Supreme Court quashes British sanctions on Iranian bank

By Clare Hutchison

LONDON (Reuters) - The UK's highest court has ruled that the government was wrong to have imposed sanctions on an Iranian bank in 2009 over alleged links to Iran's nuclear programme.

The Supreme Court decision on Wednesday mirrored a January ruling by the European Union's General Court, which overturned sanctions imposed in 2010, and could result in the bank suing Britain for damages.

Bank Mellat said in January that it would sue individual governments for damages, and a bank spokesman told Reuters on Wednesday that it is considering launching a claim against Britain that "could exceed 500 million pounds".

Europe and the United States have imposed sanctions against Iran in an effort to persuade it to rein in its nuclear programme. Western nations believe that the country is attempting to develop nuclear weapons, though Tehran says the programme is for domestic power generation and medical purposes.

In a majority judgment, Supreme Court Judge Jonathan Sumption said that the British government had been "arbitrary", "irrational" and "disproportionate" to single out Bank Mellat, Iran's largest private bank, for sanctions.

Bank Mellat has long denied allegations that it aided Iran's disputed nuclear programme and argued that it had not been consulted before sanctions were imposed.

It also questioned the Supreme Court's use of secret sessions for the first time, excluding the bank from parts of the proceedings, though a majority of the nine judges ruled that it was appropriate in this case.

"Today's ruling is a victory for the rule of law as much as it is for Bank Mellat," said Sarosh Zaiwalla, a senior partner at the bank's law firm Zaiwalla & Co Solicitors.

The British government's sanctions on Bank Mellat prevented the whole of the UK's financial sector from having any business relationship with the bank. Sanctions imposed on the bank by the United States remain in place.

Wednesday's rulings come against the backdrop of a debate over the use of secret evidence in British courts. The government is keen to extend the use of so-called Closed Material Procedures to civil court cases.

It was the first secret session in the Supreme Court's history and meant that the bank itself was not shown all the evidence.

(Reporting by Clare Hutchison; Editing by David Goodman)

NSA Dragnet 'Saved Lives,' Obama Says

BERLIN -- President Obama today defended his administration's "narrow" phone and Internet surveillance, saying that "lives have been saved" because of the programs.

"We know of at least 50 threats that have been averted because of this information, not just in the United States, but in some cases, right here in Germany," the president told reporters at a joint press conference in Berlin with German Chancellor Angela Merkel.

The president stressed that these programs are supervised by the courts to limit encroachment of privacy. "This is not a situation in which we are rifling through ordinary emails of German citizens or American citizens or French citizens or anybody else. This is not a situation where we go into the Internet and start searching any way we want. This is a circumscribed, narrowed system directed at us being able to protect our people," he said.

Obama admitted that he was critical of the previous administration's surveillance and that he came into office with a "healthy skepticism" about how these programs were structured. "What I have been able to do is examine and scrub how our intelligence services are operating. I'm confident that at this point we have struck the appropriate balance," he said.

Obama and Merkel said they discussed the programs at a bilateral meeting earlier today. Merkel said their conversation helped foster a greater understanding of the programs and their value.

The president reiterated that he welcomes the public debate surrounding surveillance and said he is looking for additional ways to declassify parts of these programs.

Also Read

Iceland: 'informal talks' about Snowden asylum

A banner supporting Edward Snowden, a former CIA employee who leaked top-secret documents about sweeping U.S. surveillance programs, is displayed at Central, Hong Kong's business district, Wednesday, June 19, 2013. U.S. President Barack Obama defended top secret National Security Agency spying programs as legal in a lengthy interview, and called them transparent - even though they are authorized in secret. (AP Photo/Kin Cheung)

STOCKHOLM (AP) — A WikiLeaks spokesman who claims to represent Edward Snowden has reached out to government officialsin Iceland about the potential of the NSA leaker applying for asylum in the Nordic country, officials there said Wednesday.

Johannes Skulason, an Icelandic government official, told The Associated Press that WikiLeaks spokesman Kristinn Hrafnssonhad held informal talks with assistants at the Interior Ministry and the prime minister's office.

Skulason said Hrafnsson "presented his case that he was in contact with Snowden and wanted to see what the legal framework was like."

Icelandic Prime Minister Sigmundur David Gunnlaugsson earlier Wednesday told reporters in Sweden that there had been no formal discussions on the matter. To apply for asylum, Snowden must be on Icelandic soil.

Hrafnsson told the AP he had talked to an intermediary that he was "100 percent sure represents Mr. Snowden," but declined to identify the intermediary.

Hrafnsson said he had met with people at the Icelandic ministries and reported back to his contact, but couldn't give any more details about when or how Snowden would possibly travel to Iceland.

In an interview published shortly after he outed himself as the source behind stories about the U.S. spy agency's online surveillance programs, Snowden floated the idea of heading to Reykjavik, the capital of Iceland. He told the Guardian newspaper that he was inclined to seek asylum in a country that shared his values — and "the nation that most encompasses this is Iceland."

Snowden, who used to live in Hawaii, initially fled to Hong Kong and is now in hiding.

It's not clear whether Iceland could protect a leaker like Snowden from American demands for his return. Iceland has a longstanding extradition treaty with the U.S., though it has never been used to deport an American citizen.

Instead, the small island nation has a tradition of providing a haven for the outspoken and the outcast, and has previously welcomed eccentric chess master Bobby Fischer and WikiLeaks secret-spiller Julian Assange.

The Government Is Spying on America with Drones, Too

The Government Is Spying on America with Drones, Too

FBI director Robert Mueller said the government has usedsurveillance drones in the U.S. — though "in a very, very minimal way, very seldom" — at a Senate hearing on Wednesday. "It's very seldom used and generally used in a particular incident when you need the capability," Mueller said before the judiciary committee. "It is very narrowly focused on particularized cases and particularized needs." He said he did not know what happens to the images the drones capture.

RELATED: Zero Dark Verizon: Why D.C. Hates Leaks Until It Loves Hunting Them Down

Mueller's answer came following questioning from California Sen. Dianne Feinstein, who said drones were the "biggest threat to privacy" in America today. This is funny, because Feinstein had just given a rousing defense of the National Security Agency's program to collect the metadata on all phone calls made by all Americans. Feinstein is the chair of the Senate Intelligence Committee, and since Edward Snowden leaked the NSA programs, has dismissed concerns that the government is spying on Americans. At Wednesday's hearing, Feinstein said the NSA collects "not the names, but the data. Not the content, but the data." A drone wouldn't collect the content of your conversation, either. It would only show exactly where you are and when. Which is what your phone call metadata says, too. Nevertheless, Dianne Feinstein is anti-NSA paranoia but pro-drone paranoia.

IRS draws new criticism over $70M employee bonuses

IRS draws new criticism over $70M in employee bonuses, says it's bound by union contract

Associated Press -

WASHINGTON (AP) -- Already reeling from a pair of scandals, the Internal Revenue Service is drawing new criticism over plans to hand out millions of dollars in employee bonuses.

The Obama administration has ordered agencies to cancel discretionary bonuses because of automatic spending cuts, but the IRS says it's merely following legal obligations under a union contract.

The agency is about to pay $70 million in employee bonuses, said Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance Committee, which has jurisdiction over the IRS.

Grassley says his office has learned that the IRS was to execute an agreement with the employees' union Wednesday to pay the bonuses. Grassley says the bonuses should be canceled under an April directive from the White House budget office.

The directive was written by Danny Werfel, a former budget official who has since been appointed acting IRS commissioner.

"The IRS always claims to be short on resources," Grassley said. "But it appears to have $70 million for union bonuses. And it appears to be making an extra effort to give the bonuses despite opportunities to renegotiate with the union and federal instruction to cease discretionary bonuses during sequestration."

On Wednesday, the IRS said it was still negotiating with the union over the matter. Under the union contract, employees can get individual performance bonuses of up to $3,500 a year.

"Because bargaining has not been completed, there has been no final determination made on the payment of performance awards for the bargaining unit employee population," IRS spokeswoman Michelle Eldridge said in a statement.

"IRS is under a legal obligation to comply with its collective bargaining agreement, which specifies the terms by which awards are paid to bargaining-unit employees," Eldridge said. However, she wouldn't say whether the IRS believes it is contractually obligated to pay the bonuses.

The National Treasury Employees Union says the bonuses are legally required as part of the collective bargaining agreement.

"NTEU has had a negotiated performance awards program at the IRS for decades, pursuant to the law and regulations which specifically authorize agencies to implement such merit-based incentive programs," NTEU President Colleen M. Kelley said in a statement. "NTEU is currently in discussions with the IRS on this matter and other matters resulting from budget cutbacks."

The IRS has been under fire since last month, when IRS officials acknowledged that agents had improperly targeted conservative groups for additional scrutiny when they applied for tax-exempt status during the 2010 and 2012 elections. A few weeks later, the agency's inspector general issued a report documenting lavish employee conferences during the same time period.

Three congressional committees and the Justice Department are investigating the targeting of conservative groups. The FBI has about 12 agents in Washington working on the case, as well as others around the country, FBI Director Robert Mueller told a congressional hearing Wednesday.

Also, key Republicans in Congress are promising more scrutiny of the agency's budget, especially as it ramps up to play a major role in implementing the new health care law.

Much of the agency's top leadership has been replaced since the scandals broke. President Barack Obama forced the acting commissioner to resign and replaced him with Werfel, who used to work in the White House budget office.

In a letter to Werfel on Tuesday, Grassley said the IRS notified the employee union March 25 that it intended to reclaim about $75 million that had been set aside for discretionary employee bonuses. However, Grassley said, his office has learned that the IRS never followed up on the notice. Instead, Grassley said, the IRS negotiated a new agreement with the bargaining unit to pay about $70 million in employee bonuses.

Grassley's office said the information came from a "person with knowledge of IRS budgetary procedures."

"While the IRS may claim that these bonuses are legally required under the original bargaining unit agreement, that claim would allegedly be inaccurate," Grassley wrote. "In fact, the original agreement allows for the re-appropriation of such award funding in the event of budgetary shortfall."

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said paying the bonuses "looks like a payoff to union workers at a time when we're drowning in a sea of red ink. Given the government guidelines on sequestration, this is certainly an issue that demands further scrutiny."

Werfel wrote the directive on discretionary employee bonuses while he was still working in the White House budget office. The directive was part of the Obama administration's efforts to impose across-the-board spending cuts enacted by Congress.

The spending cuts, known as "sequestration," are resulting in at least five unpaid furlough days this year for the IRS' 90,000 employees. On these days, the agency is closed and taxpayers cannot access many of the agency's assistance programs.

Werfel's April 4 memorandum "directs that discretionary monetary awards should not be issued while sequestration is in place, unless issuance of such awards is legally required. Discretionary monetary awards include annual performance awards, group awards, and special act cash awards, which comprise a sizeable majority of awards and incentives provided by the federal government to employees."

"Until further notice, agencies should not issue such monetary awards from sequestered accounts unless agency counsel determines the awards are legally required. Legal requirements include compliance with provisions in collective bargaining agreements governing awards."

___

Associated Press writer Pete Yost contributed to this report.

___

Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap