Bank Mellat v HM Treasury (No 2) [2013]

Ahead of its claim for damages against HM Treasury for some US$4 billion, an Iranian bank was ordered to disclose all the transactional documentation that supported its contention that it suffered losses when the Treasury imposed financial restrictions on Iran in 2009 prohibiting the UK's financial sector from doing business with the bank.

Although unredacted disclosure would breach the bank's obligations of confidentiality under Iranian law, there was no evidence of a serious risk that the bank would be subjected to Iranian sanctions where the breach resulted from compliance with a disclosure order of a competent UK court.

Ahead of its claim against HM Treasury for some US$4 billion in damages, an Iranian bank applied for an order that it was not required to search for and disclose all transactional documentation relating to the claim. The Treasury applied for an order that all documentation be disclosed and in an unredacted state.

The Iranian government owned a 17% shareholding in the bank. In October 2009, the Treasury issued the Financial Restrictions (Iran) Order 2009, which prohibited any credit or financial institution that carried out business in the UK from entering into or continuing to participate in any transaction or business relationship with the bank. The order expired in 2010. The bank claimed that the order had caused it huge losses. It was ordered to disclose the actual impacted transactions but argued that such disclosure would be expensive and time-consuming as a vast number of transactions was involved.

Instead, it proposed a sampling approach whereby it would disclose 10% of the transactions to represent the whole. It also instructed an expert in Iranian law who asserted that disclosing details of all the transactions and identifying the bank's customers would breach Iranian laws of confidentiality and put the bank at serious risk of sanctions from the Iranian government. Similar concerns were raised regarding the laws of Korea and Turkey.

Held: Bank's application refused, HM Treasury's application granted.

Sampling approach…