Bank Mellat v HM Treasury

Where legislation provides a procedure for making an executive order, the court should not ordinarily superimpose a judge-made requirement for prior representations. The affected person’s procedural rights may instead be secured through parliamentary scrutiny and an effective court challenge.

For proportionality under Schedule 7 to the Counter-Terrorism Act 2008, the court must assess the importance of the objective, the rational connection between the measure and that objective, and the fair balance between national interests and individual rights. The least restrictive means test is not invariably decisive where vital public interests are engaged. The court must make its own assessment, while giving substantial weight to the executive and Parliament’s evaluation of national-security risks.

The claimant bank challenged the Financial Restrictions (Iran) Order 2009, made under Schedule 7 to the Counter-Terrorism Act 2008. The Order required persons operating in the UK financial sector to cease business with the bank.

The bank alleged that the Treasury should have allowed prior representations and that the Order failed the statutory conditions and the bank’s rights under Article 1 of the First Protocol and Article 6(1) of the European Convention on Human Rights. Under section 63 of the 2008 Act, the High Court had to apply judicial-review principles and determine whether the decision should be set aside.

1. Procedural fairness. The statutory scheme in Schedule 7 prescribed the procedure for making the Order and contained no requirement for prior representations. Following BAPIO v Secretary of State for the Home Department [2007] EWCA Civ 1139, it was not for the court to add procedural safeguards to an executive order-making power subject to parliamentary control. The bank’s indirect opportunity to make representations arose when Parliament considered whether to affirm the Order.
2. Convention procedure. Article 1 of the First Protocol required a reasonable opportunity to challenge the interference, not necessarily a prior hearing. Section 63 provided that opportunity. Article 6(1) applied because the Order gave rise to a dispute concerning the bank’s civil rights. The hybrid procedure of executive decision, parliamentary affirmation and subsequent court challenge was compatible with Article 6. The procedure under CPR Part 79, with appropriate adaptation, was adequate, and judicial review with interim relief remained available in an urgent case.
3. Statutory conditions. The Treasury had reasonably believed that Iran was developing nuclear weapons or facilitating their development and that this posed a significant risk to UK national interests. The requirements imposed by the Order also had to be proportionate.
4. Proportionality. The statutory word “proportionate” adopted the Luxembourg and Strasbourg approach. The court applied the importance of the objective, rational connection and fair balance. The least restrictive means requirement was not invariably applicable. Where vital public interests were engaged, substantial interference with private rights could be proportionate. The court had to decide the issue itself, but gave great weight to the Treasury’s judgment, endorsed by Parliament, concerning national-security risks.
5. The exclusion of the bank from the UK financial sector was rationally connected to inhibiting Iran’s nuclear programme because international banking facilities could facilitate procurement and trade finance. The severe effect on the bank’s business and goodwill was justified by the risk of very great harm to vital national interests. The Order was therefore proportionate under both the statutory and Convention standards.
6. The court left out of account allegations concerning two named individuals because the available information did not permit a fair determination under Article 6. That issue was not determinative. The reasons supplied by the Ministerial Statement and the Treasury evidence were adequate.
7. The bank’s challenge was dismissed. The Order was procedurally and substantively lawful.