Bank Mellat v HM Treasury

A statutory financial restriction may be proportionate despite severe commercial consequences where it pursues an exceptionally important national-security objective. The court must consider whether a less intrusive measure could achieve the objective without significantly compromising it, but need not insist on the least intrusive option. Proof of past knowing wrongdoing is not essential where the evidence establishes capacity, opportunity and a preventative risk. Parliamentary approval, a statutory High Court challenge and appropriate judicial-review safeguards may satisfy procedural fairness and Articles 6 and 1 of Protocol No 1, particularly for an interim preventive measure. Adequate reasons are provided where the decision and supporting material explain the basis for the restriction and enable an effective challenge.

Bank Mellat challenged the Financial Restrictions (Iran) Order 2009, made by HM Treasury under Schedule 7 to the Counter-Terrorism Act 2008. The Order prohibited UK financial-sector participants from entering into or continuing business relationships with Bank Mellat. Mitting J rejected the challenge in the Administrative Court and granted permission to appeal.

The appeal concerned proportionality, allegedly irrelevant considerations, discrimination, common-law procedural fairness, Articles 6 and 1 of Protocol No 1 of the Convention, and adequacy of reasons. The central issues were whether the restriction was rationally connected to the statutory objective, whether less intrusive measures were required, and whether Bank Mellat was entitled to make representations before the Order was made.

1. Disposition. By a majority, the appeal was dismissed. Maurice Kay and Pitchford LJJ rejected all grounds. Elias LJ agreed with the majority on the substantive grounds but would have granted declarations that the common-law and Convention procedural requirements had been infringed.
2. Proportionality. The proportionality requirement in paragraph 9(6) of Schedule 7 required consideration of the importance of the objective, rational connection, less intrusive alternatives, and the balance between public and private interests. The minimum-interference question remained relevant, but had to be deployed cautiously. The court asked whether a less intrusive measure could achieve the legitimate aim without significantly compromising it. The high value of preventing serious threats to national interests and the wide margin afforded to the Treasury were important considerations.
3. The restriction was rationally connected to the statutory objective. Evidence that Bank Mellat had the capacity and international reach to provide banking facilities to proliferation-related entities, including a past relationship with Novin, justified a preventative approach. Proof of a past knowing trade-finance transaction was not a prerequisite. The Treasury had considered enhanced diligence, reporting, narrower transaction restrictions and limiting the affected institutions, but reasonably concluded that these would not reliably address the risk. The severe restriction was therefore proportionate. The mistaken assessment of the Iranian government's shareholding was immaterial, and any nationality-based discrimination was justified.
4. Procedure. The majority held that Schedule 7, including Parliamentary approval and the statutory High Court challenge under section 63, was intended to exclude a common-law right to make representations before the Order. The composite procedure gave Bank Mellat a reasonable and effective opportunity to challenge the interference with its possessions and complied with Articles 6 and 1 of Protocol No 1. Wright was materially different because it concerned removal from employment, whereas this Order was an interim preventive restriction akin to an asset freeze.
5. It would normally be appropriate for a designated person to make an early section 63 application and seek an expedited hearing. The High Court retained jurisdiction to grant interim relief in a sufficiently urgent case. The reasons challenge also failed: the Ministerial Statement, subsequent Treasury material and correspondence adequately explained the decision and enabled the challenge.
6. Dissent. Elias LJ considered the Order a targeted sanction causing immediate and potentially irreparable harm. In his view, fairness required disclosure of the gist of the case and an opportunity to respond. The later judicial-review procedure could not cure the absence of a fair initial fact-finding process or the irreparable damage caused before effective relief could be obtained.

• Court of Appeal (Civil Division) dismissed the appeal by a majority. Maurice Kay and Pitchford LJJ upheld the Order. Elias LJ would have granted declarations concerning procedural fairness and Convention rights.
• Queen’s Bench Division, Administrative Court Mitting J rejected Bank Mellat’s challenge to the Order and granted permission to appeal.