No resolution in sight to arms row linked to Nazanin Zaghari-Ratcliffe

Legal action to continue into 2020 over unpaid bill for tanks ordered before 1979 revolution

Nazanin Zaghari-Ratcliffe hugs her daughter Gabriella, in Iran. Free Nazanin Campaign

The prospect of a swift end to a 40-year dispute over an aborted arms deal between Iran and the UK was dismissed on Monday in a new blow to efforts to secure the release of charity worker Nazanin Zaghari-Ratcliffe.

A High Court judge dismissed a £20 million (Dh90.2m) claim by Iran for interest on the historic debt on the same day that Ms Zaghari-Ratcliffe appealed for her release on mental health grounds.

Iran has linked her continued detention to the failure by Britain to repay £380m after a deal for UK-built tanks was cancelled following the 1979 revolution.

The UK courts are in control of an account holding nearly £500m from the UK government-owned company behind the deal, but it cannot be handed over because of sanctions.

The two sides, who are continuing to wrangle over the final amount owed, are set for another showdown in the UK’s High Court in March next year, with no obvious solution in sight.

The failure to secure a breakthrough was a new blow for the family of Ms Zaghari-Ratcliffe, who has been held on unspecified espionage charges since April 2016.

Her family says the Iran-British dual national, who was jailed for five years, is being used as a pawn in a broader battle between the two countries.

Her husband, Richard Ratcliffe, has called for the debt to be repaid to improved the chances of his wife’s freedom.

“The ruling today felt like an attempt to keep kicking this issue down the road,” Mr Ratcliffe said.

He believed that an assessment of whether Ms Zaghari-Ratcliffe, 40, should be released on health grounds was deliberately scheduled for the same day as the arms deal hearing.

Tying the two issues meant that expectations of her release were low.

The Iranian-British dual national has suffered increasing mental health problems and was kept shackled when she was taken to hospital in July.

Her daughter, 5, who has visited her weekly, is soon due to return to Britain, contributing to her distress, she said in a letter released last week.

Iran’s Ministry of Defence and Support for Armed Forces was put on the EU sanctions regime in 2008.

A year later, a European trade court said that the UK should settle the debt but the sanctions meant payment was impossible, said lawyers for the British government-owned arms company International Military Services.

The judge said on Monday the issue was of “some importance and with some significant consequences”.

But the Iranian ministry was not entitled to the interest since sanctions were imposed. It said it would appeal.

It also applied to the UK’s sanctions authority to let the money be paid to the Central Bank of Iran to get around the sanctions.

The issues are likely to come to a head in March when the ministry tries to persuade the court to let it take control of the assets.

But lawyers warned there were few signs that Iran would soon get the money.

Both countries have denied there is a link between Ms Zaghari-Ratcliffe's case and the debt. But Iran’s Foreign Minister, Javad Zarif, last month openly claimed her fate was connected to the money owed.

Mr Zarif said at the UN General Assembly that the UK under former prime minister Theresa May’s leadership had sought his intervention in return for releasing the funds.

"Britain owes us that £400m for 40 years," The Guardian quoted him as saying.

“Nazanin is in prison based on a court decision. United Kingdom is supposed to give us money based on a court decision.

"Now they want us to reverse our court decision but they don’t want to implement their court decision. You see the irony?”

Her MP, Tulip Siddiq, raised her plight in parliament following the release of Jolie King, a British-Australian national, and her Australian partner Mark Firkin on Saturday.

Iranian authorities arrested Ms King, Ms Zaghari-Ratcliffe's cell mate, and Mr Firkin three months ago, accusing them of "flying a drone".

The British government has come under fire for failing to secure Ms Zaghari-Ratcliffe's release when Ms King, who had only spent three months in jail, was released last week.

All charges against Ms King and Mr Firkin have been dropped and they have returned to Australia.

“Nazanin continues to suffer at the hands of the Iranian Authorities while other governments make progress in their own consular cases,” Ms Siddiq told MPs on Monday evening.

“Nazanin is at breaking point, with the prospect of separation from her daughter compounding her frail mental and physical health.

Andrew Murrison, Britain's Middle East Minister, said on Monday evening that ensuring Ms Zaghari-Ratcliffe's release remained "a top priority" for the government.

Mr Murrison said it was hard to compare the cases of Ms King and Ms Zaghari-Ratcliffe, because the former is a foreign national and the latter is a British-Iranian dual national.

"The trouble is Iranian authorities don’t recognise dual nationality. They consider Nazanin simply to be an Iranian national," he said.

Mr Murrison said that meant the UK had no consular access to her.