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Monday, June 10, 2024 | Back issues
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UN high court finds US seizure of Iranian assets violated treaty

In 2016, the U.S. Supreme Court ordered nearly $2 billion in assets of Iran's state bank, frozen in the U.S., to be paid as compensation to relatives of victims of attacks linked to Iran.

THE HAGUE, Netherlands (CN) — The United Nations' highest court ordered the United States to pay partial compensation to Iran on Monday, finding it violated a decades-old friendship treaty by seizing Iranian assets. 

In a complicated and divided ruling, the International Court of Justice sided with Iran in a long-running legal dispute over billions in frozen state assets, but in a significant blow to Tehran the court also ruled it had no jurisdiction over the large chunk of the funds.

The amount of compensation the U.S. is ordered to pay will be determined later.

Iran brought its complaint to the ICJ in 2016 after the U.S. Supreme Court ruled in Peterson v. Islamic Republic of Iran that it had to hand over $1.75 billion in bonds held by Citibank in New York, plus accumulated interest. The Middle Eastern country argued that the U.S. had violated a 1955 bilateral friendship treaty. 

The bonds were held by Iran's central bank, Bank Markazi, and The Hague-based court found that it lacked jurisdiction under the Treaty of Amity, as the treaty focused on business activities, not the sovereign functions of a state bank.

“Bank Markazi was not engaged in activities of a commercial character,” the court's vice president, Kirill Gevorgian, said in reading out from the 67-page judgment. 

The 15-judge panel was divided throughout most of the judgment, with 13 of the judges including concurring or dissenting opinions on various points of law. 

The U.S. Supreme Court ruling awarded the money to the victims of a 1983 terrorist attack linked to Iran. More than 40 years ago, a pair of suicide truck bombs detonated outside of barracks on a military base in Beirut, Lebanon, killing 307 people. The victims were mostly American and French military personnel serving as part of a peacekeeping mission during the Lebanese civil war. 

Relatives filed civil suits against Iran and a U.S. court ultimately decided militant group Hezbollah, backed by the Iranian government, was responsible. Tehran has denied any involvement in the attacks. 

The ICJ ruled in 2019 that it had partial jurisdiction to hear the case, despite U.S. objections to jurisdiction. Tehran called the seizures a “destabilization strategy” and claimed Washington was attempting to force regime change during hearings on the case’s merits last year. 

Despite frosty relations between the two countries, both until recently remained parties to the Treaty of Amity, Economic Relations and Consular Relations. Signed in 1955 by President Dwight Eisenhower and Iranian Prime Minister Hossein Ala', the agreement sought to encourage friendlier relations between the nations as well as investment and trade.

Former Secretary of State Mike Pompeo withdrew the United States from the treaty in 2018, after the ICJ ordered the U.S. to lift sanctions against Iran in another case pending before the court. Washington also contested jurisdiction in that case but the court decided in 2021 that it had the authority to rule on the case. 

The court is expected to hold hearings on the merits of the sanctions case later this year, though it is unclear how the U.S. will defend itself. The Trump administration abruptly pulled out of the 2015 Joint Comprehensive Plan of Action, commonly known as the Iran nuclear deal, and reinstated economic sanctions in 2018. President Joe Biden, however, campaigned on reentering the deal. 

The two countries now have 24 months to negotiate the return of the remainder of the held assets. 

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Categories / Financial, Government, International, Politics

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