Bank Mellat v Her Majesty's Treasury (No 1)

The Supreme Court may use a closed material procedure on an appeal where statute authorises closed proceedings below and its appellate jurisdiction, construed by necessary implication, requires access to closed material to do justice. The power does not arise from inherent jurisdiction or procedural rules alone.

Because closed proceedings offend open justice and natural justice, their use on appeal must be exceptional and confined to what is strictly necessary. The applicant should identify convincing reasons in open court. The court must examine whether the appeal can be decided from open material or by a less restrictive course.

Where open and closed judgments are given, the open judgment should identify every conclusion affected by closed material and disclose as much of its contribution as possible.

The Treasury made the Financial Restrictions (Iran) Order 2009 under the Counter-Terrorism Act 2008. It prohibited financial-sector dealings with Bank Mellat. The Bank applied under section 63(2) to set the Order aside.

Mitting J conducted part of the hearing under a closed material procedure and dismissed the application in an open judgment, [2010] EWHC 1332 (QB), accompanied by a closed judgment. The Court of Appeal dismissed the Bank's appeal in [2011] EWCA Civ 1 after briefly considering the closed judgment.

On the further appeal, the preliminary questions were whether the Supreme Court could itself adopt a closed material procedure and, if so, whether it should inspect Mitting J's closed judgment. The substantive validity of the Order was determined in a separate judgment.

1. Disposition. By a majority of six to three, the Supreme Court held that it possessed power to adopt a closed material procedure in this appeal. By a bare majority of five to four, it decided to inspect the closed judgment. The inspection proved unnecessary because the closed material could not have affected either the reasoning or the outcome of the substantive appeal.

2. Source of the power. Lord Neuberger, with whom Lady Hale, Lord Clarke, Lord Sumption and Lord Carnwath agreed, held that sections 40(2) and 40(5) of the Constitutional Reform Act 2005 authorised the procedure by necessary implication. The jurisdiction to hear an appeal from any Court of Appeal judgment would otherwise be ineffective or liable to produce injustice where the decision below depended upon closed material. Lord Dyson agreed on this issue. The Supreme Court Rules supported that conclusion but could not independently create the power.

3. Open justice and necessity. A closed hearing is a graver interference with natural justice than an ordinary private hearing because the excluded party cannot know or answer the opposing case. The rule in Al Rawi v Security Service [2011] UKSC 43 remained unquestioned: the common law cannot itself create such a procedure. In this statutory context, however, Parliament had authorised closed proceedings below, and the Supreme Court's appellate powers necessarily extended to considering that material where justice required it.

4. Exercise in this case and future guidance. The majority inspected the closed judgment because it could not be certain, without seeing it, that it was irrelevant and because refusing inspection risked apparent and, possibly, actual injustice to the Treasury. Appellate courts should nevertheless be robust and require convincing open reasons for resorting to closed material. They should consider whether the appeal can be determined from open material, whether confidential material can be addressed elliptically in open court, and whether the extent of any closed hearing can be minimised. An excluded party must receive as much information as possible, and the special advocates must receive timely and full information about the passages and arguments relied upon.

5. Open judgments. A judge giving open and closed judgments should identify every open conclusion materially influenced by closed evidence or argument. The open judgment should explain, so far as possible, what the closed material contributed.

6. Dissents. Lord Hope, Lord Kerr and Lord Reed considered that only express and carefully defined parliamentary authority could permit the Supreme Court to adopt the procedure. They therefore found no power. Those three Justices and Lord Dyson also considered that the Treasury had failed to demonstrate convincing necessity for inspecting the closed judgment.

1. United Kingdom Supreme Court: In Bank Mellat v Her Majesty's Treasury (No 1) [2013] UKSC 38 , the court held that it could adopt a closed material procedure and, by a separate majority, inspected the closed judgment. The substantive appeal was determined separately.
2. Court of Appeal: In [2011] EWCA Civ 1 , the court dismissed the Bank's appeal. It held a brief closed hearing but found it unnecessary to rely upon the closed judgment in its published reasons.
3. High Court: Mitting J dismissed the application to set aside the Order in an open judgment, [2010] EWHC 1332 (QB) , and also delivered a shorter closed judgment.