In Bank Mellat v HM Treasury [2013] UKSC 39, the Appellant (an Iranian bank with UK subsidiaries) appealed against a decision upholding measures taken by the Treasury to restrict its access to the UK financial market.

The Treasury had directed, under the Counter-Terrorism Act 2008, that all persons operating in the UK financial sector were prohibited from having any commercial dealings with the Appellant or its UK subsidiaries. This was because the Appellant had been identified as having assisted Iran’s nuclear weapons programme.

The Appellant argued that the order was irrational and disproportionate, and that the Treasury had failed to give adequate reasons for its decision. Further or in the alternative, the Treasury’s reasons were invalidated by irrelevant considerations or mistakes of fact. It also argued that the Treasury had failed to give it an opportunity to make representations before making the order, as required by both common law and the European Convention on Human Rights 1950.

The High Court and Court of Appeal both dismissed the appeal, however the Supreme Court allowed it.

The key question was whether the interruption of commercial dealings with the Appellant in the UK financial market was proportionate to the purpose of hindering Iran’s pursuit of its weapons programmes. The courts below had neither explained nor justified why the Appellant was singled out. Further, the courts’ justification for the order was different to that given by ministers when the order was laid before Parliament.

One of the central issues raised was that the lower courts found that the justification for the order was not a problem specific to the Appellant, but a problem with Iranian banks in general. However, the order made no attempt to impose restrictions on other Iranian banks. In that regard, the measure was arbitrary, irrational and disproportionate. The order was also found to be invalid on various procedural grounds.


Relations with Iran continue to cause concern. The EU and US both have extensive sanctions measures in place. Countries such as the UK also have national legislation in place which enables them to put restrictive measures in place. However, this case emphasises that such measures must be imposed lawfully, and will be overturned if they are not.

Note that Bank Mellat remains on the EU list of designated parties. This means that it is still subject to the restrictions imposed by the EU in respect of asset freezes and financial transactions.