Iran's largest private bank will be removed from the sanctions list of the United Kingdom after its Supreme Court found no evidence Bank Mellat had helped to fund Iran's nuclear programme.
The bank had appealed against measures imposed by the UK Treasury in 2009, banning any company operating in Britain from dealing with the Tehran-based lender.
But the case was based on "misconceptions about the facts" and "singled out Bank Mellat without rational grounds", Judge Jonathan Sumption said in a ruling yesterday. The ruling is the latest loosening of sanctions against Bank Mellat and other Iranian lenders, potentially eroding the impact of international economic pressure aimed at dissuading Iran's government from pursuing its nuclear ambitions. Europe and the United States suspect Iran's nuclear programme has covert military aims but Tehran says its work is for peaceful purposes only.
The European General Court told governments in the European Union last January to ease asset freezes against Bank Mellat and Bank Saderat, ruling that the EU had failed to provide sufficient evidence the banks were involved in financing Iran's nuclear programme. The EU Council had appealed that decision.
"Today's ruling is a victory for the rule of law as much as it is for Bank Mellat," said Sarosh Zaiwalla, a senior partner at Zaiwalla & Co, the firm representing the bank, which is 20 per cent owned by the Iranian government.
"This is a finding of fact by the highest court of the United Kingdom. And the UK government, which had originally proposed to the EU Council to list Bank Mellat, will now be compelled to respect this finding of the Supreme Court and ask the EU Council to withdraw the sanctions listing against the bank."
Formed in 1980, Bank Mellat has 1,800 branches in Iran, in addition to branches in Turkey, South Korea and London. It also has a presence in Dubai through Persia International Bank, Bank Mellat's 60 per cent-owned subsidiary. The assets of the branch, along with Bank Mellat's global assets, were frozen in 2010 as a result of EU sanctions.
Part of the evidence considered by the UK court ahead of yesterday's ruling was heard in a closed session because of concerns about national security.
The US still has sanctions against Bank Mellat. The US Treasury last month blacklisted Al Hilal Exchange and Al Fida International General Trading, both based in the UAE, because of their relationship with Bank Mellat. Al Hilal was found to have provided foreign currency exchange services worth more than US$55 million to Bank Mellat. Al Hilal was also accused of providing currency exchange services to Bank Melli, another Iranian bank.
US officials have previously raised concerns about court appeals by Iranian companies against EU sanctions. A US state department official was quoted by Reuters in March as saying it hoped the EU could take steps to make its regulations more robust when challenged in court.