Former chancellor Alistair Darling may face court clash as Iran bank sues the UK

Former chancellor Alistair Darling could be called to give evidence in the High Court this month in a £1.25 billion showdown between the Government and a state-backed Iranian bank.

Bank Mellat, which is part-owned by Iran’s government, is suing the Treasury for compensation over financial restrictions that were imposed on the lender in the UK in 2009.

The sanctions were ordered by Labour Ministers who believed there was evidence linking Mellat with the financing of state nuclear weapons development.

The trial, due to commence on June 17 and last for five weeks, could see several high-profile Government figures take to the stand, including Lord Darling, who was Labour’s Chancellor at the time of the order.

Mellat denies allegations that it is linked to the financing of nuclear weapons. The bank claims the sanctions led to losses of $1.6billion (£1.25billion) – mostly in lost future business.

The restrictions had limited UK-based entities from dealing with Bank Mellat and its subsidiaries.

The Supreme Court quashed the curbs in 2013, leading Mellat to launch a damages claim in the High Court.

Mellat is being represented by London law firm Zaiwalla and Co, which is led by Sarosh Zaiwalla, a 70-year-old solicitor who famously sacked a young Tony Blair and once carried out work for the Dalai Lama. 

The bank alleges that the UK Government also lobbied other international authorities to impose financial restrictions, leading to ‘copycat’ sanctions being introduced by the United Nations, the European Union and others.

Mellat had been subject to an asset freeze in the US since 2007, but it claims that frosty relations between the US and Iran meant Washington’s restrictions had ‘little material effect’ on the bank’s reputation or its profits.

However, it alleges that the UK’s actions ‘substantially damaged the bank’s reputation’ and led to the loss of profits, customers and access to international banking services.

The Treasury claims that, following the US sanctions, financial institutions were already reluctant to work with Mellat. 

In its defence document, the Treasury asserts that Iran’s nuclear weapons development ‘posed a risk to the UK’s national interest’. 

The Treasury also expressed concerns that, due to ‘opacity’ around the ownership of Mellat, it cannot tell how much of any damages awarded would go to the Iranian government.

Defending its decision to impose the sanctions, the Treasury said: ‘Given concerns as to Bank Mellat’s involvement in providing services to Iran’s nuclear and ballistic missile programmes, and even the risk posed by these programmes, HM Treasury considered that there was ample justification for taking action to prevent the UK financial sector being involved in transactions of concern through Bank Mellat.’ 

The Treasury and Lord Darling declined to comment.