Letting in a chink of light to closed material cases : Bank Mellat again

5 November 2014 by

brown-blanket-ray-of-lightBank Mellat v HM Treasury [2014] EWHC 3631 (Admin), Collins J, 5 November 2014 –  read judgment UPDATED POST

Fireworks here from Collins J in making sure that Bank Mellat got some disclosure of information in its fight to discharge a financial restriction order against it.

Bank Mellat is an Iranian bank, initially singled out by an 2009 order which prohibited anybody from dealing with it.  The order was part of sanctions against Iran in respect of its nuclear and ballistic missiles programme. However, it bit the dust, thanks to the Supreme Court:  see judgment. I  did a post on that decision, and followed it up with one (here) on the (dis)proportionality arguments which led to the order’s downfall. 

However the Bank was subject to two further orders, made in 2011 and 2012. They led to the freezing of €183m held by it in London. The 2012 order has since been revoked, but the 2011 one remains. This is the subject of the Bank’s application to set it aside. On any view, as Collins J recognised, it had caused very serious damage to the Bank’s business.

There is a specific procedural regime for these sanctions cases, with its own Closed Material Procedure and provision for special advocates. These include closed hearings to decide how much information ought to be disclosed to the applicants. All this is aimed at making the system as Article 6-compliant as it can be given the closed material system.

The keys cases started with A. v. UK, a Strasbourg decision [2009] ECHR 301. The Grand Chamber, in an Article 5 context, ruled that the controlee must be given sufficient information about the allegations against him to enable him to give effective instructions in relation to those allegations. Provided that this requirement is satisfied, there can be a fair trial notwithstanding that the controlee is not provided with the detail or the sources of the evidence against him.

Now back home. In the AF No.3 case [2010] 2 AC 269– referred to as’AF3′ in the judgment of Collins J – the House of Lords decided that an applicant seeking to set aside a financial restriction decision should receive disclosure

sufficient to enable [it] to give sufficient instructions not merely to deny, but actually to refute (so far as that was possible) the “essential allegations” relied upon by the Treasury

The Bank relied on this decision. The issue arose because of the attempt (late in this case) by the Treasury to row back from that decision.

Part of the problem, and the interest of the decision, is that the judge was faced with EU, ECtHR and domestic decisions pulling in slightly different directions. EU law is in play because any restrictions of the flow of capital or money between member states is prohibited  by Article 63 TFEU – subject to the inevitable derogations.

The next piece in the mosaic was the CJEU decision of ZZ – here. ZZ was an EU citizen, who was refused re-admission to the UK when he visited Algeria. The CJEU decided that SIAC procedure had to ensure that the adversarial principle was complied with and that ZZ was informed of the essence of the grounds for the decision,

since the necessary protection of state security could not have the effect of denying the person his right to be heard and of rendering his right to redress ineffective.

ZZ then went to the UK Court of Appeal, to argue about what the CJEU had meant. The CA (here) thought that the essence of the grounds on which the decision was based must always be disclosed to the person concerned. This was a minimum requirement which cannot yield to the demands of national security.

A further problem came because the CJEU had not said in terms what should happen if the essence of the grounds could not be disclosed without also disclosing confidential evidence. Collins J supplied the obvious answer; the SoS could not rely on any evidence the essence of which had to be disclosed to enable a fair hearing for the individual.

Thus a highly dangerous person might have to be admitted.

Cue some ECtHR case law,namely IR v. UK from early 2014 (here), which confusingly is incorrectly referenced in Collins J’s judgment as a 2004 decision), concerning exclusions of a Sri Lankan and a Libyan on national security grounds, and therefore raising Article 8 issues. Here there had been no disclosure of the case against them, and so they were entirely dependent on the special advocates acting for them. Strasbourg declared the claims inadmissible; it thought that the closed hearing procedure did offer sufficient procedural guarantees, so the state had to provide them with nothing apart from that representation.

So the judge perceived a conflict between IR, a ECtHR decision  (pro-UK, but I don’t suppose we will hear about it in the newspapers) and an EU decision. In characteristically forthright fashion, Collins J did what he had to do:

I have no doubt that ZZ is a bad decision but, unlike decisions of the ECtHR, it is binding in our courts. ….it may be that to reconcile the decisions of the two courts the requirement to inform the person concerned of the essence of the grounds, being limited to that which is strictly necessary, requires very limited disclosure and sets a standard which may be below that set out in AF3.

Collins J was not persuaded that domestic law led to a different conclusion – nor could it.

Despite his concerns about ZZ, his conclusion did not mince words

While the Bank’s liberty is not affected in the same way as that of an individual, the utterly damaging effect on its ability to function is material. It must not be forgotten that London is a, some would say the, major centre for financial institutions. Exclusion is thus particularly damaging. In these circumstances, I am persuaded that Article 6.1 does require disclosure that meets the requirement of AF3.

Conclusion

ZZ does present the ultimate dilemma to the security services. Give a bit, and risk intelligence sources, or give nothing and risk allowing a dangerous man in because you cannot deploy the material you want to deploy.

But then the injustice of the other side of the coin will be apparent, as Collins J recognised. An applicant has no idea what material is being deployed against him. He has some special advocates engaged by the state, who are doing their very best, but who are not allowed to speak to him once they have seen the closed material. And an application of the squeeze applied by the dilemma may just bring forth something which helps the applicant, either to respond to it or, at very least, to know something about the real case against him.

Whether the judge should have been as troubled by IR as he was, given that it was an admissibility decision (contrast A v. UK, a decision of the Grand Chamber) and did not concern Article 6, is open to doubt.

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