Getting down to business
The future of Iranian assets and claims in the U.S.
March 29, 2000
In her speech on Friday, March 17, the U.S. Secretary of State, Mrs.
Albright, made reference to the Iranian assets that the United States froze
in the aftermath of the hostage crisis in 1979. It always had been that
any normalization of relations between these two countries had to consider
the unfreezing of the Iranian assets. What was never clear was the size
and nature of the assets. In her speech, Mrs. Albright indicated that much
of the frozen assets were turned over to Iran after 1981. Yet, she also
intimated that there is more that was not turned over.
The size of the remaining frozen assets has been one mystery. Their
nature and location, too, are not clear. At the time of the freeze, reports
indicated that the assets consisted of goods purchased by Iran and not
delivered by the suppliers, including military supplies, cash and securities
on deposit or in trust with various U.S. banks and financial institutions
here and their branches and subsidiaries abroad, stock and bonds of United
States issuers, real estate, right to interest, dividend, and distribution,
contract rights, and other proprietary interests.
It is time for the Iranian government to take a formal and proactive
stand with respect to its frozen assets. Iran should demand formally that
the U.S. government conduct an item by item inventory and accounting of
these assets, disclose publicly their nature, size and location, and unconditionally
release the assets to Iranian possession and control, without any of it
becoming subject of attachment or execution by lienholder of one kind or
The formal demand will serve three purposes. First, it will keep alive
Iran's ownership interest in the assets. Too long of a silence on this
issue, inaction, or not acting vigorously may be construed as an Iranian
default or abandonment of the assets. Second, the demand will test the
willingness of the U.S. administration to normalize its relations with
Iran. Third, the demand will serve as a formal prerequisite to any other
action that Iran might contemplate, such as a complaint before the United
Nations Security Council or the International Court of Justice.
Any delay or obfuscation on the part of the United States on this score
could furnish Iran with the grounds to complain to the International Court
of Justice. The court could then order an interim measure of protection
and order the U.S. government to conduct an inventory and accounting of
the assets. Next, the court could adjudge and declare the U.S. government's
continued holding of the assets to be in violation of customary international
law regarding immunity of state property. A panel of experts could attest
that there are no exigent international law circumstances that could justify
the continued detention of the Iranian assets by the United States. The
hostage crisis was over almost twenty years ago and Iran has lived up to
every commitment that it undertook in the Algiers Accord that ended that
crisis. The two countries are not in a state of declared war.
The United States and Iran each is very good at giving lip service to
international law when it suits its purposes. When it does not, each is
capable of shaming even the most rogue of nations in lawless behavior.
In this case, one does not expect the United States to quietly submit to
the jurisdiction of the International Court of Justice. The court fortunately
decides for itself if it has subject matter or personal jurisdiction in
case brought before it.
In the Iran Hostage Case, the court asserted jurisdiction over the case
even though Iran refused to appear before the court. That was a missed
opportunity for Iran to counter-demand and seek redress for many of its
grievances against the United States. In the Nicaragua Case, it was the
United States' turn to refuse to accept the court's jurisdiction; the court
nevertheless went on to find that the United States was liable for mining
Nicaragua's harbors in contravention of international law.
Assuming that an obstinate United States then refuses to abide by the
court's order to turn over the assets, what can Iran do? The authority
to enforce the court's judgments and orders rests with the U.N. Security
Council. If the matter is placed before it, the United States cannot use
its veto to block any measure that the Security Council may adopt in order
to implement the court's decision. Would the remaining four permanent members
of the Security Council vote to implement the decision of the court? The
chances are that they would, because if left unchecked the lawlessness
that the United States promotes when it comes to foreign state and government
property may one day bite the assets of these countries too. That scenario
is not far-fetched. Imagine, if you would, a victim caught in the crossfire
of a shoot out in London between the members of the British army and the
Irish Republican Army suing the British government in the U.S. courts and
seeking to satisfy the judgment against British property in the United
Mrs. Albright indicated a desire to have Iran and the United States
reach a "global settlement of outstanding legal claims." She
did not say what she meant by the use of the term "global:" one
can assume it either meant comprehensive or relating to every claim no
matter arising in which corner of the world. Nor was she clear about the
meaning of the term "legal" claims. Most of the private claims,
she said, have been settled by the Iran-U.S. Tribunal in the Hague. Most
of the decisions there went in favor of the U.S. claimants, costing the
By agreeing to the Hague Tribunal, Iran in effect placed itself in a
losing position. This was by and large the result of its inability to deal
with the United States from a position of strength when it came to the
release of the hostages. The tribunal became a substitute for what normally
should have been a legal process in the United States courts or appropriately
in Iranian courts. But, instead, Iran accepted the tribunal as the arbiter
and then pledged millions into a revolving fund in order to satisfy the
U.S. claims that were brought mostly by companies whose contracts had gone
bad or canceled after the revolution.
In the tribunal, Iran was robbed of the routine defenses prevalent in
breach of contract cases, including the use of counterclaims. The blame
for that rested entirely with the Iranian government: little more could
be expected from a group of zealot revolutionaries who had more politics
in mind than sound legal drafting, while the American side negotiated with
a platoon of lawyers on its negotiating and drafting teams. The make of
the tribunal, too, soon showed that Iran would be constantly outvoted two-to-one
in the various chambers.
At one point, Iran decided to flex its muscle and not replenish the
revolving account that was to fund the tribunals' decisions in favor of
American claims. That precipitated a mini-crisis of sorts that was resolved
when the United States conditioned the compensation of the Iranian victims
of the Airbus incident on Iran sinking more money into the revolving account.
In February 1996, the two governments agreed that Iran would pay $70 million
to settle "banking disputes." Of this, $15 million was to be
held in an escrow account at the Dutch Central Bank in order to pay American
claimants who receive awards from the tribunal. Another $55 million was
to be deposited at the New York Federal Reserve Bank, to be used for deposits
into the escrow account, to pay Iran's share of the tribunal's operating
expenses, or to pay debts owed by the Iranian banks to Americans.
Mrs. Albright pointed out that there still are "relatively few
but very substantial claims that are still outstanding between our two
governments." She was very short on detail on the nature and extent
of these "claims." It behooves the United States and Iran also
to conduct an inventory and accounting of these claims and disclose publicly
the nature and extent of these claims as well. The Iranian government should
insist on two items here. First, The United States should legislate a bar
date beyond which no further American claims could be instituted against
Iran in any of its courts or administration agencies that arise out of
the event of the past twenty years. Second, the Congress should, by legislation,
"nationalize" as it were all American claims against Iran and
place the resolution of them in the hands of the Department of State. The
State Department and the Iranian government then may dispose of the claims
in the tradition of mixed commissions that were in vogue after several
conflicts to which the United States had ben a party. This would allow
for an orderly disposition of the claims, settlement amounts that are more
reasonable than the inflammatory jury or judge awards obtained in the U.S.
Mrs. Albright intimated in part that if Iran does not resolve these
global claims, then maybe Congress would get into the act. The Congress,
she said, was already on the move "to adopt legislation that would
mandate the attachment of Iranian diplomatic and other assets as compensation
for acts of terrorism committed against American citizens." "We,"
she continued "are working with Congress to find a solution that will
satisfy the demands of justice, without setting a precedent that could
endanger vital U.S. interests in the treatment of diplomatic or other property
or that would destroy prospects for a successful dialogue with Iran."
However, in February, Mrs. Albright told Congress that the administration
was "looking at various funds" owned by the Iranian government
as a source of reparation for a number of these "terrorism" claims.
The inviolability of the person or embodiment of the sovereign is an
immutable principle of customary and conventional international law. The
arrest of General Pinochet in London lasy year on the force of a warrant
issued by a Spanish judge was an abhorrence to this time-honored rule of
international law. Imagine, if you would, an Iraqi warrant for the arrest
of President Clinton to be enforced against his person while visiting India,
for the atrocities committed against the innocent people of Iraq?
The inviolability of the property of a foreign state or government is
also an immutable principle of international law. That has meant, the property
of a state in another state is as a matter of customary and conventional
international law immune from attachment and execution, unless the owner
consents. Equally, no country has the right under international law to
freeze another country's assets, unless there is a declared state of war.
What the United States has done with respect to the freezing of the Iranian
assets may pass muster as a matter of U.S. law, but violates international
law. Full stop.
The immunity of state and diplomatically protected properties of a foreign
government or state is one thing, immunity of a foreign government from
law suit is an other matter: the two should not be confused. Claimants
against a foreign government may sue it in their own courts for acts that
are fundamentally commercial in nature. This development in international
law, that curbed the absolute immunity doctrine, evolved as the result
of German and other state practices that tried to collect on contracts
breached by the Soviet Union's commercial arms that claimed immunity from
suit in courts of other countries. While this exception obtains almost
everywhere now, there still is complete immunity with respect to a government
being sued in the courts of the United States for acts that are of a public
That is why the "terrorism" judgments rendered by the U.S.
courts in the case of Iran are a legal sham. On the one hand, they violate
international law and the United States' own law on foreign sovereign immunities.
Assuming for a moment that Iran is implicated and proven to have been liable
for the injury suffered by U.S. persons, Iran still should be found immune
from suit because the act complained of would have been presumably a "public
act" with no commercial purpose. The enforcement of such judgments
against Iranian state assets would violate the immunity of the Iranian
assets regardless of the nature of the claim regardless of whether the
claim arose out of Iran's commercial acts or public acts.
The jury verdicts in the United States are by and large obscene to begin
with. The "terrorism" judgments are even more so, but they are
self-inflicted consequences by an Iranian government that does not appear
in the proceedings or refuses to put up a defense and thereby looks every
bit as guilty as it is absent.
There are three "terrorism" cases that are worth discussing
here. Their discussion here is not intended to diminish in any way the
horrendous loss and the pain suffered by the victims and their kin. The
maiden case in this series was that of Alisa M. Flatow who was cut down
in the prime of life in 1995 while studying in Israel. The suicide bus
attack that killed her and many others was reportedly the work of Islamic
Jihad, with ties to Iran. Following the passage of the "Flatow Law"
that authorized suits against foreign governments for consequences of terrorist
acts, in March 1998 a federal court Iran to pay $247.5 million to the Flatow
family for their loss.
In August 1998, a federal court ordered Iran to pay $65 million in damages
for its role in the kidnapping and holding of Joseph J. Cicippio, Frank
Reed and David Jacobsen, who were held with another hostage Terry Anderson.
On March 24, 2000, the same federal court ordered Iran to pay a total of
$341 million to Terry Anderson, his wife and their daughter for the treatment
that he received while held captive in Beirut. Interestingly, the judge
admitted that it was difficult to determine a damage amount partly because
"the likelihood that any award will ever be paid is minimal."
Yet, that did not stop the judge to pick Iran's perceived deep pocket.
It is likely that these claims and the judgments that they have engendered
will be a part of that global Iranian-American settlement of legal claims
suggested by Mrs. Albright. Other claims that are not as yet pressed, but
may well in the future, include the death of American and other persons
and destruction of property in consequence of the bombing of the al-Khobar
Towers in Saudi Arabia, and the bombing of the U.S. barracks in Lebanon
in which over two hundred U.S. soldiers perished.
It behooves Iran to catalog its own claims involving American conduct
that has led to Iranian loss of life, property, and dignity. The dignity
claim is straightforward: Iran could claim compensation for violation of
its sovereignty on the account of each and every instance in which United
States violated Iranian air, land and water boundaries or sank and Iranian
flag boat or oil derrick in the Persian Gulf. The catalog could include
compensation for the United States' admitted role in the overthrow of the
Mossadegh regime in 1953, the aborted Desert One hostage-rescue attempt
in 1980, the damage done by the stray American missiles fired at Iraqi
targets, the wanton disregard of Iranian life and property by siding with
and sharing lethal information with the Iraqi's during the Iran-Iraq war,
the cost of reconstruction after the war, compensation for hosting and
caring for over two million Afghans and Kurdish refugees who streamed into
Iran in consequence of American operations in Iraq, Turkish operations
in eastern Turkey, and America's proxy war against the USSR in Afghanistan.
None of these may be properly labeled as acts of "terrorism,"
but one needs to bear in mind that the label "terrorism" is a
purely subjective one. What is also of a subjective nature is the value
of such claims. The Iranian precedent in this regard is the Airbus incident,
in which the Iranian government undervalued Iranian life and sold out cheap
to the American side. A review of that case is instructive in terms of
what mistakes not to repeat.
On July 3, 1988, the American cruiser USS Vincennes in the Persian Gulf
fired a missile with the intent to hit an object in the sky that turned
out to be a civilian Iranian airliner on the way from Bandar Abbas to Dubai
in the United Arab Emirates. Of the 290 killed on board, some 248 were
Iranians. At the time, the Iran-Iraq war was raging and the U.S. navy was
deployed in the Persian Gulf ostensibly to make sure that the war did not
spill over into other countries and the Kuwaiti and other oil tankers could
traffick the waters in safety. The Iranian Airbus-300 had every right to
be where it was and no negligence on its part was ascertained. Those who
argue that Iran was partially responsible for allowing the flight to proceed
into a danger zone must also then accept that Flatow in Israel and the
hostages in Lebanon had assumed the risk of being and working in counties
that are dangerous places especially to Americans.
In 1988, Iran filed a suit against the United States in the International
Court of Justice. At the time, President Reagan made an offer of an ex
gratia payment, that is, voluntary payment, without accepting liability
for the incident: the family of each Iranian wage earner was to get $300,000
and the family of a non-wage earner would get $150,000. What was more insulting
that the meager sums offered for the life an Iranian, the American sense
of justice could even split compensation along the line of employment and
wages. Contrast this sum to the Flatow or any of the lebanon hostage awards.
Even more obscene in this calculus of comparative value of life is that
the Lebanon hostages all eventually walked away with their lives.
In February 22, 1996, the Airbus case was eventually settled out of
court. The State Department announced that the U.S. had agreed with Iran
to pay up to $ 300,000 to families of each of the Iranian passengers perished
in the downing. The department said that the settlement totaled $131.8
The case took eight years to arrive at the settlement and enter the
implementation phase. The "legal proceedings" was given as an
excuse for the delay. Two other factors held up the relief for the victims
families. First there was banking dispute still around from the 1981 Algiers
Accords whose resolution was announced along with the news of the Airbus
settlement. Second, the United States outmaneuvered the Iranians and got
Iran to agree to an installment payment plan for an already low-ball settlement
amount. According to State Department and as reported in The New York
Times, the United States now was to deposit $ 61.8 million with the
Union Bank of Switzerland in Zurich in an account jointly held by the New
York Federal Reserve Bank and Iran's Central Bank. Then, payments would
be made upon joint instructions by the Swiss Embassy in Tehran that represents
U.S. interests in Iran, and Iran's Office of International Legal Services.
According to Nicholas Burns, the State Department spokesman, if more
funds were required, the United States agreed to replenish the revolving
account. "We have," he an obligation to compensate families who
lost fathers and sons and sisters and mothers," he said. Curiously,
however, the obligation to compensate was not felt with any urgency. The
United States already had compensated families of the non-Iranian victims
of the incident, who were nationals of the emirates in the Persian Gulf,
Pakistan and other countries. The pain of their loss was greater than the
pain suffered by the Iranians, apparently.
One of the issues that held up the implementation of the compensation
settlement was the insistence on the part of the United States that no
money would be paid under the settlement to the Iranian government. This
however excepted the payment of $30 million for the Airbus itself that
was an Iranian government property.
In any American-Iranian global settlement of claims, the two sides must
first agree on a variety of rules that will govern the disposition of the
claims. Among them, these are a few:
First, there must be the recognition that claims settlement is a political
act intended to settle political differences and therefore the so-called
"legal" claims should all be politicized and taken out of the
reach of legal process and its dubious American and Iranian evidentiary
requirements of proximate cause, proof and its burden.
Second, there should be a level calculus in evaluating the loss of life,
limb, and property. No Iranian's life, limb or property should be valued
less than that of a one victimized by any Iranian act.
Third, there should be not installment plan payments and escrow accounts.
One time, lump sum payment from one government to another for distribution
among its pool of claimants. Full stop.
Fourth, a complete bar to any further claims by either government or
its nationals arising form or related to the events that took place before
the date of the global settlement.
Fifth, a complete bar to any claims by a third party national in one's
courts in relation to or arising form events that took place before the
date of the global settlement.
In the meantime, Iran must begin the process of inventorying issues
that will give it the maximum leverage in the event of any future Iranian-American
political negotiations to settle their differences. Three of those items
were referred to by Mrs. Albright: opposition to the Middle East peace
process, acquisition of weapons of mass destruction, and "terrorist"
activities. Iran should unilaterally abandon and openly condemn the conduct
that is clearly terroristic in nature. Money and ammunition and logistical
support and training to murders must stop. These connections, regardless
of whether true or not, give the Iranian cause a black eye at every turn
and take away from the sympathy that the Iranian grievances may have. There
is nothing wrong with giving political an ideological support to like-minded
individuals or groups.
The opposition to the Middle East peace process is not purely an Iranian
issue. While, Iran has strategic interest in the Middle East, that process
has its own enemies among the Palestinians, Lebanese, and also Israelis.
Iran must insist to be one of the ultimate guarantors of the Arab-Israeli
peace settlement and in that quest it must align itself with the Putin
administration in Russia
The issue of the weapons of mass destruction must be dealt with as a
collective regional security matter. In that regard, Iran has the right
to continue with its nuclear research and military technology. However,
it is a signatory to the Non-Proliferation Treaty. It is time that it withdrew
from that treaty. At the time when that treaty was negotiated, the world
was in many ways a safer place: only the U.S. and USSR had nuclear weapons,
the Chinese were hobbling along, and India was no where near the threat
that it is today. The countries that signed this treaty did so on the implicit
assumption that the nuclear super-powers would prevent the proliferation
of nuclear weapons. That reliance on the super-power promise was ill-placed.
The nuclear club has expanded, many of the new members surrounding Iran.
In the Middle East, most countries are either nuclear or are under someone's
nuclear umbrella. Iran and a few are exceptions to that rule and they are
left to their own device to develop the means of a security that the treaty
failed to accomplish. That treaty therefore has failed Iran and as far
as Iran should be concerned, it is no longer worth the paper it was written
All this requires that Iran negotiate from a position of strength. Iran
clearly did not have that strength, leverage, or the savvy, when it agreed
to the Algiers Accords. It clearly lacked the strength when it accepted
the mere pittance offered to the victims of the Airbus tragedy. It is likely
that the lure of quick lucre will once again allow mendacity to influence
the government's decision to accept or reject an offer. The ability on
the part of Iran to say "no, thanks" and the willingness to walk
away from a "deal" are acquired skills and studied temperament.
At times recourse to them can serve in the long term far better than a
quick fix based on expediency and lack of principle or self-respect.
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