Facts
- Bank Mellat, an Iranian bank, was subject to a UK Treasury direction prohibiting UK financial institutions from conducting any transactions with it.
- The direction was issued under the Counter-Terrorism Act 2008 to prevent Iran from acquiring nuclear weapons.
- Bank Mellat challenged the direction, arguing that it was unlawful, discriminatory, and disproportionate.
Issues
- Whether the Treasury's direction pursued a legitimate aim.
- Whether the measure was rationally connected to that aim.
- Whether the measure was necessary to achieve the objective.
- Whether the direction struck a fair balance between the rights of Bank Mellat and the public interest.
- Whether sufficient justification and evidence supported the singling out of Bank Mellat.
Decision
- The Supreme Court found in favour of Bank Mellat.
- The Court held that the direction was unlawful because it was disproportionate.
- The Treasury did not sufficiently justify singling out Bank Mellat, nor did it demonstrate that the direction was the least restrictive means to achieve the stated objective.
- The direction failed several components of the proportionality test, particularly with respect to rational connection, necessity, and fair balance.
- The Court emphasised the need for careful evidence and reasoned justification when imposing drastic financial measures.
Legal Principles
-
The Court articulated a structured four-part proportionality test for asset-freezing measures:
- Is there a legitimate aim?
- Is the measure rationally connected to the aim?
- Is the measure necessary for achieving the aim?
- Does the measure strike a fair balance between individual rights and the public interest?
-
Asset-freezing measures require rigorous scrutiny and clear justification, especially when they interfere with fundamental rights.
-
The judiciary retains an important role in reviewing executive action, even in national security contexts.
-
Consideration of less restrictive alternatives is essential in proportionality assessments.
Conclusion
The Supreme Court held that the asset-freezing direction against Bank Mellat was unlawful due to a lack of proportionality and inadequate justification, establishing a structured proportionality test that serves as a standard for scrutinising financial sanctions impacting individual rights.