Bank Mellat v HM Treasury

Disclosure of information which may breach foreign law is governed by English procedural law. A foreign confidentiality obligation does not automatically justify withholding inspection, but neither does it automatically require disclosure. The court must evaluate the evidence of sanctions risk and balance it against the information’s utility and the prejudice caused by its absence. The burden generally lies on the party seeking departure from ordinary disclosure. Confidentiality arrangements and ciphering may reduce the risk and should be tailored to the jurisdiction and evidence. Applications seeking an advance endorsement of a disclosure strategy, or seeking to bind the trial judge, should not ordinarily be granted where they serve no practical purpose.

Bank Mellat brought damages proceedings under the Human Rights Act 1998 arising from financial restrictions imposed by HM Treasury under the Financial Restrictions Iran Order 2009. The underlying restriction had been held unlawful by the Supreme Court, and the damages claim was remitted for determination.

The claimant applied for an order confirming that it need not search for and disclose all transactional documentation, relying on sampling. HM Treasury applied for inspection of documents from which customer and counterparty identities had been redacted, subject to a confidentiality ring. The applications raised the utility and adequacy of sampling, the relevance of customer identities, and the effect of Iranian, Korean and Turkish confidentiality laws.

1. Sampling. Both applications concerning sampling were refused. The court made no order because neither side sought an order requiring a party to do anything and the proposed declarations would serve no practical purpose. They risked generating further argument and improperly influencing the trial judge’s assessment of disclosure, loss and causation.
2. The existing sampling order did not determine whether full transactional disclosure was necessary. The court observed that full disclosure appeared necessary for penalties, that the position concerning guarantees was uncertain, and that the adequacy of sampling for letters of credit remained in issue. It shared the scepticism previously expressed by Flaux J and Males J and held that their orders represented a pragmatic test of whether a lesser exercise could work, not an endorsement of sampling as a substitute for standard disclosure.
3. Foreign-law confidentiality. The court held that obligations arising under foreign law do not automatically entitle a litigant to withhold inspection. The issue is discretionary. Each case requires evaluation of the information’s utility, the prejudice caused by withholding it, and the actual risk of sanction in the foreign jurisdiction. The court rejected a rigid requirement that prejudice must be “so serious and so insurmountable”.
4. The evidence of risk had to be evaluated rather than accepted merely because it was unchallenged. The claimant bore the practical burden of justifying departure from ordinary disclosure. The evidence showed a breach of Iranian law, but did not establish a real risk of sanction resulting from compliance with an English court order. The evidence showed no real risk of serious sanction in Korea. Turkey presented a different position, but alternative procedures would not materially improve matters.
5. The redacted information was materially relevant. It could assist in identifying customer-related reasons why transactions failed, distinguishing the effects of different measures, tracing alternative or replacement transactions, assessing repeat business and evaluating the feasibility of extrapolating from the sample. Practical objections did not justify withholding it.
6. Disclosure was therefore ordered in unredacted form, subject to a confidentiality club. Ciphering was permitted. For Iran and Korea, any ciphering was to be reversible through a master list; for Turkey, separate ciphering without a master list was ordered. Permission to appeal was refused because the decision involved a multifactorial exercise of discretion and no real prospect of success or other compelling reason had been shown.

The judgment describes the earlier history of the damages proceedings but is a first-instance interlocutory decision on disclosure applications.