Restrictive measures on English bank unlawful

06/09/13

On 6 September 2013, the General Court annulled the restrictive measures imposed by the EU Council on Persia International Bank, a bank incorporated in England and regulated by the FSA.

PIB had been subjected to a worldwide asset freeze by the Council on the basis that it was ‘owned or controlled' by its 60% shareholder, Bank Mellat which had also been designated and subjected to restrictive measures.

The General Court accepted PIB's arguments that case law concerning 100% owned subsidiaries should not apply to it, that it was for the Council to demonstrate that it was controlled by Bank Mellat such that it was to a considerable degree likely that it could be prompted to circumvent sanctions against its parent, and that the way in which PIB's board was constructed and supervised was such that there was no prospect of it being prompted to circumvent sanctions in any event. This is the first time that the Court has ruled on the application of the 'owned or controlled' test to a majority shareholder.

PIB's success before the General Court follows on from that of its shareholder Bank Mellat, whose own action for annulment was allowed by the General Court in January, and from that of Bank Mellat's former Chairman Dr Divandari, PIB's Chairman Mr Meskarian, and the Head of PIB's Dubai Branch, Mr Zavvar each of whose sanctions were lifted by the Council following representations and the commencement of proceedings.

The judgment is here.