Bank Mellat v HM Treasury

An English court may order inspection of documents even where compliance would breach foreign criminal law. Disclosure and inspection are governed by the lex fori. The court must exercise a discretion by balancing the actual risk of foreign prosecution against the importance of unredacted material to the fair disposal of the English proceedings.

Foreign confidentiality law does not override the court’s procedural jurisdiction. The court may scrutinise uncontradicted expert evidence when assessing actual prosecution risk, as distinct from the content of foreign law. Confidentiality protections can mitigate foreign-law concerns, but they may not suffice where anonymisation would prevent a substantial claim from being fairly tested.

The Bank claimed damages under the Human Rights Act 1998 for losses allegedly caused by the Financial Restrictions Iran Order 2009. That order had been held unlawful by the Supreme Court in Bank Mellat v HM Treasury (No 2), [2013] UKSC 38, [2013] UKSC 39, [2014] AC 700.

In preparation for a complex and substantial trial, the Bank had disclosed Iranian banking documents with customer identities redacted. It contended that disclosure of identities, even within a confidentiality ring, would breach Iranian criminal law. Cockerill J ordered unredacted production to a confidentiality ring, with a master cipher list available to its members.

The Bank appealed. The central issue was whether the discretion to order inspection had been lawfully exercised, having regard to the actual risk of Iranian prosecution and the need for customer identities to ensure a fair trial.

1. Appeal dismissed. The court upheld Cockerill J’s order for unredacted production of the Iranian documents, subject to the confidentiality-ring safeguards.

2. Disclosure and inspection are procedural matters governed by English law as the lex fori. The English court had jurisdiction to order inspection although compliance would breach foreign criminal law. Foreign law could not displace the court’s ability to conduct English proceedings under its own procedures. The discretion nevertheless required close regard to comity and to the practical risk faced by the party ordered to disclose.

3. The proper balance was between the actual risk of prosecution in the foreign state and the importance of inspection to a fair disposal of the English proceedings. An actual risk was material but not determinative. The court could reduce the foreign-law impact by confidentiality restrictions. The court applied the approach reflected in National Crime Agency v Abacha, [2016] EWCA Civ 760, and Brannigan v Davison, [1997] AC 238.

4. Foreign law was a fact to be proved by qualified expert evidence. The Bank bore the burden of establishing the relevant foreign-law proposition and the risk it relied upon. The court could scrutinise uncontradicted expert evidence using ordinary intelligence and common sense. The content of Iranian criminal law, including whether disclosure would breach it, was distinct from the essentially factual question whether prosecution would actually occur.

5. The judge had made one immaterial mis-step by treating the expert as not having addressed whether an English order excused a breach of Iranian law. The expert had addressed that question. However, the expert’s evidence gave very limited support for the asserted degree of actual prosecution risk. The judge was entitled to find a risk greater than purely hypothetical but less serious than the expert suggested.

6. Customer identities were materially relevant to causation, mitigation, alternative transactions, sanctions evasion, sampling and the claimed loss of custom. Ciphers without a master list would not adequately enable HMT to test the claim. The need for a fair trial therefore outweighed the moderated risk of Iranian prosecution. The Bank could still seek a narrower confidentiality-ring membership if it had legitimate concerns about its breadth.

• Court of Appeal (Civil Division): dismissed the Bank’s appeal and upheld Cockerill J’s order for unredacted production within a confidentiality ring: [2019] EWCA Civ 449.
• Commercial Court: Cockerill J, on 19 September 2018, ordered production of Iranian documents in unredacted form subject to confidentiality protections.