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Supreme Court Overturns Iranian Bank Embargo

In overturning an embargo on an Iranian bank  doing business within the UK market, the Supreme Court has ruled that there was neither a rational basis for singling it out nor any sufficient connection between the ban and the stated policy objective of hindering Iran’s nuclear weapons programme.

FactoryThe Treasury employed powers under the Counter-Terrorism Act 2008 to issue a direction requiring all persons operating in the UK financial sector not to have any commercial dealings with the bank. The direction, which effectively shut down the bank’s UK operations, was subsequently embodied in the Financial Restrictions (Iran) Order 2009 and was approved by Parliament.

The bank’s challenge to the order was dismissed by the High Court and the Court of Appeal. However, in upholding the bank’s appeal and setting aside the direction and the order which gave effect to it, the Court ruled by a majority that the direction did not adequately explain or justify why the bank had been singled out from other comparable Iranian financial institutions.

The justification for the direction subsequently put forward by the Treasury was in some respects inconsistent with that put before Parliament and the decision to target the bank was arbitrary and irrational and disproportionate to any contribution which the embargo could rationally make to discouraging Iran’s nuclear programme.

The bank had been given no opportunity to make representations prior to the ban, which was imposed without notice, and the Court ruled that the direction amounted to a violation of its rights to a fair hearing and to peaceful enjoyment of property, enshrined respectively in article six and article one, protocol one, of the European Convention on Human Rights.

In a separate judgment, the Court ruled that, in considering the appeal, it had been entitled to consider certain highly sensitive material in a closed hearing. That ‘closed material’, which had not been viewed by the bank or its legal representatives, had also been considered in private by the High Court and the Court of Appeal.