On 6 May 2015, the UK High Court, in Bank Mellat v HM Treasury [2015] EWHC 1258 (Comm), decided on three preliminary issues for a damages claim brought by Bank Mellat against HM Treasury for loss and damage caused by the Financial Restrictions (Iran) Order 2009 (the “2009 Order”), the effect of which was to shut Bank Mellat out from the UK financial sector. The 2009 Order was declared unlawful by the Supreme Court in Bank Mellat v HM Treasury (No. 2) [2013] UKSC 39.
The three preliminary issues for determination by the High Court were: (1) whether it is open to HM Treasury to contend that it did not act in a way which was incompatible with the European Convention on Human Rights (“ECHR”) or the Human Rights Act 1998, despite the Supreme Court judgment; (2)whether it is open to HM Treasury to contend that the loss caused to Bank Mellat is irrecoverable under English law as it is a form of “reflective loss”, i.e. a claim for diminution in the value of its shareholding (in this case, the shareholding relates to shares of Bank Mellat’s subsidiary company); and (3) how narrowly to define the property interests of Bank Mellat that were harmed or interfered with by the 2009 order.
The High Court decided all three preliminary issues in favour of Bank Mellat holding: (1) it is not open to HM Treasury to contend that it did not act in a way which was incompatible with an ECHR right when the Supreme Court had decided that it had so acted; (2) Bank Mellat is free to pursue its claim for reflective loss; and (3) the property interests should not, at this stage, be defined as narrowly as HM Treasury desires.
