Iran bank's UK unit to challenge nuclear sanctions

LONDON (Reuters) - A London-based subsidiary of Iran's largest bank, Bank Melli, said on Tuesday it would take action in British and EU courts to challenge the legality of sanctions imposed by the European Union.

The subsidiary, Melli Bank Plc, said it would apply to the British courts for judicial review and an interim injunction to suspend the application of an EU asset freeze.

The EU agreed the move on Monday because of the parent bank's alleged role in financing firms linked to Iranian nuclear and missile programs.

"Melli Bank Plc will also be initiating proceedings before the European Court of First Instance to challenge the legality of the decision," said the London-based bank in a statement.

A source close to the bank said the application to the British courts would be made as soon as possible and could come as early as Wednesday.

Melli Bank Plc said the sanctions against it were disproportionate and discriminatory.

"Melli Bank Plc, as a UK bank, is legally and functionally distinct from its parent. It complies with all relevant sanctions (against Iran) and will continue to do so, and has an unblemished record of compliance with its regulators in the UK," the statement said.

Britain's Treasury earlier issued a notice informing banks of the sanctions against Melli Bank Plc, instructing them to check whether they hold any accounts or funds for it and, if so, to freeze them. The freeze also applies to the bank's Hong Kong branch.

Melli Bank Plc made profit after tax of 34.5 million euros ($53.67 million) in the year to December 31, 2007, down from 41.6 million euros in 2006.

According to its Web site, its average number of employees last year was 92.

The UK unit mainly conducts trade financing for British companies doing business with Iran.

(Reporting by Mark Trevelyan, editing by Richard Balmforth)