court sought more of a “gist” as to the evidence found in the closed judgment, however the Treasury maintained that no greater amount of gisting were possible in open court.
It will be very interesting indeed to see what comes out of the judgment by way of any reliance on the closed judgment in assessing the proportionality of the Treasury’s decision.