Nazanin Zaghari-Ratcliffe: Could a £450m legal battle over a UK-Iran arms deal be key to freeing British mother?

A £450m legal wrangle over a 40-year-old arms deal may play a part in securing Nazanin Zaghari-Ratcliffe’s freedom from an Iranian jail, it has been reported.

The claims are being made amid suggestions that Ms Zaghari-Ratcliffe, arrested in April 2016 on supposed security grounds, is in fact being used by Iran as a “bargaining chip” in a dispute over the 1970s deal to buy Chieftain tanks and armoured repair vehicles from Britain.

The government of the Shah of Iran paid up front for the tanks, but after the 1979 Iranian revolution Britain decided not to deliver the weapons. Instead it kept the cash and even sold some repair vehicles to Iran’s bitter enemy Iraq, under the control of Saddam Hussein.

This sparked a 38-year legal battle, with Iran demanding its money back.

Britain eventually agreed to pay something, but there still appears to be dispute between the two countries as to the precise amount that should be handed over.

And agreement is further complicated by fears that if Britain simply handed over money direct to Iran’s defence ministry it would be in breach of international sanctions against the Tehran government.

Now, however, The Sun is reporting that Foreign Secretary Boris Johnson and Chancellor Philip Hammond have “quietly authorised” government lawyers to settle the dispute once and for all.

And “senior Whitehall sources” are said to have told the Telegraph that work has “intensified” in recent months in an attempt to resolve the dispute.

The reports come after Ms Zaghari-Ratcliffe’s fate acquired huge UK political significance since Mr Johnson erroneously said she had been teaching journalists in Iran when in reality she had been there on holiday. The gaffe led to Iran calling his remarks an accidental confession, prompting UK MPs to demand Mr Johnson’s resignation.

The British Government, however, is adamant that any payment in the arms dispute will in no way be directly linked to or conditional on Ms Zaghari-Ratcliffe’s release, although it has been indicated that diplomats are keen to improve relations with Iran.

After meeting Boris Johnson on Wednesday, Ms Zaghari-Ratcliffe’s husband Richard said his wife’s case should be settled on the basis of justice rather than quid pro quo bargaining, but admitted: “It is important that the UK honours its international legal obligations so that Iran can honour its legal obligations.

“They are separate things but it is good for the atmosphere if they are all solved.”

Iran has always insisted that Ms Zaghari-Ratcliffe was arrested on legitimate security grounds, but Mr Ratcliffe, 42, an accountant has long argued that his wife is being held as a bargaining chip.

Writing in The Independent in October, he said: “We have known since June 2016 that for Iran, Nazanin is just a bargaining chip in some bigger diplomatic game.

“That’s when her interrogators told her: “Encourage your husband to tell the British to make the agreement. Let him know that if they make the agreement, his wife will be released without charge.”

It is thought that when referring to “the agreement”, the interrogators could have been referring to a possible settlement of the arms deal dispute.

The legal wrangle has its origins in the Shah of Iran ordering 1,500 Chieftain battle tanks in 1971 and 250 repair vehicles in 1976, at a total cost of £650m which was paid up front.

Britain structured the deal through International Military Services (IMS), a private limited company wholly owned by the UK Government.

It was initially hailed as a masterstroke that secured jobs for British Royal Ordnance Factories (ROF).

But in 1979 the Shah was deposed, with only 185 tanks having been delivered.

David Gibbons, the senior commercial officer of IMS, would later tell Sir Richard Scott’s 1996 Arms to Iraq Inquiry: “When the Revolution occurred something akin to panic broke out within the MoD/ROF axis.”

Margaret Thatcher’s UK Government did not want to sell weapons to the new Iranian government of Ayatollah Khomeini, but it didn’t want job losses in the arms industry either.

It publicly agreed to sell 279 Chieftain tanks to Jordan, and secretly sold 29 Armoured Recovery Vehicles (ARVs) to Iraq, shortly before Saddam Hussein attacked Iran to start the 1980-88 Iran-Iraq war.

Iran began legal action against Britain. The directors’ report in the latest set of IMS accounts, filed at Companies House in August, states that in May 2001 “an award of damages plus interest was made against the company.”

In December 2002 IMS and the British Treasury paid more than £450m into the UK High Court as security ahead of an appeal over exactly how much money they should give to Iran.

Legal wrangling over exactly how much should be paid appears to have continued ever since, with at least three appeals and counter-appeals going through international courts in The Hague.

Attempts at a negotiated settlement have been ongoing since 2010, but have been further complicated by what the IMS directors’ report calls “a number of additional issues, primarily the settlement of smaller claims not subject to judicial process.”

The directors’ report of IMS, which ceased trading in 2010 but cannot be liquidated until the legal dispute is resolved, states that Iran has applied for an enforcement order in the UK High Court, but hearings on this have “been deferred several times by Iran”.

A High Court hearing was scheduled to take place in October, but it is believed this too was deferred.

If agreement can be reached – or already has been reached – on how much money Iran should receive, there will still be complications over how it can be given the cash. Iran's Ministry of Defence remains subject to EU sanctions.

Legal sources, however, have suggested to The Independent that it may be possible to find ways to pay the money without breaching sanctions law.

It is understood that the Government is looking into ways to pay Iran, but a spokesman stressed that Britain regards the arms deal dispute and the fate of Ms Nazanin Zaghari-Ratcliffe as separate issues.

The Government spokesman said: “It is wrong to link a completely separate debt issue with any other aspect of our bilateral relationship with Iran.”

Responding to the reports of work on the dispute having intensified and Mr Johnson and Mr Hammond authorising lawyers to settle, a spokesman for Prime Minister Theresa May insisted: “The reports are speculation and not anything that I recognise”

The Iranian government has previously stated that Ms Zaghari-Ratcliffe was “detained due to her illegal acts” and treated at all times “according to the due judicial process”.

Mr Ratcliffe has repeatedly explained that his wife has never actually taught journalists at any point in her career.

Instead in her first graduate job, eight years ago, when she was an assistant at BBC Media Action, the corporation’s international development charity, she had just made travel arrangements for tutors on an international journalism course.

Ms Zaghari-Ratcliffe’s current employer, the Thomson Reuters Foundation has also confirmed that she has is not a journalist and has never trained journalists for the charity, which does not even operate in Iran.

Mr Ratcliffe has always said his wife went to Iran to visit her parents and extended family for the country’s Nowruz new year celebration.

It has also been pointed out that this would be an odd time to pick for training journalists, given that most Iranians are spending time off with their families during what is the country’s equivalent of Christmas.