Bank Mellat v HM Treasury [2010] EWHC 1332 (QB)

Case No PTA/57/2009[2010] EWHC 1332 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 11/06/2010
Before
THE HONOURABLE MR JUSTICE MITTING
Between
BANK MELLATClaimantHER MAJESTY'S TREASURYDefendant
Jonathan Crow QC and Amy Rogers (instructed by Stephenson Harwood) for ClaimantJonathan Swift QC and Robert Wastell (instructed by the Treasury Solicitor's Department) for DefendantMartin Chamberlain and Melanie Plimmer (instructed by the Special Advocates Support Office) Special AdvocatesHearing Hearing dates: 24 and 25 May 2010
JudgmentThe Hon. Mr Justice Mitting :Background
[1]On 9 October 2009 Her Majesty’s Treasury made the Financial Restrictions (Iran) Order 2009 SI 2009 No 2725 in the exercise of powers conferred by Schedule 7 to the Counter-Terrorism Act 2008. The Order was laid before Parliament at 10am on 12 October and came into force at 10.30am on that date. A written Ministerial Statement by the Exchequer Secretary to the Treasury was laid before both Houses of Parliament at the same time. The Order directed that all persons operating in the UK financial sector (“relevant persons”) must not enter into or continue to participate in any transaction or business relationship with Bank Mellat and Islamic Republic of Iran Shipping Lines (“designated persons”), with immediate effect. Because the direction contained a requirement that relevant persons ceased business with designated persons, it was required, by paragraph 14 of Schedule 7 to the 2008 Act, to be subject to the affirmative resolution procedure within 28 days. The Order was approved by the Commons Committee on Delegated Legislation on 28 October 2009 and by the House of Lords Standing Committee on 2 November 2009. Unless revoked, it lasts for one year.[2]Section 63(2) permits any person affected by the decision of the Treasury to make the Order to apply to the High Court to set it aside. Bank Mellat is such a person. By a claim form issued on 20 November 2009 the bank applied to set the decision aside. It is one of Iran’s largest privately owned commercial banks. It has some 1800 branches in Iran, Turkey and South Korea and holds some 33 million accounts for over 19 million customers. It has subsidiaries in Malaysia and Armenia and a 60% owned subsidiary, Persia International Bank plc. (PIB), in the United Kingdom. The Treasury initially believed that 80% of the voting rights of the shares in the bank were exercised, or capable of being exercised, by the Iranian Government: see paragraph 75 of the further revised witness statement of James Robertson, head of the Financial Crime Team in the International Finance Directorate of the Treasury. This is disputed by the bank. Younes Hormozi, an executive director of the bank, who has made four witness statements for the purpose of these proceedings, has explained that the Iranian Government only exercised voting rights over its 20% share holding – shortly to be reduced to 15%, as a result of a capital raising exercise – and does not seek to interfere in or influence the commercial activities of the bank. I accept Mr Hormozi’s explanation. A significant part of the business of the bank is international trade finance. As Mr Hormozi explained in paragraph 65 of his third witness statement, in the year to March 2009, it issued letters of credit with an aggregate value of about USD 11 billion. Of this total, about 25% (2 billion euros) appear to have been issued in respect of business transacted through the United Kingdom: Mr Hormozi explained in paragraph 19 of his first witness statement that PIB was the advising/negotiating/reimbursing bank on letters of credit issued by the bank for 1.98 billion euros in the 2008 financial year and 0.97 billion euros in the first 6 months of the 2009 financial year. In the financial year to March 2010, the aggregate value of letters of credit issued by the bank fell to USD 6 billion. I accept Mr Hormozi’s belief, expressed in paragraph 65 of his third witness statement, that a substantial contribution to the decline in this class of business has been the impact of the Order. Unsurprisingly, this has caused a loss in revenue to the bank, put by Mr Hormozi at USD 25 million. Paragraph 17 of Schedule 7 to the 2008 Act permits the Treasury to grant a licence to exempt Acts specified in the licence from the requirement that relevant persons cease business with the bank. Since the Order was made, a number of licences have been granted, but only to permit relevant persons to fulfil existing contracts with the bank. None have been granted for new business. The Order has also had the effect of preventing the bank from drawing 183 million euros in call and time deposit accounts at PIB. In this respect, the Order has had the same effect as an asset freeze. The effect of the Order has been that which was intended: to shut the bank out of the UK financial sector. There has been some debate about the extent of the impact on the bank’s business. Mr Swift QC for the Treasury has submitted that much of the impact of the Order could have been mitigated by conducting replacement business in other markets. Mr Hormozi states that there has been significant reputational damage to the bank and that others, not directly affected by the Order, such as Reuters Dealing Services have withdrawn vital services from the bank outside the UK. Mr Swift has also submitted that the impact upon the bank’s “possessions”, for the purposes of Article 1 of the First Protocol to the ECHR (A1P1), has not been as great as the total impact upon its business. That may, in principle be right, but the effect has none the less been significant: since 12 October 2009, the bank has been unable to make profitable use of the goodwill which it has established in the United Kingdom – undoubtedly a possession for the purposes of A1P1. Accordingly, it has not been entitled to the peaceful enjoyment of that possession. It is unnecessary for me to determine the precise extent to which the bank’s enjoyment of its possessions and its business have been affected by the Order. On any view, the effect has been substantial and suffices to require all of the bank’s challenges to the Order to be addressed and determined.

The grounds of challenge

[3]The bank’s principal grounds of challenge, though superficially manifold, can be distilled into two: i) Procedural: the Treasury was required by domestic law and by the procedural requirements of A1P1 and Article 6(1) ECHR to give the bank an opportunity to make representations before making the Order. ii) Substantive: the Order was unlawful, because the statutory conditions for a direction requiring relevant persons to cease business with the bank were not fulfilled and/or because it is incompatible with the bank’s rights under A1P1 and so unlawful under section 6 of the Human Rights Act 1998. Mr Crow QC also challenged the rationality of the Order, but as I explain below, I consider that this challenge falls within and adds nothing to the challenge to the lawfulness of the order.

The procedural challenge

[4]Schedule 7 to the 2008 Act permits the Treasury to give a direction under the Schedule if one of three conditions is met in relation to a country. Paragraph 1(4) prescribes the third condition:
“The third condition is that the Treasury reasonably believe that – (a) the development of production of nuclear, radiological, biological or chemical weapons in the country, or (b) the doing in the country of anything that facilitates the development of production of any such weapons, poses a significant risk to the national interests of the United Kingdom”
. Under paragraph 3(1)(c) a direction may be given to all persons operating in the UK financial sector. Paragraph 9 permits a direction to impose requirements in relation to transactions or business relationships with the government of the country or persons carrying on business or resident or incorporated in the country or all of them. Paragraphs 10-13 contain an escalating list of requirements: enhanced due diligence, ongoing monitoring, systematic reporting and limiting or ceasing business. Paragraph 14 requires that an order containing a requirement limiting or ceasing business must be laid before Parliament after being made and be approved under the affirmative resolution procedure within 28 days. If not so approved, it then ceases to have effect. Section 63(2) permits any person affected by the decision to make an Order under Schedule 7 to apply to the High Court to set aside the decision. In determining whether or not to set the decision aside, the Court must apply the principles applicable on an application for judicial review: section 63(3). Chapter 2 of Part 6 contains detailed enabling provisions for the procedure by which the application is to be determined.[5]Mr Crow relies on a long line of authority, from Cooper v Wandsworth Board of Works [1863] 14 CB (NS) 180 to R v Secretary of State for the Home Department ex parte Doody [1994] 1 AC 531, to assert the well established principle that natural justice will in many cases require that a person likely to be adversely affected by an administrative decision must be given an opportunity to make representations on his own behalf before it is made. He submits that, on the facts of this case, there was not such a degree of urgency, nor any need to pre-empt avoidance action by the bank as would justify making the Order without giving the bank the opportunity of making representations beforehand. In paragraph 90 of his witness statement, Mr Robertson opines that it would not have been appropriate to do so, because it would have given the bank the opportunity to re-arrange business relationships or transactions within the UK to avoid or lessen the impact of the Order. I am unconvinced by Mr Robertson’s reasoning: if the bank could have taken avoidance action before the Order was made, it could do so just as well after – indeed, as noted above, Mr Swift suggested that it should have done so to mitigate the impact of the Order upon its business. But there is a more powerful reason of principle which defeats Mr Crow’s contention: the procedure for making the Order is laid down by the 2008 Act and contains no provision for the opportunity for affected persons to make representations before it is made. It is readily understandable that no such provision was made. Although in this case, I am only concerned with a direction made in the circumstances set out in paragraph 1(4) of Schedule 7 in respect of a bank, there are many other circumstances in which directions could be made when Parliament cannot have intended that there should be an opportunity for affected persons to make representations. They include individuals engaged in terrorist financing or money laundering activities (paragraphs 1(3)(c) and 9(1)(c)); and governments reasonably believed to be engaged in the development or production of nuclear etc weapons (paragraphs 1(4)(a) and 9(1)(b)); and the manifold persons in the UK financial sector to whom the direction is given (paragraph 3(1)). As Mr Crow acknowledges, a duty to permit prior representations to be made could only arise in particular circumstances – for example, when there was no reason to believe that avoiding action would be taken by an affected person. Such an exception would be judge-made. In BAPIO v Secretary of State for the Home Department [2007] EWCA Civ 1139, Sedley LJ pointed out the difficulties in introducing a judge-made exception in paragraphs 44-47 of his judgment. His reasoning, shared by Maurice Kay and Rimer LJJ, led them to hold that where Parliament has conferred a rule making power on the executive, subject to Parliamentary control, it was not generally for the courts to superimpose additional procedural safeguards: paragraphs 58 and 65. Their observations form part of the ratio decidendi and would bind me in relation to a rule making power. There can be no difference in principle between such a power and an executive Order, such as the Order in issue here. For that reason, I reject Mr Crow’s proposition and conclude that, under domestic law, the only procedural requirements which must have been satisfied for the Order to have effect and to remain effective were those prescribed in Schedule 7. The bank’s right to make representations, somewhat theoretical though it may have been, was indirect and was at the stage at which Parliament considered whether or not to affirm the Order.[6]Mr Crow submits that A1P1 requires that an opportunity should have been given to the bank to make prior representations. The short and sufficient answer to that proposition is to be found in paragraph 45 of the judgment of the Strasbourg Court in Jokela v Finland [2003] 37 EHRR 26:
“Although Article 1 of Protocol 1 contains no explicit procedural requirement, the proceedings at issue must also afford the individual a reasonable opportunity of putting his or her case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision. In ascertaining whether this provision has been satisfied a comprehensive view must be taken of the applicable procedures”
. Section 63 is the means by which the bank is afforded a reasonable opportunity of effectively challenging the measures contained in the Order – by the claim which it has brought to this Court. It is common ground that I must decide, for myself, whether the Order is “proportionate” under paragraph 9(6) of Schedule 7 and under A1P1. By that means, the UK’s obligations to the bank under the procedural requirements of A1P1 are fulfilled.[7]Mr Crow further contends that, by making the Order, the Treasury determined the bank’s civil rights and obligations, so that the requirements of Article 6(1) apply to its decision. Although he does not expressly make the further submission that, by affirming the Order, Parliament also determined the bank’s civil rights and obligations, it must follow from his first proposition, that he does. He relies on Micallef v Malta [2010] 50 EHRR 37 and R (Wright) v Secretary of State for Health [2009] 1 AC 739 to found his submission. I accept his submission and the bank’s evidence that the impact of the Order was immediately damaging and is likely to have long term effects upon its business. Consequently, I have always accepted that the bank’s challenge under section 63 to the decision to make the Order attracts the protection of Article 6(1). That is because there is, now, a dispute over the bank’s civil rights. It is a precondition of the application of Article 6(1) that there should be such a dispute – as the Court affirmed in Micallef at paragraph 74:
“The Court reiterates that for Article 6(1) in its “civil” limb to be applicable, there must be a dispute over a “civil right” which can be said, at least on arguable grounds, to be recognised under domestic law…”
When the Order was made and affirmed there was no such dispute. It is the Order which gives rise to the dispute.[8]If that analysis is wrong, the decision to make and affirm the Order must be part of a process of determination of the bank’s civil rights of the kind analysed by Lord Clyde in R (Alconbury) Ltd v Secretary of State for the Environment [2003] 2 AC 295 in paragraphs 145 to 160. For present purposes, the conclusion to be drawn from his reasoning is that a hybrid procedure involving executive decision making can be compatible with Article 6(1). On that analysis, the procedure for determining the bank’s civil rights in this case is hybrid: an executive decision affirmed by Parliament, subject to later challenge before a Court. The procedure laid down in CPR Part 79, adapted to accommodate the bank’s rights under Article 6(1) is adequate to give effect to those rights. Even if, exceptionally, the impact of the Order was such as to cause irreparable damage to the bank, unless its challenge to the Order was determined more quickly than the procedure set out in Part 79 permitted, it could apply for judicial review. By close analogy with the control order regime, judicial review is not excluded: BX v Secretary of State for the Home Department [2010] EWCA 481 paragraphs 24 to 27. An interim injunction or mandatory or prohibitory order could be obtained in such proceedings.[9]If both of those propositions are wrong, the bank’s challenge must, ultimately, be to the compatibility of the regime for making and affirming the Order contained in paragraph 1(4) and 14 of Schedule 7 to the 2008 Act. Such a challenge would raise constitutional issues. It could only be made by a claim for a declaration of incompatibility under section 4 of the Human Rights Act 1998. No such claim has been made in these proceedings.

The substantive challenge

[10]Two conditions had to be satisfied before the Treasury could make the[11]The first condition requires the Treasury reasonably to believe two things: that Iran is developing nuclear weapons or that things are being done in Iran which facilitate the development of nuclear weapons; and that such development poses a significant risk to the national interests of the United Kingdom. Although the bank, for understandable reasons, does not formally admit either matter, they are not seriously in issue and I can deal with them shortly. Mr Robertson sets out the reasons for believing that Iran is developing nuclear weapons or taking steps to facilitate their development in paragraphs 10 to 52 of his witness statement. I accept his evidence and the conclusions which he draws from it, of which the following is a bare summary. On 10 January 2006, Iran resumed the enrichment of uranium at its Isfahan facility. Efforts by the International Atomic Energy Authority (IAEA) and the UK, France, Germany, the US, China and Russia to persuade it to desist have failed. Iran has not heeded UN Security Council Resolution 1696 adopted on 31 July 2006 which demanded that it suspend the enrichment of uranium and the reprocessing of plutonium. Nor has it been dissuaded from doing so by the economic sanctions imposed by Resolutions 1737, on 27 December 2006, 1747, on 24 March 2007 and 1803, on 3 March 2008. The sanctions imposed included the freezing of the funds, financial assets and economic resources of Iranian individuals and entities listed in the last three Resolutions. The European Union has also adopted collective measures aimed at curbing proliferation activities similar to those adopted by the Security Council. None of this appears to have had any effect upon Iran’s resolve. On 21 September 2009, it notified the IAEA that it was building a second “pilot fuel enrichment facility” at an undisclosed location and in November 2009 announced its intention to build another ten enrichment plants, with a capacity 250 times more than current production. It has also developed and improved a medium range missile capable of delivering a nuclear weapon. The assessment of the Current Intelligence Group – a Whitehall group which analyses and interprets intelligence reported by other government agencies – is that Iran is pursuing the technical capabilities to develop a nuclear weapon and is relatively far advanced in producing sufficient quantities of fissile material to produce a weapon. This summary of the information available to the Treasury demonstrates, beyond argument, that its belief that Iran is developing a nuclear weapon and/or doing things which facilitate the development of such a weapon is reasonable.[12]The reasons for believing that those developments pose a significant threat to the national interests of the United Kingdom are summarised in paragraph 55 of Mr Robertson’s statement. The development of nuclear weapons by Iran could promote a destabilising arms race in the Middle East, posing a threat to UK interests there and to its diplomatic personnel and installations. It could prompt military action to deny Iran a nuclear capability, which might set off a wider conflict. Any of these events could disrupt global oil and gas supplies, which would have a highly detrimental effect on the economic wellbeing of the United Kingdom. For those reasons, I accept that the Treasury reasonably believed that the development of nuclear weapons or the doing of anything facilitating their development by Iran posed and poses a significant threat to the national interests of the United Kingdom.[13]The lawfulness of the Order accordingly turns on the question whether the requirements imposed by it are proportionate, having regard to the risk posed to the national interests of the United Kingdom. To answer that question, I must first determine what Parliament meant by “proportionate” and by reference to what considerations or interests the requirements must be proportionate. Mr Crow submits that Parliament intended the word to have the same meaning as it has in the jurisprudence of the Strasbourg Court. Section 19 of the Human Rights Act requires a Minister promoting a Bill to make a written statement to the effect that it is compatible with Convention rights. Although I have not been shown the written statement in relation to the 2008 Act, I have no doubt that one was made - not least because in section 67(6) Parliament took care to ensure that the procedural rules about disclosure would be compliant with Article 6. Proportionality as a legal concept has been introduced into English law mainly via the law of the European Union and the jurisprudence of the Strasbourg Court. The nearest approach of the common law is the three stage test proposed by Lord Clyde in de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at p. 80:
“ Whether: (i) the legislative object is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right of freedom are no more than is necessary to accomplish the objective.”
To that must be added a requirement to balance the interests of society with those of individuals: Huang v Secretary of State for the Home Department [2007] 2 AC 167 paragraph 19. For reasons which I will explain, I do not believe that this test is exactly what Parliament intended in paragraph 9(6). All of these considerations lead me to accept Mr Crow’s proposition: Parliament used the word “proportionate” in the sense in which it is used in Luxembourg and Strasbourg.[14]The principle has not been stated with the clarity which would be expected of an English judge. It was addressed implicitly in the seminal case of Sporrong & Lönnroth v Sweden [1982]5 EHRR 35 at paragraph 69:
“The court must determine whether a fair balance was struck between the demands of the general interests of the Community and requirements of the protection of the individual’s fundamental rights. The search for this balance is inherent in the whole of the Convention and is also reflected in the structure of Article 1”
In James v United Kingdom [1986] 8 EHRR 123 at paragraph 50, the Court put it differently, but no more precisely:
“Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim “in the public interest”, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised”
. The Court appeared to treat the approach in Sporrong & Lönnroth as equivalent. In Bosphorus Hava Yollari Turizm ve Ticaretas v Minister for Transport, Energy and Communications, Ireland & the Attorney General Case [1996] ECR-I 3953 C-84/95, the Luxembourg Court held that Irish authorities were entitled to detain an aircraft owned by an undertaking based in Yugoslavia, but leased to a wholly innocent Turkish operator, for three years, pursuant to a Community Regulation imposing economic sanctions on Yugoslavia to compel it to desist from intervening in the conflict in Bosnia-Herzegovina. It did not formulate a precise test, but clearly eschewed any proposition that interference with the Turkish company’s property must be no more than was necessary to accomplish the objective of the measure taken in the public interest:
“22. Any measure imposing sanctions has, by definition, consequences which affect the right to property and the freedom to pursue a trade or business, thereby causing harm to persons who are in no way responsible for the situation which led to the adoption of the sanctions. 23. Moreover, the importance of the aims pursued by the regulation at issue is such as to justify negative consequences, even of a substantial nature, for some operators”
. It then described the developments in Bosnia which the economic sanctions imposed were designed to prevent. “25. It is in the light of those circumstances that the aim pursued by the sanctions assumes a special importance, which is, in particular…to dissuade the Federal Republic of Yugoslavia from “further violating the integrity and security of the Republic of Bosnia-Herzegovina and to induce the Bosnian Serb Party to cooperate in the restoration of peace in this Republic”. 26. As compared with an objective of general interest so fundamental for the international community, which consists in putting an end to the state of war in the region and to the massive violations of human rights and humanitarian international law in the Republic of Bosnia-Herzegovina, the impounding of the aircraft in question, which is owned by an undertaking based in or operating from the Federal republic of Yugoslavia, cannot be regarded as inappropriate or disproportionate.” The Advocate General put it even more strongly in paragraph 65 of his opinion:
“If it were demonstrated that such interference was wholly unreasonable in the light of the aims which the competent authorities sought to achieve, then it would be necessary for the this Court to intervene.”
[15]These citations suggest that the European proportionality test is wholly consistent with the first two of Lord Clyde’s propositions – that the legislative objective is sufficiently important to justify limiting a fundamental right and that the measures designed to meet the objective are rationally connected to it; but they do not suggest that the third test – that the means used are no more than is necessary to accomplish the objective – is always applicable. On the contrary, when very important public interests are in play, interference in private rights well beyond the minimum necessary to safeguard those interests may be proportionate. It is impossible to formulate a precise test from the imprecise language used by the European Courts. The more so when, as the Strasbourg Court accepted when it considered the Bosphorus Airways case [2006] 42 EHRR 1, that, when determining whether a fair balance had been struck, “the state enjoys a wide margin of appreciation with regard to the means chosen to be employed and [my emphasis] to the question of whether the consequences are justified in the general interest for the purpose of achieving the objective pursued”: paragraph 149.[16]All that I can do is to apply Lord Clyde’s first two tests and follow the European Courts’ approach to the third. In so doing, I must balance the national interests of the United Kingdom with those of the bank, as required by the Strasbourg Court in Sporrong and Bosphorus and the House of Lords in Huang. It is obvious that the first two tests are satisfied: the objective of the Order – to inhibit the development of nuclear weapons by Iran - is sufficiently important to justify interfering with property rights. The measure – excluding the bank from the financial sector in the United Kingdom – is rationally connected to it. To produce or facilitate the production of nuclear weapons, Iran needs to import uranium, centrifuges and, no doubt, a host of other materials, from abroad. To do so, it must pay for them. To pay for them, it will require, or at least find convenient, to use banking facilities, in particular the issuing and confirmation of letters of credit. An Iranian importer of such material is likely to turn to an Iranian bank with an international presence, to issue letters of credit. Cutting off one such bank from one of the principal financial markets in which such business may be transacted is clearly rationally connected to the inhibition of the development of nuclear weapons. Mr Crow objects that such a conclusion would only be rational if there were evidence that the bank had provided trade finance or banking facilities for an importer of such materials. It is, in fact, common ground that it did: to Novin Energy Company (Novin). Novin was designated by the Security Council under Resolution 1747 adopted on 24 March 2007 as a company which “operates within AEOI (the Atomic Energy Organisation of Iran) and has transferred funds on behalf of AEOI to entities associated with Iran’s nuclear programme”. By reason of the designation and for reasons set out in the closed judgment, I accept that Novin was an AEOI financial conduit and did facilitate Iran’s nuclear weapons programme. I accept the evidence of Mr Hormozi and of Hassan Azadi, General Manager of the Inspection and Monitoring Department and Compliance Officer of the bank, that once Novin was designated, the bank ran down and eventually ceased its banking relationship with Novin and that it has in place a mechanism, which it operates conscientiously, to ensure that it does not provide banking facilities to Security Council designated entities and individuals. The Treasury’s case is not that the bank has knowingly assisted Security Council designated entities after designation, or even that it has knowingly assisted entities liable to be designated, but which have not yet been, by providing banking facilities to them, but that it has the capacity to do so, has in one instance done so and is likely to do so in the future. The fundamental justification for the Order is that, even as an unknowing and unwilling actor, the bank is, by reason of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance. Concealment of the true nature of imported goods paid for by a letter of credit is straight forward: all that an issuing bank sees are documents. On presentation of compliant documents describing innocent goods, the bank must pay, whatever the nature of the goods in fact imported. Access to the international financial system is, as the Financial Action Task Force reported on 18 June 2008, essential for what it describes as “proliferators”. I accept Mr Robertson’s conclusion, in paragraph 57 of his statement, that Iran’s banking system provides many of the financial services which underpin procurement of the raw materials and components needed for its nuclear and ballistic missile programmes.[17]With one qualification, I also accept the Treasury’s reasons for making the Order, as explained in paragraph 73 to 75 of Mr Robertson’s statement. The Treasury was satisfied that the bank had provided financial services to companies engaged in Iran’s nuclear weapons programme. A direction to cease business with the bank would restrict the financial services available to entities involved in that programme by denying them access to the UK financial sector through the bank and so would have the maximum possible adverse impact on the programme of the measures available under Schedule 7 in relation to the bank. Suspect entities would be likely to find it difficult to replace existing arrangements through the bank. Some pressure would be brought to bear on the Iranian Government – though not, as Mr Robertson explained, because it has controlling voting rights in the bank.[18]Given that conclusion, it does not greatly matter that the Treasury have, in fact, established to my satisfaction that the bank has provided banking facilities (albeit, not for the importation of suspect materials) to a company which has played some part in Iran’s nuclear weapons programme, Doostan International. Mr Hormozi admits, in paragraph 28 of his fourth witness statement, that Doostan and its Managing Director Mr Shabani have accounts with it. They have been investigated and nothing unusual or suspicious has been found. I understand that banking confidentiality and Iranian law prevents the bank from making any more specific statement about the conduct of the accounts than that. I accept that the bank’s enquiries were conducted in good faith and did not reveal anything which caused the bank to be suspicious. Mr Shabanihas signed a statement in which he says that he has never been involved in the importation of materials or products related to nuclear, chemical or biological activities. For reasons which are set out in the closed judgment, I am not satisfied that Mr Shabani has made a full disclosure of his business activities and am satisfied that he and Doostan have played a part in the Iranian nuclear weapons programme. This conclusion is not determinative or even of great significance in my determination of the issue of proportionality. It is merely a small example of a risk that is, in any event, obvious: that, however careful the bank may be, the bank’s facilities are open to use by entities participating in Iran’s nuclear weapons programme.[19]For the reasons set out above, I am satisfied that the requirements imposed by the Order are rationally connected to the objective of inhibiting the development of nuclear weapons in Iran and, so, the risk to the national interests of the United Kingdom.[20]I am also satisfied that those requirements are proportionate in the sense which I have struggled to explain. I give great weight to the views of the Treasury, endorsed by Parliament, about the risk to the national interests of the United Kingdom identified above, as I am required to, by very close analogy, by the observations of the House of Lords in relation to national security in Secretary of State for the Home Department v Rehman [2003] 1 AC 153. By analogy with the margin of appreciation afforded by the Strasbourg Courts to national political authorities, I must also give great weight to the judgment of the Treasury, affirmed by Parliament, that the national interests of the United Kingdom require that the bank be excluded from the UK financial sector. Ultimately, however, I must reach my own decision about that issue. I agree with the Treasury’s judgment. In my opinion, the risk of very great harm to vital national interests justifies the imposition of a severe and costly inhibition on the business of the bank which will entail long-term damage to its goodwill in the United Kingdom. However the test is phrased – fair balance, reasonable relationship of proportionality, justified or not manifestly unreasonable – I am satisfied that it is fulfilled. Even if the stricter test propounded by Lord Clyde in de Freitas applies, I am also satisfied that it is fulfilled. For the reasons explained above, there really is no other reasonably practicable means of ensuring reliably that the facilities of an Iranian bank with international reach will not be used for the purpose of facilitating the development of nuclear weapons by Iran.[21]In reaching that conclusion, I have not taken into account the banking services claimed to have been provided to Mr Taghizadeh and Mr Esbati, to which Mr Robertson refers in paragraph 70 of his witness statement. I accept Mr Hormozi’s evidence that when the bank undertook an electronic search of its database against those names, it found over 13,000 customers called Taghizadeh and 257 called Esbati. By a letter dated 27 April 2010, the bank’s solicitors asked for further information about them, in particular, their first names. By a letter dated 11 May, the Treasury Solicitor stated, correctly, that the Treasury was unable to provide the additional information sought. Just before the hearing, this situation changed. The lateness of the change was, I am satisfied, not the responsibility, still less the fault, of the Treasury. On the morning of the first day of the hearing, Mr Swift gave the first names of the two men to Mr Crow. The bank conducted an immediate further electronic search, which revealed that there were 150 Taghizadehs and 20 Esbatis with the identified first names. On instructions, Mr Crow stated that, to discover enough about the operation of the accounts to attempt to refute the Treasury’s case, a manual search of paper records would have to be undertaken of all, or a substantial number of, the accounts - a task which would take 80 man days. Mr Swift submitted that there were means by which the difficulty of the task and the time required for it could be reduced. It is simply impossible for me to determine which side is right. In consequence, I cannot, for the purposes of Article 6, even decide whether the bank have been given sufficient information to enable them to attempt to refute the Treasury’s case about these two men. If the issue were to be determinative of the claim, I might well have had to have adjourned the hearing to permit the bank however much time it needed to attempt the exercise. Because it is not determinative of the claim, no good purpose would be served by doing so. I am not satisfied that, on the present state of information, I could fairly decide that the bank had provided banking facilities and services to the two men which served the nuclear weapons programme. Accordingly, Article 6 requires me to leave this issue out of account.[22]Mr Crow submitted that the Treasury had given inadequate reasons for the decision to make the Order. I disagree. The written Ministerial Statement of 12 October 2009 gave an adequate summary of the reasons, which was repeated by Ministerial Statements to both Houses of Parliament. Expanded reasons have been given in the statement of Mr Robertson. The principal purposes of giving reasons – to explain why a decision was made and to permit it to be challenged – have been amply fulfilled.

Conclusion

[23]For the reasons given, I am satisfied that the Order was procedurally and substantively lawful and dismiss the bank’s challenge to it.

Order

it had reasonably to believe that the development or production of nuclear etc weapons in Iran or the doing in Iran of anything which facilitated the development or production of such weapons posed a significant risk to the national interests of the United Kingdom; and the requirements imposed by the direction had to be proportionate, having regard to the risk to the national interests of the United Kingdom. If either condition was not satisfied, the Order would be unlawful. Neither the Treasury, when making the Order, nor Parliament when affirming it, has any power to make an Order which does not fulfill those conditions.

Cited in 4 later judgments