Bank Mellat wins in the EU Court of Justice

18/02/16

The CJEU today ruled that Iran’s largest privately owned bank, Bank Mellat, had been unlawfully sanctioned by the Council of the European Union for a period of almost six years.

The Bank was designated by the EU Council in July 2010, and re-designated numerous times since, on the basis that it had allegedly engaged in a pattern of conduct which supported and facilitated Iran's nuclear and ballistic missile programmes and had provided banking services to UN and EU designated entities in Iran. The Bank accepted that it had supplied services to Novin Energy, which had been subsequently designated by the UN, but denied that it supported Iran's nuclear programme in any way.

The General Court found in the Bank’s favour on several grounds (see the news story here), most significantly because the Council had not established that the Bank had provided support for Iran's nuclear programme. In this respect the General Court placed weight on the Bank not having known that Novin was involved in proliferation and the fact that the Bank wound down its provision of services to Novin after Novin's designation by the UN.

The Council appealed, supported by the Commission and the United Kingdom.

Whilst the CJEU found that the General Court erred in law in part (in that it wrongly found that the Council being unable to show that it had assessed the veracity of listing proposals provided to it by Member States constituted a separate ground for annulment) the CJEU rejected the Council’s appeal and affirmed the annulment of the Bank’s designation.

Of note, the Court rejected the submission of the Council, the Commission and the United Kingdom that it mattered little that Bank Mellat was unaware of Novin’s involvement in nuclear activities. This may shed some light on the mens rea for the imposition of sanctions, although the case law still lacks any clear statement as to the relevance of a mental element.

The Bank’s victory also throws into focus the length of time actions for annulment take in the EU courts. The judgment comes almost six years after the Bank was designated and subject to an asset freeze. It also comes after Implementation Day has occurred following Iran’s agreement to the Joint Comprehensive Plan of Action, which itself led to EU sanctions (including those against Bank Mellat) being suspended, regardless of the outcome of the Court process.

The judgment is here and the court summary is here.