Bank Mellat vs. Her Majesty’s Treasury (No.1)
The judgment was concerned with two connected questions:
(i) Is it possible in principle for the Supreme Court to adopt a closed material procedure on an appeal? If so,
(ii) Is it appropriate to adopt a closed material procedure on this particular appeal?
The Supreme Court observed that a closed material procedure involve the production of material which is so confidential and sensitive that it requires the court not only to sit in private, but to sit in a closed hearing (ie a hearing at which the court considers the material and hears submissions about it without one of the parties to the appeal seeing the material or being present), and to contemplate giving a partly closed judgment (ie a judgment part of which will not be seen by one of the parties).
The idea of a court hearing evidence or argument in private is contrary to the principle of open justice, which is fundamental to the dispensation of justice in a modern, democratic society. However, it has long been accepted that, in rare cases, a court has inherent power to receive evidence and argument in a hearing from which the public and the press are excluded, and that it can even give a judgment which is only available to the parties. Such a course may only be taken (i) if it is strictly necessary to have a private hearing in order to achieve justice between the parties, and, (ii) if the degree of privacy is kept to an absolute minimum – see, for instance A v Independent News & Media Ltd [2010] 1 WLR 2262, and JIH v News Group Newspapers Ltd [2011] 1 WLR 1645. Examples of such cases include litigation where children are involved, where threatened breaches of privacy are being alleged, and where commercially valuable secret information is in issue.
Even more fundamental to any justice system in a modern, democratic society is the principle of natural justice, whose most important aspect is that every party has a right to know the full case against him, and the right to test and challenge that case fully. A closed hearing is therefore even more offensive to fundamental principle than a private hearing. At least a private hearing cannot be said, of itself, to give rise to inequality or even unfairness as between the parties. But that cannot be said of an arrangement where the court can look at evidence or hear arguments on behalf of one party without the other party (“the excluded party”) knowing, or being able to test, the contents of that evidence and those arguments (“the closed material”), or even being able to see all the reasons why the court reached its conclusions.
The statute in question in the case was the Counter-Terrorism Act 2008 (“the 2008 Act”), which, as its name suggested, was concerned with enabling steps to be taken to prevent terrorist financing and the proliferation of nuclear weapons, and thereby to improve the security of citizens of the United Kingdom. The particular provisions which apply in the present case were in Parts 5 and 6 of the 2008 Act. The first relevant provision was section 62, which is in Part 5 and “confer powers on the Treasury to act against terrorist financing, money laundering and certain other activities” in accordance with Schedule 7.
Paragraphs 1(4), 3(1) and 4(1) of Schedule 7 to the 2008 Act permit the Treasury to “give a direction” to any “credit or financial institution”, if “the Treasury reasonably believes” that “the development or production of nuclear …. weapons in [a] country … poses a significant risk to the national interests of the United Kingdom”. According to paras 9 and 13 of the schedule, such a direction may “require” the person on whom it is served “not to enter into or to continue to participate in … a specified description of transactions or business relationships with a designated person”. Paragraph 14 require any such direction to be approved by affirmative resolution of Parliament.
Pursuant to these provisions, the Treasury made the order the subject of the present proceedings, the Financial Restrictions (Iran) Order 2009 (“the 2009 Order”), which, three days later, was laid before Parliament, where it was approved. The 2009 Order, which was in force for a year, directed “all persons operating in the financial sector” not to “enter into, or … continue to participate in, any transaction or business relationship” with two companies, one of which was Bank Mellat (“the Bank”), or any branch of either of those two companies.
The Bank is a large Iranian bank, with some 1800 branches and nearly 20 million customers, mostly in Iran, but also in other countries, including the United Kingdom. In 2009, prior to the 2009 Order, it was issuing letters of credit in an aggregate sum of over US$11bn, of which around 25% arose out of business transacted in this country. It has a 60% owned subsidiary bank incorporated and carrying on business here, which was at all material times regulated by the Financial Services Authority. The Order effectively shut down the United Kingdom operations of the Bank and its subsidiary, and it is said to have damaged the Bank’s reputation and goodwill both in the country and abroad.
The first section of Part 6 of the 2008 Act is section 63, of which subsection (2) gives any person affected by a direction the right to apply to the High Court (or the Court of Session) to set it aside, and any such application is defined by section 65 as “financial restrictions proceedings”. The Bank issued such proceedings to set aside the Order. The Government took the view that some of the evidence relied on by the Treasury to justify the 2009 Order was of such sensitivity that it could not be shown to the Bank or its representatives. Mitting J accepted the Government’s case that justice required that the evidence in question be put before the court and that it had to be dealt with by a closed material procedure. Accordingly, he gave appropriate directions as to how the hearing should proceed.
The two day hearing before him was partly in open court and partly a closed hearing. The open hearing involved all evidence and arguments (save the closed material) being produced at a public hearing, with both parties, the Bank and the Treasury, seeing the evidence and addressing the court through their respective counsel, in the normal way. The closed hearing was conducted in private, in the absence of the Bank, its counsel, and the public, and involved the Treasury producing the closed material and making submissions on it through counsel. The interests of the Bank were protected, at least to an extent, by (i) the Treasury providing the Bank with a document which gave the gist of the closed material, and (ii) the presence at the closed hearing of special advocates, who had been cleared to see the material, and who made such submissions as they could on behalf of the Bank about the closed material.
Following the two-day hearing, Mitting J handed down two judgments. The first judgment was an open judgment, in which the Judge dismissed the Bank’s application for the reasons which he explained. The second judgment was a closed judgment, which was seen by the Treasury, but not by the Bank, and is, of course, not publicly available. The closed judgment was much shorter than the open judgment, although it should be added that the open judgment is not particularly long.
The Bank appealed, and the appeal was heard by the Court of Appeal largely by way of an ordinary, open, hearing. However, there was a short closed hearing at which they considered the closed judgment of Mitting J, and at which the special advocates, but not representatives of the Bank, were present. The Bank’s appeal was dismissed by the Court of Appeal in an open judgment.
The Bank then appealed to the Supreme Court. Before the hearing of the appeal, it was clear that the Treasury would ask the Court to look at the closed judgment of Mitting J. Therefore, it was agreed between the parties that the first day of the three day appeal should be given over to the question of whether the Supreme Court could conduct a closed hearing.
Can the Supreme Court conduct a closed material procedure:
If a closed material procedure was lawfully conducted at the first instance hearing, it would seem a little surprising if an appellate court was precluded from adopting such a procedure on an appeal from the first instance judgment. As the advocate to the Court said in the course of his full and balanced argument, one would normally expect an appeal court to be entitled to have access to all the material available to the court below and to see all the reasoning of the court below. Otherwise, it is hard to see how an appeal process could be conducted fairly or even sensibly. And, if that involves the appellate court seeing and considering closed material, it would seem to follow that that court would have to adopt a closed material procedure.
Subject to any arguments to the contrary, the analysis establish that the Supreme Court can conduct a closed material procedure where it is satisfied that it may be necessary to do so in order to dispose of an appeal. This conclusion is reinforced by section 40(5) of the 2005 Act. An appeal under section 40(2) is “an appeal … under any enactment”. Accordingly, where an appeal is brought against a decision under the 2008 Act, the Supreme Court has “power to determine any question necessary to be determined for the purposes of doing justice in” such an appeal. On any appeal where the judgment is wholly or partly closed, it seems to me that this court could not do justice, or at least would run a very serious risk of not doing justice, if it could not consider the closed material, and it could only do that if it adopted a closed material procedure.
The view that the Supreme Court can conduct a closed material procedure also derive some support from the provisions of SCR 27(2), and from SCR 29(1). However, if the Supreme Court would not otherwise have the power to conduct a closed material procedure, it could not derive such a power solely from its rules. Accordingly those two rules can fairly be said to do no more than to give comfort to my conclusion
The Court also drew certain conclusions from the experience:
First, where a judge gives an open judgment and a closed judgment, it is highly desirable that, in the open judgment, the judge (i) identifies every conclusion in that judgment which has been reached in whole or in part in the light of points made or evidence referred to in the closed judgment, and (ii) that the judge says that this is what he or she has done. This was a point made by Carnwath LJ, in a judgment given after Mitting J’s judgments in this case, in AT v Secretary of State for the Home Department [2012] EWCA Civ 42, para 51.
Secondly, a judge who has relied on closed material in a closed judgment, should say in the open judgment as much as can properly be said about the closed material which he has relied on. Any party who has been excluded from the closed hearing should know as much as possible about the court’s reasoning, and the evidence and arguments it received. Further, the more the judge can say about the closed material in the open judgment, the less likely it is that a closed hearing will be asked for or accorded on an appeal. In cases where judges have to give a closed judgment, they should say in their open judgment, as far as they properly can, what the closed material has contributed to the overall assessment they have reached in their open judgment.
On an appeal against an open and closed judgment, an appellate court should, of course, only be asked to conduct a closed hearing if it is strictly necessary for fairly determining the appeal. So my third point is that any party who is proposing to invite the appellate court to take such a course should consider very carefully whether it really is necessary to go outside the open material in order for the appeal to be fairly heard. If the advocate for one of the parties invites an appellate court to look at the closed judgment on the ground that it may be relevant to the appeal, it is very difficult for the court to reject the application, at least without looking at the closed judgment, which involves the initiation of a closed material procedure, which should be avoided if at all possible. This puts an important onus on the legal representatives of the party asking an appeal court to look at closed material. An advocate acting for a party who wants a closed hearing should carefully consider whether the request is one which should, or even can properly, be made and advise the client whether such a course is necessary or appropriate. Advocates, perhaps particularly when acting for the executive, have a duty to the court as well as a duty to their clients, and the court itself is under a duty to avoid a closed material procedure if that can be achieved.
Fourthly, if the appellate court decides that it should look at closed material, careful consideration should be given by the advocates, and indeed by the court, to the question whether it would nonetheless be possible to avoid a closed substantive hearing. It is quite feasible for a court to consider, and be addressed on, confidential material in open court. If such a course is taken, the advocates and the court must obviously take care in how they refer to the contents of the closed material, and sometimes a brief closed hearing will be necessary to set the ground rules. Sometimes, the closed material will be so sensitive or so difficult to refer to elliptically, that such a course will be impracticable. However, it should always be considered, as it is plainly less objectionable to have a brief closed procedural hearing to discuss the possibility than to have a closed hearing which considers substantive issues. If such a course is taken, the court should order that, despite it being referred to and looked at in open court, the documents in issue cannot be shown to anyone and their contents cannot be referred to out of court.
Fifthly, if the court decides that a closed material procedure appears to be necessary, the parties should try and agree a way of avoiding, or minimising the extent of, a closed hearing. This would also involve the legal representatives to the parties to any such appeal advising their clients accordingly, and, if a closed hearing is needed, doing their best to agree a gist of any relevant closed document (including any closed judgment below).
Sixthly, if there is a closed hearing, the lawyers representing the party who is relying on the closed material, as well as that party itself, should ensure that, well in advance of the hearing of the appeal, (i) the excluded party is given as much information as possible about any closed documents (including any closed judgment) relied on, and (ii) the special advocates are given as full information as possible as to the nature of the passages relied on in such closed documents and the arguments which will be advanced in relation thereto.
Finally, appellate courts should be robust about acceding to applications to go into closed session or even to look at closed material. Given that the issues will have already been debated and adjudicated upon, there must be very few appeals where any sort of closed material procedure is likely to be necessary. And, in those few cases where it may be necessary, it is hard to believe that an advocate seeking to rely on closed material or seeking a closed hearing, could be unable to articulate convincing reasons in open court for taking such a course.