The High Court of Justice of England and Wales has rejected the British government's attempt to delay a hearing in which Iran's Bank Mellat is seeking US$4 billion damages from the UK Treasury.

Bank Mellat is suing the government for losses - the largest part of which the Iranian banks says are due to it being rendered unable to write letter of credit (L/C) business - after a Treasury order effectively locked the bank out of the UK's financial sector.

Successful challenge

In 2014 the bank successfully challenged a 2009 Treasury order prohibiting UK financial institutions from doing business with the Iranian lender because of its alleged links to Tehran's nuclear programme.

But the Treasury countered this by saying a hearing was not required because the bank had suffered no irrecoverable loss as a result of the order and that it was not incompatible with the European Convention on Human Rights.

High Court ruling

The court however ruled against the Treasury on all counts and upheld a previous Supreme Court ruling that it had violated Mellat Bank's rights under the convention.

The bank should, according to the High Court judgment, have the right to claim for damages as a consequence of the Treasury's unlawful interference.

Bank Mellat claims its biggest loss of US$1.3 billion was due to lost commission on foreign currency-denominated L/C business.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.