Bank Mellat v Her Majesty's Treasury

The disclosure required by article 6 is context-sensitive. Proceedings challenging financial restrictions must nevertheless satisfy the standard in AF (No.3) where the restrictions have sufficiently serious and potentially irreversible effects on a bank’s freedom of action and business.

The affected party must receive enough information to give effective instructions which can refute, so far as possible, the essential allegations. This concerns allegations rather than necessarily their supporting evidence. It applies to specific allegations concerning third parties and cannot be displaced merely because disclosure may harm national security or appear unlikely to alter the outcome.

Bank Mellat applied under section 63 of the Counter-Terrorism Act 2008 to set aside restrictions imposed by the Financial Restrictions (Iran) Orders 2011 and 2012. The Orders prohibited dealings with the Iranian banking sector. The Treasury relied partly on closed material under CPR Part 79.

Collins J held in [2014] EWHC 3631 (Admin) that article 6 required the disclosure standard stated in Secretary of State for the Home Department v AF (No.3). Ouseley J applied that standard but decided in a closed judgment that no further disclosure was necessary.

The Treasury appealed against Collins J’s ruling. Bank Mellat appealed against Ouseley J’s application of the standard. The central questions were whether the AF (No.3) standard governed these proceedings and, if so, whether further disclosure was required.

1. The Treasury’s appeal was dismissed and Bank Mellat’s appeal was allowed. The case was remitted to the Administrative Court for reconsideration of disclosure. Richards LJ gave the judgment, with which Lewison LJ and the Master of the Rolls agreed.

2. Article 6 disclosure requirements depend on the context and all the circumstances. The AF (No.3) standard is not confined to cases involving personal liberty or an equally compelling fundamental interest. Although the Orders were not asset-freezing measures, they imposed draconian restrictions capable of causing very serious and potentially irreversible damage to the bank’s freedom of action and banking business. Those consequences justified application of the AF (No.3) standard.

3. The Court of Appeal’s earlier decision concerning the 2009 Order could not serve as direct authority for a universal minimum-disclosure rule because the Supreme Court had disapproved the reasoning on which that aspect of the decision depended. Its fact-specific formulation of the required disclosure was nevertheless consistent with AF (No.3).

4. The required disclosure concerns the essential allegations, rather than necessarily the evidence, sources or detail supporting them. It must be sufficient to enable the affected party to give effective instructions not merely to deny the allegations but, so far as possible, to refute them. Where detail is necessary to permit an effective challenge, appropriate detail must be disclosed.

5. Where the Treasury relies on specific allegations concerning an Iranian bank other than the claimant, the claimant must still receive sufficient information about them. Disclosure cannot be withheld merely because the claimant may be unable to answer those allegations or because disclosure is thought unlikely to affect the outcome.

6. The requirement applies even where disclosure would be contrary to national security. Under CPR rule 79.26(7), the Treasury need not disclose material or a required summary, but it may then be prevented from relying on the material or required to make concessions or take other specified steps.

7. For reasons stated partly in the closed judgment, Ouseley J was wrong to find that the existing disclosure satisfied the standard. Further disclosure was required.

1. Court of Appeal (Civil Division): In [2015] EWCA Civ 1052, dismissed the Treasury’s appeal, allowed Bank Mellat’s appeal and remitted the disclosure issue to the Administrative Court.

2. Administrative Court: Collins J held in [2014] EWHC 3631 (Admin) that article 6 required the AF (No.3) disclosure standard.

3. Administrative Court: Ouseley J subsequently applied that standard in a closed judgment dated 18 November 2014 but held that no further disclosure was required.