Mellat v HM Treasury

Where financial restrictions seriously impair an institution’s ability to function, Article 6.1 of the European Convention on Human Rights requires disclosure of sufficient information about the evidential case to enable effective instructions to be given to special advocates. The applicable standard is that established in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269. The European Union requirement that the essence of the grounds be disclosed is binding and generally applicable, although it may require only very limited disclosure. The intensity of the procedural protection depends on the nature and weight of the interference. Exclusion from the financial market, with the practical effect of freezing substantial assets, was sufficiently damaging to engage the AF3 standard.

Bank Mellat challenged financial restriction decisions made under the Counter-Terrorism Act 2008 and the Financial Restrictions (Iran) Orders 2011 and 2012. The orders prevented persons operating in the financial sector from entering into or continuing transactions or business relationships with designated Iranian financial institutions. The Treasury relied on closed material and argued that no minimum disclosure was required because the closed-hearing procedure itself provided sufficient fairness.

The central issue was whether the claimant had to receive sufficient information about the allegations and evidential case to enable effective instructions to be given to the special advocates, applying domestic and European Union law.

1. The court held that the issue was governed by both European Union law and domestic law. Article 63 TFEU brought the restrictions within the scope of European Union law.

2. Under ZZ (France) v Secretary of State for the Home Department [2013] QB 1136, as explained authoritatively in ZZ (France) v Secretary of State for the Home Department (No 2) [2014] QB 820, the essence of the grounds for a decision must be disclosed. That was a minimum requirement which could not yield to national security. The court regarded this approach as of general application whenever European Union law was engaged.

3. The court recognised tension between that approach and IR v United Kingdom (2004) 58 EHRR 211, in which the European Court of Human Rights accepted that the overall closed-hearing system could provide sufficient procedural guarantees. However, the European Court of Justice decision was binding, even though the judge considered it difficult to reconcile with IR v United Kingdom.

4. Under domestic law, Tariq v Home Office [2012] 1 AC 452 established that there was no absolute requirement to disclose allegations where national security required secrecy. The relevant balancing exercise depended on the nature and weight of the competing circumstances. Cases involving actual or virtual imprisonment were materially different from an ordinary civil discrimination claim.

5. The claimant’s exclusion from the United Kingdom financial sector caused serious and immediate damage. Although the orders did not formally freeze assets, they prevented the claimant from moving approximately 183 million Euros and therefore had the practical effect of freezing those funds. In that context, the court followed the approach in AF (No 3) and held that Article 6.1 required disclosure sufficient to enable effective instructions to the special advocates.

First-instance decision. The judgment records earlier proceedings concerning related financial restrictions, including the Court of Appeal decision in Bank Mellat v HM Treasury [2012] QB 91, but those decisions concerned earlier stages of the same litigation.