“Hand it over” – Party Ordered to Disclose Documents Despite Risk of Criminal Penalties

5 April 2019
In Bank Mellat v Her Majesty’s Treasury[1], the Court of Appeal ordered a party to provide disclosure of documents, notwithstanding that doing so exposed the party to the risk of foreign criminal proceedings.

Background

In the context of High Court proceedings the claimant, an Iranian bank (the “Bank”), was seeking to prove losses suffered as a result of HMT’s implementation of the Financial Restrictions Iran Order 2009[2]. To do so, the Bank had disclosed some 33,000 documents, around a third of which were said to contain confidential data. The production of this data was said to be prohibited under Iranian law.

The documents were first produced by the Bank in redacted form pursuant to CPR 31.19 (3) on the basis that they contained confidential information, disclosure of which could expose the bank to criminal prosecution. HMT sought production of the un-redacted documents, limited to members of a confidentiality club and in ciphered form, with a master list of cipher codes being available to members of this club and not for open court.

At first instance, the court ordered disclosure of the unredacted documents. In particular, having heard evidence from an expert in Iranian law as to the relevant criminal law, the judge was not satisfied that the risk of prosecution was as serious as the expert purported, and held that although there was a risk, conversely there was a very real prospect that the material contained in the redactions would not just be relevant “but may have a probative influence on some issues”. Conducting that balancing exercise, unredacted disclosure was ordered.

Appeal

On appeal, the Court of Appeal considered: (1) the actual risk of prosecution faced by the Bank, (2) the importance of the production of documents in unredacted form; and (2) the discretionary balancing exercise for the Court: weighing risk against need.  It was held that:

  1. Risk: The real issue for determination was the actual risk of prosecution, rather than simply whether disclosure would simply contravene the relevant foreign law.
  2. Need: Dismissing the Bank’s assertion that the appeal should be upheld because the first instance judgment had made no express mention to the need for the unredacted documents to be disclosed, the Court of Appeal held that there was a need for production of the unredacted documents in the interests of the fair disposal of the trial.
  3. Balancing Exercise: It was accepted that, when exercising a discretion to order unredacted disclosure, 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. In so doing, the Court of Appeal considered that the restrictions on the circulation of unredacted material (in the form of the confidentiality club), the scale of the redactions made, and the dramatic impact that allowing those redactions would have on the fairness of trial, weighed heavily in HMT’s favour and ultimately should “trump concerns of Iranian law”.

This decision provides a helpful re-statement of the principles governing situations where parties allege rights and/or duties to withhold inspection of documents to avoid contravening foreign criminal law. The Court will consider the actual risk of prosecution rather than the illegality of disclosure; and a risk of prosecution is not solely determinative as to whether an order will or will not be made.


[1] [2019] EWCA Civ 449 (CA)

[2] Found to be unlawful by the Supreme Court in Bank Mellat v HM Treasury (No.2) [2013] UKSC 39


Co-written by Thomas Wilkinson, Administrator

 

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Leigh Callaway
Senior Associate
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