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                            Bank Mellat (Appellant) v Her Majesty's Treasury (Respondent) (No. 1)
Bank Mellat (Appellant) v Her Majesty's Treasury (Respondent) (No. 2)
                        
Document Text Contents
Page 1

Trinity Term
[2013] UKSC 38

On appeal from: [2011] EWCA Civ 1

JUDGMENT

Bank Mellat (Appellant) v Her Majesty's Treasury

(Respondent) (No. 1)

before

Lord Neuberger, President

Lord Hope, Deputy President


Lady Hale

Lord Kerr


Lord Clarke

Lord Dyson


Lord Sumption

Lord Reed


Lord Carnwath


JUDGMENT GIVEN ON


19 June 2013

Heard on 19, 20 and 21 March 2013

Page 2

Appellant Respondent
Michael Brindle QC Jonathan Swift QC


Amy Rogers Tim Eicke QC

Dr Gunnar Beck Robert Wastell


(Instructed by Zaiwalla (Instructed by Treasury

and Co) Solicitors)


Special Advocates Advocate to the Court
Martin Chamberlain QC Robin Tam QC

Melanie Plimmer
(Instructed by the Special (Instructed by Treasury
Advocates Support Office) Solicitors)

Intervener Intervener
Nicholas Vineall QC Dinah Rose QC

Charlotte Kilroy
(Instructed by Zaiwalla (Instructed by Liberty)

and Co)

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26. Every case turns on its own facts, and analogies with other decided cases
can be misleading. The suppression of terrorism and the prevention of nuclear
proliferation are comparable public interests, but the individual right to liberty
engaged in A v Secretary of State for the Home Department can fairly be regarded
as the most fundamental of all human rights other than the right to life and limb.
The right to the peaceful enjoyment of business assets protected by article 1 of the
First Protocol, is not in the same category of human values. But the principle is
not fundamentally different.

27. I would not go so far as to say that the Schedule 7 direction in this case had
no rational connection with the objective of frustrating as far as possible Iran’s
weapons programmes. On the footing that a precautionary approach is justified,
the elimination of any Iranian bank from the United Kingdom’s financial markets
may well have added something to Iran’s practical problem in financing
transactions associated with those programmes, just as the incarceration of some
potential terrorists under Part IV of the Crime and Security Act 2001 may have
made some difference to the reduction of terrorism. But I think that the distinction
between Bank Mellat and other Iranian banks which was at the heart of the case
put to Parliament by ministers was an arbitrary and irrational distinction and that
the measure as a whole was disproportionate. This is because once it is found that
the problem is not specific to Bank Mellat but an inherent risk of banking, the risk
posed by Bank Mellat’s access to those markets is no different from that posed by
the access which comparable banks continued to enjoy. Moreover, the
discriminatory character of the direction must drastically reduce its effectiveness
as a means of impeding the Iranian weapons programmes. As the Exchequer
Secretary herself pointed out, “as long as all financial sanctions and relevant risk
warnings are complied with, alternative banks may be used.” Nothing in the
Treasury’s case explains why we should accept that it is necessary to eliminate
Bank Mellat’s business in London in order to achieve the objective of the statute,
if the same objective can be sufficiently achieved in the case of comparable banks
by requiring them to observe financial sanctions and relevant risk warnings. It may
well be that other Iranian banks have not been found to number among their clients
entities involved in Iran’s nuclear and ballistic missile programmes. But it follows
from the fact that this is a problem inherent in the conduct of international banking
business that they are as likely to do so as Bank Mellat. The direction was
irrational in its incidence and disproportionate to any contribution which it could
rationally be expected to make to its objective. I conclude that that it was unlawful.

The Bank’s procedural grounds

28. I also consider that the Bank is entitled to succeed on the ground that it
received no notice of the Treasury’s intention to make the direction, and therefore
had no opportunity to make representations.

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29. The duty to give advance notice and an opportunity to be heard to a person
against whom a draconian statutory power is to be exercised is one of the oldest
principles of what would now be called public law. In Cooper v Board of Works
for the Wandsworth District (1863) 14 CB (NS) 180, the Defendant local authority
exercised without warning a statutory power to demolish any building erected
without complying with certain preconditions laid down by the Act. “I apprehend”,
said Willes J at 190, “that a tribunal which is by law invested with power to affect
the property of one Her Majesty’s subjects is bound to give such subject an
opportunity of being heard before it proceeds, and that rule is of universal
application an founded upon the plainest principles of justice.”

30. In R v Secretary of State for the Home Department Ex p Doody [1994] 1
AC 531, 560, Lord Mustill, with the agreement of the rest of the Committee of the
House of Lords, summarised the case-law as follows:

“My Lords, I think it unnecessary to refer by name or to quote from,
any of the often-cited authorities in which the courts have explained
what is essentially an intuitive judgment. They are far too well
known. From them, I derive that (1) where an Act of Parliament
confers an administrative power there is a presumption that it will be
exercised in a manner which is fair in all the circumstances. (2) The
standards of fairness are not immutable. They may change with the
passage of time, both in the general and in their application to
decisions of a particular type. (3) The principles of fairness are not to
be applied by rote identically in every situation. What fairness
demands is dependent on the context of the decision, and this is to be
taken into account in all its aspects. (4) An essential feature of the
context is the statute which creates the discretion, as regards both its
language and the shape of the legal and administrative system within
which the decision is taken. (5) Fairness will very often require that a
person who may be adversely affected by the decision will have an
opportunity to make representations on his own behalf either before
the decision is taken with a view to producing a favourable result; or
after it is taken, with a view to procuring its modification; or both.
(6) Since the person affected usually cannot make worthwhile
representations without knowing what factors may weigh against his
interests fairness will very often require that he is informed of the
gist of the case which he has to answer.”

31. It follows that, unless the statute deals with the point, the question whether
there is a duty of prior consultation cannot be answered in wholly general terms. It
depends on the particular circumstances in which each direction is made. Some
directions that might be made under Schedule 7 of the Act could not reasonably
give rise to an obligation on the Treasury’s part to consult the targeted entity, for

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197. I was at first persuaded by Lord Sumption’s judgment that the appeal
should also be allowed on the substantive issue. But, like Lord Hope and Lord
Neuberger, I find Lord Reed’s analysis at paras 102 to 117 and 118 to 122 more
convincing. Like Lord Neuberger, I express no view on paras 123 and 124 of Lord
Reed’s judgment.

198. The Treasury has explained why Bank Mellat was singled out. The
explanation is summarised at paras 103 to 106 and 113 of Lord Reed’s judgment.
Lord Sumption accepts (para 27) that the Schedule 7 direction may well have
added something to Iran’s practical problem in financing transactions associated
with its weapons programmes. But he concludes that the direction was irrational
in its incidence and disproportionate to any contribution which it could rationally
be expected to make to its objective.

199. This conclusion is based on (i) making an assessment of what effect the
direction would have on Iran’s ability to finance the weapons programme and (ii)
conducting a proportionality exercise by balancing that effect against the
undoubtedly grave consequences that the direction would have for Bank Mellat.

200. As Lord Sumption acknowledges at para 21, any assessment of the
rationality and proportionality of the direction must recognise that the nature of the
issue requires that the Treasury be allowed a large area of judgment or margin of
appreciation. The court is in a poor position to weigh the effectiveness of a
measure whose object is to reduce (if not eliminate) Iran’s ability to fund its
weapons programmes. This is not an area in which the court has any expertise.
Accordingly, it should only hold that such a measure is irrational or
disproportionate if it is confident that this has been clearly demonstrated. For the
reasons given by Lord Reed, I am not confident that this has been done in the
present case.

201. I would therefore dismiss the appeal on the substantive issue.

LORD CARNWATH (dissenting in part)

202. Like the other partial dissentients my views on the substantive issue have
wavered. In the end however I am persuaded by Lord Sumption that the appeal
should succeed on that issue for the reasons he gives (his paras 19-27).
Notwithstanding the force of Lord Reed’s alternative analysis, and the other
judgments in support, I do not propose to add anything of my own. It seems better
that Lord Sumption’s reasoning should stand as the single majority judgment on
this crucial issue. On the procedural point, by contrast, I find myself clearly on the

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side of the minority, agreeing wholly with the reasoning of Lord Hope on what I
regard as a point of considerable general importance (paras 134-159).

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