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Iran should defend itself in U.S. courts

By Babak Movahedi
November 29, 2000
The Iranian

Diplomatic relations between the United States and Iran were severed after the hostage crisis in 1979 and all Iranian assets in the U.S. were confiscated.

The surprise election of moderate President Mohammad Khatami brought speculation amongst Iran scholars that relations between the United States and Iran would enter a new chapter. In fact, in 1998, President Khatami took a major political step by proposing that the two countries break the "wall of mistrust" by people-to-people contacts and cultural and sports exchanges. Some steps in this direction have taken place. However, due to the lack of a consistent policy toward Iran, progress has been very slow.

Although foreign countries are usually protected from lawsuits by U.S. parties under the Foreign Sovereign Immunities Act, countries such as Iran that are deemed by the U.S. Department of State to be state sponsors of terrorism are excepted from such immunity. As a result, there have been a number of cases filed and judgments entered against the government of Iran. In each case, Iran chose not to enter an appearance in court. But the plaintiffs, nevertheless, had to show "clear and convincing" evidence that Iran was liable for the victims' wrongful deaths in order for the court to enter default judgment.

On October 28, 2000, President Clinton signed the Victims of Trafficking and Violence Prevention Act. This law, amongst other things, provides authority to compensate American victims of terrorism and their families who have obtained judgments in the U.S. courts. Although the major part of these judgments is punitive damages, the Act provides two options.

Plaintiffs can elect to receive 110% of the awarded compensatory damages with statutory interest and court-awarded sanctions as full compensation for their entire judgments or they can elect to receive 100% of the awarded compensatory damages with statutory interest and court-awarded sanctions and to look elsewhere to satisfy other parts of their judgments. However, if they elect the second option, they are prohibited from attaching or executing against certain types of property in order to satisfy other parts of judgments such as punitive damages.

The payments of these awards relating to Iran were capped at $400 million, reflecting the dollar amount kept by the Pentagon for military orders placed by the Shah. Payments are made from the U.S. Treasury and the U.S. will seek to compensate the treasury through the Iran-US Tribunal at The Hague, in other international forums or through negotiations with Iran.

Early on, the Clinton Administration had opposed the Act. But a compromise was reached between Congress and the Administration in that the attachment of Iranian assets would be prohibited. While this compromise was delicately negotiated to meet congressional pressure, it was also negotiated to limit the expected political damage with Iran. In cases involving judgment against the government of Cuba, for example, the Act authorizes the President to vest Cuban assets to pay for these awards. A move that is immensely important and sharply different to the handling of the judgments against Iran.

Still, Iran feels it must respond in kind. Believing that the U.S. is using frozen Iranian assets to pay for dubious judgments, the Iranian Majlis passed an emergency bill to allow Iranian citizens to sue the United States government, amongst other things, for emotional damage. The Iranian Judiciary has also established a special court to handle these cases.

Unfortunately for both sides, the general understanding in Iran has been that U.S. law provides for payment to U.S. plaintiffs from frozen Iranian assets. In response, the Majlis passed its own legislation. However, the delicate compromise reached by the Administration and Congress in which Iranian assets were, in fact, protected, has been overlooked.

One can accurately conclude that the Act leaves the door open for future U.S. presidents to waive the collection of the amounts paid out of the U.S. Treasury, if the White House is satisfied that these claims have been dealt with to the satisfaction of the United States. The "satisfaction" test is at the President's discretion.

While Congress has to respond to domestic pressures, foreign policy issues and U.S. obligations under international treaties are matters in which the President has vast authority. In total contrast to the vesting of the Cuban assets, Iranian assets have been left alone, at least for the time being.

Tit-for-tat diplomacy, while providing temporary psychological relief, is not effective. Iran does not hold any major U.S. assets and therefore, any judgments obtained in Iranian courts would not be taken seriously in negotiations with the U.S. Under these circumstances, an alternative for Iran would be to preserve the defense of lack of jurisdiction by U.S. courts and enter an appearance in cases filed against it. The result would be that at the very least, Iran would defend itself in the public relations war. Without a defense, the "clear and convincing" standard can easily be overcome.


Babak Movahedi is an international lawyer in Washington, DC. See website

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