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Neutral Citation Number: [2019] EWCA Civ 449
Case No: A4/2018/ IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM BUSINESS AND PROPERTY COURTS COMMERCIAL COURT Mrs Justice Cockerill DBE
Royal Courts of Justice Strand, London, WC2A 2LL
Date: 15/03/ Before :
LORD JUSTICE GROSS LORD JUSTICE PETER JACKSON and LORD JUSTICE COULSON
Between :
Bank Mellat Appellant
- and - Her Majesty’s Treasury Respondent
Timothy Young QC, Amy Rogers and Rupert Paines (instructed by Zaiwalla & Co LLP ) for the Appellant David Foxton QC, Philippa Hopkins QC and Helen Morton (instructed by Government Legal Department ) for the Respondent
Hearing dates : 19 and 20 February 2019
Approved Judgment
LORD JUSTICE GROSS :
INTRODUCTION
- The English Court welcomes litigants from all parts of the world. Gratifyingly, it enjoys a much prized reputation for fairness. There is no “home ground” advantage; it matters not whether the litigants are domestic, foreign, governmental or private. All are treated the same.
- For all litigants, the procedure in this Court is governed by the lex fori – English law. That is the norm internationally, as a matter of the conflict of laws. Disclosure and the inspection of documents form a part of the law of procedure governed by the lex fori. On occasions, a tension can arise between the English law requirement for the inspection of documents and the provisions of foreign law in the home country of the litigant.
- Where such a tension arises, it is for the Court to balance the conflicting considerations: the constraints of foreign law on the one hand, and the need for the documents in question to ensure a fair disposal of the action in this jurisdiction, on the other. That balance is struck by a Judge sitting at first instance, making discretionary, case management decisions. As is well-established, this Court will only interfere if the Judge has erred in law or principle or has (in effect) reached a wholly untenable factual conclusion.
- This is an appeal by the Iranian Appellant (“the Bank”) against the judgment and order of Cockerill J, made on 19 September 2018 (“the judgment” and the “order” respectively), on the application of the Respondent (“HMT”) under CPR Part 31.19(5), requiring the production of documents in unredacted form but subject to various confidentiality provisions. As will be seen, it is common ground that production of the Iranian documents covered by the order and with which this appeal is solely concerned, would constitute a breach of Iranian law.
- The background concerns a claim by the Bank for damages under the Human Rights Act 1998 (“the HRA 1998”) against HMT, in respect of loss it allegedly suffered as the result of a “financial restriction”, the Financial Restrictions Iran Order 2009 (“the 2009 Order”), made by HMT in October 2009 and held unlawful by the Supreme Court, by a majority, in 2013: Bank Mellat v HM Treasury (No. 2) [2013] UKSC 38; [2013] UKSC 39; [2014] AC 700.
- In overview, the issue at the trial, fixed for June 2019, is whether the Bank can prove that the losses it allegedly suffered were caused by the 2009 Order. The pleaded quantum of the Bank’s claim has been some US$4 billion; a recent amendment suggests a reduction to some US$1.7 billion, plus interest. In very broad terms, the Bank’s claim divides into two parts. The first part is now put at some US$31.7 million plus, relating to specific transactions (letters of credit (“L/Cs”), bank guarantees and penalties) said to have failed in consequence of the 2009 Order. The second – and far larger part – does not turn on existing, specific transactions and includes as its most sizeable component a claim for over US$800 million relating to the Bank’s share of the Iranian foreign currency L/C market; the allegation is that the Bank’s existing share of that market in October 2009 was approximately 25%; but for the 2009 Order, that share would have been maintained and increased to about 35%.
Club, for example by seeking to confine its membership. Nor has the Bank adopted any intermediate position on the documents covered by the order; there is no fall-back contention that even if some documents must be produced unredacted others must not. The Bank’s position is all or nothing.
THE JUDGMENT AND THE ORDER
- After recounting the history of the proceedings, Cockerill J helpfully outlined their scope as follows (at [12]):
“A number of interesting legal issues arise, including questions as to causation, whether the interference in the Bank’s enjoyment and control of its possessions has been caused by the 2009 order, the extent to which it can prove its loss, whether an award of damages is necessary to afford just satisfaction to the Bank and, if so, in what sum. In this respect it is relevant to note that there has been a recent amendment to the defence in April 2018 to plead that by reason of the Bank’s own conduct and/or its ownership and/or control by the Government of Iran no order for damages is appropriate. Alternatively, there should be a significant reduction in any damages awarded.”
- The Judge then went on to deal with the topic of sampling (which does not arise at least directly on this appeal) before turning to the question of redactions. After noting the parties’ positions (as they then were), Cockerill J observed (at [47]) that the “relevant legal principles were not very much in issue”:
“It is agreed that obligations of confidentiality arising under some other legal system do not provide an automatic entitlement on a party litigating in this forum to withhold documents from disclosure and it is a matter for the court’s discretion whether production should be ordered.”
After citing authority (to which I shall return), the Judge (at [50]) noted the HMT submission that it was relevant to the Court’s discretion “how real any risk of prosecution in the foreign state is found to be”. Ultimately (at [51]), it was agreed between the parties that:
“….the question is a discretionary one. The issue….is to what extent the fact that risk is invoked by the claimant affects the principle and to what extent the interest of the litigant trumps those of the party claiming that it is not legitimate to comply.”
- Coming to her conclusions, the Judge (at [79]) did not accept that there was “exactly the same presumption in favour of disclosure” where, as here, the disclosure of confidential information was said to be contrary to foreign law, as where the issue was “simply ‘business confidential’ information”. After some reference to authority, the Judge observed (at [82]) that each case needed to be evaluated on its own facts “…and the utility of the information sought and the prejudice caused by its absence weighed against the evidence as to the actual risk caused to the party subject to the order”.
- The Judge acknowledged that the expert evidence on Iranian law came only from the Bank, in the event through a Dr Kakhki (discussed further below). HMT had not been able to put forward evidence on its own behalf. Nonetheless, it was for the Judge to evaluate that evidence (at [84]), rather than simply take it at face value. The Bank was advancing an extremely large claim and seeking the Court’s “sanction to provide less than full disclosure by reason of redactions”. In particular, the Judge was required to consider what the evidence was telling her as to risk.
- The Judge continued as follows, in a passage much debated on the appeal:
“85. I accept Dr Kakhi’s expertise which was not in issue. I also accept the evidence indicates that there would be a breach of the law in Iran in providing the documents unredacted. The real question is as to the risks of sanction. In this area, while I see and I have read a few times now what Dr Kakhi says, which is that there are such risks from breach which he describes as even ‘ real ’ and ‘ probable ’ and ‘ likely ’, I am not entirely happy with his evidence. In particular it seems to me that there is a failure to address head on the critical question; that is, what is the risk of sanction in the face of the breach being as a result of compliance with an order of a competent court elsewhere.
- Despite Mr McLaren’s submissions [i.e., Mr McLaren QC, then representing the Bank], I do not read the report’s allusion to deliberate/knowing wrongdoing as engaging with that question. It engages rather with the question of compliance voluntarily. That appears to be the basis on which the questions as to confidentiality in ciphering were posed to him [i.e., Dr Kakhi] for the purposes of preparing his second report…. He was not asked and he does not appear to be telling me what the situation would be if the court imposed a confidentiality ring. Similarly, in his earlier report where there is a section….dealing with the question of the impact of this court’s order, it seems to me that he is not dealing with it in relation to the question of risk of sanction in the face of compliance with a court order, but only in relation to the question of enforcement.
- The question of risk is…plainly in play on the authorities. I would have expected it to be actively and specifically engaged with on that basis…..It is…still more surprising in that (i) Dr Kakhi does say that legal compulsion provides an excuse and (ii) that question of legal compulsion providing an excuse (when it is an order of the Iranian court) provides the very obvious jumping off point for engaging with the concept of what qualifies as legal compulsion. And yet he does not do so. He does deal…with the effect of the English court’s order; but there he does so only as regards the separate question of enforcement, without dealing at all with the question of the Iranian Courts’ attitude to complying with such an order. Nor does he specifically deal with the question of legal compulsion and
the top of my head, I can even looking at the question fairly critically, see the following.”
- First (at [99]), “factors such as reasons for a transaction not completing may well be customer related”. Insolvency was a “prime example”. The Judge disagreed with the Bank’s contention that this was de minimis. Similar issues arose “as regards ascertaining which transactions were affected by which measures: original, Follow-on or Copycat, although to a lesser extent…”.
- Secondly (at [100]), “alternative routes or replacement transactions” would be client specific. The Judge was not persuaded by the Bank’s argument that this was overstated. Though ciphering and specific transaction numbers (“UTNs”) had been suggested as the solution to this concern, the Judge regarded this as a dubious assumption. The Judge (at [101]) accepted the submission of Mr Foxton QC (for HMT) that information could be missed if fields were redacted, all the more so where it was sought to extrapolate from a sample.
- Thirdly (at [102]), whether a client was “a long-term customer” could be relevant to show how much business had been lost.
- The Judge was satisfied (at [103]) the (unredacted) material would be relevant “on numerous fronts”. Primarily (but not exclusively), this related to the first part of the Bank’s claim relating to specific transactions. As to the submission (in effect) that the Bank bore the burden of proof and thus the risk of failing to prove its claim, the Judge regarded it as “undesirable to create a risk of arguments having to depend on burden of proof if that is avoidable”. Moreover, the materials might go to “wider points” and the Judge saw “real problems with the argument that the material can be adequately assessed absent full disclosure and that anonymous ciphering or UTNs could enable a full picture to be seen”. Such practical objections as had been raised (at [105]) could not stand in the way of the order sought by HMT.
- The Judge’s overall conclusion was as follows:
“106. When I balance these various factors, the one against the other, I am satisfied that the appropriate answer is that an order along the lines sought by HMT should be made.
- As to that order, I have been troubled as to whether any form of confidentiality club should be ordered at all since that is contrary to the default position and the Bank does not itself seek a confidentiality club. However, I note HMT’s own willingness to contemplate this. Thus…..in the interests of those whose details might otherwise come into the open, as well as in the interests of offering as much respect as possible to the legal position in the foreign jurisdiction – because I am aware and I should make plain that I do understand their concern for confidentiality of material such as this – I am prepared to order a confidentiality club. There should be limitation to named individuals and provision of a list of those authorised, the usual kinds of measures which should be taken to ensure that a confidentiality club does not get out of hand.
- So far as ciphering is concerned….ciphering generally may well be a good idea with a view to ensuring that there is a possibility to protect client identities during trial.”
- Pausing there, the Bank’s skeleton argument on appeal (pre-dating the involvement of Mr Young QC who did not appear below) appeared to criticise the Judge for producing an ex tempore judgment. That criticism was misconceived and, very properly, Mr Young expressly disassociated himself from it. This impressive judgment was delivered after overnight reflection so that, in any event, it was not, strictly, ex tempore. More importantly, however, Judges are not to be criticised for ex tempore judgments, which have the beneficial result that the outcome is known promptly after the hearing. If there are proper grounds for differing from the judgment under appeal, they do not arise from its delivery “ ex tempore ”.
- In respect of the Iranian (and South Korean) documents, the order provided for the establishment of a “Confidentiality Ring” (i.e., the confidentiality club) and a cipher code for each document disclosed which included redacted information. A “Master List” of the cipher codes was to be maintained by the Bank, which would itself be a confidentiality club document. Schedule 1 to the order dealt, inter alia , with the membership of the confidentiality club. Thus, with the exception of the Court and individuals permitted by the Bank, the Master List was only to be made available to confidentiality club members. “Confidentiality Ring” Members were strictly limited to:
“…Ministers, employees or contractors of HM Government, the Government Legal Department, the Defendant’s expert accountants and counsel instructed in these proceedings.”
That is, it may be observed, a broad membership – but, as already highlighted, the Bank has not sought to advance any proposals or submissions for narrowing the membership. At all events, a “Confidentiality Ring Register” is to be maintained by HMT’s solicitors. A copy of or detail from the Confidentiality Ring Register is to be provided to the Bank “…if agreed by the parties or so ordered by the court”.
THE PRINCIPAL ISSUES ON THE APPEAL
- The principal issues on the appeal fall conveniently under the following headings:
i) The actual risk of prosecution faced by the Bank (or its employees) in Iran should it comply with the order; (“Issue I: Risk”)
ii) The importance of production of the documents in unredacted form to the fair disposal of the trial; (“Issue II: Need”)
iii) The discretionary balancing exercise for the Court: weighing Risk under Issue I against Need under Issue II (“Issue III: Striking the right balance”).
THE RIVAL CASES
- For the Bank , Mr Young QC submitted that the question was whether the Iranian documents should be produced (1) with customers represented by a cipher system or (2) with customers represented by a cipher system plus a master list – the master list
- As to Issue I, the focus was on the actual risk of prosecution. That was a question fundamentally different from the content or interpretation of foreign law. On that question, Dr Kakhki did not have relevant expertise. No evidence had been produced by the Bank of any Iranian prosecution of any person who had given disclosure pursuant to an order of the foreign court. The Judge was aware of the real issue – the actual risk of prosecution. She had not fallen into error. It was further to be remembered that many of the Bank’s customers could be expected not to be Iranian – by way of examples, suppliers under a performance bond or buyers under a L/C. In any event, even if there was a real risk of prosecution, that factor fed into the discretionary balancing exercise; it did not dictate the permissible outcome of the exercise.
- As to Issue II, the Bank’s case was driven by its (alleged) loss of customers. Mr Foxton submitted that the dispute could not fairly be tried without knowing who they were, together with when and why business had been lost. Further questions included whether transactions had really not completed or whether other routes had been used and whether the Bank had been involved in an attempt to evade lawful sanctions, before or after 2009. Without a master list, ciphers would not be satisfactory and would be vulnerable to minor variations, front companies, group companies and so on. HMT was entitled to test the very sizeable claim brought against it. Insofar as extrapolation from a sample was involved, the need for customer identities was heightened. As the Judge had observed, citing an observation of Flaux J (as he then was, at an early Case Management Conference (“CMC”) in this case), there were “a multitude of reasons” why customer identities needed to be provided to ensure a fair disposal of the trial.
- We were most grateful to both Mr Young and Mr Foxton, together with their respective teams, for their excellent submissions.
THE EXPERT EVIDENCE
- I come next to the expert evidence of Iranian law, given by Dr Mohammad M. Hedayati-Kakhki (“Dr Kakhki”), the subject of much debate under Issue I. Dr Kakhki practised law as a member of the Iranian Bar for a number of years. He holds Bachelor’s and Master’s degrees in law from Iranian universities. He has a PhD in Middle Eastern Politics and Law (with a focus on Iran) from Durham University, obtained in 2008. It does not appear that he has practised at the Iranian Bar since the early 2000s; however, as Mr Young underlined, he has given expert evidence here in Immigration and Asylum cases, including as to the structure of the Iranian legal system. He has assisted the Home Office with commentary and research for its Country of Origin Report on Iran. There is no doubt that Dr Kakhki has the relevant expertise to give expert evidence on Iranian law.
- Dr Kakhki’s evidence was uncontradicted. HMT was unable to instruct an expert on Iranian law. A permissible inference from what we were told is that those approached feared repercussions from Iran if they assisted HMT – and the English Court – in this matter. That is most unfortunate, but we can only proceed on the basis of the evidence that was before Cockerill J and we do so.
- Dr Kakhki’s first report was dated 29 September 2017 (“the first report”). He explained the Sharia law nature of the system, a matter of importance as the Iranian Constitution
- with its Sharia foundations – protects the right to privacy of Iranian citizens. Dr Kakhki drew attention to criminal penalties contained in the Iranian Criminal Code for
professionals and officials who disclose confidential information, where not permitted by law. Against this backdrop, the Bank owed a duty of confidentiality to its customers under the Iranian Constitution. According to Dr Kakhki, the location of the customer (whether within or outside Iran) would make no difference to the duty owed by the Bank. That duty could be overridden under Iranian law but only “…by a domestic court as Iran does not recognise and enforce foreign court orders within the Iranian jurisdiction automatically”.
- Dr Kakhki was asked this question:
“Does it make any difference…that Bank Mellat is required to give disclosure and inspection of such documents by an Order of the English Court in litigation which Bank Mellat has brought in England?”
He gave the following extended answer:
“44. As explained above, the order of a foreign court is not capable of being enforced automatically, and would have to be taken through the domestic judicial process to be first recognised, and then enforced where appropriate….
- In principle, there is no bar on the ‘recognition’ of foreign court orders/judgments in Iran but their ‘enforceability’ is contingent on their approval at the discretion of the domestic court through the issuance of an ‘enforcement order’.
…..
- According to Article 1295 of the Civil Code, a foreign judgment/document will only be considered as legal if the following conditions are met:
…
Their content is not in contradiction with public policy or good morals in Iran.
- ….privacy and confidentiality are key principles of Sharia law, and therefore Iranian law. In my opinion, an order issued by a foreign court for disclosure of client information and/or documents is likely to be found contrary to public order/ morality, per Article 1295, due to the emphasis on the preservation of individual privacy within Islamic doctrine. In my view, a disclosure order, such as that of Flaux J, would not be directly enforceable by the courts in Iran; and as noted, additional scrutiny by the Iranian courts in the context of Iranian principles and policies would likely find such disclosure incompatible with preservation of good morals and public policy and not recognise the order as valid under Article 1295.”
“Does Bank Mellat have a right or duty under Iranian law not to provide customer information to HMT through a confidentiality ring, in the manner proposed by HMT in its application? Please identify the relevant right or duty.”
He answered as follows:
“5. …the liability explained in my First Report would still apply despite disclosure being limited to a confidentiality ring. As mentioned previously, Bank Mellat has both a right not to reveal customer information and a duty not to disclose confidential information, and would be at risk of criminal investigation and liability were it to do so. It is not difficult to find examples of arrest and prosecution of Iranian bank employees for privacy law offences. For example, one account from 26th^ July 2016 details the arrest of 4 employees for disseminating information regarding over 200,000 bank customers (including names and addresses) without authorisation….”
The source of the example appears to be a BBC website.
- Reiterating what had been said in the first report, Dr Kakhki said that the Bank’s duties under Iranian law and the consequences of non-compliance would continue to apply “even in the event that an order for disclosure of confidential information is made by the English Court”. Additional complications arose from the confidentiality club in circumstances where the proposed disclosure of confidential information would be by electronic transmission to servers located outside Iran.
- Dr Kakhki went on to express further concern as to whether any of the (proposed) disclosure material might be regarded by the Iranian authorities as “secret data”. The relevant legislation was vaguely worded:
“9. …it is not difficult or unlikely that the Iranian authorities would define ‘state security’ or ‘national interest’ so as to cover many types of information, including the customer information being considered in the present case. It is….probable that the Iranian authorities would conclude that the disclosure of banking customer information on this scale could potentially lead to widespread distrust of the domestic banking system of which customers would previously have trusted the secrecy and privacy, which could undermine the national interest. These considerations would make prosecution and a significant penalty more likely in my view.”
- In relation to the confidentiality club, Dr Kakhki’s conclusions were these:
“21. ….revelation to a confidentiality ring as proposed would not eliminate liability and is unlikely to reduce the punishment if investigated. Disclosure of confidential customer information by Bank Mellat to a confidentiality ring in the manner proposed would carry a very real risk of prosecution and potential
persecution of the offenders by the Iranian authorities, in addition to the risks to the Bank’s reputation and future business. ….. In summary, under Articles 604 and 648 of the Iranian Penal Code offenders face three months to one year’s imprisonment in addition to payment of a fine and compensation for damages caused. Moreover, as well as payment of damages to affected customers or third parties, the Bank would be likely to lose its licence to operate…..
- This opinion is supported by my understanding as to the sensitivity of the Iranian authorities in relation to the materials under consideration…..Further, and to the extent Iranian authorities perceive this to be an issue of national importance (which…seems likely), such investigations would be conducted by the Iranian Revolutionary Courts and Ministry of Information and Intelligence (Ettela’at) which are known for use of aggressive investigative techniques…..
- In this context, it is entirely understandable that employees of Bank Mellat would be extremely wary of contravening Iranian criminal law….. Unfortunately, within Iran the consequences of criminal conduct can be felt within the personal sphere as well as affecting the corporate entity.
- For the avoidance of doubt I do not consider that the Bank could remove this risk by applying for an Iranian court order…..it is unlikely the Iranian courts would order the disclosure of personal information (even to a limited number of recipients….), as to do so would override fundamental Islamic and Iranian principles of privacy and confidentiality. In addition, the Iranian courts would be likely to be wary of legitimising disclosure of confidential information to third parties abroad (and particularly a foreign state). As such, and based upon my experience of Iranian courts and practising in Iran as well as my research….including discussions with practising professionals in Iran, any application would have very low prospects of being successful before the Iranian courts.”
- Finally, the use of ciphers representing customers – without a master list giving HMT access to customer identities – would meet the requirements of Iranian confidentiality law.
THE LEGAL FRAMEWORK
- There was no significant dispute before us as to the legal framework, covering two broad areas which it is convenient to outline here. The first concerns the approach of this Court to evidence of foreign law. The second goes to the position of this Court where it is admitted or established that an order for production and inspection of documents will involve the party subject to the order in a breach of foreign criminal law.
properly have regard to the question of whether inspection of the documents is necessary for disposing fairly of the proceedings in question…..”
- Coming closer to the present context, in Mackinnon v Donaldson, Lufkin and Jenrette [1986] 1 Ch 482, the Court discharged an ex parte order and subpoena requiring an American bank, not a party to the action, to produce books and other papers held at its head office in New York. In necessarily obiter observations, Hoffmann J (as he then was) said this (at pp. 494-495):
“…I am not concerned with the discovery required by RSC Ord. 24 from ordinary parties to English litigation who happen to be foreigners. If you join the game you must play according to the local rules. This applies not only to plaintiffs but also to defendants who give notice of intention to defend…..Of course a party may be excused from having to produce a document on the grounds that this would violate the law of the place where the document is kept…..But, in principle, there is no reason why he should not have to produce all discoverable documents wherever they are.”
- In Ventouris v Mountain [1991] 1 WLR 607, Bingham LJ (as he then was) underlined (at p.622) that under the (old) RSC Ord. 24 regime, production and inspection were not automatic once relevance and the absence of entitlement to privilege were established. He added this ( ibid ):
“While the court’s ultimate concern must always be to ensure the fair disposal of the cause or matter, it need not be unmindful of other legitimate concerns nor is it powerless to control the terms upon which production and inspection may be ordered. I would not wish it thought that because, as I conclude, production and inspection may be ordered therefore they must at once be ordered unconditionally.”
- Brannigan v Davison [1997] AC 238, a decision of the Privy Council on appeal from the Court of Appeal of New Zealand, concerned a commission of inquiry summoning witnesses to give evidence in circumstances where their testimony was likely to render them criminally liable under foreign law. While the issue related to the privilege against self-incrimination, rather than the inspection of documents, the considerations articulated by Lord Nicholls, giving the judgment of the Board, are nonetheless of interest for the present debate. The “chief strand of reasoning” discernible in the common law privilege against self-incrimination was (at p.249) the “…undesirability of the state compelling a person to convict himself out of his own mouth. There is an instinctive recoil from the use of coercive power to this end.” However, where prosecution under a foreign law was involved, the privilege (if applicable) “…would have the effect of according primacy to foreign law in all cases”. Lord Nicholls continued ( ibid ):
“Another country’s decision on what conduct does or does not attract criminal or penal sanctions would rebound on the domestic court. The foreign law would override the domestic
court’s ability to conduct its proceedings in accordance with its own procedures and law. If an answer would tend to expose the witness to a real risk of prosecution under a foreign law then, whatever the nature of the activity proscribed by the foreign law, the witness would have an absolute right to refuse to answer the question, however important that answer might be for the purposes of the domestic court’s litigation.”
The “opposite extreme” (at p.251) involved the proposition that the prospect of prosecution under foreign law was neither here nor there; the witness would always be required to answer a relevant question in the domestic proceedings, regardless of the likely practical consequences for the witness under foreign law. This, Lord Nicholls stated, “would be a harsh attitude”. He went on:
“It would be a reproach to any legal system. One would expect that a trial judge would have a measure of discretion….”
- Morris v Banque Arabe et Internationale d’Investissement SA [2001] IL Pr. 37 concerned a dispute arising out of the BCCI saga. The claimant liquidators commenced proceedings against the defendant French bank, seeking ( inter alia ) the disclosure and inspection of documents held in France. The defendant bank resisted inspection on the basis that under a French “Blocking Statute”, the production of such documents for use as evidence in foreign legal proceedings was prohibited. The bank argued that the claimants should instead seek the evidence via a letter or request under the 1970 Hague Convention on Obtaining Evidence Abroad.
- Neuberger J (as he then was) held (at [50]) that the Court had jurisdiction to order inspection of the documents. Under the CPR, the Court had a discretion whether or not to order a person resident and domiciled in another country to do something which would be a breach of the criminal law of that country (at [59] and following). On that footing, putting aside considerations relating to the Hague Convention (which ultimately did not dissuade him), he had little hesitation in exercising his discretion to do so; the absence of the documents in question (at [68]) would “….very substantially interfere with the liquidators’ ability to pursue the case and would clearly hamper the Court’s ability to try the case fairly”. Although (at [71]), by affording inspection, the bank would be committing an offence under the Blocking Statute:
“and could, at least in theory, suffer the imposition of a penalty, it appears to me that this risk, on the evidence I have heard, is little more, and indeed is probably no more, than purely hypothetical.”
Neuberger J (at [74]) added these observations:
“…in connection with litigation of this sort, involving a substantial sum of money, alleged wrongdoing and in the context of a massive and notorious international financial scandal….[it]…would be highly unusual if the French criminal authorities were to prosecute a party to an action such as this in England, in circumstances where he was required to comply with an order of the Court for production of documents for the
ii) Orders for production and inspection are matters of procedural law, governed by the lex fori , here English law. Local rules apply; foreign law cannot be permitted to override this Court’s ability to conduct proceedings here in accordance with English procedures and law.
iii) Whether or not to make such an order is a matter for the discretion of this Court. An order will not lightly be made where compliance would entail a party to English litigation breaching its own (i.e., foreign) criminal law, not least with considerations of comity in mind (discussed in Dicey, Morris and Collins, op cit, at paras. 1-008 and following). This Court is not, however, in any sense precluded from doing so.
iv) When exercising its discretion, this 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 balancing exercise but is a factor of which this Court would be very mindful.
v) Should inspection be ordered, this Court can fashion the order to reduce or minimise the concerns under the foreign law, for example, by imposing confidentiality restrictions in respect of the documents inspected.
vi) Where an order for inspection is made by this Court in such circumstances, 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 with the order of this Court. Comity cuts both ways.
DISCUSSION AND CONCLUSIONS
ISSUE I: RISK
- (1) Nature of the Issue: As already foreshadowed, this Issue goes to the actual risk of prosecution of the Bank and/or its employees in Iran. It is important to highlight what this entails. First, it is concerned with the risk of prosecution , rather than the risk of subsequent sanction, if prosecuted and convicted. Secondly, however, the question focuses on the actual risk of prosecution – not on whether the conduct in question discloses a breach of Iranian criminal law, without more.
- (2) The Judge’s conclusion: The Judge’s conclusion on this Issue appears from [94] of the judgment: although production of the Iranian documents unredacted would constitute a breach of Iranian law, the risk of prosecution (and sanction) was “not as serious” as suggested by Dr Kakhki in relation to “voluntary disclosure”.
- (3) Overview: For my part, I think that the Judge addressed the right ultimate question
- the actual risk of prosecution – and came to the right answer. En route , however, there appears to have been a mis-step. My reasons follow.
- (4) Dr Kakhki’s evidence: Dr Kakhki’s expertise as to matters of Iranian law was undisputed before the Judge and before us. Properly assessed, Dr Kakhki’s evidence yields the following conclusions:
i) As to the impact in Iran of the production of the Iranian documents unredacted (i.e., utilising ciphers but with a master list accessible to HMT), in compliance with an order of the English Court, Dr Kakhki’s first report dealt at some length (at paras. 44 and following) with the enforceability in Iran of the English Court order. Dr Kakhki’s conclusion was clear: the order of a foreign court would only be enforced if recognised and then enforced by an order of the domestic Iranian Court. Paras. 49 and 64 of the first report suggest that, at the least, it would be unlikely that an order would be obtained from the Iranian Court permitting unredacted production – a matter forcefully reiterated at para. 24 of Dr Kakhki’s supplementary report. The question of enforcement of an English Court order in Iran was not, however, the question with which this Issue was (at least directly) concerned and the Judge’s observations in this regard (at [87]) were, with respect, justified.
ii) That said, matters do not end there. The first report, at para. 61, does, in my judgment, address squarely – or “head-on” – the consideration that compliance with an order of the English Court would not excuse the Bank from a breach of its duty of confidentiality under Iranian law. Para. 61 is, however, the high point of the first report for the Bank’s case. Yet, on a fair reading it does not go beyond the view that unredacted production, absent a permissive order from the Iranian Court, would give rise to a breach of Iranian criminal law. It does not deal with the actual risk of prosecution in Iran.
iii) It is fair to say, as the Judge did, that Dr Kakhki’s supplementary report expanded somewhat the grounds upon which the Bank sought to base its case on Issue I – and, for my part, I can understand the Judge’s concern (at [89]) in this regard. Thus, questions of electronic transmission of the materials and “state security” were ventilated or principally ventilated in the supplementary report rather than the first report.
iv) Dr Kakhki’s supplementary report expressed the opinion that production of the Iranian documents unredacted, to a confidentiality club, would not absolve the Bank from its liability for breach of Iranian criminal law – all the more so, where one of the members of the club was a foreign State (para. 24). Dr Kakhi commented (at para. 21) that production of the Iranian documents unredacted to the confidentiality club would carry “a very real risk of prosecution”, aside from other consequences. The only example given, however, of the arrest and prosecution of Iranian bank employees for breach of their duty of confidentiality is that found at para. 5 of the supplementary report – an example self-evidently far removed from the facts of the present case.
- (5) The judgment: I turn next to the judgment. First, I am satisfied that the Judge addressed the right ultimate question – namely, that going to the actual (or real) risk of prosecution in Iran, as clearly emerges from both [50] and [82] of the judgment – and gave her answer at [94] of the judgment.
