Opinion: Supreme Court rules, OK

Slapdown for Treasury shows court subtly shifting the ground on accountability of public bodies

The Supreme Court judgments in Bank Mellat v HM Treasury illustrate how far the courts have come in fashioning robust and flexible public law principles by which to hold public bodies to account.

Bank Mellat, a large Iranian bank, challenged an order made by the Treasury under the Counter-Terrorism Act 2008 that had effectively shut down its UK operations. No similar order was made against any other Iranian bank. The order was aimed ultimately at hindering Iran’s nuclear and missiles programmes. The context was thus national security and foreign policy: fields that traditionally would have caused the courts to take the lightest touch. However, a maj-ority decided to quash the order on substantive and procedural grounds.

When the order was made, Parliament had been told Bank Mellat had assisted weapons programmes by providing services to entities involved with them. By the time of the appeal it was apparent both that Bank Mellat had only unwittingly provided services to two such entities and that it operated procedures designed to prevent such occurrences. The majority took the view that the Treasury had failed to justify singling out Bank Mellat. Drawing on the judgment of the House of Lords in the A case (detention of non-nationals on national security grounds), Lord Sumption observed that a measure “may respond to a real problem but nevertheless be -irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification.” The Treasury’s order was thus unlawful.

This link from unjustified discriminatory treatment to disproportionate effect is likely to prove important in the regulatory context. Entities may be singled out for regulatory action for a variety of reasons. In future the courts are likely to scrutinise with greater care justifications offered for differential treatment.

Bank Mellat’s procedural ground was that the Treasury had failed to give it a chance to make representations. The majority imported a duty of consultation into the statutory scheme notwithstanding that the order was, strictly, a statutory instrument and subject to Parliamentary scrutiny. It is thus now settled that a duty to consult may in principle be implied in relation to the making of statutory instruments , at least insofar as they are targeted at specific persons or groups.

The consultation duty implied by the court was also striking for its flexibility. The majority did not consider that the Treasury would always have to consult. Rather, the duty would vary from case to case. This emphasises the ease with which courts will imply fact-sensitive procedural rights into statutory schemes to meet the modern demands of fairness.

Finally, this case is notable for the finding that, despite little in the way of statutory underpinning, the Supreme Court can conduct ‘closed’ hearings, where necessary.