Bank Mellat v Her Majesty's Treasury (No. 1)

Factual and Procedural Background

Under the Counter-Terrorism Act 2008, the United Kingdom Treasury (“Government Agency”) issued the Financial Restrictions (Iran) Order 2009. The direction barred all United Kingdom financial institutions from entering or continuing relationships with an Iranian institution (“Company A”) and related entities. The measure effectively shut down Company A’s U.K. business and, according to the company, seriously damaged its reputation and goodwill.

Company A applied to the High Court under section 63(2) of the 2008 Act to set the direction aside. Government Agency contended that some evidence supporting the direction was too sensitive for disclosure and sought a closed material procedure (“CMP”). Judge [Last Name] acceded, holding part of the hearing in private with special advocates representing Company A. He later handed down an open judgment dismissing the claim and a shorter closed judgment available only to Government Agency.

Company A appealed. The Court of Appeal held a brief closed session to read the closed judgment but, in an open judgment, dismissed the appeal. Company A then appealed to the Supreme Court. Before the substantive issues were argued, the Court heard a preliminary question: whether it could, in principle and on these facts, adopt a CMP. The majority answered “yes” and, by a bare majority, went on to consider the closed judgment in a 20-minute closed session.

Legal Issues Presented

1. Does the Supreme Court possess the statutory power to conduct a closed material procedure on an appeal?
2. If such a power exists, was it appropriate to exercise it in this particular appeal concerning the 2009 financial restrictions order?

Arguments of the Parties

Government Agency’s Arguments

• Section 40(2) of the Constitutional Reform Act 2005 (“CRA 2005”) grants a right of appeal against any Court of Appeal judgment, including one containing closed reasoning; therefore the Supreme Court must be able to see that reasoning.
• Section 40(5) CRA 2005 empowers the Court to decide whatever is “necessary to do justice,” which in some cases requires access to closed material.
• Denying the Court such access would leave it with only unsatisfactory alternatives (e.g., refusing permission, deciding without full reasons, or automatically allowing/ dismissing the appeal).
• Supreme Court Rules (“SCR”) 27(2) and 29(1) contemplate private sittings and special advocates, supplying procedural machinery for a CMP on appeal.

Company A’s Arguments (supported by the intervener “Liberty”)

• A CMP is a grave departure from natural justice and requires express statutory authority; CRA 2005 contains none.
• Parliament explicitly limited CMPs under the 2008 Act to the High Court, Court of Appeal and Court of Session; its silence regarding the Supreme Court must be respected.
• Allowing CMPs in the Supreme Court undermines its constitutional role as the ultimate guardian of open justice.
• The Supreme Court lacks a detailed procedural code equivalent to CPR Part 79; without such rules a CMP cannot be fairly administered.

Table of Precedents Cited

Court's Reasoning and Analysis

Majority Analysis

1. Section 40(2) CRA 2005 grants appeals to the Supreme Court from any Court of Appeal judgment; a judgment containing closed reasoning is still a judgment, and meaningful appellate review demands access to that reasoning.
2. Section 40(5) gives the Court “power to determine any question necessary to do justice”; when closed reasoning underpins the lower-court decision, seeing that material is necessary to do justice.
3. Without CMP capability the Court would face five unsatisfactory alternatives (e.g., refusing to entertain the appeal, deciding blind, or automatically allowing/ dismissing), none compatible with section 40(2).
4. The Supreme Court Rules, especially SCR 27(2) (private sittings with special advocates) and SCR 29(1) (all powers of the court below), though not themselves conferring jurisdiction, corroborate that the procedural framework exists.
5. Parliament’s omission of the Supreme Court from sections 66-73 of the 2008 Act was attributable to timing (the Court did not yet exist) and to the expectation that SCRs would provide the needed mechanism.
6. Accordingly, a CMP is in principle available on appeal, but must remain exceptional, strictly necessary, and accompanied by robust safeguards (gist disclosure, minimal secrecy, and reasoned open explanation).

Dissenting Analysis

• Fundamental common-law rights to open justice and equality of arms can be curtailed only by clear statutory words or necessary implication; CRA 2005 contains neither.
• Parliament expressly authorised CMPs for lower courts in the 2008 Act yet chose not to do so for the Supreme Court, demonstrating an intention to exclude.
• SCR 27(2) was drafted for public-interest-immunity hearings, not full CMPs; it cannot create powers the statute withholds.
• Allowing CMPs in the apex court risks secret jurisprudence inconsistent with the Court’s constitutional role.

Application to This Appeal

Despite misgivings and by a bare majority, the Court agreed to read Judge [Last Name]’s closed judgment. The closed session lasted about 20 minutes. After review, the majority acknowledged that the closed material added nothing of substance; the open judgment already disclosed all findings relevant to the issues on appeal.

Holding and Implications

HOLDING: The Supreme Court has statutory power to conduct a closed material procedure on an appeal, and it was permissible (though not ultimately useful) to do so in this case.

Implications: The decision confirms that CMPs, while constitutionally controversial, are available at the final appellate level in financial-restriction litigation and potentially in other statutory contexts. The majority issued detailed guidance warning that:

• Closed hearings must be a last resort and justified as strictly necessary;
• Judges should specify in an open judgment every conclusion derived from closed material and summarise that material as fully as possible;
• Advocates and special advocates bear a heavy obligation to ensure CMP requests are genuinely required.

The ruling sets no new substantive counter-terrorism precedent but establishes procedural authority for—and limitations on—closed material procedures in the Supreme Court.