Bank Mellat v HM Treasury (No. 2) [2013] UKSC 39

In brief

The Supreme Court allowed the appeal of an Iranian bank against a Treasury direction under the Counter-Terrorism Act 2008 that singled it out from all other Iranian banks. The Court held the direction was irrational, arbitrary, and disproportionate because the Treasury failed to justify why this bank was selected when the stated risk applied to all Iranian banks equally. The Court also held that procedural fairness required pre-decision notice and an opportunity to make representations, given the measure's serious and immediate effects. Lord Sumption articulated the four-part proportionality test now used across UK public law.

Key provisions

• §20, §74 (Lord Sumption) — Four-part proportionality test: (i) sufficiently important objective, (ii) rational connection, (iii) no less intrusive measure available, (iv) fair balance between individual rights and community interests: The four-part proportionality test: (i) the objective must be sufficiently important, (ii) the measure must be rationally connected to the objective, (iii) a less intrusive measure could not have been used, (iv) a fair balance must be struck between the rights of the individual and the interests of the community.
• §114, §120 — Anti-arbitrariness: singling out one entity without justifying why comparable entities are treated differently is irrational and disproportionate: Anti-arbitrariness principle: singling out one entity or group without justifying why comparable entities are treated differently is irrational and disproportionate.
• §110, §112 — Reasons and justification: the justification relied upon must be the justification advanced at the point of decision; the Court was troubled that the justification presented to Parliament differed from the justification advanced in litigation: The justification relied upon must be the justification advanced at the point of decision. Courts will scrutinise whether the reasons given are genuine or post-hoc rationalisations.
• §124, §126–133 — Pre-decision consultation: where a targeted measure has serious and immediate effects on an identifiable person or group, fairness requires notice and an opportunity to make representations unless urgency or impracticability is genuinely evidenced: Where a targeted measure has serious and immediate effects on an identifiable person or group, fairness requires notice and an opportunity to make representations unless urgency or impracticability is genuinely evidenced.
• §133, §147–148 — Serious and immediate effects: where a measure causes serious and immediate damage to an identifiable person, stronger procedural safeguards are required: Where a measure causes serious and immediate damage to an identifiable person, stronger procedural safeguards are required. The seriousness of the impact determines the procedural standard.

When relevant

Central to all proportionality reasoning within the toolkit. Directly relevant when: (a) an organisation singles out a person or group for a restrictive measure, (b) decision rationale is being documented — contemporaneous reasons must be recorded, not retrofitted after challenge, (c) high-impact person-specific decisions are made without consultation, (d) an organisation changes policy reactively under external pressure or legal threat without independent proportionality analysis, (e) any EqIA or proportionality assessment is being conducted. Also grounds the proportionality wizard, the Policy Roast, Defence Mode, and Quinn framework analysis. The four-part test: legitimate aim, rational connection, necessity/less intrusive means, fair balance.