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Overseas Bank Fights ‘Irrational’ Nuclear Proliferation Sanctions

In a civilised democracy it is fundamental that anyone harmed by executive action taken by the state is entitled to know the reason why. As one case concerning an overseas bank that had its assets frozen proved, however, the international fight against nuclear proliferation can provide a rare public interest exception to the rule.

The bank was based in a country that had been made the subject of international sanctions on the basis that it was seeking to develop a nuclear arsenal. HM Treasury issued a financial restrictions order that had a very serious impact on the bank’s business, both in the UK and abroad.

The Supreme Court subsequently overturned that order on the basis that it was both procedurally and substantively unfair and proceedings were afoot whereby the bank was seeking compensation for financial losses arising from the order. However, HM Treasury had issued two further orders, the last of which was only revoked after it was superseded by restrictions imposed by the European Union.

In challenging the lawfulness of the later orders, the bank claimed, amongst other things, that its human rights to a fair hearing and to freely enjoy its private property had been violated. It was said that the orders were irrational, discriminatory and disproportionate and breached EU principles concerning free movement of capital. HM Treasury, however, was adamant that the procedures followed were fair and that the orders were necessary to prevent nuclear proliferation.

During a preliminary hearing, held behind closed doors, HM Treasury sought permission to withhold from the disclosure that normally takes place in litigation certain sensitive information (the closed material) that it wished to rely on in its defence. Although the bank had been informed of the gist of some of the closed material, it argued that was not sufficient to enable it to fairly pursue its claim.

In ruling on that issue, the High Court noted that it was vital that the bank should be able to understand the factual basis of HM Treasury’s case. Following analysis of the closed material in private, the Court ordered disclosure of those parts of it that were essential to achieving a fair trial. HM Treasury was, however, excused in the public interest from disclosing other parts of the closed material.