The UK will remove sanctions against Iran’s largest bank, Bank Mellat, after a ruling by the British Supreme Court found that its actions had not supported the Iranian nuclear programme.

The British government imposed the sanctions against Bank Mellat in 2009, which prevented any company in the UK from dealing with the Tehran-based bank.

The Supreme Court ruled that Bank Mellat has been arbitrarily singled out and described the action as “discriminatory”, “disproportionate” and “irrational”.

“Today’s ruling is a victory for the rule of law as much as it is for Bank Mellat,” the bank’s lawyer, Sarosh Zaiwalla said. “[The UK government] will now be compelled to respect this finding of the Supreme Court and ask the EU Council to withdraw the sanctions listing against the bank.”

Washington, which also imposes sanctions against Bank Mellat along with the EU, called the court’s decision “mistaken”.

“Bank Mellat was designated for sanctions by the US, the UK and the EU because it supports Iran’s nuclear and ballistic missile proliferation activities,” the US Treasury Department said. “It has no place in the international financial system.”

In January, EU sanctions against the bank were over overturned by the European General court, but remain in place due to an appeal against the ruling at the European Court of Justice.

For the first time in history, judges from the UK’s Supreme Court were forced to enter a closed session in March to receive secret evidence from the security services, effectively barring the bank from hearing the evidence against it. However this secret session, which was strongly opposed by anti-secrecy activists, did not affect the outcome of the ruling.

Economic measures against Bank Mellat are part of a comprehensive Western sanctions programme against the Tehran government, including a US ban on dealing with Iran’s central bank and measures to reduce the country’s oil exports.