The Commercial Court has handed down its judgment on three preliminary issues in Bank Mellat v HM Treasury, ruling in favour of the bank.
The Supreme Court had previously ruled that the Financial Restrictions (Iran) Order 2009, the effect of which was to shut the bank out from the UK financial sector, was unlawful (Bank Mellat v HM Treasury (No. 2) [2013] UKSC 39).
In the present damages action brought by the bank against the Treasury for damages caused by the 2009 Order, Flaux J held as follows:
- The Treasury could not contend that it did not act in a way which was incompatible with a European Convention right when a majority of the Supreme Court had decided that it did. Lord Sumption had in mind that the bank’s case was that the 2009 Order was incompatible with its right to peaceful enjoyment of its possessions and thus unlawful under section 6(1) of the Human Rights Act 1998. Moreover, Lord Sumption referred to the principles of rationality and proportionality as they had been developed in human rights law.
- The Strasbourg jurisprudence generally recognised a rule equivalent to the English law rule against recovery of reflective loss, unless there were exceptional circumstances. Since Persia International Bank Plc, of which the bank held 60%, could not have brought a claim against the Treasury under the Human Rights Act or at common law, for the purposes of the Strasbourg jurisprudence there were exceptional circumstances here. Mellat Bank could therefore pursue a claim against the Treasury for diminution in the value of its shareholding in Persia Bank.
- The Treasury could not limit the damages recoverable by the bank by arguing that such damages should be restricted to those relating to “possessions”. The issue as to what damages were recoverable depended on issues of causation. These included whether the damages claimed were demonstrably and directly caused by the violation of Article 1 of the First Protocol to the European Convention on Human Rights. This was an issue for the full trial, not to be determined at the preliminary issue stage.
Bank Mellat v HM Treasury [2015] EWHC 1258, 6 May 2015
