In Bank Mellat v Her Majesty’s Treasury (No. 2) [2013] UKSC 39, the UK Supreme Court, by a majority of 5 to 4, allowed an appeal by Bank Mellat, a major Iranian commercial bank, from a Court of Appeal decision in relation to a direction made by the UK Treasury under Schedule 7 of the Counter-Terrorism Act 2008 preventing persons operating in the financial sector from having any commercial dealings with the bank. The majority of the Supreme Court noted that the essential issue was whether the interruption to the bank’s activities in the UK bore some rational and proportionate relationship to the statutory purpose of hindering the pursuit by Iran of its nuclear weapons programmes. The particular difficulty with the direction was that it did not explain or justify the singling out of Bank Mellat. The risk that access of an Iranian bank to the UK’s financial markets might facilitate the development of Iran’s nuclear weapons programmes was not specific to the bank but an inherent risk of banking. Accordingly, the direction against Bank Mellat, but not against other Iranian banks, was irrational and disproportionate, and therefore unlawful. The appeal was allowed.

The decision of the Supreme Court does not affect the wider international sanctions regime in relation to Iran and Iranian entities, including EU Regulation 267/2012 which is directly applicable in the UK.