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Court of Appeal confirms power to order disclosure in circumstances where that exposes the disclosing party to the risk of breaching foreign criminal law

  • United Kingdom
  • Litigation and dispute management
  • Litigation and dispute management - Disclosure Other

31-05-2019

Bank Mellat v HM Treasury [2019] EWCA Civ 449

Facts of the case

– The case concerns a claim under the Human Rights Act 1998 made by Bank Mellat, an Iranian Bank (the “Bank”), against Her Majesty’s Treasury (“HMT”) in relation to the Financial Restrictions Iran Order 2009 made by HMT, as a result of which the Bank allegedly suffered loss.

– In the context of the claim, the Bank sought to redact customer identities from some 12,500 documents pursuant to CPR 31.19(3), on the ground that production of such confidential information would contravene criminal law in Iran, and expose the Bank to the risk of prosecution in that jurisdiction. The Bank’s case was that the needs of the English proceedings could be catered for by way of ciphers representing those identities.

– HMT’s position was that the documents should be produced in un-redacted form but only to members of a confidentiality ring or club, as well as in ciphered form (with a master list of cipher codes being available to members of the confidentiality club, and not for use in open court).

– At first instances, Cockerill J found in favour of HMT. The Bank appealed. The principal issues on appeal were:

– the actual risk of prosecution faced by the Bank (or it’s employees) in Iran should it comply with the court order (Issue 1: Risk);

– the importance of production of the documents in un-redacted form to the fair disposal of the trial (Issue 2: Need);

– the discretionary balancing exercise for the Court:
weighing the risk under Issue 1 against the need under Issue 2 (Issue 3: Striking the Right Balance).

The decision

– The Court of Appeal dismissed the appeal, finding that

– Risk: Cockerill J had addressed the right question, namely the actual risk of prosecution, rather than the risk of subsequent sanction if prosecuted and convicted. Cockerill J had also come to the right answer, finding that such risk was more than a purely hypothetical one, but less serious than suggested by the Bank’s expert evidence on Iranian law. In coming to this conclusion, Cockerill J had been entitled to depart from the Bank’s expert evidence (notwithstanding that this was un-contradicted), since this was not a case of the Court conducting its own research on questions of foreign law, but rather inquiring into the essentially factual question of actual risk of prosecution.

– Need: although Cockerill J did not expressly refer to the need for disclosure to ensure a fair disposal of the trial, the Court of Appeal held that this is what she had in mind among other criterion. Moreover, the Court of Appeal agreed that disclosure in un-redacted form was necessary to ensure a fair trial, given inter alia that this was a claim for loss of custom and accordingly there would be an “element of unreality” in attempting to try it without knowing who the customers are or were, which would, inter alia, prevent investigation into when and why business was lost.

– Striking the Right Balance: Cockerill J had exercised her case management discretion lawfully and appropriately in concluding that the un-redacted documents should be produced, but safeguarded by the confidentiality club provisions as requested by HMT. In reaching this decision, the Court of Appeal agreed there were rational reasons for taking a “guarded view” as to the actual risk of prosecution under Iranian law.

Analysis and practical advice

– The English Court has jurisdiction to order inspection, regardless of the fact that compliance with the order would or might entail a breach of foreign criminal law in the “home” country of the party subject to the order. This is because orders for production and inspection are matters of procedural law, governed by the lex fori (law of the forum) – in this case English law. Foreign law therefore does not override the English Court’s ability to conduct proceedings in accordance with English procedures and law.

– Whether or not to make such an order is a matter for the discretion of the English Court. An order will not lightly be made where compliance would entail a party breaching its own (i.e. foreign) criminal law, not least with considerations of comity in mind. However, the English Court is not in any sense precluded from doing so.

– When exercising its discretion, the English Court will take account of the real (in the sense of the actual) risk of prosecution in the foreign state. A balancing exercise must be conducted, on the one hand weighing the actual risk of prosecution in the foreign state and, on the other hand, the importance of the documents of which inspection is ordered to the fair disposal of the English proceedings. The existence of an actual risk of prosecution in the foreign state is not determinative of the balance exercise, but is a factor of which the English Court will be mindful.

– Where an order for inspection is made, considerations of comity may not unreasonably be expected to influence the foreign state in deciding whether or not to prosecute the foreign national for compliance. Comity cuts both ways.