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||Neutral Citation Number:  EWCA Civ 1
||Case No: T3/2010/1606
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION,
ADMIN COURT, (MITTING J)
REF NO: PTA57/2009
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MAURICE KAY Vice President of the Court of Appeal, Civil Division
LORD JUSTICE ELIAS
LORD JUSTICE PITCHFORD
|| BANK MELLAT
||- and -
Mr Jonathan Crow QC and Miss Amy Rogers (instructed by Stephenson Harwood) for the Appellant
Mr Jonathan Swift QC and Mr Robert Wastell (instructed by the Treasury Solicitor) for the Respondent
Mr Martin Chamberlain and Miss Melanie Plimmer (instructed by the Special Advocates Support Office) Special Advocates
Hearing dates : 11, 12 October 2010
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Maurice Kay :
- In this case we are required to navigate waters of a kind for which the judicial ship would have been considered unsuitable until recent years. Bank Mellat (BM) is an Iranian bank. By the Financial Restrictions (Iran) Order 2009 (the Order) which was made on 9 October 2009 and laid before Parliament on 12 October 2009, BM was effectively excluded from the UK financial market. The Order was made by Her Majesty's Treasury (the Treasury) pursuant to powers conferred by Schedule 7 to the Counter-Terrorism Act 2008 (the CTA). The Order was subject to the affirmative resolution procedure pursuant to which it received final Parliamentary approval on 2 November 2009. It was in force for 12 months from 12 October 2009. It has not been renewed but there is now in force a European Union measure to like effect. On 20 November 2009 BM issued a claim form in the High Court seeking to have the Order set aside. On 11 June 2010, Mitting J handed down a judgment in which he rejected BM's challenge to the Order. However, he gave BM permission to appeal. It is unfortunate that a challenge to a time-limited Order took so long to be heard but this is partly explained by the fact that the substantive hearing was held up by an interlocutory dispute about disclosure which also reached this Court and was resolved in favour of BM: Bank Mellat v Her Majesty's Treasury  EWCA Civ 483.
The statutory provisions
- Section 62 of the CTA refers to Schedule 7 "conferring powers on the Treasury to act against terrorist financing, money laundering and certain other activities". By paragraph 1 of Schedule 7, the Treasury "may give a direction
if one or more of the following conditions is met in relation to a country". The present case is concerned with the third condition which is set out in paragraph 1(4):
"The third condition is that the Treasury reasonably believe that
(a) the development or production of nuclear, radiological, biological or chemical weapons in the country, or
(b) the doing in the country of anything that facilitates the development or production of any such weapons,
poses a significant risk to the national interests of the United Kingdom."
- Paragraphs 3 and 4 deal with persons to whom a direction may be given. They state:
"3(1) A direction under this Schedule may be given to
(a) a particular person operating in the financial sector,
(b) any description of persons operating in that sector, or
(c) all persons operating in that sector
(2) In this Schedule 'relevant person', in relation to a direction, means any of the persons to whom the direction is given
4(1) Any reference in this Schedule to a person operating in the financial sector is to a credit or financial institution that
(a) is a United Kingdom person, or
(b) is acting in the course of a business carried on by it in the United Kingdom."
- Paragraph 9 is first concerned with the requirements that may be imposed by a direction. It provides:
"(1) A direction under this Schedule may impose requirements in relation to transactions or business relationships with
(a) a person carrying on business in the country;
(b) the government of the country;
(c) a person resident or incorporated in the country.
(2) The direction may impose requirements in relation to
(a) a particular person within sub-paragraph (1),
(b) any description of persons within that sub-paragraph, or
(c) all persons within that sub-paragraph.
(3) In this Schedule 'designated person', in relation to a direction, means any of the persons in relation to whom the direction is given."
- The kinds of requirement that may be imposed are listed in paragraph 9(4) in ascending order of stringency: customer due diligence, ongoing monitoring, systematic reporting and "limiting or ceasing business". These kinds of requirement then receive more detailed attention in paragraphs 10-13. The requirement in the present case is of limiting or ceasing business, as to which paragraph 13 provides:
"A direction may require a relevant person not to enter into or continue to participate in
(a) a specified transaction or business relationship with a designated person,
(b) a specified description of transactions in business relationships with a designated person, or
(c) any transaction or business relationship with a designated person."
Whichever kind of requirement is imposed, paragraph 9(6) provides a proportionality criterion. In the present context, it states:
"The requirements imposed by a direction must be proportionate having regard to
the risk mentioned in paragraph 1(4) to the national interests of the United Kingdom."
This provision lies at the heart of the substantive issues raised on this appeal.
- The procedure for giving a Schedule 7 direction is prescribed by paragraph 14. It provides that a direction given either to a description of persons operating in the financial sector or to all persons in that sector must be contained in an order made by the Treasury. In the case of a "limiting or ceasing business" order, it must be laid before Parliament after being made and
"if not approved by a resolution of each House of Parliament before the end of 28 days beginning with the day on which it is made, it ceases to have effect at the end of that period."
The less stringent orders attract the negative resolution procedure.
- Although there is no judicial role in relation to the making or approval of an order under Schedule 7, section 63(2) enables any person affected by "the decision" to apply to the High Court to set aside the decision. Section 63(3) provides that, in determining whether the decision should be set aside, the court "shall apply the principles applicable on an application for judicial review". Section 63(4) and (5) deal with remedies. Section 66 is an enabling provision in relation to procedural matters. In the way that is now familiar in litigation of this kind, there is a provision for the appointment of special advocates and for open and closed hearings and judgments.
- The Order made by the Treasury and approved by Parliament contains a direction in the following words:
"The Treasury direct that a relevant person must not
(a) enter into, or
(b) continue to participate in, any transaction or business relationship with a designated person."
- "Relevant persons" are "all persons operating in the financial sector". The designated persons are (a) BM, (b) Islamic Republic of Iran Shipping Lines (IRISL) and (c) a branch of BM or IRISL.
The contemporaneous documents
- On the making of the Order on 12 October 2010, a Ministerial Statement was issued. Having referred to Iran's continued pursuit of its "proliferation sensitive nuclear and ballistic missile activities in defiance of five UN Security Council Resolutions", it stated:
""[BM] has provided banking services to a UN listed organisation connected to Iran's proliferation sensitive activities, and been involved in transactions related to financing Iran's nuclear and ballistic missile programme.
The direction to cease business will therefore reduce the risk of the UK financial sector being used, unknowingly or otherwise, to facilitate Iran's proliferation sensitive activities."
- The Explanatory Memorandum to the Order stated:
"These restrictions are being imposed in respect of these entities because of their provision of services for Iran's ballistic missile and nuclear programmes. It is considered that a direction to cease business with these entities will contribute to addressing the risk to the UK national interests posed by Iran's proliferation sensitive activities. The Treasury has considered whether any of the other kinds of direction permitted by Schedule 7
would be sufficient and concluded that a direction to cease business is necessary."
- An associated impact assessment said:
"Iran's continued nuclear and ballistic missile proliferation-sensitive activity, in defiance of international efforts to control proliferation, poses a significant risk to the national interests of the UK. [BM] has been involved in transactions related to financing Iran's nuclear and ballistic missile programme and [IRISL] has transported goods for both programmes and are contributing to this risk. Government intervention is necessary to address the risks posed by Iranian proliferation in the UK's national interests."
- Lesser requirements were considered to be "not as effective in mitigating the risks". The Government's policy objective was described as "to disrupt Iran's proliferation-sensitive activities". In addition, "the Government also wants to prevent the UK financial sector from being unknowingly used to facilitate Iran's proliferation-sensitive activities".
- The Treasury issued an interpretive note for UK financial sector businesses, giving guidance as to the envisaged prohibited activities, which included, but were not limited to, the transmission of funds or value between a relevant person and a designated person; the accrual, creation or other provision of funds or value for a designated person; the exchange of financial or credit documents with a designated person; acting upon the instructions of a designated person; and acting under a contract agreed with or pursuant to an obligation owed to a designated person.
The undisputed matter
- On behalf of BM, Mr Jonathan Crow QC emphasises that he does not represent the government of Iran. Whilst he is not in a position to admit anything, he does not dispute that the Treasury satisfies the condition set out in paragraph 1(4) of Schedule 7, namely reasonable belief as to the development or production of nuclear, radiological, biological or chemical weapons in Iran or that the doing in Iran of anything that facilitates the development or production of any such weapons poses a significant risk to the national interests of the United Kingdom.
- Background evidence about BM is provided by the witness statements of Mr Younes Hormozi, an executive director. He has responsibility for the international business of BM. BM was formed in 1980 from the merger of ten private Iranian banks. It has some 1800 branches in Iran, Turkey and South Korea and subsidiaries in Malaysia, Armenia and the United Kingdom. It holds some 33 million accounts for more than 19 million customers. It holds 60% of the shares in Persia International Bank plc (PIB). PIB is incorporated in the United Kingdom where it has its business. It is authorised and regulated by the Financial Services Authority. The Iranian Government exercises voting rights over 20% of the shares in BM. Although Iran does not recognise relevant resolutions of the UN Security Council, Mr Hormozi states, and Mitting J accepted, that BM has in place a mechanism, which it operates conscientiously, to ensure that it does not provide banking facilities to Security Council designated entities and individuals. Mitting J also accepted that, by reason of the Order, BM has been unable to make profitable use of the goodwill which it has established in the United Kingdom and that BM has effectively been shut out of the UK financial sector. He also found that the Order has had the effect of "preventing BM from drawing 183 million euros in call and time deposit accounts at PIB. In this respect the order has had the same effect as an asset freeze".
- Turning to BM's international trade business, Mr Hormozi states, and Mitting J accepted, that in the year to March 2009 BM issued letters of credit with an aggregate value of about 11 billion US$. Of this total about 25% appear to have been issued in respect of business transacted through the United Kingdom. PIB was the advising/negotiating/reimbursing bank on letters of credit issued by the bank for 1.98 billion euros in the 2008 financial year and 0.97 billion in the first six months of the 2009 financial year. In the financial year to March 2010, the aggregate value of the letters of credit issued by the bank fell to 6 billion US$. Mitting J accepted Mr Hormozi's belief that a substantial contribution to the decline in this class of business was attributable to the impact of the Order. This has led to a loss in revenue to BM up to the date of the hearing in the High Court estimated by Mr Hormozi at 25 million US$.
- There is evidence that the Order has damaged BM's reputation and goodwill both in the United Kingdom and internationally. It has lost customers and correspondent banking relationships. It is no longer able to provide a full range of services to its customers. Some have moved to other banks in order to pursue business with the UK financial sector and may never return to BM. Reuters has withdrawn key dealing services from BM in Teheran and Seoul. Software and insurance suppliers terminated negotiations or resiled from prior agreements and HSBC Malaysia refused to hold accounts for BM's subsidiary. BM has also been the target of further "copycat" measures in the Isle of Man, Bermuda, the Dubai International Financial Centre and the European Union. PIB is likely to lose around 1.6 million in revenue per annum in respect of letters of credit business previously conducted through BM. The Treasury does not seek to take issue with this description of the effects of the Order.
The judgment of Mitting J
- Before Mitting J, it was submitted on behalf of BM that the Order should be set aside for both substantive and procedural reasons. The substantive challenge was put mainly on the basis that the Order was disproportionate by reference to paragraph 9(6). It was also suggested that the decision to make the Order was vitiated by reason of the taking into account of immaterial considerations. Reference was also made to BM's rights under the European Convention on Human Rights and Fundamental Freedoms (ECHR). The procedural challenge was put by reference to both domestic and ECHR requirements of procedural fairness, the essential complaint being that BM had not been given an opportunity to make representations prior to the making of the Order. As I have indicated, Mitting J was prepared to accept much of BM's evidence about the effect of the Order. However, he concluded that the grounds of challenge were not made out. I shall refer to parts of his judgment later.
The grounds of appeal
- As in the High Court, Mr Crow groups his grounds of appeal under two main headings, namely substantive and procedural grounds. The central substantive issue is that of proportionality although the submission based on the taking into account of immaterial considerations is repeated. To the extent that there is a further ground expressed in terms of irrationality, Mr Crow accepts that it adds little or nothing to the other grounds. The principal procedural ground remains a complaint that BM had no opportunity to make representations prior to the making of the Order. In addition, there is a reasons challenge. There is an inevitable overlap between some of these grounds of appeal.
1. The substantive grounds
- The proportionality test required by paragraph 9(6) is the subject of an apparent dispute between the parties. The question is whether proportionality is to be determined by reference to the three-stage test propounded by Lord Clyde in de Freitas v Permanent Secretary of Ministry of Agriculture, Fishing, Lands and Housing  1 AC 69 (PC) and later approved by Lord Steyn in R(Daly) v Secretary of State for the Home Department  2 AC 532 or whether it should be given a Strasbourg and Luxembourg flavour by stripping out the third of Lord Clyde's questions. I have referred to this as an "apparent" dispute because I am not persuaded that the domestic and European tests are significantly different.
- In de Freitas, Lord Clyde adopted the "threefold analysis" as follows (at page 80G):
whether (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective."
- This pre-Human Rights Act formulation received the imprimatur of Lord Steyn in Daly at (paragraph 27), with which Lord Bingham (at paragraph 23), Lord Cooke (at paragraph 29) and Lord Hutton (at paragraph 34) agreed. In Huang v Secretary of State for the Home Department  2 AC 167,  UKHL 11, the House of Lords added (at paragraph 19) the requirement "to balance the interests of society with those of individuals and groups
which should never be overlooked or discounted".
- In the High Court, Mitting J was persuaded that "proportionate" in paragraph 9(6) is used "in the sense in which it is used in Luxembourg and Strasbourg" (paragraph 13). He concluded that, although the Strasbourg authorities lack clarity, Luxembourg jurisprudence "clearly eschews any proposition that interference
must be no more than [is] necessary to accomplish the objective of a measure taken in the public interest". In other words, he considered that the third stage of Lord Clyde's threefold analysis, which I shall refer to as the "minimum interference" test, has no part to play in this case. He added (at paragraph 15):
"On the contrary, when very important public interests are in play, interference in private rights well beyond the minimum necessary to safeguard those interests may be proportionate."
This, coupled with a wide margin of appreciation, is the approach which Mr Jonathan Swift QC seeks to uphold.
- The Luxembourg authority relied upon by Mr Swift and Mitting J is Bosphorus Hava Yollari Turizm ve Ticaret AS v Minister of Transport, Energy and Communications  ECR-13953 in which the challenge was to the impounding of an aircraft owned by an undertaking based in Yugoslavia, but leased to a wholly innocent Turkish airline. It was a sanctions case. The authority was derived from a Regulation providing for economic sanctions against Yugoslavia to compel it to desist from intervening in the Bosnian conflict. The high watermark is to be found in the Opinion of Advocate General Jacobs. Having referred to the airline's fundamental rights (paragraph 63) and the "particularly strong public interest in enforcing embargo measures decided by the United Nations Security Council", noting that "it is difficult to think of any stronger type of public interest than that of stopping a civil war as devastating as the one that engulfed the former Yugoslavia" (paragraph 64), he acknowledged that losses to innocent third parties "are inevitable if the sanctions are to be effective (ibid)". He continued (at paragraphs 65-66):
"That does not of course mean that in such circumstances any type of interference with the right to property should be tolerated. If it were demonstrated that such interference was wholly unreasonable in the light of the aims which the competent authority sought to achieve, then it would be necessary for this Court to intervene
However, in the present case
the decision to impound the aircraft
cannot be regarded as unreasonable
I do not think that the principle of proportionality would be infringed, in view of the importance of the public interest involved." (Emphasis added).
- In its judgment, the Court of Justice agreed that the measure was proportionate, emphasising "the importance of the aims pursued" (paragraph 23) and "an objective of general interest so fundamental for the international community" (paragraph 26).
- I do not consider Bosphorus to be authority for the proposition that the minimum interference test has no relevance in assessing proportionality. The question is not always approached on the basis of doctrinal purity. Moreover, a test of "wholly unreasonable in the light of the aims" does not exclude the possibility that, notwithstanding the enormity of the aims, it may be unreasonable not to pursue them by the selection of a self-evidently less intrusive measure which is no less likely to achieve them.
- This complex subject receives inconsistent treatment in the leading textbooks. Thus, Clayton and Tomlinson, The Law of Human Rights, 2nd edition, paragraphs 6.72 - 6.76, find a place for the minimum interference test and proffer some Strasbourg illustrations of its adoption. Beatson, Gross, Hickman and Singh, Human Rights: Judicial Protection in the United Kingdom, on the other hand, are critical of it as an analytical tool, referring to it as "relative proportionality" (paragraphs 3-68 3-72). There is, of course, a risk that absolute insistence of the least intrusive measure may undermine the achievement of the strong legitimate aim. I sought to make this point in R(Clay Lanes Housing Cooperative) v The Housing Corporation  1 WLR 2229, at paragraph 25. Clayton and Tomlinson refer to the American case of Illinois Election Board v Socialist Worker Party (1979) 440 US 173, 188-189, when Blackman J said:
a judge would be unimaginative indeed if he could not come up with something a little less 'drastic' or a little less 'restrictive' in almost any situation and thereby enable himself to strike legislation down."
- I do not disagree with that.
- In my judgment, the answer lies not in the wholesale rejection of the minimum interference test but in its cautious deployment. It does not amount to insistence that the least intrusive measure is selected. It is that consideration be given to whether the legitimate aim can be achieved by a less intrusive measure without significantly compromising it. Where, as in the present case, the legitimate aim is one of very high value and the context is one in which the decision-maker is to be accorded a wide margin of appreciation, sensitivity to the risk of compromise and a dose of common sense should provide the decision-maker with ample protection against undue judicial interference.
- I turn to the circumstances of the present case. I do so by first setting out what Mitting J said (albeit that he was concerning himself with only the first two of Lord Clyde's questions). He said (at paragraph 16):
"It is obvious that the first two tests are satisfied: the objective of the Order to inhibit the development of nuclear weapons by Iran is sufficiently important to justify interfering with property rights. The measure excluding the bank from the financial sector in the United Kingdom is rationally connected to it. To produce or facilitate the production of nuclear weapons, Iran needs to import uranium, centrifuges and, no doubt, a host of other materials, from abroad. To do so, it must pay for them. To pay for them, it will require, or at least find convenient, to use banking facilities, in particular the issuing and confirmation of letters of credit. An Iranian importer of such material is likely to turn to an Iranian bank with an international presence, to issue letters of credit. Cutting off one such bank from one of the principal financial markets in which such business may be transacted is clearly rationally connected to the inhibition of the development of nuclear weapons. Mr Crow objects that such a conclusion would only be rational if there were evidence that the bank had provided trade finance or banking facilities for an importer of such materials. It is, in fact, common ground that it did: to Novin Energy Company (Novin). Novin was designated by the Security Council under Resolution 1747 adopted on 24 March 2007 as a company which 'operates within AEOI (the Atomic Energy Organisation of Iran) and has transferred funds on behalf of AEOI to entities associated with Iran's nuclear programme'. By reason of the designation and for reasons set out in the closed judgment, I accept that Novin was an AEOI financial conduit and did facilitate Iran's nuclear weapons programme. I accept the evidence of Mr Hormozi and of Hassan Azadi, general manager of the Inspection and Monitoring Department and Compliance Officer of the bank, that once Novin was designated, the bank ran down and eventually ceased its banking relationship with Novin and that it had in place the mechanism, which it operates conscientiously, to ensure that it does not provide banking facilities to Security Council designated entities and individuals. The Treasury's case is not that the bank has knowingly assisted Security Council designated entities after designation, or even that it has knowingly assisted entities liable to be designated, but which have not yet been, by providing banking facilities to them, but that it has the capacity to do so, has in one instance done so and is likely to do so in the future. The fundamental justification for the Order is that, even as an unknowing and unwilling actor, the bank is, by reason of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance. Concealment of the true nature of imported goods paid for by a letter of credit is straight forward: all that an issuing bank sees are documents. On presentation of compliant documents describing innocent goods, the bank must pay, whatever the nature of the goods in fact imported. Access to the international financial system is, as the Financial Action Task Force reported on 18 June 2008, essential for what it describes as 'proliferators'. I accept
that Iran's banking system provides many of the financial services which underpin procurement of the raw materials and components needed for its nuclear and ballistic missile programmes."
- The evidence relied upon to support these conclusions was mainly that of Mr James Robertson, the head of the Financial Crime Team in the International Finance Directorate of the Treasury. Mitting J also accepted other parts of Mr Robertson's witness statement including the following:
"A direction to cease business with Bank Mellat would restrict the financial services available to entities involved in Iran's nuclear and ballistic missile programmes by denying them access to the UK financial sector through Bank Mellat. This would have the maximum possible adverse impact on the nuclear and ballistic missile programmes of the measures available under Schedule 7 in relation to Bank Mellat. If Bank Mellat wished to continue its activities in support of those programmes it would need to seek other sources of financial services, assuming such alternatives were actually available to it. There was also the possibility that as a bank subject to restrictions in the United Kingdom, Bank Mellat would not be in a position to access the global financial system as effectively in order to seek substitute arrangements for those no longer available to it in the UK. At the very least, this would impede the Iranian nuclear and ballistic missile programmes by imposing additional costs and delays on the programmes."
- Mr Robertson referred to the further potential effect of a Direction requiring the cessation of business being that the United Kingdom financial sector would voluntarily decide to wind down business with Iran more generally, which would reduce the risk of business simply being routed through another Iranian bank. He added:
"A direction would also serve a further important practical purpose in that it would increase pressure on the Iranian government to comply fully and transparently with its international obligations ie the IAEA requirements and the terms of UN Security Council Resolutions designed to prevent it taking actions that could facilitate the development of a nuclear weapon. Applying such a restriction to one of Iran's largest banks would reduce the financial services available to the government of Iran for procuring the material needed to support the nuclear and ballistic missile programmes."
- In this latter regard, Mr Robertson was in error as to the size of the Iranian government's share-holding in BM, a point to which I shall return.
- Mitting J then referred to the "obvious risk" that "however careful the bank may be, the bank's facilities are open to use by entities participating in Iran's nuclear weapons programme". On the basis of all this he expressed satisfaction that the requirements imposed by the order are rationally connected to the objective of inhibiting the development of nuclear weapons in Iran and so the risk to the national interest of the United Kingdom. In addressing proportionality, he said (at paragraph 20):
"I give great weight to the views of the Treasury, endorsed by Parliament, about the risk to the national interest of the United Kingdom identified above, as I am required to do, by very close analogy, by the observations of the House of Lords in relation to national security in Secretary of State for the Home Department v Rehman  1 AC 153. By analogy with the margin of appreciation afforded by the Strasbourg courts to national political authorities, I must also give great weight to the judgment of the Treasury, affirmed by Parliament, that the national interests of the United Kingdom require that the bank be excluded from the UK financial sector. Ultimately, however, I must reach my own decision about that issue. I agree with the Treasury's judgment. In my opinion, the risk of very great harm to vital national interests justifies the imposition of a severe and costly inhibition on the business of the bank which will entail long term damage to its goodwill in the United Kingdom. However, the test is phrased fair balance, reasonable relationship of proportionality, justified or not manifestly unreasonable I am satisfied that it is fulfilled. Even if the stricter test propounded by Lord Clyde
applies, I am also satisfied that it is fulfilled. For the reasons explained above, there really is no other reasonably practicable means of ensuring reliably that the facilities of an Iranian bank with international reach will not be used for the purpose of facilitating the development of nuclear weapons by Iran."
- Thus, although he had rejected Lord Clyde's third question as relevant in the present context, he concluded that, in any event, the third question required an affirmative answer on the material before him.
- In this Court, Mr Crow seeks to challenge the judge's conclusions on proportionality on four grounds. The first is concerned with the approach to Lord Clyde's three questions. I have already dealt with that and the fact that the judge held that, even if minimum interference is part of the test, it is satisfied in this case. The issue now is whether he was justified in that conclusion. It is to that issue that Mr Crow's other three grounds of appeal are directed. They are: (a) that the judge was wrong in his conclusion that the Order is "rationally connected" to the legitimate aim; (b) that the Order is unduly draconian in the light of the need for minimum interference; and (c) that procedural deficiencies, in addition to sustaining the appeal on procedural grounds (as to which, see paragraphs 56 and following, below), also impact upon proportionality.
(a) Rational connection
- The submission on behalf of BM is that the Treasury failed to establish that it was involved in proliferation-related transactions and was supporting and facilitating proliferation-sensitive activities in Iran. Referring to the Ministerial Statement (paragraph 10, above) and the Explanatory Memorandum (paragraph 11, above), Mr Crow submits that the evidence did not establish that BM has "been involved in transactions related to financing Iran's nuclear and ballistic missile programme" or that it has provided services "for" that programme. He further submits that BM's dealings with Novin and another company, Doostan International, do not give rise to any risk that it will engage in the future in trade finance transactions between Iranian proliferators and the UK financial sector, over and above the risk that attaches to any major international bank; and nor do those dealings suggest that shutting BM out from the UK financial sector will reduce the risk of such transactions.
- Mr Crow's submissions, which are advanced with great skill, consistently emphasise the lack of evidence to establish that, either knowingly or unknowingly, BM has ever provided trade finance for a proliferation transaction. In my judgment, this misses the point. Whilst it is true that the Treasury's case would be stronger if it had proved such a state of affairs, such proof is not a prerequisite to the making of an order. Moreover, careful examination of paragraph 16 of the judgment of Mitting J convinces me that he was astute to base his findings on what had been established and what could reasonably be inferred. Without finding that there had been trade finance of the kind to which I have referred, he concluded that BM had provided banking facilities to Novin; that Novin was designated by the Security Council as a company which "operates within the AEOI and has transferred funds on behalf of AEOI to entities associated with Iran's nuclear programme"; that Novin was an AEOI financial conduit and did facilitate that programme; that BM has the capacity to assist designated entities and has in one instance done so; and that the fundamental justification for the Order is that, even as an unknowing and unwilling actor, BM is, by means of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance. The judge further explained all this and put it into context in the earlier and later parts of paragraph 16. Mr Crow does not criticise that further explanation or the contextual observations.
- In my judgment, the conclusions of Mitting J on rational connection were permissible and, indeed, correct. A contrary conclusion would resonate with naivetι. I also accept Mr Swift's submission that, on the basis of what the evidence does establish, a preventative approach is appropriate.
- In rejecting this ground of appeal, I have found it unnecessary to go into the matter of Doostan International, which was not a Security Council designated entity at the time of the making of the Order or at the time of the hearing before Mitting J, although we are told that it is now. The judge did not consider the evidence about Doostan to be of great significance in his determination of the issue of proportionality (see paragraph 18 of his judgment). For my part, I do not consider it to have any greater significance on this issue.
(b) "Unduly draconian"
- This ground of appeal contains two reference points: the undoubtedly severe consequences of the Order for BM and the application of the minimum interference test. As to the first, there is no doubt that, as Mitting J said, the Order amounts to "a severe and costly inhibition on the business of [BM] which will entail long-term damage to its goodwill in the United Kingdom". This is common ground. The real issue is whether consequences of this severity are justifiable, having regard to "the risk of very great harm to vital national interests" (per Mitting J, at paragraph 20). In particular, ought the legitimate aim to have been achieved by less draconian measures? I accept Mr Crow's submission that our approach to that question should be that expounded by Lord Hope in R v Shayler  1 AC 247,  UKHL 11, (at paragraph 61):
it is not enough to assert that the decision that was taken was a reasonable one. A close and penetrating examination of the factual justification for the restriction is needed if the fundamental rights enshrined in the Convention are to remain practical and effective for everyone who wishes to exercise them."
- On the other hand, I recognise that we are in territory in which, as Mitting J also said, we should accord "great weight to the views of the Treasury, endorsed by Parliament, about the risk to the national interests of the United Kingdom" (paragraph 20). His reference to Secretary of State for the Home Department v Rehman  1 AC 153 is apt.
- It is next necessary to refer again to the evidence of Mr Robertson of the Treasury. To the extent that it particularised the positive case for making the Order, it was sufficiently summarised in paragraphs 16 and 17 of Mitting J's judgment, much of which I have set out at paragraph 31 above. On the subject of less intrusive measures, Mr Robertson stated:
"It was concluded that a less intrusive measure would not be effective in addressing the risk posed to the UK by Iran's nuclear programme. Companies and entities in the United Kingdom's financial sector are already required to comply with the requirements of Regulation 423/2007 as amended by Regulation 1110/2008, including exercising continuous vigilance over account activity in their activities with credit and financial institutions domiciled in Iran, and reporting to SOCA suspicions that funds are related to proliferation financing. In addition, the Money Laundering Regulations 2007 require the UK financial sector to apply enhanced customer due diligence and enhanced ongoing monitoring in any situation which by its nature can present a higher risk of money laundering or terrorist financing.
The UK financial sector is accordingly already applying enhanced due diligence and enhanced ongoing monitoring to its transactions and business relationships with all Iranian banks. Such measures, however, rely on the UK financial institutions having sufficient knowledge of the transactions they are involved in to enable them to identify and deal with suspicious elements.
Since Iran lacks a functioning regime to combat money laundering and terrorist financing,
it is not possible for UK financial institutions to rely on such due diligence checks having taken place in Iran.
Further, the Iranian banks and other entities that are known to have provided support to Iran's nuclear and ballistic missile programmes have frequently done so by obscuring the identities of parties involved in transactions. Although there is no evidence that any companies in the United Kingdom financial sector have been knowingly complicit in transactions related to Iran's nuclear and ballistic missile programmes, there is a risk that they will be unknowingly involved. It is assessed that financial institutions in the UK, even with due diligence, are exposed to some risk of providing services to companies and individuals wittingly or unwittingly engaged in proliferation-related trade with Iran.
Moreover systematic reporting measures would do no more than require United Kingdom financial institutions to submit reports on all their transactions with Bank Mellat. While this would permit the relevant authorities to scrutinise those reports for evidence of transactions of concern after the event, it would not provide any mechanism for stopping those transactions since they would already have taken place.
Systematic reporting measures would also place significant additional costs and administrative requirements on the UK financial sector.
It is also suggested that the decision taken was disproportionate because (a) the Treasury did not exercise its power under paragraph 9(5)
so as to limit the extent of the prohibition contained in the Order to particular descriptions of transactions or business relationships, or to transactions or business relationships with some but not others of [BM's] branch offices; and/or (b) because it identified as relevant persons, all persons operating in the financial sector. In relation to (a) the risk posed was considered to be such that it was appropriate to make a direction in respect of all transactions and business relationships with [BM], regardless of the nature of those transactions or the branch
involved. The Treasury is not in a position to know in advance which transactions might be of proliferation concern, so the only effective means of guarding against the risk that the UK financial sector becomes involved in such transactions is to impose restrictions in respect of all transactions and business relationships with [BM]. Further, if only certain branches of [BM were subject to restrictions, it would be a simple matter for [BM] to avoid the effects of the restrictions by diverting transactions through a branch which was not subject to restrictions. In respect of (b) the aim of the measures contained in the Order is to prevent the use of the entirety of the UK financial sector by [BM], so it would not have been appropriate or effective to issue a direction to only certain parts of the sector. It is also the case that it is open to [BM] to apply to the Treasury for a licence in order to carry out transactions which would otherwise be prohibited by the Order."
- Thus, the evidence is that the Treasury considered but rejected the less intrusive measures listed in paragraph 9(4) of Schedule 7.
- I acknowledge that Mr Robertson's witness statement postdated the making of the Order and that that is something which must be taken into account as part of the "close and penetrating examination". Although Mr Crow attempts to criticise Mr Robertson's explanation in a number of ways, I do not consider that he succeeds in materially undermining it. Indeed, I agree with and cannot improve on the words of Mitting J (at paragraph 20):
there really is no other reasonably practicable means of ensuring reliably that the facilities of an Iranian bank with international reach will not be used for the purpose of facilitating the development of nuclear weapons by Iran."
- In my judgment, this is a case in which it is established that the most effective measure is the most intrusive one but that is justified by the very high value of the legitimate aim, namely minimising the risk of very great harm to vital national interests.
(c) Procedural deficiencies
- This complaint is founded upon the recent judgment of the European Court of Justice in Kadi v European Communities, Case T-85/09, 30 September 2010 (Kadi2). The case concerned an application for the annulment of Council Regulation (EC) No 1190/2008 which imposed restrictive measures against certain persons and entities associated with Osama bin Laden, the Al-Qaeda network and the Taleban. One of the applicant's arguments was that the Regulation was disproportionate because of procedural deficiencies. The relevant passages in the judgment are as follows:
"192. It is apparent
that the contested regulation was adopted without furnishing any real safeguard enabling the applicant to put his case to the competent authorities, in a situation in which the restriction of his property rights must be regarded as significant, having regard to the general application and duration of the freezing measures to which he is subject
193. It must therefore be held that, in the circumstances of the case, the imposition on the applicant of the restrictive measures
constitutes an unjustified restriction on his right to property
194. The applicant's claim that the infringement
of his fundamental right to respect for property entails a breach of the principle of proportionality is therefore well-founded."
- I take from that that there can be cases in which an interference with property rights may be disproportionate for procedural reasons. However, Kadi2 was concerned with a particular procedural deficiency. The applicant was denied "a full and rigorous judicial review" (paragraph 151) because of the interplay between the decision-making processes in the United Nations Sanctions Committee and the Community Court. He had not had adequate disclosure of the allegations against him as they were considered by the Sanctions Committee merely a summary of reasons. Accordingly, he had been "unable to defend his rights with regard to that evidence in satisfactory conditions before the Community judicature" (paragraph 181).
- In the present case, there is a statutory procedure akin to judicial review. Although it encompasses a closed hearing and the deployment of special advocates, no complaint is made about that. In these circumstances, I do not consider that it resembles Kadi2. I am not satisfied that there were procedural shortcomings such as to render the substantive Order disproportionate.
(2) Irrelevant considerations
- At the time when the Order was made and laid before and affirmed by Parliament, it was assumed by the Treasury that 80% of the voting rights of the shares in BM were exercised, or were capable of being exercised, by the Iranian government. This was an error. Mitting J accepted the evidence of Mr Hormozi that the Iranian government only exercised voting rights over its 20% shareholding and that that was soon to be reduced to 15% as a result of a capital raising exercise. The judge also accepted that the government does not seek to interfere in or influence the commercial activities of BM.
- It is submitted on behalf of BM that this error caused the Treasury to make the Order and to obtain Parliamentary affirmation of it as a result of taking into account a consideration subsequently shown to be irrelevant or mistaken. Mitting J plainly considered this to be a matter of no materiality. I agree. The matters relied upon by the judge in relation to the statutory conditions and the proportionality exercise are clearly set out in his judgment. He was correct to conclude that this error counted for nothing in the assessments he had to make.
- Mr Crow similarly submits that the assertion in the Ministerial Statement of 12 October 2009 that BM had "been involved in transactions related to financing Iran's nuclear and ballistic missile programme" was not established and was therefore wrongly taken into consideration. However, that was the Treasury's case at its highest. It is not the basis upon which Mitting J upheld the Order. I do not consider that this ground of appeal has merit. The grounds of appeal also referred to a separate ground of appeal under the heading "irrationality" but Mr Crow sensibly concedes that it adds nothing to the grounds I have so far considered and rejected.
(3) Article 14 ECHR: Discrimination
- This ground of appeal was not a ground of challenge advanced before Mitting J. Indeed, it appears to owe its existence to the content of his judgment, in particular the passage in which he stated (at paragraph 16):
"The fundamental justification for the Order is that, even as an unknowing and unwilling actor, [BM] is, by reason of its international reach, well placed to assist entities to facilitate the development of nuclear weapons, by providing them with banking facilities, in particular trade finance."
- Mr Crow submits that, on one level, this could be said of any international bank and the fact that the Order was made against BM results from its incorporation in Iran. This, he contends, amounts to discrimination on the basis of nationality by reference to Article 14 of the ECHR, coupled with Article 1 of the First Protocol (A1P1). Although the point was given increased prominence in Mr Crow's submissions in reply, in my judgment it simply does not run. For one thing, it is necessary to read Mitting J's words in context: the passage follows immediately upon his reference to the fact that BM has provided banking facilities to an entity involved in proliferation, that it has the capacity to do so, and is likely to do so in the future, if only unknowingly. The Order was not made simply because BM is incorporated in Iran. To the extent that it was considered that, by making the Order, pressure could be brought to bear on the Iranian government, and to the extent to which this can be construed as a decision based on nationality, any discrimination was clearly justified for the reasons to which I have referred when considering proportionality.
2. The procedural grounds
- I turn to the procedural grounds. The case for BM under this heading is that the Order is unlawful by reason of procedural unfairness. The case is put under three main headings. First, reliance is placed on the principle that natural justice will often require that a person likely to be adversely affected by an administrative decision must be given an opportunity to make representations before it is taken. Secondly, as the Order interferes with BM's property rights, it is said that A1P1 provides procedural protection to the extent that BM should have been given the opportunity to make prior representations. Thirdly, complaint is made that, in making the Order, the Treasury determined BM's civil rights and obligations in such a way as to attract the requirements of Article 6 of the ECHR. In addition to the three principal procedural grounds of appeal, there is a reasons challenge which I shall address under this general heading.
(1) Natural justice at common law
- The principle upon which Mr Crow relies is well established from cases such as Cooper v Wandsworth Board of Works (1863) 14 CB (NS) 180 to R v Secretary of State for the Home Department, ex parte Doody  1 AC 531 and beyond. In his oral submissions Mr Crow drew attention in particular to R v Gaming Board for Great Britain, ex parte Benaim and Khaida  2 QB 417 and R v Secretary of State for the Home Department, ex parte Fayed  1 WLR 763. The Gaming Board case was concerned with foreign nationals who applied to the Gaming Board for a licence as required by the Gaming Act 1968. Having referred to the Cooper line of authority Lord Denning MR said (at page 431):
"If the Board were bound to disclose every detail, that might itself give the informer away and put him in peril. But, without disclosing every detail, I should have thought that the Board ought in every case to be able to give to the applicant sufficient indication of the objections raised against him such as to enable him to answer them. That is only fair. And the Board must at all costs be fair. If they are not these courts will not hesitate to interfere."
- In Fayed, the context was an application for British citizenship. One of the issues was whether a statutory provision (section 44 of the British Nationality Act 1981) apparently relieving the Secretary of State from an obligation to give reasons for a refusal impliedly reduced the obligation to permit the applicant to make representations prior to the decision. The Court of Appeal held that it did not.
- In the present case, the submission on behalf of the Treasury to Mitting J was that an opportunity for prior representations would have been inappropriate because it would have given BM the opportunity to rearrange its business relationships or transactions in order to avoid or lessen the impact of the proposed Order. The judge rejected that submission, observing that "if [BM] could have taken avoidance action before the Order was made, it could do so just as well after" (paragraph 5). Indeed, it has always been part of the case for the Treasury that, following the making of the Order, BM could and should have rearranged its affairs so as to mitigate the impact of the Order upon its legitimate business. On the other hand, it is undoubtedly the case that some of the circumstances which may lead to sanctions being imposed under Schedule 7, such as the malevolent financing of terrorism or money laundering, would, as Mr Crow acknowledges, make prior representations wholly inappropriate. His submission is that, in the circumstances of this case, there was not a degree of urgency or a need to pre-empt avoidance action such that prior representations were not appropriate.
- The conclusions of Mitting J on this submission were as follows (at paragraph 5):
the procedure for making the Order is laid down by the 2008 Act and contains no provision for the opportunity for affected persons to make representations before it is made. It is readily understandable that no such provision was made. Although in this case, I am only concerned with a direction made in the circumstances set out in paragraph 1(4) of Schedule 7 in respect of a bank, there are many other circumstances in which directions could be made when Parliament cannot have intended that there should be an opportunity for affected persons to make representations
In BAPIO v Secretary of State for the Home Department  EWCA Civ 1139 [it was held] that where Parliament has conferred a rule-making power on the executive, subject to Parliamentary control, it was not generally for the courts to superimpose additional procedural safeguards
There can be no difference in principle between such a power and an executive Order such as the Order in issue here. For that reason, I reject Mr Crow's proposition and conclude that, under domestic law, the only procedural requirements which must have been satisfied for the Order to have effect and to remain effective were those prescribed in Schedule 7. The bank's right to make representations, somewhat theoretical though it may have been, was indirect and was at that stage at which Parliament considered whether or not to affirm the Order."
In taking issue with this analysis, Mr Crow emphasises the immediate, severe and long-term damage to BM as a result of the Order.
- The issue in BAPIO was whether there was a duty to consult prior to an amendment to the Immigration Rules those who would be affected by the amendment including the members of BAPIO. In my judgment (at paragraph 58) with which Rimer LJ agreed (at paragraph 65) I said:
I doubt that, as a matter of principle, a duty to consult can generally be superimposed on a statutory rulemaking procedure which requires the intended rules to be laid before Parliament and subjected to the negative resolution procedure. I tend to the view that, in these circumstances, primary legislation has prescribed a well-worn, albeit often criticised procedure and I attach some significance to the fact that it has not provided an express duty of prior consultation, as it has on many other occasions."
- Sedley LJ, concurring in the result, preferred to emphasise the practical difficulties of consultation in that case. I agree with Mr Crow that a proposal for legislative change which would disadvantage a group of people is not the same as a targeted sanction directed against a named person. However, I am not persuaded that there is scope for the application of a common law right to make representations in the circumstances of this case. In my judgment, Mitting J was correct to conclude that the provisions of the 2008 Act were intended to exclude such a right. There is no doubt that it was appreciated that a "limiting or ceasing business" sanction was potentially draconian. It was for this reason that it attracted the affirmative resolution procedure, rather than the negative resolution procedure which is provided in relation to the less stringent Orders under Schedule 7. I also think there is force in Mr Swift's submission about the practical difficulties of permitting representations in a situation where there is closed material. Moreover, if the intended designated person is entitled to be consulted, it might be difficult to deny the same opportunity to the unquantified and unnamed "relevant persons".
- Mr Crow submits that the affirmative resolution procedure provides no protection at all for designated persons. Although it involves a positive guarantee of Parliamentary consideration, there is no opportunity for the designated person to address the relevant committees. I accept the limitations of the affirmative resolution procedure, although they are not as great as with the negative resolution procedure. It is possible for the designated person to make written representations to and through the Treasury or through Parliamentarians. However, if this were the only protective procedure, I accept that it would fall short of what fairness requires. But it is not the only procedure. It is a procedure interposed between the making of the Order and the statutory right to apply to the High Court pursuant to section 63. It would be ironic if the provision of that procedure at an enhanced level, were to be the factor which vitiated the Order.
- Before leaving the question of common law fairness, there are two other points which I should briefly address. The first is a submission that, even if there was no obligation to permit prior representations, there was a discretion so to do and that it was irrational, in the circumstances of this case, not to exercise it in favour of BM. I do not doubt that the Treasury could lawfully have permitted prior representations, but I reject the submission of irrationality, even though the Treasury case on the need to obviate avoidance action was properly rejected by the judge. An alternative submission is that, on the evidence of Mr Robertson, the Treasury did engage in a degree of prior consultation. For example, the Financial Services Authority was informed of the proposed Order and its advice was sought as to the Order's likely effect. Mr Crow submits that, having decided to engage in consultation, it was incumbent upon the Treasury to consult properly. He relies upon R v North and East Devon Health Authority, ex parte Coughlan  1 QB 213. However, it seems to me that he is seeking an unwarranted extension of the principle. The present circumstances, involving the imposition of a sanction, are different in kind. The fact of consultation with others as to how the sanction might operate and its possible effects does not lead inexorably to an obligation to consult with the target.
(2) The procedural requirement of A1P1
- It is common ground that the Order interfered with BM's property rights. Equally, it is common ground that A1P1 has a procedural aspect. Mr Crow seeks to invoke it in support of his submission that BM had a right to be informed and to make representations prior to the Order. Mitting J rejected this submission. He referred to Jokela v Finland  37 EHRR 26, in which the Strasbourg Court stated (at paragraph 45):
"Although Article 1 of Protocol No 1 contains no explicit procedural requirements, the proceedings at issue must also afford the individual a reasonable opportunity of putting his or her case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision. In ascertaining whether this condition has been satisfied a comprehensive view must be taken of the applicable procedures."
- Mitting J concluded that, "taking such a comprehensive view" section 63 is the means by which BM is afforded a reasonable opportunity of effectively challenging the Order. If the adjective "reasonable" and the adverb "effectively" are appropriate, the reliance on A1P1 is unsustainable. In my judgment, that is the position. I shall enlarge upon it when I consider Article 6 of the ECHR.
(3) Article 6
- The premise underlying this ground of appeal is that the making of the Order amounted to a determination of BM's civil rights and obligations. Article 6(1) states:
"In the determination of his civil rights and obligations
, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law."
- Mitting J held that although there is now a dispute about BM's civil rights which is being determined pursuant to the application under section 63, when the Order was made and affirmed there was no such dispute. On the contrary, it was the Order itself which gave rise to the dispute.
- In support of his submission Mr Crow relies upon R(Wright) v Secretary of State for Health  1 AC 739,  UKHL 3. The claimants in Wright were care workers. Under the Care Standards Act 2000 there are procedures which include the maintenance of a list of people considered unsuitable to work with vulnerable adults. Ultimately, there is a procedure pursuant to which the worker can make representations to the Secretary of State before a final decision has been made and there is a subsequent right of appeal to the Care Standards Tribunal. However, the issue related to the initial stage pursuant to which the Secretary of State was enabled to include the worker on the list on a provisional basis before the final decision and without affording the worker any opportunity to make representations. The worker would then remain on a provisional list pending a final decision and possible appeal. A substantial period of time might elapse between inclusion on the provisional list and the making of the final decision as to listing. The essence of the decision of the House of Lords is distilled in this passage from the headnote:
the right to remain in employment or to be able to engage in a particular employment sector was a civil right within Article 6(1) of the Convention;
since the provisional listing of a care worker under
the 2000 Act could result in irreparable damage to the person's employment or prospects of employment in the Care Sector, it amounted to a determination of a civil right within Article 6(1) notwithstanding that it was only an interim measure;
given the possibility of such damage, it was necessary for the procedure of provisional listing to be fair, whereas the denial of an opportunity for care workers to answer allegations before being listed made [it] procedurally unfair and contrary to Article 6(1)."
- The principal speech was delivered by Baroness Hale, with whom the rest of the Judicial Committee agreed. By analogy with the long-standing Strasbourg jurisprudence to the effect that the right to practice a profession is a civil right (Le Compte v Belgium  4 EHRR 1), she described as "uncontroversial" the proposition that "the right to remain in the employment one currently holds must be a civil right, as too must the right to engage in a wide variety of jobs in the care sector even if one does not currently have one" (paragraph 19). She then moved to the question whether provisional listing amounted to a "determination" of a civil right which she described (at paragraph 20) as "more controversial". Following some consideration of the extent to which Article 6 applies to interim orders or other provisional measures in circumstances where there will be a later Article 6 compliant determination, she stated (at paragraph 21):
"Some interim measures have such a clear and decisive impact upon the exercise of a civil right that Article 6(1) does apply
if Article 6 applies to the suspension of a doctor from medical practice (as in Le Compte), it must apply to the permanent separation of a person from her current employment."
- It appears that the Secretary of State conceded as much in that case. Having concluded that Article 6 was engaged, she stated (at paragraph 28):
the scheme as enacted in the Care Standards Act 2000 does not comply with Article 6(1)
the process does not begin fairly, by offering the care worker an opportunity to answer the allegations made against her before imposing upon her possibly irreparable damage to her employment or prospects of employment."
- Mr Crow submits that the present case is indistinguishable from Wright.
- We are of course bound by Wright. However, soon after it was decided in the House of Lords, the Strasbourg Court decided Micallef v Malta  50 EHRR 37, in which it laid down a new approach in relation to the application of Article 6 to interim measures. In his judgment Mitting J referred to one passage from Micallef, namely paragraph 74, in which the Strasbourg Court stated:
"The Court reiterates that for Article 6(1) in its 'civil limb' to be applicable, there must be a dispute over a 'civil right' which can be said, at least on arguable grounds, to be recognised under domestic law
- Mr Swift also draws attention to paragraph 85, where the court stated:
the nature of the interim measure, its object and purpose as well as its effects on the right in question should be scrutinised."
- Mr Swift's submission is that the present case inhabits very different territory from that in Wright. I agree. More importantly, so, I think, would Baroness Hale. In paragraph 21 of her speech she stated:
"It is one thing temporarily to freeze a person's assets, so that he cannot divest himself of them before an issue is tried; it is another thing to deprive someone of their employment by operation of law."
- Although the Order in the present case is not simply an asset-freezing order, there are similarities.
- In my judgment, in the very different circumstances of the present case, Wright does not require us to find that Article 6 is engaged at the point where the Order is made and laid before Parliament. If Mr Crow's submission were correct, it would have stark consequences because it would necessitate the judicialisation of the making of the Order. After all, the Treasury is not "an independent and impartial tribunal" conducting "a fair and public hearing".
- Mitting J also rested his decision on an alternative basis. He said (at paragraph 8):
"If that analysis is wrong, the decision to make and affirm the Order must be part of the process of determination of the bank's civil rights of the kind analysed by Lord Clyde in R(Alconbury) Ltd v Secretary of State for the Environment  2 AC 295 in paragraphs 145-160. For present purposes, the conclusion to be drawn from his reasoning is that a hybrid procedure involving executive decision-making can be compatible with Article 6(1). On that analysis, the procedure for determining [BM's] civil rights in this case is hybrid: an executive decision affirmed by Parliament, subject to later challenge before a court. The procedure laid down in CPR Part 79, adapted to accommodate [BM's] rights under Article 6(1) is adequate to give effect to those rights. Even if, exceptionally, the impact of the Order was such as to cause irreparable damage to [BM], unless its challenge to the Order was determined more quickly than the procedure set out in Part 79 permitted, it could apply for judicial review. By close analogy with the control order regime, judicial review is not excluded: BX v Secretary of State for the Home Department  EWCA Civ 481, at paragraphs 24-27. An interim injunction or mandatory or prohibitory order could be obtained in such proceedings."
- Mr Swift supports that reasoning as an alternative to his primary submission. For my part, I am not convinced that it is truly an alternative. There is a considerable overlap between the analyses. They both lead to the conclusion that the section 63 procedure secures Article 6 compliance, in the one case on the basis that it is the first stage at which Article 6 is engaged, in the other case on the basis that, even if it is engaged earlier, the section 63 procedure is part of the process. This, in effect leads back to Jokela (paragraph 65 above). The correctness of Mitting J's analysis and Mr Swift's submissions is, of course, dependent upon the section 63 procedure being essentially fair. It is a matter of concern that an order made on 9 October 2009 was not substantively considered in the High Court until 11 June 2010, more than half way through its life. It was then assessed on the basis that it had caused significant long-term damage to BM. In the event, this was exacerbated by the fact that the substantive hearing in the High Court was delayed because there had been an earlier skirmish about disclosure which itself came to the Court of Appeal before the substantive hearing in the High Court took place. In my view, it would normally be appropriate for a person designated under a Schedule 7 Order to make an early application to the High Court pursuant to section 63 and to seek and obtain an expedited hearing. I agree with Mitting J that, in a case of greater urgency, there would be jurisdiction in the High Court to grant interim relief. I do not consider it appropriate to give general guidance about such an application because we have received only very limited submissions on the subject.
- Drawing all this together, I conclude that Mitting J was correct in his analysis for the reasons he gave.
- Under this ground of appeal, it is submitted that the Treasury gave inadequate reasons for the decision to make the Order. Mr Crow emphasises the gravity of the measure and submits that it called for the provision of specific and detailed reasons. The conclusion of Mitting J on this issue was expressed in these terms (at paragraph 22):
"The written Ministerial Statement of 12 October 2009 gave an adequate summary of the reasons, which was repeated by Ministerial Statements to both Houses of Parliament. Expanded reasons have been given in the statement of Mr Robertson. The principal purposes of giving reasons to explain why a decision was made and to permit it to be challenged have been amply fulfilled."
- He might also have referred to the correspondence which followed the making of the Order beginning with a letter from BM's solicitors date 16 October 2009 and including a detailed letter from the Treasury dated 27 October 2009, prior to the completion of the Parliamentary process. Subsequent events show that BM was able to mount an impressive albeit ultimately unsuccessful challenge to the Order. Although Mr Crow criticises the inclusion of Mr Robertson's statement as part of the satisfaction of the obligation to provide reasons, it seems to me that it is properly included. I do not consider this ground of appeal to be sustainable.
- It follows from what I have said that I would dismiss this appeal. Although we held a brief closed hearing in the course of the appeal, I do not find it necessary to refer to it or to the closed judgment of Mitting J in more detail than he did in the passage of his judgment which I set out at paragraph 31, above.
Lord Justice Elias:
- I gratefully adopt the account of the facts given by Maurice Kay LJ, and I rely on the relevant legal provisions set out by him. I agree with his conclusions on the substantive issues and I do not wish to add anything to his analysis of those points. However, I respectfully disagree with his conclusion that the Treasury was not in breach of any procedural obligations when making this Order. In my judgment, they failed to comply with the common law principles of fairness and were also in breach both of the procedural obligations imposed by Article 1 Protocol 1 to the Convention, and Article 6. I will deal with the three issues in turn.
Fairness at common law.
- There is no doubt that the Order had an immediate and significant adverse effect on BM. Maurice Kay LJ has summarised these effects at paragraph 16-18 above. Some damage would have been inevitable, even if the Order had been speedily quashed following an application to the court. Some loss therefore was irreparable. Mr Crow submits, as he did below, that given these consequences, fairness required the Treasury to consult BM. By this he meant the obligation to comply with the basic principles of natural justice which requires somebody whose rights are adversely affected to be given an opportunity to know the case against him and to make representations. I do not think that this is aptly described as a duty to consult, which has different connotations and may arise where no question of natural justice arises. In any event, whatever the term used, the submission is that fundamental principles of fairness demanded that the Order should not be made without BM being entitled to know, within the limits of national security considerations, why it was being made so that they could seek to persuade the Treasury that it would be unjust or unnecessary to make it.
- Mr Crow relied upon a well established line of authorities, commencing with the seminal case of Cooper v Wandsworth Board of Works (1863)14 C.B.(NS) 180 where Byles J observed, in a case where statute authorised the interference with property rights but was silent on the question whether there should be a hearing, that the "justice of the common law would supply the omission of the legislature." Many later cases have applied that principle: see e.g. Wiseman v Borneman  AC 297 and R v Gaming Board for Great Britain, ex parte Benaim and Khaida  2 QB 417. Mr Crow asserted that there was no justification for departing from these hallowed principles here.
- Before Mitting J, Mr Swift countered with three reasons why, notwithstanding this significant adverse impact on BM, no right to a hearing had been conferred upon it in this case. The first and primary reason relied upon before the judge below was that it would not have been appropriate to give advance notice of the proposal to make the Order because it would have enabled BM to restructure financial arrangements before the Order was made and thereby risk frustrating the very purpose of the order. Plainly that would have been a good reason for not notifying BM before the Order was made: see, for a recent example, BX v Secretary of State for the Home Department EWCA 481, para 53. The judge was wholly unimpressed by this submission. He found that BM could just as easily take avoidance action after the Order had been made as before it. This conclusion of the judge has not been challenged by the Treasury in this appeal and that particular argument has not been repeated before us. So the principal reason originally advanced for denying the right to a hearing has not been sustained.
- The second and third reasons are inter-related. As to the second, Mr Swift contends that the Order is of a legislative character and that it is well-established that generally, and absent some specific statutory obligation, there is no legal duty to consult with parties affected by proposed legislation. He relies in particular upon the authority of this court in BAPIO v Secretary of State for the Home Department  EWCA Civ 1139 in support of this proposition. Here the Order is directed not only at BM but at a far wider category of persons, namely all financial organisations operating in the UK, who will be prevented from creating new business or completing existing business with BM. It would be impossible for the Treasury to consult with all these parties - indeed the Government would not necessarily know who did have a commercial relationship with BM - and accordingly the general principle that there is no legal obligation to consult should apply here.
- Third, the statute has laid out in some detail the procedures which have to be complied with before the Order can be made and these ought to be considered to be exhaustive. This is particularly so given that the legislation applies in a wide range of situations in most of which it could not have been intended that any right to a hearing would be given before the Order was made, such as where the Order related to suspected terrorists or money launderers. It would plainly undermine the purpose of any such Order if they were to be given notice in advance of what was proposed and why. It would make no sense for the statute to require a hearing only in a narrow range of judicially created exceptional cases such as arises in this case.
- Furthermore, the Order has to be laid before Parliament and is subject to the affirmative resolution procedure; that gives an opportunity for BM to lobby members of Parliament to seek to secure that the resolution is not passed. Mr Swift contends that BAPIO materially assists the Treasury on this point also. It supports the proposition that the procedures laid down by Parliament in this case ought to be treated as exhaustive; there is no room for judicially created implied obligations.
- These submissions found favour with Mitting J:
"Although in this case, I am only concerned with a direction made in the circumstances set out in paragraph 1(4) of Schedule 7 in respect of a bank, there are many other circumstances in which directions could be made when Parliament cannot have intended that there should be an opportunity for affected persons to make representations. They include individuals engaged in terrorist financing or money laundering activities (paragraphs 1(3)(c) and 9(1)(c)); and governments reasonably believed to be engaged in the development or production of nuclear etc weapons (paragraphs 1(4)(a) and 9(1)(b)); and the manifold persons in the UK financial sector to whom the direction is given (paragraph 3(1)). As Mr Crow acknowledges, a duty to permit prior representations to be made could only arise in particular circumstances for example, when there was no reason to believe that avoiding action would be taken by an affected person. Such an exception would be judge-made. In BAPIO v Secretary of State for the Home Department  EWCA Civ 1139, Sedley LJ pointed out the difficulties in introducing a judge-made exception in paragraphs 44-47 of his judgment. His reasoning, shared by Maurice Kay and Rimer LJJ, led them to hold that where Parliament has conferred a rule making power on the executive, subject to Parliamentary control, it was not generally for the courts to superimpose additional procedural safeguards: paragraphs 58 and 65. Their observations form part of the ratio decidendi and would bind me in relation to a rule making power. There can be no difference in principle between such a power and an executive Order, such as the Order in issue here."
- Heavy reliance is therefore placed on the analysis of the Court of Appeal in the BAPIO case and it requires further consideration. In that case the Court of Appeal held that there was no duty of consultation on the Home Secretary when abolishing permit free training for doctors with no right of abode in the United Kingdom. The relevant legislation did not expressly impose any such obligation and there was no established practice of consultation. In these circumstances the court unanimously refused to imply any duty to consult. Lord Justice Sedley highlighted some of the difficulties of implying any such obligation in the following passage of his judgment (paras 43-44):
"43. The real obstacle which I think stands in the appellants' way is the difficulty of propounding a principle which reconciles fairness to an adversely affected class with the principles of public administration that are also part of the common law. These are not based on administrative convenience or potential embarrassment. They arise from the separation of powers and the entitlement of executive government to formulate and reformulate policy, albeit subject to such constraints as the law places upon the process and the product
.. It is not unthinkable that the common law could recognise a general duty of consultation in relation to proposed measures which are going to adversely affect an identifiable interest group or sector of society.
44. But what are its implications? The appellants have not been able to propose any limit to the generality of the duty. Their case must hold good for all such measures, of which the state at national and local level introduces certainly hundreds, possibly thousands, every year. If made good, such a duty would bring a host of litigable issues in its train: is the measure one which is actually going to injure particular interests sufficiently for fairness to require consultation? If so, who is entitled to be consulted? Are there interests which ought not to be consulted? How is the exercise to be publicised and conducted? Are the questions fairly framed? Have the responses been conscientiously taken into account? The consequent industry of legal challenges would generate in its turn defensive forms of public administration. All of this, I accept, will have to be lived with if the obligation exists; but it is at least a reason for being cautious."
- Maurice Kay LJ agreed with Sedley LJ's analysis but also concluded that given in particular the obligation to lay the rules before Parliament, the statutory procedure ought to be treated as exhaustive of the procedural obligations imposed on the Home Secretary. He said this (para 58):
I wholly agree with Sedley LJ's reason for concluding that a duty to consult did not arise in this case, namely the non-specific nature of the alleged duty and the lack of clear principle by which to define it. For my part, however, I would not so readily reject one of the alternative submissions made by Ms Laing on behalf of the Home Secretary. Whilst I do agree with Sedley LJ that the Rules are susceptible to judicial review on grounds such as ultra vires or irrationality, I doubt that, as a matter of principle, a duty to consult can generally be superimposed on a statutory rule-making procedure which requires the intended rules to be laid before Parliament and subjected to the negative resolution procedure. I tend to the view that, in these circumstances, primary legislation has prescribed a well-worn, albeit often criticised, procedure and I attach some significance to the fact that it has not provided an express duty of prior consultation, as it has on many other occasions. The negative resolution procedure enables interested parties to press their case through Parliament, although I acknowledge that their prospects of success are historically and realistically low.
- Rimer LJ expressly agreed with Maurice Kay LJ on this point. The judges did, however, emphasise that they were not seeking to lay down any universal principle.
- In my judgment, the Order here is of a qualitatively different character to that with which the court was concerned in the BAPIO case. This is not a typical act of subordinate legislation laying down rules which affect a broad and amorphous class or classes of persons. The problems which occur when implying a duty to consult, such as the non-specific nature of the duty as identified in BAPIO, do not arise with respect to BM. Here the Order is specifically directed at BM, albeit with an impact on other parties. The Treasury knows that the action of implementing the Order will damage the rights of this organisation; that is its purpose. There is no difficulty in identifying the nature of the information to be given to BM so that it can give its response. Even if there are security restrictions which would make some disclosure inappropriate, it should still be possible to provide BM with the gist of the case against it and such details as can safely be divulged so that it can respond appropriately. The fact that there is a wide class of other persons also affected does not in my judgment militate against acting fairly. I see no difficulty in conferring this right on the BM, the true target of this measure, whilst denying it to the other UK financial institutions which are only indirectly affected as a result of the Order. In my judgment it would allow form to dictate substance if BM were to be denied the fundamental protection of natural justice simply on the grounds that the Order is classified as a legislative act. The history of judicial review shows the courts seeking to escape from the fetter of over rigid categories, such as limiting natural justice to judicial and not administrative acts, or judicial and quasi judicial acts; or depriving the courts of judicial review altogether where the source of the power was common law (prerogative) rather than statute. The focus must be on the particular character of the act in question.
- Similarly, I am not persuaded that Parliament, in formulating the procedures in schedule 7, must have intended to exclude any rights to natural justice. In Wiseman v Borneman  AC 297, 308 Lord Reid said that there are two preconditions which need to be satisfied before the courts should supplement a procedure laid down by Parliament:
it must be clear that the statutory procedure is insufficient to achieve justice and that to require additional steps would not frustrate the apparent purpose of the legislation."
- In my judgment, these preconditions are met here. As to the first, the need for an affirmative resolution is not an effective control to remedy the failing to give a hearing; it is designed to ensure effective political accountability, not to be a substitute for a fair procedure. Nor does the availability of judicial review, with its limited review of fact, remedy the lack of a hearing. As to the second precondition, now that the primary submission of the Secretary of State has been rejected, it is not contended that complying with the basic elements of natural justice would frustrate the purpose of the legislation.
- Aside from human rights' considerations, I recognise the force of the point that Parliament cannot have intended that the right to a hearing should be conferred in some cases but not others. I accept that it will almost inevitably risk frustrating the statutory purpose to give suspected terrorists advanced notice of the case against them (although a right to a hearing after the Order has been implemented would still be possible.) Even if there might be exceptional cases where a hearing could not have that effect, it would arguably be invidious to require the Treasury to decide whether a case falls within the exceptional category or not, and that is a factor militating against the implication of natural justice: see R v Birmingham City Council ex p Ferrero Ltd  1 All ER 530 (CA). But I see no reason why a distinction cannot be drawn between different categories of case depending upon the nature of the Order and the purpose for which the Order is being made.
- Accordingly, in my judgment, neither of the reasons advanced by Mr Swift justifies the exclusion of this most basic principle of fairness. Sensitivities over security concerns can be protected by limiting the material made available to BM, but it is not a justification for refusing to put the gist of the case to BM so that they can respond. Difficulties in making available all relevant information do not justify the conclusion that no information should be given.
- There were two further submissions made by Mr Crow relating to this aspect of the case. The first related to a concession by Mr Swift during the course of the hearing that the Treasury had a discretion to permit BM to respond to the case against it; it was not precluded by statute from so doing. This led BM to submit that the failure to exercise the discretion was irrational given that it could not in any way prejudice the purpose of the Order and would make the procedures fairer. That, I think, puts the case too high. The Treasury may have been mistaken in its view that advanced notification would frustrate the purpose of the Order, but it was a rational, if mistaken, reason for its decision.
- Second, it was submitted that since the Treasury had in fact carried out some consultation with particular bodies before the Order was made, it was unfair not to consult BM. I respectfully agree with Maurice Kay LJ that the fact that there was some consultation did not render it unfair not to consult BM, nor did it contravene any legitimate expectation. As I have said, I do not think it particularly apt to describe BM's right as a right to be consulted; and the nature of the consultation which did take place was of a wholly different character to the nature of the hearing which BM says that fairness dictated.
- In my judgment, therefore, the common law principles of natural justice were infringed in this case. Having said that, I think it extremely unlikely that the decision would have been any different even had a hearing been granted. Indeed, notwithstanding the detailed factual material concerning the activities of BM on which the Treasury relied when making the Order, the evidence suggests that the Order would have been made simply because BM was Iranian, had an international reach that was well placed to help finance Iran's nuclear programme, and had at least to some extent, whether wittingly or unwittingly, provided that assistance and was likely to do so in the future. I confess that this has caused me to wonder whether the right to a hearing could properly have been denied on the grounds that it would have been a hollow and meaningless formality. If BM was being treated in this way essentially because of who it was and what it might even innocently do, rather than what it did, then there was little it could say that would have altered matters. However, the Treasury has never sought to put its case on that simple basis; and in my judgment it would not be right to deal with the point in that way now.
The human rights' claims.
- The significance of the claim being advanced in human rights' terms, as well as under the common law, is twofold. First, section 3 of the Human Rights Act requires that the statutory provisions should be read where possible compatibly with the appellant's human rights. So even if, contrary to my conclusion, there is no right to a hearing under domestic law applying traditional principles of statutory construction, that is no answer to the human rights' claims. A different principle of construction must be adopted and the statute must, if possible be construed consistently with those rights. If it cannot be so interpreted, then the court can declare the statute incompatible with the appellant's human rights pursuant to section 4 of the Human Rights Act. Second, a breach of either of the rights relied upon gives rise to a claim in damages, although we are not directly concerned with that in this case.
- The appellant submitted before Mitting J that the failure by the Treasury to provide a right to any hearing before the Order was made constituted a breach of Article 6. The submission was that the Treasury, in making the Order, was itself determining civil rights and obligations within the meaning of that Article, and that the failure to provide a hearing constituted a fundamental breach of that provision.
- The judge accepted that there was an interference with the civil rights of BM so as to engage Article 6, but not at the stage when the Treasury was making the Order. The reason for that conclusion was that in order for Article 6 to be engaged there must be a dispute with respect to civil rights and here the judge found that there was no dispute at the point when the Order was made. As the judge succinctly put it:
"It is the Order which gives rise to the dispute."
Accordingly, the focus of any Article 6 challenge had to be on the statutory appeal to the court, and that was Article 6 compliant.
- The judge further held that even if Article 6 was engaged at the initial stage, nonetheless this was one of those cases of a kind identified by the House of Lords in R (Alconbury) Ltd v Secretary of State for the Environment  2 AC 295 where there need not be full compliance with Article 6 at the initial hearing stage provided that there is sufficient protection afforded to an applicant by the combination of the safeguards provided at the initial hearing and the subsequent later challenge before a court.
- The judge considered that the procedure laid down by CPR Part 79, which deals with the procedure applicable to challenges under this statutory provision, adequately gave effect to Article 6 rights. The principles of judicial review which the court must apply as directed by section 63(3) of the 2008 Act were Article 6 compliant. The judge also observed that if the statutory appeal route could not deal adequately or sufficiently quickly with the damage caused pending the full hearing, judicial review proceedings could have been initiated and interim relief suspending the effect of the Order could have been secured to prevent, or at least substantially mitigate, that damage.
- Mr Crow submits that this analysis is fundamentally defective. He relies in particular upon the decision of the Supreme Court in the case of R (Wright) v Secretary of State for Health  1 AC 739 for the proposition that the making of the Order itself was sufficient to engage Article 6.
- In Wright there was a scheme, made pursuant to the Care Standards Act 2000, empowering the Secretary of State to maintain a list of persons considered unsuitable to work with vulnerable adults. As a consequence they were also prevented from working with children. The procedures were quite complex but the effect was that individuals so listed were suspended with immediate effect and without any right at that stage to make representations about the case against them. Ultimately they had the right to a full review of their case before a tribunal which heard evidence and made factual determinations, and that procedure complied fully with Article 6. In that case therefore, as here, there was no advance notice that the detrimental action was going to be taken. Baroness Hale of Richmond (with whose judgment Lord Phillips of Worth Matravers, Lord Hoffmann, Lord Hope of Craighead and Lord Brown of Eaton-under-Heywood agreed) upheld the decision of the Court of Appeal that the procedure established under the Act was incompatible with Article 6. She said this (para 28):
"In my view, Dyson LJ was entirely correct in his conclusion that the scheme as enacted in the Care Standards Act 2000 does not comply with Article 6(1) for the reasons he gave. The process does not begin fairly, by offering the care worker an opportunity to answer the allegation made against her, before imposing upon her possibly irreparable damage to her employment or prospects of employment."
- Mr Crow submits that that is precisely the situation here. There is irreparable damage caused by the making of the Order, and it therefore engaged Article 6. Furthermore, just as in the Wright case, the failure to permit BM to answer the allegations prior to the Order being made could not be put right on appeal. However speedily the case was brought on, there would inevitably be significant immediate and irreparable damage to BM. Even assuming that a court would have been willing to hear a judicial review application notwithstanding the right of appeal, it was wholly unrealistic to suggest that in such a sensitive area where interests of security arise, a court would have been willing to grant interim relief by suspending the effect of the Order pending a full hearing.
- It is not altogether clear that under ECHR jurisprudence it is necessary for there to be a "dispute" before the obligations under Article 6 is engaged. The requirement is said to stem from the French text that uses the word "contestation". It is true that there are certain cases that have been determined on the assumption that some dispute must be demonstrated, although the courts have taken a very minimalist view as to what that requires. In Le Compte v Belgium  4 EHRR 1, the court observed that:
"Conformity with the spirit of the Convention requires that this word should not be construed too technically and that it should be given a substantive, rather than a formal meaning; besides, it has no counterpart in the English text of Article 6
- In the subsequent case of Benthem v Netherlands (1986) EHRR 1, the court reviewed the case law bearing on this issue and concluded, citing the earlier decisions in Ringeisen v Austria 1 EHRR 455 and the Le Compte case , that there must be a real and genuine dispute and that "a tenuous connection or remote consequence" will not suffice for Article 6.
- More recently, the ECHR has expressed some doubts about whether it is necessary for an applicant to establish that there is a dispute at all: see Moreira de Azevedo v Portugal (1991) 13 EHRR 721 and Perez v France (2005) 40 EHRR 39, paras 64-65. But even if that is a material requirement, in my judgment, its purpose is essentially to prevent Article 6 claims where the applicant has an insufficiently direct interest in the outcome of a case, or where the interest is trivial. Neither exception applies here.
- The position adopted by Mitting J, namely that there was no dispute until rights were actually interfered with by the Order, is literally correct; since BM did not know about the pending Order, they were in no position to dispute it. However, I agree with Mr Crow that if advance notification to BM would have given rise to a dispute then it is highly unattractive to accept that where the Treasury fails to give such notification in circumstances where they plainly could have done so, they can thereby sidestep the application of Article 6 principles. It means that the Treasury effectively controls when and how the principles apply.
- Moreover, the ruling of the Supreme Court in Wright is inconsistent with the analysis adopted by the judge. The Court held that Article 6 was engaged at the initial stage and on the facts was not put right by the subsequent full hearing. Mr Swift contended that this case was decided without the Court having the benefit of the decision of the ECHR in Micallef v Malta (2010) 50 EHRR 37. The Court there reiterated, as had been said in some earlier cases, that for Article 6 to be engaged there must be:
"a dispute over a "civil law right" which can be said, at least on arguable grounds to be recognised under domestic law
- However, whilst that case asserts that there must be a dispute in existence, it does not begin to engage with the question when a dispute can be said to have arisen. In my judgment, it casts no doubt at all on the reasoning in Wright. I do not think that the Supreme Court would have come to a different conclusion if it had been expressly drawn to the Court's attention (as it may have been) that some ECHR authorities require that there should be a dispute before Article 6 arises.
- In any event, in my judgment, the question of when a dispute arises, and whether the Treasury was bound by Article 6 principles, is strictly irrelevant to the analysis of the principles applicable under Article 6. The important requirement under that Article is that it should apply to "all proceedings, the result of which is decisive for private rights and obligations"; see Benthem, para 32.
- It follows that the State must secure that there are proper judicial safeguards where private rights are affected. Whether or not the Treasury is directly subject to Article 6 at the time it makes the Order, the rights afforded by Article 6 must secure that BM at an appropriate stage has a proper and full opportunity to challenge both the factual and the legal conclusions on which the interference with its rights is based. If the procedures adopted by the State permit the possibility of irreparable damage to civil rights before any effective remedy can be granted, that will not comply with that obligation, as Wright demonstrates.
- In my judgment, that is the position here, given the inevitable delay that will necessarily occur before any effective challenge could be mounted to the Order made by the Treasury. I agree with Mr Crow that even if judicial review proceedings could be mounted (or perhaps more likely, some interlocutory relief could be pursued in the course of the statutory appeal) the possibility of setting aside an Order which has been laid before Parliament on an interim application in these circumstances, where matters of significant national interest are at stake, is little short of fanciful. This is particularly so if the Order has already been affirmed in Parliament. So is the suggestion that lobbying Members of Parliament to persuade them not to affirm the Order constitutes an adequate remedy.
- Furthermore, in my judgment, even if there were no immediate and irreparable harm caused by the making of the Order itself, the composite procedure in play here would not be enough to meet Article 6 requirements. It would suffice to remedy the fact that the Treasury in not an independent or impartial tribunal, but in my judgment it would not remedy the weaknesses in the fact-finding aspect of the decision.
- I accept, as a number of decisions of the ECHR establish, that where the initial decision-maker is an expert or specialist body, or where the findings of fact are intermingled with policy considerations, then Article 6 will be complied with even though the court on review has no full jurisdiction to review findings of fact and does not carry out a fresh assessment of its own. The position was succinctly and cogently summarised by Baroness Hale in Wright as follows (para 23):
It is a well-known principle that decisions which determine civil rights and obligations may be made by the administrative authorities, provided that there is then access to an independent and impartial tribunal which exercises "full jurisdiction": Bryan v United Kingdom (1995) 21 EHRR 342, applied domestically in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions  2 AC 295 and Runa Begum v Tower Hamlets London Borough Council (First Secretary of State intervening)  2 AC 430. What amounts to "full jurisdiction" varies according to the nature of the decision being made. It does not always require access to a court or tribunal even for the determination of disputed issues of fact. Much depends upon the subject matter of the decision and the quality of the initial decision-making process. If there is a "classic exercise of administrative discretion", even though determinative of civil rights and obligations, and there are a number of safeguards to ensure that the procedure is in fact both fair and impartial, then judicial review may be adequate to supply the necessary access to a court, even if there is no jurisdiction to examine the factual merits of the case. The planning system is a classic example (Alconbury); so too, it has been held, is the allocation of "suitable" housing to the homeless (Runa Begum); but allowing councillors to decide whether there was a good excuse for a late claim to housing benefit was not: Tsfayo v United Kingdom (2006) 48 EHRR 457."
- Where the review carried out by the court does not permit a proper review of the disputed findings of fact - and that is the position where traditional judicial review principles are adopted, as in this case - then it is important for the court to be satisfied that there has been a fair determination of the relevant facts by the initial decision maker. As Baroness Hale observed in the passage I have quoted "much depends on the quality of the original decision making process".
- The same point has been made on a number of occasions by the ECHR itself: see the Bryan case, para 45 and Steffan v United Kingdom (1997) 25 EHRR CD 130.
- In my judgment, it matters not whether the initial decision maker is subject to Article 6 principles or not. Even if he is not, if the determination of relevant facts is not subject to a satisfactory and fair procedure at some stage in the process then the procedures will not be Article 6 compliant. In my judgment, that is the position here.
- Lord Justice Maurice Kay has found that Article 6 is inapplicable for a further and distinct reason, not I think specifically relied upon by the judge below. He says that the Order in this case is not engaged because it is in substance a preliminary order. He distinguishes the Wright case on the basis that it was concerned with an Order having immediate and direct impact upon a person's livelihood, whereas the Order in this case was of an interim nature, being equivalent to a freezing order. He refers to the judgment of Baroness Hale in Wright (para 21) where she specifically observed that different principles might apply where an interim freezing order of that nature was under consideration.
- I respectfully disagree. I do not accept that the Order made in this case can properly be described as akin to a freezing order of the kind which is commonly obtained in civil proceedings. Typically, that is designed to ensure that any judgment in the claimant's favour will not be frustrated by a defendant dissipating his assets or otherwise removing them from the jurisdiction. Usually, of course, the claimant has to give a cross undertaking and damages so as to secure the defendant's position in the event that the claim fails.
- It is indeed well established that Article 6 will not apply to certain preliminary determinations; that much is confirmed by the decision of the ECHR in Micallef. But it is worth observing the limitations on that exception. At paragraph 85 the Court said this:
"..Secondly, the nature of the interim measure, its object and purpose, as well as its effect on the right in question, shall be scrutinised. Whenever an interim measure can be considered effectively to determine the rights or obligations at stake, notwithstanding the length of time it is in force, Article 6 will be applicable.
However, the court accepts that in exceptional cases where, for example, the effectiveness and measurement sought, depends on a rapid decision making process it may not be possible immediately to comply with all the requirements of Article 6. Thus, in such specific cases, while the independence and impartiality of the tribunal or the judge concerned is an indispensable and inalienable safeguard in such proceedings, other procedural safeguards may apply only to the extent compatible with the nature and purpose of the interim proceedings at issue. In any subsequent proceedings before the court, it will fall to the Government to establish that, in view of the purpose of the proceedings at issue in a given case, one or more specific procedural safeguards could not be applied without unduly prejudicing the attainment of the objective sought by the interim measure in question."
- In my judgment, this Order did effectively determine civil rights, albeit it for a limited period of time. It prevented BM operating its business in the UK. Moreover, the appellant contends, with some evidential basis, that other institutions, including the EU, have now made copy cat Orders relying significantly on the evidence produced in this case. This is not one of those exceptional cases where the requirements of Article 6 could not be complied with because of the need for urgency or because to have given a hearing might have frustrated the purpose of making the Order. As I have said, that was the reason originally advanced by the Secretary of State, but the submission was rejected by the judge.
- Furthermore, if the effect of the listing procedure in Wright, removing someone from his or her livelihood for a short period, attracts Article 6, then it is difficult to see why this very significant impact on BM's business would not do so likewise. In many circumstances - and perhaps here too, although there is no evidence specifically about this -, an order bringing a business to a standstill - would be likely to result in a number of individuals losing their employment.
- I do not therefore accept that this interference with BM's rights can be said to be any less burdensome than that which occurred in the Wright case. Once the Treasury has conceded that there is insufficient urgency to justify a failure to allow BM to seek to answer the allegations made against it before the Order was made, then in my view the only proper conclusion is that the failure to give the hearing infringes Article 6.
Article 1 of Protocol 1.
- The judge accepted that the Order interfered with BM's right to the peaceful enjoyment of its possessions contrary to Article 1, Protocol 1. Indeed he accepted that the effect was substantial. That indeed was its purpose. It is well established that there is a procedural requirement which is part of the protection afforded by this Convention right. It was summarised in Jokelala v Finland  EHRR 26 by the Court at Strasbourg as follows (para 45):
"Although Article 1 of Protocol No 1 contains no explicit procedural requirements, the proceedings at issue must also afford the individual a reasonable opportunity of putting his or her case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision. In ascertaining whether this condition has been satisfied a comprehensive view must be taken of the applicable procedures."
- The judge concluded that, just as the composite procedures satisfied the requirements of Article 6, so it would satisfy the requirements imposed by this provision too. I accept that in principle it could do so, but for reasons I have given, I do not accept that the composite procedure was adequate to satisfy Article 6. It has not provided any effective opportunity for BM to challenge the findings of fact on which the Order was based; and it has caused irreparable damage which the subsequent procedures were unable to remedy. It follows that, in my view, it does not suffice to comply with Article 1 of Protocol 1 either.
- It follows then I would have been willing to grant an appropriate declaration that BM has been deprived of its right to a fair hearing before the Order was made; and that its rights under Article 1 of Protocol 1 and Article 6 of the Convention were also infringed. I have reached that conclusion without, however, having to use the interpretative powers conferred by section 3 of the Human Rights Act. The appellant's human rights could have been complied with under the domestic legislation as it stands. Indeed, Mr Swift concedes that the Treasury could have afforded BM a hearing. It follows that, in my judgment, it was the application of the Treasury's powers which constituted the infringing conduct in this case, not the laws themselves.
Lord Justice Pitchford:
- I am grateful to Maurice Kay LJ for his exposition of the facts and his analysis of the legal issues raised by the appellant. I agree that the appeal should be dismissed for the reasons he gives. However, I shall make my own contribution to the issues of procedural unfairness and Art 6 compliance in deference to the contrary views so carefully expressed by Elias LJ.
- As Maurice Kay LJ has explained at paragraphs 2 7 of his judgment, Parliament has provided, by section 62 of and Schedule 7 to the Counter-Terrorism Act 2008, a specific statutory procedure for the giving of a "direction" by the Treasury. This is not a case in which a power has been conferred but a lacuna left by the legislation as to the manner in which it is to be exercised: the statute specifies how the power is to be exercised and the manner in which the decision itself may acquire parliamentary approval (c.f. Cooper v The Board of Works for The Wandsworth District  14 CB (NS) 180); neither is it a case in which a decision making body is acting judicially and "it is clear that the statutory procedure is insufficient to achieve justice" (c.f. Wiseman v Borneman  AC 297). Parliament is the decision maker. The direction is an interim measure. As in the case of the grant of other draconian powers judged to be necessary in the national interest to combat terrorism (for example, section 3 Prevention of Terrorism Act 2005), Parliament could have chosen a procedure by which, save in exceptional circumstances, the making of an administrative order would be subject to judicial supervision (see BX v Secretary of State for the Home Department  EWCA Civ 481). In the present case Parliament has chosen a specific form of supervision the elements of which comprise (1) approval by Parliament and (2) a right of challenge in the High Court. I concur with the view expressed by Maurice Kay LJ in BAPIO v Secretary for State for the Home Department 2007] EWCA Civ 1139 [§58] and paragraph 62 of his present judgment. Courts should be cautious before imposing additional 'common law' requirements upon a Parliamentary procedure for which express statutory provision has been made. In my view, this is a matter of principle and its application does not ultimately depend upon the practicality of a process of consultation, although such considerations may be relevant to the court's assessment of Parliamentary intention (c.f. Sedley LJ in BAPIO, paras. 43-44). I do not agree that this is a case in which the requirements of natural justice demand the grant of a hearing or representations before the direction is laid before Parliament. The ability to make representations to Parliament may be imperfect but it is real. Section 63 provides the means by which directions may be challenged in the High Court. Delay meant that the challenge before Mitting J in the present case became ineffective. Experience of similar challenges to the modification of control orders, made by the Secretary of State with little or no notice, demonstrates that properly used the jurisdiction is effective.
Article 6 and Article 1 Protocol 1
- In R (Wright) v Secretary of State for Health and Another  UKHL 3,  1 AC 739 at paragraphs 25 and 28 Baroness Hale approved the explanation by Dyson LJ (as he then was) in the Court of Appeal of the reasons why the statutory procedure for provisional listing of care workers did not meet the requirements of Art 6.1: (1) the denial of the right to make representations was fundamental, and (2) the detrimental effect of provisional listing was often incurable and irreversible. Dyson LJ concluded that the scheme should provide a right to make representations before provisional listing unless the "the allegations are so serious that, if they are true, the care worker is potentially a danger to vulnerable adults". Baroness Hale disagreed [§29]. She considered that the exception would apply only to cases where the urgent prevention of risk was required. The problem with the statutory scheme was its inbuilt capacity for delay between referral to the Secretary of State and the provisional listing while the Secretary of State completed enquiries, and the further delay between provisional listing and the final hearing. Contrary to the view taken by Elias LJ, I consider that the House of Lords, by recognising the need to construe the application of Art 6 according to the subject matter and urgency of the situation, anticipated the decision of the European Court in Micaleff v Malta  50 EHRR 37. Non-compliant interim measures, to which traditionally the European Court had not until Micaleff applied Art 6, are permissible in cases of urgent need provided that there is a "swift method of hearing both sides of the story and doing so before irreparable damage [is] done" (per Baroness Hale at p. 752B, §29]. Here the judge concluded that the appellant had already given assistance to organisations involved in Iran's nuclear and missile programme. When what is at stake is the risk of financing by a United Kingdom-based bank (deliberate or unconscious) of the nuclear or missile programme of an unfriendly state, it seems to me that the urgency of interim preventative measures, such as that specifically provided by Parliament in the present case, is obvious. For the reasons explained by Maurice Kay LJ at paragraphs 77 and 79 of his judgment I agree that the statutory procedure did not breach Art 6 or Art 1 Protocol 1.
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