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Court rules in UK’s favour in Iran debt dispute linked to Zaghari-Ratcliffe case

The UK is withholding £387m owed to Iran even though it could free Nazanin [Getty]

Date of publication: 26 July, 2019

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A London high court judge ruled in favour of the UK on an Iran debt case, dealing a new blow to UK-Iran relations and the case of Nazanin Zaghari-Ratcliffe.
A London high court ruled that the United Kingdom does not have to pay the £20 million interest that has accumulated on a £400 million debt owed by the UK government to Iran from an almost 50-year-old tank sale.

The payment of the debt is seen as critical to the release of British Iranian woman Nazanin Zaghari-Ratcliffe, who has been imprisoned in Tehran since 2016.

Justice Phillips ruled this week that the UK is not liable to pay the interest which has accumulated over the past ten years on the £387 million owed, the Guardian reported. 

A decision on whether the debt itself will be paid to Iran, and whether there is a Iranian body that can be lawfully paid, will be determined at a later date.

The Guardian reported in May that the UK's ministry of defence was withholding the £400 million owed by the government to Iran even though it could help secure the release of Zaghari-Ratcliffe.

An international arbitration court has ruled that the £400 million should be paid. But ministerial sources told The Guardian that the successive defence secretaries Sir Michael Fallon and Gavin Williamson have refused on the grounds that it would aid the Iranian Revolutionary Guard and its agenda in countries such as Yemen, Syria and Lebanon.

Zaghari-Ratcliffe, a UK-Iranian dual citizen, was jailed by Tehran authorities in 2016 after being accused of plotting against the government, charges she denies. She was handed a five-year jail sentence for sedition.

Although Iran has not explicitly connected Zaghari-Ratcliffe's ongoing imprisonment and UK's debt, there have reportedly been private indications by the Iranians that the two are connected.


Boris blunders

Nazanin's husband Richard Ratcliffe told
The Guardian the case "matters to us since we have been told explicitly that we are linked to this court case. It feels like we are a very explicit bargaining chip that is being used".

Prime Minister Boris Johnson, then foreign secretary, told The Sun in February 2018 that the debt would be paid after meeting with Richard Ratcliffe.

But internal divisions have prevented the payment.

According to The Guardian, Iran's Foreign Minister Javad Zarif reportedly disengaged from the case due to frustration about what he saw as "foreign office double dealing".

Johnson infamously hindered Zaghari-Ratcliffe's chances of release at release in 2017 when he wrongly implied she was working in Tehran to train journalists - comments that were later used to bolster Iran's allegations that she was engaged in "propaganda against the regime".

But Nazanin's supporters, who make clear she was just visiting Iran at the time of her arrest, say Johnson's briefing to The Sun was more damaging to her chances of release than his journalism comment.

'Ransom money'

Former British Foreign Secretary Jeremy Hunt claims Zaghari-Ratcliffe is being used as a diplomatic pawn and described the payment of the £400m as ransom money.

"The problem is if you pay ransom money to someone who is a hostage then all that happens is you might get that hostage out, but the next time they want something they'll just take someone else hostage. That is the conundrum we have," Hunt told Radio 4.

Court papers, unveiled after the Sunday Times won a court order allowing access to the documents, showed Iran requesting the Treasury to approve the payment "from a government-owned defence company to the Central Bank of Iran".

EU sanctions on Iran make payment difficult but Iran believes it can be done without breaching the sanctions.

30-year-old sale

The original dispute dates back to 1971, when International Military Services (IMS) - a now failing UK government defence trading service - agreed to sell 1,500 tanks to the Shah of Iran.

After the Shah was deposed eight years later, the contracts were cancelled but Iran had already paid for the undelivered tanks.

In 2001, an international chamber of commerce in The Hague ruled in favour of Iran and the repayment of the funds - to which IMS launched an appeal.

The UK government has received criticism for how they have dealt with the case - keeping the court hearings and their dates private.

The UK granted Zaghari-Ratcliffe - who remains separated from her daughter - diplomatic protection in March in a bid to free her.

Zaghari-Ratcliffe has suffered from health issues, including undergoing tests for breast cancer and a series of panic attacks, while her emotional state has worsened during her confinement.

A project manager with Thomson Reuters Foundation, the media group's philanthropic arm, she was arrested in April 2016 as she was leaving Iran after taking her infant daughter to visit her family.

Agencies contributed to this report.

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