Court ruling found in favor of Bank Mellat subsidiary in the UK, setting the beneficial ownership bar high for sanctions enforcers
Persia International Bank is the London-based subsidiary of major Iranian banks. It began to carry on its banking activities in the United Kingdom in 2001, following the merger of the branches in that country of its two shareholders, Bank Mellat, which controls 60% of its share capital, and Bank Tejarat, which controls the remaining 40%.
In a 2013 case, Persia International Bank v. Council, PIB disputed the freezing of its assets, claiming this action by the European Union violated its rights under the EU Blocking Statute. The Council of the European Union had frozen PIB’s assets following the Council’s 2010 sanctioning of its parent company and majority shareholder, Bank Mellat, for its role in facilitating the financing of Iran’s nuclear weapons proliferation.
In Persia International Bank v. Council, the General Court’s judgment annulled the asset freeze, and ordered the Council of the European Union to bear its own costs and to pay those incurred by Persia International Bank.
Crucially, the court’s decision raised the bar by which sanctions enforcers may define beneficial ownership. The final judgment stated that 60% ownership by a subsidiary of a sanctioned entity is not sufficient grounds to freeze the assets of that subsidiary.
The bank did not pursue a specific sum in damages during the case. Instead, its primary objective was the annulment of the sanctions and the restoration of its ability to conduct business without the restrictions imposed by the EU.
In the case of Persia International Bank v. Council of the European Union, the estimated value of the frozen assets tied to the bank was substantial, though specific figures were not directly cited in the ruling documents. However, considering the scale of Iranian banks like Persia International Bank and others involved in similar sanctions, the frozen assets likely involved significant sums, often amounting to hundreds of millions of euros.
In related cases involving Iranian banks like Bank Mellat and Bank Melli, frozen assets have been valued at several billion euros, which gives an indication of the financial impact sanctions have had on entities linked to Iran’s banking sector. (For example, South Korea released nearly 5.5 billion Eur in frozen funds to Iran via Qatari banks last year, according to Iran-based news sources.)
Persia International Bank (PIB)
Persia International Bank plc (PIB) was created on April 29, 2002, following the merger of the branches of Bank Tejarat and Bank Mellat in the UK. According to PIB’s 2021 financial disclosures, Bank Mellat has a 60% and Bank Tejarat has a 40% stake in the bank.
PIB’s main shareholder Bank Mellat was sanctioned by the US Treasury in 2007 “for its role in providing financial services to the Atomic Energy Organization of Iran (AEOI) and Novin Energy Company (Novin).”
PIB’s other shareholder Bank Tejarat was subjected to US Treasury sanctions in 2012 for providing financial services to several blacklisted Iranian entities including Bank Mellat. In 2015 following the JCPOA, banking sanctions were lifted on Bank Tejarat.
In January 2016, the UK Prudential Regulation Authority granted PIB authorization to resume normal banking activities. However, in 2018, the US Treasury reimposed sanctions on Iranian banks and financial institutions including Bank Tejarat, Bank Mellat, and Persia International Bank.
PIB’s financial document states it offers “a mixture of trade finance, syndicated and commercial loans, funded by a mixture of capital and deposits from its two shareholder Banks, the Central Bank of Iran (‘CBI’ / ‘Bank Markazi’), correspondent banks, corporates (mainly Iranian) and a small proportion of retail customers.”
The bank’s website lists among its main services the issuance and transfer of Letters of Credit, the issuance and amendment of Letters of Guarantee, project finance, and commercial loans. Persia International Bank also has a branch in Dubai.
PIB’s financial disclosures also state that it is in the process of obtaining a license from the Italian central bank to passport a third-country banking license to its branch in Milan. According to LinkedIn, “Persia International Bank Filiale Milano” was founded and has been in business since 2020.
PIB’s main shareholder Bank Mellat was sanctioned by the US Treasury in 2007 “for its role in providing financial services to the Atomic Energy Organization of Iran (AEOI) and Novin Energy Company (Novin).”