Path cleared for Bank Mellat’s claim against UK Treasury

The English Court of Appeal delivered its Judgment in the ongoing USD 4 billion damages claim brought by Bank Mellat against HM Treasury.

13 May 2016
ID : 1035
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The English Court of Appeal, presided by Lord Chief Justice Thomas of Cwmgiedd, on Tuesday delivered its Judgment in the ongoing USD4 billion damages claim brought by Bank Mellat against HM Treasury.Bank Mellat, the largest Iranian private bank, brought this claim following a Judgment of the Supreme Court of the United Kingdom, in June 2013, in which it had held that the sanctions imposed on Bank Mellat, in 2009, were both irrational and unlawful.

Bank Mellat was unlawfully sanctioned by HM Treasury and after the UK Supreme Court dismissed HM Treasury’s appeal, the Bank is pursuing a damages claim against the HM Treasury to the tune of USD 4bn in the UK Courts; the risk of payment of damages will have to come from the pockets of the British tax payers.

The Court of Appeal gave its Judgment following an appeal by HM Treasury against the decision of Mr. Justice Flaux, sitting in the English Commercial Court.

On 10th May, the HM Treasury had applied to the Commercial Court to determine three preliminary issues relating to heads of losses under which Bank Mellat can claim its losses falling under those heads as damages.

Mr Justice Flaux decided all three issues in Bank Mellat’s favor while the HM Treasury accepted the decision on one issue and appealed two issues.

The Court of Appeal delivered its judgment on the preliminary issues in Bank Mellat’s damages claim and Bank Mellat succeeded on the main issue of possessions.

In its Judgment the Court of Appeal held that Bank Mellat’s claim for 60% of the loss suffered by Persia International Bank (PIB) should be claimed by PIB rather than Bank Mellat.

Furthermore, the Court held that PIB was itself a ‘victim’ of the sanctions imposed by HM Treasury. It reached this conclusion on the basis that PIB is a UK Financial Institution to whom the direction, not to transact with Bank Mellat, was given by HM Treasury.

The Court also decided that Bank Mellat’s damages should not be limited, at this stage, by the Court so as to exclude loss of future income.

The arguments advanced by the Bank to recover damages under this head were arguable. It was a matter for the trial judge to decide whether such losses could be recovered on the basis of the facts and circumstances of the case.

The international law firm Zaiwalla & Co. Solicitors has been acting for Bank Mellat, both at the UK and EU level, challenging both the UK Supreme Court and EU Court respectively of their unlawful sanctions on the Bank.

Sarosh Zaiwalla, Senior Partner of Zaiwalla & Co., said “this is a crucial victory for Bank Mellat. The Court has decided not to limit Bank Mellat’s damages save for the loss claimed by Bank Mellat on behalf of its London subsidiary. The Bank will be considering whether to include PIB in this action so that it can claim directly against HM Treasury for the losses caused to it”.

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