Bank Mellat v Her Majesty's Treasury (No 1) [2013] UKSC 38

Facts

• The Treasury issued a direction that effectively froze the assets of Bank Mellat, an Iranian bank, within the UK.
• The direction was made under the legal framework allowing asset-freezing in response to national security and counter-terrorism concerns.
• Bank Mellat was not provided with sufficient information about the reasons for the asset-freezing order.
• Other Iranian banks continued to operate in the UK and were not subject to similar measures.
• Bank Mellat challenged the direction, arguing it violated the right to a fair hearing and lacked justification.

Issues

1. Whether Bank Mellat was afforded the right to a fair hearing regarding the asset-freezing measures imposed by the Treasury.
2. Whether the Treasury’s direction was proportionate and rationally justified in the context of national security concerns.
3. Whether adequate procedural safeguards, including disclosure of relevant information, were provided to Bank Mellat.
4. Whether the use of closed material procedures was consistent with the principles of a fair hearing.

Decision

• The Supreme Court held that the Treasury’s direction against Bank Mellat was unlawful.
• The Court found the process lacked procedural fairness due to insufficient disclosure, which prevented Bank Mellat from challenging the order effectively.
• It was determined that, although some information might be withheld on national security grounds, the total lack of meaningful disclosure rendered the process unfair.
• The direction was ruled irrational and disproportionate, as Bank Mellat was singled out without adequate justification while other Iranian banks operated freely.
• The Court cautioned against the excessive use of closed material procedures, stating they must not erode the right to a fair hearing.

Legal Principles

• The right to a fair hearing under Article 6 of the European Convention on Human Rights applies to asset-freezing measures and requires an independent and impartial tribunal.
• Interferences with fundamental rights for national security must be proportionate, rationally connected to a legitimate aim, and supported by sufficient evidence.
• Procedural fairness mandates adequate disclosure to allow affected parties to challenge restrictive measures, subject to national security limitations.
• Closed material procedures should be used only as a last resort and must not undermine the ability of parties to mount an effective challenge.

Conclusion

Bank Mellat v Her Majesty’s Treasury (No 1) [2013] UKSC 38 affirmed that even where national security is invoked, asset-freezing orders must comply with procedural fairness, allow for effective challenges, and be justified by evidence. The Supreme Court’s decision reinforces the requirements of proportionality, adequate disclosure, and judicial scrutiny in the use of such significant governmental powers.