The National:

Iran has lost its latest court battle over a near £400 million debt owed by Britain conntected to an arms deal with the former Shah that was aborted after the 1979 revolution.

Three judges ruled in favour of a UK government-owned arms company over a £20m interest payment, a relatively minor issue in a larger ongoing battle by Iran to enforce the debt.

But the decision on appeal is likely to further anger Iran which has linked the non-payment of the debt with the fate of British dual-nationals held on what their supporters say are trumped up charges.

They include Nazanin Zaghari-Ratcliffe, whose husband said he was watching to see what would happen next after senior Iranian officials spoke out strongly before the appeal hearing.

“At the moment we are watching waiting to see whether anything now happens in Iran, given how strong the statements from the Iranian Ministry for Foreign Affairs were in the build up to this appeal,” said her husband Richard Ratcliffe.

“And I have told the government repeatedly that the blowback from its actions should not be allowed to fall on innocent shoulders. The basic duty of a government is to protect.”

Iran had appealed against an October ruling which said that the UK did not have to pay interest since 2008 on the money owed for the failed delivery of more than 1,700 tanks and armoured vehicles agreed in a 1971 contract.

The tanks that were due to be part of the aborted deal were later sold to Iraqi leader Saddam Hussein who turned them on Iran during the 1980-1988 war. Before he became defence secretary, Ben Wallace once described Britain’s role as one “marred by double dealing and obfuscation”.

Britain accepts that it owes money to Iran but says that it could not pay the bill because of European Union sanctions that were imposed on the Iranian defence ministry, which is claiming the money, in 2008. The two sides were embroiled in court cases that had not settled the final amount before sanctions were imposed, the London court has heard.

In their ruling, the three judges said the Iranian ministry of defence “is frustrated that, four decades on from the events giving rise to arbitration awards in its favour and 18 years after those awards were made, it has still received nothing.

However, they said that both sides agree that “IMS cannot lawfully pay… anything”.

Families of those detained have accused the government of dragging its feet on repayment and say it has jeopardised their safety. The UK government has reportedly been looking at ways of paying the money via humanitarian aid to try avoid breaking the sanctions regime.

Britain’s International Military Services paid £382 million into a court-controlled account in 2002 until the dispute was settled, which has risen to more than £500 million with interest.

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