A London-based subsidiary of Iran’s largest bank today launched a legal fight to continue trading in the UK despite sanctions imposed over the Iranian government's nuclear programme.

Melli Bank Plc and its parent company have both had their assets frozen by the European Union. The sanctions, based on measures agreed by the UN Security Council, were agreed by the EU in June to increase pressure on Tehran to scale back its nuclear programme and abandon enrichment of uranium.

According to the EU, the bank's Iranian parent had facilitated "numerous purchases of sensitive materials” for nuclear and missile programmes.

But today Richard Gordon QC, appearing for Melli, told the High Court that the sanctions should not apply to the bank's London arm and should be suspended pending a judgment by the European Court of First Instance.

He said that Melli was strictly regulated by the Financial Services Authority, the UK's financial watchdog, and legally and functionally distinct from its parent company, with which it had “an arm’s length relationship”.

He told Lord Justice Moses and Mr Justice Sullivan that the London subsidiary had never been specifically cited in any UN resolution or designated as being subject to sanction.

Mr Gordon said the sanctions were disproportionate and amounted to a freezing of assets without evidence and without limit of time, which was an infringement of EC law.

The Treasury and Foreign Office both maintain that Melli's London arm is part of the parent bank and that the sanctions are justified.

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