EU court rules for second time against Iran bank sanctions

The entrance to the German branch of Bank Saderat Iran in the northern German town of Hamburg August 18, 2010. Picture taken August 18, 2010.

BRUSSELS (Reuters) - A European Union court has ruled that the EU should lift sanctions it imposed on one of Iran's largest banks, the second such judgment that could complicate Western efforts to increase pressure on the Islamic Republic.

The ruling further weakens the EU's sanctions regime imposed against Iran's nuclear programme, just weeks before six powers are due to resume stalled negotiations with Iran aimed at addressing fears that Tehran is seeking the bomb.

In its ruling on Tuesday, the EU's General Court said the EU had failed to provide sufficient evidence that Bank Saderat was involved in Iran's nuclear programme when the bloc targeted it with sanctions in July 2010.

EU governments have two months to appeal. Last week, the court issued a similar ruling about of Bank Mellat, the biggest private sector lender in Iran.

When the EU imposed sanctions on Bank Saderat, it accused it of providing "financial services for entities procuring on behalf of Iran's nuclear and ballistic missile programmes".

The court, however, said the claims were not sufficiently substantiated.

"The Council (of EU governments) is in breach of the obligation to state reasons and the obligation to disclose to the applicant ... the evidence adduced against it," the court said in its ruling.

The EU has severely tightened sanctions on Iran over the last two years, seeking to pressure it to curb the nuclear programme it fears is aimed at creating atomic bomb capability, a charge Tehran denies.

More than 30 cases are still pending at the General Court, including ones filed by the Central Bank of Iran and the National Iranian Oil Company (NIOC). Those sanctions severely affected Iran's ability to export oil and carry out international financial transactions.

EU diplomats, who fear the rulings could undermine the sanctions programme, say they face the challenge of providing sufficient justification while not compromising intelligence sources when they are drafting sanctions lists.

A spokeswoman for EU foreign policy chief Catherine Ashton said EU institutions would examine the ruling, but gave no further comment.

She is due to lead a delegation representing six world powers in talks with Iran that resume in Kazakhstan on February 26, aimed at defusing the nuclear stand-off.

(Reporting by Justyna Pawlak; Editing by Robin Pomeroy)