By Estelle Shirbon
LONDON (Reuters) - An Iranian bank appealed to Britain's Supreme Court on Tuesday against sanctions imposed on it by the British government in 2009 over alleged links to Iran's nuclear program.
Bank Mellat, Iran's biggest private sector lender, wants the sanctions lifted on the basis that the government has failed to provide evidence of a connection between itself and Tehran's nuclear activities.
Bank Mellat won a similar legal battle against European Union sanctions in January, raising concerns among diplomats that court rulings could erode the sanctions regime against Iran.
Tehran says its nuclear work has only peaceful purposes but the U.N. Security Council has ordered it to suspend uranium enrichment, concerned that its ultimate goal is to develop the means to build nuclear weapons.
"Sanctions are an important way to enforce international law in a peaceful manner, but they must be subject to the rule of law and require evidence," said Sarosh Zaiwalla, a London-based lawyer representing Bank Mellat.
The sanctions against Bank Mellat, which came into force in October 2009, prevent anyone in the British financial sector from having any business relationship or conducting any transactions with the bank.
Bank Mellat says it has been unable to defend itself against the government's allegation that it indirectly facilitated the nuclear program because some of the evidence, obtained from intelligence sources, was heard in secret in a lower court.
The government wants the Supreme Court to consider the secret material as part of its deliberations on Bank Mellat's appeal. But the bank says that would be unfair as it has not been shown the evidence against it in order to rebut it.
The debate highlights the challenge for Western governments seeking to impose sanctions on Iranian companies, caught between the need to provide sufficient evidence to stand up in court while not compromising intelligence sources.
Civil rights group Liberty has intervened in the case, arguing that it would go against open justice for the Supreme Court to consider secret material, and it would breach Bank Mellat's right to a fair trial.
But a lawyer acting for the government, Jonathan Swift, told the court it would be "disabled" from understanding the rulings made by the lower courts if it did not see the whole picture.
The issue of how the Supreme Court handles the secret material is considered so important that the case is being heard by nine judges instead of the usual five.
The hearings are scheduled to last three days, with the whole of Tuesday devoted to legal arguments about whether the court should or should not look at the secret material.
Once it has decided what to do about that issue, the Supreme Court will go on to consider the question of whether the sanctions against Bank Mellat were lawful or not. It will give its judgment on that at a later date.
(Reporting by Estelle Shirbon; Editing by Jon Hemming)