Court of appeal due to settle size of debt for 1970s tank sale from UK to Iran this week

The release of Nazanin Zaghari-Ratcliffe, the British-Iranian woman held in a Tehran jail since 2016, could come a step closer if a long-running dispute over the UK government’s non-payment of a £400m debt to Iran is settled in the court of appeal this week.

In a tweet, the Iranian ambassador to Britain claimed that a decades-long dispute between the UK and Iran over the size of the debt could be about to come to an end, leaving the government with no excuse to delay payment. The prediction may prove optimistic given legal complexity surrounding the tank sale payment, and the legal constraints preventing the UK from sidestepping sanctions against Iran.

Zaghari-Ratcliffe’s husband, Richard Ratcliffe, is scheduled to meet Boris Johnson on Thursday. Zaghari-Ratcliffe was jailed for five years on espionage charges in 2016, which she has denied.

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The dispute concerns an Iranian payment in the 1970s for 1,500 Chieftain tanks and armoured vehicles. The contracts were cancelled after the shah was deposed in the 1979 revolution but Iran had already paid for the undelivered tanks and demanded its money back. The two sides have been battling in the courts over the size of the debt, including whether interest is payable.

Despite strenuous official denials on both sides, the UK’s non-payment of the debt has come to be seen as hindering the release of Zaghari-Ratcliffe.

The Iranian ambassador to the UK, Hamid Baeidinejad, tweeted: “Court of appeal is due to settle a small part of the outstanding debt.” He added: “By assigning this small part, the legal process of the case is coming to an end and there will be no excuse for default.”

The appeal court is due to hold a two-day hearing on Wednesday and Thursday over whether interest on the debt is payable. Last year the high court in London ruled the UK did not have to pay interest on the debt, due to EU sanctions legislation.

The UK has set aside nearly £500m as surety for the debt. International Military Services, then a subsidiary of the Ministry of Defence, has said that even if the size of the debt is agreed by both sides, the UK cannot pay since the Iranian ministry of defence has been subject to EU sanctions since 2008.

Ahead of Ratcliffe’s meeting with the prime minister, the UK ambassador to Iran, Robert Macaire, was due to meet him and other British families of people imprisoned in Tehran as part of regular updates.

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The appeal court hearing has been highlighted in the pro-government Iranian press this week, suggesting there is an expectation the case may be nearing a conclusion. Iran has called for the debt to be paid to its central bank, but the UK appears to be resisting this.

Ben Wallace, the defence secretary, who is also an Iran expert, is understood to have been seeking alternatives to paying off the debt, including through humanitarian aid such as food and medicine. Iranian officials have been trying to find out whether the UK regards this as a serious option, and some senior officials may visit London for talks.