High Court rules Bank Mellat damages claim should proceed

The High Court has ruled that a $4bn damages trial brought by Iran's Bank Mellat against the Treasury should proceed after it rejected the UK government's attempt to delay the hearing.

Bank Mellat is suing the government for losses after it succeeded in 2014 in challenging a 2009 Treasury order prohibiting UK financial institutions from doing business with the Iranian lender - in effect shutting it out of the UK financial sector - because of its alleged links to Tehran's nuclear programme.

The Treasury then argued that the bank suffered no irrecoverable loss as a result of a diminution of its subsidiaries' earnings and that it had not acted in a way that was incompatible with the bank's rights under the European Convention on Human Rights as well as common law.

The government also contended that the only possessions that the bank could have lost as a result of the order were "unperformed concluded transactions" and "marketable goodwill represented by or referable to any such unperformed concluded transactions".

But Mr Justice Flaux has ruled against the Treasury on all three counts. He decided that because the Supreme Court had already ruled that the Treasury did violate the bank's rights under the convention and the UK's human rights act the issue could not be reopened.

Since this had been determined, damages should be recoverable for any loss and the bank should have the right to claim for damages as a consequence of the unlawful interference.

"This includes consequential losses such as the loss of future earnings or profits, not constrained by whether what is claimed by way of loss is itself a 'possession', but only by whether the loss claimed was caused by the unlawful interference with the relevant possessions which the Court has found," Zaiwalla and Co, the solicitors, said.

The bank claims its biggest loss of $1.3bn was via commission on its foreign currency-denominated letters of credit business.

Sarosh Zaiwalla, senior partner at the law firm, said: "Time and again, the courts have decided that a decision made without regard to the principles of natural justice is void.

"In the case of HM Treasury, the judgment of Mr Justice Flaux confirms this and supports the bank's position that the judgment of the Supreme Court could not be clearer - the 2009 order by the Treasury against Bank Mellat was unlawful."

The Treasury accepted the bank's description of the hearing but declined to comment on an ongoing case beyond saying its lawyers would continue to "robustly fight our corner".

Bank Mellat's victory in the Supreme Court attracted controversy because the UK's highest court had sat in private for the first time.

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