Iran's Bank Mellat suing UK for £2.3bn over alleged losses from trading ban

Government being sued by Tehran-based bank banned from trading with UK since 2009 despite sanctions being quashed
European Court of Justice
Pending an appeal at the European court of justice in Luxembourg, the UK is refusing to withdraw the trading ban. Photograph: Image Broker/Rex Features

The UK government is being sued for £2.3bn by one of Iran's largest banks, whose ban from trading with the UK over alleged links to Tehran's nuclear programme was quashed by the supreme court last year.

The claim by Bank Mellat, which is more than double the size expected, is being demanded as compensation for losses it says it incurred as a result of sanctions "negligently" imposed in 2009.

The UK Treasury alleged that the Tehran-based bank financed firms involved in Iran's nuclear programme, but the bank denies any involvement and has been fighting to have the sanctions lifted.

Last year the supreme court ordered the ban be removed on the grounds that Mellat had received no notice of the Treasury's intention to impose sanctions and that singling the bank out "was arbitrary and irrational, and disproportionate to any contribution which it could rationally be expected to make to the direction's objective".

The decision was made after the Treasury asked the supreme court to go into a secret session for the first time in its history, in order for it to justify the allegations. Pending an appeal at the European court of justice in Luxembourg, the UK is refusing to withdraw the ban.

In its claim form, filed in London's high court on Friday by the bank's law firm Zaiwalla & Co, Mellat outlined 14 areas where it is seeking compensation totalling $3.9bn (£2.3bn), principally concerning its foreign exchange business.

The claim states: "[The Treasury] was obliged to exercise reasonable care and skill when considering the exercise of its powers under [the Counter-Terrorism Act 2008] in relation to the bank … but negligently failed to do so."

It also claims the UK government lobbied other authorities to impose its own sanctions that ultimately caused the loss of profitable business, customers, banking relationships and dealing services.

The Treasury declined to comment, although it is expected to contest the claim.

The case comes at a time of lessening tensions between Iran and the west following the election of President Hassan Rouhani last year. So far the improved relations have seen Iran and six world powers, including the UK, strike a landmark deal in Geneva under which Tehran agreed to roll back its nuclear programme in exchange for partial relief from sanctions.

Today's best video

Today in pictures