Bank Mellat v HM Treasury (UK Supreme Court, 2013)

Bank Mellat v HM Treasury produced two United Kingdom Supreme Court judgments on 19 June 2013: No 1, [2013] UKSC 38, on closed material procedure; and No 2, [2013] UKSC 39, on a 2009 financial restriction. In No 2, the Court allowed the bank's challenge to the direction on procedural and substantive grounds. The decisions concern that measure and evidential record, rather than every restriction affecting the bank. Paired judgments.

Measure and proceedings

The Financial Restrictions (Iran) Order 2009 directed persons operating in the United Kingdom financial sector not to enter or continue transactions or business relationships with Bank Mellat, IRISL or their branches. Made on 9 October and effective on 12 October 2009, it used Schedule 7 to the Counter-Terrorism Act 2008. Schedule 7 also permitted Treasury licences exempting specified acts. The government's stated concern was financing associated with Iran's nuclear and ballistic missile programmes. Bank Mellat challenged the decision under section 63 of the Act. Order, articles 1 to 4; Schedule 7, paragraphs 9, 13 and 17; No 2, paragraphs 1, 4 to 12.

Closed material and procedural fairness

In No 1, the majority held that the Supreme Court could conduct a closed material procedure when necessary in an appeal arising under the statutory scheme. This was not a general permission to use secret evidence in every sanctions case. Lord Neuberger subsequently concluded that the closed judgment examined in this appeal contained nothing that could affect the substantive reasoning or outcome. He stressed that an appellate closed hearing should be requested only when strictly necessary for fair determination. *No 1*, paragraphs 35 to 61 and 64 to 70.

The procedural holding in No 2 concerned the absence of advance notice and an opportunity for the bank to make representations. Lord Sumption distinguished this targeted measure from general legislative policy and explained why later parliamentary scrutiny and judicial proceedings did not supply adequate fairness in these circumstances. He also recognised that prior consultation might be impracticable in other cases, including where it would disclose intelligence or frustrate the measure. *No 2*, paragraphs 28 to 49.

Proportionality and its limits

The substantive majority found the selection of Bank Mellat arbitrary and irrational, and the measure disproportionate. The government's explanation shifted from a problem specific to the bank to a risk inherent in international banking, without explaining why comparable Iranian banks remained available as alternative channels. Lord Sumption did not conclude that excluding the bank had no rational connection with the proliferation objective. The objection concerned the discriminatory incidence and proportionality of the measure as a whole. *No 2*, paragraphs 22 to 27.

Lord Sumption set out four connected questions: whether the objective justified limiting a protected right; whether the measure was rationally connected to it; whether a less intrusive measure could achieve it without unacceptable compromise; and whether the consequences struck a fair balance. Lord Reed agreed on the formulation while dissenting on its application. The Court's reasoning recognised a substantial executive margin in national security and did not assign judges the task of making government policy. *No 2*, paragraphs 20 to 21 and 68 to 76.

Statecraft significance

The judgments illustrate judicial scrutiny of target selection, procedural fairness and proportionality within a particular financial restriction scheme. Quashing this direction was not a blanket finding of innocence, a general removal of sanctions powers or an assessment of every later measure. This entry describes the published 2013 holdings; subsequent restrictions, compensation proceedings and later development of the doctrine require separate authorities.

See also

Targeted financial sanctions · Judicial review of sanctions · Proportionality in sanctions review · Economic statecraft

Sources

• United Kingdom Supreme Court, [Bank Mellat v HM Treasury (No 1) [2013] UKSC 38 and Bank Mellat v HM Treasury (No 2) [2013] UKSC 39](https://supremecourt.uk/uploads/uksc_2011_0040_judgment_32e27b53c6.pdf), 19 June 2013, complete paired judgments; accessed 1 November 2026.
• United Kingdom Supreme Court, case record UKSC/2011/0040, identifying both judgments and their delivery date; accessed 1 November 2026.
• HM Treasury, Financial Restrictions (Iran) Order 2009, SI 2009/2725, 9 October 2009, original text, articles 1 to 4 and explanatory note; accessed 1 November 2026.
• United Kingdom Parliament, Counter-Terrorism Act 2008, Schedule 7, original enacted text, particularly paragraphs 9, 13 and 17; accessed 1 November 2026.