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Getting down to business
The future of Iranian assets and claims in the U.S.

March 29, 2000
The Iranian

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 another.

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 States.

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 Iran millions.

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. courts.

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 nature.

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 million.

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 on.

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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