Observations and submissions of the Islamic Republic of Iran on the preliminary objections of the United States of America

INTERNATIONAL COURT OF JUSTICE
CASE CONCERNING
CERTAIN IRANIAN ASSETS
(ISLAMIC REPUBLIC OF IRAN V. UNITED STATES OF AMERICA)
OBSERVATIONS AND SUBMISSIONS
ON THE U.S. PRELIMINARY OBJECTIONS
SUBMITTED BY THE ISLAMIC REPUBLIC OF IRAN
01 SEPTEMBER 2017
IN THE NAME OF GOD
INTERNATIONAL COURT OF JUSTICE
CASE CONCERNING
CERTAIN IRANIAN ASSETS
(ISLAMIC REPUBLIC OF IRAN V. UNITED STATES OF AMERICA)
OBSERVATIONS AND SUBMISSIONS
ON THE U.S. PRELIMINARY OBJECTIONS
SUBMITTED BY THE ISLAMIC REPUBLIC OF IRAN
01 SEPTEMBER 2017
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TABLE OF CONTENTS
CHAPTER I. INTRODUCTION 1
PART I. THE TRUE NATURE AND SUBJECT MATTER OF IRAN’S CLAIMS 9
CHAPTER II. THE SUBJECT MATTER OF THE DISPUTE PENDING BEFORE THE COURT 9
SECTION 1. THE SUBJECT MATTER OF THE DISPUTE AS DEFINED BY IRAN IS CLEAR 10
SECTION 2. THE UNITED STATES MISCHARACTERISES THE DISPUTE 11
A. The United States’ misleading presentation of the 1955 Treaty of Amity 13
B. The economic relations between Iran and the United States 17
C. The subject matter of the dispute cannot be re-written by the United States 23
SECTION 3. THE U.S. ACCUSATIONS AGAINST IRAN ARE IRRELEVANT TO THE DISPUTE
AND THE COURT IS NOT IN A POSITION TO MAKE FINDINGS IN RELATION TO THEM 24
PART II. THE U.S. OBJECTIONS TO JURISDICTION 27
CHAPTER III. THE COURT HAS JURISDICTION OVER ALL OF THE CLAIMS SUBMITTED
BY IRAN 27
SECTION 1. INTRODUCTION 27
SECTION 2. THE LIMITED NATURE OF THE U.S. JURISDICTIONAL OBJECTIONS 28
SECTION 3. GENERAL POINTS ON INTERPRETATION 30
CHAPTER IV. THE U.S. OBJECTION TO THE TREATY’S APPLICATION TO BANK MARKAZI
AS A “COMPANY” 33
SECTION 1. THE UNITED STATES’ INTERPRETATION OF THE NOTION OF “COMPANY”
UNDER THE TREATY IS ERRONEOUS 34
A. The “natural reading” argument 35
B. The “contextual” argument 36
C. The “Treaty’s objective” argument 40
D. The “negotiating history” argument 43
SECTION 2. THE “COMPANY OBJECTION” DOES NOT POSSESS A PRELIMINARY
CHARACTER 45
CHAPTER V. THE U.S. “IMMUNITY OBJECTION” IS MISCONCEIVED AND MUST BE
REJECTED 47
SECTION 1. INTRODUCTION 47
SECTION 2. ARTICLE III(2) OF THE TREATY OF AMITY 51
SECTION 3. ARTICLE IV(1) OF THE TREATY OF AMITY 58
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SECTION 4. ARTICLE IV(2) OF THE TREATY OF AMITY 60
SECTION 5. ARTICLE X(1) OF THE TREATY OF AMITY: BREACH BY THE UNITED STATES
OF IRAN’S ENTITLEMENT TO FREEDOM OF COMMERCE BETWEEN THE TERRITORIES OF
IRAN AND THE UNITED STATES 62
SECTION 6. RESPONSE TO THE U.S. CONTENTION THAT THE 1955 TREATY OF AMITY
WAS NOT INTENDED TO CODIFY THE LAW OF SOVEREIGN IMMUNITY 65
CHAPTER VI. ARTICLE XX(1) OF THE 1955 TREATY OF AMITY DOES NOT EXCLUDE THE
MATTERS SPECIFIED THEREIN FROM THE JURISDICTION OF THE COURT 69
PART III. THE U.S. OBJECTIONS TO ADMISSIBILITY ARE UNFOUNDED 75
CHAPTER VII. ABSENCE OF ABUSE OF RIGHT 75
SECTION 1. ABSENCE OF PRECEDENT IN INTER-STATE DISPUTES 81
SECTION 2. IRRELEVANCE OF THE INVESTOR-STATE PRECEDENTS INVOKED BY THE
UNITED STATES 83
SECTION 3. IRAN DOES NOT ABUSE ITS RIGHTS UNDER THE TREATY NOR THE JUDICIAL
FUNCTION OF THE COURT 84
CHAPTER VIII. THE “CLEAN HANDS” THEORY IS IRRELEVANT OR INAPPLICABLE TO
IRAN’S CLAIMS BEFORE THE COURT 90
APPENDIX A. THE U.S. ALLEGATIONS ARE UNFOUNDED 99
A. Accusations of terrorism as part of U.S. foreign policy goals 99
B. Absence of definition of ‘terrorism’ 100
C. U.S. erroneous accusations against Iran as a State sponsoring terrorism 102
D. Iran as a victim of terrorist activities and other hostile acts 105
PART IV. CONCLUSIONS 108
CHAPTER IX. CONCLUDING OBSERVATIONS 108
CHAPTER X. SUBMISSIONS 113
LIST OF ANNEXES 115
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LIST OF ABBREVIATIONS AND ACRONYMS
1955 Treaty of Amity 1955 Treaty of Amity, Economic Relations, and Consular Rights
Cir. Circuit
D.C. District of Columbia
ed. edition
e.g. exempli gratia
et al. et alii
FCN Friendship, Commerce and Navigation
Fed. Reg. Federal Register
fn. footnote
FSIA Foreign Sovereign Immunities Act of 1976
IA Iran’s Application
IAEA International Atomic Energy Agency
Ibid. Ibidem
ICC International Criminal Court
I.C.J. International Court of Justice
I.C.S.I.D. International Center for Settlement of Investment Disputes
i.e. id est
I.L.C. International Law Commission
I.L.M. International Legal Materials
IM Iran’s Memorial
IOS Iran’s Observations and Submissions on the U.S. Preliminary Objections
ITRSHRA Iran Threat Reduction and Syria Human Rights Act of 2012
JCPOA Joint Comprehensive Plan of Action
No. numero
OFAC Office of Foreign Assets Control
p. page
para. paragraph
paras. paragraphs
P.C.I.J. Permanent Court of International Justice
pp. pages
s. section
S.D.N.Y. Southern District of New York
TSRA Trade Sanctions Reform and Export Enhancement Act of 2000
U.N. doc. United Nations documents
UNCITRAL United Nations Commission on International Trade Law
U.S. United States of America
U.S.C. United States Code
USD United States dollar
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U.S. PO United States’ Preliminary Objections
v. versus
VCLT 1969 Vienna Convention on the Law of Treaties
Vienna Convention 1969 Vienna Convention on the Law of Treaties
vol. Volume
Y.I.L.C. Yearbook of the International Law Commission
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CHAPTER I.
INTRODUCTION
1.1 In these Observations and Submissions, Iran responds to the United States’
preliminary objections to the admissibility of the entirety of Iran’s claims and to the
Court’s jurisdiction over parts of those claims. At the outset, it is important to
emphasise that these preliminary objections have been advanced by the United States
notwithstanding the existence of agreement between the Parties on three key points:
(a) the 1955 Treaty of Amity, Economic Relations, and Consular Rights between the
United States of America and Iran (“1955 Treaty of Amity”) remains in force
between the Parties;1 (b) there is a dispute under Article XXI (2) of that Treaty; and
(c) the relevant test for jurisdiction ratione materiae is as established in the Court’s
Judgment in Oil Platforms.2 These points of agreement are important, not merely
because they narrow the issues on which the Court must rule, but also because they
nullify much of the case that the United States has elected to put forward at this
jurisdictional phase.
1.2 As to the first key point of agreement between the Parties, the United States has not
suggested that the operation of the Treaty has been suspended under the relevant rules
of general international law, and nor could it.3 It is therefore common ground that the
United States continues to be bound to perform in good faith the full extent of the
obligations it has voluntarily assumed under the Treaty. This includes its obligations
with respect to the agreement, under Article XXI of the Treaty, to refer disputes
concerning the interpretation or application of the Treaty to the Court.
1.3 Faced with this difficulty, the United States has elected to make its objections by
reference to vague and misconceived assertions, such as that “Iran repudiated the
1 U.S. Preliminary Objections, p. 50, para. 6.11.
2 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 810, para. 16.
3 The United States could have elected to terminate the Treaty in accordance with its terms or otherwise
but it has not done so. Indeed, it has instead relied on the Treaty, including before the Iran-U.S. Claims
Tribunal.
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Treaty’s goals of friendship and cooperation through its actions … and thereby
fundamentally altered the bilateral relationship”.4 Regrettably, this is then used as an
opportunity to make a legally-unfounded challenge to admissibility5 that is, in turn,
based on unsubstantiated, prejudicial and untrue allegations. The answer to the U.S.
position is a simple one: the 1955 Treaty of Amity is – by common agreement – in
force, and must be complied with. That legal fact cannot be bypassed by an entirely
unsupported theory that it is an abuse of right for a State to assert its rights under a
treaty where that State is alleged by a Respondent to have engaged in activities
impermissible under other sources of international law (as to which, moreover, the
Court has no jurisdiction to make determinations).
1.4 As to the second key point on which the Parties agree, the United States does not deny
the existence of a dispute concerning the interpretation or application of the 1955
Treaty of Amity. Indeed, the statement of the U.S. Preliminary Objections confirms
the existence of a dispute falling within Article XXI(2) of the Treaty, including as to
the interpretation of its various provisions.
1.5 Despite this, the United States has inappropriately purported to rewrite the precise
claims that Iran has set out in its Application and Memorial – in three main respects.
(a) the United States asserts that Iran “challenge[s] sanctions” adopted by the
United States.6 That is an incorrect characterisation of Iran’s claims in the
present case.
(b) the United States contends that Iran has submitted to the Court claims under
customary international law. That is again incorrect. Iran challenges measures
adopted by the United States only insofar as they breach the 1955 Treaty of
Amity. Customary international law applies only insofar as the Treaty explicitly
or implicitly refers to or requires reference to it.
4 U.S. Preliminary Objections, p. 11, para. 2.7.
5 Summarised at U.S. Preliminary Objections, p. 4, para. 1.9.
6 U.S. Preliminary Objections, p. 52, para. 6.15.
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(c) the United States asserts that Iran “attempts to embroil the Court in a broader
strategic dispute”.7 That is, once again, an incorrect characterisation of Iran’s
case. Iran bases its claims solely on the 1955 Treaty of Amity: whether or not
the present dispute is part of a broader dispute is irrelevant. By contrast, it is the
United States that invokes and seeks to rely on “the deeply troubled history
between Iran and the United States” and an alleged “litany of international
transgressions” and “decades of offences”.8 This serves as an example of the
fact, already noted above, that the U.S. Preliminary Objections centre on
unsubstantiated, prejudicial and untrue allegations against Iran. Moreover, so
far as concerns the U.S. objections to jurisdiction, these are focused solely upon
the question of immunity, with a particular emphasis on the status of Bank
Markazi, and ignore the other aspects of Iran’s claims. There are, however, a
number of Iran’s claims that do not concern immunity and do not specifically
concern the status of Bank Markazi.
1.6 As to the third key point of agreement, both Parties accept that the test for jurisdiction
ratione materiae is as established by the Court in its Judgment in the Oil Platforms
case, although they disagree on the correct application of this test. As explained further
in Part II below, the United States raises three jurisdictional objections to parts of
Iran’s claims, and each falls to be dismissed on a straightforward application of the
Oil Platforms test. In summary:
(a) The United States’ first objection to jurisdiction is that Bank Markazi is not a
“company” within the meaning of that term as used in the 1955 Treaty of Amity,
and thus does not qualify for the substantive protections to which companies are
entitled under Articles III, IV and V.
i. This objection depends on an inappropriate and confusing attempt to read
into the Treaty a so-called ‘functional test’, whereby the notion of
“companies” is, it appears, limited to entities engaged in what the United
States characterises as ‘commercial activities’. The U.S. interpretation is
inconsistent with the definition of ‘companies’ for the purposes of the
7 U.S. Preliminary Objections, p. 2, para. 1.4.
8 Ibid.
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Treaty, given in Article III(1), as confirmed by the travaux préparatoires,
and must therefore be dismissed. Consistent with the Oil Platforms test,
Iran’s claims in relation to Bank Markazi are at least capable of falling
within each of the aforementioned provisions of the Treaty, and are
therefore within the Court’s jurisdiction pursuant to Article XXI(2).
ii. It is also noted that the United States maintains that “Iran was a party to
the Peterson enforcement proceedings” and that “Iran, through Bank
Markazi, advanced arguments before the U.S. courts that are inconsistent
with what Iran is saying to the Court in the present case about the status
of Bank Markazi, issues of sovereign immunity, and the Treaty.”9 This
merely highlights the continuing refusal of the United States to respect the
separate juridical status of Bank Markazi. The continued assertion that
Iran has failed to disclose material documents, which was the subject of
the United States’ (rejected) request for specific disclosure, remains
misconceived. As Iran previously explained in its letter dated 12 April
2017, Iran was under no obligation to file the documents sought by the
United States. In any event, the numerous documents from the Peterson
proceedings which Iran did annex to its Memorial make plain the fact that
Bank Markazi raised certain arguments before the U.S. courts. However,
Bank Markazi is a separate juridical entity and its arguments are not
automatically attributable to the State of Iran. Further, the Court will recall
its decision of 19 April 2017, finding that “the United States of America
has not sufficiently demonstrated the relevance of the documents in
question for the purposes of any preliminary objections…”. Yet, the
United States continues to assert that Iran “failed to annex to its Memorial
copies of the pleadings that allegedly support its assertions”.10 This is
plainly incorrect and there is nothing in the U.S. Preliminary Objections
that calls into question the Court’s decision of 19 April 2017.11
9 U.S. Preliminary Objections, pp. 1-2, para. 1.3.
10 U.S. Preliminary Objections, p. 3, para. 1.6.
11 Iran understands that the United States now has access to these documents, as a result of an order of a
U.S. District Court made on the application of the United States.
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(b) The United States’ second objection to jurisdiction is that there is no entitlement
to immunity for Bank Markazi under the Treaty.
i. The United States argues that none of Articles III(2), IV(1), IV(2), V(1),
X(1) and XI(4) of the 1955 Treaty of Amity expressly grants rights in
respect of immunity. This, however, is to make a selective and inapposite
point on the interpretation of the Treaty. Rather than address the
arguments as actually made by Iran in its Memorial, the United States
wrongly asserts that Iran seeks to import the entire body of customary
international law into the Treaty. Iran’s position is that specific provisions
of the 1955 Treaty of Amity impose a duty on the United States to apply
certain specific rules of international law, including rules concerning State
immunity, in its dealings with Iranian companies within the scope of the
Treaty.
ii. The United States also contends that Bank Markazi cannot in any event
be entitled to immunities in respect of its property interests if it is a
“company” within the meaning of that term in the Treaty. Indeed, the
United States seeks to portray this alleged incompatibility between the
status of the Bank as a company and Iran’s claim to immunity in respect
of the Bank as a major inconsistency in Iran’s case in relation to Bank
Markazi. But there is no reason why a company cannot be entitled to
immunities (or, to put it another way, why all entities entitled to benefit
from the immunities of a State must be organised in non-corporate form
if they are to retain that entitlement); and there is nothing in the Treaty to
indicate otherwise.
iii. In addition to its defective interpretation of the definition of a “company”
in the Treaty, the U.S. position wrongly conflates the treaty term
“commerce” in Article X with the ‘commercial exception’ in the law of
state immunity. In doing so, the United States disregards both the Court’s
findings in its Judgment in the Oil Platforms case as to the broad meaning
of “commerce” in Article X, and the fact that various aspects of classic
central banking activities are integrally related to commerce. Indeed, Bank
Markazi is involved in all Iranian foreign trade, because it is inter alia the
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provider, via Iranian commercial banks, of foreign currency including
U.S. dollars.
iv. Consistent with the applicable test for this Court’s jurisdiction, Iran’s
claims are at least capable of falling within each of the aforementioned
provisions of the 1955 Treaty of Amity, and therefore within the Court’s
jurisdiction pursuant to Article XXI(2).
(c) The United States’ third objection is that the Court has no jurisdiction over one
of the measures at issue in the present case, Executive Order 13599.12 It is said
that this measure is excluded from the scope of the Treaty by operation of
Article XX(1). The objection depends on an incorrect interpretation of
Article XX(1) as imposing a jurisdictional condition. It is telling that the only
support advanced for this proposition is a single decision of an investor-State
arbitral tribunal, which was considering a differently worded treaty provision
on a different subject matter. The U.S. position disregards both the ordinary
meaning and context of Article XX(1), and the Court’s finding in both the
Nicaragua and Oil Platforms cases that Article XX(1) (and the equivalent
provision in the Nicaragua case) merely affords a potential defence at the merits
stage. It follows that the U.S. objection is not jurisdictional in nature, and even
if it were otherwise it would also have to be dismissed since it is manifestly not
of an exclusively preliminary character.
1.7 It follows from the above that each of the United States’ three jurisdictional objections
lacks any merit, and all are easily resolved by reference to the areas of agreement
between the Parties and the Court’s well-established jurisprudence on jurisdiction.
1.8 The U.S. objections to admissibility, already touched on above, are equally
misconceived. The United States argues for the introduction of broad doctrines of
‘abuse of right’ and ‘unclean hands’, neither of which has ever been applied by the
Court as a bar to a claim; nor are they established in international law. Allegations of
abuse of right and unclean hands are not of a preliminary character; they go to the
12 U.S. Executive Order 13599, 5 February 2012, 77 Fed. Reg. 6659 (IM, Annex 22).
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merits. Further, the United States has failed to demonstrate that the test for abuse of
right and unclean hands is satisfied in the present case.
1.9 As noted above, in its Preliminary Objections, the United States makes
unsubstantiated, prejudicial and untrue allegations against Iran, on matters that are
both irrelevant and outside the Court’s jurisdiction. The United States alleges that
“[f]or decades, Iran has sponsored and supported international terrorism, as well as
taken destabilizing actions in contravention of nuclear non-proliferation, ballistic
missile arms trafficking and counter-terrorism obligations”.13 Those allegations,
which are denied,14 are irrelevant. It appears that they have been put forward by the
United States not as part of any legally grounded challenge to jurisdiction or
admissibility, but rather as an attempt to have the Court see Iran in the worst possible
(and quite inaccurate) light. For good measure, it is also noted that – as is again
manifest – the U.S. objections to admissibility are not preliminary in nature since they
raise complex questions of disputed fact that could only be determined (if at all) at the
merits stage.
1.10 The subsequent sections of these Observations and Submissions are structured as
follows.
- In Part I (Chapter II), Iran reaffirms the true nature and subject matter of its
claims, as set out in Iran’s Application and Memorial. In short, Iran’s case is
based entirely upon claims that the United States has been and is acting in
violation of its obligations under the 1955 Treaty of Amity, and is thereby
causing injury to Iran and to Iranian companies.
- In Part II, Iran addresses the three U.S. objections to jurisdiction. For the
reasons summarised above, each of the objections is misconceived and falls to
be dismissed on a straightforward application of the test for jurisdiction ratione
materiae in Oil Platforms.15
13 U.S. Preliminary Objections, p. 11, para. 3.1.
14 See infra, Appendix A to Chapter VIII.
15 See supra, pp. 3-6, para. 1.6.
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- Chapter III introduces this Part, identifying inter alia the limited nature of the
jurisdictional objections that the United States makes.
- Chapter IV responds to the U.S. objection that Bank Markazi is not a
‘company’, as defined in Article III(1), for the purposes of the Treaty.
- Chapter V responds to the U.S. ‘immunity objection’, addressing inter alia the
U.S. criticism that Iran has failed to conduct a proper exercise in treaty
interpretation and seeks inappropriately to apply customary international law.
- Chapter VI responds to the U.S. objection concerning the effect of
Article XX(1) and Executive Order 13599.
- Part III responds to the United States’ contention that the entirety of Iran’s
claim is inadmissible. Iran demonstrates that the United States can invoke no
argument in support of its case based on the concepts of ‘abuse of right’
(Chapter VII) and ‘unclean hands’ (Chapter VIII).
- Part IV contains a brief statement of conclusions (Chapter IX), and these
Observations and Submissions conclude with Iran’s submissions in Chapter X.
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PART I.
THE TRUE NATURE AND SUBJECT MATTER OF
IRAN’S CLAIMS
CHAPTER II.
THE SUBJECT MATTER OF THE DISPUTE
PENDING BEFORE THE COURT
2.1 Iran has brought to the Court a legal dispute concerning multiple and ongoing
breaches of the 1955 Treaty of Amity committed by the United States and seeks to
obtain from the Court a judgment on this matter. Its Application and Memorial are
very clear in this regard.
2.2 However, the United States has chosen to argue that Iran pursues another objective. It
contends that: “Iran does not seek resolution of a narrow legal dispute concerning the
provisions” of the 1955 Treaty of Amity.16 The essence of the U.S. preliminary
objections to the admissibility of Iran’s case is that the true nature of the dispute is
different from what is presented in Iran’s Application and Memorial. The United
States uses the excuse of Iran supposedly “embroil[ing] the Court in a broader
strategic dispute”17 to put forward contextual and evidential ‘foundations’ to its
preliminary objections that are inaccurate and have no direct connection to the actual
dispute Iran has brought before the Court. In sum, the United States asks the Court to
dismiss Iran’s case as inadmissible not because of what it is, but because of what the
United States would like it to be.
2.3 In this Chapter, Iran will demonstrate:
- in Section 1, that the subject matter of the dispute as defined by Iran is clear;
- in Section 2, that the United States mischaracterises the dispute; and
16 U.S. Preliminary Objections, p. 2, para. 1.4.
17 Ibid.
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- in Section 3, that the U.S. accusations against Iran developed in Chapter 3 of its
Preliminary Objections are irrelevant to the dispute and that the Court is not in
a position to address them.
SECTION 1.
THE SUBJECT MATTER OF THE DISPUTE AS DEFINED BY IRAN
IS CLEAR
2.4 In its Application of 14 June 201618 and its Memorial of 1 February 201719 Iran has
presented the precise claims upon which the Court is seised in the present proceedings.
In substance, these claims are as follows:
- First, that the United States by its acts, and in particular its failure to recognise
the separate juridical status of Iranian companies, including Bank Markazi, has
breached its obligations to Iran, inter alia, under Article III(1) of the 1955 Treaty
of Amity20. Article III(1) provides for the recognition by each Party of the
juridical status of “companies” constituted under the applicable domestic law
and regulations of the other Party.
- Secondly, that the United States, by its acts and in particular: (i) its unfair and
discriminatory treatment of Iranian companies and their property, (ii) its failure
to accord such companies and their property the most constant protection and
security, (iii) its expropriation of these companies’ properties and the
deprivation of their freedom of access to the U.S. courts, and (iv) its failure to
respect their right to acquire and dispose of property, breached its obligations to
Iran, inter alia, under Articles III(2), IV(1), IV(2), V(1) and XI(4) of the 1955
Treaty of Amity.21
18 Iran’s Application, pp. 13-16, para. 32.
19 Iran’s Memorial, pp. 64-117, paras. 4.1-6.20.
20 Iran’s Memorial, p. 126, para. 8.1(a)(i).
21 Iran’s Memorial, p. 126, para. 8.1(a)(ii).
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- Thirdly, that the United States applied unlawful restrictions on the financial
transfers of Iranian companies, including Bank Markazi, and interfered with the
freedom of commerce between the territories of the Treaty Parties in breach,
inter alia, of Articles VII(1) and X(1) of the Treaty.22
2.5 Iran’s claims are directly related to a series of legislative, administrative and judicial
acts undertaken by the United States that gradually deprived Iranian companies and
their property (and interests in property) of the rights and protections guaranteed by
the 1955 Treaty of Amity.23 It is a dispute concerning “Certain Iranian Assets” and
the U.S. treatment of Iranian companies and their economic interests.
SECTION 2.
THE UNITED STATES MISCHARACTERISES THE DISPUTE
2.6 In its Preliminary Objections, the United States argues, in substance, that the dispute
brought by Iran is not properly presented. It seeks to substitute Iran’s claims, including
the factual aspects, with a distinct set of so-called “facts”, that it identifies as the
“contextual [and] evidential foundations” of its Preliminary Objections.24 According
to the United States, these “foundations” should be considered by the Court, and
would provide sufficient grounds for it to decline to decide Iran’s claims.
2.7 None of these so-called “foundations” falls within the scope of the dispute brought by
Iran in its Application and Memorial. But the United States contends that the present
dispute would encompass the whole of the Iran-U.S. relationship – including on the
political and strategic levels – since 1979.
2.8 The United States proposes that the Court assesses the admissibility of Iran’s claims
according to the following theory:
22 Iran’s Memorial, p. 126, para. 8.1(a)(iii).
23 See also infra p. 13, para. 2.10 et s.
24 Part I of the U.S. Preliminary Objections, including Chapters 2, 3, 4 and 5.
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(a) The dispute brought by Iran, – which has been given the case name “Certain
Iranian Assets” by the Court – cannot be related to “certain Iranian assets”, that
is to say to a “narrow legal dispute concerning the provisions of a commercial
treaty”,25 because the commercial relationship between the two States has come
to a “protracted and fundamental rupture”;26
(b) Since there is no commerce between the two States, any claim purportedly
related to a “commercial and consular instrument of a narrow and well-known
type”27 such as the 1955 Treaty of Amity, must necessarily hide a broader
case;28 and
(c) Thus, the Court should assess the admissibility of Iran’s claims not on their face,
but in the light of the “broader strategic dispute”29 – which the United States
purports to describe in Part I of its Preliminary Objections.
2.9 This theory is misleading in all respects:
- In Subsection A, Iran explains that the United States cannot redefine the 1955
Treaty of Amity in order to restrict its scope in a manner contrary to what has
been agreed by the Parties;
25 U.S. Preliminary Objections, p. 2, para. 1.4.
26 U.S. Preliminary Objections, p. 4, para. 1.9.
27 U.S. Preliminary Objections, p. 3, para. 1.7.
28 Ibid. See also U.S. Preliminary Objections, p. 2, para. 1.5: “Iran seeks to use the Treaty as an
opportunistic – though inapposite – vehicle for its claims, the core of which concerns not commercial
entities, but the treatment of Iran itself or its Central Bank, and purported contraventions not of this
Treaty’s provisions, but of customary international law”; p. 47, para. 6.2: “A long-running strategic
dispute cannot properly be permitted to masquerade in the costume of a commercial and consular treaty
case”; p. 50, para. 6.10: “Iran may wish to regard the Treaty as a vehicle for waging this wider strategic
dispute”; p. 50, para. 6.11: “Iran’s claim in the present case does not constitute a bona fide invocation
of the Treaty, and the Court accordingly should not assume jurisdiction in this case”; p. 53, para. 6.17:
“the present dispute cannot be disguised as a transactional dispute that simply engages technical
questions regarding the application of the Treaty to ongoing commercial or consular activity. Rather,
Iran’s claims concern various actions taken in the context of long-running antagonism between the
parties. This dispute has nothing to do with the interests protected by the Treaty.”
29 U.S. Preliminary Objections, p. 2, para. 1.4 and p. 47, para. 6.1.
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- In Subsection B, Iran demonstrates that the United States cannot ignore that
certain commercial and economic intercourse does exist between the territories
of Iran and the United States; and
- In Subsection C, Iran shows that the United States cannot re-write the subject
matter of the dispute.
A. The United States’ misleading presentation of the 1955 Treaty of Amity
2.10 The United States admits that the 1955 Treaty of Amity “sought to facilitate a
commercial, trade, and investment relationship”30 – i.e. an economic relationship –
with Iran. Nevertheless, the United States systematically seeks to limit the scope of
this instrument31 to “narrow” commercial intercourse and consular relations.32
According to the United States, “[t]he activity that the Treaty was intended to govern
[was] … normal and ongoing bilateral commercial and consular relations”.33
2.11 As Iran will demonstrate, this is a misleading attempt to restrict the scope of the 1955
Treaty of Amity. The goal of the United States is obvious: the more limited the scope
of the Treaty, the easier it is to contend that Iran’s claims fall outside its scope. But
this contention rests on a distortion of the terms and the object of the Treaty.
30 U.S. Preliminary Objections, p. 8, para. 2.1.
31 U.S. Preliminary Objections, p. 3, para. 1.7 and U.S. Preliminary Objections, p. 55, para. 6.27.
32 For example, the United States presents the 1955 Treaty of Amity as simply a “commercial treaty” or
a “commercial and consular treaty” on numerous occasions: its provisions are those of a “commercial
treaty” (U.S. Preliminary Objections, p. 2 para. 1.4; p. 40, fn. 172; p. 80, para. 8.7; p. 90, para. 8.24;
p. 94, para. 8.34 and p. 102, para. 9.15, emphasis added), it is a “commercial and consular instrument”
(U.S. Preliminary Objections, p. 3, para. 1.7, emphasis added), “[t]he Treaty of Amity is a Commercial
and Consular Agreement” (U.S. Preliminary Objections, p. 8, title of Chapter 2(A), emphasis added),
“[t]he Treaty of Amity [is] one in a series of twenty-one post-World War II bilateral commercial and
consular treaties” (U.S. Preliminary Objections, p. 8, para. 2.2, emphasis added), this dispute would be
“a commercial and consular treaty case” (U.S. Preliminary Objections, p. 47, para. 6.2, emphasis
added), the 1955 Treaty would be contemplating “commercial and consular activity” (U.S. Preliminary
Objections, p. 48, para. 6.5 and p. 49, para. 6.7, emphasis added) and protecting interests arising from
“a particular kind of activity – commercial and consular relations” (U.S. Preliminary Objections, p. 48,
para. 6.6 and p. 81, para. 8.8, emphasis added).
33 U.S. Preliminary Objections, p. 47, para. 6.2.
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Moreover, the notion of “commerce” in the Treaty is broader than what is asserted by
the United States.
(a) The Scope of the Treaty
2.12 The High Contracting Parties defined the scope of the Treaty in its Preamble, stating
that they were “desirous […] of encouraging mutually beneficial trade and
investments and closer economic intercourse generally between their peoples.”34 The
full title of the Treaty is the “Treaty of Amity, Economic Relations, and Consular
Rights of 1955”. As the Court observed in its 1996 Judgment in the Oil Platforms
case:
“47. It should also be noted that, in the original English version, the actual title
of the Treaty of 1955 – contrary to that of most similar treaties concluded by the
United States at that time, such as the Treaty of 1956 between the United States
and Nicaragua – refers, besides ‘Amity’ and ‘Consular Rights’, not to
‘Commerce’ but, more broadly, to ‘Economic Relations’.”35
2.13 The Court went on to emphasise the broader scope of the Treaty as expressed in
Article I:
“…by incorporating into the body of the Treaty the form of words used in
Article I, the two States intended to stress that peace and friendship constituted
the precondition for a harmonious development of their commercial, financial
and consular relations and that such a development would in turn reinforce that
peace and that friendship. It follows that Article I must be regarded as fixing an
objective, in the light of which the other Treaty provisions are to be interpreted
and applied.”36
Curiously, the United States quotes this extract and emphasises the same words in
italics.37 Yet it insists that the Treaty is a purely commercial instrument38 or a treaty
34 Emphasis added.
35 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 819, para. 47.
36 Ibid., pp. 813-814, paras. 27-28 (emphasis added).
37 U.S. Preliminary Objections, p. 48, para. 6.6; see also pp. 9-10, para. 2.4; pp. 42-43 para. 5.8 and p. 81,
fn. 327.
38 Ibid., p. 2, para. 1.4; pp. 80-81, para. 8.7; p. 102, para. 9.15 and p. 40, fn. 172.
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intending to control the commercial and/or consular relations between the Parties,39
carefully avoiding the word “financial” and only in two instances conceding, probably
inadvertently, that it could concern “commercial and economic relations”.40
2.14 Contrary to the U.S. assertions, the Treaty is not only about commercial and consular
relations; it is, more generally, about broader economic and consular relations, among
others.
(b) The notion of ‘commerce’ or ‘commercial relationship’
2.15 In any event, even if the Treaty was restricted to “commercial” affairs – quod non –,
the word ‘commerce’ as used in the Treaty would, by itself, cover the subject matter
of the present dispute. Here again, it is significant that the United States, while quoting
at length other less relevant passages of the 1996 Oil Platforms Judgment, omits to
draw the attention of the Court to the most pertinent paragraphs. It is thus appropriate
to set those passages out in full. Responding to the argument that “the interpretation
according to which the word ‘commerce’ in Article X, paragraph 1, is restricted to
acts of purchase and sale”, the Court explained:
“In the view of the Court, there is nothing to indicate that the parties to the
Treaty intended to use the word ‘commerce’ in any sense different from that
which it generally bears. The word ‘commerce’ is not restricted in ordinary
usage to the mere act of purchase and sale; it has connotations that extend
beyond mere purchase and sale to include ‘the whole of the transactions,
arrangements, etc., therein involved’ (Oxford English Dictionary, 1989, Vol. 3,
p. 552).
In legal language, likewise, this term is not restricted to mere purchase and sale
because it can refer to ‘not only the purchase, sale, and exchange of
commodities, but also the instrumentalities and agencies by which it is promoted
and the means and appliances by which it is carried on, and transportation of
persons as well as of goods, both by land and sea" (Black's Law Dictionary,
1990, p. 269).
Similarly, the expression ‘international commerce’ designates, in its true sense,
‘all transactions of import and export, relationships of exchange, purchase, sale,
transport, and financial operations between nations’ and sometimes even ‘all
economic, political, intellectual relations between States and between their
nationals’ (Dictionnaire de la terminologie du droit international (produced
39 Ibid., p. 47, para. 6.1; p. 47, para. 6.2 (twice); pp. 47-48, para. 6.3; p. 48, para. 6.5; pp. 48-49, para. 6.6;
p. 49, para. 6.7; p. 48, para. 6.8; p. 53, para. 6.17; pp. 55-56, para. 6.27 and p. 81, para. 8.8.
40 Ibid., p. 52, para. 6.14 or p. 53, para. 6.18 (emphasis added).
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under the authority of President Basdevant), 1960, p. 126 [translation by the
Registry]).
Thus, whether the word ‘commerce’ is taken in its ordinary sense or in its legal
meaning, at the domestic or international level, it has a broader meaning than
the mere reference to purchase and sale.
46. Treaties dealing with trade and commerce cover a vast range of matters
ancillary to trade and commerce, such as shipping, transit of goods and persons,
the right to establish and operate businesses, protection from molestation,
freedom of communication, acquisition and tenure of property. Furthermore, in
his Report entitled ‘Progressive Development of the Law of International
Trade’, the Secretary-General of the United Nations cites, among a number of
items falling within the scope of the Law of International Trade, the conduct of
business activities pertaining to international trade, insurance, transportation,
and other matters (United Nations, Official Records of the General Assembly,
Twenty first Session, Annexes, Agenda item 88, doc. A/6396; also in Basic
Documents on International Trade Law, Chia-Jui Cheng (ed.), 2nd rev. ed.,
p. 3).
The Court notes that the Treaty of 1955 also deals, in its general articles, with a
wide variety of matters ancillary to trade and commerce.
[…]
48. The Court also notes that, in the decision in the Oscar Chinn case (P.C.I.J.,
Series A/B, No. 63, p. 65), […] the Permanent Court observed:
‘Freedom of trade, as established by the Convention, consists in the right – in
principle unrestricted – to engage in any commercial activity, whether it be
concerned with trading properly so-called, that is the purchase and sale of goods,
or whether it be concerned with industry, and in particular the transport
business; or, finally, whether it is carried on inside the country or, by the
exchange of imports and exports, with other countries.” (Ibid., p. 84.)
[…]
49. The Court concludes from all of the foregoing that it would be a natural
interpretation of the word ‘commerce’ in Article X, paragraph 1, of the Treaty
of 1955 that it includes commercial activities in general – not merely the
immediate act of purchase and sale, but also the ancillary activities integrally
related to commerce.”41
2.16 Indeed, a similar point was made by the United States itself, as early as 1956, when
the U.S. Department of State, in a hearing before the U.S. Senate Committee on
Foreign Relations, noted that the 1955 Treaty concluded with Iran was part of a
“program of negotiating treaties for commerce and trade”.42 At the time of the signing
41 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, pp. 818-819, paras. 45-49.
42 U.S. PO, Annex 7, p. 3 (emphasis added).
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of the Treaty, the U.S. position was that commerce and trade were to be distinguished
and both were included within the scope of the 1955 Treaty.
2.17 It follows that the U.S. attempts to limit the scope of the Treaty to only commercial
relations, and to limit the meaning of commerce to “acts of purchase and sale”, are
unavailing.
B. The economic relations between Iran and the United States
2.18 It is erroneous for the United States to assert that there is no commerce and even no
“economic intercourse” between Iran and the United States.43 Despite the political and
legal difficulties between the two States, there are certain ongoing economic relations.
The United States is fully aware of these economic relations, having authorised the
underlying transactions and exchanges.
(a) The materiality of the economic relations between Iran and the United States
2.19 Contrary to the impression the United States tries to convey in its Preliminary
Objections, economic relations between the two States have never stopped. According
to the U.S. Census Bureau, in the last ten years the direct trade between the two States
amounted to more than USD 3 billion, with U.S. exports to Iran accounting for 85%
of these exchanges.44 The following graph shows, in cumulated and adjusted for
inflation values, the levels of direct exports from the United States to Iran over the
period ranging from January 2010 to April 2017.
43 U.S. Preliminary Objections, p. 4, para. 1.9.
44 U.S. Census Bureau, “Trade in Goods with Iran”, available as of 22 January 2017 (IM, Annex 97). The
data from the U.S. Census Bureau account for the actual direct trade export to and import from Iran
over the concern period. These figures do not yet account for the economic consequences of some of
the commercial deals secured since the conclusion of the JCPOA and the subsequent partial lifting of
the sanctions regime; see infra, p. 20, para. 2.25.
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2.20 The Iranian customs reports confirm the existence of a flow of limited but actual
commercial exchanges between the two territories:
“Importation trend from the United States of America [hereafter “US”] had
regularly been witnessing as a whole incremental growth during the period from
21st March 2011 up to 18th February 2017 … During the eleven months of the
current year [Iranian Calendar for 2016-2017], the US rating, among the major
transacting countries has promoted to 25th ranking …
Our country exportation to the US, after successive decreases in the years 2013
and 2014 witnessed growth and remarkably increased by 4,689% in weight and
1,982% in USD value, reached to the figures of 351 tons and MUSD10.00 in
2015. … During the eleven months of the current year, too, this increasing trend
continued, having indicated a growth of 1,640% in the weight and 2,784% in
the USD value.”45
2.21 It is therefore nonsense for the United States to claim in its Preliminary Objections
that there is “a longstanding absence of normal commercial … relations between the
Parties”46 and that “there are no meaningful commercial … relations between the
United States and Iran”.47 Recent examples of “meaningful” economic relations
between Iran and the United States include the following:
45 I.R. Iran Customs Administration, Report on Commercial Transactions with the United States of
America, 2017 (IOS, Annex 57), p. 4.
46 U.S. Preliminary Objections, p. 50, para. 6.1.
47 U.S. Preliminary Objections, p. 52, para. 6.8.
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(a) In April 2017, the agreement by Boeing to provide thirty B737 aircraft to the
Iranian airline company Aseman Airlines,48 soon to be expanded to another
thirty planes, for an estimated value of USD 6 billion;49
(b) In December 2016, the agreement, again by Boeing, to provide eighty aircraft
to the Iranian airline company Iran Air for an estimated value of
USD 16.6 billion;50 and
(c) In April 2016, the purchase by the U.S. Department of Energy of 32 tonnes of
heavy water from Iran, for a total value of USD 8.6 million.51
2.22 Other evidences, such as the establishment in 2015 of a United States-Iran Chamber
of Commerce based in Washington D.C.52 and the agreements related to the provision
of telecommunication services between Iranian and American companies,53 confirm
that there is actual and “meaningful” economic intercourse between Iran and the
United States.
(b) The involvement of the United States in maintaining limited yet actual economic
relations with Iran
2.23 The abovementioned economic exchanges did not take place against the will of the
U.S. government, but with its express consent. Clearly, the United States considers
the interests of its own nationals and companies as a sufficient motive to pursue
economic relations with Iran.
48 “Boeing Co. says it signed new $3 billion deal with Iranian airline”, AP, 4 April 2017 (IOS, Annex 43).
49 “Iranian airline finalizes deal to purchase 60 Boeing planes”, AP, 10 June 2017 (IOS, Annex 50).
50 “Boeing seals $16,6 billion deal with Iran Air”, AP, 11 December 2016 (IOS, Annex 41).
51 “U.S. to buy heavy water from Iran's nuclear program”, Reuters, 22 April 2016 (IOS, Annex 40)
52 “Iran, U.S. to open joint Chamber of Commerce: Report”, Agence France Presse, 27 November 2013
(IOS, Annex 35).
53 For example, in 2011, U.S. claimants were allowed to attach and distribute the funds owed to the
Telecommunications Company of Iran by a U.S. telecommunication company as a result from “a
bilateral telecommunications carrier relationship” that relies on “a periodic settlement and offset
process to determine the net payer and payee”, Estate of Michael Heiser v. Islamic Republic of Iran,
U.S. District Court, District of Columbia, 10 August 2011, 807 F Supp. 2d 9 (IM, Annex 50).
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2.24 As early as 2010, the U.S. Office of Foreign Assets Control (“OFAC”) had granted
nearly 10,000 licenses to entities willing to sell and export goods to Iran.54 The
assessment of the licenses confirms the liberal policy that this office of the U.S.
Treasury adopts when considering a request to trade with Iran.55 While most of these
licenses were granted under the exceptions provided for in the Trade Sanctions
Reform and Export Enhancement Act of 2000 (the “TSRA”),56 which only authorises
the export of food products, agricultural commodities and medical supplies for
humanitarian purposes, these exceptions were often understood very broadly.57
2.25 The adoption of the Joint Comprehensive Plan of Action (the “JCPOA”) on
18 October 2015 and the delivery of the final report of the International Atomic
Energy Agency (“IAEA”)58 – which concluded that there was an absence of any
“credible indications of activities in Iran relevant to the development of a nuclear
explosive device after 2009”59 – resulted in a significant increase in economic
exchanges between the United States and Iran, despite U.S. efforts to undermine the
effect of the JCPOA. In addition to the general licenses for the exportation of
“agricultural commodities”, “medicine and medical supplies” to Iran,60 the U.S.
government adopted a range of trade licences opening up the commerce between the
two States in several areas, including:
54 Z. Goldfarb, “Firms licensed to do business in countries on U.S. terror list”, The Washington Post,
24 December 2010 (IOS, Annex 31).
55 J. Becker, “Licenses Granted to U.S. Companies Run the Gamut”, in New York Times, 24 December
2010 (IOS, Annex 30).
56 Trade Sanctions Reform and Export Enhancement Act of 2000, Title IX of Public Law 106 387
(October 28, 2000) (IOS, Annex 2).
57 J. Becker, “U.S. Approved Business with Blacklisted Nations”, in New York Times, 23 December 2010
(IOS, Annex 29); this author explains that among the licenses granted for humanitarian purposes under
the TSRA, the OFAC authorised the export to Iran of “cigarettes, Wrigley’s gum, Louisiana hot sauce,
weight-loss remedies, body-building supplements and sports rehabilitation equipment”.
58 “Final Assessment on Past and Present Outstanding Issues regarding Iran’s Nuclear Programme”,
IAEA, 2 December 2015, GOV/2015/68.
59 Ibid., p. 15, para. 87.
60 31 CFR, Section 560.530 (as of 01 July 2016) (IOS, Annex 6).
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(a) On 30 May 2013, even before the JCPOA, the authorisation to export or reexport
to Iran, from the United States or by a U.S. person, fee-based internet
communication services;61
(b) On 21 January 2016, the authorisation to import into the United States, from
Iran or a third country, certain foodstuffs and carpets of Iranian origin;62 and
(c) On 24 March 2016, the authorisation to export or re-export to Iran, by a U.S.
person, commercial passenger aircraft and related parts and services.63
2.26 Again, the issuance of these general trade licences has been motivated by U.S.
interests. The General Licence I authorising the export to Iran of U.S. aircraft was
issued shortly before Boeing entered into sales agreements with two of the three main
Iranian airlines companies.64 Regardless of the reasons behind the export licences, it
is a fallacy for the United States to claim that economic relations between Iran and the
United States have undergone a “protracted and fundamental rupture”.65 At the 2017
World Economic Forum, Iran’s Foreign Minister confirmed that “[w]e are open to
economic relations even with the United States. So, while we have our political
differences with the United States, we are not closed to economic relations, as the deal
we signed with Boeing indicates”.66
2.27 In sum, there are undoubtedly certain economic relations between the two Parties and
it is uncontroversial that these economic relations fall within the scope of the 1955
Treaty of Amity. And this is precisely the test defined by the Court in the Oil Platforms
61 OFAC General License D (authorizing the exportation and reexportation to persons in Iran of certain
services, software, and hardware incident to the exchange of personal communication, subject to certain
limitations), effective on May 30, 2013 (IOS, Annex 3).
62 OFAC Final Rule (adding to the Iran Transactions and Sanctions Regulations general licenses
authorizing the importation into the United States of, and dealings in, certain Iranian-origin foodstuffs
and carpets and related transactions), effective on January 21, 2016 (IOS, Annex 4).
63 OFAC General License I (authorizing certain transactions related to the negotiation of, and entry into,
contingent contracts for activities eligible for authorization under the statement of licensing policy for
activities related to the export or re-export to Iran of commercial passenger aircraft and related parts
and services), dated March 24, 2016 (IOS, Annex 5).
64 See supra, pp. 18-19, para. 2.21.
65 U.S. Preliminary Objections, p. 4, para. 1.9.
66 “Iran Open to Business Ties with US”, Financial Tribune, 19 January 2017 (IOS, Annex 42).
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case to determine whether it has jurisdiction over the present subject matter, namely
to “ascertain whether the violations of the Treaty of 1955 pleaded by Iran do or do not
fall within the provisions of the Treaty and whether, as a consequence, the dispute is
one which the Court has jurisdiction ratione materiae to entertain, pursuant to
Article XXI, paragraph 2.”67 As explained in Judge Higgins’ Separate Opinion:
“32. There has been some suggestion that ‘plausibility’ provides another test for
determination of whether the Court has jurisdiction. It was said in the
Ambatielos case that the Court must determine whether the arguments of the
applicant State
‘in respect of the treaty provisions on which the Ambatielos claim is said to be
based, are of a sufficiently plausible character to warrant a conclusion that the
claim is based on a Treaty’ (I.C.J. Reports 1953, p. 18; emphasis added).
‘Plausibility’ was not the test to warrant a conclusion that the claim might be
based on the Treaty. The only way in which, in the present case, it can be
determined whether the claims of Iran are sufficiently plausibly based upon the
1955 Treaty is to accept pro tem the facts as alleged by Iran to be true and in
that light to interpret Articles 1, IV and X for jurisdictional purposes - that is to
say, to see if on the basis of Iran’s claims of fact there could occur a violation
of one or more of them.”68
2.28 This test is generally accepted69 and is easily passed in the present case.
67 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 810, para. 16. See also, Pulp Mills on the River Uruguay (Argentina v. Uruguay),
Provisional Measures, Order of 13 July 2006, I.C.J. Reports 2006, p. 113, Judge Abraham’s Separate
Opinion, p. 140, para. 9.
68 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 803, Separate Opinion of Judge Higgins, p. 856, para. 32; see also pp. 857-58,
para. 34.
69 See Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia
and Herzegovina v. Serbia and Montenegro), I.C.J. Reports 1996, p. 615, para. 30; See also:
Obligations concerning Negotiations relating to Cessation of the Nuclear Arms Race and to Nuclear
Disarmament (Marshall Islands v. United Kingdom), I.C.J. Reports 2016, p. 22, para. 54; Legality of
Use of Force (Yugoslavia v. Belgium), Provisional Measures, Order of 2 June 1999, I.C.J. Reports
1999, p. 137, para. 38; I.C.S.I.D., Award, 8 February 2005, Plama Consortium Limited v. Bulgaria,
I.C.S.I.D. Case No. ARB/03/24, para. 119; I.C.S.I.D., Decision on Annulment, 5 September 2007,
Industria Nacional de Alimentos, SA and Indalsa Peru´, SA v. Republic of Peru, I.C.S.I.D. Case No
ARB/03/4, paras. 117-19; UNCITRAL, Interim Award, 1 December 2008, Chevron Corporation
(USA) and Texaco Petroleum Company (USA) v The Republic of Ecuador, PCA Case No 34877, paras.
103, 105 and 109-10; I.C.S.I.D., Award, 10 February 2012, SGS Société Générale de Surveillance SA
v. Republic of Paraguay, I.C.S.I.D. Case No ARB/07/29, paras. 47-8 and 50-3.
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C. The subject matter of the dispute cannot be re-written by the United States
2.29 As stated above,70 the United States purports to re-write Iran’s case to obfuscate the
nature of the dispute.71 But, as a matter of law, a Respondent cannot re-write the
Applicant’s case in order to raise irrelevant objections to its admissibility. As stated
by the Court, a Respondent cannot “impose on the Applicant any claim it chooses, at
the risk of infringing the Applicant’s rights and of compromising the proper
administration of justice.”72 In proceedings before the Court, disputes are defined by
the terms of the Application. In the Fisheries Jurisdiction case, the Court stated that:
“There is no doubt that it is for the Applicant, in its Application, to present to
the Court the dispute with which it wishes to seise the Court”.73
In the Obligation to negotiate an Access to the Sea case, the Court further noted that:
“To identify the subject-matter of the dispute, the Court bases itself on the
application, as well as the written and oral pleadings of the parties. In particular,
it takes account of the facts that the applicant identifies as the basis for its claim
(see Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 263,
para. 30; Nuclear Tests (New Zealand v. France), Judgment, I.C.J. Reports
1974, p. 467, para. 31; Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of
the Court, Judgment, I.C.J. Reports 1998, p. 449, para. 31; pp. 449-450,
para. 33).”74
2.30 In the present case, the subject matter of the dispute as defined by Iran’s Application
and Memorial is straightforward, and cannot reasonably be interpreted as
encompassing what the United States labels the “broader strategic dispute”.75 It is a
dispute about the interpretation and application of the 1955 Treaty of Amity,76 which
70 See supra, p. 9, para. 2.2.
71 U.S. Preliminary Objections, p. 2, para. 1.4.
72 Application of the Genocide Convention (Bosnia and Herzegovina v. Yugoslavia), Counter claims,
I.C.J. Reports 1997, pp. 257-58, para. 31.
73 Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of the Court, Judgment, I.C.J. Reports 1998,
p. 447, para. 29.
74 Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile), Preliminary Objection,
Judgment, I.C.J. Reports 2015, pp. 602-603, para. 26.
75 U.S. Preliminary Objections, p. 2, para. 1.4.
76 See supra, pp. 10-11, paras. 2.4-2.5.
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is undoubtedly in force between the Parties.77 It is related to “Certain Iranian Assets”,
as the Court has named the case, and the treatment of Iranian companies and their
economic interests by the United States.
2.31 Iran also observes that the United States misinterprets its claims despite their clarity.
For instance, the United States alleges that “[a]t the core of Iran’s case is its claims
that many of the U.S. measures at issue offend customary international law principles
of sovereign immunity. Under almost every article of the Treaty it invokes, Iran
complains that rules of State immunity have been disregarded in connection with
terrorism-related litigation in U.S. courts”.78 The core of Iran’s claims – and, in fact,
the whole of its case – is the conduct, attributable to the United States, that qualifies
as violations of provisions of the 1955 Treaty of Amity. None of Iran’s claims
concerns a violation of customary international law as such. Rather, the Treaty
contains a series of protections which, by reference to their terms, require respect for
certain rights that have their source in customary international law.
2.32 It follows that the U.S. re-writing of the subject matter of the dispute and
misinterpretation of Iran’s claims could hardly be seen as a bona fide reading of Iran’s
case and should be rejected.
SECTION 3.
THE U.S. ACCUSATIONS AGAINST IRAN ARE IRRELEVANT TO THE DISPUTE AND
THE COURT IS NOT IN A POSITION TO MAKE FINDINGS IN RELATION TO THEM
2.33 In its Application79 and Memorial80 Iran has presented the factual and legal grounds
of its claims, which are both related to the economic relationship between Iran and the
United States.
77 See infra pp. 77-78, paras. 7.8-7.10.
78 U.S. Preliminary Objections, p. 78, para. 8.1.
79 Iran’s Application, pp. 2-12, paras. 6-31 and pp. 13-16, para. 32.
80 Iran’s Memorial, pp. 15-44, paras. 2.1-2.64 and pp. 45-63, paras 3.1-3.54.
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2.34 Neither the nature of the Iranian grounds nor their accuracy is the source of the U.S.
objections to the admissibility of the case. To the contrary, the United States
acknowledges that the 1955 Treaty of Amity is in force between the Parties81 and
admits that for deciding on the “unclean hands” objection, the Court should “accept
as true Iran’s allegations as to the measures taken by the United States”.82 The United
States does not even claim that the facts upon which Iran’s case is based are of such a
nature that they cannot give rise to the claims Iran has brought before the Court.
Rather, the United States bases its admissibility objections on a distinct set of so-called
“facts”83 which may be summarised as a threefold list of alleged wrongful acts that
the United States purports to attribute to Iran: acts of terrorism,84 violation of nuclear
non-proliferation obligations,85 and violation of ballistic missile and arms trafficking
obligations.86
2.35 Iran strongly contests these accusations.87 But the point that has to be made in the
context of these proceedings on preliminary objections is that these accusations are
wholly irrelevant to the dispute before the Court. None of these accusations are said
to fall within the scope of the Treaty’s provisions relied on by Iran in this case.
2.36 Not only are the U.S. accusations against Iran outside the scope of the dispute, but the
Court is not in a position to make any finding upon them. Indeed, despite the repeated
attempts of the United States to present its contentions as “facts”88 or “factual
records”,89 that would be “indisputable”,90 the so-called “contextual [and] evidential
foundations” of its admissibility objections are mere – and baseless – accusations
against Iran. The United States requests the Court to determine (a) that a series of
81 U.S. Preliminary Objections, p. 50, para. 6.11.
82 U.S. Preliminary Objections, p. 59, para. 6.34.
83 U.S. Preliminary Objections, p. 33, para. 3.43.
84 U.S. Preliminary Objections, pp. 12- 24, paras. 3.5-3.30.
85 U.S. Preliminary Objections, pp. 24-27, paras. 3.32-3.37.
86 U.S. Preliminary Objections, pp. 27-29, paras. 3.37-3.40.
87 See infra, Appendix A to Chapter VIII.
88 U.S. Preliminary Objections, p. 30, para. 3.43.
89 U.S. Preliminary Objections, p. 30, para. 3.43.
90 U.S. Preliminary Objections, p. 54, para. 6.26.
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alleged acts are established as facts and as internationally wrongful, (b) that such acts
are attributable to Iran (in other words, that Iran is internationally responsible for those
wrongful acts), and (c) that such alleged international responsibility constitutes
sufficient grounds for depriving Iran of its right, under the Treaty, to bring the present
case to the Court. Such an ill-founded strategy cannot succeed, and goes beyond the
limits of the preliminary objections phase of proceedings.
2.37 It follows that the unsubstantiated accusations made at length in Part I of the
U.S. Preliminary Objections are irrelevant, outside the subject matter of the dispute
submitted to the Court by Iran, and in any event not susceptible to any finding by the
Court. They should therefore be disregarded in full.
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PART II.
THE U.S. OBJECTIONS TO JURISDICTION
CHAPTER III.
THE COURT HAS JURISDICTION OVER ALL OF THE CLAIMS
SUBMITTED BY IRAN
SECTION 1.
INTRODUCTION
3.1 Applying the test for jurisdiction ratione materiae as established in the Court’s
Judgment in the Oil Platforms case, the Court “must ascertain whether the violations
of the Treaty of 1955 pleaded by Iran do or do not fall within the provisions of the
Treaty and whether, as a consequence, the dispute is one which the Court has
jurisdiction ratione materiae to entertain, pursuant to Article XXI, paragraph 2.”91
The key question is whether, assuming the facts as pleaded by Iran, the breaches
alleged are “capable” of falling within the scope of the provisions of the Treaty relied
upon.92
3.2 In its Preliminary Objections, the United States advances three separate objections to
the Court’s jurisdiction ratione materiae over parts of Iran’s claims. Each of the U.S.
objections is misconceived and should be dismissed.
3.3 The first objection, to which Iran responds in Chapter IV below, is that Bank Markazi
is not a “company” for the purpose of Articles III, IV and V (the “company
objection”).
91 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 810, para. 16.
92 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, pp. 819-820, paras. 50-52. See also Legality of Use of Force (Yugoslavia v. Italy),
Provisional Measures, Order of 2 June 1999, I.C.J. Reports 1999, p. 490, para. 25.
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3.4 The second objection, to which Iran responds in Chapter V below, is that the U.S.
abrogation of jurisdictional immunities and immunities from enforcement is not
capable of constituting a breach of Articles III(2), IV(1), IV(2) and/or X(1) of the
Treaty (the “immunity objection”).93 The United States has denied to Iran and to
Iranian State-owned companies, including Bank Markazi, the immunity before the
U.S. courts that is protected under the 1955 Treaty of Amity and to which they are
entitled as a matter of international law and were formerly entitled as a matter of U.S.
law. The United States does not deny such acts, but instead objects that Iran has
submitted to the Court claims outside the scope of Article XXI(2) of the Treaty.
3.5 The third objection, to which Iran responds in Chapter VI below, is that Article XX(1)
excludes the applicability of the 1955 Treaty of Amity to (only) one of the U.S.
measures which Iran alleges constitutes a breach of the Treaty, namely Executive
Order 13599 (the “Article XX objection”).
SECTION 2.
THE LIMITED NATURE OF THE U.S. JURISDICTIONAL OBJECTIONS
3.6 Before turning to the details of the U.S. objections to jurisdiction, it is important to
emphasise that these objections concern only limited parts of Iran’s claims. It is
unnecessary for Iran to address those aspects of its claim to which no objection has
been made, and which may therefore proceed without delay to a determination on the
merits.
3.7 The United States does not challenge Iran’s claim based on Article III(1) of the 1955
Treaty of Amity with respect to the recognition of juridical personality of Iranian
companies except for the definition of “company” to the extent that the term applies
to Bank Markazi. As to Article III(2), the United States has made no objection to
Iran’s claims regarding breaches of the entitlement of Iranian companies (including
State-owned companies): (a) to rely in the U.S. courts upon the Treaty for recognition
by the courts of the juridical personality of Iranian companies (including State-owned
93 U.S. Preliminary Objections, p. 80, para. 8.6 and p. 95, para. 8.36.
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companies), and to be granted such recognition, a right that is also granted separate
protection under Article III(1) as discussed above; (b) not to be held liable for, and
not to be ordered to pay, damages in respect of allegedly wrongful acts of the Iranian
State in proceedings to which the Iranian companies were not parties; (c) to put
forward a defence by reference to the law and facts as at the time or times of alleged
wrongdoing, unaffected by retroactive and/or targeted or discriminatory legislation;
and (d) to be treated no less favourably than companies of any third country.94
3.8 As to Article IV(1) of the Treaty, there are important aspects of Iran’s interpretation
of this provision that are not challenged:
(a) The United States does not challenge Iran’s interpretation of the entitlement of
Iranian companies, as well as their property and enterprises, to treatment in
accordance with the fair and equitable standard, which prohibits conduct by the
United States that: (i) is arbitrary, grossly unfair, unjust or idiosyncratic; and/or
(ii) is discriminatory; and/or (iii) involves a lack of due process leading to an
outcome which offends judicial property; and/or (iv) defeats the legitimate
expectations of Iranian nationals and companies.95
(b) Nor does the United States deny that the language used in Article IV(1)
demonstrates the Parties’ intention that the prohibition be broad in scope.96
Leaving aside the question of immunities, the United States also does not
expressly dispute the proposition that an important consideration for the
purposes of the fair and equitable standard is whether the measures at issue are
consistent with principles of customary international law, or by contrast, at odds
with the practice of other States (i.e. where no or virtually no other States have
adopted equivalent measures).97
94 The U.S. breaches are set out in Iran’s Memorial at pp. 83-86, paras. 5.14-5.18.
95 See Iran’s Memorial, pp. 87-93, paras. 5.22 to 5.36. The only element of Iran’s interpretation set out in
these paragraphs that the United States (implicitly) challenges is the contention in para. 5.36 that the
legitimate expectations of all Iranian companies included that the principles of sovereign immunity
under international law would be respected.
96 See Iran’s Memorial, pp. 93-94, paras. 5.37-5.38.
97 Iran’s Memorial, p. 94, para. 5.39.
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(c) The United States does not dispute Iran’s interpretation of the obligation to
ensure that the lawful contractual rights of Iranian nationals and companies are
afforded effective means of enforcement, in conformity with applicable laws, as
providing for broader protection than the prohibition on denial of justice alone.98
3.9 The U.S. objection to the Court’s jurisdiction to determine the alleged breach of
Article V(1) is limited to its contention that Bank Markazi is not a “company” for the
purposes of the protections under the Treaty.99 The United States does not challenge
Iran’s interpretation of Article V(1).100 Further, it is common ground that the effect of
the U.S. measures at issue in this case has been to deprive Bank Markazi of the right
to dispose of its property as it sees fit.
3.10 The United States has made no objection to the Court’s jurisdiction over Iran’s claims
under Article VII of the Treaty. Further, as Iran understands it, the U.S. objection so
far as concerns Article X(1) of the Treaty is confined to an objection to jurisdiction
over the so-called “sovereign immunity-related claims”.101
SECTION 3.
GENERAL POINTS ON INTERPRETATION
3.11 In order to determine whether the breaches alleged are “capable” of falling within the
scope of the provisions of the 1955 Treaty of Amity that Iran relies on, the relevant
provisions must be interpreted. Iran has already identified and interpreted the Treaty
provisions on which it relies in its Memorial, and it re-visits the relevant provisions in
the remaining Chapters of this Part II. In its Preliminary Objections, the United States
has nonetheless contended that Iran failed in its Memorial to conduct a proper treaty
interpretation analysis.102 In particular, it asserts that Iran inappropriately seeks to
98 Iran’s Memorial, p. 95, paras. 5.40 to 5.41.
99 U.S. Preliminary Objections, Chapter 9.
100 See Iran’s Memorial, p. 108, paras. 5.73 to 5.74.
101 U.S. Preliminary Objections, p. 95, para. 8.36.
102 U.S. Preliminary Objections, p. 40, para. 5.4 and p. 44, para. 5.12.
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apply customary international law, rather than the Treaty.103 These criticisms are illfounded.
Iran makes three general points on interpretation.
3.12 First, while Iran agrees with the U.S. statement that “the Court cannot found its
jurisdiction on “an impressionistic basis” and it “must bring a detailed analysis to
bear” when it interprets the articles of the Treaty that are said to have been
violated”,104 it is equally true that the Court cannot decline jurisdiction on an
“impressionistic basis”. Yet that is what the United States asks the Court to do in
Chapters 1 to 4 of its Preliminary Objections. As noted in Chapters I and II above,
those Chapters in the U.S. Preliminary Objections do not address the specific dispute
or even the 1955 Treaty of Amity, but rather make prejudicial and speculative
allegations on matters outside the Court’s jurisdiction.105
3.13 The “detailed analysis” that the United States calls for must include consideration of
the entirety of the general rule codified in Article 31 of the Vienna Convention on the
Law of Treaties (the “Vienna Convention” or “VCLT”), including Article 31(3)(c)
(as to which see further Chapter V below). As the I.L.C. explained in its Commentary
to the Vienna Convention, the provisions of the Article form a single, closely
integrated rule.106
3.14 Secondly, much of the U.S. criticism of the exercise of interpretation in Iran’s
Memorial is merely a reflection of its discomfiture with the ordinary meaning of the
Treaty provisions on which Iran relies. For example, as Iran set out in its Memorial,
and as is addressed in greater detail in Chapters IV and V below, certain provisions of
the Treaty specifically require, pursuant to their ordinary meaning and applying all
the well-established principles of interpretation, reference to and compliance with
certain specific international law rules, including rules on the separate juridical status
of companies and the law of sovereign immunity.
103 U.S. Preliminary Objections, pp. 40-41, paras. 5.4-5.5.
104 U.S. Preliminary Objections, p. 42, para. 5.7.
105 See Chapter 1, paras. 1.5(c) and 1.9, and Chapter 2, paras. 2.33-2.37 supra.
106 Report of the I.L.C. on the Work of the Second Part of its Seventeenth Session (U.N.
Doc. 1/6309/Rev.I), in Y.I.L.C. 1966, vol. II, p. 220.
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3.15 Thirdly, Iran notes that the United States is silent regarding the well-established
principle of effectiveness (effet utile) that Iran relied on in its Memorial.107 This
principle requires interpreting the Treaty so as to give its provisions their fullest
weight and effect and in such a way that a reason and meaning can be attributed to
every part of the text.108 Interpreting a provision by reference to the relevant rules of
international law is one method of giving that provision a meaningful effect. Further,
as a separate matter, meaningful effect must be given to the express terms of
Article IV(2) of the Treaty, which requires reference to rules of international law by
way of renvoi.
107 Iran’s Memorial, p. 88, para. 5.24. It is recognised by the Court e.g. in Territorial Dispute (Libyan Arab
Jamahiriya v Chad), Judgment, I.C.J. Reports 1994, p. 23, para. 47.
108 Third Report on the Law of Treaties by Sir Humphrey Waldock, Special Rapporteur (U.N.
Doc. A/CN.4/167 and Add. 1-3), in Y.I.L.C. 1964, vol. II, p. 55, para. 12.
- 33 -
CHAPTER IV.
THE U.S. OBJECTION TO THE TREATY’S APPLICATION
TO BANK MARKAZI AS A “COMPANY”
4.1 In Chapter 9 of its Preliminary Objections, the United States contends that “Bank
Markazi Cannot Claim Protections as a ‘Company’ Under the Treaty”.109 It argues
that: “Iran paradoxically claims that its Central Bank, Bank Markazi, is both a
sovereign entity entitled to immunity and a ‘company’ entitled to the protections set
out in Articles III, IV, and V of the Treaty”.110
4.2 The United States further argues that a “company” within the meaning of the Treaty
depends on the functions it performs,111 which would not include sovereign
functions.112 The United States asserts that: “[a]rticles III, IV, and V provide
assurances to “companies” or “nationals and companies” of the other High
Contracting Party in their performance of private and commercial activities. These
articles do not supply rules governing the treatment to be accorded to High
Contracting Parties themselves or to their State entities carrying out sovereign
functions”.113 The United States concludes that since Bank Markazi is a central bank
and carries out sovereign functions – and was acting as such when it was submitted to
the United States’ treatment complained of by Iran, Iran’s claims with respect to Bank
Markazi are not related to a “company” protected by Articles III, IV and V of the
Treaty.
109 U.S. Preliminary Objections, p. 99, Title of Section B.
110 U.S. Preliminary Objections, p. 95-96, para. 9.1. It is not “paradoxical” that a central bank can also be
a company. The central banks of States including Belgium, Greece, Ireland, Italy, The Netherlands,
Singapore, South Africa, Switzerland and Turkey, are constituted as companies in their domestic legal
systems. The National Bank of Belgium is a public limited liability company; the Bank of Greece is
incorporated as a société anonyme; the Bank of Ireland is a public limited company; Banca d’Italia, the
Italian central bank, is a company limited by shares; De Nederlandsche Bank, Dutch central bank, is a
public limited company; the Monetary Authority of Singapore is established as a corporation as
understood in the Companies Act; the South African Reserve Bank is a joint stock company; the Swiss
National Bank is a special statute joint-stock company governed by special provisions of federal
law; the Central Bank of the Republic of Turkey is established as a joint stock company.
111 U.S. Preliminary Objections, p. 100, para. 9.11.
112 Ibid.
113 U.S. Preliminary Objections, p. 96, para. 9.2.
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4.3 The U.S. “company objection” is presented as a preliminary objection to the
jurisdiction of the Court. With respect to it, Iran submits:
- First, that should the Court admit that this is a preliminary objection to its
jurisdiction, it shall be rejected because the United States’ interpretation of the
notion of “company” under the Treaty is erroneous;
- Secondly, that this so-called preliminary objection does not possess a
preliminary character.
SECTION 1.
THE UNITED STATES’ INTERPRETATION OF THE NOTION OF “COMPANY”
UNDER THE TREATY IS ERRONEOUS
4.4 The United States agrees with Iran that the term “companies” in Article III(1) of the
1955 Treaty of Amity is broadly defined and includes both privately- and publiclyowned
entities.114 The United States also acknowledges that Bank Markazi “[has]
juridical status as an entity”.115
4.5 However, the United States denies that the term “companies” extends to State-owned
companies carrying out sovereign functions. It argues that “[t]he term “companies” is
not naturally read to include [central banks and other governmental bodies]”,116 and
that the “context, object, purpose, and negotiating history” of the Treaty lead to the
conclusion that “the functional understanding is the only way to make sense of the
Treaty’s provisions”.117
114 U.S. Preliminary Objections, p. 103-104, para. 9.18.
115 U.S. Preliminary Objections, p. 98, para. 9.6. Although the United States denies Bank Markazi’s status
as a company due to its sovereign functions, under Section 28 U.S. Code § 1603, entities like central
banks can certainly have a separate corporate status. It provides that “[a]n ‘agency or instrumentality
of a foreign state’ means any entity … (1) which is a separate legal person, corporate or otherwise …
and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose
shares or other ownership interest is owned by a foreign state or political subdivision thereof”.
116 U.S. Preliminary Objections, p. 100, para. 9.11.
117 Ibid.
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4.6 As will be demonstrated below, this analysis is erroneous in all respects and must be
rejected.
A. The “natural reading” argument
4.7 The United States’ purported “natural reading” argument is unclear. It seems to
suggest an interpretation of the term “companies” in Article III(1),118 but also an
interpretation of “the obligations contained in Articles III, IV, and V”, arguing that
these obligations “must be read naturally and in their proper context”.119
4.8 By contrast, the ordinary meaning of the terms of the Treaty leaves no doubt on two
points: (a) the “obligations contained in Articles III, IV, and V”, explicitly apply to
“companies”, with no qualification;120 and (b) Article III(1) expressly states that “[as]
used in the present Treaty, ‘companies’ means corporations, partnerships, companies
and other associations, whether or not with limited liability and whether or not for
pecuniary profit.” Thus, under a “natural reading” of the Treaty, the proper
interpretation of the term “companies” as used in the Treaty must necessarily be
carried out with reference to Article III(1).
4.9 With respect to Article III(1), the United States’ argument amounts to nothing more
than an assertion that the definition of “companies” does not include Bank Markazi.121
This contention is not supported by the ordinary meaning of the plain text of
Article III(1), which attests that the High Contracting Parties intended and agreed that
the definition of “companies” has a broad scope.122 Contrary to the U.S. contention,123
118 Ibid.
119 U.S. Preliminary Objections, p. 104, para. 9.19.
120 The provisions also apply to “nationals”, the interpretation of which is not in dispute between the
Parties.
121 U.S. Preliminary Objections, p. 100, para. 9.11.
122 See supra, p. 34, para. 4.4.
123 U.S. Preliminary Objections, pp. 98-99, para. 9.7. According to Setser: “business activities is made
synonymous with ‘activity for profit’ in Article VII of the Treaty with Israel, and with ‘activity for
gain’ in a number of other Treaties.”; Setser, 55 AM. SOC. INT’L L. PROC. at 99 (U.S. PO,
Annex 229).
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the term “companies” is not limited to “commercial” entities,124 nor to entities
engaged in “business activities”; Article III(1) explicitly includes entities “whether or
not for pecuniary profit”.125
B. The “contextual” argument
4.10 The United States asserts that when read in its context, the term “companies” as
defined in Article III(1) necessarily refers to entities “in their performance of private
and commercial activities”.126 It also contends that “[w]here State entities are
concerned, Article XI […] provides indispensable context for interpreting the Treaty’s
treatment obligations, including those set out in Articles III, IV, and V”,127 which
would lead to the conclusion that entities carrying out sovereign functions are not
“companies” under the Treaty.128 Neither of these two contentions is capable of
withstanding scrutiny.
4.11 As to the first contention, so far as context is concerned, not a single word in the Treaty
can be read or construed as limiting the meaning of the term “companies” in
Articles III, IV and V to entities carrying out certain functions, or suggesting that the
Treaty protections that these provisions contain are reserved to companies engaged in
certain specified activities.
4.12 Indeed, the text of the 1955 Treaty of Amity129 demonstrates that where the Treaty
Parties intended to qualify or limit the substantive Treaty protections to certain
specific activities, they did so expressly:
124 U.S. Preliminary Objections, p. 2, para 1.5.
125 In the same sense, see also Article VI(1): “In the case of nationals of either High Contracting Party
residing within the territories of the other High Contracting Party, and of nationals and companies of
either High Contracting Party engaged in trade or other gainful pursuit or in non-profit activities therein,
such payments and requirements shall not be more burdensome than those borne by nationals and
companies of such other High Contracting Party.”
126 U.S. Preliminary Objections, p. 96, para. 9.2.
127 U.S. Preliminary Objections, pp. 101-102, para. 9.14.
128 U.S. Preliminary Objections, p. 102, para. 9.15.
129 IM, Annex 1.
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- Article II(1) specifies that the Treaty Parties must permit “nationals” of the other
Party to enter and remain in their territory “for the purpose of carrying on trade
between their own country and the territories of such other High Contracting
Party and engaging in related commercial activities”;
- Article II(2) specifies that the Treaty Parties must permit “nationals” of the other
Party to carry out “philanthropic, educational and scientific activities”, so long
as these “activities are not contrary to public order, safety or morals”;
- Article VI(1) concerns taxes, fees, charges, applicable to nationals and
companies of the other Parties, “engaged in trade or other gainful pursuit or in
non-profit activities”;
- Article XI(4) contains a waiver of immunities which is expressly limited to
“enterprises” engaged in “commercial, industrial, shipping or other business
activities within the territories of the other High Contracting Party”; and
- Article XX(2) expressly states that the Treaty “does not accord any rights to
engage in political activities.”
4.13 By contrast, where the Parties did not intend to qualify or limit the Treaty protections
to certain activities, they used the generic term “activities” without any qualification:
- Article III(1), when providing that “companies constituted under the applicable
laws and regulations of either High Contracting Party shall have their juridical
status recognized within the territories of the other High Contracting Party”,
uses in the second sentence the generic term of “activities” (“rights … to engage
in the activities for which they are organized.”);
- Article III(2) provides that companies “not engaged in activities within the
country shall enjoy the right of such access [to the courts of justice and
administrative agencies] without any requirement of registration or
domestication.” This is directly in contradiction with the U.S. claim that
“companies” is a term that should be defined according to the activities or
functions that an entity carries out. Indeed, even entities constituted under
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Iranian laws not engaged in any activities within the United States territory are
eligible for the protections under Article III(2) of the Treaty;
- Article IV(4) refers, with respect to “companies”, to “their activities” without
qualification; and
- Article V(1) refers to companies’ “conduct of activities pursuant to the present
Treaty”.
4.14 As to the second contention, the United States develops a long interpretative theory
based on Article XI(4) which it argues sheds light on the interpretation of the term
“companies” as used in the Treaty.130 These arguments may be summarised as
follows:
(a) “State-owned enterprises acting in the marketplace alongside private companies
– and only those enterprises … would enjoy … treaty rights, but … should not
occupy a privileged position by virtue of their government ownership”;131 and
(b) Article XI(4) has been designed to ensure that these enterprises have no
privileged position compared to U.S. companies. Accordingly “the immunity
waiver provision (Article XI(4)) sought to ‘ensure that state-owned enterprises
with a claim to treaty rights would not be able to escape the liabilities to which
private United States enterprises in competition with them were subject’.”132
4.15 This theory is at best dubious since it is not clear why, and how, Article XI(4) has any
relevance for the contextual interpretation of the term “companies” as defined and
used in the Treaty. Article XI(4) has a very limited scope, addressing “enterprises”
that are engaged in “commercial, industrial, shipping or other business activities
within the territories of the other High Contracting Party”. By contrast, Articles III,
IV, and V have a much wider scope, encompassing any kind of activities carried out
by companies, including “not for pecuniary profit”. Moreover, none of the documents
discussing the scope of application of Article XI(4) relied upon by the United States
130 U.S. Preliminary Objections, pp. 101-103, paras. 9.13-9.17.
131 U.S. Preliminary Objections, p. 101, para. 9.13.
132 Ibid.
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discusses the term “companies”, or refers to the term as used in Article III, IV or V of
the 1955 Treaty of Amity or of similar FCN Treaties.
4.16 Furthermore, the reasoning of the United States is flawed. It asserts that the Treaty
rights provided for in Articles III, IV and V are supposed to be granted only to public
companies understood as “State-owned enterprises acting in the marketplace”.133 But
if this was the case, Article XI(4) would not specify that such public enterprises cannot
claim immunity “if” they engage “in commercial, industrial, shipping or other
business activities”, because they would already be supposed to be engaged in this
kind of activities. Thus, contrary to the United States’ contention, if Article XI(4) were
relevant for the interpretation of Article III(1), it would merely confirm that the term
“companies” under the Treaty is not limited to entities engaged in commercial or
business activities, but encompasses entities established under the laws and
regulations of the Parties, whatever the nature of their activities or functions.
4.17 Put simply, the correct position with respect to the articulation between Articles III(1)
and XI(4) is as follows:
(a) Article III(1) requires the recognition of the juridical status of the “companies”
constituted under the applicable laws and regulations of either High Contracting
Party, which include various kinds of entities whether privately or publicly
owned.
(b) Article XI(4) provides a special rule regarding State-owned enterprises, which
are entitled to treaty rights because they are “companies” as defined in
Article III(1). These companies enjoy treaty rights including protection of
immunities when they are entitled to immunities. It is only if and to the extent
that they engage in “commercial, industrial, shipping or other business activities
within the territories of the other High Contracting Party” that they cannot claim
immunities, while still enjoying the other Treaty protections.
4.18 Thus, “companies”, as broadly defined by Article III(1), which do not engage in
“commercial, industrial, shipping or other business activities within the territories of
133 Ibid. (emphasis added).
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the other High Contracting Party”, are indeed “insulated from the obligations of
Article XI[(4)], including the waiver of immunity, but simultaneously considered
‘compan[ies]’ entitled to protection under the Treaty’s treatment articles”.134 Contrary
to the U.S. contention, this situation does not disrupt “the careful equilibrium sought
by the Treaty drafters” which,135 according to the United States,136 was to guarantee
that national and foreign companies act on the same basis when they are in
competition. Indeed, the treatment reserved to a company which is not in competition
with U.S. companies and therefore not submitted to Article XI(4), has strictly no effect
on the said equilibrium.
C. The “Treaty’s objective” argument
4.19 Insofar as the “Treaty’s objective” is concerned, the United States, quite apart from a
reference to Article XI(4),137 makes two specific points that Iran responds to in turn
below.
4.20 First, the United States asserts that “[w]hen government entities carry out sovereign
functions, rather than operating as commercial enterprises, the very nature of such
functions means that they cannot be acting like private companies. They are instead
operating in a realm that is not the subject of a commercial treaty. Articles III, IV, and
V do not set out rules governing how the Parties will treat traditional central banking
activities of the other Party any more than they can be understood to regulate activities
relating to government agencies carrying out foreign assistance or military
activities.”138
134 U.S. Preliminary Objections, p. 103, para. 9.17.
135 Ibid.
136 U.S. Preliminary Objections, pp. 101-102, paras. 9.13-9.14.
137 U.S. Preliminary Objections, p. 101, para 9.13. The United States seems to refer to Article XI(4) both
as an element of context and for discussing the objectives of the Treaty. Iran has responded to these
arguments rather as elements of context.
138 U.S. Preliminary Objections, p. 102, para. 9.15.
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4.21 The U.S. argument is underpinned by two assumptions, both of which are incorrect.
Contrary to the U.S. position:
(a) The 1955 Treaty is not merely a “commercial” treaty.139 The term “commercial”
does not even appear in the Preamble to the Treaty, which records its object;
and
(b) An entity carrying out sovereign functions may at the same time, in certain
respects, act exactly in the same manner as a private company. Moreover, so far
as central banks are concerned, their activities are not limited to activities
analogous to those “relating to government agencies carrying out foreign
assistance or military activities”, assuming for the sake of argument that such
comparison may have relevance. Indeed, among other activities, a central bank
assists private companies in their businesses, participates in commercial
activities for its own purposes and facilitates commercial relations carried out
by private or public entities in an international context.140
4.22 Secondly, the United States refers to an extract from the Judgment on Preliminary
Objections in Oil Platforms which reads as follows:
“The whole of these provisions is aimed at the way in which the natural persons
and legal entities in question are, in the exercise of their private or professional
activities, to be treated by the State concerned. In other words, these detailed
provisions concern the treatment by each party of the nationals and companies
of the other party, as well as their property and enterprises. Such treaty
provisions do not cover the actions carried out in this case by the United States
against Iran.”141
139 See supra, pp. 13-14, paras. 2.12-2.14.
140 For example, the Bank of England explains the role it plays with respect to payments as follows:
“Payments play a key role in the smooth functioning of the economy. The Bank of England acts as a
settlement agent for banks and others who are members of several payment systems. This includes
payments settled in real-time that relate to CHAPS and CREST. On an average day we settle around
£500 billion worth of payments between banks, almost a third of the UK’s annual GDP. These
transactions span, or back, almost every payment in the UK economy – from salaries to company
invoices, from car purchases to coffee sales, from pensions to investment flows. We also settle the net
interbank transfers for several retail and card systems. In other words, we provide a safe, risk-free
means for banks to transfer money to each other. This reduces the risk for everyone involved in these
kinds of transactions, and promotes financial stability.” See bankingandpayments.aspx.
141 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 816, para. 36.
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The United States infers from this quotation that “State entities exercising sovereign
functions were never intended to fall within the “private and professional activities”
scope of the Treaty’s “nationals and companies” provisions”.142
4.23 The United States rightly points out that the above pronouncement concerns only
Article IV(1), rather than Article III or the entirety of the Treaty protections afforded
to “companies”,143 but fails to mention that in this passage the Court merely answered
Iran’s argument that “it falls to the Court to evaluate the lawfulness of the armed
actions of the United States in relation to” Article IV(1) of the Treaty.144 In its ruling,
the Court limited itself to addressing which type of “treatment” Article IV(1) is
intended to regulate, that is, “the treatment of the nationals and companies of the other
party”, rather than armed actions carried out by a State against the other. In the current
case, Iran does not complain of armed action carried out by the United States against
Bank Markazi, and the United States has made no attempt to explain – because it
simply cannot explain – how its treatment of Bank Markazi might be properly
analogised to armed actions against Iran.
4.24 In any event, the United States is incorrect to contend that a State-owned company
like Bank Markazi does not carry out “professional activities”. The banking activities
of a central bank are “professional activities”. Bank Markazi is plainly engaged in acts
pertaining to or integrally related to “commerce”.145 Moreover, buying and selling
securities in the context of open market operations are economic activities in nature,
carried out by private companies as well as by central banks, and pertain to
“professional activities”.
142 U.S. Preliminary Objections, pp. 102-103, para. 9.16.
143 Ibid.
144 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, pp. 815-816, para. 33.
145 See Articles 11 and 13 of the Monetary and Banking Act of Iran (approved on 9 July 1972, with
subsequent amendments as of 3 March 2016) (IM, Annex 73).
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D. The “negotiating history” argument
4.25 The U.S. recollection of the negotiating history does not reflect accurately the relevant
points.146 They are as follows.
4.26 The question whether State-owned entities should be considered “companies” within
the meaning of the Treaty was discussed by the Treaty Parties. Iran initially proposed
to insert the words “privately owned” before the word “corporations” in draft Article
III of an early version of the text.147 The United States explained that Iran’s proposal
was not acceptable, for the reasons explained below, and Iran accepted to withdraw
its proposal and to adopt the broader definition which appears in the final text of
Article III(1).
4.27 The position of the U.S. Department of State was expressed during a meeting on
16 November 1954:
“in commenting upon this matter the Department of State expressed the belief
that there might have been some misunderstanding of the purpose of the
paragraph. The provision is intended to confer no right upon corporations to
operate in Iran, but merely to provide their recognition as corporate entities,
principally in order that they may prosecute or defend their rights in courts as
corporate entities. In this sense, paragraph 1 is related to paragraph 2 of the
Article. Under the draft treaty no United States corporation may engage in
business in Iran except as permitted by Iran. The corporate status should be
recognized to assure the right of foreign corporate entities – those which sell
goods or furnish other services to Iran, as well as those permitted to operate in
Iran – to free access to courts in order to collect debts, protect patent rights,
enforce contracts, etc. The Department has enquired as to whether the Iranian
representatives might reconsider their suggestion in light of this explanation.”148
4.28 The United States subsequently emphasized that, under the proposed treaty, no foreign
company was to be recognised as having a right to engage in activities in the country
of the other Party except as permitted by such Party. In a telegram from the
U.S. Department of State to the U.S. Embassy in Tehran, dated 13 December 1954,
146 U.S. Preliminary Objections, p. 103-104, para. 9.18.
147 Letter of the U.S. Embassy in Tehran to the U.S. Department of State, dated 16 October 1954, p. 3 (IM,
Annex 2).
148 Aide Memoire of the U.S. Embassy in Tehran, dated 20 November 1954, p. 2 (IM, Annex 3).
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the firm position of the United States, as stated by the Secretary of State John Foster
Dulles, was that:
“to define companies for all treaty purposes as private companies establishes
precedent of questionable effect on interests both countries view trend many
countries toward state enterprises. Iran appears recognize this in proposing
separate agreement assuring rights their public corporations in US. Latter device
advertises intent discriminate against third country public corporations and
unacceptable here for obvious lack mutuality.
DEPT has considered most carefully various aspects matter in effort find
acceptable means accommodate Iran in purpose their proposal. Following
possibly helpful. Insert new sentence after first sentence paragraph one: QUOTE
it is understood, however, that recognition of juridical status does not of itself
confer rights upon companies to engage in the activities for which they are
organized UNQUOTE.
[…]
EMB may present aide memoire to effect not intent US proposals require either
party admit enterprises of other, including public corporations, but that purpose
establish reasonable standards treatment those enterprises a party may admit by
own decision.”149
4.29 Thus, the travaux, and in particular the U.S. explanation for rejecting any qualification
to the definition of “companies”, as accepted by Iran, confirm that the Treaty Parties
did not intend to limit the protections of the Treaty to entities carrying out certain
commercial or business activities or functions. The United States made perfectly clear
that the definition of “companies” and the recognition of their juridical status, which
permits them, among other things, to claim in courts the protections granted by the
Treaty, has no relation with “the activities for which they are organized”. It follows
that the Treaty Parties understood and agreed that the nature of activities or functions
of entities constituted under the laws of the other Party are wholly irrelevant to their
qualification as “companies” for the purpose of the Treaty.
4.30 In conclusion, Iran submits that the U.S. objection that Bank Markazi is not a
“company” under the Treaty should be rejected. Bank Markazi, a separate juridical
entity with legal personality constituted under the applicable laws and regulations of
Iran, is plainly a “company” as broadly defined by the 1955 Treaty of Amity. Since
the Treaty obligations under Articles III, IV and V are for the benefit of “companies”
149 Telegram of the U.S. Department of State to the U.S. Embassy in Tehran, dated 13 December 1954
(IM, Annex 5).
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including Bank Markazi, the U.S. treatment of the Bank is at least capable of
constituting a breach of these obligations, and therefore falls within the Court’s
jurisdiction pursuant to Article XXI(2).
SECTION 2.
THE “COMPANY OBJECTION” DOES NOT POSSESS A PRELIMINARY CHARACTER
4.31 As demonstrated above, the Court should reject the U.S. objection because Bank
Markazi is a company under a bona fide interpretation of the term “companies” under
the Treaty.
4.32 Additionally, Iran submits that the U.S. objection does not have a preliminary
character.
4.33 Indeed, quite apart from the argument that a central bank cannot, as a matter of
principle, be a “company” under the treaty because it carries out sovereign functions,
the U.S. contention seems to be that Bank Markazi cannot be protected by the Treaty
in this case because in relation to the facts relevant to Iran’s claims it did not perform
“private and commercial activities”150, “private or professional activities”,151 or
“business” activities,152 and was not “engaged in commerce”.153
4.34 However, Bank Markazi’s activities, including in relation to the facts relevant to Iran’s
claims, are plainly “professional”, and even on the U.S. “functional understanding”
approach they are economic in nature. Some of Bank Markazi’s activities are also
performed by private companies (e.g. concluding contracts; owning property; buying
securities), and they pertain to commerce.
150 U.S. Preliminary Objections, p. 96, paras. 9.2.
151 U.S. Preliminary Objections, pp. 102-103, para. 9.16.
152 U.S. Preliminary Objections, p. 104, para. 9.20.
153 U.S. Preliminary Objections, p. 96, para. 9.2; pp. 102-103, para. 9.16 and p. 104, para. 9.20.
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4.35 Therefore, insofar as the U.S. objection requires the Court to make determinations
about the nature of the activities of Bank Markazi in relation to the factual basis of
Iran’s claims, that objection concerns matters which can only be determined at the
merits stage, and is not preliminary in character.154
154 Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Croatia v.
Serbia), Preliminary Objections, Judgment, I.C.J. Reports 2008, pp. 462-463, para. 136; p. 463,
para. 139; and p. 465, para. 143.
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CHAPTER V.
THE U.S. “IMMUNITY OBJECTION” IS MISCONCEIVED
AND MUST BE REJECTED
SECTION 1.
INTRODUCTION
5.1 The U.S. “immunity objection” is premised on a selective exercise in treaty
interpretation, which focuses on the absence of express reference to immunities and
fails to engage with the arguments of treaty interpretation that Iran advanced in its
Memorial. The totality of the U.S. objection is expressed as follows: “None of the
articles of the Treaty Iran relies upon … namely, Articles III(2), IV(1), IV(2), X(1),
and XI(4) – say anything about providing sovereign immunity protections”.155 In
support of its position, the United States contends that FCN treaties, including the
1955 Treaty of Amity, “are not, and were never intended to be, vehicles for codifying
sovereign immunity protections enjoyed by States or other State entities; these
questions were left to be regulated by other rules existing separate from these
treaties”.156
5.2 The U.S. “immunity objection” is misconceived. The test for whether the Court has
jurisdiction over Iran’s relevant claims is not to ask whether the entire Treaty (much
less any other treaty or FCN treaties generally) is a vehicle for codifying the law of
sovereign immunity. The correct approach is to assess whether the proper
interpretation or application of the provisions of the Treaty require consideration of
compliance with the law of immunity, whether because the express wording of the
Treaty’s articles requires reference to those rules by way of renvoi, or for the purpose
of interpretation according to all of the well-established rules of treaty interpretation.
5.3 The United States has failed to engage with Iran’s position that the very nature of the
protections established by these provisions of the Treaty requires consideration of
155 U.S. Preliminary Objections, p. 80, para. 8.6. See also, to the same effect, pp. 93-94, para. 8.32.
156 U.S. Preliminary Objections, p. 80, para. 8.5. See also p. 79, para. 8.2.
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rules of customary international law on immunity (as well as the U.S. laws on
immunity).157 In light of that position, it is plain that Iran’s claims are at least capable
of falling within these provisions, properly interpreted, and therefore within the
Court’s jurisdiction pursuant to Article XXI(2) of the 1955 Treaty of Amity.
5.4 The key point on the rules of interpretation on which the Parties disagree, and which
accordingly requires elaboration in this Chapter, concerns the rule codified in
Article 31(3)(c) of the Vienna Convention. The United States asserts that Iran is using
Article 31(3)(c) “to rewrite the Treaty” and to “import international law unrelated to
the Treaty provisions being interpreted”.158 In that respect, Iran makes the following
five general points:
(a) The rule codified in Article 31(3)(c) of the Vienna Convention requires that any
relevant rules of international law applicable in the relations between the parties
be taken into account, as is evident from the use of the mandatory term “shall”.
(b) The phrase “any relevant rules of international law” implicitly refers to the
“sources of international law” which appear in Article 38(1) of the Statute of the
I.C.J.159 As the I.L.C. Study Group on Fragmentation observed, application of
the rule may therefore require reference to any relevant treaty provisions, rules
of customary international law and/or general principles of international law.160
157 Iran’s Memorial, Chapter V.
158 U.S. Preliminary Objections, pp. 93-95, paras 8.30-8.35.
159 See e.g. Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, I.C.S.I.D. Case
No. ARB/11/28, Decision on Annulment, 30 December 2015, para. 87: “The relevant rules of
international law cover all sources of international law.” The ordinary meaning of the phrase “relevant
rules of international law” is confirmed by the travaux préparatoires to the Vienna Convention: Sixth
report on the law of treaties, by Sir Humphrey Waldock, Special Rapporteur (U.N. Doc. A/CN.4/186
and Add. 1-7), in Y.I.L.C. 1966, vol. II, p. 97, para. 10.
160 I.L.C., Conclusions of the work of the Study group on Fragmentation of International Law: Difficulties
Arising from the Diversification and Expansion of International Law (U.N. Doc. A/CN.4/L.702, 18
July 2006), in Y.I.L.C. 2006, vol. II, part 2, p. 180, para. 18: “Article 31(3)(c) deals with the case where
material sources external to the treaty are relevant in its interpretation. These may include other treaties,
customary rules or general principles of law.” See also e.g. Philip Morris Brand Sàrl (Switzerland),
Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of
Uruguay, I.C.S.I.D. Case No. ARB/10/7 (Professor Piero Bernardini, Professor James Crawford, Mr
Gary Born), Award, 8 July 2016, para. 317.
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(c) The rule codified in Article 31(3)(c) of the Vienna Convention requires that
“any relevant” rules of international law which are applicable are taken into
account. The U.S. assertion that “relevant” is defined as “concern[ing] the
subject matter of the provision at issue” is applied in an inappropriately narrow
manner.161
i. Since the rule codified in the Vienna Convention does not specify any
conditions of relevance, the term “relevant” is to be given its ordinary
broad meaning. Had the drafters intended to confine recourse to such rules
of international law “relating to the same subject matter” as the treaty
being interpreted, they would have used that narrower formulation which
appears in Article 30 of the Convention.162
ii. The Court has confirmed that a rule of international law will be “relevant”
if it has a “certain bearing” on interpretation.163 Similarly, the I.L.C. Study
Group on Fragmentation referred to rules “bearing upon those same facts
as the treaty under interpretation.”164
iii. Contrary to the U.S. suggestion,165 Gardiner does not support its narrow
reading. He explains: “It seems reasonable to take the ordinary meaning
of ‘relevant’ rules of international law as referring to those touching the
same subject matter as the treaty provision or provisions being interpreted
or which in any way affect that interpretation.” 166
161 U.S. Preliminary Objections, p. 44, para. 5.12.
162 Article 30 concerns the application of successive treaties relating to the same subject-matter.
163 Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v. France), Judgment, I.C.J.
Reports 2008, p. 219, para 114. See also Oil Platforms (Islamic Republic of Iran v. United States of
America), Judgment, I.C.J. Reports 2003, p. 161, Separate Opinion of Judge Simma, p. 330, para. 9:
“The Court…thus accepts, and rightly so, the principle according to which the provisions of any treaty
have to be interpreted and applied in light of the treaty law applicable between the parties as well as of
the rules of general international law ‘surrounding’ the treaty.”
164 Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of
International Law – Report of the Study Group of the I.L.C., U.N. Doc. A/CN.4/L.682 (13 April 2006),
para 416.
165 U.S. Preliminary Objections, p. 44, para. 5.12.
166 R. Gardiner, Treaty Interpretation (OUP 2015), p. 299.
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(d) As to the phrase “applicable in the relations between the parties”, the term
“parties” refers to the contracting parties to the treaty being interpreted, in
accordance with the definition of “party” in Article 2(1)(g) of the Vienna
Convention.167
(e) The ordinary meaning of the phrase “applicable in the relations between the
parties” encompasses situations in which the relevant international law rule is
in force between the States Parties to the treaty being interpreted. As the I.L.C.
commentary explains that Article 31(3)(c) was intended to “state only the broad
principle and not attempt to define its results”.168
5.5 The Court has applied the rule in Article 31(3)(c) in numerous cases.169 In the Namibia
Advisory Opinion, for example, the Court interpreted the concept of “sacred trust” by
reference to the Charter of the United Nations and customary international law,
observing that “an international instrument has to be interpreted and applied within
the framework of the entire legal system prevailing at the time of interpretation”.170
In the Oil Platforms case, the United States pursued a substantially similar argument
to the one in the present case, proposing an unduly restrictive role for Article 31(3)(c).
The Court rejected that argument.171
5.6 Contrary to the U.S. contention,172 the Court did not “affirm[] the narrow purpose of
VCLT Article 31(3)(c) in Pulp Mills”. The Pulp Mills case is materially different
because in that case, as the United States notes, Argentina argued that “the ‘referral
167 Article 2(1)(g), Vienna Convention: ““party” means a State which has consented to be bound by the
treaty and for which the treaty is in force”. See also R. Gardiner, Treaty Interpretation, pp. 310-317.
168 Third Report on the Law of Treaties by Sir Humphrey Waldock, Special Rapporteur (U.N.
Doc. A/CN.4/167 and Add. 1-3), in Y.I.L.C. 1964, vol. II, p. 61.
169 See e.g. Aegean Sea Continental Shelf, Judgment, I.C.J. Reports 1978, pp. 34-35, para. 80,
Kasikili/Sedudu Island (Botswana/Namibia), Judgment, I.C.J. Reports 1999 (II), p. 1059, para. 18 and
Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v France), Judgment, I.C.J.
Reports 2008, p. 219, paras 112-114.
170 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West
Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports
1971, p. 31, para. 53.
171 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 817, paras. 41-43.
172 U.S. Preliminary Objections, pp. 45-46, para. 5.15.
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clauses’ contained in these articles [of the 1975 Statute between Argentina and
Uruguay] make it possible to incorporate and apply obligations arising from other
treaties and international agreements binding on the Parties”.173 The Court rejected
that argument based on the specific language of the purported “referral clause”,174
rather than adopting a narrow interpretation of Article 31(3)(c). Indeed, that provision
is not even mentioned in the Judgment.
5.7 The U.S. contentions that certain of Iran’s claims are premised on a defective treaty
interpretation analysis and amount to an attempt to apply customary international law
rather than the 1955 Treaty of Amity, are without basis. In its Memorial, and in these
Observations and Submissions, Iran applies the well-established principles of treaty
interpretation referred to above, to the provisions of the Treaty upon which it relies.
5.8 In the remainder of this Chapter, Iran addresses the provisions of the Treaty put in
issue by this aspect of the U.S. objection to jurisdiction (sections 2 to 5), before
responding to the U.S. position that the Treaty was negotiated and concluded in
isolation from the law of sovereign immunity (section 6).
SECTION 2.
ARTICLE III(2) OF THE TREATY OF AMITY
5.9 The U.S. abrogation of Bank Markazi’s entitlement to freedom of access to the U.S.
courts, and in particular its right to put forward and to be granted immunity defences,
is at least capable of falling within Article III(2), and is therefore within the Court’s
jurisdiction pursuant to Article XXI(2).
5.10 In its Memorial, Iran explained that Article III(2) is comprised of two elements, both
of which apply to “companies” without qualification. The first element entitles Iranian
companies to a comprehensive and unqualified right to freedom of access to the courts
173 Pulp Mills on the River Uruguay (Argentina v. Uruguay), I.C.J. Reports 2010, p. 43, para 56 and p. 45,
para 61.
174 Pulp Mills on the River Uruguay (Argentina v. Uruguay), I.C.J. Reports 2010, pp. 45-46, paras. 62-63.
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of justice and administrative agencies of the United States.175 The second element
requires that such access must be allowed, “in any event”, on terms no less favourable
than those applicable to companies of the United States or of any third country. Iran
also explained that its right to freedom of access to the U.S. courts for its companies
and nationals “in all degrees of jurisdiction” and “both in defence and pursuit of” the
rights of the given company or national “to the end that prompt and impartial justice
be done” under Article III(2) of the 1955 Treaty of Amity includes, on its ordinary
meaning, the entitlement to raise applicable rights to immunity and to be granted
applicable immunities from jurisdiction and enforcement.176
5.11 The United States accepts that Article III(2) requires access for Iranian companies to
the U.S. judiciary.177 However, the United States contends that Article III(2) excludes
any right for Iranian companies (including Iranian State-owned companies) to raise
and to be granted applicable immunities from jurisdiction and enforcement.178 In
raising this objection, the United States has failed to engage with Iran’s submissions
regarding the proper interpretation of the text of the provision. Indeed, the United
States has not challenged Iran’s position that Article III(2) grants “the most
comprehensive” and unqualified right of freedom of access to the U.S. courts.179
Instead, the United States confines its objection to the absence of any express
reference to immunities.180 That is a selective approach to treaty interpretation which
should be rejected.181 There is nothing whatsoever in Article III(2) to suggest that only
certain forms of access or certain pleas are protected. The question, for present
purposes, is whether Iran’s claim that access to the U.S. judiciary is being denied to
175 Iran’s case on Article III(2) of the 1955 Treaty is as set out at Iran’s Memorial, Chap V(1), paras. 5.2
to 5.18.
176 Iran’s Memorial, p. 79, para. 5.5 and pp. 85-86, paras. 5.17-5.18.
177 U.S. Preliminary Objections, p. 80, para. 8.6 and pp. 93-94, para. 8.32.
178 U.S. Preliminary Objections, p. 95, para. 8.36: “Iran cannot rely on Article[] III(2)…as a basis for
jurisdiction over sovereign immunity-related claims.”
179 Iran’s Memorial, p. 79, para. 5.4.
180 U.S. Preliminary Objections, p. 80, para. 8.6: Article III(2) does not “say anything about providing
sovereign immunity protections”.
181 See further Section 1 supra.
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Iranian companies (through inter alia a denial of immunity) is capable of falling
within Article III(2). Plainly it is.
5.12 Additionally, the United States has mischaracterised Iran’s argument that
Article XI(4) of the Treaty forms part of the context and confirms that the Parties did
not intend to waive immunities for activities jure imperii.182 The United States
contends that this provision is a “key element of the Treaty’s effort to level the playing
field between State enterprises and their private counterparts engaged in activities in
the specific fields governed by the Treaty”.183 As to this, there is some common
ground between the Parties as to the aim of Article XI(4), as follows from Iran’s
Memorial.184 However, the United States then contends that Article XI(4) “in no way
indicates that the Treaty was also intended to be a source of affirmative sovereign
immunity rights”.185 This is to confuse the issue. It is not Iran’s case that the 1955
Treaty of Amity is a source of sovereign immunity rights in that it aims to be a code
on sovereign immunity. Rather, the Treaty contains an important series of protections
which, by reference to their own terms, may protect rights to immunities that have
their source in customary international law (and U.S. law).
5.13 The United States seeks to rely on Iran’s pleadings in domestic proceedings before
U.S. courts to the effect that Article XI(4) did not waive the immunity of the State
itself as compared to its “enterprises” as support for the separate proposition that Iran
did not believe that Article XI(4) had any effect on immunity.186 However, once again,
the United States mischaracterises Iran’s position. It is disingenuous to expect Iran to
argue that Article XI(4) constitutes a general waiver of sovereign immunity – a
position contrary to the text, context and object and purpose of the Treaty as well as
Iran’s legal position. Iran’s argument is different and straightforward – that
Article XI(4) places no limit on the right to rely on immunity in respect of acts jure
182 U.S. Preliminary Objections, Chapter 8, section C.
183 U.S. Preliminary Objections, p. 82, para. 8.10.
184 Iran’s Memorial, p. 80, para. 5.8.
185 U.S. Preliminary Objections, p. 82, para. 8.10 and pp. 87-89, paras. 8.21 to 8.23.
186 U.S. Preliminary Objections, para. 8.23, and see e.g. U.S. PO Annex 230, at 31.
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imperii and confirms by strong implication the existence of a Treaty obligation that
such immunity must be upheld.187
5.14 While Iran maintains that Article XI(4) imposes an implied obligation to grant
immunities for activities jure imperii, the relevance of that provision for the purposes
of the interpretation of Article III(2) does not depend on the existence of such an
implied obligation.188
5.15 Nor do the U.S. arguments on Iran’s alleged practice regarding Article XI(4) have any
bearing on the interpretation of Article III(2). In this respect, the United States claims
that Iran and certain Iranian State entities have “passed up numerous opportunities in
litigation before U.S. courts to claim sovereign immunity as a Treaty right”.189 It refers
to two cases, one diplomatic note, and Iranian parliamentary debates. Each of these
will be addressed briefly in turn.
5.16 First, as to the 5th Circuit proceeding in 1979-81 concerning a contract action against
Iran, its Social Security Organization and the Ministry of Health and Welfare:190
(a) In the case, Iran emphasised that the Treaty did not apply to the Government of
Iran but only to its enterprises, but this was said in relation to Article XI(4), not
Articles X or III(2) which were not in issue in the domestic proceedings.
(b) Iran argued that the Treaty did not constitute a general waiver of sovereign
immunity – a position that Iran maintains in this case.191 The simple and correct
point that Iran was making in its pleadings before the U.S. court was that
Article XI(4) “cannot be seen as removing sovereign immunity from all
government agencies that have any contact with the territories of the other state,
187 See Iran’s Memorial, para. 5.8.
188 See Iran’s Memorial, p. 83, para. 5.13: “Related to this, the U.S. legislative, executive and judicial
measures have also breached the implied obligation under Article XI(4) of the 1955 Treaty of Amity
so far as concerns acts jure imperii and/or where State of Iran and Iranian State-owned companies did
not engage in commercial activities within the United States.”
189 U.S. Preliminary Objections, Chapter 8, section B, paras. 8.2 and 8.13.
190 U.S. Preliminary Objections, pp. 84-85, paras. 8.14 to 8.16.
191 U.S. Preliminary Objections, p. 84, para 8.14; U.S. PO Annex 228 at 35.
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but only those government “enterprises” in competition with domestic
enterprise and operated for a profit.”192
(c) The United States seeks to infer from the fact that Iran’s arguments before the
U.S. courts were based on the U.S. Foreign Sovereign Immunities Act (“FSIA”),
rather than the 1955 Treaty, a concession that the Treaty did not provide the basis
for Iran’s invocation of immunity. No such concession may be inferred. Iran’s
reliance on the FSIA provisions on waiver, the commercial activity exception,
prejudgment attachment, and immunity from execution of funds and assets193
makes perfect sense in a proceeding before a U.S. court. The fact that the FSIA
provided the “governing framework”194 for questions of immunity under U.S.
law before U.S. courts does not exclude the relevance of the Treaty’s provisions
on immunity under international law in international proceedings.
(d) In any event, this is a proceeding from over 35 years ago, taking place in the
difficult period directly following the Revolution, when Iran was involved in
over 400 cases and had difficulties in getting appropriate instructions to
those representing it in the United States.
5.17 Secondly, as to the enforcement proceedings before the 2nd Circuit in the Peterson
case, the United States claims that Bank Markazi cast its arguments in terms of the
FSIA rather than the Treaty of Amity.195 The stance adopted by Bank Markazi is of
no assistance to the United States:
(a) First, the Defendant in that case was not Iran but Bank Markazi, a separate entity
conducting its own litigation.
(b) Second, as stated just above, it was appropriate for Bank Markazi to invoke the
FSIA in U.S. domestic proceedings.
192 U.S. PO, Annex 228, p. 33, emphasis in original. The same point is made in U.S. PO, Annex 230 at
p. 30.
193 U.S. PO, Annex 228, pp. 13-14, 36-42, 44.
194 U.S. Preliminary Objections, p. 85, para. 8.16.
195 U.S. Preliminary Objections, pp. 85-86, para. 8.17.
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(c) Third, the United States incorrectly contends that the fact that Bank Markazi
“did not allege a breach [of the Treaty] based on the lower court’s denial of
Iran’s claim that the assets enjoyed sovereign immunity” means that the Bank
(and Iran) believed that sovereign immunity did not arise under the Treaty.196 In
fact, Bank Markazi’s pleading explains that 22 USC § 8772 (in the “Iran Threat
Reduction and Syria Human Rights Act of 2012” – “ITRSHRA”):
“includes particularized language providing that it applies
“notwithstanding any other provision of law, including any provision of
law relating to sovereign immunity, and preempting any inconsistent
provision of State law[.]” 22 U.S.C. § 8772(a)(1) (emphasis added). Thus,
Congress was quite specific about which “provision[s] of law” it intended
to abrogate in § 8772 – yet Congress failed to include any reference
whatsoever to the Treaty in § 8772.”197
It is thus unsurprising that Bank Markazi did not plead that the sovereign immunity
arose under the Treaty. It was pleading within the specific meaning, and for the limited
purpose, of the ‘notwithstanding clause’ in 22 USC § 8772.198
5.18 Thirdly, the United States seeks to rely on the absence of any explicit reference to the
Treaty in the 1998 Iranian Diplomatic Note objecting to initial judgments entered
against Iran.199 The purpose of this short (1.5) page note is not to provide a
comprehensive legal argument but succinctly and urgently to convey Iran’s protest
against the U.S. actions. In any event, the note expressly states that Iran’s property
“enjoys immunity under international treaty obligations of the United States”.
5.19 Finally, the United States claims that the Iranian parliamentary debates on legislation
stripping the United States of immunity contain no explicit reference to the measures
“as a response to perceived violations of the Treaty”.200 The absence of express
reference to the Treaty is irrelevant. It was not in issue in the parliamentary debates.
196 U.S. Preliminary Objections, pp. 86-87, para. 8.18 (emphasis in original).
197 U.S. PO, Annex 233, p. 43.
198 U.S. Preliminary Objections, p. 86, para. 8.18, fn. 348. In any event, the proposition that the 1955
Treaty does not concern state immunity in particular is to be distinguished from a concession that it
does not concern state immunity at all.
199 U.S. Preliminary Objections, p. 86, para. 8.17 citing IM, Annex 89.
200 U.S. Preliminary Objections, p. 86, para. 8.17.
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If anything, these debates suggest that the Iranian legislation was intended as a
counter-measure in response to the U.S. violations, which indeed it was.201
5.20 The above instances do not come close to establishing relevant subsequent practice.
Indeed, subsequent practice is only relevant if it gives rise to an “agreement between
the parties regarding the interpretation of the treaty or the application of its
provisions”.202 The instances cited by the United States do not demonstrate any
“agreement” between the Treaty Parties that the 1955 Treaty of Amity does not
contain protections which, by reference to their terms, may protect rights to
immunities under customary international law. As a leading commentator observes:
“The interpretative value of subsequent practice, which by definition is not a formal,
textual agreement, is wholly dependent on the practice being concordant, the
agreement being that of all parties and the resultant interpretation being a single
autonomous one”.203 Moreover, the United States cites Iranian practice rejecting an
interpretation of the treaty as a general waiver of immunity, which is different to
practice showing Iran did not consider immunity to arise at all under the Treaty.
5.21 On a proper interpretation of Article III(2), the U.S. abrogation of Bank Markazi’s
right to put forward, and to be granted, immunity defences which the United States
does not deny it would otherwise enjoy (like the central banks of third states) as a
matter of U.S. law, and to which it is entitled under customary international law, is at
least capable of falling within that provision.204 This interpretation is supported by
reference to the travaux, which shows that the Treaty Parties agreed that the definition
of “companies” extends to state-owned companies,205 such that issues of immunity
might arise and be subject to the limited waiver in Article XI(4). Accordingly, the
Court has jurisdiction ratione materiae to determine this aspect of Iran’s claim
pursuant to Article XXI(2).
201 See e.g. U.S. PO, Annex 167, p. 2 & U.S. PO, Annex 168, p. 2.
202 Article 31(3)(b) VCLT (emphasis added).
203 R. Gardiner, Treaty Interpretation (OUP 2015), p. 268.
204 Iran’s Memorial, pp. 81-83, paras. 5.12 to 5.13. Contrary to the U.S. contention, at fn. 371 of its
Preliminary Objections, the appropriate comparison under Article III(2) is to the treatment of foreign
central banks. See further Iran’s Memorial, p. 85, para. 5.17.
205 See pp. 43-44, paras. 4.26 to 4.29 supra. See also Iran’s Memorial, pp. 65-66, para. 4.5.
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SECTION 3.
ARTICLE IV(1) OF THE TREATY OF AMITY
5.22 The U.S. (undisputed) abrogation of immunities to which Bank Markazi is entitled is
at least capable of constituting a breach of the entitlement of Iranian companies to fair
and equitable treatment, and/or freedom from unreasonable or discriminatory
treatment that would impair legally acquired rights and interests, under Article IV(1).
The alleged breach therefore falls within the Court’s jurisdiction pursuant to
Article XXI(2).
5.23 In its Memorial, Iran has shown that the U.S. acts constitute numerous breaches of
Article IV(1).
5.24 As to the first protection contained within Article IV(1), fair and equitable treatment:
(a) The U.S. acts are arbitrary, grossly unfair, unjust and idiosyncratic.206 The U.S.
abrogation of the immunities to which Bank Markazi is entitled, and which
protect its property, are both egregious and inconsistent with the practice of all
other States (save for Canada).207
(b) The U.S. acts are discriminatory.208 Bank Markazi has been singled out (along
with other Iranian companies) and denied the generally available and
elementary immunity defence afforded to the property of a central bank from
enforcement. The discriminatory nature of the U.S. measures is emphasised by
the fact that they are contrary to customary international law and are not
mirrored generally in the practices of other States,209 and that U.S. legislation
(Section 502 of the ITRSHRA) has gone so far as to target Bank Markazi
206 Iran’s Memorial, pp. 96-97, para. 5.44.
207 See Iran’s Memorial, Chapter III, Section 2(A)(a)(ii), p. 55, para. 3.29.
208 Iran’s Memorial, pp. 97-98, para. 5.45.
209 See Iran, Memorial, Chapter III, Section 2(A)(a)(ii), p. 55, paras. 3.29 to 3.30.
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specifically and individually in the Peterson case, removing available defences
under U.S. law with retroactive effect.210
(c) The unreasonable and discriminatory nature of the U.S. measures is emphasised
by their being inconsistent with customary international law and the practices
of other States (including the United States prior to the changes to the FSIA at
issue in this case),211 and the very specific targeting that U.S. legislation has
effected (including with retroactive effect). The impairment of Bank Markazi’s
legally acquired rights is manifest, since it has been deprived of massive sums
in which it has a legal or beneficial interest.
(d) The U.S. acts involve a lack of due process leading to an outcome which offends
judicial propriety and/or have resulted in a denial of justice so far as concerns
Bank Markazi.212 Through legislative and executive fiat, Bank Markazi has been
denied the right (i) to raise and (ii) be granted an immunity defence.
(e) The U.S. acts have defeated and continue to defeat the legitimate expectations
of Bank Markazi that it and its property would not be specifically targeted
through the enactment of legislation having discriminatory and/or retroactive
effect and that, in light of the obligations assumed by the Parties to the 1955
Treaty, applicable principles of sovereign immunity under international law
would be respected.213
5.25 Contrary to the U.S. position,214 Iran’s claims under Article IV(1) are limited to
breaches of entitlements owed to Iranian companies (including State-owned
companies).215 In determining those claims, and in particular the alleged breach of fair
210 Bank Markazi v. Peterson et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), joint dissenting
opinion of Roberts CJ and Sotomayor J, at pp. 7-8 (IM, Annex 66).
211 Iran’s Memorial, Chapter II, Section 1, p. 16, para. 2.4.
212 Iran’s Memorial, p. 98, para. 5.46.
213 Iran’s Memorial, pp. 98-99, para. 5.47.
214 U.S. Preliminary Objections, p. 93, para. 8.30, fn. 368 and p. 100, para. 9.11, fn. 394.
215 Iran’s Memorial, p. 96, para. 5.43: “As to the first protection contained within Article IV(1), the
obligation at all time to accord fair and equitable treatment to (inter alia) Iranian companies and their
property and enterprises, the acts of the USA have, and continue to, cut across each of the elements of
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and equitable treatment, the Court must consider the relevant factual and legal context
i.e. the U.S. abrogation of sovereign immunities.216
5.26 Rather than engaging with Iran’s arguments regarding the interpretation of
Article IV(1), as in relation to Article III(2), the U.S. objection is limited to the
observation that the express terms of Article IV(1) do “not say anything about
providing sovereign immunity”.217 That adds nothing. The question (for now) is
whether the terms of Article IV(1) may be engaged, not whether the words “sovereign
immunity” are expressly referred to in that provision. The United States also observes
that in its Judgment in the Oil Platforms case the Court found that this provision did
not “lay down any norms applicable to th[at] particular case”, and therefore did not
form a basis of jurisdiction.218 That specific finding is not relevant in the present case
and does not support the U.S. objection to jurisdiction.
SECTION 4.
ARTICLE IV(2) OF THE TREATY OF AMITY
5.27 The U.S. abrogation of immunities to which Bank Markazi is entitled is at least
capable of constituting a breach of the right to the most constant protection and
security under Article IV(2), and therefore falls within the Court’s jurisdiction
pursuant to Article XXI(2).
5.28 As Iran explained in its Memorial, the first limb of Article IV(2) entitles Iranian
companies to the right to most constant protection and security of their property “in
no case less than that required by international law”.219
identified in paragraph 5.26 supra, and have thereby breached this first limb of Article IV(1).” See also
pp. 98-99, para. 5.47.
216 See Iran’s Memorial, pp. 96-97, para. 5.44(a) and (d).
217 U.S. Preliminary Objections, p. 80, para. 8.6.
218 U.S. Preliminary Objections, pp. 42-43, para. 5.8 citing Oil Platforms (Islamic Republic of Iran v.
United States of America), Preliminary Objection, Judgment, I.C.J. Reports 1996, p. 816, para. 36.
219 Iran’s Memorial, pp. 100-102, paras. 5.52 to 5.57.
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5.29 The United States does not deny that the protection required under Article IV(2)
extends to legal as well as physical protection.220 Indeed, the U.S. agreement on this
issue is established by its submissions before the Chamber in the ELSI case with
respect to Article V(1) of the 1948 Italy-United States FCN Treaty.221
5.30 Rather than engaging with the Iran’s arguments regarding the interpretation of
Article IV(2), again, the U.S. objection is limited to the observation that the express
terms of Article IV(2) do “not say anything about providing sovereign immunity”.222
However, the ordinary meaning of the entitlement to the most constant protection and
security “in no case less than that required by international law” under Article IV(2)
requires reference to, and compliance with, rules of customary international law as
they exist from time to time, including the law of immunity. Accordingly, those rules
of customary international law are incorporated by reference and are directly
applicable as the “floor” of protection afforded by Article IV(2) of the Treaty.
5.31 In a similar way to the terms of Article IV(2), the renvoi to “other rules of international
law ” in Article 2(3) of the U.N. Convention on the Law of the Sea223 was found by
the Annex VII tribunal in the Chagos Islands case to impose an obligation on parties
to exercise sovereignty in the territorial sea subject to the general rules of international
law.224 Accordingly, the tribunal held that “general international law requires the
United Kingdom to act in good faith in its relations with Mauritius, including with
respect to undertakings”.225 The renvoi was not interpreted as being restricted in a
manner equivalent to that now sought by the United States.
220 See Iran’s Memorial, p. 101, para. 5.57 citing Elettronica Sicula S.p.A. (ELSI), Judgment, I.C.J. Reports
1989, p. 66, para. 111, applying Article V(1) of the 1948 Italy-United States FCN Treaty. Compare,
U.S. Preliminary Objections, pp. 90-92, paras. 8.25-8.29, which address only the question whether
Article IV(2) requires compliance with the law of state immunity.
221 Elettronica Sicula S.p.A. (ELSI), Judgment, I.C.J. Reports 1989, pp. 65-66, para. 109 recording the
U.S. submission that “the Respondent violated its obligations [to afford constant protection and
security] when it unreasonably delayed ruling on the lawfulness of the requisition for 16 months”.
222 U.S. Preliminary Objections, p. 80, para. 8.6.
223 Article 2(3) reads: “sovereignty over the territorial sea is exercised subject to this Convention and to
other rules of international law”.
224 Chagos Marine Protected Area Arbitration (The Republic of Mauritius v The United Kingdom of Great
Britain and Northern Ireland), Award, 18 March 2015, paras. 514-516.
225 Ibid. para. 517.
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5.32 The undisputed seizure of the security entitlements of Bank Markazi to the amount of
amount of USD 1.895 billion in the Peterson proceedings226 is at least capable of
constituting a breach of Bank Markazi’s entitlement to the most constant protection
and security for its property under Article IV(2) of the Treaty. Such breach includes
the denial to Bank Markazi of protection as required by international law in the form
of immunities from enforcement so far as concerns its property, as well as the denial
to Bank Markazi of any form of legal defence so far as concerns protection of its
property in the Peterson case (see the impact of Section 502 of the ITRSHRA).227
Accordingly, the Court has jurisdiction over this aspect of Iran’s claim pursuant to
Article XXI(2) of the Treaty.
SECTION 5.
ARTICLE X(1) OF THE TREATY OF AMITY: BREACH BY THE UNITED STATES OF
IRAN’S ENTITLEMENT TO FREEDOM OF COMMERCE BETWEEN THE TERRITORIES
OF IRAN AND THE UNITED STATES
5.33 The U.S. abrogation of immunities to which Bank Markazi is entitled is likewise at
least capable of constituting a breach of the right to freedom of commerce between
the territories of Iran and the United States under Article X(1). Thus it also falls within
the Court’s jurisdiction pursuant to Article XXI(2).
5.34 It is common ground that Article X(1) is to be interpreted as per the Court’s Judgment
in the Oil Platforms case.228 As Iran explained in its Memorial: (a) the meaning of
“commerce” “includes commercial activities in general” as well as “ancillary
activities integrally related to commerce”;229 (b) any act capable of impeding
226 Peterson et al. v. Islamic Republic of Iran et al., U.S. District Court, Southern District of New York,
28 February 2013, 2013 U.S. Dist. LEXIS 40470 (S.D.N.Y. 2013) (IM, Annex 58), confirmed by
Peterson et al. v. Islamic Republic of Iran et al., U.S. Court of Appeals, Second Circuit, 9 July 2014,
758 F.3d 185 (2nd Cir. 2014) (IM, Annex 62) and, subsequently, by Bank Markazi v. Peterson et al.,
U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016) (IM, Annex 66).
227 Iran’s Memorial, p. 103, para. 5.60.
228 U.S. Preliminary Objections, p. 94, para. 8.34.
229 Iran’s Memorial, p. 113, para. 6.13. In this connection, Iran notes that the United States accepts the
“integrally related” test: see U.S. Preliminary Objections, p. 94, para. 8.34.
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“freedom of commerce” falls within Article X(1);230 and (c) the provision protects
freedom of commerce “[b]etween the territories of the two High Contracting
Parties”.231
5.35 While the United States reiterates its basic point that Article X(1) does not “say
anything about providing sovereign immunity protections”,232 it does not dispute
Iran’s interpretation of “freedom of commerce” as a “broad concept”.233 The Court’s
Judgment in the Oil Platforms case demonstrates that the absence of express language
could not be decisive. Notwithstanding the absence of any express definition of
“commerce”, the Court has held that that term is not to be interpreted narrowly as “the
immediate act of purchase and sale”, but also encompasses “the ancillary activities
integrally related to commerce”.234
5.36 The entitlement to sovereign immunities of the State of Iran, and the entitlement of
central bank immunities of Bank Markazi, are “integrally related” to “freedom of
commerce” between the territories of the Treaty Parties.235 The U.S. rejection of this
proposition rests on its narrow reading of the two concepts of “freedom of commerce”
and “sovereign acts” as mutually exclusive.236 The U.S. interpretation wrongly
conflates the broad concept of “freedom of commerce” in the 1955 Treaty of Amity
with the entirely separate and narrower concept of acts jure gestionis (which it
characterises as “commercial or private acts”) in the law of state immunity.
5.37 In its Memorial, Iran explained that “[t]he essential duty of a central bank is to serve
as the guardian and regulator of the monetary system and currency of that State both
230 Iran’s Memorial, p. 113, para. 6.14.
231 Iran’s Memorial, p. 113, para. 6.15.
232 U.S. Preliminary Objections, para. 8.6.
233 Iran’s Memorial, p. 114, para. 6.16.
234 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 819, para. 49. See supra, pp. 15-17, paras. 2.15-2.17.
235 See p. 42, para. 4.24 supra.
236 U.S. Preliminary Objections, p. 94, para. 8.34: “Iran fails to explain how a commercial treaty provision
relating to freedom of commerce…can coherently be understood to create obligations relating to the
circumstances in which the Parties will afford sovereign immunity protections to each other’s sovereign
acts.”
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internally and internationally. Central banks therefore play a key role in the exercise
of a State’s monetary sovereignty.”237 As the tribunal in Gold Looted by Germany
from Rome in 1943 observed, the performance of central banking activities “affects
the economic prosperity of the entire community”.238 The United States accepts that
“the Treaty of Amity does expressly address central banking activities, in Article VII
concerning the application of exchange restrictions”.239 In this connection,
Article VII(3) explicitly recognises that such central banking activities may “influence
… the commerce, transport or investment of capital”.240 Such central banking
activities are clearly in the exercise of sovereign authority irrespective of whether the
central bank is a “company” within the definition of Article III(1).
5.38 In the case of Bank Markazi, which is a “company”, it is common ground between the
Parties that Iran’s Monetary and Banking Act 1972 provides that Bank Markazi “shall
have the task of formulating and implementing monetary and credit policies on the
basis of the general economic policy of the State”, and that the “objectives of the
Central Bank of the Islamic Republic of Iran are to maintain the value of the currency
and the equilibrium in the balance of payments, to facilitate trade transactions, and to
assist the economic growth of the country.”241 Indeed, as noted in Chapter I above,
Bank Markazi inter alia provides foreign exchange with respect to Iranian foreign
trade and hence it has a role to play so far as concerns the USD multi-billion purchases
by Iranian companies of new Boeing aircraft and other commercial transactions
permitted under U.S. existing laws and regulations. It follows that the U.S.
interference with the functions of a central bank such as Bank Markazi through the
abrogation of immunities to which it is entitled are at the very least capable of
237 Iran’s Memorial, p. 53, para. 3.24.
238 See e.g. Gold Looted by Germany from Rome in 1943 (USA/France/UK/Italy), Award of 20 February
1953, 20 I.L.R. 441, p. 474: “Even when they take the form of purely private financial establishments,
or semi-private, the banks invested with the exclusive privilege of issuing bank-notes recognized as
legal tender and valid for payments, discharge a function which affects the economic prosperity of the
entire community, since they have to regularize all money transactions. When creating them, the State
aimed less at drawing profits from their activity than at making the whole national community share
the advantages of monetary stability.”
239 U.S. Preliminary Objections, p. 102, para. 9.15, fn. 404.
240 See also Article VIII(5) of the 1955 Treaty.
241 Monetary and Banking Act, Article 10(a) and (b) (IM Annex 73) quoted at U.S. Preliminary Objections,
pp. 97-98, para. 9.5. See also Iran’s Memorial, pp. 66-67, para. 4.7.
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interfering with the “freedom of commerce” between the territories of the Parties to
the same extent as the blockading of a harbour or the blowing up of an oil platform,
but in fact rather more so.242
SECTION 6.
RESPONSE TO THE U.S. CONTENTION THAT THE 1955 TREATY OF AMITY WAS
NOT INTENDED TO CODIFY THE LAW OF SOVEREIGN IMMUNITY
5.39 Finally, as a separate matter, Iran will respond to the U.S. contention that FCN treaties,
including the 1955 Treaty of Amity, “are not, and were never intended to be, vehicles
for codifying sovereign immunity protections enjoyed by States or other State entities;
these questions were left to be regulated by other rules existing separate from these
treaties”.243 As explained above, this is not the correct test for present purposes. Nor
is it correct in fact.
5.40 The Treaty Parties envisaged that issues of immunity would arise within the scope of
the protections under the Treaty, subject to the limited waiver in Article XI(4). That
indeed is evident from the text of Article XI(4). As noted in Chapter IV above, the
term “companies” as defined in Article III(1) encompasses any kind of corporate
entity, including those wholly or partly owned or controlled by the State, and without
regard to the nature of their activities. It covers government instrumentalities and
agencies that enjoy separate juridical status and immunity for acts in the exercise of
sovereign authority.
5.41 In principle, any type of company may be directed or empowered by the State to
perform certain sovereign functions. For example, private companies may be directed
or empowered to take custody of prisoners in prisons, or to perform certain police
functions on railways. Immunity may attach to the performance of those functions,
and the State has a right to have its immunity respected when bodies that it has directed
242 In this connection, as to the scale of the U.S. interference with “freedom of commerce”, Iran recalls
that in the Peterson proceedings also the U.S. courts have seized and turned over the ‘blocked assets’
of Bank Markazi of USD 1.895 billion in security entitlements.
243 U.S. Preliminary Objections, p. 80, para. 8.5. See also p. 79, para. 8.2.
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or empowered to act on its behalf do so act. But state-owned/controlled companies are
more likely to be acting in the exercise of sovereign authority and to benefit from State
immunity.
5.42 The United States asserts that the reference to consular immunities in the Treaty
implies that other immunities are not included in the Treaty’s scope.244 However, the
express reference to some types of immunity (consular) and certain aspects of
sovereign immunity (waiver under Article IX(4)) merely shows that rules of
international law on immunity were envisaged as properly arising under in the Treaty.
Nowhere does the Treaty state or imply that no issues of immunity other than those
expressly mentioned may be considered. Rather, issues of immunity fall to be
considered and resolved like any other rules of international law relevant to the Treaty
(as well as by reference to U.S. law where this is applicable by virtue of the most
favoured nation provision in Article III(2)). In this respect, the drafters expressly
referred to other rules of international law, for example through the language of
Article IV(2), discussed above.
5.43 For the United States, the “object and purpose” of the Treaty “does not logically relate
to” sovereign immunity. It is said to be concerned with commercial and consular
relations.245 But the quotation from Oil Platforms relied on by the United States
confirms the broad scope of the Treaty, and likewise the fact that the Treaty is
concerned with “access to courts and arbitration” and “safeguards for the nationals
and companies of each of the contracting parties as well as their property and
enterprises”, both of which are, according to the test applied by the Court in Oil
Platforms, “integrally related” to the law of immunity.246 The question for present
purposes is whether the protections under the Treaty are capable of engaging the rules
on immunity. Plainly they are.
244 U.S. Preliminary Objections, p. 5, para. 1.14 and pp. 80-81, para. 8.7.
245 U.S. Preliminary Objections, p. 81, para. 8.8 quoting Oil Platforms (Islamic Republic of Iran v. United
States of America), Preliminary Objection, Judgment, I.C.J. Reports 1996, p. 813, para. 27.
246 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 813, para. 27. See supra, pp. 62-63, paras. 5.34-5.35.
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5.44 Contrary to the U.S. suggestion, it is not Iran’s case that the Treaty should be
interpreted as “incorporating … all of the provisions of international law” concerning
peaceful and friendly relations between the two States.247 Rather, the Treaty is to be
interpreted, inter alia, by reference to its terms, including any renvoi, and taking into
account those relevant rules of international law that are applicable between the Treaty
Parties.248
5.45 In its Judgment in the Oil Platforms case, the Court did not limit the Treaty’s object
and purpose to commercial and consular relations, but recognised that the Treaty was
intended to foster the “harmonious development of their commercial, financial and
consular relations” that would in turn reinforce friendly relations between the Treaty
Parties.249 Rules that facilitate such harmonious development include the rules of
immunity allocating jurisdiction between the Treaty Parties and protecting acts in the
exercise of sovereign authority from foreign judicial scrutiny. Rules on other aspects
of international law, such as rules on maritime delimitation for example, are not
relevant to such relations between the Treaty Parties.
5.46 The United States claims that, in 1955, there was a diversity of views regarding the
absolute or restrictive theories of sovereign immunity so the Treaty text would have
to be specific to confirm what view the Treaty Parties saw as operative between
them.250 However, three years prior to the adoption of the 1955 Treaty, the United
States made clear its position in the Tate Letter of 1952.251 Moreover, the Treaty text
was specific as to the restrictive doctrine in Article XI(4), which is identical to
Article XVIII(3) in the U.S. Standard Draft FCN Treaty. As the Sullivan Study
observes, “Article XVIII(3) was, of course, a clear application of the restrictive theory
and in harmony with the Tate letter”.252
247 See U.S. Preliminary Objections, p. 81, para. 8.9.
248 See supra, pp. 31-32, paras. 3.13-3.15 and pp. 47-51, paras. 5.2-5.7.
249 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 814, para. 28.
250 U.S. Preliminary Objections, pp. 82-83, para. 8.11.
251 U.S. PO Annex 225.
252 C. Sullivan, “Treaty of Friendship, Commerce and Navigation, Standard Draft”, U.S. Department of
State (1962), pp. 271-272 (IM, Annex 20).
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5.47 The United States argues that the travaux do not include any statements indicating
that the Treaty would affect the immunity of the State or afford immunity to Stateowned
companies.253 It relies exclusively on three cables between the U.S. Embassy
in Tehran and the U.S. State Department.254 These cables are merely a snapshot in
time of a complex negotiating process, and cannot be relied upon as definitive
evidence of the Parties’ intentions.
253 U.S. Preliminary Objections, p. 83, para. 8.12.
254 IM, Annex 2; U.S. PO, Annexes 226-227.
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CHAPTER VI.
ARTICLE XX(1) OF THE 1955 TREATY OF AMITY
DOES NOT EXCLUDE THE MATTERS SPECIFIED THEREIN
FROM THE JURISDICTION OF THE COURT
6.1 The U.S. objection regarding Article XX(1) of the 1955 Treaty of Amity is limited to
only one aspect of Iran’s claims, namely the alleged breaches occasioned by the
adoption and implementation of Executive Order 13599.255 The United States
contends that, pursuant to Article XX(1)(c) and/or (d), “Executive Order 13599 is
placed firmly outside the four corners of the Treaty and hence outside the Court’s
jurisdiction”.256 This objection is misconceived, since it lacks a textual basis and is
inconsistent with the Court’s case law. It should also be dismissed. Properly
construed, Article XX(1) of the Treaty provides for a potential defence on the merits
by excusing conduct which would otherwise amount to a breach: it does not exclude
such matters from the scope of the Treaty.
6.2 As the Court observed in its Judgment in the Oil Platforms case, the starting point is
that “the Treaty of 1955 contains no provision expressly excluding certain matters
from the jurisdiction of the Court”.257 Instead, Article XX (1) provides, so far as
relevant:
“The present Treaty shall not preclude the application of measures:
...
(c) regulating the production of or traffic in arms, ammunition and implements
of war, or traffic in other materials carried on directly or indirectly for the
purpose of supplying a military establishment; and
(d) necessary to fulfill the obligations of a High Contracting Party for the
maintenance or restoration of international peace and security, or necessary to
protect its essential security interests.”
255 U.S. Preliminary Objections, pp. 4-5, para. 1.12; p. 62, para. 7.1 and pp. 65-78, paras. 7.10-7.37.
256 U.S. Preliminary Objections, p. 78, para. 7.37.
257 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 811, para. 20.
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6.3 It is trite that the Court must interpret the actual provision before it. Article XX(1)
does not state that the consequence of ‘non-preclusion’ is that the Treaty is
inapplicable to the measures specified therein.
6.4 The U.S. interpretation of Article XX(1) is without textual basis. The ordinary
meaning of the phrase “[t]he present Treaty shall not preclude the application of
measures” is not that the matters specified are excluded from the scope of the Treaty,
but that the adoption of such measures will not constitute a breach of the Treaty (if, as
determined at the merits phase, the measures do indeed fall within Article XX(1)).
The ordinary meaning of the term “preclude” means to “make impossible”.258 Thus,
Article XX(1) simply provides that the Treaty does not “make impossible” a Party’s
application of measures specified in subparagraphs (c) or (d). Article XX(1) does not
identify the consequences which arise when a Party does apply such measures.
However, by way of analogy, the term “preclude” reflects the language of
circumstances precluding wrongfulness under general international law, i.e. the
existence of a defence rather than a jurisdictional limitation. The ordinary meaning is
supported by the context, including the absence of any reference to Article XX in
Article XXI(2), which delimits the Court’s jurisdiction.
6.5 Further, the U.S. interpretation of Article XX(1) is inconsistent with the Court’s case
law. The Court has already examined the effect of Article XX(1) in its Judgment in
the Oil Platforms case, and held that “Article XX, paragraph 1 (d), does not restrict
its jurisdiction in the present case, but is confined to affording the Parties a possible
defence on the merits to be used should the occasion arise.”259 In reaching this finding,
the Court affirmed its earlier interpretation of the identically worded clause included
in the United States-Nicaragua Treaty of Friendship, Commerce and Navigation 1956
in the case concerning Military and Paramilitary Activities in and against
Nicaragua:260
“Article XXI defines the instances in which the Treaty itself provides for
exceptions to the generality of its other provisions, but it by no means removes
258 “Preclude” in Oxford English Dictionary, Oxford: O.U.P., 7th ed., 2012.
259 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 811, para. 20.
260 Ibid., citing Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States
of America), Merits, Judgment, I.C.J. Reports 1986, p. 116, para. 222 and p. 136, para. 271.
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the interpretation and application of that article from the jurisdiction of the
Court as contemplated in Article XXIV. That the Court has jurisdiction to
determine whether measures taken by one of the Parties fall within such an
exception, is also clear a contrario from the fact that the text of Article XXI of
the Treaty does not employ the wording which was already to be found in Article
XXI of the General Agreement on Tariffs and Trade. This provision of GATT,
contemplating exceptions to the normal implementation of the General
Agreement, stipulates that the Agreement is not to be construed to prevent any
contracting party from taking any action ‘which it considers necessary for the
protection of its essential security interests’, in such fields as nuclear fission,
arms, etc. The 1956 Treaty, on the contrary, speaks simply of ‘necessary’
measures, not of those considered by a party to be such.”261
“Article XXI of the Treaty provides that “the present Treaty shall not preclude
the application of” such measures. The question thus arises whether
Article XXI…affords a defence to a claim…”262
6.6 In light of the Court’s finding set out above, the United States is wrong to assert that
the Nicaragua Judgment “did not bar consideration of the equivalent clause as a
jurisdictional objection…[and] did not explicitly engage with the question of whether
a measure, once found to fall within an exception, could be excluded from the Court’s
jurisdiction”.263 The most straightforward analysis, and the one supported by the
ordinary meaning and context of Article XX, is that where the provision applies it
affords a defence to conduct that would otherwise amount to a breach of the Treaty.
6.7 Further, the U.S. objection by reference to Article XX could not, in any event, be
regarded as having an exclusively preliminary character within the meaning of
Article 79, paragraph 7, of the Rules of Court. It is clear from the Court’s judgments
in both Nicaragua and Oil Platforms that the issue of the interpretation and application
of Article XX (1) of the 1955 Treaty does not possess an exclusively preliminary
character but is inherently tied to the merits.264 In Nicaragua, the Court held that:
“Since Article XXI of the 1956 Treaty contains a power for each of the parties
to derogate from the other provisions of the Treaty, the possibility of invoking
261 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 116, para. 222 (emphasis added).
262 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 136, para. 271 (emphasis added).
263 U.S. Preliminary Objections, p. 64, para. 7.8.
264 For this reason, the U.S. contention that its objection based on Article XX(1)(d) may be recast as some
“other objection the decision upon which is requested before any further proceedings on the merits” is
misconceived: see U.S. Preliminary Objections, p. 65, para. 7.9.
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the clauses of that Article must be considered once it is apparent that certain
forms of conduct by the United States would otherwise be in conflict with the
relevant provisions of the Treaty. The appraisal of the conduct of the United
States in the light of these relevant provisions of the Treaty pertains to the
application of the law rather than to its interpretation, and the Court will
therefore undertake this in the context of its general evaluation of the facts
established in relation to the applicable law.”265
6.8 The U.S. argument rests, not on the text of Article XX(1), but on a single decision
from the many cases in investor-State arbitration, in which the tribunal was
considering a very different provision.266 The decision of the tribunal in EnCana v.
Ecuador is of no assistance to the United States. The United States has failed to draw
to the Court’s attention to either the text of the specific provision at issue in that case
or the tribunal’s key reasoning. Article XII(1) of the Canada-Ecuador BIT 1996
provides that “Except as set out in this Article, nothing in this Agreement shall apply
to taxation measures.”267 Based on the ordinary meaning of this specific provision, the
tribunal found that it lacked jurisdiction over taxation measures other than those
specified as exceptions.268 However, that cannot assist the United States as the
wording of the provision at issue in the EnCana case is markedly different to that of
Article XX(1) of the 1955 Treaty of Amity.
6.9 Indeed, wording close to that at issue in the EnCana case may be found elsewhere in
the Treaty. Reference may be made, for example to Article XVI(2), which provides
that the protection afforded by “[t]he preceding paragraph shall not apply in respect
of” the matters specified. This shows that where the Parties intended to exclude
matters from the scope of the Treaty, as one would expect, they did so expressly. By
265 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 116, para. 225 (emphasis added).
266 U.S. Preliminary Objections, p. 63, para. 7.5, citing EnCana Corp v. Republic of Ecuador, UNCITRAL,
LCIA Case No. UN3481 (Professor James Crawford, President; Mr. Horacio Grigera Naón; Mr
Christopher Thomas), Award, 3 February 2006, paras. 130-149 (U.S. PO, Annex 195).
267 Canada-Ecuador Agreement for the Promotion and Reciprocal Protection of Investments, signed 29
April 1996, in force 6 June 1997, 2027 UNTS I-34972, cited in EnCana Corp v. Republic of Ecuador,
UNCITRAL, LCIA Case No. UN3481, Award, 3 February 2006, para. 108 and Appendix II (U.S. PO,
Annex 195).
268 EnCana v. Ecuador, para. 110: “the jurisdictional provision of the BIT lacks application also, since
subject to the enumerated exceptions, nothing in the BIT applies to taxation measures and this includes
Article XIII.” See also para. 149, concluding that the tax measure at issue was “excluded from the scope
of the BIT by Article III”.
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contrast, Article XX(1) does not provide for the inapplicability of the substantive
obligations of the Treaty. The context of Article XX(1) therefore provides additional
support, if it were needed, for the interpretation of Article XX(1) advanced by Iran
and adopted by the Court in the Oil Platforms case.
6.10 The U.S. attempt to recharacterise its earlier position before the Court in the Oil
Platforms case is equally puzzling. As the Court recorded in its judgment, the United
States accepted that “consideration of the interpretation and application of Article XX,
paragraph (1)(d), was a merits issue”.269 The United States now contends that this
concession was made without conceding that Article XX(1)(d) “could never pose a
jurisdictional question”.270 It is unnecessary for the Court to scrutinise the scope of
the U.S. concession in the Oil Platforms case.271 The simple point is that, if the United
States had believed that Article XX(1)(d) afforded a sound basis for a preliminary
objection to jurisdiction, it would have advanced/maintained that argument. It is
undisputed that the United States did not do so.272
6.11 The U.S. position is, therefore, inconsistent with both the terms of the 1955 Treaty of
Amity as well as the Court’s earlier case law. In essence, the United States
inappropriately invites the Court to read Article XX(1) as if it stated: “Nothing in the
269 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 811, para. 20, quoting Verbatim Record of the Public Sitting of the I.C.J. Held
on Sept. 23, 1996, at 35-36, Oil Platforms (Islamic Republic of Iran v. United States of America)
(Mr. Crook for the United States). See also Verbatim Record of the Public Sitting of the I.C.J. Held on
17 September 1996, at 32-33, Oil Platforms (Islamic Republic of Iran v. United States of America)
(Mr. Crook for the United States): “Article XX (1) (d)…excludes certain matters from the operation of
the Treaty…Today, the core question is the Court’s jurisdiction. In this connection, the interpretation
and application of Article XX (1) (d) are not now at issue…the significance of Article XX (1) (d) is not
at the heart of our position concerning this Court’s lack of jurisdiction…it is not necessary for the Court
to address the specific arguments regarding the construction and application of Article XX (1) (d),
unless there should be a future merits phase”.
270 U.S. Preliminary Objections, pp. 63-64, para. 7.6.
271 Iran notes, however, that the U.S. suggestion that the right to rely on Article XX(1)(d) as a preliminary
objection was somehow reserved at the merits stage is not supported by the record: see U.S. Preliminary
Objections, pp. 63-64, para. 7.6, citing Rejoinder Submitted by the United States of America (Mar. 23,
2001), para. 4.02, Oil Platforms (Islamic Republic of Iran v. United States of America). In its Rejoinder,
the United States adopted the same position as during the Preliminary Objections phase, stating that
Article XX(1)(d) concerns measures “not prohibited” by the Treaty (Rejoinder, para. 4.03) and affords
“a complete defence” (para. 4.04).
272 U.S. Preliminary Objections, pp. 63-64, para. 7.6: “In the Oil Platforms case, the United States left the
invocation of the Article XX(1)(d) “essential security” clause to the merits phase…”.
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present Treaty shall apply to the following measures”. In doing so, the United States
has failed to appreciate the Court’s reasoning in Nicaragua on this very point.
6.12 For all of the above reasons, the U.S. reliance on Article XX(1) as the basis for a
preliminary objection to the Court’s jurisdiction is misconceived and should be
dismissed.
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PART III.
THE U.S. OBJECTIONS TO ADMISSIBILITY
ARE UNFOUNDED
CHAPTER VII.
ABSENCE OF ABUSE OF RIGHT
7.1 By contrast with the U.S. objections to jurisdiction, its “objections to admissibility go
to the admissibility of the Application as a whole…” and, “[g]iven the overarching
character of the objections to admissibility, [they] are set out first.”273 They are based
on two grounds:
- Iran’s abuse of the Treaty; and
- Iran’s unclean hands.
In the present Chapter, Iran responds to the first of these objections while the second
objection on admissibility will be addressed in Chapter VIII.
7.2 The United States summarises its first objection to the admissibility of Iran’s
Application as follows:
“The first objection contends that Iran’s reliance on the Treaty to found the
Court’s jurisdiction in this case constitutes an abuse of right. The Treaty was
predicated upon, and was designed to govern, normal and ongoing commercial
and consular relations between the United States and Iran – a state of affairs that
has not existed for nearly four decades. Iran’s claims in the present case arise in
the context of a protracted and fundamental rupture in relations, during which
time there has been no general economic intercourse between Iran and the
United States, and no consular relations. Iran has nonetheless attempted to cloak
its allegations in the commercial language of the Treaty, but its claims do not
genuinely attempt to vindicate any interest protected by the Treaty’s provisions.
To allow Iran to found jurisdiction on the Treaty in these circumstances would
sanction an abuse of right and undermine the integrity of the Court’s judicial
function.”274
273 U.S. Preliminary Objections, pp. 3-4, para. 1.8.
274 Ibid., p. 4, para. 1.9.
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7.3 The U.S. objection is comprised of multiple contentions.
7.4 First, the United States alleges that “Iran may wish to regard the Treaty as a vehicle
for waging this wider strategic dispute. But to permit Iran to do so in the present case
would subvert the purpose of the Treaty and misappropriate the Court’s judicial
function.”275
7.5 The Court settled this matter in 1980, in the dispute that was brought by the United
States against Iran, and subsequently reiterated its position in Nicaragua v. United
States:
“no provision of the Statute or Rules contemplates that the Court should decline
to take cognizance of one aspect of a dispute merely because that dispute has
other aspects, however important.
[…N]ever has the view been put forward before that, because a legal dispute
submitted to the Court is only one aspect of a political dispute, the Court should
decline to resolve for the parties the legal questions at issue between them. Nor
can any basis for such a view of the Court’s functions or jurisdiction be found
in the Charter or the Statute of the Court; if the Court were, contrary to its settled
jurisprudence, to adopt such a view, it would impose a far-reaching and
unwarranted restriction upon the role of the Court in the peaceful solution of
international disputes.”276
7.6 Despite this crystal-clear holding, the United States again tried to raise the same
argument in the Lockerbie Case.277 The Court stated that:
“23. The United States does not deny that, as such, the facts of the case could
fall within the terms of the Montreal Convention. However, it emphasizes that,
in the present case, from the time Libya invoked the Montreal Convention, the
United States has claimed that it was not relevant because it was not a question
of ‘bilateral differences’ but one of ‘a threat to international peace and security
resulting from State-sponsored terrorism’.
24. Consequently, the Parties differ on the question whether the destruction of
the Pan Am aircraft over Lockerbie is governed by the Montreal Convention. A
275 Ibid., p. 50, para. 6.10.
276 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Jurisdiction and Admissibility, I.C.J. Reports 1984, pp. 439-440, para. 105 quoting from United States
Diplomatic and Consular Staff in Tehran (United States of America v. Iran), I.C.J. Reports 1980, p.
19, para. 36, and p. 20, para. 37.
277 Questions of Interpretation and Application of the 1971 Montreal Convention arising from the Aerial
Incident at Lockerbie (Libyan Arab Jamahiriya v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 1998, p. 92.
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dispute thus exists between the Parties as to the legal regime applicable to this
event. Such a dispute, in the view of the Court, concerns the interpretation and
application of the Montreal Convention, and, in accordance with Article 14,
paragraph 1, of the Convention, falls to be decided by the Court.”278
Contrary to the U.S. allegations, the Court’s jurisdiction is not limited to
“transactional dispute[s]” concerning “technical questions”.279 Iran does not deny that
the limited, but not anodyne, legal dispute it has submitted to the Court could be linked
to a larger political conflict between itself and the United States; nevertheless, the
resolution of this specific dispute would contribute to realising the aims of the 1955
Treaty of Amity and may not justifiably be disregarded simply because it is part of or
related to a broader dispute.
7.7 Iran’s position is therefore that the United States cannot re-write Iran’s claims – which
are related to certain Iranian assets – nor reformulate, in its Preliminary Objections,
the subject matter of the dispute as set out in the Application and Memorial.280 What
must be assessed at this stage of the proceedings is the admissibility of the case as it
has been presented by Iran. Therefore, the so-called “broader strategic dispute”
mentioned by the United States is simply irrelevant.
7.8 Secondly, the United States alleges that “[t]he situation that exists between the Parties
today is far removed from that contemplated by the Parties in 1955 and crystallized in
the text of the Treaty.”281 The United States asserts that the fundamental conditions
underlying the Treaty no longer exist between the Parties. Not only this is
erroneous,282 but the United States is also responsible for this situation through its
violations of various provisions of the Treaty.283 Moreover, it is the Court that shall
adjudge whether or not any fundamental conditions underlying the Treaty subsist.
278 Ibid, p. 123, paras. 23 and 24. See also e.g. Obligation to Negotiate an Access to the Pacific Ocean
(Bolivia v. Chile), Preliminary Objections, Judgment, I.C.J. Reports 2015, p. 604, para. 32.
279 U.S. Preliminary Objections, p. 53, para. 6.17.
280 See supra, pp. 23-24, paras. 2.29-2.32.
281 U.S. Preliminary Objections, pp. 47-48, para. 6.3.
282 See supra, pp. 17-19, paras. 2.18-2.22 and infra Section 3.
283 See supra, pp. 10-11, paras. 2.4-2.5.
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7.9 Therefore, even if the facts were as alleged by the United States (which is denied), the
present situation cannot be used as a pretext for declaring that the Treaty is
inapplicable. According to the well-known adage, which is also rooted in the most
elementary common sense, nemo auditur propriam turpitudinem allegans. As was
stated by the Permanent Court of International Justice:
“It is […] a principle generally accepted in the jurisprudence of international
arbitration, as well as by municipal courts, that one Party cannot avail himself
of the fact that the other has not fulfilled some obligation or has not had recourse
to some means of redress, if the former Party has, by some illegal act, prevented
the latter from fulfilling the obligation in question, or from having recourse to
the tribunal which would have been open to him.”284
7.10 This principle forms the foundation of the limitations concerning the possibility of
invoking an impossibility of performance (Article 61 VCLT) or a fundamental change
of circumstances (Article 62 VCLT) for suspending the operation of a treaty – which
is precisely what the United States seeks to do:
- Article 61, paragraph 2:
“Impossibility of performance may not be invoked by a party as a ground
for terminating, withdrawing from or suspending the operation of a treaty
if the impossibility is the result of a breach by that party either of an
obligation under the treaty or of any other international obligation owed
to any other party to the treaty.”285
- Article 62, paragraph 2:
“A fundamental change of circumstances may not be invoked as a ground
for terminating or withdrawing from a treaty:
[…]
284 Factory at Chorzów, Jurisdiction, Judgment No. 8, 1927, P.C.I.J., Series A, No. 9, p. 31; Dissenting
Opinions of Judges Read and Azevedo, Interpretation of Peace Treaties (second phase), Advisory
Opinion: I.C.J. Reports 1950, pp. 244, 252-254; Gabčíkovo-Nagymaros Project (Hungary/Slovakia),
Judgment, I.C.J. Reports 1997, p. 67, para. 110.
285 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West
Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, I.C.J. Reports
1971, p. 47, para. 94: “The rules laid down by the Vienna Convention on the Law of Treaties
concerning termination of a treaty relationship on account of breach (adopted without a dissenting vote)
may in many respects be considered as a codification of existing customary law on the subject.”
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(b) If the fundamental change is the result of a breach by the party
invoking it either of an obligation under the treaty or of any other
international obligation owed to any other party to the treaty.”286
And, of course, neither may a party to a treaty invoke its own breach to suspend the
operation of that treaty.287
7.11 Iran notes that the United States invokes various justifications for its non-compliance
with the provisions of the Treaty. But, at this stage, the Court is not called upon to
decide on the legality of the U.S. conduct. Moreover, as the Court noted in Nicaragua:
“If a State acts in a way prima facie incompatible with a recognized rule, but
defends its conduct by appealing to exceptions or justifications contained within
the rule itself, then whether or not the State’s conduct is in fact justifiable on
that basis, the significance of that attitude is to confirm rather than to weaken
the rule.”288
Therefore, the very fact that the United States attempts to excuse its non-compliance
with the Treaty confirms the continuing existence of the obligations contained therein.
7.12 According to the United States, “Iran’s claims in this case constitute an abuse of the
rights afforded by the Treaty, and Iran’s assertion of jurisdiction based on the Treaty
should therefore be rejected as inadmissible. Iran’s claims are abusive in the
circumstances of the present case because they subvert the purposes of the Treaty.”289
286 Paragraph 3 of Article 62 VCLT reads as follows: “3. If, under the foregoing paragraphs, a party may
invoke a fundamental change of circumstances as a ground for terminating or withdrawing from a treaty
it may also invoke the change as a ground for suspending the operation of the treaty.” In its Judgment
of 25 September 1997, the Court stressed that “[t]he negative and conditional wording of Article 62 of
the Vienna Convention on the Law of Treaties is a clear indication moreover that the stability of treaty
relations requires that the plea of fundamental change of circumstances be applied only in exceptional
cases.” (Gabčíkovo-Nagymaros Project (Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p. 7,
pp. 64-65, para. 104.). The I.C.J. has also stated that “Article 62 of the Vienna Convention on the Law
of Treaties […] may in many respects be considered as a codification of existing customary law on the
subject of the termination of a treaty relationship on account of change of circumstances (Fisheries
Jurisdiction (United Kingdom v. Iceland), Jurisdiction of the Court, Judgment, I.C.J. Reports 1973,
p. 18, para. 36).
287 See Article 60 VCLT (Termination or suspension of the operation of a treaty as a consequence of its
breach) which reads as follows: “A material breach of a bilateral treaty by one of the parties entitles
the other to invoke the breach as a ground for terminating the treaty or suspending its operation in
whole or in part” (emphasis added).
288 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, p. 98, para. 186.
289 U.S. Preliminary Objections, p. 50, para. 6.12.
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7.13 As demonstrated above,290 the dispute between the United States and Iran brought
before the Court falls within the scope of the Treaty. Even if one accepts the United
States’ very broad definition according to which an “[a]buse of right occurs where,
inter alia, a party exercises a right in a manner that is not ‘genuinely in pursuit of
those interests which the right is destined to protect,291 or where a party exercises a
treaty right or power for an improper purpose292”,293 it must be noted that this principle
has never been applied as a bar to a claim in an inter-State dispute. In the paragraphs
below, Iran explains that the Court has made it clear that this can only be a defence
on the merits (Section A). Therefore, the only authorities advanced by the United
States in which a tribunal or court decided on the inadmissibility of a claim concern
investor-State disputes which were fundamentally different from the present case
(Section B). In any event, nothing in Iran’s claim constitutes an abuse of right
(Section C).
290 See supra, pp. 14-15, paras. 2.12-2.15; p. 21, para. 2.27 and pp. 2.30-2.31, paras. 23-24.
291 U.S. Preliminary Objections, p. 51, fn. 211: “BIN CHENG, GENERAL PRINCIPLES OF LAW AS
APPLIED BY INTERNATIONAL COURTS AND TRIBUNALS 131-32 (1953) (“It follows from
th[e] interdependence of rights and obligations that rights must be reasonably exercised. The reasonable
and bona fide exercise of a right implies an exercise which is genuinely in pursuit of those interests
which the right is destined to protect and which is not calculated to cause any unfair prejudice to the
legitimate interests of another State, whether these interests be acquired by treaty or by general
international law.”).”
292 U.S. Preliminary Objections, p. 51, fn. 212: “E.g., Gabčíkovo-Nagymaros Project (Hungary v.
Slovakia), 1997 I.C.J. 7, 78-79, ¶ 142 (Sept. 25) (stating that the principle of good faith “implies that,
in this case, it is the purpose of the Treaty, and the intentions of the parties in concluding it, which
should prevail over its literal application. The principle of good faith obliges the Parties to apply it in a
reasonable way and in such a manner that its purpose can be realized.”); Mutual Assistance in Criminal
Matters, 2008 I.C.J. at 279, ¶ 6 (Declaration of Judge Keith) (“I now consider the reasons given by the
judge in her soit-transmis against the principles of good faith, abuse of rights and détournement de
pouvoir. Those principles require the State agency in question to exercise the power for the purposes
for which it was conferred and without regard to improper purposes or irrelevant factors.”); Miroļubovs
& autres c. Lettonie, Req. No. 798/05, Arrêt, ¶ 62 (Eur. Ct. H.R., Dec. 15, 2009) (US Annex 174) (“La
Cour considère donc que la notion d’ ‘abus’, au sens de l’article 35 § 3 de la Convention, doit être
comprise dans son sens ordinaire retenu par la théorie générale du droit – à savoir le fait, par le
titulaire d’un droit, de le mettre en oeuvre en dehors de sa finalité d’une manière préjudiciable.” [“The
Court therefore considers that the concept of ‘abuse’, within the meaning of Article 35 § 3 of the
Convention, must be understood in the ordinary meaning of the general theory of law - namely, the
fact, by the holder of a right, to implement it outside of its purpose in a prejudicial manner]); Emmanuel
Gaillard, Abuse of Process in International Arbitration, 32 I.C.S.I.D. REV. 17, 36 (2017) (U.S. PO,
Annex 175) (explaining that the “abuse of process principle could ... allow for the dismissal of claims
initiated for purposes ulterior to the resolution of a genuine dispute”).”.
293 U.S. Preliminary Objections, pp. 50-51, para. 6.13.
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SECTION 1.
ABSENCE OF PRECEDENT IN INTER-STATE DISPUTES
7.14 As the Court will be aware, the I.C.J. has never dismissed claims or counter-claims
based on an abuse of rights objection.294
7.15 Furthermore, the authorities invoked by the United States in support of its allegation
that “[t]he obligation to act in good faith entails the correlative principle – widely
recognized by international tribunals – that rights shall not be abused”,295 themselves
confirm that abuse of rights has never been accepted by the Court as an inadmissibility
objection:
(a) The Rights of Nationals of the United States in Morocco case concerned the
general finding on the merits – that “[t]he power of making the valuation rests
with the Customs authorities, but it is a power which must be exercised
reasonably and in good faith” – and has no bearing on preliminary objections.296
(b) Similarly, the reference to ‘abuse’ in the case of the Free Zones of Upper Savoy
and the District of Gex was not concerned with admissibility or jurisdiction, but
as a “reservation” to the power to impose taxes.297 In that same Judgment, the
Court emphasised that “an abuse cannot be presumed by the Court”.298
(c) In the Case concerning Certain German Interests in Polish Upper Silesia
(Merits):
294 Arbitral Award of 31 July 1989, Judgment, I.C.J. Reports 1991, p. 63, para. 26; Certain Phosphate
Lands in Nauru (Nauru v. Australia), Preliminary Objections, Judgment, I.C.J. Reports 1992, p. 255,
para. 38; Application of the Convention on the Prevention and Punishment of the Crime of Genocide,
Preliminary Objections, Judgment, I.C.J. Reports 1996, p. 622, para. 46; Aerial Incident of 10 August
1999 (Pakistan v. India), Jurisdiction of the Court, Judgment, I.C.J. Reports 2000, p. 30, para. 40; Pulp
Mills on the River Uruguay (Argentina v. Uruguay), Provisional Measures, Order of 23 January 2007,
I.C.J. Reports 2007, p. 9, para. 21.
295 U.S. Preliminary Objections, pp. 50-51, para. 6.13.
296 Case concerning rights of Nationals of the United States of America in Morocco, Judgment of August
27th, 1952, I.C.J. Reports 1952, p. 212.
297 P.C.I.J., Judgment, 7 June 1932, Free Zones of Upper Savoy and the District of Gex, Series A/B, No. 46,
p. 167.
298 Ibid.
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i. the ‘abuse of right’ concept was invoked not as a preliminary objection,
but rather as giving rise to an alleged treaty violation, with the Court
stating that “only a misuse of this right could endow an act of alienation
with the character of a breach of the Treaty”;299
ii. the P.C.I.J. concluded that “such misuse has not taken place in the present
case”300 because there were insufficient grounds for regarding the relevant
acts as anything “other than a genuine transaction”, rather than one
“designed to procure…an illicit advantage and to deprive the other of an
advantage to which he was entitled” or “calculated to prejudice Poland’s
rights”;301 and
iii. this reasoning supports Iran’s claim since there is no suggestion that the
establishment of the relevant Iranian companies or any continuing
commerce is not genuine.
7.16 As noted by the Court in the Fisheries Jurisdiction cases:
“If, as contended by Iceland, there have been any fundamental changes in
fishing techniques in the waters around Iceland, those changes might be relevant
for the decision on the merits of the dispute, and the Court might need to
examine the contention at that stage, together with any other arguments that
Iceland might advance in support of the validity of the extension of its fisheries
jurisdiction beyond what was agreed to in the 1961 Exchange of Notes. But the
alleged changes could not affect in the least the obligation to submit to the
Court’s jurisdiction, which is the only issue at the present stage of the
proceedings. It follows that the apprehended dangers for the vital interests of
Iceland, resulting from changes in fishing techniques, cannot constitute a
fundamental change with respect to the lapse or subsistence of the
compromissory clause establishing the Court’s jurisdiction.”302
299 P.C.I.J., Judgment, 25 May 1926, Certain German Interests in Polish Upper Silesia (Merits), Series A,
No. 07, p. 30.
300 Ibid.
301 Ibid., pp. 37-38.
302 Fisheries Jurisdiction (United Kingdom v. Iceland), Jurisdiction of the Court, Judgment, I.C.J. Reports
1973, p. 21, para. 40 and Fisheries Jurisdiction (Federal Republic of Germany v. Iceland), Jurisdiction
of the Court, Judgments, I.C.J. Reports 1973, p. 64, para. 40 (emphasis added).
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SECTION 2.
IRRELEVANCE OF THE INVESTOR-STATE PRECEDENTS
INVOKED BY THE UNITED STATES
7.17 The United States relies on two investment cases, Churchill Mining v. Indonesia and
Philip Morris v. Australia, in order to assert that “[w]here the initiation of a legal
proceeding is founded on an abuse of rights, the claims in that proceeding are
inadmissible.”303
7.18 In the first case, Churchill Mining v. Indonesia, the Tribunal observed that “the claims
are based on documents forged to implement a fraud aimed at obtaining mining
rights”, and that “[t]he inadmissibility applies to all the claims raised in this
arbitration, because the entire EKCP project is an illegal enterprise affected by
multiple forgeries and all claims relate to the EKCP.”304 In the second case, Philip
Morris v. Australia, the UNCITRAL tribunal accepted the abuse of rights argument
on the ground that the investor, a private person, had abused its juridical personality.305
7.19 It will be obvious that such situations cannot occur in inter-State cases. Moreover, in
contrast with what occurs in the context of relations between an investor and a State,
in inter-State relations the situation where disputes arise is governed by Articles 2(3)
and 33 of the U.N. Charter. The Parties to the dispute are under an obligation of
peaceful settlement of disputes, which includes, as one of the means, “judicial
settlement”. Performance of the obligation to settle peacefully a dispute by judicial
settlement, cannot amount to an abuse of rights. To the contrary, refusing to
implement the provision of a treaty in force which provides for the submission of
303 U.S. Preliminary Objections, pp. 50-51, para. 6.13.
304 I.C.S.I.D., Award, 6 December 2016, Churchill Mining PLC and Planet Mining Pty Ltd v. Republic of
Indonesia, I.C.S.I.D. Case No. ARB/12/14 and 12/40, p. 191, paras. 528-529.
305 UNCITRAL, Award on Jurisdiction and Admissibility, 17 December 2015, Philip Morris Asia Limited
v. The Commonwealth of Australia, PCA Case No. 2012-12, p. 185, para. 588. See also: I.C.S.I.D.,
Decision on Jurisdiction, 29 April 2004, Tokios Tokeles v. Ukraine, I.C.S.I.D. Case No. ARB/02/18,
paras. 54-56; I.C.S.I.D., Award, 2 October 2006, ADC Affiliate Limited and ADC & ADMC
Management Limited v. The Republic of Hungary, I.C.S.I.D. Case No. ARB/03/16, para. 359;
I.C.S.I.D., Award, 29 July 2008, Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri
A.S. v. Republic of Kazakhstan, I.C.S.I.D. Case No. ARB/05/16, para. 206; I.C.S.I.D., Award, 22 June
2017, Capital Financial Holdings Luxembourg SA v. Republic of Cameroon, I.C.S.I.D. Case No.
ARB/15/18, p. 74, para. 360.
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“[a]ny dispute between the High Contracting Parties as to the interpretation or
application of the present Treaty, not satisfactorily adjusted by diplomacy”, if not an
abuse of right is, no doubt, a mere and obvious breach of this provision.
SECTION 3.
IRAN DOES NOT ABUSE ITS RIGHTS UNDER THE TREATY
NOR THE JUDICIAL FUNCTION OF THE COURT
7.20 Notably, the United States offers not the slightest argument in support of its contention
that Iran’s Application in the present case amounts to an abuse of rights or of
procedure. The U.S. position is comprised of pure assertion and wishful thinking,
stated in only four paragraphs, which Iran examines briefly in turn below.
7.21 The U.S. first argument is:
“6.14 Iran’s claims in this case do not concern disputes arising in the course of
ordinary and friendly economic or consular activity, for the simple reason that,
as noted above, such activity currently does not exist between the parties. Iran’s
effort to funnel the claims it seeks to pursue in the present case into the language
of the Treaty thus constitutes an abuse of rights.”306
7.22 As to this first argument:
(a) As shown previously,307 it is not true that the ‘activities’ envisaged by the Treaty
Parties no longer exist;
(b) The Treaty has been invoked before U.S. courts and they have not considered
that such reliance constitutes an abuse of right;308 thus, there is no reason why
it would be different when the issue arises before the I.C.J.;
306 U.S. Preliminary Objections, p. 52, para. 6.14.
307 See supra, pp. 17-19, paras. 2.19-2.22.
308 Bennett et al. v. The Islamic Republic of Iran et al., U.S. Court of Appeals, Ninth Circuit, 22 February
2016, 817 F.3d 1131, as amended 14 June 2016, 825 F.3d 949 (9th Cir. 2016), pp. 21-22 (IM,
Annex 64); Peterson et al. v. Islamic Republic of Iran et al., U.S. Court of Appeals, Second Circuit,
9 July 2014, 758 F.3d 185 (2nd Cir. 2014), p. 7 (IM, Annex 62); see also Peterson et al. v. Islamic
Republic of Iran et al., U.S. District Court, Southern District of New York, 28 February 2013, [2013
U.S. Dist. LEXIS 40470] (S.D.N.Y. 2013), p. 52 (IM, Annex 58); Weinstein et al. v. Islamic Republic
of Iran et al., U.S. Court of Appeals, Second Circuit, 15 June 2010, 609 F.3d 43 (2d Cir. 2010), pp. 20-
23 (IM, Annex 47).
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(c) The United States is responsible for the current level of activities regulated by
the Treaty;
(d) The United States has made no effort to substantiate its assertion that Iran
funnels “the claims it seeks to pursue in the present case into the language of the
Treaty.”
7.23 Already in its 1980 Judgment in the case of the United States Diplomatic and
Consular staff in Tehran, the Court considered that:
“although the machinery for the effective operation of the 1955 Treaty has, no
doubt, now been impaired by reason of diplomatic relations between the two
countries having been broken off by the United States, its provisions remain part
of the corpus of law applicable between the United States and Iran.”309
This was also the situation when the Court decided in the Oil Platforms case in
proceedings which began in 1992, i.e. after the date at which the U.S. alleges any
commercial relations between the Treaty Parties ceased. In its 1996 Judgment on the
preliminary objections raised by the United States in that case, the Court pointed out
“to begin with, that the Parties do not contest that the Treaty of 1955 was in
force at the date of the filing of the Application of Iran and is moreover still in
force. The Court recalls that it had decided in 1980 that the Treaty of 1955 was
applicable at that time (United States Diplomatic and Consular Staff in Tehran,
Judgment, I.C.J. Reports 1980, p. 28, para. 54); none of the circumstances
brought to its knowledge in the present case would cause it now to depart from
that view.”310
7.24 There is no reason why the Court would today consider that Iran is abusing its right
to act under the 1955 Treaty of Amity, while it was not the case in 1992. And the
Court’s celebrated dictum in its 1980 Judgment holds true more than ever:
“It is precisely when difficulties arise that the treaty assumes its greatest
importance, and the whole object of Article XXI, paragraph 2, of the 1955
Treaty was to establish the means for arriving at a friendly settlement of such
difficulties by the Court or by other peaceful means. It would, therefore, be
incompatible with the whole purpose of the 1955 Treaty if recourse to the Court
309 United States Diplomatic and Consular Staff in Tehran, I.C.J. Reports 1980, p. 28, para. 54.
310 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 809, para. 15.
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under Article XXI, paragraph 2, were now to be found not to be open to the
parties precisely at the moment when such recourse was most needed.”311
7.25 While it is true that, because of the U.S. conduct, the implementation of the Treaty is
far from satisfactory, contrary to U.S. assertions, some economic relations between
the Parties have always existed on a limited scale and in limited fields.
7.26 Moreover, the Treaty has been relied on before U.S. courts and applied by them,
including in certain of the proceedings that are at the crux of the present case. No U.S.
courts have ever gone so far as to contend that the Iranian companies abused their
rights by calling for the application of the Treaty. To the contrary, in Peterson case,
the U.S. Court of Appeals (Second Circuit) (wrongly) concluded:
“In sum, turnover of the blocked assets under § 8772 is entirely consistent with
the United States’ obligations under the Treaty of Amity. And, assuming
arguendo that it is not, § 8772 would have to be read to abrogate any inconsistent
provisions in the Treaty.”312
7.27 Secondly, the United States alleges:
“6.15 The claims that Iran raises in this case, by their own terms, do not concern
interests arising out of the kind of activity that the Treaty was designed to
protect. For instance, Iran challenges sanctions imposed by the United States,
which, in concert with other U.S. and multilateral actions, target Iran’s pursuit
of ballistic missile capability and its support for and facilitation of terrorism,
including through the provision of arms.313 Iran also challenges various
legislative measures taken by the United States under which individuals may
obtain reparation for injury and death caused by acts of terrorism carried out by
or with the support of State officials, employees, or agents.314”315
7.28 As to this argument:
(a) Iran challenges certain measures adopted by the United States, only insofar as
they breach the 1955 Treaty of Amity. While the U.S. measures also breach
311 United States Diplomatic and Consular Staff in Tehran, I.C.J. Reports 1980, p. 28, para. 54.
312 Peterson et al. v. Islamic Republic of Iran et al., U.S. Court of Appeals, Second Circuit, 9 July 2014,
758 F.3d 185 (2nd Cir. 2014), p. 7 (IM, Annex 62); see also supra, p. 84, fn. 308.
313 U.S. Preliminary Objections, p. 52, fn. 214: “See supra Chapter 4, Sec. A.”
314 U.S. Preliminary Objections, p. 52, fn. 215: “See id.”
315 U.S. Preliminary Objections, p. 52, para. 6.15.
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international law in many other respects, this is not within the scope of the
dispute Iran has placed before the Court;
(b) In this case, Iran challenges in particular the U.S. violation of the rights and
protections that Iranian companies are entitled to under the 1955 Treaty,
including the failure to recognise their juridical status and to grant their freedom
of access to the U.S. courts in defence and pursuit of their rights;316
(c) As explained in greater detail below,317 the United States has failed to provide
any evidence to establish, in accordance with any internationally recognised
standards or procedures, the attribution to Iran of the actions referred to in its
Preliminary Objections. And Iran formally reiterates that it condemns and has
always condemned terrorism in all its forms and manifestations.318
7.29 According to the U.S. third argument:
“6.16 In this respect, Iran’s claims concerning sovereign immunity are
particularly egregious. Prior to initiating this claim, Iran had repeatedly resisted
the notion that the sole provision of the Treaty that addresses sovereign
immunity – the waiver of immunity contained in Article XI(4) – reaches Iran or
any Iranian State entities that are not ‘enterprises’ within the meaning of that
provision.319 And in the Peterson enforcement proceeding itself, Bank Markazi
went so far as to argue that the Treaty of Amity was not a ‘provision of law
relating to sovereign immunity.’320 Nevertheless, Iran now asserts that the
Treaty requires the extension of ‘[g]enerally applicable immunities’ under
customary international law to Iran and Iranian entities.321 This attempt to
rewrite the Treaty to suit Iran’s present needs violates basic principles of good
316 Iran, Memorial, p. 12, para. 1.30, pp. 70-77, paras. 4.18-4.36, pp. 81-87, paras. 5.11-5.21, pp. 87-100,
paras. 5.22-5.51, pp. 102-103, paras. 5.58-5.60, pp. 106-107, paras. 5.69-5.71 and p. 109, paras. 5.75-
5.76.
317 See infra Appendix A, pp. 102-105, paras. A.10 to A.15.
318 See infra Appendix A, p. 105, para. A.15.
319 U.S. Preliminary Objections, p. 52, fn. 216: “See infra Chapter 8, Sec. B.”
320 U.S. Preliminary Objections, p. 52, fn. 217: “Brief for Defendant-Appellant Bank Markazi at 45,
Deborah Peterson, et al. v. Islamic Republic of Iran, et al. (No. 13-2952) (2d Cir. Nov. 19, 2013) (U.S.
PO Annex 233).”
321 U.S. Preliminary Objections, p. 52, fn. 218: “E.g., IM, ¶ 5.44(a).”
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faith322 and serves only to demonstrate the abusive manner in which Iran seeks
to manipulate the Treaty in disregard of its object and purpose.”323
7.30 As to this argument:
(a) As shown in Chapter V above, Article IV(2) of the Treaty expressly requires a
renvoi to international law which includes the law of sovereign immunities;324
(b) Contrary to the U.S. contention, Iran has never alleged the contrary. As recalled
in Chapter V above, Iran has already explained, in its Response to the U.S.
request for production of documents, that “Bank Markazi is a separate juridical
entity, and like the United States, Iran ‘does not have independent access to
these documents because it is not a party to the proceeding’ in the U.S.
courts.”325 Thus, Bank Markazi’s pleadings before the U.S. courts cannot be
attributed to Iran. In any case, as explained above, Bank Markazi was pleading
within the specific meaning, and for the limited purpose, of the ‘notwithstanding
clause’ in 22 USC § 8772.326
(c) The U.S. approach is misconceived. The correct test, as defined in Oil
Platforms, is whether the U.S. abrogation of immunities is capable of “fall[ing]
within the provisions of the Treaty”.327
7.31 As for the fourth “argument” advanced by the United States in support of its claim of
abuse of rights – namely that the “present dispute cannot be disguised as a
transactional dispute that simply engages technical questions regarding the application
322 U.S. Preliminary Objections, p. 52, fn. 219: “See, e.g., CHENG at 141 (‘It is a principle of good faith
that ‘a man shall not be allowed to blow hot and cold – to affirm at one time and deny at another.’)”.
323 U.S. Preliminary Objections, p. 52, para. 6.16.
324 See supra, p. 61, paras. 5.30-5.31.
325 Iran’s Response of 12 April 2017 to U.S. Request for production of document of 30 March 2017, p. 2.
326 See supra, p. 55, para. 5.17(c).
327 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 803, p. 810, para. 18.
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of the Treaty to ongoing commercial or consular activity”328 – has already been
addressed above.329
7.32 Concerning the judicial function of the Court, Iran notes that the sole authority relied
on by the United States is Northern Cameroons.330 However, this case is of no
assistance to the U.S. objection because, as the United States recognises, “the issue
was the interpretation of a treaty that was no longer in force”:331
“Throughout these proceedings the contention of the Republic of Cameroon has
been that all it seeks is a declaratory judgment of the Court that prior to the
termination of the Trusteeship Agreement with respect to the Northern
Cameroons, the United Kingdom had breached the provisions of the Agreement,
and that, if its Application were admissible and the Court had jurisdiction to
proceed to the merits, such a declaratory judgment is not only one the Court
could make but one that it should make.”332
7.33 It is indeed difficult to understand why and how making an application before the
I.C.J. in accordance with the compromissory clause of a treaty “of amity, economic
relations, and consular rights”, invoking a number of substantive provisions of this
treaty, the application of which is obviously at least plausible, could be capable of
constituting an abuse of rights or of process. Properly submitting a dispute to the Court
under a jurisdictional provision that is in force, and in a case in which the claims are
related to treaty breaches, cannot, as a matter of principle, be considered an abuse of
litigation. And deciding on those claims is precisely within the function of the Court
which is “to decide in accordance with international law such disputes as are
submitted to it.”
328 U.S. Preliminary Objections, p. 53, para. 6.17.
329 See supra, p. 76, para. 7.6.
330 U.S. Preliminary Objections, p. 54, para. 6.22.
331 Ibid.
332 Case concerning the Northern Cameroons (Cameroon v. United Kingdom), Preliminary Objections,
Judgment of 2 December 1963: I.C.J. Reports 1963, p. 36.
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CHAPTER VIII.
THE “CLEAN HANDS” THEORY IS IRRELEVANT OR INAPPLICABLE
TO IRAN’S CLAIMS BEFORE THE COURT
8.1 According to the United States’ own summary of its ‘unclean hands’ objection to the
admissibility of Iran’s Application:
“Iran’s unclean hands should preclude the Court from proceeding with this case.
Iran’s allegations against the United States are focused on U.S. measures that
engage the legal and political responsibility of Iran as a sponsor of terrorism
directed at the United States, its nationals, and others over the past forty years,
as well as its persistent violations of counter-terrorism, weapons proliferation,
and arms trafficking obligations. Iran comes to the Court with unclean hands,
and the Court should decline to exercise any such jurisdiction it may have, given
that the U.S. measures that Iran now seeks to impugn were taken in response to
Iran’s own conduct.”333
8.2 It is not Iran’s intention to enter into a sterile and lengthy dispute on these allegations;
they are, in any event, irrelevant to the resolution of the present case. Suffice it to note
that, by making these accusations against Iran, the United States adopts the tactic of
seeking to denigrate an opponent and ignore that opponent’s case. The United States
cannot, however, by introducing such allegations, distract attention from the actual
dispute which Iran has placed before the Court.
8.3 Iran is confident that the Court will not allow the United States to turn the opportunity
offered by the Court’s legal procedures into a propaganda exercise. Iran does not
intend to reply to the substance of these unfounded allegations, which it considers to
be both irrelevant and outside the jurisdiction of the Court, as it has been explained in
these Observations.334 Therefore, Iran has decided to make a few general comments
in a brief Appendix to the present Chapter.335
8.4 This Appendix briefly places the U.S. accusations of terrorism in context by showing
their use by the U.S. to achieve its foreign policy goals, and to destabilise foreign
333 U.S. Preliminary Objections, p. 4, para. 1.10.
334 See supra, Chapter II, Section 3.
335 See infra Appendix A to Chapter VIII, U.S. Allegations are unfounded.
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governments.336 The political instrumentalisation of the concept of ‘State-sponsored
terrorism’ is one of the reasons which has prevented and is still preventing States from
being able to agree on a definition of ‘terrorism’ in international law, even despite the
limited progress made in the specific field of international criminal law.337
8.5 In the past four decades, the U.S. has pursued a strategy of misinformation by
systematically accusing Iran of various terrorist attacks. Even when Iran has been
deeply struck by terrorist attacks in Tehran, the United States suggested that Iran was
responsible for these attacks and imposed new sanctions against Iran for its alleged
support of terrorism.338
8.6 Iran rejects categorically, as it has always done, all of these allegations. It recalls that
it has been the victim of various terrorist attacks and that its leaders have clearly
condemned terrorism in all its forms.339
8.7 While the U.S. accusations against Iran are ill-founded, they could, in any event, not
be a bar to the admissibility of Iran’s Application.
8.8 Although the doctrine of “clean hands” has sometimes been relied on by parties before
international courts or tribunals, after extensive research, Iran has not found a single
case of a State-to-State claim being dismissed on that ground. The I.C.J. has
systematically dismissed objections to admissibility based on this doctrine.340 And it
is revealing that, for example, the Court did not rely on the extremely miscellaneous
336 See infra Appendix A, p. 99, paras. A.2-A.4.
337 See infra Appendix A, pp. 100-102, paras. A.5-A.9.
338 See infra Appendix A, pp. 102-104, paras. A.10-A.14.
339 See infra Appendix A, pp. 105-107, paras. A.15-A.20.
340 See Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of
America), Merits, Judgment, I.C.J. Reports 1986, p. 134, para. 268; Gabčíkovo-Nagymaros Project
(Hungary/Slovakia), Judgment, I.C.J. Reports 1997, p. 73, para. 133; Arrest Warrant of 11 April 2000
(Democratic Republic of the Congo v. Belgium), Judgment, I.C.J. Reports 2002, Judge Van den
Wyngaert, Dissenting Opinion of, pp. 160-162, para. 35; Oil Platforms (Islamic Republic of Iran v.
United States of America), Judgment, I.C.J. Reports 2003, pp. 177-178, paras. 28-30; Legal
Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion,
I.C.J. Reports 2004, p. 163, para. 63; Avena and Other Mexican Nationals (Mexico v. United States of
America), Judgment, I.C.J. Reports 2004, p. 38, paras. 45-47; I.C.J., Judgment, 2 February 2017,
Maritime Delimitation in the Indian Ocean (Somalia v. Kenya), p. 45, paras. 139-143.
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materials cited by Judge Schwebel in his Dissent in Nicaragua v. United States341 and
did not refer to the doctrine of clean hands in its 1984 Judgment. It is indeed noticeable
that, while Judge Schwebel relied heavily on the Opinion of Judge Hudson in the
Diversion of Water from the Meuse – which dealt not with the clean hands principle
but, more generally, with the principle of equity –, Judge Schwebel’s dissent
overlooks the latter’s caveat according to which:
“The general principle is one of which an international tribunal should make a
very sparing application. It is certainly not to be thought that a complete
fulfillment of all its obligations under a treaty must be proved as a condition
precedent to a State’s appearing before an international tribunal to seek an
interpretation of that treaty.”342
8.9 The doctrine was discussed at some length during the proceedings in the Barcelona
Traction case343 but, clearly, its cursory dismissal by Professor Rolin, co-agent for
Belgium,344 satisfied the Court, as the point was not referred to at all in the
Judgment.345
8.10 In Certain Phosphate Lands, Australia argued that Nauru’s Application was precluded
by its bad faith, but the Court considered:
“that the Application by Nauru has been properly submitted in the framework
of the remedies open to it. At the present stage, the Court is not called upon to
weigh the possible consequences of the conduct of Nauru with respect to the
merits of the case. It need merely note that such conduct does not amount to an
abuse of process. Australia's objection on this point must also be rejected.”346
8.11 In the Avena case, the Court examined “the objection of the United States that the
claim of Mexico is inadmissible in that Mexico should not be allowed to invoke
341 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, Judge Schwebel, Dissenting Opinion, I.C.J. Reports 1986, pp. 393-394.
342 P.C.I.J., Judgment, 28 June 1937, Diversion of Water from the Meuse, Series A/B, No. 70, p. 77
(emphasis added).
343 I.C.J. Pleadings, Barcelona Traction, Light and Power Company, Limited (New Application: 1962),
CR 1964/2, vol. III, p. 680-681 (Reuter).
344 I.C.J. Pleadings, Barcelona Traction, Light and Power Company, Limited (New Application: 1962),
CR 1964/1, vol. II, p. 336-338 (Rolin).
345 Barcelona Traction, Light and Power Company, Limited, Preliminary Objections, Judgment, I.C.J.
Reports 1964, p. 6.
346 Certain Phosphate Lands in Nauru (Nauru v. Australia), Preliminary Objections, Judgment, I.C.J.
Reports 1992, p. 255, para. 38.
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against the United States standards that Mexico does not follow in its own practice.”347
And it concluded:
“47. The Court would recall that it is in any event essential to have in mind the
nature of the Vienna Convention [on Consular Relations]. It lays down certain
standards to be observed by all States parties, with a view to the ‘unimpeded
conduct of consular relations’, which, as the Court observed in 1979, is
important in present-day international law “in promoting the development of
friendly relations among nations, and ensuring protection and assistance for
aliens resident in the territories of other States” (United States Diplomatic and
Consular Staff in Tehran (United States of America v. Iran), Provisional
Measures, Order of 15 December 1979, I.C.J. Reports 1979, pp. 19-20,
para. 40). Even if it were shown, therefore, that Mexico’s practice as regards the
application of Article 36 was not beyond reproach, this would not constitute a
ground of objection to the admissibility of Mexico’s claim. The fifth objection
of the United States to admissibility cannot therefore be upheld.”348
The situation in the present case is similar: whatever allegations are made against Iran,
this would not constitute a ground of objection to the admissibility of Iran’s claim.
8.12 The Court once again adopted a similar solution in its 2003 Judgment in Oil Platforms.
In that case, the United States had not suggested that the clean hands issues were issues
of admissibility, appropriate to be enquired into before any examination of the merits;
and it had not asked the Court to find Iran’s claim inadmissible, but had rather argued
“that Iran’s conduct is such that it ‘precludes it from any right to the relief it seeks
from this Court’, or that it ‘should not be permitted to recover on its claim’.”349 The
Court noted
“that in order to make that finding it would have to examine Iranian and United
States actions in the Persian Gulf during the relevant period – which it has also
to do in order to rule on the Iranian claim and the United States counter-claim.”
And it concluded:
“30. At this stage of its judgment, therefore, the Court does not need to deal with
the request of the United States to dismiss Iran’s claim and refuse the relief that
it seeks on the basis of the conduct attributed to Iran. The Court will now
347 Avena and Other Mexican Nationals (Mexico v. United States of America), Judgment, I.C.J. Reports
2004, p. 38, para. 45. See also LaGrand (Germany v. United States of America), Judgment, I.C.J.
Reports 2001, pp. 488-489, paras. 61-63.
348 Ibid., pp. 484-485, paras. 47.
349 Oil Platforms (Islamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports 2003,
p. 177, para. 29.
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proceed to the consideration of the claims made by Iran and the defences put
forward by the United States.”350
8.13 This review of the inter-State case-law is largely consistent with the usual position in
investment cases, as summarised by the Arbitral Tribunal in the Yukos case:
“1358. The Tribunal is not persuaded that there exists a “general principle of
law recognized by civilized nations” within the meaning of Article 38(1)(c) of
the I.C.J. Statute that would bar an investor from making a claim before an
arbitral tribunal under an investment treaty because it has so-called “unclean
hands.”
1359. General principles of law require a certain level of recognition and
consensus. However, on the basis of the cases cited by the Parties, the Tribunal
has formed the view that there is a significant amount of controversy as to the
existence of an “unclean hands” principle in international law. […]
1362. However, as Claimants point out, despite what appears to have been an
extensive review of jurisprudence, Respondent has been unable to cite a single
majority decision where an international court or arbitral tribunal has applied
the principle of “unclean hands” in an inter-State or investor-State dispute and
concluded that, as a principle of international law, it operated as a bar to a claim.
1363. The Tribunal therefore concludes that “unclean hands” does not exist as
a general principle of international law which would bar a claim by an investor,
such as Claimants in this case.” 351
8.14 The case-law of the Iran-U.S. Claims Tribunal is not more positive in using the clean
hands doctrine. The United States refers to the jurisprudence of that Tribunal in order
to show that “Iran itself has relied on the doctrine”;352 but it omits to mention that, in
all three cases it relies upon, the Tribunal refused to apply the doctrine:
- In Aryeh, the Tribunal stated that no basis supported the Respondent’s
contentions “that the claim should be barred on the basis of the theories of clean
hands, estoppel, misrepresentation, good faith or state responsibility”;353
350 Ibid., pp. 177-178, paras. 29-30.
351 Final Award, 10 July 2014, Yukos Universal Limited v. The Russian Federation, PCA Case No. AA
227, pp. 431-432, paras. 1358-1363.
352 U.S. Preliminary Objections, p. 58, para. 6.32.
353 Moussa Aryeh v. The Islamic Republic of Iran, Award No. 583-266-3, 25 September 1997, 33 Iran-
U.S. C.T.R. 368, p. 387, para. 62 (U.S. PO, Annex 187).
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- In Karubian, the Tribunal rejected “the Claimant’s contention that the
Respondent should be estopped from arguing that he illegally purchased real
property in Iran as a dual national”;354 and
- In Mohtadi it found that “the issue of the Claimant’s enjoyment of real property
rights in a manner inconsistent with Iranian Law does not fall to be decided. The
Tribunal therefore finds it unnecessary to consider this issue”.355
Moreover, it must be noted that, in all three cases, the conduct of the claimant as a
private person was at stake. Had the Tribunal accepted the argument based on the
clean hands doctrine, this would have only confirmed that that doctrine may be used
in relation to diplomatic protection or similar situations, but certainly not with regard
to precluding a State from bringing a case of its own.
8.15 More than fifty years ago, in a landmark article, Professor Jean Salmon considered an
autonomous clean hands doctrine to be “useless” (“inutile” in French) and
unfounded.356 Similarly, Professor Charles Rousseau opined that “it is not possible to
consider the ‘clean hands’ theory as an institution of general customary law.”357 This
position was cited with approval by the I.L.C. Special Rapporteur on State
Responsibility, Professor James Crawford, who accepted that “the conclusion reached
by Charles Rousseau seems still to be valid;”358 For his part, the Special Rapporteur
on Diplomatic Protection, Professor John Dugard, maintained that “the clean hands
354 Rouhollah Karubian v. The Government of the Islamic Republic of Iran, Award No. 569-419-2,
6 March 1996, 32 Iran-U.S. C.T.R. 3, p. 38, para. 153 (U.S. PO, Annex 189).
355 Jahangir Mohtadi and Jila Mohtadi v. The Government of the Islamic Republic of Iran, Award No.
573-271-3, 2 December 1996, 32 Iran-U.S. C.T.R. 124, p. 155, para. 92 (U.S. PO, Annex 188).
356 J. Salmon, “Des mains propres comme conditions de recevabilité des réclamations internationales”,
Annuaire français du droit international, Vol. 10, 1964, p. 265.
357 Translation given in A/CN.4/498/Add.2, Second Report on State Responsibility by Mr. James
Crawford, Special Rapporteur, Fifty-first session of the I.L.C., 3 May-23 July 1999, para. 331, fn. 654;
original in French: C. Rousseau, Droit international public, Tome V. Les rapports conflictuels, 5th ed.
(Paris, Sirey, 1983), para. 170.
358 Ibid., para. 334.
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doctrine has no special place in claims involving diplomatic protection.”359 and this
position was endorsed by the Commission.360
8.16 As it has been clearly put by the Tribunal in the Guyana v. Suriname case:
“No generally accepted definition of the clean hands doctrine has been
elaborated in international law. Indeed, the Commentaries to the ILC Draft
Articles on State Responsibility acknowledge that the doctrine has been applied
rarely361 and, when it has been invoked, its expression has come in many forms.
The I.C.J. has on numerous occasions declined to consider the application of the
doctrine,362 and has never relied on it to bar admissibility of a claim or recovery.
[…T]he use of the clean hands doctrine has been sparse, and its application in
the instances in which it has been invoked has been inconsistent.”363
8.17 In any event, there is no need to engage in a futile factual discussion: the procedural
use that the United States attempts to make of the clean hands doctrine in order to
convince the Court to dismiss the case in limine cannot prevail.
8.18 The doctrine of clean hands has nothing to do with the admissibility of an application.
And, when, as in this case, “immediate” injury has been caused to a State by the
internationally wrongful act of another State, there can be no question of a court or
tribunal being prevented from considering the former’s claim on the pretext that the
claimant State itself has allegedly committed a breach of international law to the
detriment of the latter. Accepting such a theory would serve to legitimise the right of
all to take the law into their own hands, something which the possibility of judicial
359 A/CN.4/546, Sixth Report on Diplomatic Protection by John Dugard, Special Rapporteur, Fiftyseventh
session of the ILC, 2 May-3 June and 4 July-5 August 2005, para. 9.
360 See Report of the International Law Commission, 53rd session, 2001, General Assembly Official
Records, 56th session, Supplement No. 10, A/56/10, p. 173.
361 Annex VII Tribunal, Award, 17 September 2007, Guyana v. Suriname, PCA Case No. 2004-04, p. 135,
fn. 476: “James Crawford, The International Law Commission’s Articles on State Responsibility:
Introduction, Text and Commentaries, p. 162 (2002).”
362 Ibid., fn. 477: “Legal Consequences of the Construction of a Wall in the Occupied Palestinian
Territory, Advisory Opinion, I.C.J. Reports 2004, p. 136, para. 63; Oil Platforms (Islamic Republic of
Iran v. United States of America), Judgment, I.C.J. Reports 2003, p. 161, para. 100; Legality of Use of
Force (Serbia and Montenegro v. Belgium), Preliminary Objections, Judgment, I.C.J. Reports 2004, p.
279: in this case Belgium raised the question of clean hands in its preliminary objections (Preliminary
Objections of the Kingdom of Belgium, Legality of Use of Force (Serbia and Montenegro v. Belgium),
(5 July 2000), available at http://www.icj-cij.org/docket/files/105/8340.pdf), but the Court did not
address the argument in its judgment.”
363 Ibid., p. 135-136, para. 418.
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settlement is specifically intended to avoid, and would lead to the progressive
degradation of international order. As Professor Jean Salmon wrote at the end of his
detailed study of international jurisprudence in this field, which was referred to
earlier:364 in such cases, “les arbitres n’ont jamais déclaré la demande irrecevable.
Accueillir l’irrecevabilité dans cette hypothèse aurait eu pour conséquence de
reconnaître la légalité des représailles.”365
8.19 Moreover, to the extent that “unclean hands” may exist as a doctrine of international
law, it only applies where the claimant is engaged in “precisely similar action, similar
in fact and similar in law” as that which it complains of as amounting to a violation
by the Respondent.366 The Claimant’s conduct must relate to the same reciprocal
obligation on which it bases its claim. In Guyana v. Suriname, the Tribunal rejected
Suriname’s unclean hands argument (both as to admissibility and as to merits), inter
alia, on the ground that: “Guyana’s Third Submission claims that Suriname violated
its obligation not to resort to the use or threat of force, while Suriname bases its clean
hands argument on Guyana’s alleged violation of a different obligation relating to its
authorization of drilling activities in disputed waters. Therefore, there is no question
of Guyana itself violating a reciprocal obligation on which it then seeks to rely.”367
8.20 The U.S. objection does not satisfy this requirement. Indeed, the United States has not
even claimed that the accusations upon which it bases its assertion that Iran has
unclean hands amount to an ongoing violation of Iran’s obligations under the Treaty
364 See para. 8.15 supra.
365 [“The arbitrators never declared an application to be inadmissible. To accept the inadmissibility in this
case would have meant recognizing the legality of the reprisals”] “Des mains propres comme condition
de recevabilité”, A.F.D.I., 1964, p. 259.
366 See Annex VII Tribunal, Award, 17 September 2007, Guyana v. Suriname, PCA Case No. 2004-04,
pp. 137-138, paras. 420-421 citing Diversion of Water from the Meuse, Individual Opinion of Judge
Hudson, p. 78, para. 325.
367 Ibid., p. 138, para. 421. See also Judge Schwebel’s Dissent in Nicaragua, relying on the Opinion of
Judge Hudson and reasoning that Nicaragua “had deprived itself of the necessary locus standi” to bring
its claims, as it was guilty of illegal conduct resulting in “deaths and widespread destruction” (Military
and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Merits,
Judgment, Judge Schwebel, Dissenting Opinion, I.C.J. Reports 1986, respectively p. 394, para. 272
and p. 392, para. 268) or the I.C.S.I.D. tribunal’s Decision on Jurisdiction, in Niko Resources
(Bangladesh) Ltd v. People’s Republic of Bangladesh et al, rejecting “unclean hands” defence because,
inter alia, “there is no relation of reciprocity between the relief which the Claimant now seeks in this
arbitration and the acts in the past which the Respondents characterise as involving unclean hands”.
(Decision on Jurisdiction, 19 August 2013, I.C.S.I.D. Case No. ARB/10/11 and ARB/10/18, para. 483).
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of Amity. There is no allegation that Iran has violated a reciprocal obligation on which
it then seeks to rely. Instead, the United States alleges that “[i]n addition to its
sponsorship of terrorism, Iran engaged in a years-long pattern of conduct in violation
of its obligations under the NPT and the resulting restrictions imposed under UN
Security Council resolutions.”368
* *
*
8.21 Whatever the (very limited) use of the clean hands doctrine in investor-State case-law,
in any event, it does not apply to State-to-State cases, in which one party is never
justified in availing itself of an internationally wrongful act by the other in order to
seek to prevent an international court or tribunal from rendering a judgment. A fortiori,
a claim based on the clean hands doctrine cannot be envisaged as a bar to the
admissibility of an Application putting a case before the Court, with the effect of
encouraging recourse to counter-measures. Furthermore, the fact that Iran might have
allegedly violated some of its obligations under the Treaty – quod non – cannot bar it
from using this procedural right: determining the responsibilities of the United States
for the breaches of the 1955 Treaty of Amity is the very purpose of the recourse to the
I.C.J. on the basis of Article XXI of the Treaty.
368 U.S. Preliminary Objections, p. 24, para. 3.31.
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APPENDIX A.
THE U.S. ALLEGATIONS ARE UNFOUNDED
A.1 As explained above,369 Iran refuses to enter in the United States’ game which only seeks
to tarnish the image of Iran and distract attention away from the actual dispute at issue,
which Iran has submitted to the Court. Only a few general points on these allegations
will be made in the present Appendix.
A. Accusations of terrorism as part of U.S. foreign policy goals
A.2 The U.S. allegations emanate from the hostile policy that it adopted soon after the
overthrow in 1979 of the Shah’s regime. That regime had been brought to power by the
U.S.-planned and -backed coup against the national Iranian government in 1953,370 and
was one of the closest allies of the United States in the region. This new policy led the
United States to make every effort to coerce and intimidate the new Iranian Government
by any direct or indirect means.
A.3 In line with this policy, in January 1984 the United States placed Iran on the State
Department’s list of States “sponsoring terrorism”, at a time when the new Iranian
Government had been defending its country against numerous bombings and
assassinations by U.S.-sponsored terrorist groups, as well as against aggression from
Saddam Hussein with U.S. extensive diplomatic, financial, intelligence and training
support, during Iraq’s war against Iran.
A.4 The accusation made by the United States against other States concerning the
‘sponsoring of terrorism’ is made in order to advance U.S. foreign policy goals. The
United States uses the word “terrorism” as a convenient label to attack its opponents.
Indeed, the accusation is a nebulous and self-serving allegation, and particularly so in
369 See supra, p. 90, para. 8.2.
370 See the documents recently declassified by the CIA in August 2013 (National Security Archive, “CIA
Confirms Role in 1953 Iran Coup”, 19 August 2013 (IOS, Annex 34)) and June 2017 (National Security
Archive, “Iran 1953: State Department Finally Releases Updated Official History of Mosaddeq Coup”,
15 June 2017 (IOS, Annex 54)).
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the absence of any agreed definition in international law of the concept of ‘terrorism’
as such.
B. Absence of definition of ‘terrorism’
A.5 The U.S. Government itself agreed, in its 1997 report, Patterns of Global Terrorism,
that “[n]o one definition of terrorism has gained universal acceptance”.371 This situation
has not changed, despite the increased willingness of States to come together to build a
common understanding of grave offences that are condemned by all States and to
develop a detailed body of international criminal law, backed by international
institutions, culminating in the adoption of the Statute of the International Criminal
Court (“ICC”). These developments have still not produced either an agreed general
definition of terrorism, or the inclusion of ‘terrorism’ among the offences over which
the ICC has jurisdiction.
A.6 One of the main reasons behind the lack of consensus between States is the exclusion
of national liberation wars or self-determination struggles from the scope of the
definition of terrorism. These divergences prevented the adoption of the Draft
Comprehensive Global Convention on Terrorism. Only sectoral conventions have been
adopted and they define very particular acts of terrorism. The one broader convention
which has been adopted, the International Convention for the Suppression of the
Financing of Terrorism, still does not define terrorism but adopts its own definition of
terrorist acts, in part by a renvoi to previous conventions. The I.C.J. had very recently
the opportunity to recall that, as far as international law is concerned, ‘support of
terrorism’ is not a political incantation but should involve a definition, fulfil particular
conditions, and be proved by facts:
“75. In the present case, the acts to which Ukraine refers (see paragraph 66
above) have given rise to the death and injury of a large number of civilians.
However, in order to determine whether the rights for which Ukraine seeks
protection are at least plausible, it is necessary to ascertain whether there are
sufficient reasons for considering that the other elements set out in Article 2,
paragraph 1, such as the elements of intention or knowledge noted above (see
371 U.S. Department of State, Patterns of Global Terrorism: 1997, Department of State Publication 10535,
Introduction, p. 3 (IOS, Annex 56).
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paragraph 74), and the element of purpose specified in Article 2, paragraph 1
(b), are present. At this stage of the proceedings, Ukraine has not put before the
Court evidence which affords a sufficient basis to find it plausible that these
elements are present.”372
A.7 Neither is there a definition of terrorism or even of a terrorist act in customary
international law. In 2003, a U.S. Court of Appeal declared “that customary
international law currently does not provide for the prosecution of ‘terrorist’ acts under
the universality principle, in part due to the failure of States to achieve anything like
consensus on the definition of terrorism.”373
A.8 Beyond difficulties with a general definition of terrorism, there has also been an acute
controversy over the notion of ‘State terrorism’. ‘Terrorism’ was not included, for
example, as a State crime in the list contained in Article 19(3) of the ILC Draft Articles
on State Responsibility as adopted on first reading in 1996.374 It should also be noted
that ‘terrorism’ was dropped from the I.L.C.’s Draft Code of Crimes against the Peace
and Security of Mankind (1996).375 In the I.L.C.’s 1994 Draft Statute for an
International Criminal Court, various ‘treaty crimes’ dealing with specific terrorist
offences (e.g. crimes against civil aviation, ships and internationally protected persons)
were included, but there was no recognition of a customary law crime of international
‘terrorism’ as such.376 Nor, despite several proposals, was such a crime inserted in the
Rome Statute of the International Criminal Court: on the contrary, the treaty provisions
(Article 5) dealing with ‘terrorism’ were deleted, with the support of the United States.
During the recent Review Conference in Kampala in 2010, the Netherlands proposed
to add the crime of terrorism under Article 5, but this was not followed by a majority
372 I.C.J., Order, 19 April 2017, Application of the International Convention for the Suppression of the
Financing of Terrorism and of the International Convention on the Elimination of All Forms of Racial
Discrimination (Ukraine v. Russian Federation), Provisional Measures, p. 26, para. 75.
373 United States of America v. Yousef et al., Court of Appeals, Second Circuit, 4 April 2003, 327 F.3d 56,
p. 39 (IOS, Annex 7).
374 U.N. Doc. No A/51/10 (1996). See also Skubiszewski, K., “The Definition of Terrorism”, 19 IYHR
(1989), p. 47.
375 U.N. Doc. A/CN.4/L.532, 8 July 1996.
376 Yearbook of the International Law Commission, 1994, Vol. II, Part 2, pp. 26-69.
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of the participants. It is interesting to note that in its proposal the Netherlands
recognised “the absence of a generally acceptable definition of terrorism.”377
A.9 Finally, it should be noted that the resolutions of the Security Council do not attempt to
define terrorism in general: rather, they assert an international interest in suppressing
“acts of international terrorism in all its forms which endanger or take innocent lives,
have a deleterious effect on international relations and jeopardize the security of
States.”378 These resolutions are not based on any legal definition of terrorism, but fall
within the sphere of the discretion and appreciation allowed to the Security Council
under the Charter. Two points only need to be made about them.
(a) First, as already noted, no such Security Council resolutions have been passed
with respect to Iran – not one single resolution, in more than 35 years since the
new Iranian Government replaced the regime of the Shah.
(b) Second, neither the Security Council resolutions themselves, nor any other
international norms, give the slightest support to the idea that any individual
State has the right to determine unilaterally that acts anywhere in the world
constitute "terrorist acts" and to use that unilateral determination in order to
justify conduct on its part which is otherwise unlawful. In short, the resolutions
provide no basis whatever on which the United States could take international
law into its own hands with impunity.
C. U.S. erroneous accusations against Iran as a State sponsoring terrorism
A.10 In the past four decades, the United States has employed every means at its disposal to
weaken and slander Iran, falsely depicting Iran as a “State sponsoring terrorism” and
engaging in other destabilizing acts. For many years, there has been a concerted
misinformation campaign in the political vocabulary of U.S. officials, and consequently
in the U.S. media, to make the name of Iran synonymous with terrorism, with Iranian
leaders being portrayed as sponsors of terrorism. This misinformation has become so
377 Assembly of States Parties, eighth session, Report of the Bureau on the Review Conference –
Addendum, 10 November 2009, ICC-ASP/8/43/Add.1, Annex IV, p. 13.
378 United Nations Security Council Resolution 1044, 31 January 1996, preambular para. 1.
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deeply engrained that no matter where terrorism is committed, as far as the United
States is concerned, Iran will be portrayed as responsible. For instance, in 1996 the then
U.S. Secretary of Defence accused Iran of being involved in the Khobar Tower
bombing:379 but later the Saudi Arabian Government, after completing its investigation,
concluded that “there was no foreign role in this explosion” and that the bombing “took
place at Saudi hands”.380
A.11 Following the hideous terrorist attacks in Tehran on 7 June 2017, U.S. President Donald
Trump went as far as suggesting that Iran brought them upon itself.381 The very same
day that Iran was struck by these deadly terrorist attacks, the U.S. Senate voted new
sanctions against Iran because of an alleged support of terrorism.382
A.12 Iran rejects categorically the U.S. accusation of sponsoring terrorism. It considers the
designation of Iran as a sponsor of terrorism to be unfounded and internationally wrong.
The process of unilaterally designating other countries as “State-sponsors of terrorism”
is opaque, applying double standards driven by U.S. political and financial interests
even in cases where there is evidence clearly pointing to the “clandestine financial and
logistic support” by allies to the United States.383 It is interesting to note that Cuba has
been recently removed from the list of “State sponsors of terrorism” after it resumed its
diplomatic relations with the United States. This was also the case of Iraq, when the
United States established relation with Saddam Hussein’s regime in 1984. The recent
crisis between the Arab States in the Persian Gulf is also interesting in this respect. Two
weeks after the U.S. President came to Saudi Arabia, this State and other countries in
the region accused Qatar of being a supporter of terrorism; and this was endorsed by
379 S. Robinson, “Gingrich in call to arms against Iran terror bases”, The Daily Telegraph, 5 August 1996
(IOS, Annex 22).
380 “Riyadh accepts for first time that bombers of US base were Saudi”, Agence France Press, 21 May
1998 (IOS, Annex 25).
381 See e.g. J. Cook, “Trump Suggests Iran Brought Deadly Terrorist Attacks Upon Itself”,
www.huffingtonpost.com, 7 June 2017 (IOS, Annex 46) or I. Tharoor, “Terror in Iran reveals the
hypocrisy of Trump and his allies”, The Washington Post, 8 June 2017 (IOS, Annex 48).
382 See Z. Jilani, R. Grim, “Bucking Bernie Sanders, Democrats Move Forward on Iran Sanctions After
Terror Attack in Tehran”, The Intercept, 7 June 2017 (IOS, Annex 47) or R. Shabad, “Senate passes
measure to expand sanctions on Iran and Russia”, www.cbsnews.com, 15 June 2017 (IOS, Annex 55).
383 F. Zakaria, “How Saudi Arabia Played Donald Trump”, The Washington Post, 25 May 2017 (IOS,
Annex 45).
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the U.S. President who declared that “[t]he nation of Qatar, unfortunately, has
historically been a funder of terrorism at a very high level.”384 A few days later, this did
not prevent the United States selling weapons, including jet fighters, to Qatar, while
U.S. diplomacy was taking back these accusations.385
A.13 The United States has failed to provide any evidence to establish, in accordance with
any internationally recognised standards or procedures, the attributability to Iran of the
actions referred to in its Preliminary Objections, including the alleged actions attributed
to militant groups such as Hezbollah or Hamas. Furthermore, contrary to the U.S.
claims, these organizations are not the proxy of Iran or any other governments which
support them. Rather, they are militant groups which have been defending their country
against foreign invasion and occupation. Hezbollah is a highly popular and independent
political party in Lebanon, with a number of seats in the cabinet of ministers and
parliament. Hamas, too, is a political party in occupied Palestine, which was elected by
Gaza’s people to run the government.
A.14 Under the U.S. approach to designating these groups as ‘terrorists’, the U.S.
Government itself can be considered as a ‘State sponsor of terrorism’ because it has
been involved in the creation or support of militant groups – for example in the 1980s,
when it supported groups which fought against the Soviet Union’s occupation in
Afghanistan.386 It has been admitted that the United States supported the foundation of
terrorist organizations such as Al-Qaeda and ISIS (the so called Islamic State of Iraq
and Sham). Ms. Hillary Clinton, former U.S. Secretary of State, testified before the
Congress that: “[t]he people we are fighting today we founded 20 years ago”.387 The
384 See e.g. N. Gaouette, D. Merica & R. Browne, “Trump: Qatar must stop funding terrorism”, CNN,
10 June 2017 (IOS, Annex 51) or D. Smith & S. Siddiqui, “Gulf crisis: Trump escalates row by
accusing Qatar of sponsoring terror”, The Guardian, 9 June 2017 (IOS, Annex 49).
385 See e.g. P. Beaumont, “US signs deal to supply F-15 jets to Qatar after Trump terror claims”, The
Guardian, 15 June 2017 (IOS, Annex 52) or R. Browne, “Amid diplomatic crisis Pentagon agrees $12
billion jet deal with Qatar”, CNN, 15 June 2017 (IOS, Annex 53).
386 See S. Galster, “The September 11th Sourcebooks – Vol. II: Afghanistan: Lessons from the Last War –
Afghanistan: The Making of U.S. Policy, 1973-1990”, The National Security Archive, 9 October 2001
(IOS, Annex 26).
387 See “Hillary Clinton speaks out about US links with Taliban”, SouthAsiaNews available at
www.youtube.com/watch?v=X2CE0fyz4ys (last visited 16 August 2017).
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current U.S. President pointed out several times during his presidential campaign that
“Obama and Hillary Clinton created ISIS”.388
D. Iran as a victim of terrorist activities and other hostile acts
A.15 Iran has always condemned terrorism in all its forms and manifestations and has done
so at the highest level.389 Indeed, Iran has been itself a major victim of terrorist activities
conducted by groups supported mainly by the United States after the revolution. By
way of example more than 17,000 Iranian civilians and officials have been killed by the
Mujahedin Khalgh Organization of Iran (“MKO”) and the National Council of
Resistance (“NCR”), through bombings and assassinations. Members and supporters
of MKO and NCR have been very active in the United States and had access to U.S.
officials. Representatives of those groups have continuously contacted U.S. Senators
and Congressmen and met with U.S. Executive officials.390
A.16 In 1998, the Taliban killed ten Iranian diplomats in Afghanistan at the siege of the
Iranian consulate in Mazar-i-Sharif. Between 2010 and 2012, five Iranian nuclear
scientists were assassinated by terrorist groups. During the past several years, terrorist
groups have killed many civilians and security personnel in one south-eastern Iranian
388 See R. LoBianco & E. Landers, “Trump: Clinton, Obama ‘created ISIS’”, CNN, 3 January 2016 (IOS,
Annex 38) or K. Ng, “Donald Trump says Barack Obama and Hillary Clinton ‘created ISIS’”, The
Independent, 3 January 2016 (IOS, Annex 39).
389 See G. A. Nader, “Interview with President Ali Akbar Hashemi Rafsanjani”, Middle East Insight, July-
August 1995, Vol. XI, No.5, p. 10 (IOS, Annex 19); “Transcript of interview with Mohammad
Khatami, Former President of the Islamic Republic of Iran”, CNN, 7 January 1998, p. 8 (IOS, Annex
23). See also Statement by H.E. Dr. Kamal Kharrazi, Minister for Foreign Affairs of the Islamic
Republic of Iran, before the Fifty-Second Session of the United Nations General Assembly, New York,
22 September 1997 (IOS, Annex 8); Statement by H.E. Seyed Mohammad Khatami, Former President
of the Islamic Republic of Iran, 21 September 1998 (IOS, Annex 9); Statement by H.E. Dr. Hassan
Rohani, President of the Islamic Republic of Iran, before the Sixty-Eight Session of the United Nations
General Assembly, New York, 24 September 2013, p. 3 (IOS, Annex 10).
390 See e.g., Mojahed, MKO Bulletin, Issue No. 295, Feb-March 1993 (IOS, Annex 15); Mojahed, MKO
Bulletin, issue No. 294, Dec. 1992 (IOS, Annex 14); Mojahed, MKO Bulletin, Issue No. 298, May 1993
(IOS, Annex 18); Mojahed, MKO Bulletin, Exclusive Issue, Autumn 1991 (IOS, Annex 12); Mojahed,
MKO Bulletin, Issue No. 297, April 1993 (IOS, Annex 17); see also S. M. Hersh, “Our Men in Iran”,
The New Yorker, 5 April 2012 (IOS, Annex 32); Daniel Chaitin, “Sen. John McCain meets with Iranian
dissidents relocated to Albania”, Washington Examiner, 15 April 2017 (IOS, Annex 44).
- 106 -
province (Sistan and Baluchistan) alone. More recently, the terrorist attack in Tehran
of 7 June 2017 (claimed by ISIS) killed 18 and injured over 45 civilians.
A.17 The United States also accuses Iran of engaging “in a years-long pattern of conduct in
violation of its obligations under the NPT and the resulting restrictions imposed under
UNSC resolutions”.391 The U.S. description of the issue is disingenuous, and fails to
take into account many other intervening issues with respect to Iran’s peaceful nuclear
program which cannot be discussed here. Indeed, all Iran’s nuclear installations and all
nuclear materials have been under the IAEA’s constant and strict inspections. The UN
Security Council has never declared Iran to be in violation of the NPT, and the IAEA
has never reported that nuclear materials were used for non-peaceful purposes.
A.18 In sum, the main underlying reason for the dispute – which is not before the Court –
was the United States’ policy after 1979 with respect to Iran’s peaceful program to cut
off the supply of enriched uranium fuel and other materials by IAEA’s members for
Iran’s nuclear research reactors and to deprive Iran of its inalienable rights under the
NPT and IAEA agreements.392 The dispute was resolved through the JCPOA, which
inter alia reaffirmed Iran’s rights under the said agreements, though U.S. Government
or U.S. Congress have continued their policy of imposing sanctions against Iran or
Iranian nationals and companies. It is regrettable that these matters have been placed
before the Court for inappropriate, prejudicial purposes.
A.19 Similarly, the United States’ other accusations against Iran emanate either from a U.S.
hostile approach toward Iran or are taken out of their appropriate context. Iran does not
intend to belabour the Court with these issues, which are irrelevant to any correctly
brought objection to jurisdiction or admissibility, but reserves its right to respond to
them in the later stages of proceeding if necessary. It is sufficient here to emphasise that
it is Iran’s view that it is the United States that has destabilised the Middle East by its
inappropriate policies and actions. This inter alia includes occupation of Iraq in 2003
391 See U.S. Preliminary Objections, p. 24, para. 3.31.
392 The U.S. officials were publicly questioning Iran’s need for nuclear power since it has so much oil
whereas the United States had encouraged Iran in 1970th to develop nuclear energy because Iran
eventually run out of oil (R. Erlich, “U.S. Tells Iran: Become a Nuclear Power”, Foreign Policy in
Focus, 28 November 2007) (IOS, Annex 27).
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which destabilised that country and paved the way for emerging terrorist groups such
as ISIS.393
A.20 Finally, to put matters in a proper context, Iran should also refer briefly here to a number
of other hostile actions that the United States has taken against Iran after the overthrow
of the U.S. backed Shah’s regime in 1979 including: (a) General Robert E. Hyser’s
mission to Iran in January 1979 for a last-resort coup d’état prior to the revolution;
(b) the U.S. unsuccessful military operation in Tabas desert on 24 April 1980 (the socalled
‘Operation Eagle Claw’); (c) the Nojeh coup plot on 9 July 1980 to overthrow
the newly established Islamic Republic of Iran; (d) the support of Saddam Hussein’s
aggression against Iran by different means;394 (e) the attack and destruction of certain
Iranian Naval units and several offshore oil installations in the Persian Gulf;395 (f) the
shooting down of an Iranian civil aircraft over the Persian Gulf, killing all 300
passengers on board;396 and (g) the interfering in Iran by allocating funds for covert
operations, threatening Iran with military attack, and stating publicly its support for a
regime change in Iran.397
393 I. Tharoor, “Iraq’s Crisis: Don’t Forget the 2003 U.S. Invasion”, The Washington Post, 5 April 2014
(IOS, Annex 36); D. Rohde, “The Iraq Takeaway: American Ground Invasions Destabilize the Middle
East”, The Atlantic, 20 March 2013 (IOS, Annex 33); D. Hussain, “ISIS: The ‘Unintended
Consequences’ of the US-led War on Iraq”, Foreign Policy Journal, 23 March 2015 (IOS, Annex 37).
394 This included restricting flow of arms to Iran, replacing Iraq with Iran on the State sponsor of terrorism
list in 1984, supplying Iraq with materials and data in its illicit chemical and ballistic missile attacks
against Iranian military and civil targets, providing Iraq with financial, intelligence and diplomatic help.
See e.g., U.S. House of Representatives, Report on Banking Committee’s Investigation of the Atlanta
Branch BNL, Congressional Record, 102nd Congress (1991-1992), 2 March 1992 (IOS, Annex 1);
C. W. Weinberger, Fighting for Peace, Warner Books, 1990, p. 358; H. Kissinger, “Clinton and the
World”, News Week, 1 February 1993, p. 12 (IOS, Annex 16); K. R. Timmerman, “Europe’s Arms
Pipeline to Iran”, The Nation, Vol. 245, 18 July 1987, p. 47 (IOS, Annex 11); CRS Report for Congress,
“Terrorism: Middle Eastern Groups and State Sponsors”, 9 August 1995 (IOS, Annex 20); M. Waas &
D. Frantz, “Abuses in US Aid to Iraqis Ignored”, Los Angeles Times, 22 March 1992 (IOS, Annex 13);
R. Wright, “Some See Hypocrisy in U.S. Stand on Iraq Arms Mideast: Officials say American
intelligence aided Baghdad's use of chemical weapons against Iran in 80s”, Los Angeles Times,
16 February 1998 (IOS, Annex 24); see also M. Phythian, Arming Iraq: How the US and Britain
Secretly Built Saddam’s War Machine, North Western University Press, Boston, p. 37; E. Sciolino, The
Outlaw State: Saddam Hossein’s Quest for Power and the Gulf Crises, John Wiley & Sons, New York
1991, p. 166.
395 See Oil Platforms (Islamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports
2003, p. 161.
396 I.C.J., Case concerning the Aerial Incident of 3 July 1988 (Islamic Republic of Iran v. United States of
America).
397 See e.g., R. Smith & T. Lippman, “White House Agrees to Bill Allowing Covert Action Against Iran”,
The Washington Post, 22 December 1995 (IOS, Annex 21); “Obama says on Iran all options on the
table”, Reuters, 21 April 2009 (IOS, Annex 28); “Tillerson says U.S. Iran policy is “peaceful transition
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PART IV.
CONCLUSIONS
CHAPTER IX.
CONCLUDING OBSERVATIONS
9.1 This chapter briefly recalls the main legal arguments made in the U.S. Preliminary
Objections, and Iran’s main responses to them. It does so without prejudice to the
detailed responses set out in the preceding chapters of these Observations and
Submissions.
9.2 The United States has filed a wide-ranging document, based largely upon irrelevant,
unsupported allegations and criticisms of Iran, in support of its preliminary objections.
The U.S. Preliminary Objections rest on four legal propositions which the United
States requests that the Court adopt, and which are set out in the Submissions at
pp. 107-108 of that document.
U.S. proposition 1: all Iran’s claims are inadmissible
9.3 First, the United States submits that all Iran’s claims are inadmissible. It says that the
fundamental conditions underlying the Treaty of Amity no longer exist between the
Parties.398 But Iran has pointed out that the United States has not terminated the
Treaty,399 and that certain economic relations (a concept wider than commercial
relations)400 between the United States and Iran continue.401
of that government”, www.msn.com, 21 June 2017 available at www.msn.com/en-ca/lifestyle/smartliving/
tillerson-says-us-iran-policy-is-peaceful-transition-of-that-government/vp-BBCXUa8 (last
visited 16 August 2017).
398 U.S. Preliminary Objections, pp. 47-50, paras. 6.3-6.11.
399 See supra, pp. 1-2, paras. 1.2-1.4.
400 See supra, pp. 14-17, paras. 2.12-2.17.
401 See supra, pp. 17-22, paras. 2.18-2.28.
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9.4 The United States says that Iran’s claims are abusive and must be deemed
inadmissible,402 and that exercising jurisdiction in this case would undermine the
integrity of the Court’s judicial function.403 Iran has recalled the Court’s earlier
discussions of such arguments,404 and noted that the United States does not explain
how it can be ‘abusive’ to put forward claims of specific breaches of specific
provisions of the Treaty.405
9.5 The United States says that Iran has “unclean hands, soiled by decades of support for
terrorism and other destabilizing actions in violation of international law” and that this
renders its claims inadmissible.406 Putting aside the irrelevant and unsupported
allegations made by the United States, Iran has submitted that the ‘clean hands’
doctrine has nothing to do with the admissibility of an application and no role in Stateto-
State cases. Iran has also reviewed the jurisprudence on the doctrine, pointing out
that the doctrine has never been applied by the Court to render an application
inadmissible.407
U.S. proposition 2: U.S. measures that block or freeze assets of the Iranian
government or Iranian financial institutions (as defined in Executive Order 13599)
are outside the Court’s jurisdiction
9.6 Next, the United States seeks the dismissal of all Iranian claims that U.S. measures
blocking or freezing assets of the Iranian government or Iranian financial institutions
violate the Treaty. The argument is linked specifically to U.S. Executive Order 13599.
The U.S. argument is that those measures are excluded from the Court’s jurisdiction
by Article XX(1) of the Treaty.408
402 U.S. Preliminary Objections, pp. 50-53, paras. 6.12 – 6.18.
403 U.S. Preliminary Objections, pp. 53-54, paras. 6.19-6.23.
404 See supra, pp. 76-82, paras. 7.4-7.16.
405 See supra, pp. 83-88, paras. 7.20-7.31.
406 U.S. Preliminary Objections, pp. 54-61, paras. 6.25-6.38.
407 See supra, pp. 90-98, paras. 8.1-8.21.
408 U.S. Preliminary Objections, Chapter 7.
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9.7 Iran has recalled the Court’s examination of Article XX(1) in the Oil Platforms case,
and submitted that where that provision applies it affords a defence on the merits to
conduct that would otherwise amount to a breach of the Treaty, but does not restrict
the jurisdiction of the Court.409 Further, the question of the scope of Article XX(1) is
in any event not of an exclusively preliminary character within the meaning of
Article 79(7) of the Rules of the Court.410 In addition, Iran has noted that this U.S.
objection touches only one aspect of Iran’s case, and has no bearing on other aspects
of Iran’s Application.411
U.S. proposition 3: all claims, brought under any provision of the Treaty of Amity,
that are predicated on the United States’ purported failure to accord sovereign
immunity from jurisdiction and/or enforcement to the Government of Iran, Bank
Markazi, or Iranian State-owned entities, are outside the Court’s jurisdiction.
9.8 The next U.S. submission asserts that all claims predicated on an entitlement to
sovereign immunity are outside the Court’s jurisdiction, because they do not fall
within the provisions of the Treaty.412
9.9 Iran has submitted that the question is not whether the entire Treaty is a vehicle for
codifying the law on sovereign immunity but whether specific provisions of the Treaty
require consideration of compliance with the law on immunity.413 Iran has pointed to
several such provisions:
(a) Article III(2) (‘freedom of access to the courts … both in defense and pursuit of
their rights…’);414
409 See supra, pp. 69-71, paras. 6.1-6.6.
410 See supra, pp. 71-73, paras. 6.7-6.11.
411 See supra, pp. 28-30, paras. 3.6-3.10.
412 U.S. Preliminary Objections, Chapter 8.
413 See supra, pp. 47-51, paras. 5.1-5.8 and pp. 65-68, paras. 5.39-5.47.
414 See supra, pp. 51-57, paras. 5.9-5.21.
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(b) Article IV(1) (fair and equitable treatment; freedom from unreasonable or
discriminatory treatment that would impair legally acquired rights and
interests);415
(c) Article IV(2) (right to ‘most constant protection and security’ of property ‘in no
case less than that required by international law’);416
(d) Article V(1) (right to lease, purchase, acquire and dispose of property);417
(e) Article VII(1) (right to make payments, remittances and transfers of funds);418
and
(d) Article X(1) (freedom of commerce and navigation).
9.10 Iran submits that all of these provisions are on their face evidently capable of being
violated by the denial of rights to immunities before U.S. courts.
U.S. proposition 4: all claims of purported violations of Articles III, IV, or V of the
Treaty that are predicated on treatment accorded to the Government of Iran or to
Bank Markazi are outside the Court’s jurisdiction.
9.11 The United States submits, finally, that the Government of Iran and Bank Markazi are
not entitled to protection under the Treaty.419 It says that Bank Markazi is a “sovereign
entity exercising sovereign functions”,420 and therefore cannot be a “company” under
the Treaty, benefitting from Treaty protections.421
9.12 Iran has pointed out that the Treaty itself defines (in Article III(1)) the “companies”
to which it applies, and does so in terms that include Bank Markazi and other Iranian
415 See supra, pp. 58-60, paras. 5.22-5.26.
416 See supra, pp. 60-62, paras. 5.27-5.32.
417 Iran, Memorial, pp. 108-109, paras. 5.72-5.76.
418 Iran, Memorial, pp. 110-112, paras. 6.2-6.9.
419 U.S. Preliminary Objections, Chapter 9.
420 U.S. Preliminary Objections, pp. 97-99, paras. 9.4-9.8.
421 U.S. Preliminary Objections, pp. 99-104, paras. 9.9-9.19.
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companies affected by the U.S. measures at issue in this case. This interpretation is
borne out by the ordinary meaning of the Treaty provisions in their context, and
confirmed by examination of the travaux préparatoires, in accordance with the
Vienna Convention rules on treaty interpretation.422 It is not uncommon for Central
Banks to be incorporated as companies under domestic laws.423 Furthermore, Iran has
noted that the reliance by the United States on the functions carried out by Bank
Markazi necessarily requires an investigation into the facts, and cannot be a question
of a preliminary character.424
The limited nature of the U.S. jurisdictional objections
9.13 Iran has also pointed out that the United States’ preliminary objections to the
jurisdiction of the Court (unlike the objections to admissibility) are directed only at
particular parts of Iran’s Application.
9.14 As Iran has noted, the United States does not question the Court’s jurisdiction over
claims based on Article III of the Treaty (recognition of juridical status of companies
and freedom of access to courts), except in respect of one company, Bank Markazi.425
The same is true in respect of Article IV and V of the Treaty.426 The United States
similarly makes no objection to the Court’s jurisdiction over Iran’s claims in respect
of a breach of Article VII of the Treaty, or (sovereign immunity- related claims apart)
in respect of a breach of Article X(1).
9.15 For these reasons, and the further reasons and explanations given in the preceding
chapters, Iran requests the Court to dismiss all of the U.S. preliminary objections and
to proceed to a hearing on Iran’s Application.
422 See supra, pp. 34-44, paras. 4.4-4.30.
423 See supra, p. 33, fn. 110.
424 See supra, pp. 45-46, paras. 4.31-4.35.
425 See supra, p. 28, para. 3.7.
426 See supra, pp. 29-30, paras. 3.8-3.9.
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CHAPTER X.
SUBMISSIONS
10.1 For the reasons given above, the Islamic Republic of Iran requests that the Court:
(a) Dismiss the preliminary objections submitted by the United States in its
submission dated 1 May 2017, and
(b) Decide that it has jurisdiction to hear the claims in the Application by the Islamic
Republic of Iran dated 14 June 2016, and proceed to hear those claims.
M. H. Zahedin Labbaf
Co-Agent of the Government of the
Islamic Republic of Iran
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CERTIFICATION
I, the undersigned, M. H. Zahedin Labbaf, Co-Agent of the Islamic Republic of Iran, hereby
certify that the copies of these Observations and Submissions and the documents annexed in
the Volume of Annexes are true copies and conform to the original documents and that the
translations into English are accurate translations.
M. H. Zahedin Labbaf
Co-Agent of the Government of the
Islamic Republic of Iran
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LIST OF ANNEXES
PART I – U.S. LEGISLATIVE ACTS
Annex 1 U.S. House of Representatives, Report on Banking Committee’s
Investigation of the Atlanta Branch BNL, Congressional
Record, 102nd Congress (1991-1992), 2 March 1992 (excerpts)
p. 1
Annex 2 Trade Sanctions Reform and Export Enhancement Act of 2000,
Title IX of Public Law 106 387 (28 October 2000)
p. 5
PART II – U.S. EXECUTIVE ACTS
Annex 3 OFAC General License D (authorizing the exportation and
reexportation to persons in Iran of certain services, software, and
hardware incident to the exchange of personal communication,
subject to certain limitations), effective on 30 May 2013
p. 13
Annex 4 OFAC Final Rule (adding to the Iran Transactions and Sanctions
Regulations general licenses authorizing the importation into the
United States of, and dealings in, certain Iranian-origin
foodstuffs and carpets and related transactions), effective
21 January 2016
p. 17
Annex 5 OFAC General License I (authorizing certain transactions
related to the negotiation of, and entry into, contingent contracts
for activities eligible for authorization under the statement of
licensing policy for activities related to the export or re-export
to Iran of commercial passenger aircraft and related parts and
services), dated 24 March 2016
p. 23
Annex 6 31 CFR, Section 560.530 (as of 01 July 2016) p. 27
PART IV – U.S. COURTS DECISIONS
Annex 7 United States of America v. Yousef et al., Court of Appeals,
Second Circuit, 4 April 2003, 327 F.3d 56 (excerpts)
p. 35
PART V – IRANIAN OFFICIAL STATEMENTS
Annex 8 Statement by H.E. Dr. Kamal Kharrazi, Minister for Foreign
Affairs of the Islamic Republic of Iran, before the Fifty-second
Session of the United Nations General Assembly, New York,
22 September 1997
p. 55
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Annex 9 Statement by H.E. Seyed Mohammad Khatami, Former
President of the Islamic Republic of Iran, before the 53rd session
of the United Nations General Assembly, New York,
21 September 1998
p. 91
Annex 10 Statement by H.E. Dr. Hassan Rohani, President of the Islamic
Republic of Iran, before the Sixty-Eight Session of the United
Nations General Assembly, New York, 24 September 2013
p. 99
PART VI – PRESS ARTICLES
Annex 11 K. Timmerman, “Europe’s Arms Pipeline to Iran”, The Nation,
Vol. 245, 18 July 1987
p. 109
Annex 12 Mojahed, MKO Bulletin, Exclusive Issue, Autumn 1991
(excerpts)
p. 117
Annex 13 M. Waas & D. Frantz, “Abuses in US Aid to Iraqis Ignored”,
Los Angeles Times, 22 March 1992
p. 121
Annex 14 Mojahed, MKO Bulletin, issue No. 294, December 1992
(excerpts)
p. 127
Annex 15 Mojahed, MKO Bulletin, Issue No. 295, February-March 1993
(excerpts)
p. 135
Annex 16 Henry Kissinger, “Clinton and the World,” News Week,
1 February 1993
p. 139
Annex 17 Mojahed, MKO Bulletin, Issue No. 297, April 1993 (excerpts) p. 147
Annex 18 Mojahed, MKO Bulletin, Issue No. 298, May 1993 (excerpts) p. 151
Annex 19 G. A. Nader, “Interview with President Ali Akbar Hashemi
Rafsanjani”, Middle East Insight, July-August 1995, Vol. XI,
No.5
p. 155
Annex 20 CRS Report for Congress, “Terrorism: Middle Eastern Groups
and State Sponsors”, 9 August 1995 (excerpts)
p. 165
Annex 21 R. Smith and T. Lippman, “White House Agrees to Bill
Allowing Covert Action Against Iran”, The Washington Post,
22 December 1995
p. 169
Annex 22 S. Robinson, “Gingrich in call to arms against Iran terror bases”,
The Daily Telegraph, 5 August 1996
p. 175
Annex 23 “Transcript of interview with Mohammad Khatami, Former
President of the Islamic Republic of Iran”, CNN, 7 January 1998
p. 179
Annex 24 R. Wright, “Some See Hypocrisy in U.S. Stand on Iraq Arms
Mideast: Officials say American intelligence aided Baghdad's
use of chemical weapons against Iran in 80s”, Los Angeles
Times, 16 February 1998
p. 193
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Annex 25 “Riyadh accepts for first time that bombers of US base were
Saudi”, Agence France Press, 21 May 1998
p. 197
Annex 26 S. Galster, “Volume II: Afghanistan: Lessons from the Last War
– Afghanistan: the Making of U.S. Policy, 1973-1990”, The
National Security Archive, 9 October 2001
p. 201
Annex 27 R. Erlich, “U.S. Tells Iran: Become a Nuclear Power”, Foreign
Policy in Focus, 28 November 2007
p. 223
Annex 28 “Obama says on Iran all options on the table”, Reuters, 21 April
2009
p. 231
Annex 29 J. Becker, “U.S. Approved Business with Blacklisted Nations”,
New York Times, 23 December 2010
p. 235
Annex 30 J. Becker, “Licenses Granted to U.S. Companies Run the
Gamut”, New York Times, 24 December 2010
p. 243
Annex 31 Z. Goldfarb, “Firms licensed to do business in countries on U.S.
terror list”, The Washington Post, 24 December 2010
p. 263
Annex 32 S. M. Hersh, “Our Men in Iran”, The New Yorker, 5 April 2012 p. 267
Annex 33 D. Rohde, “The Iraq Takeaway: American Ground Invasions
Destabilize the Middle East”, The Atlantic, 20 March 2013
p. 271
Annex 34 National Security Archive, “CIA Confirms Role in 1953 Iran
Coup”, 19 August 2013
p. 275
Annex 35 “Iran, U.S. to open joint Chamber of Commerce: Report”,
Agence France Presse, 27 November 2013
p. 287
Annex 36 I. Tharoor, “Iraq’s Crisis: Don’t Forget the 2003 U.S. Invasion”,
The Washington Post, 5 April 2014
p. 291
Annex 37 D. Hussain, “ISIS: The “Unintended Consequences” of the USled
War on Iraq”, Foreign Policy Journal, 23 March 2015
p. 295
Annex 38 R. LoBianco & E. Landers, “Trump: Clinton, Obama 'created
ISIS'”, CNN, 3 January 2016
p. 301
Annex 39 K. Ng, “Donald Trump says Barack Obama and Hillary Clinton
‘created Isis’”, The Independent, 3 January 2016
p. 305
Annex 40 “U.S. to buy heavy water from Iran's nuclear program”, Reuters,
22 April 2016
p. 309
Annex 41 “Boeing seals $16,6 billion deal with Iran Air”, AP,
11 December 2016
p. 313
Annex 42 “Iran Open to Business Ties with US”, Financial Tribune,
19 January 2017
p. 317
Annex 43 “Boeing Co. says it signed new $3 billion deal with Iranian
airline”, AP, 4 April 2017
p. 321
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Annex 44 D. Chaitin, “Sen. John McCain meets with Iranian dissidents
relocated to Albania”, Washington Examiner, 15 April 2017
p. 325
Annex 45 F. Zakaria, “How Saudi Arabia Played Donald Trump”, The
Washington Post, 25 May 2017
p. 329
Annex 46 J. Cook, “Trump Suggests Iran Brought Deadly Terrorist
Attacks Upon Itself”, Huffingtonpost.com, 7 June 2017
p. 333
Annex 47 Z. Jilani & R. Grim, “Bucking Bernie Sanders, Democrats Move
Forward on Iran Sanctions After Terror Attack in Tehran”, The
Intercept, 7 June 2017
p. 337
Annex 48 I. Tharoor, “Terror in Iran reveals the hypocrisy of Trump and
his allies”, The Washington Post, 8 June 2017
p. 341
Annex 49 D. Smith & S. Siddiqui, “Gulf crisis: Trump escalates row by
accusing Qatar of sponsoring terror”, The Guardian, 9 June
2017
p. 345
Annex 50 “Iranian airline finalizes deal to purchase 60 Boeing planes”,
AP, 10 June 2017
p. 349
Annex 51 N. Gaouette, D. Merica & R. Browne, “Trump: Qatar must stop
funding terrorism”, CNN, 10 June 2017
p. 353
Annex 52 P. Beaumont, “US signs deal to supply F-15 jets to Qatar after
Trump terror claims”, The Guardian, 15 June 2017
p. 359
Annex 53 R. Browne, “Amid diplomatic crisis Pentagon agrees $12 billion
jet deal with Qatar”, CNN, 15 June 2017
p. 363
Annex 54 National Security Archive, “Iran 1953: State Department Finally
Releases Updated Official History of Mosaddeq Coup”,
15 June 2017
p. 367
Annex 55 R. Shabad, “Senate passes measure to expand sanctions on Iran
and Russia”, www.cbsnews.com, 15 June 2017
p. 373
PART VII – OTHER DOCUMENTS
Annex 56 U.S. Department of State, Patterns of Global Terrorism: 1997,
Department of State Publication 10535 (excerpts)
p. 377
Annex 57 I.R. Iran Customs Administration, Report on Commercial
Transactions with the United States of America, 2017
p. 387