Bank Mellat v HM Treasury (No 2)

Bank Mellat v HM Treasury (No 2) is a leading United Kingdom constitutional law case decided by the Supreme Court of the United Kingdom in 2013 concerning sanctions, miscarriages of administrative process, and judicial review of decisions made under the Counter-Terrorism Act 2008 and ministerial powers exercised in response to measures adopted by the United Nations Security Council and the European Union. The case involved Bank Mellat, a Tehran-based financial institution, challenging domestic measures that froze assets and prohibited certain transactions, raising issues touching on the UK Treasury, diplomatic relations with the Islamic Republic of Iran, and the reach of judicial scrutiny over national security determinations linked to international sanctions regimes.

Background

In the aftermath of the Iran–Iraq War and ensuing concerns about Iranian nuclear program, the United Nations Security Council adopted resolutions imposing targeted measures. The European Council implemented restrictive measures against Iran which the United Kingdom implemented through domestic instruments administered by Her Majesty's Treasury and the Office of Financial Sanctions Implementation. Bank Mellat, founded in Tehran, had been subject to UK measures restricting access to the London financial markets and prohibiting UK persons from engaging in business with it. Prior litigation included proceedings in the High Court of Justice and the Court of Appeal of England and Wales; the bank argued that the UK measures were ultra vires statutory powers derived from anti-terrorism and sanctions legislation, breached rights under the Human Rights Act 1998 and principles of administrative law articulated in cases such as Council of Civil Service Unions v Minister for the Civil Service and R (on the application of Bancoult) v Secretary of State for Foreign and Commonwealth Affairs.

Legal issues

The central legal issues were whether the Treasury's Direction and associated notices were lawful, whether procedural fairness and legitimate expectations owed to Bank Mellat were breached, whether the exercise of powers was compatible with obligations under the European Convention on Human Rights as incorporated by the Human Rights Act 1998, and whether deference to executive findings linked to national security and foreign policy precluded full judicial review. The case required the court to consider statutory interpretation of powers under secondary legislation implementing United Nations Security Council and European Union sanctions, the proper scope of proportionality and rationality review following authorities such as Associated Provincial Picture Houses Ltd v Wednesbury Corporation and R (Daly) v Secretary of State for the Home Department, and the relevance of extrinsic materials including evidence from United States and European Union institutions.

Judgment

The Supreme Court of the United Kingdom allowed the appeal in part, finding that the Treasury's Direction was unlawful because it failed to give adequate reasons and breached the bank's rights to property and procedural fairness under legislation and common law principles. The court held that while states and international bodies such as the United Nations Security Council and European Union may adopt measures for sanctions and that national authorities like the UK Treasury have obligations to implement them, domestic exercise of such powers remained subject to judicial scrutiny as in prior decisions by the House of Lords and the Supreme Court. Judges including Lord Neuberger and Lady Hale contributed majority reasoning that emphasized standards for rational decision-making and adequate disclosure.

Reasoning and legal principles

The court applied established principles of administrative law, emphasizing that even where national security and foreign policy concerns exist, the rule of law requires written reasons and a fair procedure. It engaged with the distinction between Wednesbury irrationality and proportionality review developed in cases such as R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions and R (Daly) v Secretary of State for the Home Department, concluding that the present statutory framework called for robust review of legality and reasoning rather than wholly deferential treatment. The judgment drew on comparative reference to jurisprudence from the European Court of Human Rights and national precedents like R (ProLife Alliance) v British Broadcasting Corporation to assess compatibility with rights and the adequacy of justification for interference with property rights and access to financial services. The court also clarified limits to implied powers and stressed transparency obligations when domestic instruments implement measures traceable to United Nations or European Union obligations.

Impact and significance

The decision is significant for its reinforcement of judicial oversight over executive implementation of international sanctions and the requirement for reasoned decisions affecting rights and assets, influencing subsequent practice by the UK Treasury, Financial Conduct Authority, and listing procedures in sanctions regimes. It has been cited in litigation concerning targeted sanctions against entities linked to states such as Syria and Russia, and informed policy reforms in the Office of Financial Sanctions Implementation and guidance under the Sanctions and Anti-Money Laundering Act 2018. The case is an important authority in the intersection of administrative law, human rights, and the domestic implementation of multilateral measures emanating from bodies like the United Nations Security Council and the European Union Council.

Category:United Kingdom administrative case law Category:2013 in United Kingdom case law