Reply of of the Islamic Republic of Iran

IN THE NAME OF GOD
INTERNATIONAL COURT OF JUSTICE
CASE CONCERNING
CERTAIN IRANIAN ASSETS
(ISLAMIC REPUBLIC OF IRAN V. UNITED STATES OF AMERICA)
REPLY
OF THE ISLAMIC REPUBLIC OF IRAN
17 AUGUST 2020

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TABLE OF CONTENTS
CHAPTER I. INTRODUCTION ........................................................................................... 1
SECTION 1. INTRODUCTORY OBSERVATIONS 1
SECTION 2. BRIEF PROCEDURAL HISTORY 3
SECTION 3. THE SUBJECT MATTER OF THE CASE 5
SECTION 4. THE JUDGMENT OF 13 FEBRUARY 2019 ON PRELIMINARY OBJECTIONS 8
SECTION 5. STRUCTURE OF THE REPLY 12
CHAPTER II. THE JUDICIAL DECISIONS IMPLEMENTING THE U.S. LEGAL
AND REGULATORY MEASURES AGAINST IRAN AND IRANIAN COMPANIES 14
SECTION 1. THE IRANIAN COMPANIES CONCERNED 16
A. Bank Melli 16
B. Bank Markazi 19
C. Other Iranian banks 21
D. Telecommunication Infrastructure Company 23
E. Iranian energy companies 26
F. Iranian shipping and shipbuilding companies 30
G. Iran Air 33
SECTION 2. THE JUDICIAL PROCEEDINGS AGAINST THESE IRANIAN COMPANIES 34
A. U.S. final judgments against Iranian companies: the Havlish v. Bin Laden case and
the subsequent actions 34
B. Enforcement of U.S. judgments entered against Iran against property belonging to
Iranian companies 46
i. Enforcement proceedings against Bank Melli 48
ii. Enforcement proceedings against Bank Markazi: the Peterson cases 57
iii. Enforcement proceedings against TIC: the Heiser case 72
iv. Enforcement proceedings against other Iranian companies: the Heiser cases
74
SECTION 3. THE PENDING JUDICIAL PROCEEDINGS AGAINST THE STATE OF IRAN 76
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PART I. THE UNITED STATES BREACHED IRAN’S TREATY RIGHTS ................ 81
CHAPTER III. BANK MARKAZI WAS CARRYING OUT, AT THE RELEVANT
TIME, ACTIVITIES CHARACTERISING IT AS A “COMPANY” WITHIN THE
MEANING OF THE TREATY OF AMITY ....................................................................... 81
SECTION 1. THE RULING OF THE COURT IN THE JUDGMENT ON THE PRELIMINARY
OBJECTIONS 83
SECTION 2. THE COMMERCIAL NATURE OF BANK MARKAZI’S ACTIVITIES THAT CAME
UNDER THE AMBIT OF THE IMPUGNED US MEASURES 87
A. The commercial and business activities which Bank Markazi can perform
according to its statutes 88
B. The activities carried out by Bank Markazi relevant to the present case 90
C. The commercial/business nature of the activities carried out by Bank Markazi in
respect of security entitlements 91
SECTION 3. CONCLUSION OF CHAPTER III. 95
CHAPTER IV. THE UNITED STATES HAS VIOLATED ARTICLE III(1) OF THE
TREATY OF AMITY............................................................................................................ 97
SECTION 1. INTERPRETATION OF ARTICLE III(1) OF THE TREATY OF AMITY 99
SECTION 2. VIOLATION OF ARTICLE III(1) OF THE TREATY OF AMITY 104
SECTION 3. CONCLUSION OF CHAPTER IV 110
CHAPTER V. THE BREACHES OF ARTICLE III(2) OF THE TREATY OF AMITY:
IRAN’S ENTITLEMENT TO FREEDOM OF ACCESS TO THE U.S. COURTS FOR
ITS COMPANIES ................................................................................................................ 111
SECTION 1. THE PROTECTIONS AFFORDED BY ARTICLE III(2) 112
SECTION 2. VIOLATION OF IRAN’S ENTITLEMENT TO FREEDOM OF ACCESS TO THE U.S.
COURTS FOR ITS COMPANIES UNDER ARTICLE III(2) 121
CHAPTER VI THE BREACHES OF ARTICLE IV(1) OF THE TREATY OF AMITY
................................................................................................................................................ 126
SECTION 1. THE PROTECTIONS WITH RESPECT TO FAIR AND EQUITABLE TREATMENT,
UNREASONABLE OR DISCRIMINATORY MEASURES, AND EFFECTIVE MEANS OF
ENFORCEMENT 126
A. Article IV(1) establishes three discrete obligations 127
B. Fair and equitable treatment 129
i. The fair and equitable treatment provision in Article IV(1) is not limited to
the customary international minimum standard 131
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ii. Even if fair and equitable treatment provision in Article IV(1) were limited
to the international minimum standard, it would not be confined to a
protection against denial of justice 136
iii. The “fair and equitable treatment” provision in Article IV(1) is not static
138
iv. The elements of the fair and equitable treatment provision in Article IV(1)
140
C. Unreasonable or discriminatory measures 147
D. Effective means of enforcement 150
SECTION 2. THE BREACHES OF ARTICLE IV(1) BY THE UNITED STATES 152
A. Breaches of the fair and equitable treatment provision in Article IV(1) 152
i. Denial of rights of the defence of separate juridical status and subjection of
Iranian companies to enforcement action in respect of the (purported)
liability of the Iranian State 154
ii. Legislative interference in judicial proceedings and denial of rights of
defence, including with retrospective effect 161
B. Breach of the protection against unreasonable or discriminatory measures in
Article IV(1) by the United States 166
C. Breach of the obligation to assure effective means of enforcement for lawful
contractual rights of Iranian companies in Article IV(1) by the United States 169
CHAPTER VII. THE BREACHES OF ARTICLE IV(2) AND ARTICLE V(1) OF THE
TREATY OF AMITY.......................................................................................................... 171
SECTION 1. BREACH BY THE UNITED STATES OF IRAN’S ENTITLEMENT TO PROTECTION AND
SECURITY FOR ITS COMPANIES AND NATIONALS UNDER ARTICLE IV(2) 171
A. Iran’s entitlement to the most constant protection and security of the property and
interests in property of its nationals and companies, in no case less than that
required by international law 171
B. Breach by the USA of the first limb of Article IV(2) 175
SECTION 2. BREACH BY THE UNITED STATES OF THE PROHIBITION ON TAKING UNDER
ARTICLE IV(2) 176
A. Iran’s entitlement to freedom from expropriation of the property and interests in
property of its companies and nationals, except for a public purpose and the
payment of just compensation 176
B. Breach by the USA of the prohibition of takings under Article IV(2) 179
SECTION 3. BREACH BY THE UNITED STATES OF IRAN’S ENTITLEMENT FOR ITS COMPANIES
AND NATIONALS TO BE PERMITTED TO LEASE, ACQUIRE AND DISPOSE OF PROPERTY 182
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CHAPTER VIII. THE BREACHES OF ARTICLES VII(1) AND X(1) OF THE
TREATY OF AMITY.......................................................................................................... 185
SECTION 1. ARTICLE VII(1) OF THE TREATY OF AMITY: BREACH BY THE UNITED STATES OF
IRAN’S ENTITLEMENT TO FREEDOM, INCLUDING FOR ITS COMPANIES AND NATIONALS, FROM
RESTRICTIONS ON THE MAKING OF PAYMENTS, REMITTANCES AND OTHER TRANSFERS OF
FUNDS TO OR FROM THE TERRITORY OF THE UNITED STATES 185
A. Article VII(1) of the Treaty of Amity 185
B. Violation of Iran’s entitlement to freedom, including for its companies and
nationals, from restrictions on the making of payments, remittances and other
transfers of funds to or from the territory of the United States 187
SECTION 2. 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 189
A. Article X(1) of the Treaty of Amity 189
i. “Commerce” is not restricted to “commerce related to navigation” 190
ii. “Commerce” is not restricted to “trade in goods” 192
iii. The territorial limitation 195
B. Violation of Iran’s entitlement to freedom of commerce between the territories of
Iran and the United States, under Article X(1) of the Treaty of Amity 197
PART II. THE OTHER U.S. DEFENCES DOES NOT BAR IRAN’S CLAIMS ......... 199
CHAPTER IX THE DUTY TO EXHAUST LOCAL REMEDIES DOES NOT BAR
IRAN’S CLAIMS ................................................................................................................. 199
SECTION 1. LOCAL REMEDIES HAVE BEEN EXHAUSTED TO THE EXTENT THAT THEY ARE
REASONABLY AVAILABLE 200
SECTION 2. IRAN’S CLAIMS DO NOT REQUIRE THE EXHAUSTION OF LOCAL REMEDIES 206
CHAPTER X. ARTICLE XX(1) OF THE TREATY OF AMITY DOES NOT BAR
IRAN’S CLAIMS WITH REGARD TO E.O. 13599........................................................ 213
SECTION 1. ARTICLE XX(1)(C) DEFENCE REGARDING ARMS TRAFFICKING IS UNFOUNDED
214
SECTION 2. ARTICLE XX(1)(D) DEFENCE REGARDING U.S. ESSENTIAL SECURITY INTERESTS
IS UNFOUNDED 218
A. Article XX(1)(d) is not self-judging 220
B. The court must determine whether the alleged measure was necessary to protect
essential security interests 222
C. The measures were not necessary to protect the U.S. essential Security interests 224
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CHAPTER XI. THE UNITED STATES’ UNCLEAN HANDS AND ABUSE OF
RIGHTS DEFENCES ARE INADMISSIBLE AND UNFOUNDED ............................. 229
SECTION 1. THE UNITED STATES’ UNCLEAN HANDS DEFENCE 229
A. International courts and tribunals have not applied the clean hands doctrine
despite many invocations by states 231
B. There is no general principle of law recognising the clean hands doctrine 236
C. The United States does not allege that Iran violated the Treaty of Amity on which
its claim is based 238
SECTION 2. THE SO-CALLED “ABUSE OF RIGHTS” DEFENCE RAISED BY THE UNITED STATES
242
A. The United States merely relabels as “abuse of rights” the “abuse of process”
objection already rejected by the Court 243
B. The U.S. so-called “abuse of right” defence is not founded in law and in facts 246
i. The doctrine of the abuse of rights has never been upheld in an inter-State
dispute 247
ii. Abuse of rights must be rejected in the instant case for lack of any basis 250
APPENDIX A. THE U.S. ALLEGATIONS OF TERRORISM ARE INAPPROPRIATE
AND UNFOUNDED ............................................................................................................ 255
PART III. CONCLUSIONS ................................................................................................ 266
CHAPTER XII. SUMMARY OF IRAN’S CASE AND SUBMISSIONS ....................... 266
SECTION 1. SUMMARY OF IRAN’S CASE 266
SECTION 2. IRAN’S REQUEST FOR RELIEF 268
SECTION 3. SUBMISSIONS 272
LIST OF ATTACHMENTS AND ANNEXES .................................................................. 277
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LIST OF ABBREVIATIONS AND ACRONYMS
AEDPA Antiterrorism and Effective Death Penalty Act of 1996
a.k.a. also known as
CAFTA Central America Free Trade Agreement
Cir. Circuit
Cong. Congress
C.U.P. Cambridge University Press
D.C. District of Columbia
D.D.C. District Court for the District of Columbia
DTC Depository Trust Company of New York
ECHR European Convention on Human Rights
ECtHR European Court of Human Rights
ed. edition
EDBI Export Development Bank of Iran
E.D.N.Y. Eastern District of New York
e.g. exempli gratia
EHRR European Human Rights Reports
E.O. Executive Order
et al. et alii
FCN Friendship, Commerce and Navigation
Fed. Reg. Federal Register
fn. footnote
FRBNY Federal Reserve Bank of New York
FSIA Foreign Sovereign Immunities Act of 1976
F. Supp. Federal Supplement
HRC Human Rights Committee
H. R. Rep. House of Representative Report
IAEA International Atomic Energy Agency
Ibid. Ibidem
I.C.C. International Chamber of Commerce
ICCPR International Covenant on Civil and Political Rights
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
IM Iran’s Memorial
Inc. Incorporated
IOS Iran’s Observations and Submissions on the U.S. Preliminary
Objections
IRGC Islamic Revolutionary Guard Corps
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IRISL Islamic Republic of Iran Shipping Lines
ISIN International Securities Identification Number
ITLOS International Tribunal for the Law of Sea
ITRSHRA Iran Threat Reduction and Syria Human Rights Act of 2012
IUSCT Iran – United States Claims Tribunal
JASTA Justice Against Sponsors of Terror Act of 2016
JCPOA Joint Comprehensive Plan of Action
MKO Mujahedin Khalgh Organization of Iran
MOIS Iranian Ministry of Intelligence and Security
NAFTA North American Free Trade Agreement
NCR National Council of Resistance
NDAA National Defense Authorization Act for Fiscal Year
NIGC National Iranian Gas Company
NIOC National Iranian Oil Company
NITC National Iranian Tanker Company
No. numero
NPC National Petrochemical Company
NPT Treaty on the Non-Proliferation of Nuclear Weapons
OFAC Office of Foreign Assets Control
O.U.P. Oxford University Press
p. page
para. paragraph
paras. paragraphs
P.C.I.J. Permanent Court of International Justice
PCA Permanent Court of Arbitration
pp. pages
Pub. L. Public Law
QSF Qualified Settlement Fund
RCADI Recueil des Cours de l’Académie de Droit International
Rec. Record
R.I.A.A. Reports of International Arbitral Awards
s. section
S.D.N.Y. Southern District of New York
TIC Telecommunication Infrastructure Company
TRIA Terrorism Risk Insurance Act of 2002
UCC United States Uniform Commercial Code
UBAE Unione delle Banche Arabe ed Europee
U.K. United Kingdom
UNCLOS United Nations Convention on the Law of the Sea
U.N. doc. United Nations documents
UNCITRAL United Nations Commission on International Trade Law
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UNSC United Nations Security Council
U.N.T.S. United Nations Treaty Series
U.S. United States of America
U.S.C. United States Code
U.S. CM United States’ Counter-Memorial
USD United States dollar
U.S. PO United States’ Preliminary Objections
v. versus
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
SECTION 1.
INTRODUCTORY OBSERVATIONS
1.1 The Islamic Republic of Iran (‘Iran’) filed its Memorial in this case on 1 February
2017. Since then the United States announced, on 3 October 2018,1 its denunciation
of the 1955 Treaty of Amity, Economic Relations, and Consular Rights (‘the Treaty
of Amity’2) which is the legal basis of this case, and the Court delivered,
on 13 February 2019, its decision on the preliminary objections raised in this case by
the United States. Iran has taken due note of those developments and has adjusted its
position and its submissions accordingly; but it is important to emphasise from the
outset that the core of Iran’s case, and likewise the rationale for instituting these
proceedings and the importance of deciding on Iran’s claims, remain intact.
1.2 Iran’s core case was and is that in the Treaty of Amity, Iran and the United States
accepted legally binding obligations to apply agreed rules and principles in their
dealings with one another and in the treatment of each other’s companies. Those rules
and principles provided the foundation upon which the peoples of Iran and the United
States would develop “mutually beneficial trade and investments and closer economic
intercourse”.3 The Court’s 13 February 2019 Judgment indicated that, contrary to
Iran’s submission, the rules and principles secured by the Treaty do not include rights
to establish a claim where there has been a failure to comply with the rules of
international law on sovereign immunity. Iran therefore does not pursue those of its
original claims that were predicated on the United States’ failure to accord immunity
1 Diplomatic Note from the U.S. Department of State to the Ministry of Foreign Affairs of I.R.
Iran, 3 October 2018 (IR, Annex 2).
2 Treaty of Amity, Economic Relations, and Consular Rights of 1955 between the United States of
America and Iran, 284 U.N.T.S. 93 (IM, Annex 1).
3 Treaty of Amity, preambular para. 1 (IM, Annex 1).
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from jurisdiction and/or enforcement to the Government or Iran, Bank Markazi, or
Iranian State-owned entities under the customary international law on sovereign
immunity.4 All of Iran’s other claims remain before the Court.
1.3 The United States repeatedly insists on addressing the broad context of Iran-U.S.
relations and global politics, rather than Iran’s narrow legal claim. The United States
and Iran have not made treaty agreements that put all aspects of their relationship into
a legal framework that provides for the compulsory adjudication of disputes. But they
have put the aspects in issue here within such a legal framework; and the question
now before the Court is, essentially, whether when the United States binds itself under
international law to act in a certain way it can decide unilaterally that it will not behave
in that way. It is the most basic question of the application of the Rule of Law in
international relations: whether States are free to abandon legal commitments in order
to pursue foreign policy goals.
1.4 In its Counter-Memorial, the United States has engaged again in an attempt to “poison
the well” and has also chosen to put before the Court a distorted account of Iran’s case
in order to bolster the credibility of its defences. It attempts, for example, to cut down
Iran’s case to claims regarding a few companies or entities, ignoring the violation of
Iran’s own rights under the Treaty of Amity, so as to transform this into a case of
diplomatic protection.5
1.5 It is necessary to focus on Iran’s claim as it has actually been presented in its
Memorial, narrowed down by reference to the Court’s decision on jurisdiction, rather
than on the distorted version of Iran’s claim as the United States has sought to re-cast
it in its Counter-Memorial. The United States has submitted a pleading centred on
Iran - U.S. relations generally and a multiplicity of spurious allegations of terrorism
such that, remarkably, it is not until Chapter 12 of its Counter-Memorial that the
United States starts to engage with Iran’s actual claim, i.e. its claim for breaches of
the Treaty of Amity. Yet that claim cannot be re-shaped into a case about alleged
4 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, pp. 22, 25, 29 and 30, paras. 48, 58, 70 and 74.
5 U.S. Counter-Memorial, Chapter 10.
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terrorism, with Iran’s actual case then confined almost to a footnote in the United
States (ill-founded) complaints as to Iran’s conduct over the past 40 years.
1.6 At the heart of Iran’s case is the United States’ extraordinary disregard for, and
deliberate nullification of, Iran’s rights and interests protected by the Treaty of Amity.
This includes the United States’ legislative intervention into ongoing U.S. court
proceedings in order to ensure that Iranian companies lose those proceedings, and its
complete disregard for the separate juridical status of Iranian companies, both of
which inflict injury on the Iranian economy. In the Peterson case, U.S. legislation
targeted the specific proceedings, retroactively removing all defences that would
usually have been available to Bank Markazi.6 In the Bennett litigation, legislation
pre-determined the outcome of the case against Bank Melli by providing that the
assets of any entity regarded by U.S. law as an “instrumentality” of an alleged terrorist
State were available to satisfy the “terrorism judgment”, even though Bank Melli was
not a party to the judgment and was not even alleged to have been involved in any
terrorist activity.7 These and other acts by the United States directly engage and breach
protections accorded by the Treaty of Amity to the Islamic Republic of Iran itself and
to Iranian companies.
SECTION 2.
BRIEF PROCEDURAL HISTORY
1.7 On 14 June 2016, Iran filed its Application based on the fact that the adoption by the
United States of a series of measures directed against Iranian companies and their
property “have had and/or are having a serious adverse impact upon the ability of Iran
and of Iranian companies (including Iranian State-owned companies) to exercise their
rights to control and enjoy their property, including property located outside the
6 See paras. 2.95-2.96 (Peterson I) and paras 2.103-2.107 (Peterson II) below. See also Iran’s Memorial,
pp. 96-97, paras. 5.44-5.45.
7 See paras. 2.70-2.78 below; see also 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) (IM, Annex 64). See also 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) at pp. 7-12 (IM, Annex 47).
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territory of Iran/within the territory of the USA”.8 Iran submitted – and subject to the
modifications entailed by the Court’s judgment of 13 February 2019, still submits –
that these measures violate the Treaty of Amity, and invoked Article XXI(2) of that
Treaty as the basis for the Court’s jurisdiction.
1.8 On 1 February 2017, Iran filed its Memorial, in which it elaborated upon the U.S.
violation of its obligations under the Treaty of Amity through its stated policy of
“imposing serious harm upon the Iranian economy and the Iranian nationals and
companies who make up and depend on that economy, to the point where it has
become necessary for Iran to seek the protection of its legal rights before this Court”.9
Iran explained that the U.S. legislature had abrogated certain procedural provisions
and defences in its domestic law and that the “actual and intended effect of this is to
deprive Iran and Iranian companies of the possibility of properly defending their legal
rights before the U.S. courts, and to enable plaintiffs in the U.S. courts to satisfy
judgment debts in cases against the Iranian State (again, in the U.S. courts) by seizing
assets of juridically separate Iranian companies that are not even parties to those
cases.”10 Indeed, that was not only the effect of those measures, it was their very
purpose.
1.9 On 1 May 2017, the United States filed a number of preliminary objections to the
Court’s jurisdiction and the admissibility of Iran’s Application. Iran responded with
its Observations and Submissions of 1 September 2017. The Court heard the oral
arguments of the Parties on 8-12 October 2018. A few days before the hearings
opened, the United States announced it was withdrawing from the Treaty of Amity in
order to “limit[] its exposure to decisions by the International Court of Justice”.11 Iran
stated that the “shift in the position of the United States” regarding its Treaty
obligations “in no way prejudices the already acquired rights of the Iranian
8 Iran’s Application, p. 1, para. 1.
9 Iran’s Memorial, p. 1, para. 1.3.
10 Ibid., p. 2, para. 1.6.
11 N. Gaouette & J. Crawford, “U.S. blasts international court on Iran ruling, pulls out of 1955 treaty”,
CNN, 3 October 2018 (IR, Annex 118).
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government, nationals and companies as well as the legal claims made against the
United States in accordance with the said Treaty”.12
1.10 The Court issued its Judgment on Preliminary Objections on 13 February 2019. The
Court unanimously rejected the first preliminary objection raised by the United States,
that claims relating to Executive Order 13599 fell outside the scope of the Treaty of
Amity by virtue of Article XX(1)(c) and (d) of the Treaty. The Court also unanimously
rejected the U.S. objections to admissibility based on abuse of process and “unclean
hands” arguments. By 11 votes to 4, the Court upheld the second preliminary
objection by the United States that “Iran’s claims based on the alleged violation of the
sovereign immunities guaranteed by customary international law do not relate to the
interpretation or application of the Treaty of Amity” and therefore do not fall within
the Court’s jurisdiction.13 Also by 11 votes to 4, the Court declared that the third
preliminary objection raised by the United States – that Bank Markazi is not a
“company” for the purposes of Articles III, IV and V of the Treaty of Amity – did not
possess an exclusively preliminary character.
1.11 The United States submitted its Counter-Memorial on 14 October 2019. This Reply
responds to it.
SECTION 3.
THE SUBJECT MATTER OF THE CASE
1.12 Not only does the United States seek to distort the Court’s Judgment on Preliminary
Objections as set out above, but it also seeks to transform the very subject matter of
the dispute. It attempts to change a case concerning rights and protections in economic
and commercial relations into a case about terrorism. The United States asserts that
“[i]t is a case now about U.S. measures, including certain U.S. judicial decisions, that
have facilitated the ability of victims holding terrorism-related judgments against Iran
12 Diplomatic Note from the Ministry of Foreign Affairs of I.R. Iran to the U.S. Department of State,
13 November 2018 (IR, Annex 3). See also Note Verbale No. 211543 from I.R. Iran to the Government
of the United States, 2 October 2019 (IOS, Annex 13).
13 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 34 at para. 80.
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to enforce those judgments against Iran, its Central Bank and other state-owned
entities”.14 In an argument built on unproven allegations that Iran has sponsored
terrorist attacks, the Respondent attempts to shift the Court’s focus to the proposition
advanced by the United States that the Treaty of Amity’s provisions “do not and were
never intended to protect a party who sponsors terrorist attacks directed at the other
party and its nationals”.15
1.13 It is not for a respondent to redefine the scope of a claim to suit its own preferred
defensive arguments. It is for the Court, and not the Parties, to determine the scope of
the claim; but the Court will give “particular attention to the formulation of the dispute
chosen by the Applicant”.16
1.14 The subject-matter of the dispute remains as Iran set out in its Application: a dispute
concerning the adoption of U.S. measures in violation of the Treaty of Amity that are
adversely impacting on the ability of Iran and Iranian companies to exercise their
rights and to control and enjoy their property.17 The Treaty sets out basic ground rules,
agreed between the United States and Iran, governing how they will treat each other’s
companies as they pursue economic intercourse. As Iran’s Memorial explained, the
“case arises from the implementation of a policy of the United States that strips Iranian
companies of respect for their rights including respect for their separate corporate
personality, violates […] property rights of the State of Iran and Iranian entities […]
and severely impedes trade between Iran and the United States, all in violation of the
terms of the 1955 Treaty of Amity”.18
1.15 Despite the United States’ attempts to re-cast the issues, the case has not somehow
changed into one that pivots on the question of whether the Treaty’s provisions were
14 U.S. Counter-Memorial, p. 6, para. 2.2.
15 Ibid., p. 1, para. 1.3.
16 Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of the Court, Judgment, I.C.J. Reports 1998,
p. 448, para. 30; Territorial and Maritime Dispute (Nicaragua v. Colombia), Preliminary Objections,
Judgment, I.C.J. Reports 2007 (II), p. 848, para. 38; Certain Questions of Mutual Assistance in
Criminal Matters (Djibouti v. France), Judgment, I.C.J. Reports 2008, p. 177 at paras. 65, 69. See also
Article 38(1) of the Rules of Court.
17 Iran’s Application, p. 1, para. 1.
18 Iran’s Memorial, p. 1, para. 1.1.
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designed actively to “protect a party who sponsors terrorist attacks”, which is how the
United States presents matters. Rather, there is now a line of defence which requires
the Court to consider whether allegations of terrorism somehow allow the United
States to act in violation of obligations clearly set out in the Treaty. Those violations
are plainly identified by Iran, and include the action of the United States in, inter alia,
amending laws explicitly aimed at predetermining the outcome of specific court cases
against Iran, adopted while those cases were pending before the U.S. courts and
specifically in order to benefit the U.S. plaintiffs, and in passing laws allowing its
courts to seize assets of juridically-separate Iranian companies that are not even parties
to the cases. Such actions violate the basic principles of the Rule of Law; and they
violate the Treaty of Amity. Further, the seizure of company assets has taken place in
a context of specific cases in which Iranian companies have not even been accused of,
let alone been found responsible for, support of terrorism.
1.16 The disconnect between the U.S. allegations against Iran and reality is illustrated by
the litigation surrounding responsibility for sponsoring the 9/11 attacks in New York.
In Havlish v. Bin Laden, a U.S. District Court implausibly held in 2011 that Iran has
provided material support to Al Qaeda, and entered a default judgment holding that,
among others, the State of Iran, and also several State-owned companies, are liable to
the plaintiffs for the damages resulting from the 9/11 terrorist attacks.19 But within the
United States a different story is being told. Brian Hook, the U.S. special
representative on Iran, testified to U.S. Congress in 2019 that Iran was not responsible
“for the deaths on 9/11”.20 In 2016, the U.S. Congress has passed legislation aiming
to expose Saudi Arabia to liability in U.S. courts for sponsoring the 9/11 attacks;21
and U.S. courts have also found Iraq liable for those very same attacks.22 The
19 Havlish, et al. v. Bin Laden, et al., U.S. District Court, Southern District of New York,
22 December 2011, No. 03 MD 1570 (S.D.N.Y. 2011) (IM, Annex 52; Iran’s Memorial, pp. 38-39,
para. 2.53).
20 Oversight of the Trump Administration's Iran Policy, Hearing before the Subcommittee on the Middle
East, North Africa and International Terrorism of the Committee on Foreign Affairs, House of
Representatives, 116th Congress, 1st session, 19 June 2019, serial no. 116-48 (IR, Annex 6).
21 Justice Against Sponsors of Terrorism Act (‘JASTA’) 2016; Iran’s Memorial, p. 3, para. 1.9.
22 Smith v. The Islamic Emirate of Afghanistan, The Taliban, Al Qaida/Islamic Army, Sheikh Usamah
Bin-Muhammad Bin-Laden a/k/a Osama Bin Laden, Saddam Hussein, The Republic of Iraq, et al., U.S.
District Court for the Southern District of New York, Opinion and Order, 7 May 2003 as amended
16 May 2003, 262 F. Supp. 2d 217 (2003) (IR, Annex 17).
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incoherence and absurdity of the U.S. position is explained in greater detail in
Chapter II below.
1.17 The United States contends that “[t]he Treaty of Amity does not preclude a party from
taking peaceful, measured steps to enable victims of terrorist attacks to bring suit
seeking compensation for such attacks”.23 But not only are its steps, which are
punitive and go far beyond the goal of enabling victims to sue for compensation,
neither “peaceful” nor “measured”, but they also violate the principle of pacta sunt
servanda and the object and purpose of the Treaty. The Court has already defined the
object and purpose of the Treaty of Amity in terms that amply cover the claims made
by Iran:
“[…] The Treaty is aimed at guaranteeing rights and affording protections to
natural and legal persons engaging in activities of a commercial nature, even if
this latter term is to be understood in a broad sense”.24
1.18 The United States refers to expansive “underlying principles” of the Treaty of Amity25
rather than to the object and purpose of the Treaty in accordance with the principles
of interpretation enshrined in the Vienna Convention on the Law of Treaties. Instead
of complying with the real object and purpose of the Treaty, the United States speaks
of the “Object and Purpose of the U.S. FCN Program”.26 In so doing, it manipulates
the nature and scope of the Treaty to suit a political agenda that it tries to support by
references to terrorism.
SECTION 4.
THE JUDGMENT OF 13 FEBRUARY 2019 ON PRELIMINARY OBJECTIONS
1.19 The United States overstates and misrepresents the effect of the Court’s Preliminary
Objections Judgment of 13 February 2019 in saying that it has “significantly narrowed
23 U.S. Counter-Memorial, p. 3, para. 1.9.
24 Certain Iranian Assets (Islamic Republic of Iran v. United States of America) Preliminary Objections,
Judgment, I.C.J. Reports 2019, p 38, para 91.
25 U.S. Counter-Memorial, p. 14, para. 4.5.
26 Ibid., pp. 13-15, paras. 4.2-4.6.
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the scope of Iran’s case” by “exclud[ing] from the scope of Iran’s case going forward
all claims advanced by Iran in its own right”.27
1.20 While it is true that the Court has upheld the second preliminary objection, thus
excluding from its jurisdiction Iran’s claims based on alleged violations of its
sovereign immunities under customary international law, it has not excluded all
claims advanced by Iran in its own right. Iran’s case is a State-to-State claim seeking
remedies for the United States’ violation of treaty obligations.28 Even if this were
solely a case of diplomatic protection, the duty to exhaust local remedies would be
inapplicable because such remedies have in fact been exhausted, and any further
pursuit of remedies within the U.S. judicial system is patently futile in the
circumstances of this case.
1.21 To this end, the United States’ argument that U.S. judicial decisions in Attachments 1
and 4 to Iran’s Memorial, which arise in the course of litigation in cases directly
affected by the measures of which Iran complains, are outside of the Court’s
jurisdiction is erroneous.29 The cases listed in Attachment 1, with judgments dating
from 1998 to 2017, remain relevant as a significant part of factual background to the
U.S. measures of which Iran complains. The judgments are also relevant to the extent
that they were solely issued against Iran but were enforced against Iranian companies,
denying their separate juridical status, in breach of Iran’s rights under the Treaty of
Amity, and as instances of the blocking and seizure of Iran’s assets in violation of the
provisions of that Treaty.30 Iran does not rely on the cases in Attachment 1 in respect
of its previous claim of sovereign immunity, which was found by the Court to fall
outside of its jurisdiction in its ruling of 13 February 2019 on preliminary objections.
1.22 The cases listed in Attachment 2, which concern the enforcement of U.S. judgments
against assets that are treated by U.S. law as being “Iranian” and liable to seizure,
remain as the basis of Iran’s specific claims against the United States. So, too, do the
27 Ibid., p. 6, para. 2.2.
28 See Chapter IX below.
29 U.S. Counter-Memorial, p. 7, para. 2.7.
30 See, e.g., in Attachment 1: No. 42 (Peterson), No. 41 (Bennett), and No. 11 (Weinstein), and many
other judgments that were enforced by their judgment creditors against Iranian companies.
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cases listed in Attachment 3, where attempts are made to apply the U.S. in other, non-
U.S. jurisdictions, in order to obtain the recognition and enforcement of U.S.
judgments in a manner that violates the Treaty of Amity, just as it does when the
measures are applied via courts in the United States itself. Acts outside the United
States that harm Iranian interests are a direct, foreseeable, and intended result of the
U.S. measures and form part of the injury caused by the breach of the Treaty of Amity.
Attachment 3 has been updated to reflect recognition and enforcement action against
the Government of Iran and, in some cases, also against Iranian companies, taken in
Canada, Luxembourg, France, and Italy.
1.23 Attachment 4, which lists claims against Iran and Iranian State entities known to be
pending in U.S. courts as of 31 December 2019, is relevant as a factual exhibit
demonstrating the extent to which the U.S. measures of which Iran complains remain
a matter of real current concern to Iran and to Iranian companies.
1.24 In addition, certain arguments raised by the United States – and rejected by the Court –
at the Preliminary Objections stage, now fall for consideration by the Court.
a. The first preliminary objection raised by the United States, that claims relating
to Executive Order 13599 (which only concerns some of Iran’s claims) falls
outside the scope of the Treaty of Amity by virtue of Article XX(1)(c) (arms
trafficking) and XX(1)(d) (essential security interests) of the Treaty of Amity.
Article XX(1) was found by the Court to be irrelevant to the question of its
jurisdiction, but to afford “a possible defence on the merits to be used should
the occasion arise”, in line with its holding in Oil Platforms.31 Iran will show
that that Article XX(1) does not excuse the United States’ conduct with respect
to Executive Order 13599, because the exceptions in the Treaty of Amity
regarding arms production and trafficking and “essential security interests” are
not engaged in this case.32 Further, these Treaty exceptions are not self-judging
31 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 25 at para. 45.
32 See Chapter X below.
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and, particularly when assessed as to their necessity and proportionality, the
U.S. measures do not fall within their proper scope.
b. In an attempt to give the greatest prominence to its prejudicial allegations
against Iran, the United States attempts to breathe life into its objections based
on what it terms “unclean hands” and “abuse of rights”. Each of these arguments
is misconceived and should be rejected. The U.S. objection to admissibility on
the basis of an alleged abuse of rights or “abuse of process” was rejected by the
Court because the United States failed to show the exceptional circumstances
and clear evidence that would justify rejecting on this ground a claim based on
a valid title of jurisdiction.33 Iran will show that the objection must be rejected
also at the merits stage. Nothing that Iran has done can credibly be characterised
as an abuse of its rights under the Treaty of Amity.34 The U.S. objection based
on “unclean hands” was also rejected by the Court finding that “even if it were
shown that the Applicant’s conduct was not beyond reproach, this would not be
sufficient per se to uphold the objection to admissibility raised by the
Respondent on the basis of the “clean hands” doctrine”.35 The Court noted that
the allegations made by the United States might possibly “provide a defence on
the merits”. 36 Iran will show that the “unclean hands” argument is unfounded.37
1.25 Finally, the Court left for the merits stage the examination of the question whether
Bank Markazi is a “company” for the purposes of Articles III, IV and V of the Treaty
of Amity, because this is a question that does not possess an exclusively preliminary
character. In its Counter-Memorial, the United States cites the Court’s conclusion that
“an entity carrying out exclusively sovereign activities, linked to the sovereign
functions of the State, cannot be characterised as a “company” within the meaning of
the Treaty and, consequently, may not claim the benefit of the rights and protections
33 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 42 at para. 113.
34 See Chapter XI below.
35 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 44 at para. 122.
36 Ibid., p. 44 at para. 123.
37 See Chapter XI below.
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provided for in Articles III, IV and V”.38 But the United States then proceeds to
substitute its own, quite different, test, according to which any entity that is entrusted
with some “sovereign functions” (such as Iran’s central bank) cannot engage in
commercial activities and therefore can never be a “company” for the purposes of the
Treaty of Amity.39 Iran will show that the U.S. argument is wrong both in law and on
the facts.
1.26 Furthermore, as a separate matter, the U.S. measures in blocking and seizing the assets
of Bank Markazi and other Iranian companies in aid of the execution of judgments in
the U.S. courts constitute violations of Iran’s rights under Article X of the Treaty of
Amity because those assets were the products of commerce between the two countries.
SECTION 5.
STRUCTURE OF THE REPLY
1.27 This Reply is structured as follows:
a. The factual and legal background of the case, including the impugned U.S.
measures, and the Iranian companies and the assets of Iran and Iranian
companies that have been subjected to those measures and the judicial
proceedings against them, are described in more detail in the following chapter
of this Introduction (Chapter II);
b. Part I sets out the U.S. breaches of Iran’s rights under the Treaty of Amity that
are the subject of Iran’s claims in this case. It first shows that Bank Markazi is
a “company” under the Treaty (Chapter III) and then addresses the
U.S. violations of Articles III(1), III(2), IV(1), IV(2), V(1), VII(1) and X(1)
(Chapters IV, V, VI, VII, and VIII);
38 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 38 at para. 91 (emphasis added); U.S. Counter-Memorial,
p. 8, para. 2.11.
39 U.S. Counter-Memorial, Chapter 9, see e.g. para. 9.17. See Chapter III below.
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c. Part II addresses the other U.S. arguments and defences. The U.S. argument
that local remedies must be exhausted cannot bar Iran’s claims in this case
because those remedies, to the extent effectively available, have in key cases
been exhausted in practice, and exhaustion is in any event not a condition for
the admission of Iran’s claims (Chapter IX). It is also shown that Article XX(1)
of the Treaty of Amity does not bar Iran’s claims, in particular in relation to
U.S. Executive Order 13599 (Chapter X). Further, the U.S. “unclean hands”
objection is inadmissible and unfounded, and there is no “abuse of rights” by
Iran in this case (Chapter XI). This Part of Iran’s Reply concludes with an
Appendix responding to U.S. allegations against Iran which, although legally
irrelevant in these proceedings, cannot be allowed to stand on the record
unchallenged.
d. Part III contains a summary of Iran’s case and Iran’s formal Submissions
(Chapter XII).
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CHAPTER II.
THE JUDICIAL DECISIONS IMPLEMENTING THE U.S. LEGAL AND
REGULATORY MEASURES AGAINST IRAN AND IRANIAN COMPANIES
2.1 The United States contends that “many of Iran’s arguments are comprised of
conclusory assertions supported only by generalized factual allegations or vague
charts, neither of which are sufficient to substantiate Iran’s claims”, it says that Iran’s
pleading “has hampered the U.S. effort to respond”40 and has led the United States to
postpone its “appropriate” response until Iran “elaborates on the inadequate factual
support it has so far provided for its claims”.41 These assertions are untenable. Nothing
– apart from the United States’ own litigation choices – has prevented the United
States from fully understanding and responding to Iran’s case.
2.2 Indeed, putting the U.S. rhetoric to one side, the Parties are generally in agreement on
the facts underlying Iran’s claims. The United States does not dispute that, as
described in Chapter II of the Memorial, the U.S. legal and regulatory measures at
stake have consisted in the gradual abrogation of the protections previously afforded
to Iran and to Iranian companies under the 1955 Treaty of Amity, international law
and U.S. law, in the following sequence: (i) since 1996, the removal, under a
“terrorism exception” introduced in the Foreign Sovereign Immunity Act (‘FSIA’), of
Iran’s jurisdictional immunity in the United States, enabling U.S. nationals to obtain
judgments awarding significant compensatory damages against the State of Iran;42
(ii) since 2002, the allowing of the attachment of property and interests of Iran and of
Iranian companies to satisfy such judgments, notwithstanding the separate juridical
status of companies that, in addition, were not connected with the cases;43 (iii) since
2008, the broadening of the so-called “terrorism exception” to allow – retroactively –
40 U.S. Counter-Memorial, p. 10, para. 2.14. See also p. 94, para. 12.4.
41 Ibid., p. 11, para. 2.18.
42 Iran’s Memorial, pp. 16-19, paras. 2.4-2.8 (on the amendment of FSIA 1976 by the U.S. Antiterrorism
and Effective Death Penalty Act of 1996 (‘AEDPA’)). The “terrorism exception” was codified in
Section 1605(a)(7) of Title 28 of the U.S. Code (28 U.S.C. § 1605(a)(7)). It provided that jurisdictional
immunity would, as a matter of principle, not apply in respect of terrorism claims against States
designated by the U.S. Executive as “sponsors of terrorism” – such as Iran since 1984.
43 Iran’s Memorial, pp. 19-23, paras. 2.9-2.15 (on Section 201 of the U.S. Terrorism Risk Insurance Act
of 2002 (‘TRIA’)).
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punitive and additional damages to be awarded to plaintiffs against Iran44 and expand
the range of assets available for execution;45 (iv) in 2012, the freezing of Iranian assets
and the specific abrogation of Bank Markazi’s immunity from measures of execution,
while enforcement proceedings were pending against its assets in the amount of
USD 1,895 billion, so as to guarantee the turnover of these assets to the holders of
“terrorism judgments” against the State of Iran alone.46
2.3 The United States admits that the aim of this legal regime is to enable plaintiffs to sue
Iran in U.S. courts and then to enforce “terrorism judgments” against Iran by attaching
assets owned by Iran’s agencies and instrumentalities.47 It has turned out that seizures
made against assets owned by Iran itself – such as the so-called “Cubic judgment”
held by the Iranian Ministry of Defence in the amount of USD 9,462,75048 – are not
44 Iran’s Memorial, pp. 23-27, paras. 2.16-2.26 on Section 1605A of FSIA as adopted by the U.S. National
Defense Authorization Act for Fiscal Year 2008, signed into law on 28 January 2008 (‘NDAA 2008’).
Section 1083 of the NDAA 2008, revised the “terrorism exception” to sovereign immunity by
repealing § 1605(a)(7) of Title 28 of the U.S. Code and replacing it with a separate section, § 1605A.
As described by the U.S. Courts, “Section 1605A creates a private, federal cause of action against a
foreign state that is or was a state sponsor of terrorism, and provides for economic damages, solatium,
pain and suffering, and punitive damages” (Beer, et al., v. The Islamic Republic of Iran, et al., U.S.
District Court for the District of Columbia, Findings of Fact and Conclusions of Law (Liability and
Damages), 26 August 2008, Case No. 06-473, p. 18 (IR, Annex 24)).
45 Iran’s Memorial, pp. 27-30, paras. 2.27-2.33 (on Section 1610(g) of FSIA as amended by the
NDAA 2008). The new Section 1610(g) provides that all property of Iranian State-owned companies
engaged in commercial activities in the United States, including “an interest held directly or indirectly
in a separate juridical entity”, can be attached, whether or not it has been “blocked”, to satisfy
judgments against the Iranian State.
46 Iran’s Memorial, pp. 30-35, paras. 2.34-2.43 (on Executive Order 13599 blocking assets owned by Iran
and its agencies or instrumentalities including Bank Markazi – the Central Bank of Iran – and located
in the United States; also on Section 8772 of Title 22 of the U.S. Code as amended by Section 502 of
the Iran Threat Reduction and Syria Human Rights Act of 2012 (‘ITRSHRA’)).
47 See for instance U.S. Counter-Memorial, pp. 1-2, paras. 1.2 and 1.5.
48 See Iran’s Memorial, p. 43, para. 2.62. The “Cubic judgment”, which confirmed an I.C.C. arbitral
award of 1997 in favour of the Iranian Ministry of Defence against Cubic Defense Systems, a U.S.
provider of military equipment, had been frozen in 2007 as a result of the designation of the Ministry
by the U.S. Department of State under E.O. 13382 for “proliferation activities” (U.S. Department of
Treasury, Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and
Support for Terrorism, 25 October 2007 (IR, Annex 9) – contrary to what this fact sheet alleged, no
elements of the Iranian Ministry of Defence had been targeted by the U.N. Security Council
Resolution 1737 of 2006 imposing sanctions on Iran). In 2016, the Rubin judgment creditors have
obtained the turnover of the “Cubic judgment” money (see Ministry of Defense of Iran v. Cubic, et al.,
U.S. District Court, Southern District of California, 29 April 2016, No. 98 cv 1165 (S.D. Cal. 2016)
(IM, Annex 67)). For the default judgments so enforced see Campuzano, et al. v. The Islamic Republic
of Iran, et al. and Rubin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District
of Columbia, Findings of Fact and Conclusions of Law, 10 September 2003, Cases Nos. 00-2328 and
01-1655, 281 F. Supp. 2d 258 (D.D.C. 2003) (IM, Annex 33) and Rafii v. The Islamic Republic of Iran
- 16 -
sufficient by far to satisfy the extraordinary amounts of damages awarded by these
default judgments.
2.4 However, the United States contends that most of the U.S. judgments on liability and
enforcement proceedings that the Memorial listed in Attachments 1 to 4 are outside
the ambit of the present case. As Iran explained above, that is incorrect.49
2.5 This Chapter describes further the ongoing judicial implementation of the relevant
U.S. measures which, under the guise of providing justice to U.S. victims of terrorism,
deprives major Iranian companies of their assets through execution of judgments
awarding damages in billions of dollars in cases which these companies are not
parties. It will focus on the Iranian companies concerned (Section 1), the judicial
proceedings engaged against them (Section 2) and provide an update on the pending
judicial proceedings against Iran (Section 3).
SECTION 1.
THE IRANIAN COMPANIES CONCERNED
2.6 Judicial proceedings in the United States have been targeting the major Iranian
companies in each of the industrial and commercial sectors that are key to Iran’s
international trade: the banking industry, telecommunications, oil and energy,
shipping and shipbuilding, and aviation.
A. Bank Melli
2.7 Bank Melli Iran, incorporated in 1927 under Iranian law, is the largest commercial
bank in Iran.50 It is a state-owned company, the legal personality of which is wholly
separate from the State. Bank Melli is not subject to the laws and regulations
and The Iran Ministry of Information and Security, U.S. District Court for the District of Columbia,
Findings of Facts and Conclusions of Law, 2 December 2002, Case No. 01-850 (IR, Annex 16).
49 See paras. 1.21-1.23 above.
50 Page “History of Bank Melli” on Bank Melli’s website (IR, Annex 89).
- 17 -
applicable to Iranian Government organs and entities, unless expressly provided by
law.51 The objective of the Bank is to perform banking services and operations in Iran
and abroad. It is active in domestic and foreign commerce and in production activities
for the economic benefit of Iran.
Homepage of Bank Melli’s website52
2.8 Bank Melli owns assets in its own name and engages in any banking and financial
operations authorised by law.53 It provides its customers with conventional Islamic
banking services. It also offers import and export banking services, such as issuing
letters of credit and bank guarantees, providing foreign exchange facilities, as well as
rendering correspondent banking services.
51 Article 1 of Articles of Association of Bank Melli Iran of 1981 (IM, Annex 74). See also Iran’s
Memorial, p. 67, para. 4.8.
52 Available at bmi.ir/En/Default.aspx (last consulted on 23 July 2020).
53 Article 6 of Articles of Association of Bank Melli Iran of 1981 (IM, Annex 74). Pursuant to this article
such banking and financial operations include, without limitation, opening current or saving accounts,
giving loans or receiving credits, engaging in foreign currency transactions, purchasing or selling bonds
and securities, entering into partnership and making investments, purchasing or selling gold and silver,
entering into insurance transactions, and issuing or accepting bank guarantees.
- 18 -
Homepage of Bank Melli’s website, section relating to the services54
2.9 The Bank’s activities are performed by the managing director and the board of
directors in accordance with its Articles of Association. The managing director is the
bank’s highest administrative authority, who executes the decisions of the board of
directors and ensures compliance with the Bank’s Articles of Association and
regulations. In accordance with the regulations in force, the managing director
oversees day-to-day activities of the bank, which he or she represents in its dealings
with government offices and private institutions. He or she can make or cancel any
transaction and contract with third persons.55 He or she has full authority to pursue or
defend or settle claims brought by or against Bank Melli before courts, or
administrative bodies.56
2.10 In 1931, the Iranian Parliament granted to Bank Melli the sole power to issue
banknotes thus establishing that Bank as the State’s bank of issue. Bank Melli was
given responsibility for additional central bank functions including government
banking operations, the regulation of currency circulation, maintenance of balance of
payments surpluses, credit regulation as well as supervision of the State’s banking
54 Available at bmi.ir/En/Default.aspx (last consulted on 23 July 2020).
55 Article 20(6) of Articles of Association of Bank Melli Iran of 1981 (IM, Annex 74).
56 Ibid., Article 20(9).
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system. Bank Melli was replaced in respect of the functions of the central bank by
Bank Markazi, pursuant to the Monetary and Banking Act 1960.57
2.11 Headquartered in Tehran, Bank Melli maintains a large network of domestic and
international branches – the largest in terms of branches and employees – including Bank
Melli PLC, the Bank’s wholly owned subsidiary in the United Kingdom since 1967.58
B. Bank Markazi
2.12 Bank Markazi, also known as the Central Bank of the Islamic Republic of Iran,59 came
into existence, as “an independent institution”, pursuant to Article 28 of the Monetary
and Banking Act of 1960.60
Homepage of Bank Markazi’s website61
57 This Act is available at www.cbi.ir/page/5298.aspx (last consulted on 23 July 2020).
58 See the page “About Us” on Bank Melli PLC’s website, accessed on 3 May 2020 (IR, Annex 90).
59 As mentioned above, before establishment of Bank Markazi, Bank Melli Iran, which was Iran’s first
commercial bank, had assumed to act as Iran’s central bank.
60 Under Article 28 (1) of the Act as approved on 27 May 1960, “in order to stabilize the value of currency
and to regulate the volume of credit, an independent institution to be called the Bank Markazi Iran shall be
established which shall have the monopoly of coin note issue”; available at: www.cbi.ir/page/5298.aspx.
61 Available at www.cbi.ir/default_en.aspx (last consulted on 23 July 2020).
- 20 -
2.13 The Monetary and Banking Act of 1972, which contains the statutes of Bank Markazi
as amended, provides that the Bank “enjoys legal personality and shall be governed
by the laws and regulations pertaining to joint-stock companies in matters not
provided for by [the Monetary and Banking Act of 1972].”62 Bank Markazi’s shares
are wholly owned by the State of Iran. It acts as a separate entity, distinct from its sole
shareholder, and is administered by a governor, executive board, supervisory board
and general meeting.63
2.14 As any other central bank, the Bank plays a critical role in supporting both domestic
and international trade through the formulation, the implementation, and the
supervision of Iran’s monetary and credit policy. The objective of such policy is
obviously to “maintain the value of the currency and equilibrium in the balance of
payments, to facilitate trade transactions, and to assist in the economic growth of the
country”.64 In addition to these functions which are key to commerce, Bank Markazi
performs routine commercial activities, like any other private company doing business
in a free and competitive market, and without having any exclusive role or special
authority. For example, under Article 13 of the Monetary and Banking Act of 1972,
Bank Markazi has, amongst others, the following powers:
“3- Granting loans and credits to, and guaranteeing loans and credits granted
government companies and municipalities, as well as to the Government and
municipalities’ affiliated entities against adequate collateral;
4- Rediscounting bills of exchange and short-term commercial instruments and
granting credits to banks against adequate collateral;
5- Purchasing and selling treasury bills and Government bonds, and the bonds
issued by foreign governments or accredited international financial institutions;
6- Purchasing and selling gold and silver;
7- Opening and holding current accounts with foreign banks, and/or holding
accounts for domestic and foreign banks with itself, and carrying out all other
62 The Monetary and Banking Act of Iran, approved on 9 July 1972, Article 10(c) (IM, Annex 73).
63 Ibid., Article 17 (General Meeting), Article 19 (Executive Board), Article 19(b) and
footnote 35 (Governor), and Article 22 (Supervisory Board).
64 Ibid., Article 10 (a) and (b). See also Article 11, enumerating the functions that the Bank shall fulfil as
the regulatory authority of the monetary and credit system of the State, and Article 14 authorising the
Bank to intervene in, and supervise monetary and banking affairs.
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authorised banking operations[65], and obtaining credits inside the country and
abroad on its own account or on behalf of domestic banks.”66
2.15 As explained in Chapter III below, the most profitable of these various commercial
activities are the selling of foreign currencies, mainly coming from Iran’s oil exports,
to commercial banks in the Iranian foreign exchange market, and the investment in
foreign currencies and various financial – cash or derivative – instruments.67
2.16 As Bank Markazi earns profits from its commercial activities, it must pay income tax
to the Government of Iran in accordance with the regulations applicable to the
governmental companies.68 To this end, pursuant to Article 24 (b) of the said Act,
Bank Markazi prepares and submits each year to the Bank’s supervisory board its
balance sheet and profit and loss account at least one month before the annual general
meeting.69
C. Other Iranian banks
2.17 Bank Saderat Iran, a public joint stock company since its privatisation in 2018,
maintains the second largest banking network in Iran (approximately 3.000 branches),
and operates 21 international branches and subsidiaries.70 It is incorporated as an
independent juridical entity under Iranian law.71 The Government of Iran owns 16,9%
65 Article 2(7) of the Iranian Commercial Code (available on the website of the Iranian Ministry of
Industry, Mine and Trade, en.mimt.gov.ir) describes “any kind of banking and exchanges operation”
as “commercial transactions.”
66 The Monetary and Banking Act of Iran, approved on 9 July 1972, Article 13 (IM, Annex 73).
67 See paras. 3.21-3.22 below.
68 Article 25 (a) (1) of the Monetary and Banking Act of 1972 (IM, Annex 73).
69 Ibid., such balance sheets, which attest to the Bank’s engagement in commercial activities by indicating
its profits and expenses and its income and payable taxes, are available at the Bank’s website, webpage
“Economic Report & Balance Sheet” (www.cbi.ir/category/EconomicReport_en.aspx) and, in relevant
part, in IR, Annexes N23 to N30.
70 Page “History” on Bank Saderat’s website (IR, Annex 92).
71 Articles of Association of Bank Saderat of 2014 (IM, Annex 77).
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of its stock, the rest of which is divided among a large number of small Iranian
shareholders.72 Trade finance is Bank Saderat Iran’s core business.73
Homepage of Bank Saderat’s website74
2.18 Bank Sepah International PLC is a public company incorporated as an independent
juridical entity under English law.75
Homepage of Bank Sepah PLC’s website76
72 Page “Bank Saderat Iran” on the Tehran Stock Exchange’s website (IR, Annex 93). Under the bank’s
Articles of Association, the legal entities whose shareholders include the Government of Iran or
governmental companies or whose management is controlled by the public sector cannot be the bank’s
stockholders (note 1 to Article 7) and the Government of Iran may not hold more than 20% of the
bank’s capital (note 4 to Article 7) (IM, Annex 77).
73 Ibid., see also Iran’s Memorial, pp. 67-68, para. 4.10.
74 Available at www.bsi.ir/en/Pages/HomePage.aspx (last consulted on 23 July 2020).
75 See Memorandum and Articles of Association of Bank Sepah International PLC (IR, Annex 100).
76 Available at www.banksepah.co.uk (last consulted on 23 July 2020).
- 23 -
2.19 It is the London-based wholly owned subsidiary of Bank Sepah, the oldest Iranian
bank – established in 1925 and itself a State-owned bank –, whose financial activities
focus on the implementation of economic projects in Iran.77 Bank Sepah International
PLC provides financial services including international trade finance and corporate
banking.
2.20 The Export Development Bank of Iran (‘EDBI’) is a public company founded in 1991.
It offers banking and advisory services to Iranian exporters and their foreign
counterparts and clients, mainly in the non-oil trade.78 It has separate juridical
personality and financial independence.79
Homepage of EDBI’s website80
D. Telecommunication Infrastructure Company
2.21 Telecommunication Infrastructure Company (‘TIC’) is a public company
incorporated in Iran, and its head office is in Tehran.81 The company is responsible
77 See homepage of Bank Sepah’s website, accessed on 8 May 2020 (IR, Annex 91).
78 Page “EDBI at a glance” on EDBI’s website, accessed on 3 May 2020 (IR, Annex 94). See also Iran’s
Memorial, p. 67, para. 4.9.
79 See preamble of EDBI’s Articles of Association of 1991 (IM, Annex 75).
80 Available at en.edbi.ir (last consulted on 23 July 2020).
81 Articles of Association of TIC of 2008 (IM, Annex 76).
- 24 -
for telecommunication networks infrastructure in Iran, with the aim of creating,
developing, managing, organising, supervising, maintaining and implementing the
main telecommunication backbone of the country and its continuous infrastructural
activities.82 It is not engaged in telecommunications as such: that was transferred to
the private sector in 2004.
Homepage of TIC’s website83
2.22 Pursuant to Article 5 of its Articles of Association, the company is administrated in
the form of private joint stock company, and enjoys legal, financial, administrative
and recruitment independence.84
2.23 TIC owns assets in its own name,85 is entitled to make profits and can appear before
courts of law to litigate or defend claims.
2.24 According to Article 8 of its Articles of Association, the operations and functions of
the company inter alia consist of:
82 See webpage “About us” of TIC’s website, accessed on 3 May 2020 (IR, Annex 95).
83 Available at www.tic.ir/en (last consulted on 15 July 2020).
84 Articles of Association of TIC of 2008 (IM, Annex 76).
85 Ibid., Article 7.
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a. Preparing and compiling comprehensive plans in the areas of communication
infrastructure.
b. Marketing in respect of establishment, development, improvement,
implementation, maintenance and operation, as well as supervision over the
management of the State infrastructural communication network.
c. Satisfying all infrastructural requirements – with respect to the development,
operation and optimisation of telecommunication networks – of authorised
applicants including those of the governmental, private and cooperative sectors
providing information technology and communications through such networks
in accordance with national and international standards.
2.25 Among the most important projects currently developed by TIC are the deployment
of the 5G technology in Iran, the exploitation of Iran’s fibre optic network to ensure
transit of Iraq data through Iran, and the installation of a new transmission gateway
for Europe/Iran communications with a very significant increase in capacity.
Page of TIC’s website regarding the EPEG project86
86 Available at www.tic.ir/en/international/epeg (last consulted on 15 July 2020).
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E. Iranian energy companies
2.26 National Iranian Gas Company (‘NIGC’) plays a leading role in the Iranian gas sector.
It is a public company, the shares of which are owned by the State of Iran, enjoying
independent juridical status.87 NIGC’s activities include the refining, domestic supply
and export of natural gas and liquefied petroleum gas, mainly from the South Pars
field, and the supervision of the gas distribution network in Iran.88
Homepage of NIGC’s website89
Homepage of NIGC’s website, section “News Archive”90
87 Articles of Association of NIGC of 1977, Articles 1 and 4 (IM, Annex 85).
88 Articles of Association of NIGC of 1977 (IM, Annex 85).
89 Available at www.iraniangas.ir (last consulted on 3 August 2020).
90 Available at www.iraniangas.ir (last consulted on 23 July 2020).
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2.27 The National Iranian Oil Company (‘NIOC’) is the largest Iranian energy company.
It is a public company established in 1951 and has its own legal personality as a
separate juridical entity.91
Homepage of NIOC’s website92
2.28 It is responsible for the exploration, drilling, production, distribution and export of
Iran’s crude oil and natural gas resources.93
Page “Sale in Iran Energy Exchange” of NIOC’s website94
91 Articles of Association of NIOC of 2016, Articles 1 and 4 (IM, Annex 78).
92 Available at en.nioc.ir/portal/home (last consulted on 23 July 2020).
93 See also Iran’s Memorial, p.68, para. 4.12.
94 Available at bourse.nioc.ir/portal/home (last consulted on 23 July 2020).
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2.29 National Petrochemical Company (‘NPC’) was the main producer and exporter of
petrochemicals in Iran until it evolved, in 2018, into a regulatory and policy-making
company responsible for the development of Iran’s petrochemical industry.95
Homepage of NPC’s website96
2.30 To this end, it enters into contracts with other companies investing in Iran’s numerous
petrochemical projects.
Homepage of NPC’s website, section relating to ongoing projects97
95 See “National Petrochemical Company – The History and Structure” on NPC’s website (IR, Annex 96).
96 Available at en.nioc.ir/portal/home (last consulted on 15 July 2020).
97 Ibid.,
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2.31 NPC is fully state-owned and affiliated to Iran’s Ministry of Petroleum.98 It has a separate
juridical personality with all rights attached to such status.99
2.32 Established in 1963 as a joint venture with Exxon Mobil in Iran, Behran Oil Company
is the leading lubricant manufacturing company in Iran and in the Middle East, mainly
producing automotive and industrial lubricants.100 Under its Articles of Association
of 2011, it is a public joint stock company, incorporated under Iranian law as having
separate juridical personality.101
Homepage of Behran Oil’s website102
2.33 Founded in 1955, the National Iranian Tanker Company (‘NITC’) is a private joint
stock company whose stocks belong to three funds managing pensions for millions of
98 Articles of Association of NPC of 1977, Article 4 (IM, Annex 86).
99 Articles of Association of NPC of 1977 (IM, Annex 86).
100 See the page “About Us” on Behran Oil website (IR, Annex 97). See also Iran’s Memorial,
p. 69, para. 4.15.
101 IM, Annex 81. See the page “Behran Oil Company” on the Tehran Stock Exchange website, mentioning
that the two largest shareholders – Mostafazan Foundation and Sina Energy Development Company –
respectively hold 29,95 and 21,18 % of the company’s capital (IR, Annex 98).
102 Available at www.behranoil.co (last consulted on 15 July 2020).
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Iranians.103 It has a separate juridical status with all rights attached to such status.104
Operating the largest tanker fleet in the Middle East, it transports Iranian crude oil to
export markets and crude oil from other origins in cross-trade transactions.
F. Iranian shipping and shipbuilding companies
2.34 Islamic Republic of Iran Shipping Lines (‘IRISL’) is Iran’s major shipping company.
Its shares are traded in the Tehran Stock Exchange, and it has a separate juridical
personality.105
Homepage of IRISL’s website106
103 The company’s capital is shared between NIOC’s Pension and Saving Fund (34%), Iran’s Civil
Servants Pension Fund (33%), and Iran’s Social Security Organization (33%) (Article 7 of NIPC’s
Articles of Association of 2000 (IM, Annex 84), which translates as follows:
“Article 7 – Capital. The company’s capital is equal to thirty-two billion Rials (32,000,000,000
Rials) which are divided into thirty-two million (32,000,000) shares, each with a par value of
1000 Rials, and have been paid for in full. The shareholders of the company and the number of
their shares are as follows:
Shareholders Percentage Number of Shares Amount of Capital
NIOC Pension Fund 34 10,880,000 10,880,000,000
Civil Servants Pension Fund 33 10,560,000 10,560,000,000
Social Security Organisation 33 10,560,000 10,560,000,000
TOTAL 100 32,000,000 32,000,000,000”).
104 Articles of Association of NITC of 2000 (IM, Annex 84).
105 Articles of Association of IRISL of 2008 (IM, Annex 87).
106 Available at www.irisl.net (last consulted on 15 July 2020).
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2.35 IRISL has the largest merchant fleet in the Middle East and it is ranked 21st among
the top 25 containership operators in the world in 2017.107 Its fleet carries bulk and
general cargo as well as chemical and petrochemical cargo. IRISL operates shipping
lines from the Persian Gulf to the Far East, South Mediterranean Sea, South America,
and Africa. It provides shipping and logistical services in major renowned ports all
over the world.
Homepage of IRISL’s website, section relating to activities108
2.36 IRISL has numerous subsidiaries, including Iranohind Shipping Company – an
Iranian private limited company founded as a joint-venture with the Indian Stateowned
company Shipping Corp. of India Ltd109 –, and IRISL Benelux NV – a limited
liability company incorporated in Belgium in 2003 which represents IRISL shipping
and logistical services in Belgium and the Netherlands.110
107 International Chamber of Shipping, “25 Largest Containership Operators”, 2017 (IR, Annex 113).
108 Available at www.irisl.net (last consulted on 15 July 2020).
109 A. Lakshmi, “India to revive Irano Hind Shipping Company”, www.marine link.com, 4 September 2016
(IR, Annex 117). The distribution of the company’s capital is as follows: IRISL 51% and Shipping
Corp. of India 49% (see articles 5 to 8 of Iranohind’s Articles of Association of 2000(IM, Annex 83).
See also Iran’s Memorial, p. 68, para. 4.13.
110 See Ministry of Economy of Belgium website, “Banque-Carrefour des entreprises et Registre du
Commerce – Public Search”, accessed on 3 May 2020 (IR, Annex 111). See also Articles of Association
of IRISL Benelux NV (IM, Annex 88).
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2.37 Iranian Marine and Industrial Company, also known as SADRA, is the main
shipbuilding and ship-repairing company in Iran, specialising in building ships, docks
and oil rigs.111 It is a public joint stock company whose shares belong to a large
number of legal persons – the Government of Iran is not among its shareholders.112 It
has an independent legal personality and all the rights attached to such status.113
Homepage of SADRA’s website114
2.38 SADRA is currently engaged in several onshore – on the South Pars gas field – and
offshore Engineering Procurement and Construction (EPC) projects for the oil and gas
industry in Iran. It is also building four 113,000-ton oil tankers, and various vessels
dedicated to offshore oil and gas production.
111 See also Iran’s Memorial, p. 68, para. 4.14, and IM, Annex 82.
112 See the page “Iranian Marine and Industrial Co.” on the Tehran Stock Exchange website
(IR, Annex 99).
113 Articles of Association of Iran Marine Industrial Co. of 2011 (IM, Annex 82).
114 Available at www.sadra.ir/default.aspx?PID=HomePage (last consulted on 15 July 2020).
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Homepage of SADRA’s website, section relating to ongoing projects115
G. Iran Air
2.39 Created in 1962 as the Iran National Airlines Corporation, Iran Air, the flag carrier of
Iran, is the oldest and largest airline in Iran. All its shares belong to the Iranian
Government, from which its legal personality is separate.116 Iran Air
operates 26 domestic routes and 28 international routes, including to Europe, the
Middle East and the Indian subcontinent.117
Homepage of Iran Air’s website118
115 Available at www.sadra.ir (last consulted on 15 July 2020).
116 See Iran Air’s Articles of Association of 1982, Article 5 (IM, Annex 79).
117 See Iran’s Memorial, para. 4.12, and IM, Annex 79.
118 Available at ebooking.iranair.com/Booking (last consulted on 15 July 2020).
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SECTION 2.
THE JUDICIAL PROCEEDINGS AGAINST THESE IRANIAN COMPANIES
2.40 The U.S. courts targeted, and are targeting, Iranian companies, in some cases (A) by
imposing damages in respect of their alleged material support for acts of terrorism and
in most of the cases (B) by enforcing against their assets numerous final judgments
condemning Iran to which the companies are not parties.
A. U.S. final judgments against Iranian companies:
the Havlish v. Bin Laden case and the subsequent actions
2.41 The Havlish v. Bin laden et. al. proceeding was the first class-action filed on
19 February 2002 by U.S. victims of the 11 September 2001 terrorist attacks.
2.42 The proceeding served the United States’ desire that the plaintiffs receive
compensation for the 9/11 attacks, regardless of the actual responsibility for the
events. Not only did the Havlish court accept a very low – if any – standard of proof
and causation, it implemented tailor-made retroactive legislation designed to deprive
the defendants of their defences, to increase the damages and ultimately to enable the
seizure of their property. Such a defective judicial process could only lead to an absurd
result: finding Iran and major Iranian companies responsible for sponsoring the
9/11 attacks – so preposterous an accusation that no one but a few U.S. judges have
ever made it.119
2.43 The initial complaint against, inter alia, Bin Laden, the Taliban, Muhammed Omar,
Al Qaeda, Afghanistan, Iraq, but also, inter alia, Iran, Bank Markazi, NIOC, NITC,
NPC, NIGC, and Iran Air120 was based on the Torture Victim Protection Act and on
119 Even the current U.S. Executive denies any Iranian responsibility in the 9/11 terrorist attacks. See below
para. 6.66.
120 Plaintiffs had also asserted claims against Ayatollah Khamenei, Mr. Rafsanjani, the Hezbollah, the
Iranian Ministry of Information and Security, the Islamic Revolutionary Guard Corps, the Iranian
Ministry of Petroleum, the Iranian Ministry of Economic Affairs and Finance, the Iranian Ministry of
Commerce, the Iranian Ministry of Defence and Armed Forces Logistics, and also against Usama bin
Laden, the Taliban, Muhammad Omar, and the al Qaeda/Islamic Army. Since 2013, this ongoing classaction
targets the government of Saudi Arabia.
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section 28 U.S. Code § 1605(a)(7) codifying the “terrorism exception” to sovereign
immunity before U.S. courts.
2.44 This exception withdraws the immunity from suit of those foreign States, including
their agencies and instrumentalities,121 arbitrarily designated by the U.S. Executive as
“State sponsors of terrorism”, in cases arising out of certain terrorist acts.122 The U.S.
courts had interpreted this exception, as “merely a jurisdiction conferring provision”
and therefore not creating an independent federal cause of action to address statesponsored
terrorism.123 Thus, under 28 U.S. Code § 1605(a)(7) the plaintiffs had
(unsurprisingly) to proceed using pre-existing causes of action available to them,
i.e., they had to base their terrorism-related claims against foreign sovereigns on state
tort law. This was said to lead, notably in cases involving Iran, to “inconsistent and
varied [decisions] when various states’ tort laws differed”.124
2.45 In response to this and to the unavailability of punitive damages under 28 U.S. Code
§ 1605(a)(7), the U.S. Congress amended the FSIA in section 1083 of the National
121 28 U.S. Code § 1603(b) defines, for the purposes of the FSIA, an “agency or instrumentality of a foreign
state” as “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, and (3) which is neither
a citizen of a State of the United States as defined in section 1332 (c) and (e) of [title 28 of the U.S.
Code], nor created under the laws of any third country”.
122 On the 1996 amendments to the FSIA see Iran’s Memorial at pp. 16-19, paras. 2.4-2.8. The U.S.
Supreme court recently recalled the genesis of this exception: “In 1976, the Congress sought to remedy
the problem [that the governing standards for foreign sovereign immunity determinations were neither
clear nor uniformly applied] and address foreign sovereign immunity on a more comprehensive basis.
The result was the Foreign Sovereign Immunities Act (FSIA). As a baseline rule, the FSIA holds
foreign states and their instrumentalities immune from the jurisdiction of federal and state courts.
See 28 U.S.C. §§1603(a), 1604. But the law also includes a number of exceptions. See, e.g.,
§§1605, 1607. Of particular relevance today is the terrorism exception Congress added to the law
in 1996. That exception permits certain plaintiffs to bring suits against countries who have committed
or supported specified acts of terrorism and who are designated by the State Department as state
sponsors of terror. Still, as originally enacted, the exception shielded even these countries from the
possibility of punitive damages. See Antiterrorism and Effective Death Penalty Act of 1996 (codifying
state-sponsored terrorism exception at 28 U.S.C. §1605(a)(7)); §1606 (generally barring punitive
damages in suits proceeding under any of §1605’s sovereign immunity exceptions)” (Opati, et al., v.
Republic of Sudan, et al., U.S. Supreme Court, 18 May 2020, No. 17-1268, p. 3 – IR, Annex 87).
123 Cicippio-Puelo, et al. v. Islamic Republic of Iran, et al., U.S. Court of Appeals, D.C. Circuit,
16 January 2004, 353 F.3d 1024 (D.C. Cir. 2004), p. 12 (IM, Annex 34).
124 Valore, et al. v. The Islamic Republic of Iran, et al., Arnold (Estate of James Silvia), et al. v. The Islamic
Republic of Iran, et al., Spencer, et al. v. The Islamic Republic of Iran, et al., and Bonk, et al. v. The
Islamic Republic of Iran, et al. (consolidated), U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability and Damages), 31 March 2010, 700 F. Supp. 2d 52 5 (D.D.C. 2010),
Cases No. 03-cv-1959, 06-cv-516, 06-cv-750, and 08-cv-1273, pp. 2-3 (IR, Annex 30).
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Defense Authorization Act for Fiscal Year 2008 (the ‘NDAA 2008’).125 Section 1083
of NDAA 2008 repealed 28 U.S. Code § 1605(a)(7) and replaced that provision with
a new version of the terrorism exception authorising punitive damages under an
independent federal cause of action against “states sponsors of terrorism”, 28 U.S.
Code § 1605A. This, the U.S. Congress directed, may be applied retroactively to a
broad range of cases. As the U.S. Supreme Court recently stated:
“Congress was as clear as it could have been when it authorized plaintiffs to
seek and win punitive damages for past conduct using § 1605A(c)’s new federal
cause of action. After all, in § 1083(a), Congress created a federal cause of
action that expressly allows suits for damages that “may include economic
damages, solatium, pain and suffering, and punitive damages.” (Emphasis
added.) This new cause of action was housed in a new provision of the U.S.
Code, 28 U.S.C. § 1605A, to which the FSIA’s usual prohibition on punitive
damages does not apply. See § 1606. Then, in §§ 1803(c)(2) and (c)(3) of the
very same statute, Congress allowed certain plaintiffs in “Prior Actions” and
“Related Actions” to invoke the new federal cause of action in § 1605A. Both
provisions specifically authorized new claims for pre-enactment conduct. Put
another way, Congress proceeded in two equally evident steps: (1) It expressly
authorized punitive damages under a new cause of action; and (2) it explicitly
made that new cause of action available to remedy certain past acts of terrorism.
Neither step presents any ambiguity, nor is the NDAA fairly susceptible to any
competing interpretation”.126
125 See Iran’s Memorial, pp. 24-27, paras. 2.18-2.26. See also Opati, et al., v. Republic of Sudan, et al.,
U.S. Supreme Court, 18 May 2020, No. 17-1268, pp. 2-3 (IR, Annex 87), and Valore, et al. v. The
Islamic Republic of Iran, et al., Arnold (Estate of James Silvia), et al. v. The Islamic Republic of Iran,
et al., Spencer, et al. v. The Islamic Republic of Iran, et al., and Bonk, et al. v. The Islamic Republic of
Iran, et al. (consolidated), U.S. District Court for the District of Columbia, Memorandum Opinion
(Liability and Damages), 31 March 2010, 700 F. Supp. 2d 52 5 (D.D.C. 2010), Cases No. 03-cv-1959,
06- cv- 516, 06-cv-750, and 08-cv-1273, p. 3 (IR, Annex 30).
126 Opati, et al., v. Republic of Sudan, et al., U.S. Supreme Court, 18 May 2020, No. 17-1268, pp. 8-9
(IR, Annex 87). The intent of the U.S. Congress in enacting section 1083 of NDAA 2008 –
guaranteeing that plaintiffs suing Iran in “terrorism judgment” cases would win in any U.S. district
court and obtain punitive damages in addition to compensation – had appeared equally clearly to the
lower courts, which have applied 28 U.S. Code § 1605A retroactively. See e.g. Estate of Heiser, et al.
v. Islamic Republic of Iran, et al. (consolidated with Estate of Campbell, et al. v. Islamic Republic of
Iran, et al.), U.S. District Court, District of Columbia, Memorandum Opinion, 30 September 2009,
Case No. 1:00-cv-02329, 659 F.Supp.2d 20 (D.D.C. 2009), p. 3 (IM, Annex 45): “[O]n
December 22, 2006, this Court entered Default Judgment in favor of most Plaintiffs […] [T]he Court
was not able to award punitive damages. A little over a year later, the President signed the 2008 NDAA,
which repealed §1605(a)(7) and replaced that provision with a new version of the terrorism exception,
§1605A […]. While this new FSIA enactment is more advantageous in many significant respects, what
is most important for the purpose of today’s decision is that §1605A abrogates Cicippio-Puleo by
establishing a federal cause of action against state sponsors of terrorism and provides that punitive
damages may be awarded in those actions. See 1605A(c). […] Thus, plaintiffs proceeding under
§1605A can forgo the pass-through approach that controlled in the wake of Cicippio-Puleo and may
assert claims on the basis of the new federal statute alone. Notably, Congress directed that this new
terrorism exception, §1605A, may be applied retroactively to a broad range of cases, provided certain
conditions are satisfied. See §1083(c) [of NDAA 2008] […]. In March 2008, plaintiffs filed a Motion
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2.46 In 2010, the Havlish plaintiffs amended their complaint for the third time to avail
themselves of the more advantageous 28 U.S. Code § 1605A, the impact of which has
been commended by the District Court.127
2.47 The legal basis of the action introduced by the third amended complaint diverged
considerably from that invoked in the second. For example, although the Torture
Victim Protection Act only imposes liability for acts of torture and extrajudicial
killing, 28 U.S. Code § 1605A added aircraft sabotage, hostage taking and generally
the provision of material support or resources for terrorist acts. As a result, the
conditions for imposing the liability on Iran and the Iranian companies were
substantially – and retroactively – relaxed.
2.48 Bank Markazi and the other Iranian companies did not appear before the U.S. courts
as, inter alia, the amended complaints either were not served or otherwise improperly
served on them.
2.49 In December 2011, the U.S. District Court for the Southern District of New York
found, in absentia and without any evidence, Bank Markazi and the other Iranian
companies to be acting as agents or instrumentalities of Iran in its alleged provision
of material support to Al Qaeda in the execution of the 11 September 2001 terrorist
attacks.128
2.50 The court did not even follow the so called “but-for” standard for any causal link
between the 11 September attacks and the alleged acts of material support attributed
for Supplementary Relief in which they requested that this Court apply §1605A retroactively to their
actions and award additional damages, including 650 million dollars in punitive damages, against Iran.
[…] On March 13, 2009, this Court determined that plaintiffs’ actions satisfied the conditions for
retroactive application of §1605A and issued an order indicating that plaintiffs were entitled to proceed
before this Court.”).
127 Judge Frank Maas writes in his Report and Recommendation on the evaluation of damages in these
proceedings that “Section 1605A effected a 'sea change' in suits against State sponsors of terrorism.
[…] Previously, to recover damages against such defendants [i.e. foreign States that had been designed
as State sponsors of terrorism], plaintiffs had to demonstrate their entitlement under state or foreign
law. […] Now, such claims are subject to a ‘uniform federal standard’” (In Re: Terrorist Attacks on
September 11, 2001 (relating to Havlish v. Bin Laden), U.S. District Court, Southern District of
New York, Report and Recommendation to the Honorable George B. Daniels, 30 July 2012,
Case 1:03- cv-09848-GBD-FM, p. 5 (IR, Annex 38).
128 Havlish, et al. v. Bin Laden, et al., U.S. District Court, Southern District of New York,
22 December 2011, No. 03 MD 1570 (S.D.N.Y 2011), pp. 52-53 (IM, Annex 52).
- 38 -
to the Iranian companies. Instead, the court merely adopted the findings of facts and
conclusions of law proposed by the plaintiffs, none of which mentioned – let alone
demonstrated – any provision of material support to Al Qaeda or support for these
attacks by any defendant Iranian company.129
2.51 Such so-called “findings of facts” regarding the defendant Iranian companies are
limited to the following general and baseless allegations of control by Iran or indirect
engagement in general terrorist activity:
a. “The entire apparatus of the Iranian State and government, and many parts of
Iran’s private sector, including corporations (e.g. National Iranian Oil
Company, Iran Air, Iran Shipping Lines); banks (e.g. Central Bank, Bank
Sepah), (…) and even charities are at the service of the Supreme Leader, the
Islamic Revolutionary Guard Corps, and the Iranian Ministry of Information
and Security when it comes to support terrorism”;130
b. NITC, NIOC, NIGC, NPC, Iran Air and Bank Markazi “are all agencies and
instrumentalities of the state of Iran. Each of these corporate defendants has a
legal corporate existence outside the government and core functions which are
commercial, not governmental, in nature. Each of [them] is, however, tightly
connected to the government of Iran, and each is an organ of the government
and/or has been owned, directed, and controlled by the Iranian State”;131
c. As to NITC: it is “controlled by the Islamic Republic of Iran”;132
129 The Levinson case is another example of such a minimal standard of proof. See Levinson, et al. v. The
Islamic Republic of Iran, U.S. District Court for the District of Columbia, Memorandum Opinion,
9 March 2020, No. 1:17-cv-00511 (IR, Annex 82), p. 25 (“As a result, a plaintiff that offers proof
sufficient to establish a waiver of foreign sovereign immunity under § 1605A(a) has also established
entitlement to relief as a matter of federal law if the plaintiff is a citizen of the United States. Fritz,
320 F. Supp. 3d at 86–87; see Hekmati, 278 F. Supp. 3d at 163 (‘Essentially, liability under § 1605A(c)
will exist whenever the jurisdictional requirements of § 1605A(a)(1) are met.’)”).
130 Havlish, et al. v. Bin Laden, et al., U.S. District Court, Southern District of New York,
22 December 2011, No. 03 MD 1570 (S.D.N.Y 2011), p. 11 (IM, Annex 52).
131 Ibid., p. 12.
132 Ibid., p. 12. The plaintiffs provided no other finding of fact regarding NITC.
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d. As to NIOC: it “is owned, controlled and managed by the Government of Iran”
and “a large cash flow of money was funnelled to terrorist organisations through
the NIOC”;133
e. As to NIGC: “Terrorists received monetary commissions from [NIGC] for
operating as go-betweens for arrangements involving long-term payments”;134
f. As to NPC: “Terrorists acted as go-betweens for arrangements with [NPC]
involving long-term payment promises – that are never kept – and the terrorists
receive monetary commissions for the bogus transactions”;135
g. As to Iran Air: “Iranian agents who carried out acts of terrorism left the country
in which the act was perpetrated on Iran Air flights which were specially held
on the ground until the alleged perpetrator(s) could board the flight”; “Iran Air
acted as facilitator for the transfer of cash to terrorists on missions abroad”;136
h. As to Bank Markazi: it “has core functions that are quasi-governmental, but it
is a corporation rather than an agency within the government”; “[t]he transfers
of huge sums of Iranian money to terrorist organisations such as Hamas and
Hizballah, often millions of dollars of cash carried in suitcases, can only be
accomplished with the complicity and/or knowledge and acquiescence of [Bank
Markazi]. The same must be true in the case of banking transactions between
Iranian agencies and instrumentalities and terrorist organisations”; it “facilitates
the transfer of money to terrorist groups”.137
2.52 The “evidence” supporting these purported findings of fact is limited to four affidavits
or testimonies by people who were not, at the relevant time, involved in any way in
133 Ibid., p. 12.
134 Ibid., p. 13.
135 Ibid.
136 Ibid.
137 Ibid., pp. 13-14 (emphasis added).
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the Iranian government, the defendant Iranian companies, Al Qaeda or the
11 September 2001 attacks:138
a. The testimony of Abolghasem Mesbahi, an alleged former Iranian intelligence
officer presenting himself as “an Iranian regime ‘insider’ who knew many of
the Islamic regime’s top leaders during the 1980s and early 1990s”139 and who
defected to Germany in 1996 [i.e. 5 years before 9/11] under the United
Nations refugee status and never went back.140
b. The affidavit of Dr. Patrick Clawson, “one of the [U.S.] foremost experts on
all matters pertaining to Iran for the last thirty years [who] has done consulting
work for the Central Intelligence Agency, the Defense Intelligence Agency,
the National Security Agency, and the Defense Department, among other
governmental agencies”.141
c. The affidavit of Kenneth Timmerman, “investigative journalist, author and
noted Iran expert”142 who is the president and executive director of the
American Foundation for Democracy in Iran, which allegedly supports
democratic movements in Iran.143
d. The testimony of Abolhassan Banisadr, Iran’s first president after
the 1979 Revolution, ousted in 1981, who has been living in exile in France
since then.144
138 Pursuant to the Weinstein precedent, in FSIA default judgment proceedings, the plaintiffs may establish
proof by affidavit (ibid., p. 5). The judgment’s sections referring to Iranian companies (ibid., pp. 11-
14) do not cite to any other source than these four affidavits and testimonies.
139 Ibid., p. 26, para. 147.
140 Ibid., p. 27, paras. 158-159.
141 Ibid., p. 39, para. 238.
142 Ibid., p. 44, para. 272.
143 See the Foundation’s website at iran.org/about.htm.
144 Ibid., p. 10, para. 32.
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2.53 In fact, the plaintiffs did not provide the court with any evidence of support by Iran or
Iranian companies to the perpetrators of the 9/11 attacks, and for good reason: there
was no such support. However, the court relying on mere assumptions unrelated to
the specific facts underlying the claims and authored by so-called witnesses without
any knowledge of those specific facts, determined that the plaintiffs had met the
burden of establishing their claims “by evidence satisfactory to the Court”145 with
respect to the defendant Iranian companies. Indeed, the court concluded that:
“31. Plaintiffs have demonstrated several reasonable connections between
the material support provided by defendants and the 9/11 attacks. Hence,
plaintiffs have established that the 9/11 were caused by Defendants’
provision of material support to al Qaeda” (…)
“33. (…) Defendants … [NITC, NIOC, NIGC, Iran Air, NPC, Bank
Markazi], at all relevant times acted as agents or instrumentalities of
defendant Iran. Each of these Defendants is subject to liability as agents of
Iran under §1606A(c) of the FSIA and as co-conspirators, aiders and abetters
under the ATCA”146
2.54 The Court thereafter condemned the Iranian defendants to pay the amount of over
USD 6 billion, including USD 4.6 billion as punitive damages to 152 plaintiffs, which
amounts to an average USD 39.5 million per plaintiff.147 It is not known on what
factual and legal basis this extraordinary and irrational amount of damages was
awarded and allocated to the plaintiffs.
2.55 In addition to Havlish, Bank Markazi has been sued by three other groups of victims
of the 11 September 2001 terrorist attacks in Hoglan, Burnett and Ryan and has been
condemned to payment of equally extraordinary and irrational amounts in
compensation and punitive damages. In none of these cases did the U.S. courts carry
out a review of the factual allegations, evidence, causation and other legal
requirements to find Bank Markazi liable for the alleged material support of the
145 Ibid., p. 49. This is the standard required by 28 U.S.C. Sect. 1608(e) for the entry of a default judgment
to be appropriate.
146 Ibid., pp. 52-53.
147 In Re Terrorist Attacks of September 11, 2001 (relating to Havlish v. Bin Laden), U.S. District Court
for the Southern District of New York, Memorandum Decision and Order of 3 October 2012,
Case 1:03-cv-09848-GBD-SN (IR, Annex 39). The District Court subsequently ordered the precise
allocation of damages to each plaintiff in In Re Terrorist Attacks of September 11, 2001 (relating to
Havlish v. Bin Laden), U.S. District Court, Southern District of New York, Order and Judgment
of 12 October 2012, Case 1:03-cv-09848-GBD-SN (IR, Annex 41).
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attacks – otherwise they would have had to deny such liability. They simply relied on
the unsubstantiated findings made in the Havlish and Ashton cases.148 Alongside Bank
Markazi, the above Iranian companies were also condemned jointly or severally in the
Hoglan and Ryan cases.149
2.56 This judicial absurdity continues: pending before the same U.S. District Court for the
Southern District of New York is the Ray case against Iran and fifteen Iranian entities
including six companies – Bank Markazi, NIOC, NITC, NIGC, NPC, and Iran Air –
which are accused, based on the factual and legal findings made in the Havlish and
Hoglan case, of being liable as the agents of Iran “for their role in providing direct
and material support to al-Qaeda in carrying out [the 11 September 2001] attacks”.150
2.57 Also pending, before the U.S. District Court for the District of Columbia, and also as
a result of the U.S. measures in this case, are seven proceedings against Bank Markazi,
Bank Melli – often with Bank Melli PLC – and NIOC, as sole defendants151 or as co-
148 Thomas Burnett, Sr., et al. v. The Islamic Republic of Iran, et al. US District Court for the Southern
District of New York, Plaintiffs’ Motion for Judgment by Default against the Islamic Republic of Iran,
The Islamic Revolutionary Guard, and the Central Bank of the Islamic Republic of Iran (the “Sovereign
Defendants”) and Order of Judgment dated 31 January 2017 granting Plaintiffs Motion (IR, Annex 54).
149 Hoglan, et al. v. Iran, et al., U.S. District Court for the Southern District of New York, Plaintiffs
Proposed Findings of Fact and Conclusions of Law in Support of Motion for Entry of Default
Judgment, 31 August 2015, and Order of Judgment, 31 August 2015, Case No. 1:11 Civ. 7550 (GBD)
(IR, Annex 51); Ryan, et al. v. Islamic Republic of Iran, et al., U.S. District Court for the Southern
District of New York, Order of Partial Final Default Judgments, 6 March 2020,
Case No. 1:20- cv- 00266 (IR, Annex 80) (see also Ashton, et al. v. al Qaeda Islamic Army, et al., U.S.
District Court for the Southern District of New York, Amended Order of Judgment, 8 March 2016,
Case No. 02- cv- 6977 (GBD) – IR, Annex 52).
150 In Re: Terrorist Attacks on September 11, 2001, Ray, et al. v. Iran, et al., U.S. District Court for the
Southern District of New York, Complaint (made pursuant to, inter alia, the FSIA, 28 U.S.C. §§ 1605A
and 1605B), 9 January 2019, Case No. 1:19-cv-00012, introductory paragraph (IR, Annex 65).
Plaintiffs are Estates or family members of seventeen persons who died, and one person who was
injured, in the attacks. Like in the Havlish, et al. v. bin Laden, et al. (1:03-cv-09848) and Hoglan, et al.
v. Islamic Republic of Iran, et al. (1:11-cv-07550) cases (in which the same fifteen Iranian entities, in
addition to Iran itself, were defendants), the plaintiffs claim that the Iranian defendants “instructed,
trained, directed, financed and otherwise supported and assisted al-Qaeda, or conspired in the
instruction, training, direction, financing, and support of al-Qaeda, in connection with al-Qaeda’s
terrorist plans [including the September 11, 2001 attacks]” (ibid., para. 157). As to the defending
companies, the complaint alleges, without referring to any evidence, that they “funnel[] funds to the
Iranian government with knowledge that the Iranian government uses those funds to support its own
terrorist activities as well as those of Defendant Hezbollah and al-Qaeda” and that in addition Iran Air
“knowingly assists Iran’s efforts to export terrorism by transporting individual terrorists to destinations
for the purpose of committing terrorist acts in foreign countries” (ibid., para. 86).
151 Hake, et al. v. Bank Markazi, et al., U.S. District Court for the District of Columbia, Complaint,
17 January 2017, Case No. 1:17-cv-00114 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S.
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defendants alongside Iran, the Islamic Revolutionary Guard Corps (‘IRGC’), and the
Iranian Ministry of Intelligence and Security (‘MOIS’).152 Plaintiffs in these cases are
estates and families of U.S. nationals and/or members of the U.S. armed forces killed
or injured in Iraq between 2003 and 2011 in a thousand of so-called “terrorist attacks”
allegedly carried out by various Shia and Sunni groups with Iran’s support. The
complaints in these six cases, brought pursuant to the FSIA, 28 U.S.C. § 1605A, all
build on the same allegations – that are not based on evidence but on the
U.S. Government’s own determinations – against the Iranian companies:
a. “In order to fund this terror campaign in Iraq, Iran directed [Bank Markazi,
Bank Melli, Bank Melli PLC and NIOC] to conspire with an assortment of
Western financial institutions willing to substantially assist Iran to evade
U.S. and international economic sanctions, conduct illicit trade-finance
transactions, and illegally disguise financial payments to and from U.S. dollardenominated
accounts”153
b. Bank Markazi, Bank Melli, Bank Melli PLC and NIOC as Iran’s agencies
“directed millions of U.S. dollars in arms, equipment and materiel to
Hezbollah, the IRGC and the IRGC-QF [Qods Force, a subdivision of the
latter], which, in turn, trained, armed, supplied and funded Iran’s terrorist
District Court for the District of Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737 (IR,
Annex 55); Field, et al. v. Bank Markazi, et al., U.S. District Court for the District of Columbia,
13 October 2017, Case No. 1:17-cv-02126 (IR, Annex 57); Wise, et al. v. Bank Markazi, et al., U.S.
District Court for the District of Columbia, Complaint, 9 April 2019, Case No. 1:19-cv-00995 (IR,
Annex 66).
152 Estate of Brook Fishbeck, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Complaint, 27 September 2018, Case No. 1:18-cv-02248 (IR, Annex 63); Hartwick, et al. v. Iran, et
al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018, Case No. 1:18-cv-01612
(IR, Annex 62); Holladay, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Amended Complaint, 14 September 2017, Case No. 1:17-cv-00915 (IR, Annex 56).
153 Hartwick, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018,
Case No. 1:18-cv-01612, para. 3 (IR, Annex 62). See also Hake, et al. v. Bank Markazi, et al., U.S.
District Court for the District of Columbia, Complaint, 17 January 2017, Case No. 1:17-cv-00114,
para. 5 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S. District Court for the District of
Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737, para. 5 (IR, Annex 55); Holladay, et
al. v. Iran, et al., U.S. District Court for the District of Columbia, Amended Complaint, 14 September
2017, Case No. 1:17-cv-00915, para. 3 (IR, Annex 56); Field, et al. v. Bank Markazi, et al., U.S. District
Court for the District of Columbia, 13 October 2017, Case No. 1:17-cv-02126, para. 5 (IR, Annex 57);
Estate of Brook Fishbeck, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Complaint, 27 September 2018, Case No. 1:18-cv-02248, para. 5 (IR, Annex 63); Wise, et al. v. Bank
Markazi, et al., U.S. District Court for the District of Columbia, Complaint, 9 April 2019, Case No.
1:19-cv-00995, para. 5 (IR, Annex 66).
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agents in Iraq in carrying out their attacks against Plaintiffs and their family
members”.154
c. Bank Markazi “has provided millions of dollars to terrorist organisations” and
“is an alter-ego and instrumentality of the Iranian government and its Supreme
Leader, and it has routinely used Iranian banks like [Bank Melli and Bank
Melli PLC] as conduits for terror financing and weapons proliferation on
behalf of the Iranian regime”.155
d. “[B]etween 2004 and 2011, Bank Melli Iran and Melli Bank PLC in London
transferred approximately $100 million USD to the IRGC-QF”; “Bank Melli
Iran financed transactions that purposefully evaded U.S. sanctions on behalf
of Mahan Air (…) and Iran’s Ministry of Defense and Armed Forces
Logistics”; and “[i]n mid-2007, Bank Melli Iran’s branch in Hamburg (…)
transferred funds on behalf of Iran’s Defense Industries Organization”.156
154 Hartwick, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018,
Case No. 1:18-cv-01612, para. 11 (IR, Annex 62). See also Hake, et al. v. Bank Markazi, et al., U.S.
District Court for the District of Columbia, Complaint, 17 January 2017, Case No. 1:17-cv-00114,
para. 6 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S. District Court for the District of
Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737, para. 6 (IR, Annex 55); Holladay, et
al. v. Iran, et al., U.S. District Court for the District of Columbia, Amended Complaint, 14 September
2017, Case No. 1:17-cv-00915, para. 11 (IR, Annex 56) Field, et al. v. Bank Markazi, et al., U.S.
District Court for the District of Columbia, 13 October 2017, Case No. 1:17-cv-02126, para. 6
(IR, Annex 57); Estate of Brook Fishbeck, et al. v. Iran, et al., U.S. District Court for the District of
Columbia, Complaint, 27 September 2018, Case No. 1:18-cv-02248, para. 6 (IR, Annex 63); Wise, et
al. v. Bank Markazi, et al., U.S. District Court for the District of Columbia, Complaint, 9 April 2019,
Case No. 1:19-cv-00995, para. 6 (IR, Annex 66).
155 Hartwick, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018,
Case No. 1:18-cv-01612, paras. 91 and 93 (IR, Annex 62). See also Hake, et al. v. Bank Markazi, et
al., U.S. District Court for the District of Columbia, Complaint, 17 January 2017, Case
No. 1:17-cv-00114, paras. 12 and 14 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S. District
Court for the District of Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737, paras. 12 and
14 (IR, Annex 55); Holladay, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Amended Complaint, 14 September 2017, Case No. 1:17-cv-00915, paras. 91 and 93 (IR, Annex 56);
Field, et al. v. Bank Markazi, et al., U.S. District Court for the District of Columbia, 13 October 2017,
Case No. 1:17-cv-02126, paras. 12 and 14 (IR, Annex 57); Estate of Brook Fishbeck, et al. v. Iran, et
al., U.S. District Court for the District of Columbia, Complaint, 27 September 2018, Case
No. 1:18-cv-02248, paras. 94 and 96 (IR, Annex 63); Wise, et al. v. Bank Markazi, et al., U.S. District
Court for the District of Columbia, Complaint, 9 April 2019, Case No. 1:19-cv-00995, paras. 13-14
(IR, Annex 66).
156 Hartwick, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018,
Case No. 1:18-cv-01612, paras. 107, 113, and 118 (IR, Annex 62). See also Hake, et al. v. Bank
Markazi, et al., U.S. District Court for the District of Columbia, Complaint, 17 January 2017, Case No.
1:17-cv-00114, paras. 26, 32 and 37 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S. District
- 45 -
e. “NIOC used its oil and natural gas revenues to launder money for the IRGC,
often using Defendant [Bank Markazi] for this purpose”; “Iranian intelligence
gathering [in the Maysan province in Iraq] takes place using National Iranian
Oil Company helicopters”; and “NIOC also obtained letters of credit from
western banks to provide financing and credit to the IRGC”.157
2.58 In sum, whoever the author of the alleged terrorist acts they are said to be victim of,
however unproven and absurd the allegation of a link to Iran or its companies, U.S.
plaintiffs are allowed by the U.S. legal and regulatory measures to pursue Iran and its
companies and hold them liable for such terrorist acts.158
Court for the District of Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737, paras. 26, 29,
and 34 (IR, Annex 55); Holladay, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Amended Complaint, 14 September 2017, Case No. 1:17-cv-00915, paras. 107, 113 and 118 (IR,
Annex 56); Field, et al. v. Bank Markazi, et al., U.S. District Court for the District of Columbia,
13 October 2017, Case No. 1:17-cv-02126, paras. 21, 24 and 29 (IR, Annex 57); Estate of Brook
Fishbeck, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 27 September
2018, Case No. 1:18- cv-02248, paras. 110, 116 and 121 (IR, Annex 63); Wise, et al. v. Bank Markazi,
et al., U.S. District Court for the District of Columbia, Complaint, 9 April 2019, Case
No. 1:19-cv-00995, paras. 21, 24 and 29 (IR, Annex 66).
157 Hartwick, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint, 7 July 2018,
Case No. 1:18-cv-01612, paras. 133, 134, 136 (IR, Annex 62). See also Hake, et al. v. Bank Markazi,
et al., U.S. District Court for the District of Columbia, Complaint, 17 January 2017, Case
No. 1:17-cv-00114, paras. 50-51 and 53 (IR, Annex 53); Brooks, et al. v. Bank Markazi, et al., U.S.
District Court for the District of Columbia, Complaint, 20 April 2017, Case No. 1:17-cv-00737,
paras. 47, 48, and 50 (IR, Annex 55); Holladay, et al. v. Iran, et al., U.S. District Court for the District
of Columbia, Amended Complaint, 14 September 2017, Case No. 1:17-cv-00915, paras. 133, 134, and
136 (IR, Annex 56); Field, et al. v. Bank Markazi, et al., U.S. District Court for the District of
Columbia, 13 October 2017, Case No. 1:17-cv-02126, paras. 42, 43 and 45 (IR, Annex 57); Estate of
Brook Fishbeck, et al. v. Iran, et al., U.S. District Court for the District of Columbia, Complaint,
27 September 2018, Case No. 1:18-cv-02248, paras. 136, 137 and 139 (IR, Annex 63); Wise, et al. v.
Bank Markazi, et al., U.S. District Court for the District of Columbia, Complaint, 9 April 2019, Case
No. 1:19-cv-00995, paras. 42, 43 and 45 (IR, Annex 66).
158 A recent example of this phenomenon is the (pending) Henkin case. Plaintiffs – the children of a U.S.
national killed in the West Bank in an attack attributed to members of the Hamas organisation – brought
a complaint against Iran, the IRGC, the MOIS, Bank Markazi, Bank Melli, Bank Saderat, Iran and
Syria. The “factual basis” of their claim that the Defendants are liable for the injuries suffered rests in
the U.S. government general allegation that “Iran provides funding to Hamas through its government
owned and controlled central bank, Bank Markazi, which uses other Iranian banks, like Bank Melli and
Bank Saderat, as conduits” (Henkin, et al. v. Iran, et al., U.S. District Court for the District of Columbia,
Complaint, 24 April 2019, Case No. 1:19-cv-01184, para. 107 (IR, Annex 67).
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B. Enforcement of U.S. judgments entered against Iran
against property belonging to Iranian companies
2.59 Between 1998 and 2019, the U.S. courts issued nearly 140 final judgments against the
State of Iran alone over its alleged support of alleged terrorist acts targeting U.S.
interests around the world.159 None of them are based on any evidence of such support,
which Iran has not provided.
2.60 Twenty-one of these judgments – all of which resulted from the retroactive application
of the FSIA (1996), 28 U.S.C. § 1605(a)(7) and/or its successor FSIA (2008),
28 U.S.C. § 1605A160 to past terrorist acts161 and/or to pending proceedings with
159 See Attachment 1 to this Reply (Attachment 1 to Iran’s Memorial, as updated as of 31 December 2019).
160 On these provisions concerning the “terrorism exception” to the foreign sovereign immunity that the
U.S. Congress added to the FSIA in 1996 and broadened in 2008, see paras. 2.43-2.45 above and Iran’s
Memorial at pp. 16-19, paras. 2.4-2.8 and at pp. 23-27, paras. 2.16-2.26.
161 With the exception of the Greenbaum and Bennett cases, concerning bombings in Jerusalem in 2001
and 2002 respectively, which were decided in 2006 and 2007 respectively under 28 U.S.C.
§ 1605(a)(7), in force at the time of the relevant conduct (see Greenbaum, et al. v. Islamic Republic of
Iran, et al., U.S. District Court, District of Columbia, Findings of Fact and Conclusions of Law,
10 August 2006, Case No. 1:02-cv-02148, 451 F. Supp.2d 90 (D.D.C. 2006) (IM, Annex 37) and
Bennett v. Islamic Republic of Iran, U.S. District Court, District of Columbia, Memorandum Opinion
(Liability and Damages), 30 August 2007, Case No. 03-1486, 507 F. Supp. 2d 117 (D.D.C. 2007) –
IM, Annex 39), the 19 other cases arose out of the following acts, preceding the enactment of the legal
ground for their decision: the bombing of the U.S. Marine barracks in Beirut in 1983 (Valore, et al. v.
The Islamic Republic of Iran and Iranian Ministry of Information and Security, Arnold (Estate of James
Silvia), et al. v. The Islamic Republic of Iran, et al., Spencer, et al. v. The Islamic Republic of Iran, et
al., and Bonk, et al. v. The Islamic Republic of Iran, et al. (consolidated), U.S. District Court for the
District of Columbia, Memorandum Opinion (Liability and Damages), 31 March 2010, 700 F. Supp.
2d 52 5 (D.D.C. 2010), Cases No. 03-cv-1959, 06-cv-516, 06-cv-750, and 08-cv-1273 (IM, Annex 46);
Murphy, et al., v. Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability and Damages), 24 September 2010, Case No. 06-cv-596
(IR, Annex 31); Peterson, et al. v. Islamic Republic of Iran and Iranian Ministry of Information and
Security, U.S. District Court for the District of Columbia, Memorandum Opinion (Liability),
30 May 2003, Case No. 1:01-cv-2094 (IR, Annex 18); Estate of Anthony K. Brown, et al., v. Islamic
Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court for the District
of Columbia, Order Granting Motion to Enter Default Judgment and to Take Judicial Notice (of the
findings of facts and conclusions of law in the Peterson judgment of 30 May 2003 as fully applicable
to the matter), 1 February 2010, Case No. 08-cv-531 (IR, Annex 28); Davis, et al., v. Islamic Republic
of Iran, et al., U.S. District Court for the District of Columbia (Liability – taking judicial notice of the
Peterson judgment of 30 May 2003), 1 February 2010, Case No. 07-cv-1302 (IR, Annex 29); Estate of
Steven Bland, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of
Columbia, Order (Liability – taking judicial notice of the Peterson judgment of 30 May 2003),
6 December 2006, Case No. 1:05-cv-02124 – IR, Annex 19); a kidnapping in Beirut in 1984 (Levin, et
al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia, Report and
Recommendation, 31 December 2007, Case No. 05-2494, 529 F. Supp.2d 1 (D.D.C. 2007) – IM,
Annex 41); an assassination in New York in 1990 (Acosta, et al. v. The Islamic Republic of Iran, et al.,
U.S. District Court, District of Columbia, Findings of Facts and Conclusions of Law (under the FSIA
- 47 -
respect to such acts162 – have been implemented against assets belonging not to Iran
but to Iranian companies.
(2008), 28 U.S.C. § 1605A), 26 August 2008, Case No. 1:06-cv-00745, 574 F.Supp.2d 15 (D.D.C.
2008) (IM, Annex 43); a bombing in Jerusalem in 1996 (Weinstein, et al., v. The Islamic Republic of
Iran, et al., U.S. District Court, District of Columbia, 6 February 2002, 184 F.Supp.2d 13 (D.D.C
2002)(IM, Annex 30); the bombing of the Khobar Towers in Dharhan, Saudi Arabia in 1996 (Estate of
Heiser, et al. v. Islamic Republic of Iran, et al. (consolidated with Estate of Campbell, et al. v. Islamic
Republic of Iran, et al.), U.S. District Court, District of Columbia, Memorandum Opinion (under the
FSIA (2008), 28 U.S.C. § 1605A), 30 September 2009, Case No. 1:00-cv-02329, 659 F.Supp.2d 20
(D.D.C. 2009)(IM, Annex 45); a bombing in Jerusalem in 1997 (Campuzano, et al. v. The Islamic
Republic of Iran, et al. and Rubin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for
the District of Columbia, Findings of Fact and Conclusions of Law, 10 September 2003, Cases Nos.
00-2328 and 01-1655, 281 F. Supp. 2d 258 (D.D.C. 2003)(IM, Annex 33); the bombing of the U.S.
embassies in Nairobi and Dar-es-Salaam in 1998 (Khaliq, et al. v. Republic of Sudan, et al. U.S. District
Court for the District of Columbia, Memorandum Opinion (Damages), 28 March 2014, Case No. 10-
0356 (IR, Annex 46), Owens, et al. v. Republic of Sudan, et al., U.S. District Court for the District of
Columbia, Memorandum Opinion (Damages), 28 March 2014, Case No. 01-2244 (IR, Annex 47) and
Mwila, et al. v. Republic of Sudan, et al., U.S. District Court for the District of Columbia, Memorandum
Opinion (Damages), 28 March 2014, Case No. 08-1377 (IR, Annex 48) – these three judgments were
entered under the FSIA (2008), 28 U.S.C. § 1605A); a bombing in Jerusalem in 2001 (Kirschenbaum,
et al., v. Islamic Republic of Iran, U.S. District Court for the District of Columbia, Memorandum
Opinion (Punitive damages under the FSIA (2008), 28 U.S.C. § 1605A), 19 May 2011, Case No. 08-
cv-1814(IR, Annex 33); a bombing in Jerusalem in 2003 (Beer, et al. v. Islamic Republic of Iran, et al.,
U.S. District Court for the District of Columbia, Memorandum Opinion (Punitive damages under the
FSIA (2008), 28 U.S.C. § 1605A), 19 May 2011, Case No. 08-cv-1807(IM, Annex 49).
162 In some of these cases the plaintiffs, who had originally made their complaint against Iran pursuant to
the “terrorism exception” in FSIA (1996), § 1605(a)(7), were permitted to amend such complaint in the
course of the proceedings – sometimes after the court’s entry of judgment on liability – following the
enactment on the NDAA 2008 on 28 January 2008 to take advantage of the FSIA. (2008), § 1610A
replacing § 1605(a)(7). See the Valore, Bonk, Spencer and Arnold consolidated cases
sp. pp. 2- 3(IR, Annex 30), See also the Murphy (IR, Annex 31), Acosta (IM, Annex 43), Brown (IR,
Annex 28), Khaliq, Owens and Mwila (IR, Annexes 46, 47, 48) and Havlish (IM, Annex 52) cases.
Some of the plaintiffs were even allowed to bring a new complaint to seek punitive damages against
Iran even though they had already obtained a final judgment under the FSIA (1996), 28 U.S.C.
§ 1607(a)(7) in the same case. See the Beer case (Beer, et al. v. Islamic Republic of Iran, et al., U.S.
District Court for the District of Columbia, Memorandum Opinion (Damages), 19 May 2011, Case
No. 08-cv-1807 – IM, Annex 49): in a previous action against the same defendants, the Beer plaintiffs
had successfully pursued claims against Iran and MOIS under the former state-sponsored terrorism
exception codified at 28 U.S.C. § 1605(a)(7). The Court held that defendants were liable for the death
of Alan Beer in the bombing of a bus in Jerusalem in 2003 and were awarded compensatory damages
yet denied punitive damages because they had not properly asserted a cause of action under 28 U.S.C.
§ 1605A (Beer, et al., v. The Islamic Republic of Iran, et al., U.S. District Court for the District of
Columbia, Findings of Fact and Conclusions of Law (Liability and Damages), 26 August 2008, Case
No. 06-473, p. 18 – IR, Annex 24). The Beer plaintiffs subsequently filed an amended complaint
pursuant to the FSIA, 28 U.S.C. § 1605A to claim punitive damages, which the Court awarded in its
19 May 2011 Judgment. See also the Kirschenbaum II case (Kirschenbaum, et al., v. Islamic Republic
of Iran, U.S. District Court for the District of Columbia, Opinion and Order (Liability), 15 December
2010, Case No. 08-cv-1814, p. 2 (IR, Annex 32): “Prior to the Court’s entry of judgment Kirschenbaum
I [final judgment issued under the “state-sponsored terrorism” exception to the FSIA, which, at the time
of the suit, was codified at 28 U.S.C. § 1605(a)(7): Kirschenbaum, et al., v. Islamic Republic of Iran,
U.S. District Court for the District of Columbia, Findings of Fact and Conclusions of Law, 26 August
2008, Case No. 03-1708 (IR, Annex 25)], Congress passed the National Defense Authorization Act for
Fiscal Year 2008 (“NDAA”), which repealed § 1605(a)(7) and replaced it with a new state-sponsored
terrorism exception (…). This new exception, codified at 28 U.S.C. §1605A, ‘creat[ed] a federal right
- 48 -
2.61 This section further describes these enforcement proceedings carried out, either
collectively or individually, by the 21 groups of judgment creditors thanks to yet again
the intervention of retroactive U.S. legislation – Section 201 of TRIA in 2008 and
Section 502 of ITRSHRA in 2012 and 2020 – specifically allowing the attachment of
the Iranian companies’ property in satisfaction of judgments against Iran.
2.62 Iran considers the companies that have been thus deprived of their properties and/or
are still under the threat of such deprivation before the U.S. courts in the following
order: (i) Bank Melli, (ii) Bank Markazi, (iii) TIC, and (iv) a multitude of Iranian
companies whose assets have been globally seized in smaller amounts.
i. Enforcement proceedings against Bank Melli
(a) Susan Weinstein et al. v. Islamic Republic of Iran
2.63 After the enactment in April 1996 of the retroactively applicable FSIA amendments,
and thereby the removal of Iran’s immunity before U.S. courts,163 the Weinstein
plaintiffs sued Iran in 2000 under Section 1605(a)(7) for damages resulting from the
death of a U.S. citizen in Jerusalem who was killed in February 1996 in the suicide
bombing of a bus for which Hamas claimed responsibility.
2.64 In 2002, in a default judgment issued by the U.S. District Court for the District Court
of Columbia, Iran was held liable on the basis that it had allegedly provided “material
support” to Hamas and ordered Iran to pay more than USD 192 million to the
of action against foreign states, for which punitive damages may be awarded’ […]. The NDAA also
permits plaintiffs to have §1605A retroactively applied in certain circumstances. […]. Plaintiffs here –
the same plaintiffs as in Kirschenbaum I – seek to invoke the additional remedies provided by this new
state-sponsored terrorism exception through the retroactive procedures outlines in the NDAA”). See
also the Rubin case (Rubin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the
District of Columbia, Memorandum Order, 3 June 2008, Case No. 1:01-cv-01655, p. 2, fn. 3 (IR,
Annex 23), and the Heiser case (Estate of Heiser, et al. v. Islamic Republic of Iran, et al. (consolidated
with Estate of Campbell, et al. v. Islamic Republic of Iran, et al.), U.S. District Court, District of
Columbia, Memorandum Opinion, 30 September 2009, Case No. 1:00-cv-02329, 659 F.Supp.2d 20
(D.D.C. 2009) p. 3. (IM, Annex 45),
163 See above para. 2.2, and Iran’s Memorial, pp. 16-19, paras. 2.4-2.8 (on the amendment of FSIA 1976
by the U.S. Antiterrorism and Effective Death Penalty Act of 1996).
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plaintiffs, including USD 150 million in punitive damages.164 Bank Melli was not
named as a defendant or judgment debtor in this case, and the default judgment does
not contain any allegation concerning Bank Melli.165
2.65 In 2007, following the designation by the United States of Bank Melli as a company
facilitating “Iran’s proliferation activities or its support for terrorism” and the
subsequent blocking of all properties of the bank within the United States,166 the
Weinstein judgment creditors applied to the District Court for the Eastern District of
New York for authorisation to appoint a receiver to sell, in aid of execution of their
judgment, Bank Melli’s real property located in 135 Puritan Avenue, Forest Hills,
New York and to receive the proceeds in partial satisfaction of its judgment.167
2.66 This application was based on Section 201(a) of the TRIA (2002) which authorises
the attachment of the “blocked assets” not only of an alleged “State sponsor of
terrorism”, such as Iran (according to the United States), but also of its agencies and
instrumentalities.168 Thus, the plaintiffs claimed, they were entitled to enforce their
judgment against the property because the property was a “blocked asset” under the
TRIA and Bank Melli was an “agency or instrumentality” of Iran.169
164 Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District Court, District of Columbia,
6 February 2002, 184 F.Supp.2d 13 (D.D.C 2002) (IM, Annex 30).
165 The Iranian Ministry of Information and Security alone was accused of having “acted as a conduit for
the Islamic Republic of Iran’s provision of funds to Hamas”, the alleged author of the terrorist attack
at issue (ibid., p. 11, para. 30 IM, Annex 30).
166 See U.S. Department of Treasury, Fact Sheet: Designation of Iranian Entities and Individuals for
Proliferation Activities and Support for Terrorism, 25 October 2007 (IR, Annex 9).
167 Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District Court, Eastern District of New
York, Memorandum and Order, 5 June 2009, Case 2:02-mc-00237-LDW (IR, Annex 26).
168 Section 201(a) of the TRIA thus provides that “in every case in which a person has obtained a judgment
against a terrorist party [defined to include foreign states designated a “sponsor of terrorism” such as
Iran], or for which a terrorist party is not immune under section 1605A or 1605(a)(7) (as such section
was in effect on January 27, 2008) of title 28, United States Code, the blocked assets[ ] of that terrorist
party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be
subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of
any compensatory damages for which such terrorist party has been adjudged liable” (Section 201(a) of
the IM, Annex 13), as amended by Section 502(e)(2) of the ITRSHRA see Iran’s Memorial, p. 32,
para. 2.38. On Section 201(a) of the TRIA see Iran’s Memorial, pp. 19-23, paras. 2.9-2.15 and
pp. 71- 72, paras. 4.20-4.24.
169 Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District Court, Eastern District of New
York, Memorandum and Order, 5 June 2009, Case 2:02-mc-00237-LDW, pp. 2-3 (IR, Annex 26).
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2.67 In 2008, Bank Melli requested the District Court to dismiss this application on several
grounds including by reference to Articles III(1), IV(1), IV(2), IV(4) and V(1) of the
Treaty of Amity. However, the Court rejected the Bank’s defence, including the
argument that, since it has a separate juridical status from the Government of Iran, the
Weinstein judgment cannot be enforced against the Bank’s property. With respect to
this argument, the Court held that “[t]here is nothing in the language or purpose of
Article III(1) of the Treaty of Amity that precludes the veil-piercing authorised by
TRIA § 201(a)”170 and that “[i]n any event, to the extent that TRIA § 201(a) may
conflict with Article III(1) of the Treaty of Amity, the TRIA would ‘trump’ the Treaty
of Amity.”171 Accordingly, it granted the plaintiffs’ application to appoint a receiver
as the property was subject to attachment under the TRIA.172
2.68 In 2010, the Court of Appeals for the Second Circuit, while affirming the District
Court’s decision, acknowledged that “Bank Melli was not itself a defendant in the
underlying action”.173 However, referring to Section 201(a) TRIA, it held that this
provision “provides courts with subject matter jurisdiction over post-judgment
execution and attachment proceedings against property held in the hands of an
instrumentality of the judgment-debtor, even if the instrumentality is not itself named
in the judgment”,174 and it confirmed the attachment of the property of Bank Melli in
partial satisfaction of the liability of the State of Iran.
170 The District Court made this finding relying on the U.S. Supreme Court case-law: “As the Supreme
Court has recognized, ‘the primary purpose of the corporation provisions of the [FCN] Treaties was to
give corporations of each signatory legal status in the territory of the other party, and to allow them to
conduct business in the other country on a comparable basis with domestic firms.’ Sumitomo Shoji
Am. Inc. v. Avagliano, 457 U.S. 176, 185-86 (1982). Indeed, ‘the purpose of the [FCN] Treaties was
not to give foreign corporations greater rights than domestic companies, but instead to assure them the
right to conduct business on an equal basis without suffering discrimination based on their alienage.’
Id. at 187-88” (Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District Court, Eastern
District of New York, Memorandum and Order, 5 June 2009, Case 2:02-mc-00237-LDW, pp. 5-6 IR,
Annex 26 emphasis omitted).
171 Ibid., p. 6.
172 Ibid., p. 13.
173 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), p. 7 (IM, Annex 47).
174 Ibid., p. 12. The Court of Appeals held that Section 201(a) authorised the attachment of Bank Melli’s
property to satisfy a terrorism-based judgment against Iran, even though the Bank was not itself a party
to the underlying tort action that gave rise to that judgment and was not alleged to have played any role
in the facts underlying the action. It considered that Congress made clear its intent that assets of any
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2.69 In 2012, after Bank Melli’s petition for a writ of certiorari was denied by the U.S.
Supreme Court, the District Court finally ordered the distribution of the sale price of
the Bank’s property in the amount of USD 1,355,513.06 to the proposed Heiser
interveners and the Weinstein plaintiffs.175
(b) Bennett, et al. v. Islamic Republic of Iran
2.70 The Bennett proceedings, initiated in December 2011, involved a request for the
turnover of assets, in the amount of USD 17.6 million, owed by Visa and Franklin to
Bank Melli, to satisfy the judgments obtained by four groups of individuals against
Iran in the cases of Michael Bennett, et al. v. Islamic Republic of Iran, et al;176 Acosta,
et al. v. Islamic Republic of Iran, et al;177 Michael Heiser, et al. v. Islamic Republic
of Iran, et al;178 and Greenbaum, et al. v. Islamic Republic of Iran, et al.179 Bank Melli
‘instrumentality’ of an alleged terrorist State were available to satisfy the ‘terrorism judgment’ against
the State itself. The Court concluded that its reading was confirmed by Section 201’s legislative history,
which indicates that the provision does not recognise any juridical distinction between an alleged
terrorist State and its agencies or instrumentalities (ibid., pp. 7-12).
175 Weinstein, et al. v. Islamic Republic of Iran, et al., U.S. District Court, Eastern District of New York,
20 December 2012, No. 12 Civ. 3445, (E.D.N.Y. 2012) (IM, Annex 54).
176 Bennett, v. Islamic Republic of Iran, U.S. District Court, District of Columbia, Memorandum Opinion
(Liability and Damages), 30 August 2007, Case No. 03-1486, 507 F. Supp. 2d 117 (D.D.C. 2007)
(IM, Annex 39).
177 Acosta, et al. v. The Islamic Republic of Iran, et al., U.S. District Court, District of Columbia, Findings
of Facts and Conclusions of Law, 26 August 2008, Case No. 1:06-cv-00745, 574 F. Supp. 2d 15
(D.D.C. 2008) (IM, Annex 43).
178 Estate of Heiser, et al. v. Islamic Republic of Iran, et al. (consolidated with Estate of Campbell, et al.
v. Islamic Republic of Iran, et al.), U.S. District Court, District of Columbia, Memorandum Opinion,
30 September 2009, Case No. 1:00-cv-02329, 659 F. Supp. 2d 20 (D.D.C. 2009) (IM, Annex 45). The
District Court had already entered a final judgment in this case on 22 December 2006 (Estate of Heiser,
et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of Columbia, Memorandum
Opinion, 22 December 2006, Case No. 1:00-cv-02329, 466 F. Supp.2d 229 (D.D.C. 2006)
(IM, Annex 38). However, in March 2008, following the amendment of the 1996 FSIA by NDAA 2008
to create 28 U.S.C. § 1605A, plaintiffs filed a Motion for Supplementary Relief in which they requested
that the District Court apply 28 U.S.C. § 1605A retroactively to their actions and award additional
damages, including 650 million dollars in punitive damages, against Iran. On 13 March 2009, the
District Court determined that plaintiffs’ actions satisfied the conditions for retroactive application of
§ 1605A and issued an order indicating that plaintiffs were entitled to proceed before the District Court
under the terms of the new law. These new proceedings resulted in the 30 September 2009 final
judgment.
179 Greenbaum, et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of Columbia, Findings
of Fact and Conclusions of Law, 10 August 2006, Case No. 1:02-cv-02148, 451 F. Supp.2d 90
(D.D.C. 2006) (IM, Annex 37).
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was not a judgment debtor under any of these judgments, which moreover do not
contain any allegation concerning the bank.
2.71 These assets consisted of a debt deriving from a contract signed between Visa Inc. and
Bank Melli in 1991. Under the contract, Bank Melli agreed to accept Visa cards in
Iran through its branches and to reimburse the agents based on their vouchers. Visa
Inc. in turn agreed to reimburse Bank Melli for its payments. These assets had been
blocked by the U.S. Government following the designation of Bank Melli in
October 2007.180
2.72 The plaintiffs relied on Section 201(a) of TRIA (2002)181 as well as Section 1610(g)
of the FSIA (codified at 28 U.S.C. § 1610(g)) to seek the attachment of these assets.
Section 1610(g), introduced by the NDAA 2008 into the 28 U.S. Code, modified the
law concerning attachment in relation to judgments based on Section 1605A. It stated
in principle that the property of an agency or instrumentality of a foreign state against
which such judgment is entered, including property that is a separate juridical entity,
may be subject to attachment in aid of execution, and execution, upon that judgment
regardless of certain conditions.182
2.73 In August 2012, Bank Melli moved to dismiss the complaint on several grounds, and
in particular on the ground of the separate personality of the Bank, distinct from the
180 See para. 2.65 above.
181 See para. 2.66 above.
182 In relevant part, Section 1610(g) of FSIA (codified at 28 U.S.C. § 1610(g)) provides: “PROPERTY IN
CERTAIN ACTIONS.— (1) In General.— Subject to paragraph (3), the property of a foreign state against
which a judgment is entered under section 1605A, and the property of an agency or instrumentality of
such a state, including property that is a separate juridical entity or is an interest held directly or
indirectly in a separate juridical entity, is subject to attachment in aid of execution, and execution, upon
that judgment as provided in this section, regardless of— (A) the level of economic control over the
property by the government of the foreign state; (B) whether the profits of the property go to that
government; (C) the degree to which officials of that government manage the property or otherwise
control its daily affairs; (D) whether that government is the sole beneficiary in interest of the property;
or (E) whether establishing the property as a separate entity would entitle the foreign state to benefits
in United States courts while avoiding its obligations. (2) United states sovereign immunity
inapplicable.— Any property of a foreign state, or agency or instrumentality of a foreign state, to which
paragraph (1) applies shall not be immune from attachment in aid of execution, or execution, upon a
judgment entered under section 1605A because the property is regulated by the United States
Government by reason of action taken against that foreign state under the Trading With the Enemy Act
or the International Emergency Economic Powers Act. (…)”. On Section 1610(g) of the FSIA see Iran’s
Memorial, pp. 28-30, paras. 2.30-2.33 and pp. 72-73, paras. 4.25-4.26.
- 53 -
Iranian Government, based on the U.S. Supreme Court’s decision in Bancec183 and
provisions of the Treaty of Amity (Articles III and IV). Further, Bank Melli pointed
to the non-retroactive application of Section 201(a) of TRIA and also the fact that
funds “due and owing” could not be regarded as property “of” the Bank, which is a
threshold TRIA requirement.184
2.74 In November 2012, the District Court discharged Visa and Franklin and held hearings
on the Bank’s motion. In February 2013, it rejected Bank Melli’s motion to dismiss
holding inter alia that Section 201(a) of TRIA and Section 1610(g) of FSIA were
applicable to the case and permitted judgment creditors to execute on blocked assets
of an agency or instrumentality of foreign state sponsors of terrorism. According to
the court,
a. TRIA validly applies to judgments pre-dating it because “TRIA relates to
collectability, not liability”,185 and
b. TRIA overrides the presumption of separateness in Bancec and Section 1610(g)
of FSIA (2008) squarely abrogates this presumption in the context of terrorismrelated
judgments.186
183 See First National City Bank v. Banco Para el Comercio Exterior de Cuba (aka Bancec), U.S. Supreme
Court, 17 June 1983, 462 U.S. 611 (1983) (IM, Annex 28), paras. 33-34 (“[G]overnment
instrumentalities established as juridical entities distinct and independent from their sovereign should
normally be treated as such. We find support for this conclusion in the legislative history of the Foreign
Sovereign Immunities Act. During its deliberations, Congress clearly expressed its intention that duly
created instrumentalities of a foreign state are to be accorded a presumption of independent status”).
The Supreme Court thus recognised that juridical persons controlled by a foreign State enjoy a
presumption of separateness from it under the FSIA 1976. The lower courts’ case law then identified
five factors in deciding whether an instrumentality or agency of a foreign state was to benefit indeed
from such presumption (the so-called “Bancec factors”).
184 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the Northern District of
California, Order Denying Motion to Dismiss, 28 February 2013, Case 3:11-cv-05807-CRB
(IR, Annex 42).
185 Ibid., p. 13.
186 Ibid., pp. 12-13. The Supreme Court interprets section 1610(g) in the same way: there is “no dispute
that, at a minimum, § 1610(g) serves to abrogate Bancec with respect to the liability of agencies and
instrumentalities of a foreign state where a § 1605A judgment holder seeks to satisfy a judgment held
against the foreign state” (Rubin, et al. v. Islamic Republic of Iran, et al., 21 February 2018, Case No.
16-534, p. 8 (IR, Annex 59); see also p. 11: “Prior to the enactment of §1610(g), the plaintiffs would
have had to establish that the Bancec factors favor holding the agency or instrumentality liable for the
foreign state’s misconduct. With §1610(g), however, the plaintiffs could attach and execute against the
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2.75 Bank Melli appealed from the judgment but the Court of Appeals for the Ninth Circuit
affirmed the decision of the District Court in June 2016. It ruled that money owed by
Visa and Franklin to Bank Melli is the property of the latter which may be seized by
the judgment creditors. As to Bank Melli’s reliance on the Treaty of Amity, the Court
said that there is no conflict between Section 1610(g) of FSIA and the Treaty
provisions. It emphasised that “even if the two provisions were inconsistent, when a
treaty and a later-enacted federal statute conflict, the subsequent statute controls to the
extent of the conflict.”187
2.76 Following the dismissal of Bank Melli’s petition for a writ of certiorari by the
U.S. Supreme Court, the “Bennett plaintiffs” filed a motion for summary judgment
and turnover of the Bank’s assets based on TRIA. Bank Melli once again challenged
the contention that the assets are property of the Bank as defined by TRIA. In
December 2018, the District Court rejected Bank Melli’s defence and held that the
assets in question, though not yet in possession of the Bank, could be regarded as
property of the Bank and qualify as assets subject to execution under TRIA.188
2.77 Bank Melli appealed that decision and once again availed itself of the Treaty of Amity
and TRIA’s ownership precondition for enforcement of the so-called “anti-terrorism
judgments”. However, the Court of Appeals for the Ninth Circuit affirmed in
September 2019 that the property rights of Bank Melli in the funds and concluded that
the factual disputes as to ownership of the funds did not call for dismissal of the
plaintiffs’ motion for summary judgment.189
property of the state-owned entity regardless of the Bancec factors, so long as the plaintiffs can establish
that the property is otherwise not immune (e.g., pursuant to § 1610(a)(7) because it is used in
commercial activity in the United States)”).
187 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), p. 24
(IM, Annex 64).
188 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the Northern District of
California, Order Granting Motion for Summary Judgment, Granting Motion for Stay,
19 December 2018, Case 3:11-cv-05807-CRB (IR, Annex 64).
189 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S. Court of Appeals for the Ninth Circuit,
Memorandum, 30 September 2019, No. 3:11-cv-05807-CRB (IR, Annex 72).
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2.78 Bank Melli subsequently filed a petition for a writ of certiorari, which the U.S.
Supreme Court denied on 30 March 2020. On 24 April 2020, the District Court
ordered the withdrawal by the plaintiffs’ counsel of the amount of the assets, i.e.
USD 17.6 million that had been wired to the Court’s Registry in May 2012.190
(c) Levin, et al. v. Islamic Republic of Iran
2.79 The Levin proceedings involved the turnover of blocked assets belonging to Iranian
companies, including Bank Melli, to a number of plaintiffs in aid of execution of the
judgments issued by U.S. courts in their favour. Bank Melli was not a judgment debtor
under any of these judgments, which do not contain any finding of fact concerning the
Bank.191
190 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the Northern District of
California, Order Granting Motion to Lift Stay and for Withdrawal, 24 April 2020, No. 3:11-cv-05807-
CRB (IR, Annex 85).
191 See Levin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia,
Report and Recommendation, 31 December 2007, Case No. 05-2494, 529 F. Supp. 2d 1 (D.D.C. 2007)
(IM, Annex 41); Greenbaum, et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of
Columbia, Findings of Fact and Conclusions of Law, 10 August 2006, Case No. 1:02-cv-02148, 451 F.
Supp.2d 90 (D.D.C. 2006) (IM, Annex 37); Acosta, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court, District of Columbia, Findings of Facts and Conclusions of Law, 26 August 2008, Case
No. 1:06-cv-00745, 574 F.Supp.2d 15 (D.D.C. 2008) (IM, Annex 43); Estate of Heiser, et al. v. Islamic
Republic of Iran, et al. (consolidated with Estate of Campbell, et al. v. Islamic Republic of Iran, et al.),
U.S. District Court, District of Columbia, Memorandum Opinion, 30 September 2009, Case No. 1:00-
cv-02329, 659 F. Supp. 2d 20 (D.D.C. 2009) (IM, Annex 45); Peterson, et al. v. Islamic Republic of
Iran and Iranian Ministry of Information and Security, U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability), 30 May 2003, Case No. 1:01-cv-2094 (IR, Annex 18) and Peterson,
et al. v. Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court
for the District of Columbia, Memorandum Opinion (Damages), 7 September 2007, Case No. 1:01-cv-
2094 (IR, Annex 21); Campuzano, et al. v. The Islamic Republic of Iran, et al. and Rubin, et al. v. The
Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia, Findings of Fact and
Conclusions of Law, 10 September 2003, Cases Nos. 00-2328 and 01-1655, 281 F. Supp. 2d 258
(D.D.C. 2003) (IM, Annex 33); Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District
Court, District of Columbia, Memorandum and Opinion (Liability and Damages), 6 February 2002,
184 F. Supp. 2d 13 (D.D.C 2002) (IM, Annex 30); Valore, et al. v. The Islamic Republic of Iran and
Iranian Ministry of Information and Security, Arnold (Estate of James Silvia), et al. v. The Islamic
Republic of Iran, et al., Spencer, et al. v. The Islamic Republic of Iran, et al., and Bonk, et al. v. The
Islamic Republic of Iran, et al. (consolidated), U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability and Damages), 31 March 2010, 700 F. Supp. 2d 52 5 (D.D.C. 2010),
Cases No. 03-cv-1959, 06-cv-516, 06-cv-750, and 08-cv-1273 (IM, Annex 46) (the Valore plaintiffs
already held, before the 2008 amendments to FSIA, a final judgment on liability of 27 March 2007 of
the same District Court, and subsequently amended their complaint so that it is made pursuant to the
newly created 28 U.S.C. § 1605A); Murphy, et al., v. Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, Memorandum Opinion (Liability and Damages), 24 September
2010, Case No. 06-cv-596 (IR, Annex 31); Bennett, et al., v. Islamic Republic of Iran, U.S. District
Court, District of Columbia, Memorandum Opinion (Liability and Damages), 30 August 2007, Case
No. 03-1486, 507 F. Supp. 2d 117 (D.D.C. 2007) (IM, Annex 39); Estate of Anthony K. Brown, et al.,
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2.80 On 22 June 2009, the Levin plaintiffs, holding a final judgment in the amount of
USD 28 million against Iran, MOIS and IRGC,192 initiated enforcement proceedings
against Bank of New York, JP Morgan Chase, Société Générale and Citibank under
Section 201 of TRIA and Section 1610(g) of FSIA.193
2.81 The turnover of the blocked assets of the Iranian companies held with these four U.S.
financial institutions was carried out in three phases pursuant to the decisions made
by the U.S. District Court for the Southern District of New York. The first phase
concerned some blocked assets consisting in proceeds from wire transfers or deposit
accounts belonging to certain Iranian entities. Their turnover was ordered in January
and June 2011.194 In a second phase which started in 2013, the court ordered the
v. Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court for
the District of Columbia, Order Granting Motion to Enter Default Judgment and to Take Judicial Notice
(of the findings of facts and conclusions of law in the Peterson judgment of 30 May 2003 mentioned
above (IR, Annex 18) as fully applicable to the matter), 1 February 2010, Case No. 08-cv-531 (IR,
Annex 28) and Estate of Anthony K. Brown, et al., v. Islamic Republic of Iran and Iranian Ministry of
Information and Security, U.S. District Court for the District of Columbia, Memorandum Opinion
(Damages), 3 July 2012, Case No. 08-cv-531 (IR, Annex 37); Estate of Steven Bland, et al. v. The
Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court for the
District of Columbia, Order (Liability – taking judicial notice of the findings of facts and conclusions
of law in the Peterson judgment of 30 May 2003), 6 December 2006, Case No. 1:05-cv-02124, 831 F.
Supp. 2d 150 (D.D.C. 2011) (IR, Annex 19) and Estate of Steven Bland, et al. v. The Islamic Republic
of Iran and Iranian Ministry of Information and Security, U.S. District Court for the District of
Columbia, Memorandum Opinion (Damages), 21 December 2011, Case No. 1:05-cv-02124, 831 F.
Supp. 2d 150 (D.D.C. 2011) (IM, Annex 51); Khaliq, et al. v. Republic of Sudan, et al; Owens, et al. v.
Republic of Sudan, et al.; and Mwila, et al. v. Republic of Sudan, et al. (consolidated), U.S. District
Court for the District of Columbia, Memorandum Opinion (Liability), 30 November 2011, Cases Nos.
10-0356, 01-2244 and 08-1377 (IR, Annex 34); and Khaliq, et al. v. Republic of Sudan, et al; U.S.
District Court for the District of Columbia, Memorandum Opinion (Damages), 28 March 2014, Case
No. 10-0356 (IR, Annex 46), Owens, et al. v. Republic of Sudan, et al., U.S. District Court for the
District of Columbia, Memorandum Opinion (Damages), 28 March 2014, Case No. 01-2244 (IR,
Annex 47) and Mwila, et al. v. Republic of Sudan, et al., U.S. District Court for the District of Columbia,
Memorandum Opinion (Damages), 28 March 2014, Case No. 08-1377 (IR, Annex 48).
192 See Levin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia,
Clerk’s Judgment, 6 February 2008, Case No. 05-2494 (IR, Annex 22).
193 Levin, et al. v. Bank of New York, et al., U.S. District Court, Southern District of New York, Complaint,
22 June 2009, Case No. 09 Civ. 5900 (IR, Annex 27). The defendants had reported to the U.S. Office
of Foreign Assets Control that they were in possession of assets owned by Iranian companies and
blocked pursuant to various U.S. Executive Orders.
194 Levin, et al. v. Bank of New York, et al., U.S. District Court, Southern District of New York,
28 January 2011, 2011 WL 337358 (S.D.N.Y. 2011) (IM, Annex 48).
- 57 -
turnover of similar blocked assets, in the amount of more than USD 4 million to the
Levin, Greenbaum, Acosta, and Heiser judgment creditors.195
2.82 Among the assets designated by the court for the third phase was the debt of
MasterCard International Incorporated to Bank Melli, held with JP Morgan Chase
Bank in two accounts. The amounts of MasterCard’s debt as of March 2012 were
USD 2,927,258.58 and USD 1,264,233.67.196
2.83 On 31 October 2013, the District Court directed the turnover, inter alia, of this debt
of MasterCard to Bank Melli to the Levin, Greenbaum, Acosta, and Heiser judgment
creditors.197
ii. Enforcement proceedings against Bank Markazi: the Peterson cases
(a) Peterson I
2.84 The proceedings for the enforcement against the assets and interests of Bank Markazi
of the final judgment in Peterson v. Islamic Republic of Iran began in June 2008 when
the U.S. Office of Foreign Assets Control (‘OFAC’), pursuant to a protective order
issued by the District Court for Southern District of New York,198 provided the
195 Levin, et al. v. Bank of New York, et al., U.S. District Court, Southern District of New York, 10 October
2013, No. 09 Civ. 5900 (S.D.N.Y. 2013) (IM, Annex 59) and Levin, et al. v. Bank of New York, et al.,
U.S. District Court, Southern District of New York, Amended Answer of JP Morgan Chase Parties to
Amended Counterclaim of Heiser Judgment Creditors, with Counterclaims, and Amended and
Supplemental Third-Party Complaint against Judgment Creditors of Iran, Plaintiffs Suing Iran and
Account and Wire Transfer Parties (Phase 3), 10 October 2012, No. 09 Civ. 5900, p. 51 (IR, Annex 40).
See also Levin, et al. v. Bank of New York Mellon, et al., U.S. District Court, Southern District of New
York, 1 November 2016, No. 09 Civ. 5900 (S.D.N.Y. 2016) (IM, Annex 71).
196 Levin, et al. v. Bank of New York, et al., U.S. District Court, Southern District of New York, Amended
Answer of JP Morgan Chase Parties to Amended Counterclaim of Heiser Judgment Creditors, with
Counterclaims, and Amended and Supplemental Third-Party Complaint against Judgment Creditors of
Iran, Plaintiffs Suing Iran and Account and Wire Transfer Parties (Phase 3), 10 October 2012,
No. 09 Civ. 5900, Exhibit A (IR, Annex 40).
197 Levin, et al. v. Bank of New York, et al., U.S. District Court, Southern District of New York, Judgment
and Order Directing Turnover of Funds and Discharge, 31 October 2013, No. 09 Civ. 5900
(S.D.N.Y. 2013) (IM, Annex 60).
198 Peterson, et al. v. Islamic Republic of Iran, et al., U.S. District Court for the Southern District of New
York, Defendant Bank Markazi’s Memorandum of Law in Support of its Motion to Dismiss,
15 March 2012, Case No. 10 civ 4518 (BSJ), pp. 4-5 (IR, Annex 35).
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judgment creditors with confidential information regarding Bank Markazi’s assets
invested in the United States financial market. These proceedings involved, in
addition to the Peterson plaintiffs, 17 other groups of judgment creditors, comprised
of more than a thousand individuals, who had also obtained judgments against Iran.199
2.85 Bank Markazi was not a defendant in any way in the eighteen cases underlying the
Peterson I enforcement proceedings. None of the decisions on liability in these cases
contains any allegations against Bank Markazi – or any other Iranian company.200 The
199 These are the following: Levin, et al. v. Islamic Republic of Iran, et al; Greenbaum, et al. v. Islamic
Republic of Iran, et al; Acosta, et al. v. Islamic Republic of Iran, et al; Michael Heiser, et al. v. Islamic
Republic of Iran, et al; Valore, et al. v. Islamic Republic of Iran, et al; Lolita M. Arnold, et al. v. Islamic
Republic of Iran, et al; Bonk, et al. v. Islamic Republic of Iran, et al; Elizabeth Murphy, et al. v. Islamic
Republic of Iran, et al; Estate of Anthony Brown, et al. v. Islamic Republic of Iran, et al; Estate of
Stephen Bland v. Islamic Republic of Iran, et al; Khaliq, et al. v. Islamic Republic of Iran, et al; Owens,
et al. v. Islamic Republic of Iran, et al; Mwila, et al. v. Islamic Republic of Iran, et al; Beer, et al. v.
Islamic Republic of Iran, et al. Rubin, et al. and others v. Islamic Republic of Iran, et al; Sylvia, et al.
v. Islamic Republic of Iran, et al; Kirschenbaum, et al. v. Islamic Republic of Iran, et al. See 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) (“Peterson I”), p. 1, fn. 1 (IM, Annex
58).
The Owens, Khaliq and Mwila creditors eventually abandoned their claim to Bank Markazi’s frozen
assets discussed in this section, since none of these plaintiffs had obtained judgments for damages
against Iran at the time the District Court ordered the turnover of such assets. See Peterson, et al. v.
Islamic Republic of Iran, Bank Markazi a/k/a Central Bank of Iran, Banca UBAE SpA, Citibank, N.A.,
and Clearstream Banking, S.A., U.S. District Court for the Southern District of New York, Order
Entering Partial Final Judgment Pursuant to Fed. R. Civ. P. 54 (b), Directing Turnover of the Blocked
Assets, Dismissal of Citibank with Prejudice and Discharging Citibank from Liability, 9 July 2013,
No. 10-cv-4518-KBF, p. 6 (IR, Annex 43).
200 Levin, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia,
Report and Recommendation, 31 December 2007, Case No. 05-2494, 529 F. Supp. 2d 1 (D.D.C. 2007)
(IM, Annex 41); Greenbaum, et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of
Columbia, Findings of Fact and Conclusions of Law, 10 August 2006, Case No. 1:02-cv-02148, 451
F. Supp.2d 90 (D.D.C. 2006) (IM, Annex 37); Acosta, et al. v. The Islamic Republic of Iran, et al.,
U.S. District Court, District of Columbia, Findings of Facts and Conclusions of Law, 26 August 2008,
Case No. 1:06-cv-00745, 574 F. Supp. 2d 15 (D.D.C. 2008) (IM, Annex 43); Estate of Heiser, et al. v.
Islamic Republic of Iran, et al. (consolidated with Estate of Campbell, et al. v. Islamic Republic of Iran,
et al.), U.S. District Court, District of Columbia, Memorandum Opinion, 30 September 2009,
Case No. 1:00- cv-02329, 659 F.Supp.2d 20 (D.D.C. 2009) (IM, Annex 45); Peterson, et al. v. Islamic
Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court for the District
of Columbia, Memorandum Opinion (Liability), 30 May 2003, Case No. 1:01-cv-2094 (IR, Annex 18)
and Peterson, et al. v. Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S.
District Court for the District of Columbia, Memorandum Opinion (Damages), 7 September 2007, Case
No. 1:01-cv-2094 (IR, Annex 21); Campuzano, et al. v. The Islamic Republic of Iran, et al. and Rubin,
et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the District of Columbia, Findings
of Fact and Conclusions of Law, 10 September 2003, Cases Nos. 00-2328 and 01-1655, 281 F. Supp.
2d 258 (D.D.C. 2003) (IM, Annex 33); Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S.
District Court, District of Columbia, Memorandum and Opinion (Liability and Damages), 6 February
2002, 184 F.Supp.2d 13 (D.D.C 2002) (IM, Annex 30); Valore, et al. v. The Islamic Republic of Iran
and Iranian Ministry of Information and Security, Arnold (Estate of James Silvia), et al. v. The Islamic
Republic of Iran, et al., Spencer, et al. v. The Islamic Republic of Iran, et al., and Bonk, et al. v. The
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findings of fact are limited to the various groups accused of having committed the
attacks at issue and to Iran, Iranian ministries, the IRGC, and Iranian officials
allegedly providing financial and material support to the said groups.
2.86 Bank Markazi’s assets in issue, as disclosed by OFAC, consisted of the Bank’s
investments in the United States, namely ownership interest in security entitlements
in U.S. dollars held with Clearstream account at Citibank in New York which were
eventually turned over by U.S. courts to Peterson’s judgment creditors.
Islamic Republic of Iran, et al. (consolidated), U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability and Damages), 31 March 2010, 700 F. Supp. 2d 52 5 (D.D.C. 2010),
Cases No. 03-cv-1959, 06-cv-516, 06-cv-750, and 08- cv- 1273 (IM, Annex 46) (the Valore plaintiffs
already held, before the 2008 amendments to FSIA, a final judgment on liability of 27 March 2007 of
the same District Court, and subsequently amended their complaint so that it is made pursuant to the
newly created 28 U.S.C. § 1605A); Murphy, et al., v. Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, Memorandum Opinion (Liability and Damages), 24 September
2010, Case No. 06-cv-596 (IR, Annex 31); Bennett, v. Islamic Republic of Iran, U.S. District Court,
District of Columbia, Memorandum Opinion (Liability and Damages), 30 August 2007, Case No. 03-
1486, 507 F. Supp. 2d 117 (D.D.C. 2007) (IM, Annex 39); Estate of Anthony K. Brown, et al., v. Islamic
Republic of Iran and Iranian Ministry of Information and Security, United States District Court for the
District of Columbia, Order Granting Motion to Enter Default Judgment and to Take Judicial Notice
(of the findings of facts and conclusions of law in the Peterson judgment of 30 May 2003 mentioned
above (IR, Annex 18) as fully applicable to the matter), 1 February 2010, Case No. 08-cv-531 (IR,
Annex 28) and Estate of Anthony K. Brown, et al., v. Islamic Republic of Iran and Iranian Ministry of
Information and Security, United States District Court for the District of Columbia, Memorandum
Opinion (Damages), 3 July 2012, Case No. 08-cv-531 (IR, Annex 37); Estate of Steven Bland, et al. v.
The Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court for
the District of Columbia, Order (Liability – taking judicial notice of the findings of facts and
conclusions of law in the Peterson judgment of 30 May 2003), 6 December 2006, Case No. 1:05-cv-
02124 (IR, Annex 19) and Estate of Steven Bland, et al. v. The Islamic Republic of Iran and Iranian
Ministry of Information and Security, U.S. District Court for the District of Columbia, Memorandum
Opinion (Damages), 21 December 2011, Case No. 1:05-cv-02124, 831 F.Supp.2d 150 (D.D.C. 2011)
(IM, Annex 51); Khaliq, et al. v. Republic of Sudan, et al; Owens, et al. v. Republic of Sudan, et al.;
and Mwila, et al. v. Republic of Sudan, et al. (consolidated), U.S. District Court for the District of
Columbia, Memorandum Opinion (Liability), 30 November 2011, Cases Nos. 10-0356, 01-2244 and
08-1377 (IR, Annex 34); and Khaliq, et al. v. Republic of Sudan, et al; U.S. District Court for the
District of Columbia, Memorandum Opinion (Damages), 28 March 2014, Case No. 10-0356 (IR,
Annex 46), Owens, et al. v. Republic of Sudan, et al., U.S. District Court for the District of Columbia,
Memorandum Opinion (Damages), 28 March 2014, Case No. 01-2244 (IR, Annex 47) and Mwila, et
al. v. Republic of Sudan, et al., U.S. District Court for the District of Columbia, Memorandum Opinion
(Damages), 28 March 2014, Case No. 08-1377 (IR, Annex 48); Kirschenbaum, et al., v. Islamic
Republic of Iran, U.S. District Court for the District of Columbia, Opinion and Order (Liability),
15 December 2010, Case No. 08-cv-1814 (IR, Annex 32) and Kirschenbaum, et al., v. Islamic Republic
of Iran, U.S. District Court for the District of Columbia, Memorandum Opinion (Punitive Damages),
19 May 2011, Case No. 08-cv-1814 (IR, Annex 33); Beer, et al., v. The Islamic Republic of Iran, et al.,
U.S. District Court for the District of Columbia, Findings of Fact and Conclusions of Law (Liability
and Damages), 26 August 2008, Case No. 06-473, p. 18 (IR, Annex 24) and Beer, et al. v. Islamic
Republic of Iran, et al., U.S. District Court for the District of Columbia, Memorandum Opinion
(Damages), 19 May 2011, Case No. 08-cv-1807 (IM, Annex 49).
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2.87 The securities had been purchased by Bank Markazi during the years 2002 to 2007 at
the nominal value of USD 1,753,000,000.201 These were 22 entitlements in
dematerialised bonds issued by various foreign governments and intergovernmental
organisations such as the World Bank.
2.88 The purchase of the security entitlements constituted a specific kind of ownership
interest for Bank Markazi, known within the U.S. legal system as a “security
entitlement”, the particular nature of which is the consequence of the modern holding
system of securities. The entitlements in this system were dematerialised within the
chain of different tiers. This means that, although the securities may themselves be
represented by certain global notes being registered with a central depository, the
entitlements stemming from them are not represented by a physical certificate, but
rather take an electronic form as book-entries on the intermediaries’ records.
2.89 The securities purchased by Bank Markazi “had been issued in physical form and were
registered with either Federal Reserve Bank of New York (‘FRBNY’) or Depository
Trust Company of New York (‘DTC’), also located in New York. Accordingly, prior
to their maturity, the FRBNY and the DTC were the custodians of [Bank Markazi’s
bonds].”202 The Federal Reserve Bank of New York is the fiscal and paying agent for
U.S. dollar denominated securities in the United States as held through the book entry
system operated by such bank.
2.90 Bank Markazi purchased the security entitlements using the services of Clearstream
Banking S.A. (‘Clearstream’ or ‘CBL’), a Luxembourg clearing house: “Clearstream
Luxembourg is an international service provider for the financial industry offering
securities settlements and custody-safekeeping services […] Clearstream serves as an
intermediary between financial institutions worldwide to ensure that transactions from
one bank to another are efficiently and successfully completed.”203 In order to pay for
the entitlements, Bank Markazi had to transfer the agreed price in U.S. dollars, into
201 See para. 3.25 below.
202 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. 5 (IM, Annex 58).
203 Ibid.
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Clearstream’s bank account at Citibank NY (‘Citibank’) so that Clearstream could
effectively purchase the securities.
2.91 Clearstream had agreed in 1994 to act as the custodian of Bank Markazi’s security
entitlements. Under its General Terms and Conditions (the ‘Contract’), Clearstream
agreed to provide services relating to the clearance, settlement, custody and
administration of securities.204 It opened, pursuant to Article 4 of the Contract, in its
books an account in Luxembourg in the name of Bank Markazi for the conduct of the
Bank’s business.
2.92 To maintain security entitlements for its customers in securities whose physical notes
were “immobilized” with depositories in the United States, Clearstream had deposited
the entitlements at its omnibus account with Citibank, i.e. had “sub-custodized” these
entitlements with Citibank.205
2.93 Under Article 20 of the Contract, Clearstream, through Citibank, as its agent, had to
collect every six months the interest accrued on bonds from the said U.S. depositories,
after it had been collected from the issuers, and transfer the interest to Bank Markazi’s
account in its books in Luxembourg or another account at the Bank’s instruction.
Similarly, when the bonds themselves matured or were sold by the Bank, the related
204 Clearstream Banking S.A., General Terms and Conditions, 2008 (IR, Annex 109).
205 A custodian, or custodian bank, is a financial institution responsible for safekeeping and administering
financial assets or securities on behalf of their owners and for providing related post-trade services. It
is common practice in the financial industry for the legal owner of securities to hold them through a
registration chain – designed to facilitate the registration of traded securities – involving one or more
custodian. The custodians are registered as the holders of the securities that they hold in a fiduciary
arrangement for the ultimate beneficial owner of the securities. A sub-custodian (or local custodian
bank, or agent bank) is a financial institution that provides custody services, with respect to securities
traded in a particular jurisdiction, on behalf of another custodian who may not have an operation in that
jurisdiction. In the instant case, Clearstream, maintaining a mere representative office in the United
States, had to use Citibank – a U.S. institution among the largest custodian banks in the world alongside
Bank of New York Mellon, JP Morgan or BNP Paribas Securities Services – as a sub-custodian for the
securities ultimately held by Bank Markazi.
An omnibus account is used to maintain appropriate custody of securities. It hosts funds belonging to
more than one investor (“omni” is for “many”, “bus” is for “business”). They are intended to facilitate
the operations of professional securities intermediaries such as Clearstream, as it allows them to execute
trades in securities on behalf of the participating investors.
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proceeds received by Clearstream from the buyer into its account with Citibank had
to be transferred to Bank Markazi’s account in Clearstream’s books.206
2.94 In 2007, as a result of OFAC’s threat to impose sanctions, Clearstream decided to
close all accounts that it maintained for Bank Markazi and other Iranian customers,
regardless of whether such accounts involved securities held in custody in the United
States.
2.95 In 2008, Bank Markazi consequently agreed to transfer the security entitlements from
its custody account with Clearstream to the account of an Italian bank, called Unione
delle Banche Arabe ed Europee (‘UBAE’), which had been opened with Clearstream.
This transfer was marked “free transfer”.207 UBAE in turn credited the Bank’s custody
account held with UBAE with the transferred bonds. This transfer only added a new
tier of intermediary in the relationship between the parties involved: Bank Markazi
continued to maintain its entitlement and remained the ultimate beneficial owner of
the bonds.208
2.96 As of 2008, after the OFAC disclosed these securities, the following series of legal,
regulatory and judicial measures were taken by the United States against them:
206 See 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), pp. 9-10 (IM, Annex 58).
207 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. 7 (IM, Annex 58).
208 In the course of proceedings before the District Court, UBAE expressly admitted that it had no “legally
cognizable interest in the restrained bonds” (IM Annex 58, p. 47). Pursuant to the U.S. Uniform
Commercial Code which is the law governing the securities generated in the U.S. market, both a
“security” and a “security entitlement”, i.e. “any property that is held by a securities intermediary for
another person”, are considered as financial assets of the entitlement holder (UCC, Section 8-
102(a)(9)(i) and (iii)). In fact, “all interests in [a] financial asset held by the securities intermediary are
held by the securities intermediary for the entitlement holders [and] are not property of the securities
intermediary” (UCC, Section 8-503(a)). In the case of a security entitlement, a person acquires it if a
security intermediary “indicates by book entry that a financial asset has been credited to the person’s
securities account” (UCC, Section 8-501(b)(1)). The security intermediary, in such a situation,
undertakes to treat the holder of the account “as entitled to exercise the rights that comprise the financial
asset.” (UCC, Section 8-501(a)).
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a. In June 2008, the District Court issued, pursuant to plaintiffs’ request, orders to
restrain Bank Markazi’s security bonds which were sub-custodized by
Clearstream with Citibank in New York.209
b. In February 2012, the assets of Government of Iran, Bank Markazi and all other
Iranian institutions were “blocked” (i.e., frozen) pursuant to E.O. 13599.
According to Sections 1(a) and (b) of this Executive Order:
“(a) All property and interests in property of the Government of Iran,
including the Central Bank of Iran, that are in the United States, that
hereafter come within the United States, or that are or hereafter come
within the possession or control of any United States person, including
any foreign branch, are blocked and may not be transferred, paid,
exported, withdrawn, or otherwise dealt in.
(b) All property and interests in property of any Iranian financial
institution, including the Central Bank of Iran, that are in the United
States, that hereafter come within the United States, or that are or
hereafter come within the possession or control of any United States
person, including any foreign branch, are blocked and may not be
transferred, paid, exported, withdrawn, or otherwise dealt in.”210
The aim of this Executive Order was to ensure the concrete implementation of
Section 201(a) of the TRIA notably by the Peterson I plaintiffs: it legally
provides the “blocked assets” – those of Iran as well as those of its financial
agencies and instrumentalities, including Bank Markazi – that these plaintiffs
needed to be authorised, pursuant to Section 201(a), to attach Bank Markazi’s
property.211
209 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. 5 (IM, Annex 58).
Bank Markazi’s commercial activity in the United States was further barred three months later.
Effective 10 November 2008, the Iranian Transactions Regulations were amended to revoke
authorisation for so-called “U-turn” transfers, i.e. dollar transactions involving the transfer of funds
through U.S. financial institutions between two foreign – non-Iranian – banks for the direct or indirect
benefit of non-designated Iranian banks, other persons in Iran or the Government of Iran. As a result
of this amendment, U.S. financial institutions such as depository institutions, registered brokers or
dealers in securities, are no longer permitted to process U-turn transfers involving any Iranian banks
including Bank Markazi – except transfers involving certain specified underlying transactions. See
OFAC, Final Rule amending the Iranian Transactions Regulations, 4 November 2008, U.S. Federal
Register Vol. 73, No. 218 of 10 November 2008 (IR, Annex 10).
210 Executive Order 13599, 5 February 2012, 77 Fed. Reg. 6659 (IM, Annex 22).
211 Section 201(a) of TRIA authorises post-judgment execution against the property of the agencies or
instrumentalities of the judgment debtor – provided it is designated as “State sponsor of terrorism –
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c. In August 2012, Congress passed Section 502 of ITRSHRA (codified at
22 U.S.C. § 8772) in order specifically to authorise the turnover of Bank
Markazi’s financial assets to the particular plaintiffs in specific litigation in the
U.S. courts in satisfaction of the judgments in their favour.212 This Act
addressed the specific property which was the subject of the then ongoing
enforcement proceedings in Peterson I, namely the property of Bank Markazi.
Section 502(a)(1) reads:
“(…) notwithstanding any other provision of law, including any
provision of law relating to sovereign immunity, and pre-empting any
inconsistent provision of State law, a financial asset that is–
(A) held in the United States for a foreign securities intermediary doing
business in the United States;
(B) a blocked asset (whether or not subsequently unblocked) that is
property described in subsection (b); and
(C) equal in value to a financial asset of Iran, including an asset of the
central bank or monetary authority of the Government of Iran or any
agency or instrumentality of that Government, that such foreign
securities intermediary or a related intermediary holds abroad, shall be
subject to execution or attachment in aid of execution in order to satisfy
any judgment to the extent of any compensatory damages awarded
against Iran for damages for personal injury or death caused by an act
of torture, extrajudicial killing, aircraft sabotage, or hostage-taking, or
the provision of material support or resources for such an act.”
The “property described in subsection (b)” referred to in subsection (B) was
described as follows:
“the financial assets that are identified in and the subject of proceedings
in the United States District Court for the Southern District of New
York in Peterson et al. v. Islamic Republic of Iran et al.,
Case No. 10 Civ. 4518 that were restrained by restraining notices and
levies secured by the plaintiffs in those proceedings, as modified by
court order dated June 27, 2008, and extended by court orders dated
only if such property consists in “blocked assets” within the meaning of the U.S. sanctions law. See
para. 2.66 above.
On E.O. 13599 see Iran’s Memorial, pp. 31-32, paras. 2.35-2.37, and p. 74, para. 4.29.
212 22 U.S. Code, Section 8772 as adopted by Section 502 of the U.S. Iran Threat Reduction and Syria
Human Rights Act of 2012 Pub. L. 112-158, 126 Stat. 1214 (IM, Annex 16). Section 502 was in fact
drafted by attorneys of plaintiffs, carefully tailored for Peterson I proceedings, and thereafter enacted
by the U.S. Congress. See Julie Triedman, “Can American Lawyers Make Iran Pay for
1983 Bombing?”, The American Lawyer, 30 September 2013 (IR, Annex 116).
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June 23, 2009, May 10, 2010, and June 11, 2010, so long as such assets
remain restrained by court order.”213
As highlighted by the U.S. Supreme Court in Peterson, the Congress intended
to create 22 U.S.C. § 8772 as the mean to “place beyond dispute the availability
of some of the E.O. 13599-blocked assets for the satisfaction of judgments
rendered in terrorism cases”.214 In other – more blunt – words, those used by
Chief Justice Roberts and Justice Sotomayor in the same case:
“Section 8772 does precisely that, changing the law—for these
proceedings [Peterson I] alone—simply to guarantee that respondents
win. The law serves no other purpose—a point, indeed, that is hardly
in dispute. As the majority acknowledges, the statute “‘sweeps away
… any … federal or state law impediments that might otherwise exist’”
to bar respondents from obtaining Bank Markazi’s assets. … In the
District Court, Bank Markazi had invoked sovereign immunity under
the [FSIA 1976]. … Section 8772(a)(1) eliminates that immunity”.215
d. On 28 February 2013, the District Court granted plaintiffs’ motion for partial
summary judgment for turnover of the cash proceeds of the securities held in
the Clearstream account at Citibank under both Section 201(a) of the TRIA and
Section 8772 of the U.S. Code.216
e. On 9 July 2013, the District Court ordered (i) the creation of a Qualified
Settlement Fund (or ‘QSF trust’) to be administered by a trustee for the benefit
of the Peterson plaintiffs and (ii) the payment of “all funds directed for turnover
pursuant to the Partial Judgment of 28 February 2013 and any Order of this
court directing the entry of a final and appealable order and judgment
213 IM, Annex 16.
214 Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), at p. 5
(IM, Annex 66).
215 Bank Markazi v. Peterson, et al., U.S. Supreme Court (Joint Dissenting Opinion Roberts & Sotomayor),
20 April 2016, 578 U.S. 1 (2016), at p. 34 (IM, Annex 66). On Section 8772 (Section 502 of ITRSHRA)
generally see Iran’s Memorial, pp. 32-35, paras. 2.38-2.43 and pp. 73-74, paras. 4.27-4.28.
216 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). Although
summoned as defendant, Iran chose not to appear in these proceedings because pursuant to international
law it shall, as a foreign State, be immune from suit in U.S. courts.
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consistent with the Partial Judgment” – i.e. the deposit by Citibank of the
abovementioned cash proceeds into the QSF trust.217
f. On the same day, the District Court awarded judgment for turnover of the
blocked assets and ordered (i) OFAC to issue a license to the trustee of the QSF
to transfer these assets to the Registry of the Court and (ii) Citibank to deposit
these assets, minus any Citibank’s reasonable fees, plus all accrued interest
thereon to date, “which as of June 4, 2013 constituted $1,895,600,513.03”, in
an account opened in the name of the QSF.218
g. In July 2014, the District Court’s turnover partial judgment of 28 February 2013
was affirmed by the Court of Appeals for the Second Circuit. The Court rejected
Bank Markazi’s arguments including the conflict of Section 8772 with the
Treaty of Amity.219
h. In April 2016, the U.S. Supreme Court dismissed Bank Markazi’s writ of
certiorari and affirmed the judgment of the Court of Appeals for the Second
Circuit – subject to a powerful dissent by Chief Justice Roberts and Justice
Sotomayor.220
217 Peterson, et al. v. Islamic Republic of Iran, Bank Markazi a/k/a Central Bank of Iran, Banca UBAE
SpA, Citibank, N.A., and Clearstream Banking, S.A., U.S. District Court for the Southern District of
New York, Order Approving Qualified Settlement Fund, 9 July 2013, No. 10-cv-4518-KBF, p. 2
(IR, Annex 44).
218 Peterson, et al. v. Islamic Republic of Iran, Bank Markazi a/k/a Central Bank of Iran, Banca UBAE
SpA, Citibank, N.A., and Clearstream Banking, S.A.., U.S. District Court for the Southern District of
New York, Order Entering Partial Final Judgment Pursuant to Fed. R. Civ. P. 54 (b), Directing
Turnover of the Blocked Assets, Dismissal of Citibank with Prejudice and Discharging Citibank from
Liability, 9 July 2013, No. 10-cv-4518-KBF, p. 8 (IR, Annex 43). The District Court held that if this
Partial Final Judgment became definitive, the plaintiffs should apply to the Court for an order
authorising the distribution of the funds in the account opened in the name of the QSF, otherwise the
blocked assets would have to be transferred to the Registry of the Court upon application for, and
receipt of, the License from OFAC (see ibid., p. 9, paras. 5 and 7).
219 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).
220 Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), joint
dissenting opinion of Chief Justice Roberts and Justice Sotomayor (IM, Annex 66).
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i. Finally, in June 2016, the District Court ordered the distribution to the plaintiffs
of about USD 1.895 billion – i.e. the nominal value of the securities, which had
matured since 2008 – plus interest, as property belonging to Bank Markazi.221
(b) Peterson II
2.97 In addition to these securities, Peterson and other judgment creditors of Iran have been
seeking, in a separate enforcement proceeding initiated on 30 December 2013,222 to
execute their default judgments totalling billions of dollars against Iran, against
USD 1.68 billion in XS security bond223 proceeds owned by Bank Markazi.224
221 Peterson, et al. v. Islamic Republic of Iran, et al., U.S. District Court, Southern District of New York,
6 June 2016, No. 10 Civ. 4518 (S.D.N.Y. 2016) (IM, Annex 68).
222 See Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S.
District Court for the Southern District of New York, Amended Complaint, 25 April 2014, No. 13-cv-
9195-KBF (IR, Annex 49). The judgment creditors who initiated this additional enforcement action are
listed in Exhibit A to this complaint. They form the following groups: the Peterson creditors (Peterson,
et al. v. Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S. District Court
for the District of Columbia, Memorandum Opinion (Damages), 7 September 2007, Case No. 1:01-cv-
2094 (IR, Annex 21); the Valore, Arnold, Spencer and Bonk creditors (see the opinion accompanying
the final judgments in these four consolidated cases: Valore, et al. v. The Islamic Republic of Iran and
Iranian Ministry of Information and Security, U.S. District Court for the District of Columbia,
Memorandum Opinion (Liability and Damages), 31 March 2010, 700 F. Supp. 2d 52 5 (D.D.C. 2010),
Cases No. 03-cv-1959, 06-cv-516, 06-cv-750, and 08-cv-1273 – IM, Annex 46), the Bland creditors
(see Bland, et al. v. The Islamic Republic of Iran and Iranian Ministry of Information and Security,
U.S. District Court for the District of Columbia, Memorandum Opinion (Damages), 21 December
2011, 831 F. Supp. 2d 150 (D.D.C. 2011) – IM, Annex 51), the Brown creditors (Estate of Anthony K.
Brown, et al., v. Islamic Republic of Iran and Iranian Ministry of Information and Security, United
States District Court for the District of Columbia, Memorandum Opinion (Damages), 3 July 2012, Case
No. 08-cv-531 (IR, Annex 37) and the Davis creditors (Davis, et al. v. Islamic Republic of Iran and
Iranian Ministry of Information and Security, U.S. District Court for the District of Columbia,
Memorandum Opinion (Damages), 30 March 2012, Case No. 07-cv-1302 (IR, Annex 36). None of the
judgments held by these creditors makes any reference to Bank Markazi as being involved in any of
their purported findings of fact.
223 Securities are coded with unique identification numbers. The most popular global securities identifier
code – and used with respect to the securities at issue in the instant case – is the International Securities
Numbering Identification Number (‘ISIN’). An ISIN consists in twelve alphanumeric characters
including (i) two letters coding the issuing country, i.e. the country in which the issuing company is
headquartered (e.g. “US” for the United States), (ii) nine alphanumeric characters – the specific security
identifying number, i.e. a serial number assigned by the local country’s numbering agency (e.g. the
CUSIP Service Bureau in the United States) –, and (iii) one final numerical check digit. By contrast
with this traditional system involving local depositories, the international securities cleared through an
international central depository like Clearstream or Euroclear have in their ISIN an “XS” used in place
of any two-letter country code. See www.isin.org/isin.
224 Thereafter, three other enforcement proceedings have been initiated by groups of judgment creditors
of Iran against these same bond proceeds. The Havlish and Levin actions have been stayed since their
inception in light of the ongoing appellate proceedings in Peterson II, while the Heiser action has been
stayed since 10 March 2020 pending decision on the said appeal. See Estate of Michael Heiser, et al.
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2.98 The plaintiffs had been seeking, inter alia, an order requiring Clearstream and other
financial institutions to turn over these bond proceeds pursuant to New York law. On
20 February 2015, the District Court dismissed the turnover claims on jurisdictional
grounds, having found that the assets at issue are not in the United States.225
2.99 As the court explained, the bond proceeds are recorded as book entries made in
Clearstream’s Luxembourg offices and reflected as a positive account balance
showing a right to payment owed by Clearstream to Bank Markazi through UBAE;
when Clearstream receives proceeds on behalf of Bank Markazi in New York in
correspondent accounts at U.S. bank JP Morgan, it in turn credits Bank Markazi’s
account in Luxembourg with an equivalent positive amount attributable to the
bonds.226 The District Court concluded that Bank Markazi’s interest in book entries
held by Clearstream in Luxembourg was not subject to turnover because the
provisions of the FSIA “do not allow for attachment of property outside of the United
States”.227
2.100 On 21 November 2017, the U.S. Court of Appeals for the Second Circuit ruled that
the bond proceeds held in Luxembourg by Clearstream for the benefit of Bank
v. Clearstream Banking, S.A., U.S. District Court for the Southern District of New York, Granted
Motion for Stay of Case, 10 March 2020, No. 19-cv-11114 (IR, Annex 83).
See in addition Hoglan, et al., v. The Islamic Republic of Iran, et al., United States District Court for
the Southern District of New York, Restraining Notice to Clearstream Banking S.A., 26 March 2018,
Case Nos. 1:11-cv-07550 and 1:03-md-01570, in execution of the judgment (annexed to the restraining
notice as Exhibit B) entered pursuant to 28 U.S.C. § 1605A on 26 February 2018 against Iran and
various Iranian companies including Bank Markazi in the total amount of USD 3,395,354,978.01 in
compensatory damages, including interests (IR, Annex 61). On 7 April 2020, the U.S. District Court
for the Southern District of New York authorised the Hoglan Plaintiffs to enforce this final judgment
“by any lawful means, including attachment of, and execution against, the specific assets against the
property held at Clearstream Banking, S.A. that belongs to any of the Judgment Debtor Defendants
[Iran, Ayatollah Khamenei, A. Rafsandjani, MOIS, IRGC, Iran’s Ministry of Petroleum, Iran’s
Ministry of Economic Affairs and Finance, Iran’s Ministry of Commerce, Iran’s Ministry of Defence
and Armed Forces Logistics, Bank Markazi, NPC, NIOC, NITC, NIGC, Iran Air, and Hezbollah],
including, more particularly, the Central Bank of Iran, a.k.a. Bank Markazi, as described and authorised
by 22 U.S.C. §8772 (2019)” (In re Terrorist Attacks On September 11, 2001, relating to Hoglan, et al.
v. Iran, et al., Order Under 28 U.S.C. § 1610(c) authorising Enforcement of Judgment, 7 April 2020,
Case No. 03 MDL 1570 – IR, Annex 84). On 22 U.S.C. §8772 (2019), see paras. 2.103-2.107 below.
225 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S.
District Court for the Southern District of New York, Opinion and Order, 20 February 2015, No. 13-
cv-9195-KBF (IR, Annex 50) (“Peterson II”).
226 Ibid., p. 6.
227 Ibid., p. 10.
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Markazi are not entitled to immunity under the 1976 FSIA. The Second Circuit
therefore vacated the District Court’s decision with respect to the turnover claims and
remanded for the District Court to (i) consider whether it has personal jurisdiction
over Clearstream and, if the affirmative, (ii) determine whether any provision of U.S.
law prevents it from recalling the assets.228
2.101 The Court of Appeals agreed with the District Court that the assets that the plaintiffs
were seeking – the bond proceeds – are not held by Clearstream as cash in New York
City but are represented by a right of payment in the possession of Clearstream located
in Luxembourg.229 But it did not agree that the FSIA does not allow for attachment of
property outside of the United States. According to the Court of Appeals, “the FSIA
does not by its terms provide execution immunity to a foreign sovereign’s
extraterritorial assets”.230 It held that New York law controls the authority of a New
York District Court to enforce a judgment by attaching property. The relevant part of
this law – article 52 of the New York Civil Practice Law and Rules – was construed
as containing no express territorial limitation barring the entry of a turnover order
requiring a garnishee to transfer property into New York from another state or country.
The Court of Appeals concluded that “a court sitting in New York with personal
jurisdiction over a non-sovereign third party [has the authority] to recall to New York
extraterritorial assets owned by a foreign sovereign”.231 In other words, the Court
extended the scope of the “state-sponsored terrorism exception” to sovereign
immunity provided by the FSIA to include property located outside the United States.
2.102 Clearstream, UBAE and Bank Markazi filed petitions for certiorari with the U.S.
Supreme Court seeking review of this decision. On 26 February 2018, Bank Markazi
228 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S. Court
of Appeals for the Second Circuit, Opinion and Order, 21 November 2017, Case 15-0690
(IR, Annex 58).
229 Ibid., p. 43 and p. 50. The court stressed that “the nature and location of the asset here – a right to
payment located in Luxembourg – distinguishes this case from Peterson I, where it was ‘undisputed’
that Clearstream held a segregated pool of ‘$1,75 billion in cash proceeds of the bonds … in an account
at Citigroup in New York’ […] Here, by contrast, there never was a traceable or segregated pool of
Markazi-owned bond proceeds held as cash in Clearstream’s correspondent account at JPMorgan in
New York City” (ibid., pp. 49-50; internal references omitted).
230 Ibid., p. 57.
231 Ibid., p. 61.
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– as Clearstream also did – moved to stay issuance of the mandate to the District Court
in Peterson II pending the resolution of these petitions, on the basis that “whether or
not the district court ultimately distributes the assets to plaintiffs, a mere order
directing Clearstream to transfer the assets to the United States would itself be a
significant restraint on the use of the property and thus an infringement of Bank
Markazi’s sovereign immunity”.232 The Second Circuit granted the stay of the
mandate.
2.103 On 20 December 2019, the U.S. President signed into law the National Defense
Authorization Act for Fiscal Year 2020 (‘NDAA 2020’). Section 1226 of that law
headed “Expansion of availability of financial assets of Iran to victims of terrorism”,
amends Section 502 of ITRSHRA (codified at 22 U.S.C. § 8772). As amended,
22 U.S.C. § 8772 now provides that: “notwithstanding any other provision of law,
including any provision of law relating to sovereign immunity, and pre-empting any
inconsistent provision of State law”, a specified “financial asset” that meets certain
criteria “shall be subject to execution or attachment in aid of execution, or to an order
directing that the asset be brought to the State in which the court is located and
subsequently to execution or attachment in aid of execution, (…) without regard to
concerns relating to international comity”, in order to satisfy a terrorism-related
judgment for compensatory damages against Iran.233
2.104 In sum, the new 22 U.S.C. § 8772 purported to make Bank Markazi’s loss in the
proceedings certain as it retroactively extends the U.S. courts’ jurisdiction over the
assets located outside the United States, whereas under the former law (the FSIA) such
assets were immune from execution. It comes as a confirmation of the abovementioned
decision of the U.S. Court of Appeals for the Second Circuit of
21 November 2017 which construed the FSIA as not prohibiting attachment of (Bank
Markazi’s) property outside of the United States.234
232 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S. Court
of Appeals for the Second Circuit, Bank Markazi’s Motion to Stay the Mandate, 26 February 2018,
Case 15-0690, p. 6 (IR, Annex 60).
233 22 U.S.C. 8772(a)(1) as amended by Section 1226 of NDAA 2020 (IR, Annex 7 – emphasis added).
234 See para. 2.101 above.
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2.105 Identically to the pre-amendment version of Section 502 ITRSHRA applied in
Peterson I,235 the three criteria that a “financial asset” must meet to come within the
ambit of 22 U.S.C. § 8772 are the following: they must be “held by or for a foreign
securities intermediary doing business in the United States”, be either an asset
“blocked” under U.S. sanctions law “or an asset that would be blocked if the asset
were located in the United States”, and be “equal in value to a financial asset of Iran
[…] that such foreign securities intermediary or a related intermediary holds
abroad”.236
2.106 The amended statute specifically provides that such “financial assets” include those
that are:
“identified in and the subject of proceedings in the United States District
Court for the Southern District of New York in Peterson et al. v. Islamic
Republic of Iran et al., Case No. 13 Civ. 9195 (LAP)”237 (i.e. the bond
proceeds at issue in Peterson II).
2.107 In fact, by enacting Section 1226 of NDAA 2020 while the Peterson II case was
pending, the U.S. Congress acted in the exact same way as it did with respect to Bank
Markazi’s securities that the Peterson I plaintiffs sought to seize:238 it intervened in a
case pending before a U.S. court in order to decide that case by depriving the Iranian
company concerned of the defence on which it was relying – immunity from execution
under U.S. law.239 The Congress further changed a law already designed to guarantee
that the (Peterson I) plaintiffs win against Bank Markazi, to specifically ensure that
the Peterson II plaintiffs obtain the turnover of the Bank’s XS bond proceeds that the
U.S. Court of Appeals for the Second Circuit’s reasoning had allowed in 2017.240
2.108 On 13 January 2020, the U.S. Supreme Court granted Clearstream, UBAE and Bank
Markazi’s petitions for certiorari, vacated the Second Circuit’s judgment, and
235 See para. 2.96c) above.
236 22 U.S.C. 8772(a)(1)(A)-(C) (IR, Annex 7).
237 22 U.S.C. 8772(b)(2) (IR, Annex 7).
238 See para. 2.96(c) above.
239 See Iran’s Memorial, pp. 33-35, paras. 2.41-2.45.
240 See paras. 2.95-2.96 above.
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remanded the case to the Second Circuit for further consideration in light of Section
1226 of NDAA 2020, which contains, as explained above, provisions concerning the
Peterson II assets.241 The case is pending before the District Court, to which the
Second Circuit directed, on remand, to address the issues before it, notably those
pertaining to the NDAA 2020.242
iii. Enforcement proceedings against TIC: the Heiser case
2.109 TIC’s asset affected by U.S. measures is the sum of USD 613,587.38 which
corresponds to the amount that Sprint Communications Company LP owed TIC
pursuant to their “bilateral telecommunications carrier relationship” that resulted in a
periodic settlement and offset process to determine the net payer and payee.
241 Clearstream Banking, Banca UBAE, Bank Markazi v. Peterson, et al., U.S. Supreme Court, Summary
Disposition Granting Petition for Certiorari, 13 January 2020, Cases 17-1529, 17-1530, 17-1534
(IR, Annex 74). The rationale for this decision seems to be that the application of Section 8772 to Bank
Markazi’s bond proceeds, and the issue such application raises, i.e. whether the bond proceeds would
enjoy execution immunity while located abroad (in Luxembourg), can only be addressed by the lower
courts. Bank Markazi maintains that Section 1226 of the NDAA 2020 is unconstitutional because,
notably, it violates the Bank’s due process rights: it purports to abrogate the immunity of the Peterson
II assets from seizure and thus to deprive Bank Markazi of property in which it has a beneficial interest
without a neutral decision-maker.
242 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S. Court
of Appeals for the Second Circuit, Opinion, 22 June 2020, Case 15-0690 p. 6 (“We now reinstate only
our judgment that the district court prematurely dismissed the amended complaint for lack of subjectmatter
jurisdiction and remand for the district court to reconsider that question. We do not, at this time,
reinstate our analysis as to whether the common law and Koehler provide the district court with
jurisdiction over the extraterritorial asset. Based on the enactment of the NDAA [2020], and the
language employed by the Supreme Court in vacating and remanding this matter to this Court, however,
we respectfully direct the district court, on remand, to address the issues before it pertaining to the
NDAA [2020], personal jurisdiction, and, consistent with this opinion, any other matters necessary to
the resolution of the case”)(IR, Annex 88).
Meanwhile, on 30 January 2020, the Bland, Brown, Valore (as consolidated) and Davis creditors served
restraining notices with Clearstream. See Estate of Brown, et al. v. Islamic Republic of Iran and Iranian
Ministry of Information and Security, United States District Court for the Southern District of New
York, Restraining Notice to Garnishee, 30 January 2020, Case No. 1:13-MC-113 (IR, Annex 75);
Valore, et al. v. The Islamic Republic of Iran, et al. and Iranian Ministry of Information and Security,
U.S. District Court for the Southern District of New York, Restraining Notice to Garnishee,
30 January 2020, Case No. 1:11-MC-217 (IR, Annex 76); Davis, et al. v. Islamic Republic of Iran and
Iranian Ministry of Information and Security, U.S. District Court for the Southern District of New
York, Restraining Notice to Garnishee, 30 January 2020, Case No. 1:13-MC-00046 (IR, Annex 77);
Estate of Stephen B. Bland, et al. v. Islamic Republic of Iranian Ministry of Information and Security,
U.S. District Court for the Southern District of New York, Restraining Notice to Garnishee,
30 January 2020, Case No. 1:12-MC-373 (IR, Annex 78).
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2.110 This asset was seized in 2013 in satisfaction of the amended default judgment obtained
by the Heiser plaintiffs in 2009 ordering the Islamic Republic of Iran, the MOIS and
the IRGC to pay USD 290 million in compensatory damages and USD 300 million in
punitive damages.243
2.111 Neither the initial default judgment on liability and damages nor the amended one on
damages contains any reference to TIC. The plaintiffs’ baseless allegations regarding
persons involved in the terrorist attacks on the Khobar Towers were limited to Iran,
MOIS, IRGC, and the Hezbollah in Saudi Arabia.244
2.112 In 2010, the Heiser plaintiffs had filed with the District Court a motion to garnish any
debts that might be owed by various telecommunications companies, including Sprint,
to Iran. They invoked Section 1610(g) FSIA to garnish funds held by Sprint and owed
to TIC.245 In a Memorandum Opinion issued in August 2011, the District Court held
that TIC is an instrumentality of Iran and thus the judgment creditors could execute
their judgment against TIC’s funds held by Sprint under Section 1610(g) FSIA.246
243 Estate of Heiser, et al. v. Islamic Republic of Iran, et al., U.S. District Court for the District of
Columbia, Memorandum Opinion (Damages), 30 September 2009, Case No. 00-2329, 659 F. Supp. 2d
20 (IM, Annex 45). Initially, in 2006, the District Court had held the defendants jointly and severally
liable for USD 250 million in compensatory damages (Estate of Heiser, et al. v. Islamic Republic of
Iran, et al., U.S. District Court for the District of Columbia, Memorandum Opinion (Liability and
Damages), 22 December 2006, Case No. 00-2329, 466 F. Supp. 2d 229 (D.D.C. 2006) – IM, Annex 38).
However, following the 2008 FSIA amendments which, inter alia, replaced § 1605(a)(7) with a new
“state-sponsored terrorism exception” codified at § 1605A, and permitted recovery of punitive
damages, the court entered this amended judgment of 2009, ordering an additional USD 36 million in
compensatory damages and USD 300 million in punitive damages. On these Heiser judgments see
Iran’s Memorial, pp. 37-38, para. 2.51. On the 2008 FSIA amendments see Iran’s Memorial, pp. 23-
30, paras. 2.16-2.33.
244 Ibid.,
245 Under Section 1610(g), introduced in 2008, the property “of a foreign state” or “of an agency or
instrumentality of a foreign state” is subject to execution, even where that property “is a separate
juridical entity or is an interest held directly or indirectly in a separate juridical entity”. See Iran’s
Memorial, pp. 28-30, paras. 2.30-2.33 and pp. 72-73, paras. 4.25-4.26.
246 Estate of Heiser, et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of Columbia,
Memorandum Opinion, 10 August 2011, 807 F. Supp. 2d 9 (D.D.C. 2011) (IM, Annex 50). As to
Section 1610(g) FSIA, the court explained that “prior attempts to execute against assets held by foreign
instrumentalities had to be made under § 1610(b), which requires—in addition to proof of an
instrumentality relationship—that ‘the judgment relates to a claim for which the agency or
instrumentality is not immune by virtue’ of the FSIA liability exceptions […]” (p. 13). However, the
court added, “Section 1610(g) unwinds these limitations […] by excluding any requirement that the
foreign instrumentality be subject to the underlying claim and thus not otherwise immune from liability
[…] and by expressly declaring that property held by an instrumentality is subject to execution
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iv. Enforcement proceedings against other Iranian companies: the Heiser cases
2.113 On 8 March 2011, the Heiser judgment creditors filed a petition with the U.S. District
Court for the Southern District of New York against the New York branch of Bank of
Baroda for the enforcement of the final judgment rendered against Iran. According to
the Heiser plaintiffs, the Bank of Baroda was holding certain funds or interest in funds
of Iranian companies following electronic fund transfers.
2.114 On 19 February 2013, the District Court granted the plaintiffs’ motions for summary
judgment and turnover, pursuant to Section 1610(g) FSIA and Section 201(a) TRIA,
with respect for the following funds retained by Bank of Baroda:
a. Bank Saderat: USD 2,180;
b. EDBI: USD 12,467.68, USD 13,000 and USD 13,020;
c. Behran Oil and Bank Saderat: USD 11,600;
d. Bank Melli: USD 19,000 and USD 49,000; and
e. a remaining USD 9,561.31 which constituted interests of Iranian entities.247
2.115 In another effort to satisfy the Heiser final judgment, on 29 January 2013, the U.S.
District Court for the Southern District of New York ordered the New York branch of
Bank of Tokyo Mitsubishi to turn over to the Heiser judgment creditors the properties
– electronic funds – belonging to Iranian State-owned companies, as follows:
a. Bank Sepah International PLC: USD 92,058.08;
b. Iranohind Shipping Company: USD 4,740;
‘regardless of the level of economic control over the property by the government of the foreign state.’”
(p. 14).
247 The Estate of Michael Heiser, et al. v. Bank of Baroda, New York Branch., U.S. District Court, Southern
District of New York, 19 February 2013, No. 11 Civ. 1602 (S.D.N.Y. 2013) (IM, Annex 57). The
District Court thereafter ordered the turnover to the plaintiffs of the residual Iranian companies’ assets
held by Bank of Baroda in the amount of USD 9,561.31 plus any accrued interest (The Estate of Michael
Heiser, et al. v. Bank of Baroda, New York Branch, U.S. District Court, Southern District of New York,
Judgment and Order Allocating Remaining Blocked Assets, 19 August 2013, No. 11 Civ. 1602 –
IR, Annex 45).
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c. IRISL: USD 62,216.80;
d. IRISL Benelux NV: USD 100,365.63;
e. EDBI: USD 98,127.36;
f. Bank Melli: USD 2,181.88.248
2.116 As the said companies had been enlisted as Special Designated Nationals by the
OFAC, these assets had been “blocked” and maintained in interest-bearing accounts
held by the Bank of Tokyo Mitsubishi for the Iranian companies. Their turnover was
ordered based on Section 1610(g) of FSIA and Section 201(a) of TRIA.
2.117 Similarly, on 9 June 2016, the District Court of Columbia ordered, pursuant to the
same provisions, the turnover of the following properties of Iranian companies – funds
held with Bank of America and Wells Fargo – to Heiser judgment creditors:
a. Iranian Marine and Industrial Company: USD 37,543.59;
b. Sediran Drilling Company (now known as NIOC): USD 11,744.80;
c. Iran Air and Bank Melli PLC: USD 9,743.53.249
2.118 As mentioned above,250 none of these various companies – in fact, no Iranian company
at all – was involved in the underlying Heiser case. The Heiser judgment on liability
does not contain a single reference to them.251
248 Estate of Michael Heiser, et al. v. Bank of Tokyo Mitsubishi UFJ, New York Branch, U.S. District
Court, Southern District of New York, 13 February 2013, No. 11 Civ. 1601 (S.D.N.Y. 2013)
(IM, Annex 56).
249 Estate of Heiser, et al. v. Islamic Republic of Iran, et al., U.S. District Court, District of Columbia,
9 June 2016, No. 00 Civ. 02329 (D.D.C. 2016) (IM, Annex 69). The District Court followed the same
reasoning that in the abovementioned Estate of Michael Heiser, et al. v. Bank of Tokyo Mitsubishi UFJ,
New York Branch proceedings. It held that the funds constituted “blocked assets” under the TRIA,
belonging to Iranian companies deemed agencies or instrumentalities of Iran within the meaning of the
TRIA and the FSIA, and were therefore subject to execution in accordance with the requirements of
Section 1610(g) FSIA and Section 201(a) TRIA.
250 See above, para. 2.111.
251 Estate of Heiser, et al. v. Islamic Republic of Iran, et al., U.S. District Court for the District of
Columbia, Memorandum Opinion (Liability and Damages), 22 December 2006, Case No. 00-2329,
466 F. Supp. 2d 229 (D.D.C. 2006) (IM, Annex 38).
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2.119 In conclusion, the U.S. measures at issue were designed for, and used by, judgment
creditors of Iran alone to inevitably obtain massive compensation from Iranian
companies – as such, juridically separate from the State of Iran – that none of these
enforced judgments found liable in respect of any act. As the U.S. District Court for
the Northern District of California put it in the Bennett enforcement proceedings
against Bank Melli:
“This case is not about holding Bank Melli liable for Iran’s actions, it is simply
about collecting money from Iran, wherever that money can be found.”252
2.120 The United States continues to apply this approach, and increasingly so: the amounts
of damages sought from Iranian companies alien to the judgments held are
accumulating, and the money is indeed collected everywhere as Iranian companies are
facing enforcement proceedings against their assets located in the United States as
well as in other countries.253
SECTION 3.
THE PENDING JUDICIAL PROCEEDINGS AGAINST THE STATE OF IRAN
2.121 The U.S. legislative and regulatory measures at issue are still having an impact, and
increasingly so, on the State of Iran as defendant in proceedings continuously initiated
by U.S. claimants with respect to terrorist acts to which Iran is not connected in any
way. As of 31 December 2019, there were, in addition to those enumerated above,
nearly a hundred cases pending against Iran alone, without any Iranian company being
a defendant, before the U.S. courts.254
252 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S. District Court for the Northern District of
California, Order Denying Motion to Dismiss, 28 February 2013, Case 3:11-cv-05807-CRB p. 12
(IR, Annex 42)
253 See Attachment 3 to this Reply, “Actions filed in other Jurisdictions for Recognition & Enforcement
for U.S. judgments against Assets of Iran & Iranian State Entities as of May 2020”.
254 Attachment 4 to this Reply, “Claims Pending before U.S. Courts against Iran & Iranian State Entities
as of 31 December 2019”. This in addition to the dozens of judgments already entered against Iran
pursuant to the “state-sponsored terrorism exception” in either the FSIA, as amended, 28 U.S.C.
§ 1605(a)(7) or 28 U.S.C. § 1605A. See Attachment 1 to this Reply (Attachment 1 to Iran’s Memorial,
as updated as of 31 December 2019).
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2.122 This phenomenon of judicial accumulation against the State of Iran is not about to
stop – on the contrary, it seems to be accelerating. Some of the pending cases were
filed as early as 2011255 but a third of them were brought before the U.S. courts during
last year only.256
2.123 Most of these recently initiated actions are based on very ancient facts for which the
U.S. courts have already purportedly decided, many years ago and without any
evidence, that Iran is liable as alleged provider of material support to the authors of
terrorist attacks. For instance, the Arias plaintiffs, who present themselves as victims
of the 11 September 2001 attacks - for which the U.S. District Court for the Southern
District of New York purportedly found Iran and Iranian companies responsible in
2012-257 filed their complaint in 2019;258 likewise, alleged victims of the Khobar
Towers bombing, which occurred in 1996, recently brought claims against Iran259 on
the basis that U.S. courts decided 14 years ago that Iran was supposedly
255 See Baxter, et al. v. Islamic Republic of Iran and Iranian Ministry of Information and Security, U.S.
District Court for the District of Columbia, Memorandum Opinion (Liability), 27 September 2019,
Case No. 11-2133 (IR, Annex 71), concerning ten terrorist attacks committed by members of the Hamas
organisation, allegedly supported by Iran, between December 2001 and September 2004. Originally
the complaint named Syria and the Syrian Air Force Intelligence as co-defendants. The longest pending
proceedings against Iran is from 2003. It is the multi-district litigation captioned In re Terrorist Attacks
on September 11, 2001 (U.S. District Court for the Southern District of New York, Case No. 03 MDL
1570). It also involves certain Iranian companies (among over two hundred of defendants accused of
having directly or indirectly provided material support to Osama bin Laden and the al Qaeda members
who carried out the 11 September 2001 terrorist attacks: the Taliban, al-Qaeda, Saudi Arabia, Sudan,
Iraq, several Saudi princes, and various banks and charities registered in the abovementioned States,
and various religious groups. See Ashton, et al. v. al Qaeda Islamic Army, et al., U.S. District Court for
the Southern District of New York, Sixth Amended Complaint, 30 September 2005, Case No. 02-cv-
6977 pp. 98-101(IR, Annex 20)
256 Attachment 4 to this Reply, “Claims Pending before U.S. Courts against Iran & Iranian State Entities
as of 31 December 2019”.
257 Havlish, et al. v. Bin Laden, et al., U.S. District Court, Southern District of New York,
22 December 2011, No. 03 MD 1570 (S.D.N.Y 2011) (IM, Annex 52). Generally, on the Havlish case,
see paras. 2.41-2.55.
258 See Arias, et al. v. The Islamic Republic of Iran, U.S. District Court for the Southern District of
New York, Order of Judgment as to Liability, 9 September 2019, Case No. 1:19-cv-00041
(IR, Annex 70).
259 See e.g. Christie, et al. v. Islamic Republic of Iran, the Islamic Revolutionary Guard Corps, and Iranian
Ministry of Intelligence & Security, Second Amended Complaint, 28 May 2019, Case
No. 1:19-cv-01289 (IR, Annex 69), and Blank, et al., v. The Islamic Republic of Iran, U.S. District
Court for the District of Columbia, Complaint, Case No. 1:19-cv-036545, 6 December 2019 (IR,
Annex 73).
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responsible.260 Using Section 1605A of the (2012) FSIA, plaintiffs are guaranteed to
cash-in on Iran – and expeditiously so – since the sole determination that the U.S.
courts have to make concerns the relation between the unproven case they bring and
cases already (wrongly) decided.261
2.124 The list of pending cases against Iran, in Attachment 4 to this Reply, clearly shows
the dramatic extent of the impact of certain U.S. measures at issue – 28 U.S.C.
§ 1605(a)(7) then 28 U.S.C. § 1605A – which, by eliminating Iran’s immunity from
suit for terrorism-related claims, make these claims admissible and, due to a very
relaxed standard of proof, ultimately successful.
2.125 These cases were brought by U.S. victims of dozens of terrorist acts that took place in
the last 40 years, most of them pre-dating the abovementioned measures – resulting
from amendments to the FSIA in 1996 and 2008 –, all over the world: in the United
260 Estate of Heiser, et al. v. Islamic Republic of Iran, et al., U.S. District Court for the District of
Columbia, Memorandum Opinion (Liability and Damages), 22 December 2006, Case No. 00-2329,
466 F. Supp. 2d 229 (D.D.C. 2006) (IM, Annex 38).
Such actions should be inadmissible under Section 1605A of the FSIA as 28 U.S.C. § 1605A(b)
imposes the following time limitation: “An action may be brought or maintained under this section if
the action is commenced, or a related action was commenced under section 1605(a)(7) (before the date
of the enactment of this section) … not later than the latter of‒ (1) 10 years after April 24, 1996; or
(2) 10 years after the date on which the cause of action arose”. However, untimeliness of an action
pursuant to this section has, in fact, no consequence. The U.S. Courts of Appeals indeed held that the
district courts lack authority and discretion to raise on their own initiative a forfeited statute of
limitation defense – such as timeliness of the action – in an FSIA terrorism exception case where the
defendant sovereign fails to appear. See Maalouf, et al. v. Islamic Republic of Iran and Iranian Ministry
of Information and Security, U.S. Court of Appeals for the District of Columbia Circuit, Opinion,
10 May 2019, Cases No. 18-7052 and 18-7053, p. 34(IR, Annex 86)
261 See e.g. Arias, et al. v. The Islamic Republic of Iran, U.S. District Court for the Southern District of
New York, Order of Judgment as to Liability, 9 September 2019, Case No. 1:19-cv-00041
(IR, Annex 70) (the complaint, concerning the 11 September 2001 attacks, was filed on
3 January 2019); Aceto, et al. v. Islamic Republic of Iran, U.S. District Court for the District of
Columbia, Memorandum Opinion, 7 February 2020, Case No. 1:19-cv-00464 (IR, Annex 79) (the
complaint, concerning the 1996 Khobar Towers bombing in Saudi Arabia, was filed on
25 February 2019).
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States itself,262 but also in all the Middle East,263 in East Africa,264 in Afghanistan,265
and in Europe.266 The plaintiffs claim, without providing any evidence, that Iran is
liable for the damages resulting from these acts on the basis of the alleged provision
of support to the various bodies and individuals who have been held responsible for
these acts.
2.126 In other words, according to the U.S. plaintiffs, Iran is somehow behind virtually all
terrorist acts that have affected American interests since the 1980s, whoever the
perpetrator: any group of Afghan insurgents, any group of Iraqi insurgents, Shia
organisations such as Hezbollah, Sunni organisations such as Hamas or Palestine
Islamic Jihad, the Houthi movement in Yemen, etc.
2.127 The global amount of damages currently sought by these plaintiffs is estimated at
USD 25 billion in compensatory damages and USD 26 billion in punitive damages.267
Under the U.S. legal regime, and following the judicial pattern described in this
Chapter, it is foreseeable that the U.S. courts will (i) hold Iran responsible and award
these damages in absentia, and (ii) allow the creditors of such default judgments to
execute against assets, wherever they are located, belonging to the major Iranian
companies, including banks, on which Iran’s trade and economy rely.
2.128 The U.S. legislative and executive measures, by opening jurisdictional venues to
baselessly sue Iran, allowing for the award of massive amounts of damages, and
guaranteeing that they would win and indeed collect such damages, deliberately
262 See e.g. the Arias case (IR, Annex 70) (11 September 2001 attacks).
263 See in Attachment 4 e.g. the Bova case (Lebanon – bombing of the U.S. Marine Barracks in Beirut
in 1983); the Baxter case (IR, Annex 71) (Israel – ten attacks between 2001 and 2004); the Aceto case
(IR, Annex 79), the Christie and Bland cases (Saudi Arabia – bombing of the Khobar Towers in 1996),
the Burks case (Iraq – multitude of attacks between 2005 and 2016), the Hamen case (Yemen –
kidnapping in Sana’a in 2015).
264 See in Attachment 4 the consolidated cases Sheikh, Kinyua and Chogo (Kenya and Tanzania –
bombings of the U.S. embassies in Nairobi and Dar-Es-Salaam in 1998).
265 See in Attachment 4, e.g, the Strange case (shooting down of a U.S. helicopter by Afghan insurgents
on 6 August 2011).
266 See in Attachment 4 the McCarty case (Greece – Hijacking of TWA Flight 847 after departing from
Athens on 14 June 1985).
267 See Attachment 4 to this Reply, “Claims Pending before U.S. Courts against Iran & Iranian State
Entities as of 31 December 2019”.
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created this dramatic situation. The United States presents this legal scheme it
elaborated since the 1996 FSIA as “ensuring that victims of terrorism are not unduly
burdened in their efforts to seek justice”.268 This presentation is misleading, as
demonstrated in this Chapter. Instead of justice, the U.S. measures serve the pillage
of a State’s major economic operators, in plain breach of international law.
268 U.S. Counter-Memorial, p. 42, para. 6.2.
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PART I.
THE UNITED STATES BREACHED IRAN’S TREATY
RIGHTS
CHAPTER III.
BANK MARKAZI WAS CARRYING OUT, AT THE RELEVANT TIME,
ACTIVITIES CHARACTERISING IT AS A “COMPANY” WITHIN THE
MEANING OF THE TREATY OF AMITY
In its Memorial, Iran has claimed that the United States has violated the Treaty of
Amity in adopting a conduct in breach of its obligation vis-a-vis Iranian “companies”,
as this term is defined for the purposes of the Treaty of Amity. Iran maintained that
Bank Markazi, which is the central bank of Iran, is a “company” within the meaning
of the Treaty.269 Iran also explained that many other entities qualify as “companies”
under the Treaty, namely Bank Melli,270 EDBI,271 Bank Saderat Iran,272 TIC,273
NIOC,274 Iranohind Shipping Company,275 Iran Marine Industrial Company,276
Behran Oil Company, and Sediran.277
In its Preliminary Objections, the United States objected that the Court lacked
jurisdiction with respect to Iran’s claim concerning the treatment reserved by the
United States to Bank Markazi because, according to the Respondant, Bank Markazi
269 Iran’s Memorial, para. 4.7.
270 Ibid., para. 4.8.
271 Ibid., para. 4.9.
272 Ibid., para. 4.10.
273 Ibid., para. 4.11.
274 Ibid., para. 4.12.
275 Ibid., para. 4.13.
276 Ibid., para. 4.14.
277 Ibid., para. 4.15.
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is not a “company” as this term is defined for the purposes of the Treaty.278 By
contrast, the United States did not deny that the other Iranian entities listed above are
“companies” under the Treaty of Amity.
The Court rendered its Judgment on the preliminary objections raised by the United
States on 13 February 2019. It interpreted the term “company” under the Treaty of
Amity as encompassing entities having their own legal personality and engaging in
activities of commercial nature (or, more broadly, business activities).279 The Court
held that a “legal person […] should be regarded as a ‘company’ within the meaning
of the Treaty to the extent that it is engaged in activities of a commercial nature, even
if they do not constitute its principal activities.”280
However, the Court held that the objection based on Bank Markazi’s status as a
“company” under the Treaty does not possess a preliminary character, in the
circumstances of the case.281 It took the view that:
“it does not have before it all the facts necessary to determine whether Bank
Markazi was carrying out, at the relevant time, activities of the nature of those
which permit characterization as a ‘company’ within the meaning of the Treaty
of Amity, and which would have been capable of being affected by the measures
complained of by Iran by reference to Articles III, IV and V of the Treaty. Since
those elements are largely of a factual nature and are, moreover, closely linked
to the merits of the case, the Court considers that it will be able to rule on the
third objection only after the Parties have presented their arguments in the
following stage of the proceedings, should it find the Application to be
admissible.”282
In its Counter-Memorial, the United States correctly states that, in substance, it
follows from the Court’s findings in its Judgment on U.S. preliminary objections that
the enquiry is now focused on whether the activities carried out by Bank Markazi
related to the U.S. measures at issue in this case are of a commercial nature. However,
278 U.S. Preliminary Objections, pp. 95-104, paras 9.1-9.20.
279 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 37, para. 87, and p. 38, para. 92.
280 Ibid., pp. 38-39, para. 92.
281 Ibid., p. 45, para. 126, points (3) and (5).
282 Ibid., p. 40, para. 97 (emphasis added).
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the United States erroneously contends that this is not the case,283 basing its assertions
on a misconstruction of the Court’s Judgment (Section 1), as well as on a failure to
assess the relevant facts correctly (Section 2).
SECTION 1.
THE RULING OF THE COURT IN THE JUDGMENT ON THE PRELIMINARY
OBJECTIONS
As recalled above, the Court took the view in its Judgment on the U.S. preliminary
objections that it was not in a position to decide whether or not Bank Markazi’s
activities at issue in the current case permitted it to qualify it as a “company” under
the Treaty of Amity, because the Court did not have before it the facts required for
doing so. Yet, the Court did interpret the term “companies”, holding that what
characterises a “company” under the Treaty is the nature of its activities. By contrast,
the Court rejected the function – or purpose – underlying an activity as irrelevant to
assessing whether an entity that carries out this activity is a “company” under the
Treaty. Clearly, if function – or purpose – had been the test, there would have been no
need for the Court to join the question to the merits.
Curiously, in its Counter-Memorial, the United States insists that as a matter of
principle the “sovereign functions” or “purpose” of the activities carried out by Bank
Markazi as a central bank should disqualify them as characterising Bank Markazi as
a “company” under the Treaty.284 The United States contends that Bank Markazi has
“stated that it acted in a sovereign – not commercial – capacity in all relevant
aspects”,285 and that “Bank Markazi has consistently claimed that its activities at issue
in this case consist of the management of its foreign currency reserves”.286 The United
States seems to postulate that the purpose of investments carried out by central banks,
when such investments are implemented to manage the foreign currency reserves,
283 U.S. Counter-Memorial, Chapter 9.
284 U.S. Counter-Memorial, p. 66, para. 9.9, repeating U.S. Preliminary Objections, p. 99, para. 9.8, and
p. 100, para. 9.11.
285 U.S. Counter-Memorial, p. 68, para. 9.13, repeating U.S. Preliminary Objections, p. 98, para. 9.7.
286 U.S. Counter-Memorial, p. 70, para. 9.15, repeating U.S. Preliminary Objections, pp. 98-99, para. 9.7.
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automatically qualifies their related activities as having a “sovereign nature”.287 The
U.S. thesis is that “when a central bank engages in the purchase of securities as part
of its management of foreign currency reserves, it is acting on behalf of the State, not
as a ‘company’ with private comparators”.288 The United States also insists that, in
the context of domestic litigations, Bank Markazi argued that it was performing
sovereign functions.289
Iran is of the view that, in repeating at the merits phase the very same arguments as
those developed by the United States in Chapter 9 of its Preliminary Objections, the
Counter-Memorial does not help the Court to fulfill its task. The Court has heard, and
has not been convinced by, the U.S. argument according to which when an entity is
entitled to perform sovereign functions, or to pursue a sovereign purpose, all its
activities are necessarily to be characterised as sovereign. Iran cannot see why the
Court would be more convinced now. Indeed, as suggested above, if the United States
were right that this is the correct approach, the Court would not have needed to join
the issue to the merits.
What the Court has acknowledged is that the functions of an entity, that is, the
objective it pursues, is one thing, but the nature of its different activities is another
thing. As held by the Court, but ignored by the United States, “there is nothing to
preclude, a priori, a single entity from engaging both in activities of a commercial
nature (or, more broadly, business activities) and in sovereign activities”.290
In other words, if sovereign activities are, of course, “linked to the sovereign functions
of the State”,291 in the sense that, in principle, an entity entitled to exercise sovereign
functions can carry out sovereign activities, that does not mean that all the activities
287 U.S. Counter-Memorial, p. 71, para. 9.17.
288 Ibid.,
289 U.S. Counter-Memorial, pp. 71-72, para. 9.18, repeating U.S. Preliminary Objections, pp. 98-99,
para. 9.7. See also U.S. Counter-Memorial, footnote 251, repeating U.S. Preliminary Objections, p. 87,
para. 8.18 (re Bank Markazi’s argument under Article XI, paragraph 4 of the Treaty of Amity); see also
para. 9.14, footnotes 246-247.
290 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 38, para. 92.
291 Ibid., p. 38, para. 91.
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carried out by such entity are necessarily sovereign activities. Sovereign activities
encompass sovereign “acts”, or acts “of sovereignty”, or, as said by the Court, acts of
“public authority”.292 As held also by the European Court of Justice “an exercise of
public powers […] entails the exercise of powers falling outside the scope of ordinary
legal rules applicable to relationships between private individuals”.293 By contrast,
activities that do not involve the exercise of State power are not “sovereign” activities.
This finding had already been illustrated by an I.C.S.I.D. Tribunal in the CSOB case.
It was argued in this case that Ceskoslovenska Obchodni Banka, A.S. (CSOB), a bank
organised under Czech law, was discharging governmental functions and that the
dispute of which the Tribunal was seized arose out of functions performed in that
capacity.294 The Tribunal held that:
“It cannot be denied that for much of its existence, CSOB acted on behalf of the
State in facilitating or executing the international banking transactions and
foreign commercial operations the State wished to support and that the State’s
control of CSOB required it to do the State’s bidding in that regard. But in
determining whether CSOB, in discharging these functions, exercised
governmental functions, the focus must be on the nature of these activities and
not their purpose. While it cannot be doubted that in performing the abovementioned
activities, CSOB was promoting the governmental policies or
purposes of the State, the activities themselves were essentially commercial
rather than governmental in nature.”295
That the United States could be missing this basic point made by the Court in its
Judgment on preliminary objections is all the more surprising given that in the U.S.
legal system it is common ground, although in a different context, namely the law of
State immunities, to consider that it is the “nature test”, not the “purpose test” which
292 Ibid., p. 38, para. 90. For an example of an act of public authority, it has been held that “taxation per se
is of course a lawful sovereign activity”; see Mobil Exploration and Development Inc. Suc. Argentina
and Mobil Argentina S.A. v. Argentine Republic, I.C.S.I.D. Case No. ARB/04/16, Decision on
Jurisdiction and Liability, 10 April 2013.
293 General Court of the European Union, Joined Cases C-226/13, C-245/13, C-247/13 and C-578/13,
Judgment of 11 June 2015, para. 51.
294 Ceskoslovenska Obchodni Banka, a.s. v. The Slovak Republic, I.C.S.I.D. Case No. ARB/97/4, Decision
of the Tribunal on Objections to Jurisdiction, 24 May 1999, para. 19. See also OAO “Tatneft” v.
Ukraine, PCA Case No. 2008-8, Partial Award on Jurisdiction, 28 September 2010, para. 147.
295 Ceskoslovenska Obchodni Banka, a.s. v. The Slovak Republic, I.C.S.I.D. Case No. ARB/97/4, Decision
of the Tribunal on Objections to Jurisdiction, 24 May 1999, para. 20 (emphasis added).
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is to be used to determine the commercial character of an activity.296 For example, the
legislative history of the 1976 FSIA indicates that it was intended to direct courts to
consider the nature of an activity rather than its purpose,297 and it is thus clear that
“[t]he fact that goods or services to be procured through a contract are to be used for
a public purpose is irrelevant; it is the essentially commercial nature of an activity or
transaction that is critical.”298 The U.S. case-law, and in particular, the U.S. Supreme
Court’s judgments, is consistent with this view.299 For example, in Republic of
Argentina v. Weltover (1992), the Supreme Court had to determine whether issuance
of bonds by Argentina, as part of its debt-refinancing program, was a commercial
activity. In its analysis,300 the Court emphasised the differentiation of “‘purpose’ (i.e.
the reason why the foreign state engages in the activity) from ‘nature’ (i.e. the outward
form of the conduct that the foreign state performs or agrees to perform).”301 Arguing
that “the commercial character of an act is to be determined by reference to its ‘nature’
rather than its ‘purpose’”,302 the Court established the “private person test”, and held
that “the question is not whether the foreign government is acting with a profit motive
or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is
whether the particular actions that the foreign state performs (whatever the motive
behind them) are the type of actions by which a private party engages in ‘trade and
traffic or commerce’”.303 It ultimately applied the private person test to the facts of
296 It can also be noted that during the hearings in the Oil Platforms case, the United States appeared fully
aware of the distinction to be made between the functions and the activities. Counsel for the United
States argued, in order to demonstrate the lack of ratione materiae jurisdiction of the Court, that
“whatever their normal function, the oil platforms involved in the present case were being used, as you
have heard, from Commander Neubauer, for guiding armed attacks on shipping in the Gulf - hardly a
commercial activity.” Oil Platforms (Islamic Republic of Iran v. United States of America),Verbatim
Record, CR96/12, (Lowenfell) p. 55.
297 D.A. Brittenham, “Foreign Sovereign Immunity and Commercial Activity: A Conflicts Approach”,
Columbia Law Review, Vol. 83, No. 6, 1983, pp. 1440, 1443.
298 House Report, Rep. No. 1487, 94th Cong., 2d Session 7 (1976), reprinted in 1976 U.S. Code Cong. &
Ad. News at 6615 (IR, Annex 4).
299 See, e.g., Republic of Argentina v. Weltover, 504 U.S. 607 (1992); Saudi Arabia v. Nelson,
507 U.S. 349 (1993).
300 Republic of Argentina v. Weltover, 504 U.S. 607 (1992), at p. 613. See also, for example, Crystallex
International Corporation v. Bolivarian Republic of Venezuela, I.C.S.I.D. Case No. ARB(AF)/11/2,
Order of the US District Court for the District of Delaware, 9 August 2018, para. 131.
301 Republic of Argentina v. Weltover, 504 U.S. 607 (1992), at p. 618.
302 Ibid., at p. 615.
303 Ibid. (emphasis in the original).
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the case and found that, through issuing the bonds, Argentina engaged in commercial
activity.304 Since this jurisprudence a new rule has been introduced as § 1603 of the
U.S. Code, providing, among other definitions, that:
“(d) A “commercial activity” means either a regular course of commercial
conduct or a particular commercial transaction or act. The commercial character
of an activity shall be determined by reference to the nature of the course of
conduct or particular transaction or act, rather than by reference to its
purpose.”305
In these proceedings it is of course neither the U.S. Code nor the U.S. case-law related
to State immunity which is to be applied, but the criteria determined by the Court to
characterise a “company”, as this term is defined for the purposes of the Treaty of
Amity. Thus, consistent with the Court’s Judgment on the U.S. preliminary objections,
the only relevant question concerns the nature of the “activities” at issue and is
whether they are “of a commercial nature (or, more broadly, business activities)”.306
SECTION 2.
THE COMMERCIAL NATURE OF BANK MARKAZI’S ACTIVITIES THAT CAME UNDER
THE AMBIT OF THE IMPUGNED US MEASURES
This section (A) recalls that according to its statutes, Bank Markazi can perform
commercial activities, then (B) turns to show what were the activities actually carried
out by Bank Markazi and relevant in the context of the present case, and finally
(C) demonstrates that these activities are commercial in nature “or, more broadly,
business activities”.307
304 Ibid., at p. 618.
305 28 U.S. Code § 1603.
306 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 37, para. 87, and p. 38, para. 92. It is noted that the question whether
Bank Markazi must be considered a “company” and whether its activities at issue here are of
commercial nature under the Treaty are unrelated to the jurisdictional and enforcement immunity that
Bank Markazi enjoys under international law.
307 Ibid., p. 38, para. 92.
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A. The commercial and business activities which Bank Markazi can perform
according to its statutes
As explained in Chapter II, above, it is beyond debate that Bank Markazi “enjoys legal
personality and shall be governed by the laws and regulations pertaining to joint-stock
companies in matters not provided for by [Iran’s Monetary and Banking] Act.”308
In so far as Bank Markazi’s activities are concerned, Iran’s Monetary and Banking
Act of 1972, which contains the statutes of Bank Markazi, is of particular relevance
since, as acknowledged by the Court, the Act “contains various provisions defining
the types of activities in which Bank Markazi is entitled to engage”.309
Under Iran’s Monetary and Banking Act of 1972, Bank Markazi is vested with certain
sovereign functions and authority. Article 11 provides that it has “the regulatory
authority of the monetary and credit system of the country”, and that it shall fulfill a
series of “functions”: issuance of notes and coins (art. 11(a)), supervision of banks
and credit institutions (art. 11(b)), adoption of certain regulation (art. 11(c)), exercise
of control over certain activities (art. 11(d) and(e)). Article 14 also grants authority to
Bank Markzazi to implement the country’s monetary policy. Under this Article, Bank
Markazi is mandated to supervise the banking and financial sector. For example, it
determines the “official rediscount rate” (art. 14(1)), and the ratios of banks’ liquid
assets to their total assets or to their different types of liabilities (art. 14(2) and(3)).
In addition to these sovereign functions, regulatory and supervisory powers, Bank
Markazi is also designated by Article 12 as “the Banker to the Government”. Under
this provision, Bank Markazi is required to perform some banking activities that are
identical to those performed by any commercial bank, but for one category of client
only, namely governmental entities. Indeed, Article 12(a) provides that Bank Markazi
shall be:
308 Iran’s Monetary and Banking Act of 1972, Article 10 (c) (IM, Annex 73).
309 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 39, para. 95. It is noted that the Court acknowledged that Bank
Markazi is entitled to perform various “types of activities”, and not to a single type of activity.
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“keeping account and handling banking transactions for the Government”.
Note 2 to this Article confirms the commercial nature of this activity since it clarifies
that the law may provide that other banks – i.e. commercial banks – are authorised to
perform the same activity for certain governmental entities:
“Ministries, companies, and entities which, under special laws, are authorised
to conduct their banking transactions through other banks, shall not be subject
to the provision of Section (a) and the first part of Note (1) of this Article.”310
As explained in Chapter II, above, Bank Markazi is also vested with other financial
and banking activities that are typically commercial/business in nature, identical to
those performed by any other private company doing business in a free and
competitive market. In particular, under Article 13(7) of the Monetary and Banking
Act of 1972, Bank Markazi is empowered to engage in:
“Opening and holding current accounts with foreign banks, and/or holding
accounts for domestic and foreign banks with itself, and carrying out all other
authorised banking operations311, and obtaining credits inside the country and
abroad on its own account or on behalf of domestic banks.”312
Under Article 25(a)(1) of the Monetary and Banking Act of 1972, as amended, Bank
Markazi must also pay income tax to the Government in accordance with the
regulations applicable to the governmental companies.313 The obligation to pay tax is
another indication of the fact that the Bank also engages in for-profit activities, and
earns taxable profits.
The profits come from foreign currency transactions, selling such currency to
“commercial banks in the Iranian foreign exchange interbank market as part of Bank
310 According to the first part of note (1) to the Article: “Ministries, municipalities, government companies,
and entities referred to in Section (a) of this Article shall deposit their funds exclusively with, and
conduct their banking transactions through CBI”.
311 Article 2(7) of the Iranian Commercial Code describes “any kind of banking and exchanges operation”
as “commercial transactions.”
312 Iran’s Monetary and Banking Act of 1972, Article 13(7)(IM Annex 73);the English translation is not
totally accurate, and this is why here “themselves”, as it appears in the public English version of Iran’s
Monetary and Banking Act, has been corrected as “itself”.
313 Ibid., Article 23(a)(1).
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Markazi’s daily operations to satisfy foreign currency needs of the market”.314 The
source of foreign currency is mainly Iran’s oil export revenues which are credited to
Bank Markazi's account. The Bank becomes the sole beneficial owner of such funds
after it has credited Iranian Government Treasury accounts maintained in its books
with its equivalent in the rial value.315
Another important source of the Bank’s income is its investments in different
currencies and instruments such as fixed-term bank deposits and fixed income debt
instruments including bonds and securities issued by foreign governments or
accredited international financial institutions.316
B. The activities carried out by Bank Markazi relevant to the present case
It is the acquisition, ownership and management of property rights with respect to its
investment in the security entitlements and their proceeds, mentioned in Chapter II,
above, which constitute the relevant activities of Bank Markazi related to the U.S.
measures at issue. The exercise of these activities has been precluded by the U.S.
measures recalled in Chapter II, above.
Bank Markazi, as part of its activities, has regularly invested its assets in the securities
and bonds denominated in different currencies issued by top-rated sovereign entities.
Bank Markazi purchased bonds to diversify its investment in different instruments
rather than limiting itself to primarily short-term money market instruments.317
The relevant investing activities in the context of the present case are related to
22 security entitlements in U.S. dollars purchased by Bank Markazi during the years
314 Affidavit of Ali Asghar Massoumi as Head of Foreign Exchange Negotiable Securities Section at Bank
Markazi, 17 October 2010, filed on 31 August 2017 in U.S. District Court for the Southern District of
New York, Peterson, et al. v. Islamic Republic of Iran, Case No. 10 Civ. 4518 (BSJ), para. 10
(Annex A02 of the Peterson’s Proceeding Documents filed with the I.C.J. by the United States on
19 September 2017).
315 Ibid., para 10.
316 Ibid., para 11.
317 Ibid., para 13.
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2002 to 2007.These security entitlements were entitlements in dematerialised bonds
issued by a number of foreign governments and intergovernmental organisations such
as the World Bank. The nominal value of these bonds was USD 1,753,000,000.
Pursuant to the U.S. Uniform Commercial Code (‘UCC’) which is the law governing
the securities generated in the U.S. market, the entitlement holder with respect to these
22 security entitlements mentioned above was Bank Markazi.318
The maturing date of these bonds varied in time. All payment of interests and principal
for the bonds have occurred in New York. In 2012, after the last bond matured, the
cash associated with the bonds was placed on an interest-bearing account maintained
at Citibank in New York.
C. The commercial/business nature of the activities carried out by Bank Markazi
in respect of security entitlements
There can be no doubt that the exercise of ownership rights and rights derived from
ownership of security entitlements and of their proceeds is a business (or commercial)
activity. Like all commercial activities related to security entitlements or other sort of
investments held in the United States, they are governed by the UCC, which purpose
is “(1) to simplify, clarify, and modernize the law governing commercial transactions;
(2) to permit the continued expansion of commercial practice”.319
318 See para. 2.95 and footnote 208 above.
319 UCC, Section 1-103.
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This is a classic activity of commercial banks and other private financial institutions.
The U.S. Court of Appeals for the Second Circuit noticed that point in stating: “[l]ike
many large financial institutions, Markazi invests in foreign sovereign bonds”.320
Indeed, investing in security entitlements, including sovereign bonds, is a widespread
practice in modern business. As explained in a recent OECD report, government
securities “serve as a saving instrument for individuals and institutional investors, an
investment instrument for central banks, a risk management instrument for companies,
a collateral to secure to financial transactions, and a benchmark for pricing of other
debt instruments. For example, pension funds and insurance companies invest in longterm
government bonds to meet their future liabilities. Central banks use government
bonds for quantitative monetary policy purposes along with reserve management.”321
There is therefore no surprise that “Clearstream has business relations with
2500 financial institutions from all over the world”.322
Bank Markazi was plainly involved in these business (or commercial) activities. The
governing contract with Clearstream establishes a business relationship between Bank
Markazi and Clearstream as its agent for “transacting business”, in the form of “a
series of financial transactions over an extended period of time with regard to these
New York based bonds”.323 Bank Markazi was “the only owner” of these assets,324
and “[t]he only entity with any financial interest in the funds in the account”,325 located
at Citibank in New York.326
Just like any other company, Bank Markazi paid tax on the profits generated by its
foreign deposits in the United States. The balance sheets of Bank Markazi for the
320 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S. Court
of Appeals for the Second Circuit, Opinion and Order, 21 November 2017, Case 15-0690,
p. 8 (IR, Annex 58).
321 OECD, “Chapter 2. Understanding investor demand for government securities”, OECD Sovereign
Borrowing Outlook 2019, Ed. OECD, 23 April 2019, para. 2.2 (IR, Annex 114).
322 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. 6 (IM, Annex 58).
323 Ibid., p. 39.
324 Ibid., p. 47.
325 Ibid., p. 49.
326 Ibid., p. 50.
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period, extending between 2002 and 2009 indicates the profits generated by them and
that Bank Markazi paid substantial income tax on this profit.
For 2002, the Bank’s balance sheet indicates that foreign bonds generated a revenue
of 410 billion rials. It contributed to the net profit of the Bank, which paid more than
6 billion rials in income tax. The following extract of the balance sheet for
2002 illustrates these points.327
For 2003, the profits generated by the foreign bonds increased significantly, from
410 to 2,599 billion rials. The income tax paid also increased from 6 to 239 billion
rials.328
327 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2002, pp. 89 and 91
(IR, Annex 101).
328 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2003, pp. 97 and 99
(IR, Annex 102).
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For 2004, the revenue generated from foreign bonds was more than 3,373 billion rials,
and the income tax increased to 305 billion rials.329
For 2005, 2006, and 2007, and 2008, the revenue generated from foreign bonds was
4,074,330 4,709,331 5,360,332 and 5,766333 billion rials respectively, and the income tax
was 455,334 1,368,335 2,869336 and 4,956 billion rials respectively.337
As of March 2009 the revenue generated from foreign bonds decreased significantly
to 3,124 billion rials.338 Income tax paid was 6,511 billion rials.339 From this year, the
bonds detained in the United States and their proceeds were restrained, and ceased
generating any profit for the Bank.
329 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2004, pp. 93 and 95
(IR, Annex 103).
330 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2005, p. 97 (IR, Annex 104).
331 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2006, p. 125 (IR, Annex 105).
332 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2007, p. 122 (IR, Annex 106).
333 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2008, p. 137 (IR, Annex 107).
334 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2005, p. 99 (IR, Annex 104).
335 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2006, p. 127 (IR, Annex 105).
336 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2007, p. 123 (IR, Annex 106).
337 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2008, p. 138 (IR, Annex 107).
338 Balance Sheet and Profit and Loss Account of Bank Markazi, 20 March 2009, p. 154 (IR, Annex 108).
339 Ibid., p. 155.
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This figures plainly confirm that Bank Markazi’s activities subjected to the U.S.
impugned measures were of a purely business/commercial nature, carried out in the
same manner than and under the same regime as any commercial bank
SECTION 3.
CONCLUSION OF CHAPTER III.
As demonstrated in this Chapter, the question of whether Bank Markazi is a
“company” for the purposes of the Treaty of Amity depends on the commercial (or
more generally business) nature – not the purpose – of the activities with respect to
which Bank Markazi has been subjected to the United States measures described in
Chapter II, above.
These activities consist in the acquisition, ownership and management of property
rights with respect to investment in security entitlements and their proceeds in the
United States. The U.S. measures intentionally precluded Bank Markazi from
exercising these activities, by depriving it of all its property rights in those security
entitlements. The U.S. measures enumerated in Chapter II, above have had the effect
of depriving Bank Markazi of its right to exercise its property rights over its financial
assets – including its right to use them, for example as guarantee, to earn profit from
them, to transfer them, to sell them, to enforce them, as well as of its capacity to
effectively defend its rights. These rights have been denied, and the financial assets,
of a value of almost 2 billion dollars, have been turned over to third parties, in breach
of the Treaty of Amity, as demonstrated by Iran in its Memorial, and further developed
in this Reply.
These activities plainly qualify as commercial activities, or more broadly as business
activities. They are classic commercial/business activities generating profit and loss
that commercial banks and other private institutions perform on a daily basis and on
which they pay income tax.
Bank Markazi thus plainly qualifies as a company, as this term is defined by the Treaty
of Amity. It was performing, at the relevant time, activities of the nature of those
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which permit characterisation as a “company” within the meaning of the Treaty of
Amity, capable of being affected by the measures complained of by Iran by reference
to Articles III, IV and V of the Treaty. As a matter of fact, as will be developed below,
Bank Markazi’s activities of a commercial/business nature have been severely
affected by numerous United States’ breaches of Article III, IV and V of the Treaty.
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CHAPTER IV.
THE UNITED STATES HAS VIOLATED ARTICLE III(1)
OF THE TREATY OF AMITY
4.1 Iran claims that the United States has violated its obligation set out in Article III(1)
through depriving Iranian companies of their juridical status as established under the
applicable laws and regulations of Iran, because it has conflated their juridical status
with that of another legal person, namely the Iranian State.340 Among other Iranian
companies, the United States has abrogated Bank Markazi’s rights as a separate
juridical entity.341
4.2 In its Counter-Memorial, the United States contends that Article III(1) has a “narrow
purpose”,342 and is “limited to recognizing the legal personality of the companies of
the other Party, and nothing more”.343 The United States bases its interpretation on
what would be, according to the Respondent:
a. a “straightforward reading of the text” – though the United States in fact bases
its interpretation on anything but the text;344
b. alleged “travaux préparatoires” – although the United States has not asserted,
let alone demonstrated, that recourse to “supplementary means of
interpretation” is permitted or required as a matter of international law;345
c. U.S. internal analysis in the context of the negotiation of the U.S.-Netherlands
FCN, or during negotiations with Belgium – which can hardly find a place in
340 Iran’s Memorial, pp. 70-77, paras. 4.18-4.36.
341 Ibid., p. 77, para. 4.35.
342 U.S. Counter-Memorial, p. 97, para. 13.8.
343 Ibid., p. 98, para. 13.9.
344 Ibid., p. 97, para. 13.7.
345 Ibid., pp. 97-98, para. 13.8.
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the application of any sound method of treaty interpretation to the Treaty of
Amity.346
4.3 Further, the United States contends that it has not violated Article III(1) of the Treaty
of Amity, as it interprets it, since it has not denied Iranian companies their “legal
personality”.347 The United States recalls that the contested U.S. measures “make
available for attachment certain property of States designated as sponsors of terrorism,
including the property of their agencies and instrumentalities”, suggesting that the
mere fact that these measures concern “States designated as sponsors of terrorism”,
on the one hand, and “their agencies and instrumentalities”, on the other hand, proves
that the legal personality of the latter is recognised.348 It also suggests that the legal
personality of these companies has been duly recognised because they have been
subject to judicial proceedings in the United States.349 Alternatively, the United States
asserts that even if the interpretation proposed by Iran were correct, the Respondent
would not have violated Article III(1) in conflating the juridical status of companies
with that of Iran because it was, in this case, appropriate to “pierce the corporate veil
or otherwise disregard the distinction between a corporation and its shareholders in
the interest of justice”.350
4.4 In making these arguments, the United States fails to interpret Article III(1) correctly
(Section 1). Iran maintains that the United States has failed to respect its Treaty
obligation as provided for in this Article (Section 3) vis-à-vis Iranian companies which
all have a separate juridical status (Section 2).
346 Ibid., p. 98, para. 13.10.
347 Ibid., p. 101, para. 13.20.
348 Ibid.
349 Ibid., pp. 101-102, para. 13.20.
350 U.S. Counter-Memorial, p. 102, para. 13.21.
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SECTION 1.
INTERPRETATION OF ARTICLE III(1) OF THE TREATY OF AMITY
4.5 Article III(1) of the Treaty provides, in its first sentence:
“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.”
4.6 The United States fails to interpret the text of this provision properly, on four basic
points:
a. First, it conflates “juridical status” – the terms used in the Treaty – and “legal
personality”351 – terms not used in the Treaty, although the two concepts are to
be distinguished.
i. The “juridical status” of an entity or of a person is its legal status as
determined by the laws and regulations applicable to this entity or
person. The “juridical status” of a company entails its basic specificities.
The International court of Justice in Barcelona Traction observed that
corporate entities are “endowed with a specific status” made of “rules
governing [their] creation and operation”.352 It is this “specific status”,
defining the specificities of each company, to which the Parties refer in
Article III(1) of the Treaty with the terms “juridical status”. With respect
to persons other than legal entities, their “juridical status” usually entails
specific rules applicable to these persons. For example, the Convention
relating to the status of refugees adopted on 28 July 1951 contains a
Chapter II titled “Juridical status”, which provides for rules applicable
to refugees, relating to their “Personal status” (art. 12), “Movable and
immovable property” (art. 13), “Artistic rights and industrial property”
(art. 14), “Right of association” (art. 15), and “Access to courts”
(art. 16). “Juridical status” is also used to designate the specific group
351 See, e.g., U.S. Counter-Memorial, p. 98, para. 13.9 and p. 101, para. 13.18.
352 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 34,
para. 39.
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of rules applicable to certain features devoid of legal personality. For
example, one can discuss “the juridical status of waters”,353 or “the
juridical status of the EEZ”.354
ii. By contrast, “legal personality” merely refers to the existence of a
person or of an entity as a “legal being”. Of course, these terms are
reserved to “persons”, unlike the terms “juridical status” which, as
illustrated above, are not reserved to characterising “persons” only. The
“legal personality” of an entity derives from what the law says about this
entity, or, in other words, from its juridical status. But the juridical status
of an entity that is recognised as a legal being under its domestic law is
broader than the mere establishment of the legal personality of this
entity, since it also provides for the essential legal rights and duties
attached to this legal person.
iii. The context confirms that recognition of a “juridical status”, as these
terms appear in Article III(1) of the Treaty, cannot be reduced to
recognition of a “legal personality”, which, of itself, does not encompass
any right to engage in substantive activities. Indeed, if it were the case,
the Parties would have had no reason, in the same paragraph of the same
article, to precise that: “[i]t 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 organised.”355
iv. This immediate context further confirms that the terms “juridical status”
in Article III(1) refer to company’s basic rights, and not merely to their
“legal existence”. The sentence quoted in the preceding paragraph
introduces a qualification to the extent of the rights that would derive
from an unqualified recognition of the “juridical status” of the other
Party’s companies. With this precision, the Parties agree that even if the
353 R. Jennings, A. Watts (Eds.), Oppenheim's International Law: Volume 1 Peace (9th Edition), p. 647.
354 D. P. O’Connell, The International Law of the Sea: Volume I, 1st Edition (16 December 1982), p. 579.
355 Article III(1), last sentence, of the Treaty of Amity (IM, Annex 1).
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laws of the other Party grant to its companies, as part of their juridical
status, rights to engage in activities “for which they have been
organised”, the recognition of their juridical status under the Treaty
would not concern this aspect of their juridical status. A contrario, it
concerns all other aspects.
v. The last sentence of Article III(1) sheds further light on the notion of
“juridical status”. It provides that the term “companies” under the
Treaty, i.e., the legal entities the juridical status of which the Parties
must “recognize”, means “corporations, partnerships, companies and
other associations, whether or not with limited liability and whether or
not for pecuniary profit”. These are all categories of legal persons that
U.S. and Iranian domestic laws distinguish as to their juridical status. In
this context, the “juridical status” of companies obviously refers to the
basic legal features defining the different categories of companies, and
not only to their existence as “legal beings”. For example, the
recognition of the juridical status of a partnership entails recognition of
this partnership as a specific category of legal entity. Likewise, the
recognition of the juridical status of a corporation encompasses
recognition of a legal person with the specificities that the law attaches
to a corporate entity.
vi. This understanding of the notion of “juridical status” is confirmed by
the travaux préparatoires. In discussing the meaning of Article III(1),
the U.S. Embassy’s Aide Mémoire dated 20 November 1954356 argues
that in so far as it relates to corporation, the provision provides “for their
recognition as corporate entities”.357
b. Second, the United States errs in reading Article III(1) as providing, in
substance, that Iranian companies shall have “a” juridical status, or a mere
356 Aide Mémoire of the U.S. Embassy in Tehran, dated 20 November 1954(IR, Annex 1)
357 IM, Annex 3 (emphasis added).
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“existence”,358 recognised by the laws of the United States. Article III(1)
provides that Iranian companies shall have “their” juridical status recognised,
which means the juridical status they possess according to the laws and
regulations under which they have been constituted, not “a” juridical status,
limited to an unqualified “legal existence”.
c. Third, the United States fails to acknowledge that the terms “their juridical
status” refer to the juridical status of Iranian companies as established “under
the applicable laws and regulations” of Iran. By recognising the juridical status
of Iranian companies as established under Iranian laws and regulations, the
United States commits to give legal effect to Iranian laws on its territory
governing the establishment of Iranian companies – and, conversely, Iran
commits to give legal effect on its territory to U.S. laws governing the
establishment of U.S. companies. This is a common feature in private
international law as well as in public international law. In this regard, the Court
observed in Barcelona Traction “that international law has had to recognize the
corporate entity as an institution created by States in a domain essentially within
their domestic jurisdiction.”359
d. Fourth, the United States fails to mention that under Article III(1), the juridical
status of Iranian companies must be “recognized within the territories of” the
United States. The obligation to recognise, in this context, refers to an obligation
to be given legal effect in the United States. Thus, it establishes a Treaty
obligation for the United States to give legal effect in the United States to the
Iranian companies’ juridical status as established by Iranian laws and
regulations.
4.7 In sum, according to its ordinary meaning, read in context, Article III(1) of the Treaty
of Amity provides that Iranian companies shall have their juridical status, i.e. the
juridical status they possess under Iranian laws and regulations, recognised within
358 U.S. Counter-Memorial, p. 98, para. 13.10.
359 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 33,
para. 38. See also Ahmadou Sadio Diallo (Republic of Guinea v. Democratic Republic of the Congo),
Merits, Judgment, I.C.J. Reports 2010, p. 675, para. 104.
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the U.S. territory, i.e. given legal effect within this territory. Consequently, the precise
scope of the obligation to recognise an Iranian company’s juridical status depends on
the content of this juridical status as established by the laws and regulations under
which this company has been constituted.
4.8 It follows that if, as is the case, according to these laws and regulations, this juridical
status provides for separateness of the legal entity, then the obligation to recognise
this juridical status plainly encompasses the obligation to recognise this separateness.
This is confirmed by the definition of companies provided for by Article III(1) of the
Treaty, which reads: “‘companies’ means corporations, partnerships, companies, and
other associations, whether or not with limited liability and whether or not for
pecuniary profit.” As is apparent, this text expressly mentions specific legal entities
the juridical status of which does, in both the U.S. and the Iranian domestic systems,
inherently encompass independence and separateness, namely “corporations”.
4.9 Recognising the juridical status of a corporation without recognising that it is a
juridical entity separate from its shareholders would make no sense. Indeed, as
observed by the Court in Barcelona Traction, “[t]hese entities have rights and
obligations peculiar to themselves.”360 By contrast with associations, they “enjoy
independent corporate personality”.361 Indeed, [“t]he concept and structure of the
company are founded on and determined by a firm distinction between the separate
entity of the company and that of its shareholders, each with a distinct set of rights.
The separation of property rights as between company and shareholders is an
important manifestation of this distinction.”362 This separation is part of the “basic
characteristic of the corporate structure”363, or, in the words of the U.S. administration,
one of the “basic principles of corporal law and international principles”.364
360 Barcelona Traction, Light and Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 33,
para. 39.
361 Ibid., para. 40.
362 Ibid., para. 41.
363 Ibid.
364 U.S. House of Representatives, Report on the Justice for Victims of Terrorism Act, 13 July 2000, H.
R. Rep. No. 106-733, at p. 12 (IM, Annex 12).
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4.10 Thus, the obligation to recognise the juridical status of companies constituted as
corporations necessarily encompasses the obligation to recognise – i.e. give legal
effect to the legal rule – that they enjoy independent corporate personality as separate
legal entities, as established under the relevant domestic laws and regulations. By
contrast, if a partnership has no separate legal personality, the obligation to recognise
the juridical status of this company organised as a partnership implies recognition that
it does not have separate legal personality.
SECTION 2.
VIOLATION OF ARTICLE III(1) OF THE TREATY OF AMITY
4.11 The Iranian laws and regulations under which the Iranian companies referred to in the
present proceedings are established grant them a juridical status the basic
characteristic of which is that they are corporate entities separate from their
shareholders including the Iranian State.
4.12 In this regard, the Court can take note that, whereas the United States wrongly contests
that the obligation to recognise the juridical status of Iranian companies encompasses
the obligation to recognise their separate juridical status, it does not dispute that the
Iranian companies relevant to this case have been legally constituted in Iran as
separate and independent juridical entities. This is indeed beyond dispute. For
example, Bank Markazi has been constituted in the Iranian domestic order as a
separate juridical entity. Article 28, paragraph 1, of the Monetary and Banking Act
of 1960, as amended, expressly provides that “an independent institution to be called
the Bank Markazi Iran shall be established”.365 Likewise, the Export Development
Bank of Iran was constituted in 1979 and, as indicated in Article 1 of its statutes: “the
bank is an independent legal entity, with financial independence, and Iranian
365 Under Article 28 (1) of the Act as approved on 27 May 1960, “in order to stabilize the value of currency
and to regulate the volume of credit, an independent institution to be called the Bank Markazi Iran shall
be established which shall have the monopoly of coin note issue”; available at:
www.cbi.ir/page/5298.aspx.
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nationality”.366 The same can be said of all other Iranian companies concerned in the
present case, as explained above in Chapter II.367
4.13 The Treaty obligation to recognise the juridical status of Iranian companies as separate
legal entities entails that there can be no confusion between their liability, on the one
hand, and the liability of their shareholders for their own acts, on the other hand. Thus,
an Iranian separate entity cannot be held liable for execution of a judgment against its
shareholders, including when the shareholder is the State of Iran, and its own property
cannot be subject to attachment in execution of a judgment passed against its
shareholders, including when Iran is concerned. As held by the Court “[c]onferring
independent corporate personality on a company implies granting it rights over its
own property”.368
4.14 Yet, the United States has abrogated the separate juridical status of the Iranian
companies relevant to the present case through successive legislative and executive
acts, as explained by Iran in its Memorial.369 These are Section 201(a) of the TRIA of
2002, Section 1610(g) of Title 28 of the U.S. Code introduced by NDAA of 2008,
Section 8772 of Title 22 of the U.S. Code introduced by the ITRSHRA, and Section
7(b) of E.O. 13599. On the basis of these laws and executive acts, U.S. courts ordered
the seizure and turning over of the assets of Iranian companies in aid of execution of
judgments issued against Iran.370
4.15 The United States does not dispute that it has disregarded the distinction between
Iranian companies, as independent legal entities, and the State of Iran.371 Rather, it
366 IM, Annex 75.
367 Article 583 of the Iranian Commercial Code provides that “All trading companies mentioned in this
Act have juridical personality” (code available on the website of the Iranian Ministry of Industry, Mine
and Trade at https://en.mimt.gov.ir). Further, where the separate juridical status of an entity is not
expressly mentioned in a company’s articles of association or its constituting document, this inherent
legal peculiarity follows from the entity’s purpose, functions, its mode of administration, its limited
capital and liability.
368 Ahmadou Sadio Diallo (Republic of Guinea v. Democratic Republic of the Congo), Preliminary
Objections, Judgment, I.C.J. Reports 2007, p. 605, para. 61.
369 Iran’s Memorial, pp. 70-74, paras. 4.19- 4.29.
370 Ibid., p. 74-77, paras. 4.30-4.36; U.S. Counter-Memorial, p. 50, para. 6.18.
371 U.S. Counter-Memorial, p. 102, para. 13.21; p. 124, para. 14.45.
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argues that its acts are not breaches of its treaty obligations under Article III(1) of the
Treaty of Amity.
4.16 The first argument of the United States is that it has no Treaty obligation to respect
the separate juridical status of Iranian companies; its only obligation, according to the
Respondent, is to recognise nominally that the Iranian companies have a “legal
personality” – that they have an “existence” in law. According to the United States:
“Article III(1) does not speak to the issue of the rights of a company in the context of
an action to enforce a judgment obtained against one of its owners.”372
4.17 But as has been demonstrated above,373 Article III(1) provides for the U.S. obligation
to give legal effect within its territories to the juridical status of Iranian companies,
which, properly interpreted, includes the obligation to respect a key feature of their
juridical status in Iranian laws and regulations, namely their legal separateness from
the State of Iran.
4.18 The United States then argues that even if it were correct that its Treaty obligation is
to respect the juridical separateness of Iranian companies, this obligation would not
have been violated by the U.S. measures challenged by Iran in the present case. While
the United States acknowledges “the general principle that a distinction between a
corporation and its shareholders should be observed”, it argues that there are
exceptions, mentioning a “well-established principle in both common law and civil
law jurisdictions that it may be appropriate to pierce the corporate veil or otherwise
disregard the distinction between a corporation and its shareholders in the interests of
justice”,374 and claims that “[t]he U.S. measures at issue can only be viewed as serving
the ends of justice as Iran has demonstrated no willingness to accept responsibility or
provide compensation to the victims of the terrorist acts it has supported.”375
4.19 This defence fails for at least two reasons.
372 Ibid., p. 100, para. 13.17.
373 See paras. 4.6(c)-(d) and 4.7 above.
374 Ibid., p. 102, para. 13.21.
375 Ibid.
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4.20 First, the United States founds this thesis on a single U.S. authority, namely a decision
of its Supreme Court, the so-called Bancec decision (First Nat. City Bank v. Banco
Para El Comercio Exterior de Cuba, 462 U.S. 611, 633-34 (1983)).376 This decision
is relevant, according to the Counter-Memorial, because the U.S. Supreme Court
found an exception to the separateness of corporate juridical status, allegedly deriving
from “internationally recognized equitable principles”, in the objective “to avoid the
injustice that would result from permitting a foreign state to reap the benefits of
[domestic] courts while avoiding the obligations of international law.”377
4.21 The U.S. argument is disingenuous since it is not in implementing the Bancec
exception that the United States has abrogated the separate juridical status of Iranian
companies, but in disapplying the Bancec exception.
4.22 As explained in Iran’s Memorial, the Court of Appeals of the Ninth Circuit carefully
assessed in the 2002 Flatow judgment whether the Bancec exception to the
separateness of corporate entities could apply to an Iranian public bank. The Court
articulated and applied the so-called five “Bancec factors” that trigger the exception.
On this basis, it considered that the Iranian public bank could not be conflated with
Iran and concluded that since the bank could not be held liable for Iran’s debt, its
assets were not subject to attachment in execution of a judgment passed against
Iran.378
4.23 Thus, contrary to what the United States contends, the Bancec exception is of no avail
to its case. In fact, it was precisely to override the five “Bancec factors”, and to create
an exception specially tailored to apply unconditionally to certain Iranian companies,
that the Congress enacted the NDAA 2008.
376 Ibid., p. 102, para. 337. In fact, the United States also refers in general to an article of doctrine, namely
Cheng-Han Tan, et al., “Piercing the Corporate Veil: Historical, Theoretical, & Comparative
Perspectives”, 16 Berkeley Business Law Journal 140, 140-41 (2019) (U.S. CM, Annex 140). But this
article discusses a practice which has no relation at all with the one of the United States with respect to
Iranian companies.
377 U.S. Counter-Memorial, p. 102, para. 13.21, fn. 337.
378 Flatow v. Islamic Republic of Iran, et al., U.S. Court of Appeals, Ninth Circuit, 23 October 2002, 308
F.3d 1065 (9th Cir. 2002) (IM, Annex 31).
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4.24 Senator Specter, who submitted in 2005 the bill which was introduced in NDAA 2008,
made it clear that the bill was specifically passed against Iran and Iranian companies:
“This legislation clarifies a private right of action, in Federal courts, for U.S.
citizens against state sponsors of terrorism and will ultimately make it easier for
victims of such acts to collect court-ordered damages against state-sponsors of
terrorism. The specific provisions of the legislation have been drafted to
harmonize existing statutory law with the recent decision by the District of
Columbia circuit in Cicippio-Puleo v. Islamic Republic of Iran, 353 F.3d 1024,
D.C. Cir. 2004, which held that ‘neither 28 U.S.C. §1605(a)(7) nor the Flatow
Amendment to the Foreign Sovereign Immunities Act ... , nor the two
considered in tandem, creates a private right of action against a foreign
government.’ 353 F.3d 1024, 1032-33 (D.C. Cir. 2004). This bill will permit the
families of the brave servicemen who died at the Marine Corps Barracks in
Beirut, Lebanon. to collect court-ordered damages against state-sponsors of
terrorism such as Iran. […]
The second section of the bill eliminating many of the barriers which have
prevented U.S. citizens from collecting on court ordered damages against state
sponsors of terrorism. The bill does this by changing the legal standard of the
Bancec doctrine from day to day managerial control to those under the
beneficial ownership of the state. The Supreme Court enunciated the so called
Bancec doctrine in First Nat'l City Bank v. Banco Para El Comercio Exterior
de Cuba, 462 U.S. 611, 626-27, 1983. In this case. the U.S. Supreme Court
created a presumption against a party that seeks to satisfy an outstanding
judgment against a foreign government by seizing the foreign government's
assets. This section of the bill will ease the burden on the families of victims of
terrorism by permitting them to attach the hidden assets of terrorist states held
within the United States.”379
4.25 Indeed, the NDAA 2008 explicitly abrogated the separate juridical status of Iranian
companies “regardless of” each of the five “Bancec factors”. Under this law, the
property of Iranian companies can be attached in aid of execution, or execution, upon
a judgment against Iran, “regardless of : (A) the level of economic control over the
property by the government of the foreign state; (B) whether the profits of the property
go to that government; (C) the degree to which officials of that government manage
the property or otherwise control its daily affairs; (D) whether that government is the
sole beneficiary in interest of the property; or (E) whether establishing the property as
379 U.S. Congressional Record – Senate, Vol. 151, Pt 9, 16 June 2005, p. 12869 (IR, Annex 5).
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a separate entity would entitle the foreign state to benefits in United States courts
while avoiding its obligations.”380
4.26 The invocation by the U.S. Counter-Memorial of the Bancec exception is therefore
wholly misplaced: the separate juridical status of Iranian companies has not been
abrogated by U.S. courts in application of Bancec; to the exact contrary, it has been
abrogated in disapplication of Bancec.
4.27 Secondly, since it is the Treaty of Amity which is the relevant applicable law in the
current case, what the United States must demonstrate in order to make good its
position is that, while establishing the obligation for the United States to give effect
to the separate juridical status of Iranian companies, the same Treaty authorises
exceptions to this obligation. The United States does not even try, at para. 13.21 of its
Counter-Memorial, to make such demonstration, limiting itself to vague and
unconvincing assertions of allegedly “well-established” exceptions in common law
and civil law.381
4.28 Thirdly, there is not a single basis justifying the existence of an alleged “well
established” exception permitting the abrogation of the separate juridical status of a
company in order to treat its assets as if they were assets of another person. What has
been acknowledged by the Court regarding the States’ practice, is that “’lifting the
corporate veil’ or ‘disregarding the legal entity’”382 has been considered justified and
equitable when “forms of corporations and their legal personality”383 have “not been
employed for the sole purposes they were originally intended to serve”, 384 or when
“the corporate entity has been unable to protect the rights of those who entrusted their
financial resources to it”.385 It is in these situations only that the independent existence
380 28 U.S. Code, Section 1610(g)(1) as adopted by Section 1083(b)(3)(D) of the U.S. National Defense
Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, 122 Stat. 206 (IM, Annex 15); Iran’s
Memorial, pp. 28-29, para. 2.30.
381 U.S. Counter-Memorial, p. 102, para. 13.21.
382 Barcelona Traction, Light And Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 39, para.
56.
383 Ibid.
384 Ibid.
385 Ibid.
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of the legal entity has been sometimes disregarded in order “to provide protective
measures and remedies in the interests of those within the corporate entity as well as
of those outside who have dealings with it: the law has recognized that”. The Court
further explained that this practice has been employed “from without, in the interest
of those dealing with the corporate entity. However, it has also been operated from
within, in the interest of – among others – the shareholders, but only in exceptional
circumstances.”386 At no point did the Court admit the existence, let alone suggest,
anything close to the U.S. newly asserted thesis, which is that it is “well-established”
that the wrongful acts of a shareholder or of an owner of a company can justify
enforcing judgments against its companies established as independent corporate
entities.
SECTION 3.
CONCLUSION OF CHAPTER IV
4.29 As demonstrated in this Chapter:
- Article III(1) of the Treaty of Amity provides for the obligation of the United
States to recognise the juridical status of Iranian companies as provided for in
Iranian laws and regulations;
- This Treaty provision entails the obligation for the United States to respect the
independent corporate personality conferred to Iranian companies by Iranian
laws and regulations; the Treaty provides for no exception to this obligation;
and
- The United States plainly violated its Treaty obligation under Article III(1) by
conflating Iranian companies and the government of Iran, including in seizing
and turning over their assets in execution of judgments entered against Iran.
386 Ibid.
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CHAPTER V.
THE BREACHES OF ARTICLE III(2) OF THE TREATY OF AMITY:
IRAN’S ENTITLEMENT TO FREEDOM OF ACCESS TO THE U.S.
COURTS FOR ITS COMPANIES
5.1 The United States’ defence to all of Iran’s claims under Article III(2) is to adopt the
extreme position that the obligation to afford Iranian nationals and companies
“freedom of access to the courts of justice […] both in defence and pursuit of their
rights, to the end that prompt and impartial justice be done” means nothing more than
that Iranian nationals and companies should not be prevented from entering U.S.
courtrooms and making submissions. It is said that this follows from the Court’s
Judgment on Preliminary Objections.387
5.2 According to the United States, as long as this essentially physical access is granted,
the provision contains nothing to stop it from imposing targeted measures (legislative
or executive) which bar (including with retrospective effect) any reliance by Iranian
nationals or companies on defences/arguments which would otherwise have been
available to those nationals and companies even if those defences/arguments have in
fact already been relied upon in the given proceeding. The United States’ core
argument is that such conduct cannot be prohibited by the freedom of access provision
because this creates no new substantive or procedural right.
5.3 The United States fails to engage with Iran’s position. Properly interpreted,
Article III(2) confers a broad and unqualified obligation to afford a meaningful
freedom of access to courts (i.e., freedom which is not merely illusory).388 This follows
from an application of the rules of treaty interpretation and is consistent with the
interpretation of access to court provisions by other international courts and tribunals.
387 U.S. Counter-Memorial, pp. 103-104, paras. 13.25-13.26.
388 In the context of the “freedom of commerce” under Article X(1) of the Treaty, the Court has recognised
that the provision is not to be interpreted and applied “such [that this] freedom is to be rendered
illusory”: see Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary
Objection, Judgment, I.C.J. Reports 1996, p. 819, para. 50, quoted at Oil Platforms (Islamic Republic
of Iran v. United States of America), Judgment, I.C.J. Reports 2003, p. 201, para. 83. See also at p. 203,
para. 89.
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5.4 Once the U.S. interpretation is disposed of, it becomes clear that it has no defence to
Iran’s claims under Article III(2). Indeed, it is notable that the United States prefers
to mischaracterise Iran’s case rather than engage with the submissions actually
advanced in Iran’s Memorial.
SECTION 1.
THE PROTECTIONS AFFORDED BY ARTICLE III(2)
5.5 Article III (2) of the Treaty of Amity provides:
“Nationals and companies of either High Contracting Party shall have freedom
of access to the courts of justice and administrative agencies within the
territories of the other High Contracting Party, in all degrees of jurisdiction, both
in defense and pursuit of their rights, to the end that prompt and impartial justice
be done. Such access shall be allowed, in any event, upon terms no less
favorable than those applicable to nationals and companies of such other High
Contracting Party or of any third country. It is understood that companies not
engaged in activities within the country shall enjoy the right of such access
without any requirement of registration or domestication.”
5.6 The Parties appear to agree that Article III(2) affords a protection that is cast in
mandatory and absolute terms, i.e. an unqualified entitlement to freedom of access, as
well as protection formulated on a national treatment and a most favoured nation
basis.389 However, they disagree on the question of the meaning of “freedom of
access”.
5.7 Iran’s position is that, as follows from the broad and unqualified language used, the
“freedom of access” required under Article III(2) is meaningful. The Parties did not
attempt to predict and specify all of the many and varied situations in which measures
will obstruct freedom of access to court. It is therefore unsurprising and immaterial
that Article III(2) does not expressly specify the entitlements of Iranian companies
and nationals which are at issue in the present case, namely: (a) the entitlement of
Iranian companies to respect for their separate juridical status as distinct from the State
of Iran, and (b) the entitlement of Iranian nationals and companies not be subjected to
389 Iran’s Memorial, p. 78, para. 5.3; U.S. Counter-Memorial, pp. 103-104, para. 13.26.
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the targeted removal of legal defences which would otherwise be available under U.S.
law.390
5.8 Further, the requirement to accord freedom of access “both in defence and pursuit of
their [i.e. companies’] rights” is equally broad, and the word “rights” is subject to no
limitation by reference to the source or nature of the rights. Thus, the “rights” at issue
would include those conferred or recognised by domestic law (including U.S. law) as
well as those conferred under the Treaty of Amity. This includes (but is not limited
to) the right to respect for separate juridical status under both U.S. law and under
Article III(1) of the Treaty of Amity.
5.9 In proceedings before the U.S. courts both Bank Markazi and Bank Melli specifically
invoked the requirement to respect their separate juridical status under Article III(1)
of the Treaty of Amity.391 The U.S. courts rejected these arguments on the basis that,
even if Article III(1) could be relied on, the U.S. measures would “trump” this
provision.392
5.10 The additional words “to the end that prompt and impartial justice be done” must, of
course, be given meaning and effect. Indeed, they were specifically negotiated.393
Wilson (a U.S. commentator with experience of negotiating U.S. FCN treaties)
confirms that: “The Iranian treaty differs from the others in providing for access on a
390 Cf. U.S. Counter-Memorial, p. 104, para. 13.27 stating that these entitlements do not “appear in the
text of Article III(2)”.
391 See paras. 2.67 above and 9.30 below.
392 With respect to Bank Markazi see: 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), pp. 51- 52 (IM, Annex 58); 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), pp. 6-7 (IM, Annex 62). With
respect to Bank Melli see Weinstein, et al., v. The Islamic Republic of Iran, et al., U.S. District Court,
Eastern District of New York, Memorandum and Order, 5 June 2009, Case 2:02-mc-00237-LDW, p. 5
(IR, Annex 26); 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. 20-21 (IM, Annex 47) ; Bennett, et al. v. The
Islamic Republic of Iran, et al., U.S. District Court for the Northern District of California, Order
Denying Motion to Dismiss, 28 February 2013, Case 3:11-cv-05807-CRB, p. pp. 4-5 (IR, Annex 42);
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. 23-24 (IM, Annex
64).
393 R. Wilson, United States Commercial Treaties and International Law (1960), p. 239, note 130. The
United States accepts that such material is relevant for the purpose of interpretation of the provisions
of the Treaty of Amity: see U.S. Counter-Memorial, p. 95, para. 12.7.
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non-contingent basis”,394 and the inclusion of the words “to the end that proper and
impartial justice be done” is unique among the FCN treaties concluded up to 1959.395
Thus, the language and scope of Article III(2) is substantially broader in certain
respects than that of equivalent freedom of access provisions found in other U.S.
commercial treaties. Since the last sentence of Article III(2) specifically and “in any
event” protects against discrimination against Iranian nationals and companies (by
comparison with U.S. and third country nationals and companies), these additional
words are to be understood as providing for greater protection. Thus, unlike certain
traditional freedom of access provisions, Article III(2) requires more than merely nondiscriminatory
treatment.
5.11 The U.S. interpretation of Article III(2) disregards the fact that the right to freedom of
access of court is expressly stated to be “to the end that […] impartial justice be done”.
If access were limited to physical access and participation, as the United States
contends, this would be insufficient to secure the objective of “impartial justice”.
Impartiality requires much more, and it is necessary at this phase of the case for the
Court to assess whether the effect of any restrictions on access to court – including
with respect to legislative or executive interference in the judicial process – was to
prevent impartial justice from being done.
5.12 The United States wrongly contends that “Iran attempts to transform Article III(2)
from a provision protecting ‘access to the courts’ into a provision guaranteeing
litigants a variety of rights once they are in court”.396 Iran’s interpretation reflects the
ordinary meaning of the treaty language in its context and in light of its object and
purpose. By contrast, the U.S. interpretation should be rejected as unduly restrictive
394 R. Wilson, United States Commercial Treaties and International Law (1960), p. 239, note 130. See
further p. 230 (“National treatment was, for the great majority of the access clauses during this period
[i.e., prior to 1923], the agreed basis”) and p. 239 (“Each of the seventeen treaties signed up to mid-
1959 provides for access on a national-treatment basis”).
395 R. Wilson, United States Commercial Treaties and International Law (1960), p. 239, note 130. As the
United States accepts, in addition to the object and purpose, “the Court has also taken into account its
[the Treaty’s] context and history, including in connection with similar FCN treaties concluded by the
United States during the same time period”: U.S. Counter-Memorial, p. 95, para. 12.7 citing Oil
Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, at p. 814, para. 29 (referring to clauses in FCN treaties concluded between the
United States and China, Ethiopia and Oman).
396 U.S. Counter-Memorial, p. 96, para. 13.2.
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and emptying Article III(1) of any concrete meaning. Relying on highly formalistic
and technical arguments, the United States seeks to redraw the scope of Article III(2)
in a way that would lead to absurd consequences, including in the present case (see
para. 5.171.5 below).
5.13 The United States’ primary position rests on an assertion that the Court “rejected
Iran’s interpretation” in its Judgment on Preliminary Objections and “left no basis for
its Article III(2) claims”.397 This is incorrect. At the jurisdiction stage, the Court
interpreted Article III(2) specifically for the purposes of ruling on the second objection
to jurisdiction which asked the Court to dismiss “as outside the Court’s jurisdiction
all claims […] 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”.398 Thus, the Court stated that it would
examine the provision “in order to ascertain whether it permits the question of
sovereign immunities to be considered as falling within the scope ratione materiae of
the Treaty of Amity”.399 With respect to Article III(2), the specific question the Court
asked itself was whether “the breach of international law on immunities would […]
be capable of having some impact on compliance with the right guaranteed by
Article III, paragraph 2”400 The Court answered this question in the negative.401
5.14 Having found that Iran’s immunity-related claims did not fall within the scope of
Article III(2) – because the question of freedom of access is “clearly distinct” from
the question of any obligation to uphold immunities under customary international
397 U.S. Counter-Memorial, p. 96, para. 13.2.
398 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 25, para. 48, emphasis added. See also the dispositif, para. 126(2)
upholding the second preliminary objection to jurisdiction.
399 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 26, para. 52.
400 Ibid., p. 32, para. 70.
401 It was in this specific and limited context that the Court reasoned that: “The provision at issue does not
seek to guarantee the substantive or even the procedural rights that a company of one Contracting Party
might intend to pursue before the courts or authorities of the other Party, but only to protect the
possibility for such a company to have access to those courts or authorities with a view to pursuing the
(substantive or procedural) rights it claims to have. […]” (Certain Iranian Assets (Islamic Republic of
Iran v. United States of America), Preliminary Objections, Judgment, I.C.J. Reports 2019, p. 32, para.
70).
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law402 – the Court was not required to and did not interpret the provision conclusively
with reference to Iran’s other claims. In particular, the Court did not find that the
targeted imposition of a condition or restriction, such as measures specifically
removing defences which were previously available under domestic law, would not
breach the obligation to grant free access.
5.15 The United States also contends that the “text [of Article III(2)] protects only ‘access
to the courts’”.403 However, as the Court has highlighted: “The rights […] are
guaranteed ‘to the end that prompt and impartial justice be done’”.404 The United
States disregards these additional words, which are an integral part of the protection
and key to understanding what is meant by “freedom of access”.
5.16 The United States seeks to justify its unduly narrow interpretation of Article III(2) by
arguing that “the provision does not guarantee any substantive or procedural rights”,
and by claiming with respect to the Peterson case that “what ultimately transpired as
a result of these court proceedings is irrelevant”.405 This misses the point. The United
States accepts, as it must, that freedom of access encapsulates procedural rights.406 No
separate question arises as to whether Iranian nationals or companies are (or should
be) entitled to other substantive or procedural rights under U.S. law which have no
bearing on freedom of access to courts. Nor, contrary to the United States’ contention,
is Iran’s claim reducible to a contention that it disagrees with the result reached by the
U.S. courts in certain proceedings.
5.17 In essence, the United States’ position is that, under Article III(2), the Parties have
agreed to a bare guarantee that the nationals and companies of the other Party must be
402 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 32, para. 70.
403 U.S. Counter-Memorial, p. 104, para. 13.26.
404 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 32, para. 70. Cf. U.S. Counter-Memorial, p. 103, para. 13.25 omitting
this sentence.
405 U.S. Counter-Memorial, pp. 105-106, paras. 13.32-13.33.
406 See ibid., pp. 115-116, para. 14.28-14.29.
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allowed physically to enter its courts and participate in proceedings.407 On this
reading, there is nothing to stop a Party from adopting executive or legislative
measures (including retroactive measures) targeting the companies of the other Party
and depriving them of the ability to raise legal defences which would otherwise have
been available to them under domestic law, and which continue to be available to its
own nationals and companies and those of third countries. In other words, according
to the United States, a Party remains free to change its domestic law specifically to
guarantee that the nationals and companies of the other Party lose proceedings before
its courts, such that the supposed freedom of access is an entirely empty protection.408
The United States’ interpretation must be rejected: it would not only impermissibly
limit the requirement of freedom of access, which is expressed in absolute and
unqualified terms, but render this protection illusory.
5.18 Iran agrees with the United States that the jurisprudence of the European Court of
Human Rights (‘ECtHR’) under Article 6 of the ECHR is an appropriate reference
point. The ECtHR has long held that the right of access to court is an inherent aspect
of the safeguards enshrined in the right to a fair trial in Article 6(1) ECHR.409
5.19 In National & Provincial Building Society et al. v. United Kingdom (a case concerning
retrospective legislation which the United States relies on with respect to its
interpretation of the provisions of the Treaty of Amity410), the ECtHR emphasised that
it “will subject to close scrutiny the reasons adduced by the respondent State for
justifying any intervention which may have occurred in pending litigation as a result
407 U.S. Counter-Memorial, p. 103, para. 13.25: “In other words, Article III(2) simply grants a company
the right of access to courts to protect whatever rights the company claims to have. It does not do
anything more”. See also ibid., p. 104, para. 13.29.
408 U.S. Counter-Memorial, p. 106, para. 13.33.
409 See e.g. Zubac v. Croatia, Grand Chamber Judgment, 5 April 2018, para. 76 referring to Golder v.
United Kingdom, 21 February 1975, Series A. no. 18, paras. 28-36. Likewise, the right to equality
before courts and tribunals and to a fair trial under Article 14 of the ICCPR “encompasses the right of
access to the courts”: see HRC General Comment No. 32, para. 9. Further, a situation in which the
executive is able to control or direct the judiciary “is incompatible with the notion of an independent
tribunal”: HRC General Comment No. 32, para. 19.
410 Iran notes that the United States also adopts the position that “the Treaty should be assumed to respect
the customary international law principles of judicial independence and deference”: see U.S. Counter-
Memorial, pp. 115-116, paras. 14.27-14.28.
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of the retrospective effects of [legislation]”.411 The Court elaborated this concern as
follows:
“the Court is especially mindful of the dangers inherent in the use of
retrospective legislation which has the effect of influencing the judicial
determination of a dispute to which the State is a party, including where the
effect is to make pending litigation unwinnable. Respect for the rule of law and
the notion of a fair trial require that any reasons adduced to justify such measures
be treated with the greatest possible degree of circumspection”.412
5.20 On the facts of the case, the ECtHR concluded that there was no breach of the right of
“access to court” under Article 6 ECHR because the United Kingdom’s enactment of
the legislation (in that case, tax legislation designed to remedy a technical defect in
earlier legislation) was justified by “compelling public interest motives”.
5.21 Notably, the United States has not drawn the above passages to the Court’s attention.
5.22 Nor has it mentioned that the statement of principle in the National & Provincial
Building Society case reaffirmed the ECtHR’s earlier judgment in Stran Greek
Refineries.413 It is useful to focus also on that earlier case because there are important
parallels between what Greece was then arguing and the position that the United States
now adopts.
5.23 The Stran Greek Refineries case concerned legislation removing rights arising under
a contract concluded with the former military regime and the invalidation of an
arbitration award in the applicants’ favour while litigation concerning the validity of
the arbitration agreement was pending before the Greek courts. The Court of
Cassation upheld the constitutionality of the legislation and, in implementation of that
legislation, the Greek courts held that the arbitration award was void.
411 See National & Provincial Building Society, et al. v. United Kingdom (117/1996/736/933-935),
Judgment (Oct. 23, 1997), para. 107 (U.S. CM, Annex 188). The Judgment is reported at (1988) 25
EHRR 127.
412 See National & Provincial Building Society, et al. v. United Kingdom, para. 112.
413 National & Provincial Building Society, et al. v. United Kingdom, para. 112 citing Stran Greek
Refineries and Stratis Andreadis v. Greece (1995) 19 EHRR 293, para. 49.
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5.24 In response to Greece’s argument that the legislation was justified in the public
interest of eradicating measures taken by the military regime, the ECtHR did not
“question the Government’s intention to act in response to the Greek people’s concern
that democratic legality be re-established”. However, it found that the relevant
legislation “was in reality aimed at the applicant company – although the latter was
not mentioned by name” and “the legislature’s intervention […] took place at a time
when judicial proceedings in which the State was a party were pending”.414 In other
words, this was a case of targeted legislation.
5.25 Similar to the position of the United States in the present case, Greece argued that the
legislation entailed no breach of Article 6 ECHR because “the applicants had had the
opportunity to put their arguments before the First Division of the Court of Cassation,
which had heard the case on its merits”.415 The ECtHR was “not persuaded by this
reasoning” because:
“the principle of the rule of law and the notion of fair trial enshrined in
Article 6 preclude any interference by the legislature with the
administration of justice designed to influence the judicial determination
of the dispute. The wording of [the legislation] […] effectively excluded
any meaningful examination of the case by the First Division of the
Court of Cassation. Once the constitutionality of those paragraphs had
been upheld by the Court of Cassation in plenary session, the First
Division’s decision became inevitable.
In conclusion, the State infringed the applicants’ rights under Article 6,
para. (1) by intervening in a manner which was decisive to ensure that
the – imminent – outcome of proceedings in which it was a party was
favourable to it”.416
414 Stran Greek Refineries and Stratis Andreadis v. Greece, paras. 46-47.
415 Ibid., para. 48.
416 Ibid., paras. 49-50. In subsequent cases, the ECtHR has concluded that there will be a violation of
Article 6 where the State intervenes in the judicial process in a manner which affects the outcome of
proceedings by determining the substance of pending proceedings and making it pointless for a party
to carry on with the litigation, unless there are “compelling grounds of the general interest”: see e.g.
Zielinski, Pradal, Gonzalez and Others v. France, Grand Chamber Judgment, (2003) EHRR 60, para.
57; Agoudimos v. Greece (2003) 36 EHRR 60, paras. 30-35; Papageorgiou v. Greece
(97/1996/716/913), 22 October 1997; Azienda v. Italy, 48357/07, 24 June 2014, paras 76, 86-89. It is
sufficient that the decision of the domestic court is based even subsidiarily on the intervening act of the
State: see e.g. Anagnostopoulos v. Greece, 39374/98, 7 November 2000, paras 20-21. This is so
irrespective of whether the State is a party to those proceedings: Ducret v. France, 40191/02, 12 June
2007, paras. 33-37.
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5.26 It is also instructive that international courts and tribunals tasked with interpreting
narrower freedom of access clauses than that in Article III(2) of the Treaty, which
clauses are essentially concerned with discrimination, have rejected the narrow
reading of “freedom of access” which the U.S. insists upon.
5.27 In Van Bokkelen’s case of 1888, the sole arbitrator found that there was an “irresistible
inference” that the obligation to accord access under Article VI of the Treaty of 1864
between the United States and Haiti417 “included all the steps and processes of the
judicial tribunals of either of the contracting parties”.418 The arbitrator therefore
rejected Haiti’s attempt (much like the attempt of the United States in the present case)
to “seek to constrain and confine the treaty protection of ‘free access to the tribunals
of justice’ to very narrow limits” and found for the United States.419 This reasoning
has even greater force in the present case since the Court is not concerned with a
freedom of access clause that is qualified by reference to national treatment or even
most-favoured-nation treatment.
5.28 Similarly, in the Ambatielos case, the Commission of Arbitration held that the
obligation to accord “free access to the courts” on a national treatment basis in Article
XV of the 1886 Treaty of Commerce and Navigation between Greece and Great
Britain was not to be interpreted narrowly. Greece argued that the protection was not
limited to allowing a foreign national to go to court and plead his case but that it
included the obligation to make it possible to avail himself of all the documents
necessary for the defence of his rights. The Commission explained:
“when ‘free access to the Courts’ is covenanted by a State in favour of the
subjects or citizens of another State, the covenant is that the foreigner shall enjoy
417 Art VI of the Treaty of 1864 states, so far as pertinent: “The citizens of the contracting parties shall
have free access to the tribunals of justice, in all cases to which they may be a party, on the same terms
which are granted by the laws and usage of the country to native citizens, furnishing security in the
cases required, for which purpose they may employ in the defense of their interests”.
418 J. B. Moore, History and digest of the international arbitrations to which the United States has been a
party, Washington, Gov't Print Off., Vol. II at p. 1825 (IR, Annex 112). See also R. Wilson, United
States Commercial Treaties and International Law (1960), p. 237.
419 Contrary to its position in the present case, the U.S. resisted that very narrow interpretation and argued
that the unavailability for Mr Van Bokkelen (who had been imprisoned for debt) of the right of judicial
assignment (i.e., a debtor’s release from detention on the condition of the surrender of all his property
for the benefit of creditors), which was afforded to Haitian nationals under Haitian law, amounted to a
breach of free access (Claim of Charles Adrian Van Bokkelen v. The Government of Hayti, Brief of
Argument in Support of the Claim, 8 August 1888, p. 13 – IR, Annex 15).
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full freedom […] in short to use the Courts fully and to avail himself of any
procedural remedies or guarantees provided by the law of the land in order that
justice may be administered on a footing of equality with nationals of the
country.” 420
5.29 The Commission found that there would be a breach of free access if inter alia
“conditions, restrictions or taxes beyond those imposed on British subjects were
imposed on him [Mr Ambatielos]; or that he was in some other way denied access to
the English courts”.421
SECTION 2.
VIOLATION OF IRAN’S ENTITLEMENT TO FREEDOM OF ACCESS TO THE U.S.
COURTS FOR ITS COMPANIES UNDER ARTICLE III(2)
5.30 In its Memorial, Iran showed that the U.S. measures violate its entitlement of freedom
of access to the U.S. courts for its companies, “in defence and pursuit of their rights”,
under Article III(2) through:
a. The abrogation of the rights of Iranian companies to recognition of their
separate juridical status, effected through Section 1610(g) FSIA, Section 201
of the TRIA, E.O. 13599, and Section 502 of the ITRSHRA, and the
implementation of those legislative and executive acts by the U.S. courts.422
b. Establishing, by legislation, the liability of Iranian companies for judgments
rendered against the Iranian State by U.S. courts in proceedings to which those
companies were not parties and in respect of facts in which they were not even
420 The Ambatielos Claim (Greece, United Kingdom of Great Britain and Northern Ireland), 6 March
1956, R.I.A.A. Vol. XII, pp. 83-153, para. 111.
421 See The Ambatielos Claim, paras. 111-112. While the provision then at issue expressly referred to
conditions or restrictions on free access, it follows from the Commission’s reasoning that, even absent
such explanatory language, an obligation to accord free access (i.e. “full freedom”) entails that no
conditions or restrictions shall be imposed.
422 Iran’s Memorial, p. 83, para. 5.14.
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alleged, in the (purported) findings of facts in those proceedings, to have been
involved.423
c. The enactment and implementation (through the processes of the U.S. courts)
of legislation having retroactive effect that ultimately enabled the seizure of the
property of these companies (i.e., Section 1605A and 1610(g) FSIA and
Section 502 of the ITRSHRA), including the retroactive change in the law
depriving Bank Markazi of defences upon which it had previously been entitled
to rely and had relied in the Peterson case.424
5.31 It is unnecessary for Iran to repeat its case in any greater detail. The U.S. response to
each of these alleged breaches amounts to nothing more than a restatement of its
unduly restrictive and formalistic interpretation of the unqualified right of “freedom
of access” under Article III(2).425 Thus, the United States repeats its misconceived
argument that Article III(2) “cannot be interpreted as providing other substantive or
procedural rights”,426 Iranian companies “regularly appeared as named defendants,
were represented by experienced counsel, and made detailed legal submissions”, 427
and “[w]hether or not the companies prevailed in these court proceedings is
irrelevant”.428 Iran has already responded to the U.S. interpretation (see
paras. 5.5- 5.29 above).
5.32 The United States complains that Iran “cites to no support for the proposition that
Article III(2) encompasses an obligation with regard to ‘separate’ juridical status”.429
It is, however, the ordinary meaning of the unqualified word “rights” in
Article III(2) that it encompasses Treaty rights, including the right to respect for
separate judicial status under Article III(1) (see para. 5.8 above). The United States
423 Ibid., p. 84, para. 5.15.
424 Iran’s Memorial, p. 85, para. 5.16.
425 U.S. Counter-Memorial, pp. 104-107, paras. 13.29-13.34.
426 Ibid., p. 105, para. 13.31.
427 Ibid., p. 104, para. 13.29.
428 Ibid.
429 Ibid., p. 105, para. 13.31.
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does not engage with this point (beyond repeating its interpretation of Article III(1)),
and instead suggests that Iran is somehow seeking to “create […] [a] new obligation
or right”.430
5.33 In any event, contrary to the U.S. assertion, however, it is not necessary for Iran to
show that the Treaty right of freedom of access to U.S. courts necessarily entails or
requires a freestanding right of Iranian companies to have their separate juridical
status (or any other defence).431 Nor is Iran required to show that the provision
prohibits a “default judgment […] by itself”.432
5.34 Rather, the provision prohibits the abrogation of such rights and defences which have
been conferred as a matter of U.S. law (and/or by the Treaty of Amity). It is no answer
for the United States to say that the relevant rights and defences have been abrogated
by the U.S. measures in accordance with U.S. law, or to point to the content of U.S.
law only after the adverse change and to suggest that the Iranian company must accept
the situation in which it has been placed.
5.35 The United States seeks to place particular weight on the Peterson case in particular,
stating that:
“It strains credulity for Iran to argue that Section 502 [of the ITRSHRA]
deprived access to courts when Bank Markazi not only appeared in the courts,
but also defended its interests all the way through the appellate process,
including a challenge to the constitutionality of Section 502 in the U.S. Supreme
Court”.433
5.36 The United States is wrong to suggest that Iran’s claim concerns “disappointment with
the outcome of [the] court proceedings”.434 This is not a point Iran made in its
Memorial, and the United States has not engaged with Iran’s actual submission that:
430 Cf. ibid.
431 U.S. Counter-Memorial, p. 105, para. 13.31.
432 Ibid., p. 106, para. 13.32. Iran has not claimed that the imposition of default liability judgments against
Iran for alleged wrongful acts was in breach of Article III(2).
433 U.S. Counter-Memorial, p. 106, para. 13.33.
434 Ibid.
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“a right of access to courts must comprise a right to a fair trial before competent
and impartial judges whose ability to reach a decision according to law is not
constrained by retrospective and targeted legislation, and yet such right has been
defeated”.435
5.37 The United States also ignores the obvious and undeniable point recorded by Chief
Justice Roberts and Justice Sotomayor in their joint dissenting opinion in the U.S.
Supreme Court that the purpose and effect of the U.S. measures was:
“changing the law … simply to guarantee that [the Peterson plaintiffs] win. The
law serves no other purpose – a point, indeed, that is hardly in dispute. As the
majority acknowledges, the statute ‘sweeps away … any … federal or state law
impediments that might otherwise exist’ to bar [the Peterson plaintiffs] from
obtaining Bank Markazi’s assets.”436
5.38 The same point applies with respect to the other U.S. court proceedings because, in
each instance, the right to respect for separate juridical status which was previously
protected in U.S. law under the Bancec presumption has been denied to the Iranian
companies through legislative and executive acts, including measures targeted
specifically at Bank Markazi.
5.39 The United States states that “Iran seems to imply that a defence can only be ‘properly’
or ‘meaningfully’ made if it proves successful”.437 This is incorrect. Rather, the
requirement to accord freedom of access to Iranian companies under Article III(2)
means that the United States is prohibited from interfering with such access, including
by abrogating defences which would otherwise have been available to those
companies, and which remain available to companies (including State-owned/Statecontrolled
companies) of other nationalities. A defence can only be made properly or
meaningfully – and access to the court can thus only be meaningful – if it is open to
the court to accept that defence if the conditions for its application are made out. This
is precisely what the U.S. measures sought to prevent.
435 Iran’s Memorial, p. 85, para. 5.16.
436 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).
437 U.S. Counter-Memorial, p. 105, para. 13.31.
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5.40 The United States also claims, with respect to the obligation to accord freedom of
access on the basis of most-favoured nation treatment, that “Iran has not identified
any way in which Iranian companies had ‘less favourable’ access to the courts than
comparably-situated companies of third States”.438 This is misconceived since, unlike
other treaties to which the United States is a party, the protection under Article III(2)
is not limited to the companies of third States “in like circumstances”.439 It is
concerned with more favourable treatment extended to “nationals or companies of
[…] any third country” without any qualification. In any event, the United States has
put forward no suggestion that the central bank (or, indeed, any bank) of any other
State – even that of another country which has been unilaterally designated by the
United States as a so-called “State sponsor of terror” – has been subjected to the same
treatment as Bank Markazi in being made subject to targeted measures which ensure
that the property of that bank is to be enforced and executed against in order to satisfy
liability judgments rendered by the U.S. courts against the bank’s national State.
Likewise, it has not pointed to any such measures having been implemented as they
have been in the Peterson case. Again, there is no basis for seeking to characterise
Iran as attempting to “invent a right to a particular outcome or defence”.440
438 Ibid., p. 107, para. 13.34.
439 Cf. e.g., Article 1103 of the NAFTA.
440 U.S. Counter-Memorial, p. 107, para. 13.34.
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CHAPTER VI
THE BREACHES OF ARTICLE IV(1) OF THE TREATY OF AMITY
SECTION 1.
THE PROTECTIONS WITH RESPECT TO FAIR AND EQUITABLE TREATMENT,
UNREASONABLE OR DISCRIMINATORY MEASURES, AND EFFECTIVE MEANS OF
ENFORCEMENT
6.1 Article IV(1) states:
“Each High Contracting Party shall at all times afford fair and equitable
treatment to nationals and companies of the other High Contracting Party, and
to their property and enterprises; shall refrain from applying unreasonable or
discriminatory measures that would impair their legally acquired rights and
interests; and shall assure that their lawful contractual rights are afforded
effective means of enforcement, in conformity with the applicable laws”.441
6.2 The repetition of the word “shall”, combined with the use of the semi colon and the
conjunction “and”, shows that Article IV(1) imposes three separate obligations. It is
perplexing that this has been put in issue by the United States.
6.3 The United States puts forward the most restrictive – and unconvincing – interpretation
of Article IV(1). It contends that each of the three separately expressed elements – the
fair and equitable treatment provision, the prohibition on unreasonable or
discriminatory measures that would impair legally acquired rights, and the requirement
to afford effective means of enforcement for lawful contractual rights – is limited by
reference to a single protection against a denial of justice under the international
minimum standard as it stood in 1955.442 It goes so far as to contend that – despite the
plainly mandatory nature of the language used – “shall” – the second and third
elements do not establish independent obligations and serve only to “inform how this
obligation [the obligation not to deny justice] is to be interpreted and applied”.443
441 Emphasis added.
442 See U.S. Counter-Memorial, p. 118, para. 14.32. On the question of timing see ibid., p. 107, para. 14.3.
443 U.S. Counter-Memorial, p. 110, para. 14.12.
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A. Article IV(1) establishes three discrete obligations
6.4 The United States’ interpretation is contrary to the ordinary meaning of the text of
Article IV(1) in its context and in light of its object and purpose, and amounts to an
attempt to rewrite this provision. The apparent aim is to raise the threshold for Iran’s
claims under Article IV(1), and to seek to introduce a generalised requirement for the
exhaustion of local remedies, which is not present in the Treaty.444 At a very obvious
level:
a. If the Parties had agreed to the narrow scope which the United States now insists
upon, they would not have used language establishing three separate obligations
in Article IV(1), not one of which – pursuant to its ordinary meaning – is
confined to (or even uses the language of) denial of justice. They would instead
have used a quite different formulation including, if the second and third
elements of Article IV(1) were indeed to be merely subsidiary, by using
connective words after the fair and equitable treatment standard such as
“including” or “in particular”.
b. As noted in Iran’s Memorial, any interpretation that would require that the
different elements of Article IV(1) are merely duplicative would cut across the
principle of effectiveness.445 The United States has not engaged with this
obvious point. Indeed, it is to be noted that certain earlier treaties concluded by
the United States, such as that at issue in the ELSI case, contained a prohibition
against arbitrary or discriminatory measures but no fair and equitable treatment
provision.446 On the United States’ current position, the introduction of the fair
and equitable provision served no purpose. That is not a tenable position.
6.5 The context confirms Iran’s interpretation as to the existence of three free-standing
obligations in Article IV(1). Thus, other provisions of the Treaty contain more than
444 See U.S. Counter-Memorial, p. 118, para. 14.31.
445 Iran’s Memorial, p. 88, para. 5.24(a).
446 See Article 1, Supplementary Agreement dated 26 September 1951 to the United States – Italy Treaty
of Friendship, Commerce and Navigation 1948, quoted at Elettronica Sicula S.p.A (ELSI), Judgment,
I.C.J. Reports 1989, pp. 71-72, para. 120.
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one independent obligation, as indeed the United States accepts. This is the case for
example for Article IV(2) which contains a requirement to afford the most constant
protection and security and a separate prohibition against takings.
6.6 Supplementary means of interpretation may be resorted to in order to confirm that,
properly interpreted, Article IV(1) confers separate standards of protection, as follows
from the materials cited at paragraph 6.19 below.
6.7 The United States is therefore incorrect in claiming that it intended for Article IV(1)
to contain only a single obligation. Further, as explained in greater detail in
sub- section B below, it is likewise incorrect that the obligation of fair and equitable
treatment under Article IV(1) is limited to denial of justice under the international
minimum standard.
6.8 Before turning to the detail, Iran notes the United States’ assertion that, in the Judgment
on Preliminary Objections, the Court “recognized that the relevant provisions of
Article IV are circumscribed by the customary international law rules governing the
minimum standard of treatment, contrary to the interpretation put forward by Iran”.447
This is plainly incorrect. The United States has elected to misread the Court’s
reasoning that “the purpose of Article IV is to guarantee certain rights and minimum
protections for the benefit of natural persons and legal entities engaged in activities of
a commercial nature”.448 There is nothing here to suggest that the Court had in mind
minimum standards existing in customary international law, as opposed to minimum
protections as established by the Treaty. To the contrary, the Court was expressly
focusing on Treaty protections and thereby rejecting Iran’s argument on immunity
protections that exist as a matter of customary international law. Moreover, the Court
referred to “certain rights” as well as “minimum protections”, such that even if the
latter had been limited to minimum protections under customary international law,
447 U.S. Counter-Memorial, p. 108, para. 14.7.
448 Ibid., referring to Certain Iranian Assets (Islamic Republic of Iran v. United States of America),
Preliminary Objections, Judgment, I.C.J. Reports 2019, p. 28, para. 58.
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there is nothing to suggest that Article IV (including the fair and equitable treatment
provision in Article IV(1)) does not establish discrete Treaty rights.449 It plainly does.
B. Fair and equitable treatment
6.9 As Iran demonstrated in its Memorial, properly interpreted and applied, the U.S.
measures are in breach of various elements of the obligation to accord fair and
equitable treatment under Article IV(1) of the Treaty of Amity: the U.S. measures are
arbitrary, grossly unfair, unjust and idiosyncratic;450 discriminatory;451 constitute a
lack of due process leading to an outcome which offends judicial propriety, including
through a denial of justice;452 and defeat the legitimate expectations of Iranian
companies.453
6.10 The United States has elected not to engage with many of Iran’s arguments regarding
the ordinary meaning to be given to the fair and equitable treatment provision in its
context and in light of the object and purpose of the Treaty.454 It does not dispute, for
example, that:
a. Fair and equitable treatment is to be accorded “at all times” both to Iranian
companies and to the property (i.e., all forms of property, whether tangible or
intangible, and including interests in property as in Article IV(2)) and
enterprises of such companies;455
449 Cf. Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary
Objections, Judgment, I.C.J. Reports 2019, p. 28, para. 57, finding that the reference to “international
law” in Article IV(2) is to the minimum standard of protection for property.
450 Iran’s Memorial, pp. 90-91, paras. 5.29-5.30 and p. 96, para. 5.44.
451 Iran’s Memorial, p. 91, para. 5.31 and p. 97, para. 5.45.
452 Ibid., pp. 91-93, paras. 5.32-5.35 and p. 98, para. 5.46.
453 Ibid., p. 93, para. 5.36 and p. 98, para. 5.47.
454 See ibid., pp. 87-89, paras. 5.22-5.25.
455 See ibid., pp. 87-88, para. 5.23(a) and p. 89, para. 5.24(b). The United States also does not dispute that
– as with respect to Article III – each element of protection is afforded to “companies” as broadly
defined (see Article III(1)) and without qualification, i.e. protection is afforded to companies including
those that are wholly or partly owned or controlled by one of the High Contracting Parties. See below
Chapter VII, Section 1(A), p. 169, paras. 7.1-7.10.
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b. The treatment to be accorded is not restricted by any territorial limitation on the
place where the “treatment” occurs.456
6.11 The United States’ interpretation depends upon reading the fair and equitable treatment
provision as a renvoi to the customary international law minimum standard of
treatment. This is an essential part of its contention that the provision is further limited
to a prohibition against denial of justice. The United States thus contends both that the
fair and equitable treatment provision “subsum[es]”457 or “encompasses”458 or “in
particular […] includes”459 the customary international law prohibition on denial of
justice,460 and further that it is limited to a prohibition on denial of justice only.461
6.12 Since it occupies a central place in the United States’ pleading, Iran will show that this
interpretation should be rejected because (i) the fair and equitable treatment provision
in Article IV(1) is not limited to the customary international minimum standard,
(ii) even if the provision were so limited, it would still not be confined to a protection
against denial of justice, and (iii) the provision is not static. However, it is to be
emphasised that the U.S. measures amount to a breach of the fair and equitable
treatment obligation of Article IV(1), including because they entail a denial of justice.
Thus, the United States’ restrictive interpretation (even if it were to be accepted) is in
no way an answer to Iran’s claim under the fair and equitable treatment provision in
Article IV(1).
456 See Iran’s Memorial, p. 88, para. 5.23(c).
457 U.S. Counter-Memorial, p. 109, para. 14.9.
458 Ibid., p. 110, para. 14.12.
459 Ibid., p. 107, para. 14.3.
460 See also ibid., p. 109, para. 14.9, note 357 stating that “the term ‘fair and equitable treatment’ is
sometimes used as shorthand to refer to all the obligations encompassed within the minimum standard
of treatment”. The United States does not, however, explain whether this is how it interprets the fair
and equitable treatment provision in Article III(2).
461 Ibid., p. 108, para. 14.4: “Iran’s claims under Article IV(1) do not meet the high threshold necessary to
establish that companies or nationals have been denied justice by the United States”. See also ibid., p.
110, para. 14.14 and p. 113, para. 14.23 (“for Iran’s claims under Article IV(1) to succeed, it must
establish that the challenged measures have resulted in a denial of justice”).
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i. The fair and equitable treatment provision in Article IV(1) is not limited to the
customary international minimum standard
6.13 Iran notes that the United States is unable to put forward any textual basis for its
position that this provision is limited to the customary international minimum standard.
Unlike other provisions of the Treaty, the fair and equitable treatment provision (and,
indeed, Article IV(1) as a whole) contains no reference to “international law” or to the
“international minimum standard”.462 Moreover, if the Parties had agreed to limit
Article IV(1) to a prohibition against “denial of justice”, they would have done so
expressly by referring (exclusively) to this concept, but they did not.
6.14 The United States has also elected not to engage with the point that Article IV(1) is
materially broader than fair and equitable treatment provisions in other treaties it has
concluded.463 Instead, it seeks to rely on its pleadings in cases concerning
Article 1105(1) of the NAFTA which, as Iran highlighted in its Memorial, uses
materially different language to Article IV(1) of the Treaty of Amity.464 Indeed, the
United States’ position in NAFTA cases relied primarily on the specific language used
in Article 1105(1). For example, in its memorial in Methanex v. USA, the United States
submitted that –
“the drafters of Chapter Eleven excluded any possible conclusion that the parties
were diverging from the customary international law concept of fair and
equitable treatment. Accordingly, they chose a formulation that expressly tied
fair and equitable treatment to the customary international minimum standard
rather than some subjective, undefined standard.”465
462 Nor is there anything in the Treaty text that indicates that a party’s conduct will amount to a breach of
the provision only if it is, “grossly unfair”, “egregious” or “manifest” such that it would shock the
conscience or offend a sense of juridical propriety. The treatment required “at all times” is simply “fair
and equitable treatment”.
463 See Iran’s Memorial, p. 88, para. 5.23(b) referring to NAFTA, Article 1105, as interpreted by the
NAFTA Commission.
464 U.S. Counter-Memorial, pp. 109-110, paras. 14.8-14.10.
465 Methanex Corp. v. United States, NAFTA/UNCITRAL, Memorial on Jurisdiction and Admissibility
of Respondent United States of America (13 November 2000), p. 42 (U.S. CM, Annex 143). See also
to the same effect e.g. Mondev International Ltd. v. United States of America, I.C.S.I.D. Case No.
ARB(AF)/99/2, U.S. Counter-Memorial (1 June 2001), p. 34; Pope & Talbot v. Government of Canada,
Fourth submission of the United States (1 November 2000); Pope & Talbot, Fifth Submission of the
United States (1 December 2000), para. 7.
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6.15 The United States has not attempted in the current Counter-Memorial to explain how
its arguments concerning the interpretation of Article 1105(1) of the NAFTA are
relevant to the interpretation of the very differently-worded Article IV(1) of the Treaty
of Amity.
6.16 It is also curious that, at the same time, the United States should seek to dissuade the
Court from considering the reasoning on the interpretation of the fair and equitable
treatment standard of the tribunal in a different NAFTA case, Waste Management v.
Mexico (2004), which Iran referred to in its Memorial because this reasoning has been
widely referred to outside the NAFTA context.466
a. According to the United States, this is an Award “rendered more than
fifty years after the Parties signed the Treaty of Amity that did not
engage and has no direct bearing on the Treaty”.467 Yet the United States
places weight on its submissions made before NAFTA tribunals
between 2000 and 2008 on the meaning of Article 1105(1) of the
NAFTA,468 as to which precisely the same point could be made. To the
same effect, it can be said of the United States’ reliance on the 2001
interpretation issued by the NAFTA Contracting States pursuant to
Article 1131 NAFTA469 that this post-dates the Treaty of Amity by
many decades, concerns different treaty wording, and has no bearing on
the Treaty of Amity.470
b. The relevance of the Waste Management case is that this has been
widely followed as to its summation of the elements of the fair and
equitable treatment standard, both where this is tied through treaty
466 U.S. Counter-Memorial, pp. 110-111, para. 14.15; cf. Iran’s Memorial, p. 90, para. 5.27.
467 U.S. Counter-Memorial, p. 95, para. 12.8.
468 See ibid., p. 109, para. 14.8.
469 Ibid., p. 111, para. 14.15.
470 Moreover, the sole effect of the 2001 interpretation of Article 1105(1) NAFTA was that this provision
should be interpreted as limited to the customary international minimum standard. There is no such
agreement with respect to Article IV(1) of the Treaty of Amity. Indeed, prior to this case, the United
States has not even proposed to Iran that the Treaty Parties should adopt an interpretation of Article
IV(1) to this effect.
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language to the customary international law minimum standard and
where it is not.
6.17 As to context, the United States contends that “the provisions of Article IV must be
read in the context of Article IV as a whole”.471 This is correct. Yet the United States
then suggests that the reference in the full protection and security provision of
Article IV(2) to “international law” somehow supports its interpretation that the fair
and equitable treatment standard in Article IV(1) is qualified by reference to the
international law minimum standard. To the contrary, as Iran explained in its
Memorial:
“The standard of fair and equitable treatment established is not qualified,
whether by reference to the customary international law minimum standard of
treatment or otherwise. This suggests that, unlike other treaties to which the
United States is a party,472 there was no intention to restrict the
Article IV(1) standard of fair and equitable treatment to the customary
international law minimum standard. By contrast, at Article IV(2), the Treaty
Parties did choose to refer to ‘international law’ in formulating the protection
afforded to national companies”.473
6.18 As to the object and purpose of the Treaty, as Iran noted in its Memorial, a key aim in
the Preamble is “encouraging mutually beneficial trade and investments and closer
economic intercourse generally between their peoples”. The United States does not
disagree with Iran’s position that this aim suggests that one object and purpose of the
Treaty would be to establish, so far as concerns protected nationals and companies
engaged in trade and investment, an important degree of stability and predictability in
the legal and regulatory regimes of each Party. This is consistent with Iran’s
interpretation of the fair and equitable treatment standard in Article IV(1).474
6.19 Supplementary means of interpretation confirm that the formulation “fair and equitable
treatment” was intended to afford a broad standard of protection, which was neither
471 U.S. Counter-Memorial, p. 107, para. 14.3.
472 See, e.g., NAFTA, Article 1105, as interpreted by the NAFTA Commission: see NAFTA Free Trade
Commission, Statement on NAFTA Article 1105 and the Availability of Arbitration Documents, 31 July
2001. For analogous reasoning, see also Liman Caspian Oil BV and Dutch Investment BV v. Republic
of Kazakhstan, I.C.S.I.D. Case No. ARB/07/14, Award, 22 June 2010, at para. 263.
473 Iran’s Memorial, p. 89, para. 5.24(b).
474 Iran’s Memorial, p. 89, para. 5.25.
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duplicative of the other separate elements of Article IV(1) nor confined to the
customary international law minimum standard of treatment:
a. The formulation is one that, according to U.S. sources, the “State
Department never attempted to describe exhaustively” and accepted “may
not be susceptible of precise definition”.475
b. As recognised by a commentator that the United States relies on,
Vandevelde,476 the fair and equitable treatment provision “imposed an
independent standard of treatment”,477 and “imposed an independent
obligation on treaty parties that provided a basis for challenging the legality
of host state treatment in situations where the other, more precise provisions
of the treaty did not apply”.478 He characterises the provision as establishing
“a blanket rule of equitable treatment”,479 and:
“was intended ‘to suggest a general policy of liberal, rather than of
narrow construction of the provisions of the treaty.’ Where more than
475 Memorandum dated March 28, 1947, from Vernon Setser to Seymour Rubin, NARA, Record Group
59, Department of State Lot Files, Walter Hollis Papers, quoted in K. Vandevelde, The First Bilateral
Investment Treaties: U.S. Postwar Friendship, Commerce and Navigation Treaties (2017), p. 406. This
is consistent with the view expressed more recently by the tribunal in Waste Management, Award,
30 April 2004, para. 99, that: “Evidently the standard is to some extent a flexible one which must be
adapted to the circumstances of each case”.
476 See U.S. Counter-Memorial, p. 13, para. 4.4 citing K. Vandevelde, The First Bilateral Investment
Treaties: U.S. Postwar Friendship, Commerce and Navigation Treaties (2017) (U.S. CM, Annex 3).
In preparing this Reply, Iran has been unable to obtain access to the NARA facility (the only institution
which holds the U.S. records referred to by Professor Vandevelde) because this facility has been closed
due to the ongoing COVID-19 pandemic.
477 K. Vandevelde, The First Bilateral Investment Treaties: U.S. Postwar Friendship, Commerce and
Navigation Treaties (2017), p. 402 (U.S. CM, Annex 3).
478 K. Vandevelde, The First Bilateral Investment Treaties: U.S. Postwar Friendship, Commerce and
Navigation Treaties (2017), p. 412 (U.S. CM, Annex 3). See also p. 403 noting that: “During
negotiations with Belgium, it [the State Department] explained that the purpose of the fair and equitable
treatment standard was ‘to establish a blanket rule of equitable treatment to be applicable in cases or
situations which may not happen to be covered by more specific provisions elsewhere in the treaty’.
During negotiations with India, the State Department explained that the provision ‘provides a general
guidance as to the treatment to be accorded where more specific rules are lacking or sufficient’”.
479 K. Vandevelde, The First Bilateral Investment Treaties: U.S. Postwar Friendship, Commerce and
Navigation Treaties (2017), p. 403 (U.S. CM, Annex 3). Although in one example the United States
referred to a measure that was “grossly unjust”, and such a statement made today would naturally be
viewed through the prism of the Court’s definition of “arbitrariness” in ELSI, “such extreme language
was rare” and “[i]n any event, this illustration was merely an example of a measure that would violate
the standard. Gross injustice was sufficient, but as suggested by the absence of similar language in
diplomatic correspondence, it was not necessary to constitute a violation of the fair and equitable
treatment standard”: pp. 409-410 (U.S. CM, Annex 3).
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one construction of the treaty language was equally possible, the
construction that would lead to an equitable result was to be preferred.
That is, it provided an interpretive principle for the remaining
provisions of the treaty.”480
c. Iran’s interpretation of Article IV(1) is also confirmed by the testimony
before the Senate Committee on Foreign Relations of a U.S. State
Department senior official explaining the scope of the Treaty of Amity.481
The then Deputy Assistant Secretary of State for Economic Affairs informed
the Committee that the Treaty “strengthen[s] the hands of the Government
for the protection of the interests of American citizens abroad in many fields
of activity”,482 and is intended to make “at least a modest contribution to the
development of the rule of law and of fair treatment of the foreigner and his
enterprise”.483
6.20 As follows from the above, the United States’ current position that the fair and
equitable treatment provision in Article IV(1) is limited by reference to the customary
international law minimum standard is misconceived and should be rejected.
Article IV(1) contains a binding treaty obligation that requires the United States to
accord fair and equitable treatment to Iranian nationals and companies as well as their
property and enterprises.
480 K. Vandevelde, The First Bilateral Investment Treaties: U.S. Postwar Friendship, Commerce and
Navigation Treaties (2017), pp. 405-406, citing Instruction dated October 30, 1953, from the
Department of State to the U.S. High Commissioner in Bonn, NARA, Record Group 59, Department
of State File No. 611.62A4/10-653; Despatch dated February 26, 1954, from the U.S. High
Commissioner in Bonn to the Department of State, NARA, Record Group 59, Department of State File
No. 611.62A4/2-2654; Airgram dated December 31, 1951, from the Department of State to the U.S.
Political Adviser in Tokyo, NARA, Record Group 59, Department of State File No. 611.944/12-751.
481 Statement of Thorsten V. Kalijarvi, Deputy Assistant Secretary of State for Economic Affairs (U.S.
CM, Annex 1).
482 Ibid., p. 2 (U.S. CM, Annex 1).
483 Ibid., p. 3 (U.S. CM, Annex 1).
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ii. Even if fair and equitable treatment provision in Article IV(1) were limited to
the international minimum standard, it would not be confined to a protection against
denial of justice
6.21 It is common ground between the Parties that Iran’s claim with respect to denial of
justice is correctly brought under the fair and equitable treatment in Article IV(1). For
completeness, moreover, Iran notes that even if this provision were limited by
reference to the international minimum standard, on any view the fair and equitable
treatment standard in Article IV(1) would not be confined to a protection against denial
of justice only. Rather, as Iran explained in its Memorial, the standard will certainly
be breached by conduct of the United States that:
a. is arbitrary, grossly unfair, unjust or idiosyncratic;
b. is discriminatory;
c. involves a lack of due process leading to an outcome which offends judicial
propriety; and/or
d. defeats the legitimate expectations of Iranian nationals and companies.484
6.22 The United States contends that: “While the obligation not to deny justice has
crystallized as part of the customary international law minimum standard of treatment,
the three other obligations that Iran seeks to ground in Article IV(1) have not”.485 While
the United States wishes to place particular reliance on Article 1105(1) of the NAFTA,
it has disregarded (and appears to disagree with) numerous cases which have
interpreted even that NAFTA provision as encompassing conduct that is arbitrary,
484 Iran’s Memorial, p. 89, para. 5.26.
485 U.S. Counter-Memorial, p. 110, para. 14.14.
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grossly unjust, idiosyncratic or discriminatory.486 This includes Glamis Gold, a case
the United States currently relies on.487
6.23 The United States’ assertion that “Waste Management is the only authority Iran cites
for the test that it would have the Court apply in assessing the challenged measures”488
also ignores the cases cited in the Memorial as support for Iran’s interpretation.489 If
further support were needed in terms of tribunals following the Waste Management II
case in the context of treaties referring to the international minimum standard (unlike
here), reference may be made to many other cases.490
6.24 As to the contention that the reasoning of the tribunal in Waste Management II (which
was presided over by Professor, now Judge, Crawford), “does not accurately reflect
the fair and equitable treatment obligation under customary international law’s
minimum standard of treatment”:
a. In support of this criticism, the United States cites only the 2001 interpretation
of Article 1105(1) adopted by the Free Trade Commission acting under
Article 1131 of the NAFTA. Yet the tribunal in Waste Management II
486 Glamis Gold Ltd. v. United States of America, Award, 8 June 2009, para. 22 (U.S. CM, Annex 148);
Cargill, Incorporated v. United Mexican States, I.C.S.I.D. Case No. ARB(AF)/05/2, Award,
18 September 2009; Murphy; International Thunderbird Gaming Corporation v. The United Mexican
States, I.C.S.I.D., Arbitral Award, 26 January 2006; Mobil Investments Canada Inc. and Murphy Oil
Corporation v. Government of Canada (I), I.C.S.I.D. Case No. ARB(AF)/07/04, Decision on Liability
and Principles of Quantum, 22 May 2012; Railroad Development Corporation (RDC) v. Republic of
Guatemala, I.C.S.I.D. Case No. ARB/07/23, Award, 29 June 2012, para. 219 (“The Tribunal finds that
Waste Management II persuasively integrates the accumulated analysis of prior NAFTA tribunals and
reflects a balanced description of the minimum standard of treatment. The Tribunal accordingly adopts
the Waste Management II articulation of the minimum standard for purposes of this case”.
487 See U.S. Counter-Memorial, p. 139, para. 14.82 and U.S. CM, Annex 148.
488 U.S. Counter-Memorial, p. 111, para. 14.15.
489 See Iran’s Memorial, para. 5.27 citing the examples of Perenco Ecuador Limited v. Republic of
Ecuador, I.C.S.I.D. Case No. ARB/08/6, Decision on Remaining Issues of Jurisdiction and Liability,
12 September 2014, para. 558; Quiborax S.A. and Non-Metallic Minerals S.A. v. Plurinational State of
Bolivia, I.C.S.I.D. Case No. ARB/06/2, Award, 16 September 2015, para. 291; Liman Caspian Oil BV
and Dutch Investment BV v. Republic of Kazakhstan, I.C.S.I.D. Case No. ARB/07/14, Award, 22 June
2010, para. 263, para. 285.
490 See e.g. Railroad Development Corporation (RDC) v. Republic of Guatemala, I.C.S.I.D. Case No.
ARB/07/23, Award, 29 June 2012, para. 219 with respect to Article 10.5 of CAFTA: “The Tribunal
finds that Waste Management II persuasively integrates the accumulated analysis of prior NAFTA
Tribunals and reflects a balanced description of the minimum standard of treatment. The Tribunal
accordingly adopts the Waste Management II articulation of the minimum standard for the purposes of
this case”.
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(i) explicitly applied that interpretation which (ii) in any event does not specify
the content of the international minimum standard.491
b. Whereas the United States seeks to criticise the tribunal for “fail[ing] to ground
its test in a review of state practice and opinio juris, relying instead on other
arbitral awards”, the tribunal explicitly recalled the reasoning in ADF that “any
general requirement to accord ‘fair and equitable treatment’ and ‘full protection
and security’ must be disciplined by being based on State practice and judicial
or arbitral caselaw or other sources of customary or general international
law”.492 Further, the tribunal’s conclusion as to the content of the minimum
standard of treatment of fair and equitable treatment was based on a careful
survey of NAFTA arbitral awards.493
c. Further, the United States overlooks the fact that the International Law
Commission has confirmed that, consistent with Article 38(1)(d) of the Court’s
Statute: “Decisions of international courts and tribunals, in particular the
International Court of Justice, concerning the existence of rules of customary
international law are a subsidiary means for the determination of such rules”.494
iii. The “fair and equitable treatment” provision in Article IV(1) is not static
6.25 The United States is also incorrect to suggest that the phrase “fair and equitable
treatment” must be interpreted strictly “as it was understood at the time of the Treaty’s
conclusion”.495 On any reading (i.e., irrespective of whether a renvoi to customary
international law is required) the provision is to be given an evolutionary
interpretation.
491 See Waste Management, Inc. v. United Mexican States, I.C.S.I.D. Case No. ARB(AF)/00/3, Award,
30 April 2004 (Waste Management II), para. 90.
492 Waste Management II, para. 96 citing ADF, para. 184.
493 See Waste Management II, paras. 91-98.
494 Draft Conclusion 13(1), Draft conclusions on identification of customary international law 2018.
495 U.S. Counter-Memorial, p. 107, para. 14.3.
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6.26 In Dispute regarding Navigational and Related Rights, the Court reasoned that:
“there are situations in which the parties’ intent upon conclusion of the treaty
was, or may be presumed to have been, to give the terms used – or some of them
– a meaning or content capable of evolving, not one fixed once and for all, so as
to make allowance for, among other things, developments in international law.
In such instances it is indeed in order to respect the parties’ common intention
at the time the treaty was concluded, not to depart from it, that account should
be taken of the meaning acquired by the terms in question upon each occasion
on which the treaty is to be applied”.496
6.27 Thus, an application of Article 31(1) of the Vienna Convention may lead to the
conclusion that:
“where the parties have used generic terms in a treaty, the parties necessarily
having been aware that the meaning of terms was likely to evolve over time, and
where the treaty has been entered into for a very long period or is ‘of continuing
duration’, the parties must be presumed, as a general rule, to have intended those
terms to have an evolving meaning.”497
6.28 This is the case with respect to the fair and equitable treatment provision in
Article IV(1) of the Treaty of Amity. The generic nature and breadth of the terms “fair
and equitable” appear as a paradigm example of terms to be given an evolutionary
interpretation. Further, the Treaty is intended to be of continuing duration,498 and the
object of “firm and enduring peace and sincere friendship” is recorded in Article 1.499
The Court has confirmed that the “spirit and intent” of this objective:
“animate[s] and give[s] meaning to the entire treaty and must, in case of doubt,
incline the Court to the construction which seems more in consonance with its
496 Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua), Judgment, I.C.J.
Reports 2009, p. 242, para. 64.
497 Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua), Judgment, I.C.J.
Reports 2009, p. 243, para. 66. Applying these principles, the Court found that the term “comercio” in
the 1958 treaty between Costa Rica and Nicaragua on the settlement of territorial disputes was to be
given an evolutionary interpretation because it is a generic term “referring to a class of activity” (i.e.
commerce) and the 1958 treaty was entered into for an unlimited duration, as was evident from its
object and purpose.
498 Article XXII provides that the Treaty “shall remain in force for ten years and shall continue in force
thereafter until terminated as provided herein”.
499 The Treaty, in fact, endured for more than sixty years before the United States issued its notification of
termination in response to the Court’s Order on Provisional Measures in the Alleged Violations case.
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overall objective of achieving friendly relations over the entire range of
activities covered by the Treaty.”500
6.29 For completeness, the United States is wrong insofar as it suggests that the
international minimum standard is to be understood as “crystallized”501 in 1955. This
standard could not be static but (as a rule of customary international law) it evolves.
The United States omits to mention that, before NAFTA tribunals, it has expressly
stated that the minimum standard of treatment does evolve and is “constantly in a
process of development”.502 Further, even the standard as advanced by the United
States requires an assessment of what (for example) is outrageous.503 The assessment
of the international community and this Court as to what is outrageous could not be
the same as in the mid-1920s, which the United States takes as the source for this
test.504
iv. The elements of the fair and equitable treatment provision in Article IV(1)
6.30 As regards the first three elements of the fair and equitable treatment provision (as
identified at paragraph 5.26 of Iran’s Memorial and paragraph 6.21 above), the United
States does not dispute Iran’s understanding of measures which are (a) arbitrary,
500 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 820, para. 52. See also para. 31 stating that the objective in Article 1 “is such as
to throw light on the interpretation of the other Treaty provisions”. In his Separate Opinion at the
provisional measures stage of the Alleged Violations case, after referring to the above passages of the
Court’s Judgment in Oil Platforms, Judge Trindade stated that: “The Court thus found that Article 1 of
the 1955 Treaty of Amity allows it to undertake an evolutionary interpretation of the relevant provisions
of the Treaty”: Alleged Violations of the 1955 Treaty of Amity, Economic Relations, and Consular
Rights (Islamic Republic of Iran v. United States of America), Provisional Measures, Sep. Op. Judge
Trindade, I.C.J. Reports, p. 657, para. 13.
501 U.S. Counter-Memorial, p. 109, para. 14.8.
502 See, e.g., ADF Group Inc v. United States of America, I.C.S.I.D. Case No. ARB(AF)/00/1, Award,
9 January 2003, para. 179. See also Waste Management, Award, para. 92.
503 U.S. Counter-Memorial, pp. 118-119, paras. 14.34-14.35.
504 See, e.g., Glamis Gold Ltd. v. United States of America, Award, 8 June 2009 (‘Glamis’), para. 22,
noting by reference to the 1926 Neer standard that “it is entirely possible that, as an international
community, we may be shocked by State actions now that did not offend us previously” (Neer and
Neer v. United Mexican States, Mixed Claims Commission United States-Mexico, Decision,
15 October 1926).
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grossly unjust, unfair or idiosyncratic,505 (b) discriminatory,506 or (c) involve a lack of
due process leading to an outcome which offends judicial propriety, and in particular
conduct which would support a complaint of a denial of justice.507 Rather, as discussed
above, it contends that any such measures will breach Article IV(1) only if they amount
to a denial of justice under the international minimum standard.
6.31 As to (a), it is well established that a measure will not be arbitrary for the purposes of
the fair and equitable treatment standard if it is reasonably related to a rational policy.
This, however, requires a consideration both as to the existence of a rational policy and
the reasonableness of the act of the State in relation to the policy, as to which it is
appropriate to consider the proportionality of the given measure. As noted by the
arbitral tribunal in the Electrabel case:
“Standard for ‘Arbitrariness’: [...] this Tribunal agrees with the Saluka, AES,
and Micula tribunals in that a measure will not be arbitrary if it is reasonably
related to a rational policy. As the AES tribunal emphasised, this requires two
elements: ‘the existence of a rational policy; and the reasonableness of the act
of the state in relation to the policy. A rational policy is taken by a state
following a logical (good sense) explanation and with the aim of addressing a
public interest matter. Nevertheless, a rational policy is not enough to justify all
the measures taken by a state in its name. A challenged measure must also be
reasonable. That is, there needs to be an appropriate correlation between the
state’s public policy objective and the measure adopted to achieve it. This has
to do with the nature of the measure and the way it is implemented.’ In the
Tribunal’s view, this includes the requirement that the impact of the measure on
the investor be proportional to the policy objective sought. The relevance of the
proportionality of the measure has been increasingly addressed by investment
tribunals and other international tribunals, including the ECtHR. The test for
proportionality has been developed from certain municipal administrative laws
and requires the measure to be suitable to achieve a legitimate policy objective,
necessary for that objective, and not excessive considering the relative weight
of each interest involved.”508
505 See Iran’s Memorial, pp. 90-91, paras. 5.29-5.30. Cf. U.S. Counter-Memorial, p. 112, para. 14.18.
506 See Iran’s Memorial, p. 91, para. 5.31. Cf. U.S. Counter-Memorial, p. 112, para. 14.18.
507 See Iran’s Memorial, pp. 91-92, para. 5.32-5.35. Cf. U.S. Counter-Memorial, p. 112, para. 14.18.
508 Electrabel S.A. v. Republic of Hungary, I.C.S.I.D. Case No. ARB/07/1-9, Award, 25 November 2015,
para. 179 (footnotes omitted, emphasis added). See also Hydro Energy 1 S.à r.l. and Hydroxana
Sweden AB v. Kingdom of Spain, I.C.S.I.D. Case No. ARB/15/42, Decision on Jurisdiction, Liability
and Directions on Quantum, 9 March 2020, paras. 573–574.
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6.32 As follows from the reasoning of the tribunal in Blusun, an assessment of whether a
measure is disproportionate may be of particular value in assessing whether conduct is
in violation of the FET standard because it “carries in-built limitations and is more
determinate. It is a criterion which administrative law courts and human rights courts,
have become accustomed to apply to government action”.509
6.33 As to (b), discriminatory conduct, Iran considers this further in the context of the
prohibition of unreasonable or discriminatory measures (section C).
6.34 As to (c), the United States is also wrong insofar as it suggests that the fair and
equitable treatment standard protects against due process in the judicial context only
to the extent of prohibiting measures that amount to a denial of justice.510
6.35 The attempt to elide all alleged breaches concerning judicial acts with denial of justice
has been rejected by various investor-State arbitration tribunals.511 For example, the
tribunal in Tatneft v. Ukraine reasoned that the fair and equitable treatment standard
encompasses both a protection against denial of justice (as well as protection against
arbitrary and unreasonable measures and discrimination) and the right to procedural
propriety and due process.512 It rejected the respondent’s contention that “the
governing element of a finding of liability is ‘the egregiousness of the acts constituting
denial of due process’”, reasoning persuasively that:
“Judicial impropriety, grave and manifest injustice and bad faith […] indeed
have a very important role to play in the consideration of liability for breach of
509 Blusun S.A., Jean-Pierre Lecorcier and Michael Stein v. Italian Republic, I.C.S.I.D. Case No.
ARB/14/3, Award, 27 December 2016, para. 318 (‘Blusun’). It is noted that according to the tribunal
in Blusun (which was chaired by Judge Crawford) that the FET at issue (Art 10 ECT) is intended to
reflect the customary international law minimum standard: see para 319(3).
510 The U.S. position is unclear since, on the one hand, the Counter-Memorial refers to denial of justice as
an example of “a breach of Article IV(1) based on judicial acts” and, on the other hand and in the same
passage, the United States also asserts that any such alleged breach will arise “only if the justice system
of the State as a whole (i.e., until there has been a decision of the court of last resort available) produces
a denial of justice”: see U.S. Counter-Memorial, para. 14.37.
511 See e.g. ECE Projektmanagement v. The Czech Republic, UNCITRAL, PCA Case No. 2010-5, Award,
19 September 2013, paras. 4.742–4.743; OAO Tatneft v. Ukraine, UNCITRAL, Award on the Merits,
29 July 2014, paras. 394, 405-406 and 411. See also Al-Bahloul v. Tajikistan, SCC Case No. 064/2008,
Partial Award on Jurisdiction and Liability, 2 September 2009 (a case relied on by the United States),
para. 221 reasoning that the duty to provide due process and denial of justice are both part of the fair
and equitable treatment standard.
512 OAO Tatneft v. Ukraine, UNCITRAL, Award on the Merits, 29 July 2014, para. 394.
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the FET. But […] such high standard is not the only one relevant in the present
protection of rights under the FET […] Conduct which might not be as grave as
to amount to egregiousness or bad faith but which nonetheless interferes with
the legitimate exercise of rights of the protected individual might equally qualify
as a kind of conduct resulting in liability.”513
6.36 Thus, judicial acts involving a lack of due process leading to an outcome which offends
judicial propriety will breach the fair and equitable treatment provision in Article IV(1)
even if this does not amount to a denial of justice.514
6.37 The United States also says that “as a matter of customary international law” this Court
should defer to the decisions of domestic courts, including presumably the U.S. courts,
“unless there is a denial of justice”.515 This is of no assistance to the United States since
its measures do amount to a denial of justice; but the United States’ attempt to impose
the highest possible threshold is anyway misconceived.
6.38 As an obvious point, Iran’s present claims are all brought under the Treaty of Amity
not customary international law. The Court’s jurisdiction flows from the Treaty and its
task is to apply its provisions. A particular judgment of the U.S. courts may properly
be disavowed if it is shown either to be in breach of any provision of the Treaty
(including the requirement of due process under the fair and equitable treatment
provision) or a denial of justice under customary international law. This approach is
consistent with the statement of the tribunal in Azinian (in a passage the United States
relies on) that: “What must be shown is that the court decision itself constitutes a
violation of the treaty”.516 Similarly, the tribunal in Helnan v. Egypt reasoned:
“the Tribunal will accept the findings of local courts as long as no deficiencies
in procedure or substance, are shown in regard to the local proceedings which
513 Ibid., para. 411.
514 An example of such a judicial act would be the revocation of a licence by a domestic court.
515 U.S. Counter-Memorial, p. 120, para. 14.36.
516 Robert Azinian, Kenneth Davitian & Ellen Baca v. The United Mexican States, I.C.S.I.D. Case No.
ARB(AF)/97/2, Award, 1 November 1999, para. 99 (U.S. CM, Annex 161) quoted at U.S. Counter-
Memorial, para. 14.36, fn. 402 (emphasis added).
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are of a nature of rendering these deficiencies unacceptable from the viewpoint
of international law, such as in the case of a denial of justice”.517
6.39 As to the content of the prohibition on denial of justice, the Parties are agreed that the
well-known definition in Article 9 of the Harvard Law School, Draft Convention on
the Law of the Responsibility of States for Damages Done in Their Territory to the
Person or Property of Foreigners provides guidance:
“A state is responsible if an injury to an alien results from a denial of justice.
Denial of justice exists when there is a denial, unwarranted delay or obstruction
of access to courts, gross deficiency in the administration of judicial or remedial
process, failure to provide those guarantees which are generally considered
indispensable in the proper administration of justice, or a manifestly unjust
judgment. An error of a national court which does not produce manifest injustice
is not a denial of justice.” 518
6.40 Once again, however, the United States has elected not to engage with Iran’s case as
set out in its Memorial. In particular, the United States does not dispute that:
a. the ‘fair and equitable’ standard in Article IV(1) prohibits inter alia
obstruction of access to the U.S. courts, including circumstances where such
obstruction is the result of legislation or executive decree and circumstances
where a party is prevented from raising applicable defences;519
b. a lack of due process can be the result of the operation of the domestic laws
or regulations governing a judicial procedure, and not only of a failure by
the judiciary to apply rules of procedure;520 and
517 Helnan International Hotels A/S v. Arab Republic of Egypt, I.C.S.I.D. Case No. ARB/05/19, Award,
3 July 2008, para. 106. See also Luigiterzo Bosca v. Republic of Lithuania, PCA Case No. 2011-05,
Award, 17 May 2013, para. 198.
518 Harvard Law School, Draft Convention on the International Responsibility of States for Injuries to
Aliens (Cambridge, Mass., 1961) and (1961) 55 American Journal of International Law, at pp. 548-
584 referred to at Iran’s Memorial, para. 5.32. Applied e.g. in Liman Caspian Oil BV and Dutch
Investment BV v. Republic of Kazakhstan, I.C.S.I.D. Case No. ARB/07/14, Award, 22 June 2010, at
para. 277; also quoted at J. Paulsson, Denial of Justice in International Law (Cambridge: C.U.P., 2005),
at p. 96. See also U.S. Counter-Memorial, p. 119, para. 14.35 citing the identical text of the 1929 Draft
Articles (U.S. CM, Annex 169).
519 See Iran’s Memorial, p. 92, para. 5.33.
520 Ibid.
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c. where legislation or executive orders deny to a given alien fundamental
procedural rights, and such legislation or executive orders are implemented
by the domestic courts in circumstances where there is no reasonable
prospect of recourse against the legislation or executive order by appeal or
challenge at the domestic level, there will prima facie be a denial of justice
in breach of the fair and equitable treatment standard in Article IV(1). 521
6.41 As regards retroactive measures (whether executive, legislative or judicial), although
there is no general prohibition under international law, retroactivity is plainly relevant
to an assessment of what is fair and equitable, including by reference to
reasonableness.522 While the United States seeks to rely on the National & Provincial
Building Society case,523 this demonstrates the ECtHR’s very considerable concern as
to retroactive legislation that interferes with pending proceedings (see para. 5.19
above).524
6.42 As to what constitutes a “manifestly unjust” judgment of a domestic court, it is notable
that the United States insists on the formulation of the Mixed Claims Commission in
the 1927 Chattin case.525
a. Notwithstanding the approach to the formation of customary international
law the United States affects to adopt in its Counter-Memorial,526 the Mixed
Commission in that case did not formulate the minimum standard of
521 Ibid., p. 92, para. 5.34.
522 Hydro Energy 1 S.à.r.l. and Hydroxana Sweden AB v. Kingdom of Spain, I.C.S.I.D. Case
No. ARB/15/42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020,
para. 578. See also RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure
Two Lux S.à.r.l. v. Kingdom of Spain, I.C.S.I.D. Case No. ARB/13/30, Decision on Responsibility and
on the Principles of Quantum, 30 November 2018, paras. 325–330.
523 U.S. Counter-Memorial, p. 125, para. 14.48 referring to U.S. CM Annex 188, para. 93.
524 National & Provincial Building Society, et al. v. United Kingdom (117/1996/736/933-935), Judgment
(Oct. 23, 1997), paras. 107 and 112 (U.S. CM, Annex 188).
525 U.S. Counter-Memorial, pp. 118-119, paras. 14.34-14.35.
526 See U.S. Counter-Memorial, p. 111, para. 14.15, where the United States contends that the Award in
Waste Management “fails to ground its test in a review of state practice and opinio juris, relying instead
on other arbitral awards issued in investor-state dispute settlement proceedings”.
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treatment after an analysis of State practice.527 Rather, the Mixed
Commission repeated its finding in the 1926 Neer case which, “[w]ithout
attempting to announce a precise formula”, was based on the opinions of
commentators and, by its own admission, went further than their views
without an analysis of State practice.528
b. In other cases the United States has specifically relied on Neer and has
accepted that the international minimum standard can evolve (see para. 6.29
above).529
6.43 In relation to the fourth element of the fair and equitable treatment provision (as
identified at paragraph 5.26 of Iran’s Memorial and paragraph 6.21 above), the United
States contends that “no doctrine of legitimate expectation exists as a component
element of ‘fair and equitable treatment’ under customary international law that gives
rise to an independent host State obligation” under the minimum standard of
treatment.530 This also is misconceived. As the ad hoc committee in MTD v. Chile aptly
recognised: “The obligations of the host State towards foreign investors derive from
the terms of the applicable investment treaty and not from any set of expectations
investors may have or claim to have”.531 Thus, contrary to the contention of the United
States, the question is not whether a “doctrine of legitimate expectations […] is part of
general international law”,532 but whether the treaty standard of fair and equitable
527 Cf. U.S. Counter-Memorial, pp. 111-112, paras. 14.16–14.17. As regards the role of previous decisions
in relation to the existence of rules of customary international law see e.g. Railroad Development
Corporation (RDC) v. Republic of Guatemala, I.C.S.I.D. Case No. ARB/07/23, Award, 29 June 2012,
para. 217 (“as such, arbitral awards do not constitute State practice, but it is also true that parties in
international proceedings use them in their pleadings in support of their arguments of what the law is
on a specific issue. There is ample evidence of such practice in these proceedings. It is an efficient
manner for a party in a judicial process to show what it believes to be the law”).
528 Neer and Neer v. United Mexican States, Mixed Claims Commission United States-Mexico, Decision,
15 October 1926, para. 4. See also Railroad Development Corporation (RDC) v. Republic of
Guatemala, I.C.S.I.D. Case No. ARB/07/23, Award, 29 June 2012, para. 216.
529 See e.g. Glamis Gold Ltd. v. United States of America, Award, 8 June 2009, para. 21.
530 U.S. Counter-Memorial, p. 113, para. 14.21.
531 MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile, I.C.S.I.D. Case No. ARB/01/7, Decision on
Annulment, 21 March 2007 (‘MTD’), para. 67.
532 U.S. Counter-Memorial, p. 112, para. 14.19. See also p. 113, para. 14.21 referring to the absence of
any “independent host State obligation” as a component element of fair and equitable treatment under
customary international law.
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treatment in Article IV(1) will be breached by conduct that defeats the legitimate
expectations of Iranian nationals and companies. This is confirmed in the Court’s
observations in Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile),
an authority the United States relies on. In that case, the Court stated:
“The Court notes that references to legitimate expectations may be found in
arbitral awards concerning disputes between a foreign investor and the host
State that apply treaty clauses providing for fair and equitable treatment. It does
not follow from such references that there exists in general international law a
principle that would give rise to an obligation on the basis of what could be
considered a legitimate expectation”.533
6.44 Ultimately, the question is whether the U.S. measures are fair and equitable, and it is
instructive to consider the various elements that tribunals have consistently looked at,
or considered useful tools, in determining whether a given measure is unfair and
inequitable. The United States is plainly wrong to suggest that it can have its measures
subjected to one isolated element of the fair and equitable standard only, namely denial
of justice which has the highest threshold, and ignore all other elements.
C. Unreasonable or discriminatory measures
6.45 It is common ground between the Parties that the protection against “unreasonable or
discriminatory measures” in Article IV(1) encompasses protection from a denial of
justice. Thus, it is undisputed that Iran’s denial of justice claim falls within the scope
of this provision.
6.46 With respect to Iran’s other claims under this provision, the United States contends
that the specific and mandatory protection against “unreasonable or discriminatory
measures” in Article IV(1) does not impose an “independent obligation under the
Treaty”, but merely “elucidate[s] the denial of justice obligation” under customary
international law which is found in the fair and equitable treatment provision.534 This
533 Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile), Judgment, I.C.J. Reports 2018,
p. 559, paras. 160-161.
534 U.S. Counter-Memorial, p. 109, para. 14.9 and pp. 113-114, para. 14.24.
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is to pay no regard whatsoever to the ordinary meaning of the words of the Treaty and
the other basic tools of interpretation (see paras. 6.4-6.7 above).
6.47 The ordinary meaning of the language is mandatory (“shall”) and imposes different
obligations. Article IV(1) provides that the United States “shall refrain from applying
unreasonable or discriminatory measures”.535 It contains no reference to “international
law” or to a “denial of justice”, although such language would no doubt have been
used if the Parties had agreed to limit the obligation as the United States contends.
6.48 The current United States’ position is also inconsistent with its submissions before the
Chamber of this Court in ELSI. In that case, the United States argued that the object
and purpose of the provision prohibiting “arbitrary or discriminatory measures” and
this “formula in particular” “indicate that the prohibition of ‘arbitrary or
discriminatory’ measures should be construed broadly, to protect investors against
government action which violated the basic principles of non-discrimination and ‘fair
play’ which underlie the Treaty”.536 In particular, the United States stated that:
a. “by the use of the disjunctive ‘or’ in the phrase ‘arbitrary or discriminatory’,
Article 1 prohibits ‘arbitrary’ measures as distinct from, and in addition to,
‘discriminatory measures’”.537
b. “The prohibition of ‘arbitrary’ measures conveys above all the commitment
of the respective Governments not to injure the investments and related
interests of foreign investors by the unreasonable or unfair exercise of
government authority”.538 Arbitrary measures “include those which are
535 See Iran’s Memorial, pp. 93-94, paras. 5.37 to 5.39. See also with respect to reasonableness Electrabel
S.A. v. Hungary, Award, 25 November 2015 (I.C.S.I.D. Case No. ARB/07/19), para. 179. As to the test
for proportionality, see further paras. 6.31-6.32 above.
536 U.S. Memorial (15 May 1987), I.C.J. Pleadings, Elettronica Sicula S.P.A. (ELSI) (United States of
America v. Italy), volume 1, p. 76. Unlike its claim under the full protection and security standard, the
U.S. claim for breach of this provision was not formulated as a claim for a denial of justice and was
articulated as invoking wider protections: cf. ibid., p. 98.
537 Ibid., p. 76.
538 Ibid.
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unreasonable, in the sense that they are not based on sufficient or legitimate
reasons, or are unduly unjust or oppressive”.539
c. “To ‘discriminate’ is to make distinctions in treatment, show partiality (in
favor of) or prejudice (against).”540
6.49 The current contention that the prohibition of “unreasonable or discriminatory
measures” merely “elucidate[s] the denial of justice obligation” under customary
international law is untenable.541 The United States asserts that, whereas “it is wellestablished
that non-discrimination is a principle encompassed within the denial of
justice obligation, whether through access to judicial remedies or treatment by the
courts”,542 there is no “generalized obligation for States to refrain from [...]
discrimination” 543 under customary international law. As to this, a denial of justice is
sufficient but not necessary to demonstrate a breach of the provision:
a. Certain unreasonable or discriminatory measures in connection with judicial
acts will, of course, amount to a denial of justice. It by no means follows,
however, that the treaty protection in Article IV(1) against unreasonable or
discriminatory measures that would impair legally acquired rights is
reducible to a protection against denial of justice. Moreover, the treaty
protection is expressed in absolute and unqualified terms.
b. Tellingly, the United States provides no support for its assertion that the
word “‘unreasonable’ […] must be understood in terms of the high threshold
required to establish a violation of the denial of justice obligation”.544 This
proposition depends on an assumption that the word “unreasonable” is “used
539 Ibid., p. 77.
540 Ibid., p. 80.
541 U.S. Counter-Memorial, p. 109, para. 14.9 and p. 114, para. 14.25.
542 Ibid., p. 114, para. 14.25.
543 Ibid., p. 112, para. 14.18.
544 Ibid., p. 114, para. 14.25.
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in the context of the denial of justice obligation”, thereby assuming the
contested interpretation of the provision in the United States’ favour.545
D. Effective means of enforcement
6.50 It is, again, common ground that the protection afforded by the obligation to assure
effective means of enforcement for lawful contractual rights encompasses a protection
against denial of justice.
6.51 The United States, once again, contends that the protection extends no further, with the
result that Iran’s other claims under this provision fail. This is incorrect.
6.52 According to the United States: “As an obligation with respect to the judicial system
of a Party, the effective means clause thus is a component of the obligation not to deny
justice”.546 This is a non sequitur. The fact that a treaty provision concerns the judicial
framework does not mean that it is necessarily limited to a protection against a denial
of justice. Similarly, the fact that a failure to assure effective means of enforcement of
the rights of foreign nationals or companies may also amount to a denial of justice does
not mean that this delimits the extent of the treaty protection.547
6.53 Indeed, as Iran explained in its Memorial, as follows from the context of this provision
alongside (but separate from) the obligation to accord fair and equitable treatment, the
obligation to afford effective means of enforcement is not merely a restatement of the
prohibition on denial of justice.548 Investor-State arbitration tribunals have interpreted
treaty provisions which require “effective means” as establishing “a distinct and
potentially less demanding test, compared to denial of justice in customary
545 Ibid.
546 U.S. Counter-Memorial, p. 115, para. 14.27.
547 Ibid., p. 118, para. 14.31.
548 Iran’s Memorial, p. 95, para. 5.41.
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international law”, which “requires both that the host State establish a proper system
of laws and institutions and that those systems work effectively in any given case”.549
6.54 The United States contends that the effective means of enforcement provision is
“intended to encapsulate many of the procedural elements” of denial of justice which
it understands as a requirement of freedom of access to court, which however is
specifically protected under Article III(2).550
6.55 Although the United States suggests that the drafters placed particular importance on
this provision as a “component of the denial of justice obligation”, it has put forward
no travaux confirming its position.551 Nor is the United States assisted by the materials
which, it says, show that the “obligation to provide ‘effective means’ for enforcement
of contractual rights has […] been historically considered a component of the
customary international law protection against denial of justice”.552
a. The views of the 1926 Committee of Experts for the Progressive
Codification of International Law concerned the scope of the different
obligation to provide foreign nationals with “the necessary means for
defending their rights”. The same point applies with respect to the United
Kingdom’s proposed definition of denial of justice as including
circumstances where a foreign national “is not afforded in the courts a
549 See e.g. White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award,
30 November 2011, paras. 11.3.2 – 11.3.3 citing Chevron I, UNCITRAL, PCA Case No. 34877, Partial
Award on the Merits, 30 March 2010. The provision at issue in these cases required that “each party
shall provide effective means of asserting claims and enforcing rights with respect to investment,
investment agreements and investment authorisations”. Although there is a competing line of cases,
these appear less convincing as they fail to give full effect to this discrete provision, i.e. in
circumstances where there is already a separate prohibition of denial of justice.
550 U.S. Counter-Memorial, pp. 115-117, paras. 14.28-14.29.
551 U.S. Counter-Memorial, p. 115, para. 14.27. Vandevelde, a commentator relied on by the U.S.
elsewhere, states that the provision “reflect[s] the greater concern at the time about the adequacy of the
courts” but he does not link it with either the international minimum standard or the concept of a denial
of justice. See K. Vandevelde, The First Bilateral Investment Treaties: U.S. Postwar Friendship,
Commerce and Navigation Treaties (2017), p. 500.
552 U.S. Counter-Memorial, p. 116, para. 14.29.
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reasonable means of enforcing his rights, or is afforded means of redress less
adequate than those afforded to nationals”.553
b. The 1929 Harvard Law School draft codification (which was superseded by
the 1961 Harvard Law School Draft Convention referred to in Iran’s
Memorial554) does not support the United States’ position that an obligation
to afford “effective means of redress for injuries” was simply a component
of the obligation not to deny justice. To the contrary, the 1929 draft articles
addressed these two obligations in separate provisions (draft articles 5 and 9
respectively).555
SECTION 2.
THE BREACHES OF ARTICLE IV(1) BY THE UNITED STATES
6.56 There have been breaches by the United States of all three of the protections contained
within Article IV(1).
A. Breaches of the fair and equitable treatment provision in Article IV(1)
6.57 The United States has left large parts of Iran’s case on fair and equitable treatment
unanswered. It has elected to deal with the case with respect to denial of justice only
(although the U.S. denial of justice is in any event sufficient to, and does establish, a
breach of Article IV(1)).
6.58 It follows that, save so far as concerns its misconceived arguments on interpretation,
the United States has no response to the case advanced in Iran’s Memorial that the U.S.
measures breach the fair and equitable treatment standard in Article IV(1) because they
553 Ibid.
554 See Iran’s Memorial, p. 91, para. 5.32.
555 U.S. CM, Annex 169.
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are (a) arbitrary, grossly unjust, unfair or idiosyncratic,556 (b) discriminatory,557 or
(c) involve a lack of due process leading to an outcome which offends judicial
propriety (other than conduct which would support a complaint of a denial of justice).
Any such response could, and should, have been made in the U.S. Counter-Memorial.
Iran reserves its rights to respond to the United States should it later seek to rebut Iran’s
other claims under Article IV(1).
6.59 In this section, Iran replies to the United States’ limited response to its claims under
the fair and equitable treatment standard in Article IV(1) with respect to denial of
justice.
6.60 In its Memorial, Iran explained that the legislative, executive and judicial acts at issue
in this case 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 Iranian
companies.558 Three aspects of Iran’s claim for denial of justice are unrelated to the
issue of customary international law State immunity, and are therefore unaffected by
the Court’s Judgment on Preliminary Objections:
a. The first aspect of Iran’s claim for denial of justice is that multiple Iranian
companies and their enterprises have been or are being denied the right to
raise a defence based on respect for their separate juridical status, as well as
the right to be afforded that defence if the conditions which would otherwise
apply under U.S. law are made out.
b. The second aspect of Iran’s claim is that the property of multiple Iranian
companies and their enterprises has been subjected to enforcement
proceedings and execution to satisfy liability judgments rendered by the
U.S. courts against the Iranian State for its (purportedly) wrongful acts in
proceedings to which those companies were not even parties and in relation
to which no allegations or (purported) findings were made against them. The
556 See Iran’s Memorial, pp. 90-91, paras. 5.29-5.30. Cf. U.S. Counter-Memorial, p. 112, para. 14.18.
557 See Iran’s Memorial, p. 91, para. 5.31. Cf. U.S. Counter-Memorial, p. 112, para. 14.18.
558 Iran’s Memorial, p. 98, para. 5.46.
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United States does not dispute this. It characterises the effect of the
U.S. measures as follows:
“as a technical matter, the relevant companies were not subject to
liability imposed on the Iranian State; rather, the measures in question
simply meant that the companies’ assets could be attached and
executed against to satisfy the Iranian State’s liability under terrorism
judgments”.559
c. The third aspect of Iran’s claim is that multiple Iranian companies and their
enterprises have been or are being denied the rights of defence through
legislation having retroactive effect, and the removal of the ability to rely on
defences (whether under U.S. law or international law) and on elementary
legal principles such as res judicata, limitation of actions and collateral
estoppel.
i. Denial of rights of the defence of separate juridical status and subjection of
Iranian companies to enforcement action in respect of the (purported) liability of the
Iranian State
6.61 In response to the first and second aspects of Iran’s claim for denial of justice, the
United States makes six points. Since the United States addresses these two aspects
together, Iran will follow the same structure for convenience.
6.62 First, the United States contends that “none of the portions of the statutes Iran invokes
dealing with sovereign immunity [as a matter of international law] may serve as a
ground for any alleged breach of Article IV(1) or (2)”.560 This overstates the effect of
the Court’s Judgment on Preliminary Objections.561 To the extent that the relevant
provisions also abrogate respect for the separate juridical status of Iranian companies
or specifically remove defences which would otherwise be available to Iranian
companies, they continue to form part of Iran’s claims that fall within the Court’s
jurisdiction.
559 U.S. Counter-Memorial, p. 122, para. 14.40.
560 U.S. Counter-Memorial, p. 122, para. 14.39.
561 Ibid.
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6.63 Second, the United States contends that Iran has not shown that any of the proceedings
at issue amounted to an obstruction of access to courts. This is a restatement of the
United States’ incorrect interpretation of Article III(2) (see paras. 5.5-5.27 above). The
same applies to the related assertion that Iran has not shown “a failure to provide those
guarantees which are generally considered indispensable to the proper administration
of justice; or […] a manifestly unjust judgment”.562 As with respect to what is required
for freedom of access to courts, the United States contends that all that matters is that
“Iran hired U.S. counsel and made arguments carefully considered by the courts, as
reflected in their decisions”.563 There are two obvious problems with this line of
argument:
a. First, the United States is wrong to suggest that Iran participated in the
proceedings against the relevant Iranian companies, which have separate
juridical status from the Iranian State.
b. Second, the United States ignores the fact that the U.S. measures have
specifically abrogated by legislative or executive fiat defences/arguments
which would otherwise have been available to the relevant Iranian
companies, and that the U.S. courts have implemented those measures.
6.64 Third, the United States seeks to characterise Iran’s claim as “broad brush arguments,
without regard to the facts of specific cases”.564 This is no answer. The way that Iran
has put its claim is a reflection of the broad-brush approach that is inherent in the U.S.
measures, since these disregard the separate juridical status of Iranian companies and
treat their property as available for enforcement to satisfy liability judgments entered
against the Iranian State. The specific cases establish specific instances of breach, but
the detailed facts of a given case may be of little relevance.
6.65 The key factual point is that liability judgments entered against Iran have been and are
being enforced against the property of Iranian companies notwithstanding the absence
562 Ibid., p. 122, para. 14.40.
563 U.S. Counter-Memorial, p. 122, para. 14.41.
564 Ibid.
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of any allegations or findings of the liability of those companies with respect to the
acts at issue in the liability judgments. For example:
a. No allegations or (purported) findings of wrongdoing were made against
Bank Markazi in connection with the 1983 bombing of the U.S. marine
barracks in Beirut that was the subject of the underlying liability judgment
against Iran which was enforced against Bank Markazi’s property in the
Peterson litigation.
b. No allegations or (purported) findings of wrongdoing were made against
Bank Melli in connection with the bombing of a bus by Hamas that was the
subject of the underlying liability judgment against Iran which was enforced
against Bank Melli’s property in the Weinstein enforcement proceedings.565
c. No allegations or (purported) findings of wrongdoing were made against
Bank Melli in connection with the acts that were the subject of the
underlying liability judgments against Iran (in the Bennett, Acosta, Heiser
and Greenbaum cases), which were enforced against the contractual debt of
USD 17.6 million owed to Bank Melli by Visa and Franklin in the Bennett
enforcement proceedings.566
d. No allegations or (purported) findings of wrongdoing were made against
Bank Melli in connection with the kidnapping and mistreatment of a
journalist in Beirut that was the subject of the underlying liability
judgment/judgments against Iran which were enforced against Bank Melli’s
property in the Levin enforcement proceedings.567
e. No allegations of (purported) findings of wrongdoing were made in
connection with the 1996 bombing of the Khobar Towers in Saudi Arabia
that was the subject of the underlying liability judgment against Iran which
565 See para. 2.68 above.
566 See para. 2.70 above.
567 See para. 2.79 above.
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was enforced in the various Heiser proceedings against the property of
(a) TIC in 2011, (b) Bank Melli, the Iranian Marine & Industrial Company,
Iran Air or NIOC in 2016, (c) Bank Sepah, Iranohind Shipping Company,
IRISL, Export Development Bank of Iran and Bank Melli in 2013, (d) Bank
Saderat, the Export Development Bank of Iran, Behran Oil Company, Bank
Melli and Siba Bank Melli in 2013.568
6.66 The exception concerns liability judgments rendered by the U.S. courts in the Havlish
v. Bin Laden et al. and Hoglan, Burnett and Ryan litigation against Bank Markazi,
NIOC, NITC, NPC, NIGC and Iran Air, purporting to find (on the basis of four
affidavits from disaffected former Iranian officials, a journalist and a consultant for the
U.S. authorities) that those Iranian companies were agencies or instrumentalities of
Iran and that (other than NITC) they were used to facilitate terrorism financing
generally, such that they could somehow be held specifically liable for supposedly
providing material support in connection with the terrorist acts of
11 September 2001.569 The court’s purported finding that “Plaintiffs have
demonstrated several reasonable connections between the material support provided
by [the Iranian companies] and the 9/11 attacks” and that “the 9/11 attacks were caused
by Defendants’ provision of material support to al Qaeda” was untenable and
absurd.570 Indeed, during a hearing before the Committee on Foreign Affairs of the
U.S. Congress on 19 June 2019, the U.S. Special Representative for Iran testified that
Iran was not responsible for the terrorist acts of 11 September 2001:
“Mr. Sherman. Do you take the--did the Islamic Republic bomb us on 9/11?
Mr. Hook. Did the Islamic Republic bomb us on 9/11?
Mr. Sherman. Did the Islamic Republic and one of the entities responsible for
the deaths on 9/11 [sic]?
Mr. Hook. No.”571
568 See para. 2.111 above.
569 See paras. 2.41-2.58 above.
570 Havlish, et al. v. Bin Laden, et al., U.S. District Court, Southern District of New York, 22 December
2011, No. 03 MD 1570 (S.D.N.Y 2011), p. 52, para. 31 (IM, Annex 52). See further para. 2.42 above.
571 Oversight of the Trump Administration’s Iran Policy’, Hearing before the Subcommittee on the Middle
East, North Africa, and International Terrorism of the Committee on Foreign Affairs, House of
Representatives, One Hundred and Sixteenth Congress, First Session, 19 June 2019, Serial No. 116-48
(IR, Annex 6).
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6.67 Further, while the United States seeks to emphasise the facts of the Rubin case as being
of special relevance, those proceedings are not part of (and, indeed, are not mentioned
in the Memorial in connection with) Iran’s claim under Article IV(1).572 Whereas
Article IV(1) concerns protections which must be afforded to Iranian nationals and
companies and their property, the United States contends: “In Rubin, plaintiffs sought
to attach and execute against property that consisted of artifacts held by the University
of Chicago, to satisfy a default judgment entered against Iran”.573 The property at issue
was the cultural property of the Iranian State, and no question of the rights to be
afforded to Iranian companies arose.
6.68 Fifth, the United States seeks to rely on the absence of any decided case directly on
point, i.e. to the effect that the U.S. measures constitute a denial of justice.574 Thus, it
is said that “Iran has submitted no support for the proposition that it is a denial of
justice to provide redress for victims of terrorism holding unpaid judgments against a
state sponsor of terrorism by allowing them to enforce their judgments against the
State’s agencies and instrumentalities”.575 The absence of direct authority, however,
merely highlights the extreme nature of the U.S. measures and the absence of any
comparable practice by other States.
6.69 As to the U.S. courts, these have rejected any reliance on Article IV(1) (as well as any
other provision of the Treaty of Amity and any other laws requiring fundamental due
process) on the basis that the executive and legislative U.S. acts trump any conflicting
laws (see further para. 2.67 above).
6.70 Sixth, the United States contends that “the corporate form is not inviolable” and
invokes the doctrine of the lifting of the corporate veil as it was articulated by the Court
572 The United States seeks to rely on the inclusion of the Rubin case in Attachment 2 to Iran’s Memorial,
which contains a table of enforcement cases decided or pending (at that time) before the U.S. courts.
However, Iran’s Memorial does not refer to Attachment 2 with respect to its claims under Article IV(1)
of the Treaty of Amity.
573 U.S. Counter-Memorial, p. 123, para. 14.41.
574 See U.S. Counter-Memorial, p. 123, para. 14.42: “Iran has submitted no authority suggesting that it is
a denial of justice to allow plaintiffs with terrorism-related judgments against a state sponsor of
terrorism such as Iran to attach the assets of one of the State’s agencies or instrumentalities in order to
satisfy that judgment”.
575 Ibid., p. 126, para. 14.50.
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in Barcelona Traction, relying on the following passage of the Court’s Judgment in
that case:
“the process of ‘lifting the corporate veil’ or ‘disregarding the legal entity’ has
been found justified and equitable in certain circumstances or for certain
purposes. The wealth of practice already accumulated on the subject in
municipal law indicates that the veil is lifted, for instance, to prevent the misuse
of the privileges of legal personality, as in certain cases of fraud or malfeasance,
to protect third persons such as a creditor or purchaser, or to prevent the
evasion of legal requirements or of obligations.”576
6.71 There is no basis in the Treaty for the proposition that the requirement of respect for
separate juridical status may be bypassed or ignored.577 But, in any event, following
the Court’s logic in Barcelona Traction, the requirement of respect for the separate
juridical status of companies is derived from a general principle of international law as
identified by reference to the major legal systems of the world. Similarly, in relation
to the doctrine of lifting the corporate veil, the Court referred to: “The wealth of
practice already accumulated on the subject in municipal law”. Thus, even accepting
that a principle of lifting the corporate veil may apply in certain exceptional cases, the
United States would still have to show that the circumstances it now seeks to rely on
as justifying lifting the corporate veil reflect (at the very least) an established general
principle of international law under Article 38(1)(c) of the Court’s Statute.578 Yet, the
United States has made no such showing. Instead, it relies on the views of a single
academic commentator, whose writing does not purport to engage with the facts of the
present case and takes matters no further than the vague articulations of the doctrine
under U.S. law.579 The United States approach also stands in marked contrast to its
(misconceived) insistence on Iran satisfying the strict requirements for emergence of
a rule of customary international law (see para. 6.24 above).
6.72 Further, none of the circumstances identified in the passage from Barcelona Traction
quoted above are relevant in the present case. None of the relevant Iranian companies
576 Barcelona Traction, Light And Power Company, Limited, Judgment, I.C.J. Reports 1970, p. 39,
para. 56 (emphasis added).
577 See above at paras. 4.5-4.10.
578 See above at para. 4.28.
579 See U.S. Counter-Memorial, p. 124, para. 14.44 citing A. Badia, Piercing the Veil of State Enterprises
in International Arbitration (2014), at 55-59 (U.S. CM, Annex 186).
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were even parties to the liability proceedings which were enforced against their
property, and in relation to which no allegations or (purported) findings were made
against them.580
6.73 The United States’ position is that the separate juridical status of the Iranian companies
should be disregarded because their shareholder (i.e. the Iranian State) is alleged to
have supported terrorism. The U.S. measures were not adopted on the basis of an
allegation or (purported) finding that Iran has committed such acts through a misuse
of the corporate form of, for example, Bank Markazi, or that it has somehow relied on
its separate juridical status to evade liability. Indeed, the U.S. courts have entered
liability judgments against Iran, and the express purpose of the U.S. measures at issue
in this case is to facilitate recovery of any compensation by the plaintiffs in those cases.
6.74 Indeed, if, consistent with Barcelona Traction, the basis for the U.S. measures were
allegations or (purported) findings that Iran has misused the corporate form of its
companies to perpetrate injustice or to evade liability, there would have been no need
for the United States specifically to abrogate the Bancec presumption of separateness
and permit attachment against the property of instrumentalities of Iran through
Section 1610(g) of the FSIA and Section 201 of the TRIA. The presumption does not
apply where the sovereign is found to have abused the corporate form to work a “fraud
or injustice.”
6.75 According to the United States, the U.S. measures “sought to ensure that victims of
terrorism were not unduly prejudiced in their efforts to obtain and enforce valid court
judgments against terrorist actors, including state sponsors of terrorism”.581 Thus, it is
said that “the U.S. measures at issue in this case reflect reasonable efforts by the U.S.
Government to ensure that victims of terrorism are not unduly burdened in their efforts
580 See further above at paras. 2.68 (regarding the enforcement of the liability judgment in the Weinstein
proceedings against the property of Bank Melli), 2.70 (regarding the enforcement of the liability
judgment in the Bennett proceedings against the property of Bank Melli), 2.79 (regarding the
enforcement of the liability judgment in the Levin proceedings against the property of Bank Melli),
2.85 (regarding the Peterson I proceedings), 2.111 (regarding the enforcement of the liability judgment
in the Heiser proceedings against the property of TIC), and 2.119 (regarding the enforcement of the
liability judgment in the Heiser proceedings against the property of various Iranian companies) above.
581 U.S. Counter-Memorial, pp. 45-46, para. 6.10.
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to seek justice and compensation against terrorism actors and their state sponsors”.582
The measures are also said to be justified and reasonable because Iran “failed to
provide redress for the victims of these acts and avoided being held accountable. Iran
failed to appear in the proceedings leading to the liability decisions and has failed to
pay any portion of the judgments”.583
6.76 The United States has failed to show that lifting the corporate veil for this reason – i.e.
in order to obtain what it characterises as “justice” pursuant to a hostile foreign policy
against Iran – is an established basis for the application of the doctrine in any other
country, let alone as a general principle of international law. Instead, relying on a
conclusory passage from one of its own court judgments, the United States merely
asserts that:
“it was both reasonable and justified […] to attach assets of Iran’s agencies and
instrumentalities ‘to achieve justice, equity, to remedy or avoid fraud or
wrongdoing, or to impose a just liability”.584
6.77 Yet, the existence of the doctrine of lifting the corporate veil under international law,
and its applicability to the facts of the present case, are not self-judging questions
which can be answered by reference to U.S. law. These are questions for the Court,
applying international law.
ii. Legislative interference in judicial proceedings and denial of rights of defence,
including with retrospective effect
6.78 In response to the legislative interference in judicial proceedings, and the specific
removal of rights of defence available to Iranian companies, including with retroactive
effect,585 the United States makes two points.
582 Ibid., p. 42, para. 6.2. See also p. 124, para. 14.45: “it was both reasonable and justified to allow victims
holding terrorism-related judgments against Iran to attach assets of Iran’s agencies and
instrumentalities ‘to achieve justice, equity, to remedy or avoid fraud or wrongdoing, or to impose a
just liability’”.
583 Ibid., p. 124, para. 14.45.
584 Ibid., citing In re Cambridge Biotech Corp., 186 F.3d at 1376 (U.S. CM, Annex 187).
585 With respect to the retroactive effect of the U.S. legislative measures and its implementation by the
U.S. courts see paras. 2.60, 2.61, 2.63 and 2.104 above.
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6.79 First, the United States, again, contends that this ground falls outside the Court’s
jurisdiction as a result of its Judgment on Preliminary Objections.586 This is apparently
because the defences which were specifically abrogated by the U.S. measures with
retroactive effect – res judicata, limitation of actions, and collateral estoppel – “were
eliminated only to the extent that they are brought in an action under the Foreign
Sovereign Immunities Act (FSIA) under Section 1605A of Title 28 of the U.S.
Code”.587 Yet the fact that, as a matter of the organisation of internal law, the United
States treats the relevant domestic proceedings as related to Section 1605A of the FSIA
is irrelevant. Indeed, this is merely to point to the legislative mechanism by which the
United States has permitted the enforcement of liability judgments entered against Iran
against the property of separate Iranian companies. The abrogation of these defences
with retroactive effect is a question separate from and additional to the abrogation of
immunity.
6.80 Second, the United States suggests that Iran is required to establish that “a State is
obligated under customary international law to provide these three defences”. This is
incorrect and fails to engage with Iran’s case. Iran’s complaint is not that U.S. law
never provided for these three defences, but that it formerly did so, and that the rights
of the relevant Iranian companies to rely on them were specifically abrogated by
targeted legislative measures.
6.81 Third, the United States contends that “merely because a measure has retroactive
application does not make the measure a denial of justice”.588 This general observation
is of no assistance to the United States. As to the general position, it is noticeable that
the United States has not engaged with Professor Paulsson’s conclusion that: “It is not
difficult to see that the retroactive application of laws by judges must be characterised
as a denial of justice if the courts thereby make themselves the tools of ‘targeted
legislation’.”589 In any event, however, the Court is concerned only with the adoption
586 U.S. Counter-Memorial, p. 125, para. 14.46.
587 Ibid.
588 Ibid., p. 125, para. 14.47.
589 See Iran’s Memorial, pp. 92-93, para. 5.35 citing J. Paulsson, Denial of Justice in International Law
(Cambridge: C.U.P., 2005), at p. 199, internal cross-reference omitted.
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of the particular retroactive U.S. measures in the specific circumstances of the present
case, and these amount to a denial of justice for the reasons explained in Iran’s
Memorial.590
a. The provisions of Section 502 of the ITRSHRA (as codified in Section 8772 of
Title 22 of the U.S. Code) specifically abrogate, for the purpose of then ongoing
Peterson I proceedings, the immunity from enforcement under U.S. law to
which Bank Markazi would have otherwise been entitled (and which it had
invoked) in respect of its property applied retroactively. The U.S. courts
implemented this measure by allowing enforcement actions against the
property of Bank Markazi at issue in the Peterson I proceedings.591
b. In the same way, the U.S. measures culminating in Section 1226 of the
NDAA 2020 specifically abrogate Bank Markazi’s same rights with respect to
its property which is the subject of the Peterson II proceedings, and the U.S.
courts have implemented this measure by entertaining enforcement actions (see
Chapter II above).592 It is noted that Section 1226 NDAA goes even further
than Section 502 ITRSHRA since it allows the U.S. courts to make “an order
directing that the asset [i.e. Bank Markazi’s property] be brought to the State
in which the court is located and subsequently to execution or attachment in
aid of execution, […] without regard to concerns relating to international
comity”.
590 Iran’s Memorial, p. 98, para. 5.46(d).
591 See 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), 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), Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016,
578 U.S. 1 (2016) (IM, Annex 66) and Peterson, et al. v. Islamic Republic of Iran, et al., U.S. District
Court, Southern District of New York, 6 June 2016, No. 10 Civ. 4518 (S.D.N.Y. 2016) (IM, Annex 68).
592 See Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP Morgan Chase Bank, U.S.
District Court for the Southern District of New York, Opinion and Order, 20 February 2015, No. 13-
cv-9195-KBF (IR, Annex 50), Peterson, et al. v. Iran, Bank Markazi, Banca UBAE, Clearstream, JP
Morgan Chase Bank, U.S. Court of Appeals for the Second Circuit, Opinion and Order, 21 November
2017, Case 15-0690 (IR, Annex 58) and Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. Court of Appeals for the Second Circuit, Opinion, 22 June
2020, Case 15-0690 (IR, Annex 88); see above paras. 2.97-2.108.
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c. Similarly, enforcement actions were allowed against the property of Bank
Melli.593
6.82 The United States relies on the Judgment of the ECtHR in National & Provincial
Building Society et al. v. United Kingdom, but this supports Iran’s position. In that very
different case, the ECtHR held that the U.K. authorities enactment of retrospective tax
legislation to cover an unintended temporal gap in the scope of application between
successive legislation – arising as a result of a technical deficiency in regulations – did
not entail a denial of access to court in breach of the right to a fair trial under
Article 6(1) of the ECHR. This was not a case arising from targeted measures against
the applicants (let alone on the basis of their nationality or ownership/control by a
particular state), and that this case is in no way analogous to treatment of Iranian
companies such as Bank Markazi under the U.S. measures.
6.83 Moreover, as noted in Chapter V above, as a general statement of principle, the ECtHR
considered that reasons adduced by a State to justify retrospective legislation that has
the effect of influencing pending judicial proceedings must be “treated with the
greatest possible degree of circumspection”.594 On the specific facts of the case before
it, however, the ECtHR concluded that:
“the decision of the authorities to legislate with retrospective effect to remedy
the defect in the 1968 Regulations was taken without regard to the pending legal
proceedings and with the ultimate aim of restoring Parliament’s original
intention with respect to all building societies whose accounting periods ended
in advance of the start of the fiscal year. That the extinction of the restitution
proceedings was a significant consequence of the implementation of that aim
cannot be denied. Nevertheless, it cannot be maintained that the [applicant
banks] were the particular targets of the authorities’ decision”.595
593 See Weinstein, et al. v. Islamic Republic of Iran, et al., U.S. District Court, Eastern District of New
York, 20 December 2012, No. 12 Civ. 3445, (E.D.N.Y. 2012) (IM, Annex 54), and Bennett, et al. v.
The Islamic Republic of Iran, et al., U.S. Court of Appeals, Ninth Circuit, Order and Opinion, 22
February 2016, 817 F.3d 1131, as amended 14 June 2016, 825 F.3d 949 (9th Cir. 2016) (IM, Annex
64).
594 See National & Provincial Building Society, et al. v. United Kingdom, para. 112. This has been
reiterated in subsequent cases not involving litigation against the State itself. See, e.g., Ducret v.
France, Application No. 40191/02, Judgment (12 June 2007), paras. 33-42.
595 National & Provincial Building Society, et al. v. United Kingdom, para. 110 (emphasis added). See also
at paras. 81-82.
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6.84 Further, the ECtHR found that the applicants were aware of Parliament’s original
intention, that the pending litigation was “in reality […] a deliberate strategy to
frustrate the original intention of Parliament” by securing a windfall and that the
applicants “could not safely rely on the Treasury remaining inactive in the face of a
further challenge to Parliament’s original intention, the more so since that challenge
was directed at the validity of the Treasury Orders which formed the legal basis for the
very substantial amounts of revenue collected from 1986 onwards not just from
building societies but also from banks and other deposit institutions”.596 There is no
suggestion in the present case that the U.S. measures have been imposed in an effort
to prevent the Iranian companies from obtaining a windfall. Rather, they are designed
to effect punishment against Iran and secure the recovery of compensation by U.S.
plaintiffs.
6.85 The ECtHR also took into account the fact that: “The judicial review proceedings
launched by the applicant societies had not even reached the stage of an inter partes
hearing” at the time of enactment of the retrospective legislation.597 By contrast, the
U.S. measures targeting Iranian companies (including State-owned companies) were
adopted long after the relevant enforcement proceedings were initiated:
a. The U.S. measures targeting Bank Markazi were imposed in Peterson I (via
E.O. 13599 and Section 502 ITRSHRA 2012) while the enforcement
proceedings were ongoing and some four years after the plaintiffs had obtained
restraint orders from the U.S. courts in 2008.598
b. In Peterson II measures were imposed (culminating in the NDAA 2020) while
the case was pending before the U.S. Supreme Court, around seven years after
596 National & Provincial Building Society, et al. v. United Kingdom, para. 111. See also para. 112: “It
must also be observed that the applicant societies in their efforts to frustrate the intention of Parliament
were at all times aware of the probability that Parliament would equally attempt to frustrate those efforts
having regard to the decisive stance taken when enacting [the legislation]. They had engaged the will
of the authorities in the tax sector, an area where recourse to retrospective legislation is not confined to
the United Kingdom.”
597 National & Provincial Building Society, et al. v. United Kingdom, para. 112. Further, the Court noted
that the tax sector is one where “recourse to retrospective legislation is not confined to the United
Kingdom”. By contrast, the United States has not put forward any evidence that the U.S. measures are
similar to those adopted by any other State.
598 See Iran’s Memorial, para. 2.58. See also para. 2.96 above.
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the enforcement proceedings were initiated in 2013599 and around two years
after the Court of Appeals held that the bond proceeds could not be attached
under the FSIA because they were outside the territory of the United States.600
B. Breach of the protection against unreasonable or discriminatory measures in
Article IV(1) by the United States
6.86 As explained in Iran’s Memorial, there has been a series of legislative and executive
acts of the United States – implemented by the U.S. courts – that have singled out, and
continue to single out, Iranian companies in order to deny them generally available and
elementary defences, including with respect to the recognition of separate juridical
personality.601
6.87 The United States’ sole response to Iran’s claim that the measures are unreasonable is
to say that “there is nothing unreasonable about permitting victims of Iran-sponsored
terrorism to attach the assets of Iran’s agencies and instrumentalities to enforce a
lawfully obtained judgment against Iran where Iran itself has refused to satisfy the
judgment or otherwise compensate its victims”.602 Since this is the policy which was
actually relied on at the time and which underpins the U.S. measures, the questions are
whether this was a rational policy and, if so, whether the U.S. measures were
reasonably connected to that policy.603
6.88 The United States’ argument fails under both limbs.
6.89 As to the existence of a rational policy, the United States assumes the veracity of its
grave allegations against Iran – and, in the case of the alleged liability of certain Iranian
companies (which the U.S. courts have assimilated with the State of Iran) with respect
599 See para. 2.107 above.
600 See para. 2.104 above.
601 Iran’s Memorial, p. 99, para. 5.48.
602 U.S. Counter-Memorial, p. 127, para. 14.53.
603 See e.g. Electrabel S.A. v. Republic of Hungary, I.C.S.I.D. Case No. ARB/07/1-9, Award, 25 November
2015, para. 179. See further para. 6.31 above.
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to the terrorist acts of 11 September 2001604 – on the basis of the judgments of its own
courts (which are strictly denied), applying an expansive concept of “material support”
(as mandated by U.S. legislation) which is not reflected in a rule of international law.605
The U.S. measures are not justified by a rational policy since they are underpinned by
a unilateral and political designation of Iran as a so-called “State sponsor of terror”.
6.90 More generally, the United States’ continued assertion that the affected Iranian
companies whose property has been or is being seized are “agencies or
instrumentalities” of the Iranian State likewise relies on the United States’
characterisation which disregards the Bancec factors which would otherwise have
applied under U.S. law.
6.91 As to the second limb, there is anyway no reasonable connection between the policy
and the U.S. measures. Importantly, it is not the United States’ case that the U.S.
measures are reasonable because the relevant Iranian companies were alleged or found
to be involved in the (purported) wrongdoing which led to the liability judgments
against Iran.
a. In its Counter-Memorial, the United States seeks to emphasise its allegations –
unconnected to any of the above proceedings with which this case is concerned
– that certain Iranian financial institutions (including Bank Markazi, Bank
Melli, Bank Sepah and Bank Saderat) are involved in what it calls Iran’s
“deceptive banking practices”.606 Further, the United States appears to attempt
to use this to draw a link between the “assets at issue in the Peterson litigation,
and Iran’s deceptive financial conduct, including conduct involving assets in
the Peterson litigation”.
604 See paras. 2.41-2.54 above.
605 For the purpose of the relevant U.S. measures, “material support” is defined in 18 USC
§§ 2339A(b)(1): “[T]he term ‘material support or resources’ means any property, tangible or
intangible, or service, including currency or monetary instruments or financial securities, financial
services, lodging, training, expert advice or assistance, safehouses, false documentation or
identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel
(1 or more individuals who may be or include oneself), and transportation, except medicine or religious
materials.” See also Iran’s Memorial, p. 18, para. 2.7, note 40.
606 U.S. Counter-Memorial, pp. 81-85, paras. 11.10-11.17.
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b. However, the allegations against these Iranian companies are advanced
specifically in the context of the United States’ response on Executive
Order 13599. The United States has not stated that they were relied on with
respect to the other U.S. measures at issue in this case.
6.92 The United States also denies that it has singled out the Iranian companies at issue in
the present case, relying on its designation of certain other States as so-called “State
sponsors of terrorism”.607
6.93 Even if the United States were correct that its measures did not single out Iranian
companies (which is denied: see paras. 6.95-6.96 below), it would be of no assistance
to the United States in establishing either the existence of a rational policy (in light of
the unilateral and political nature of the designation and the excessively broad notion
of “material support”) or a reasonable connection between such a policy and the U.S.
measures at issue in this case (given the absence of any allegation or finding at the time
the measures were adopted of any involvement on the part of the relevant Iranian
companies in the purported wrongdoing of Iran which was the subject of the liability
judgments).
6.94 Further, U.S. measures and their implementation against the relevant Iranian
companies are not equivalent to the treatment of the companies of other States. In
particular, the United States accepts (as it must) that there is no equivalent example of
legislative interference in pending judicial proceedings as in the Peterson case with
respect to the property of Bank Markazi which, on any view, was plainly singled out
through Section 502 ITRSHRA.608
a. The attempt to downplay the significance of Section 502 as “one element of
the overall legal regime” is irrelevant.
b. The same applies to the contention that “the circumstances that led to this
statute involved questions of New York law that were unique to assets at issue
607 Ibid., p. 127, para. 14.53 and p. 128, paras. 14.54-14.55.
608 Ibid., pp. 128-129, para. 14.56.
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in the Peterson litigation”. More accurately, the statute targeted Bank Markazi
and interfered with pending litigation against it so as to remove certain defences
which would have otherwise been available under New York law.
6.95 As for discrimination, at the level of the specific U.S. measures, Iran and its companies
have been singled out for uniquely unfavourable treatment. In particular, there is no
parallel, with respect to the companies of other so-called State sponsors of terror, to
Section 502 ITRSHRA or Section 1226 which specifically targeted the property of
Bank Markazi which was/is the subject of ongoing enforcement proceedings in
Peterson I and in Peterson II and ensured that Bank Markazi lost those proceedings.
6.96 More generally, with respect to the U.S. measures which specifically abrogated the
Bancec presumption of separateness, the U.S. court has referred to this as part of “The
Never-Ending Struggle to Enforce Judgments Against Iran”.609
C. Breach of the obligation to assure effective means of enforcement for lawful
contractual rights of Iranian companies in Article IV(1) by the United States
6.97 The United States has also breached the obligation to assure effective means of
enforcement for lawful contractual rights of Iranian companies under Article IV(1) of
the 1955 Treaty. It has failed to provide a proper system of laws and institutions
(including a judiciary) that assures effective means of enforcement of such rights in
cases in which liability judgments entered against Iran have been enforced against the
property of Iranian companies who were not alleged or found to have been involved in
the acts giving rise to liability.
6.98 As Iran has explained, the U.S. measures rendered illusory the lawful contractual rights
of (a) Bank Melli to receive monies owed pursuant to agreements it had concluded
with Visa, Franklin and Mastercard concerning the use of credit cards in Iran, and
609 In re Islamic Republic of Iran Terrorism Litigation., 659 F. Supp. 2d 31, 45- 46, 49 (D.D.C. 2009) (IM,
Annex 44). See also the legislative history of the NDAA 2008 as recorded in 154 Cong. Rec. 499
(22 January 2008), at p. 501: “I also want to make special mention of the inspiration for this new
legislation. […] Congress’s support of my provision will now empower those victims to pursue Iranian
assets to obtain this just compensation for their suffering. This is true justice through American rule of
law”.
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(b) TIC to receive monies owed by Sprint Communications Company LP pursuant to
their bilateral telecommunications carrier relationship.
6.99 The United States has made no attempt either to rebut the claim that these contractual
rights were vested in those Iranian companies or to suggest that those companies
somehow did not comply with U.S. law.
6.100 It is no answer for the United States to say that the protection under the third element
of Article IV(1) applies only where Iranian companies have sought to enforce their
contractual rights before the U.S. courts. Further, Bank Melli did appear before the
U.S. court to contest the seizure of its property (i.e. to enforce its lawful contractual
rights) in the Bennett and Weinstein proceedings but this effort was futile as a result of
the U.S. measures. In these circumstances, since the U.S. courts had established the
position they would adopt, it would have been equally futile for the TIC to appear in
an attempt to enforce its lawful contractual rights.
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CHAPTER VII.
THE BREACHES OF ARTICLE IV(2) AND ARTICLE V(1) OF THE
TREATY OF AMITY
SECTION 1.
BREACH BY THE UNITED STATES OF IRAN’S ENTITLEMENT TO PROTECTION AND
SECURITY FOR ITS COMPANIES AND NATIONALS UNDER ARTICLE IV(2)
A. Iran’s entitlement to the most constant protection and security of the property
and interests in property of its nationals and companies, in no case less than that
required by international law
7.1 The United States is incorrect to suggest that the protection and security required to
be afforded under Article IV(2) is limited to that available under the international
minimum standard. Further, even if the protection and security obligation under the
international minimum standard were to apply, this is not limited to “physical”
protection of property.610
7.2 As in relation to Article IV(2), the United States has elected not to engage with the
ordinary meaning of the language of the first sentence as explained in Iran’s
Memorial. It offers no response to the basic point that the text expressly requires the
“most constant protection and security” without any qualification, and that the level
of protection “required by international law” operates as a “floor”.611 If the Treaty
Parties had agreed to limit the obligation to “physical” interferences, they could have
expressly included words to that effect.612 By contrast, however, they expressly
610 See further T. Weiler, The Interpretation of International Investment Law (Nijhoff 2013), pp. 129-182.
611 Iran’s Memorial, p. 101, para. 5.56.
612 See Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic,
I.C.S.I.D. Case No. ARB/97/3, Award, 20 August 2007, para. 7.4.15.
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extended the protection to “interests in property”, i.e. intangible property which
cannot be subjected to physical interference.613 This should be an end to the argument.
7.3 Rather than purporting to apply the rules of interpretation in the Vienna Convention,
the United States instead bases its position on an argument regarding what “protection
and security” clauses in other treaties “have traditionally been understood” to mean.614
At a very obvious level, this is to ignore the specific wording of Article IV(2) of the
Treaty of Amity, including the express protection of intangible property. Further, it is
anyway wrong to suggest that such clauses are limited to protection against physical
harm. It is likewise wrong to suggest that ELSI provides no support for the contrary
view, or that Iran seeks to transform the first sentence of Article IV(1) into a
stabilisation clause.
7.4 First, the United States’ claim that “protection and security” clauses have
“traditionally” been understood to require States to provide protection against physical
harm is supported by reference to certain investor-State arbitration awards issued
between 2006 and 2010. These awards do not of course concern the Treaty of Amity
and cannot have informed the Parties’ agreement when the Treaty was concluded half
a century earlier.615 In any event, as is well-known, there are many recent investor-
State arbitration cases which have reached the opposite conclusion.616 The United
States is also not assisted by citing various cases concerning physical attacks on
613 See also Siemens A.G. v. The Argentine Republic, I.C.S.I.D. Case No. ARB/02/8, Award, 6 February
2007, para. 303: “As a general matter and based on the definition of investment, which includes tangible
and intangible assets, the Tribunal considers that the obligation to provide full protection and security
is wider than “physical” protection and security. It is difficult to understand how the physical security
of an intangible asset would be achieved”. See too Moss, ‘Full Protection and Security’ in A. Reinisch
(ed.), Standards of Investment Protection (O.U.P. 2008), pp.134-135, endorsing this approach.
614 U.S. Counter-Memorial, p. 131, para. 14.65.
615 See U.S. Counter-Memorial, p. 131, para. 14.65, note 450. Cf. U.S. attempt to criticise Iran’s reliance
on Waste Management.
616 See, e.g., Anglo American PLC v. Bolivarian Republic of Venezuela, I.C.S.I.D. Case No.
ARB(AF)/14/1, (Tawil, Vinuesa, Derains) Award, 18 January 2019, para. 482; AES Summit Generation
Limited and AES-Tisza Erömü Kft. v. Republic of Hungary (II), I.C.S.I.D. Case No. ARB/07/22, Award,
23 September 2010, para. 13.3.2; Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC
Case No. 064/2008, Partial Award on Jurisdiction and Liability, 2 September 2009, para. 246 (U.S.
CM, Annex 180).
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property in which the question of whether the relevant protection and security
provision encompassed legal security did not arise.617
7.5 Second, the United States claims that the ELSI case provides no support for Iran’s
interpretation because the Chamber rejected its claim that delay in ruling upon the
lawfulness of the requisition of the plant amounted to a breach of the “most constant
protection and security” provision in the 1948 Italy-United States FCN Treaty.618
According to the United States: “The Court simply did not decide the interpretative
issue that Iran has put before it here”.619 This is an incomplete and incorrect reading
of the judgment, and an attempt to gloss over the case the United States put before the
Chamber.
7.6 The United States now contends that both aspects of its claim for breach of the
protection and security provision in ELSI “were rooted in an alleged failure to protect
ELSI’s physical assets, namely its plant and equipment”. As the Chamber recorded,
however, the United States specifically claimed that “the ‘property’ to be protected
under this provision of the FCN Treaty was not the plant and equipment the subject
of the requisition, but the entity of ELSI itself”.620 This was specifically stated to
include intangible property such as the shares in ELSI.621 The Chamber concluded
617 See U.S. Counter-Memorial, p. 132, para. 14.65 and note 451. Although the United States refers
specifically to acts by “criminal actors” it appears to accept that the provision applies to the conduct of
State actors.
618 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. That provision may be seen as a less stringent standard
than Article IV(2) of the Treaty of Amity in that the requirement is that: “The nationals of each High
Contracting Party shall receive, within the territories of the other High Contracting Party, the most
constant protection and security for their persons and property, and shall enjoy in this respect the full
protection and security required by international law.”
619 U.S. Counter-Memorial, p. 132, para. 14.66.
620 Elettronica Sicula S.p.A. (ELSI), Judgment, I.C.J. Reports 1989, p. 64, para. 106. Italy claimed that
“property” was limited to immovable property.
621 See U.S. Reply, I.C.J. Pleadings, Elettronica Sicula S.P.A. (ELSI) (United States of America v. Italy),
volume II, p. 391: “Articles V (1) and (2) speak of protection and security for […] ‘property’, not
‘immovable property’. Property in its ordinary sense is not confined to immovable property, and when
the Treaty intends to cover immovable property, such as in Article VII, it expressly says so. In this
case, the property of Raytheon and Malchett in Italy was ELSI itself. The entire entity of ELSI – plant,
equipment, receivables, inventories, goodwill, and other intangibles – was at stake when the requisition
occurred. The Respondent was obligated to protect ELSI from the deleterious effects of the unlawful
requisition. The failure to overturn the Mayor’s order, and the failure to provide ELSI with any security
from trespass, deprived Raytheon and Malchett of the security and protection for their investment to
which they, as 100 per cent owners of ELSI, were entitled.”
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that it had jurisdiction over this claim,622 and found that the word “property” in the
protection and security provision included “the shares themselves”.623 It follows that
the Chamber considered that the protection and security provision extended to
intangible property.
7.7 The Court proceeded to adjudicate on the merits of the U.S. claim under Article V,
which it considered required compliance with the minimum international standard as
supplemented by the national treatment and most-favoured-nation treatment
standards, and rejected it on the basis that:
“It must be doubted whether in all the circumstances, the delay in the Prefect’s
ruling in this case can be regarded as falling below that standard. Certainly, the
Applicant’s use of so serious a charge as to call it a ‘denial of procedural justice’
might be thought exaggerated”.624
7.8 Plainly, the Chamber would not have considered it necessary to rule on the merits of
the U.S. claim if it had concluded that the provision did not cover legal protection and
security of intangible property. Indeed, commentary the United States now relies on
ELSI as support for the contrary proposition.625
7.9 The reasoning in ELSI applies with even greater force in the present case since, unlike
Article V of the U.S.-Italy Treaty, Article V(1) of the Treaty of Amity expressly
covers “interests in property” and refers to “international law” as a floor rather than a
ceiling.
622 Elettronica Sicula S.p.A. (ELSI), Judgment, I.C.J. Reports 1989, pp. 41-42, paras. 48-49.
623 Ibid., p. 64, para. 106: “While there may be doubts whether the word ‘property’ in Article V, paragraph
1, extends, in the case of shareholders, beyond the shares themselves, the Chamber will nevertheless
examine the matter on the basis argued by the United States that the ‘property’ to be protected under
this provision of the FCN Treaty was not the plant and equipment the subject of the requisition, but the
entity of ELSI itself”.
624 Ibid., p. 66, para. 111. The Chamber’s reasoning in this passage indicates that it did not consider that
the international minimum standard was limited to a protection against denial of justice.
625 Dolzer and Schreuer (U.S. CM, Annex 163). Notably, the United States has not included the relevant
passages at pp. 163-164 in its annex. See also Frontier Petroleum Services Ltd. v. Czech Republic,
UNCITRAL, Final Award, 12 November 2010, para. 264: “While the ICJ’s Chamber rejected the
argument on factual grounds, this decision indicates that “protection and security” is not restricted to
physical protection but extends to legal protection through the domestic courts.” See also para. 263:
“Contrary to Respondent’s assertions, it is apparent that the duty to protection and security extends to
providing a legal framework that offers legal protection to investors – including both substantive
provisions to protect investments and appropriate procedures that enable investors to vindicate their
rights.”
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7.10 Third, contrary to the United States’ contention, it is not Iran’s position that “any
reduction or removal of ‘legal protections’ that would otherwise apply to Iranian
property should be considered a breach of Article IV(2)’s first sentence”.626 Rather,
as the United States also recognises, Iran’s case is that the provision prohibits “any
executive or legislative measures formulated specifically to remove legal
protections”.627 Thus, the United States’ mischaracterisation of Iran’s interpretation
as amounting to a general stabilisation clause – “a guarantee that the legal framework
applying to Iranian property must forever remain unchanged” – is unavailing.628
B. Breach by the USA of the first limb of Article IV(2)
7.11 The United States’ response to Iran’s claims under the first limb of Article IV(2)
amounts to nothing more than a repetition of its flawed interpretation, i.e. the United
States does nothing more than point to the absence of a case based on “physical
invasion by criminal actors”.629 Iran reserves its right to respond should the United
States later seek to rebut its claims.
626 U.S. Counter-Memorial, p. 134, para. 14.71.
627 U.S. Counter-Memorial, p. 134, para. 14.71 quoting Iran’s Memorial, pp. 101-102, para. 5.57
(emphasis added).
628 U.S. Counter-Memorial, p. 134, para. 14.72.
629 See ibid., p. 135, paras. 14.74-14.76.
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SECTION 2.
BREACH BY THE UNITED STATES OF THE PROHIBITION ON TAKING
UNDER ARTICLE IV(2)
A. Iran’s entitlement to freedom from expropriation of the property and interests
in property of its companies and nationals, except for a public purpose and the
payment of just compensation
7.12 The United States disagrees with two aspects of Iran’s interpretation of the second
sentence of Article IV(2).
7.13 First, the United States claims that Iran’s position that “Article IV(2) requires some
form of actual or substantial taking” mis-states the applicable test.630 Iran, however,
was simply referring to the ordinary meaning of the language (and in particular the
word “taking”) in its context.631 It is correct that international tribunals have
interpreted “expropriation” (which is synonymous with a “taking”) to mean that the
property holder has been “radically deprived of the economic use and enjoyment of
its [property], as if the rights related there […] had ceased to exist”.632
7.14 Second, as anticipated in Iran’s Memorial,633 the United States invokes the doctrine
of “police powers” despite the fact that this is not mentioned in the provision and was
also not referred to by the U.S. State Department when it was asked to explain the
scope of taking provisions to the Senate.634 Further, the United States has elected not
630 U.S. Counter-Memorial, p. 138, para. 14.82.
631 See Iran’s Memorial, p.105, paras. 5.63 and 5.65.
632 See U.S. Counter-Memorial, para. 14.82 citing Glamis, para. 357. Multiple tribunals have come to the
same conclusion using similar language: see e.g. Electrabel S.A. v. The Republic of Hungary, I.C.S.I.D.
Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012,
para. 6.62 and the authorities citied therein.
633 Iran’s Memorial, p. 107, para. 5.71.
634 See Treaties of Friendship, Commerce and Navigation Between the United Sates and Colombia, Israel,
Ethiopia, Italy, Denmark, and Greece: Hearing Before the Subcommittee of the Senate Committee On
Foreign Relations, 82nd Cong. 4 (1952) (Statement of Harold F. Linder, Deputy Assistant Secretary for
Economic Affairs), p. 398 (U.S. CM, Annex 2). Nor is the point made in Commercial Treaties with
Iran, Nicaragua, and The Netherlands: Hearing Before the Senate Committee on Foreign Relations,
84th Cong. (1956) (statement of Thorsten V. Kalijarvi, Department of State) (U.S. CM, Annex 1),
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to engage with Iran’s position that: “on any analysis, an exercise of ‘police powers’
must be non-discriminatory and designed and applied to achieve legitimate public
welfare objectives, i.e. proportionate and not in violation of other applicable principles
of international law”.635 Rather, the United States simply states that an exercise of
“police powers’ must be “a bona fide, non-discriminatory regulation”.636 It has not
commented on the further requirements identified by Iran and has not attempted to
show that these are satisfied on the facts of the present case.
7.15 Further, the United States’ contention that it is “entitled to significant deference in
determining what measures are necessary to serve its chosen purpose” is based on
writings of Sohn and Baxter and Christie in the early 1960s637 suggesting that what is
a public purpose has been rarely discussed by international tribunals. Whilst this may
have been accurate in the 1960s, it is not so now: international tribunals regularly
engage in an assessment of the reasonableness and proportionality of state measures,
including determination of the existence of a public purpose. There are two separate
stages to the test to be applied:
a. The first question is whether there exists a legitimate policy aim. As to this, a
State is entitled to a certain level of deference but the matter is still one which
although the State Department was specifically asked to address the scope of the expropriation
provision in the U.S.–Nicaragua FCN Treaty: see p. 21. Cf. U.S. Counter-Memorial, p. 156, para. 17.7
stating that if Iran’s interpretation of Article X(1) were correct “the U.S. Senate’s summary certainly
would have mentioned the fact”. Notably, the doctrine of “police powers” is also not mentioned in
Wilson’s explanation of the provisions of U.S. FCN treaties which protect property: see R. Wilson,
United States Commercial Treaties and International Law (1960), chapter IV.
635 Iran’s Memorial, p. 107, para. 5.71. Iran further explained that it considers that the element of
proportionality is implicit, but notes that this is supported by various cases also: see e.g. Corn Products
International, Inc. v. United Mexican States, I.C.S.I.D. Case No. ARB(AF)/04/1, Award, paras. 87-88,
referring to Fireman's Fund Insurance Company v. Mexico, I.C.S.I.D. Case No. ARB(AF)/02/1,
Award, para. 196. If further support were required, reference may be made to: Técnicas
Medioambientales Tecmed, S.A. v. United Mexican States, I.C.S.I.D. Case No. ARB(AF)/00/2, Award,
29 May 2003, para. 122; Azurix Corp. v. The Argentine Republic (I), I.C.S.I.D. Case No. ARB/01/12,
Award, 14 July 2006, paras. 311–312; Burlington Resources Inc. v. Ecuador, I.C.S.I.D. Case No.
ARB/08/5, Decision on Liability, 14 December 2012, para. 504; Occidental Petroleum Corporation
and Occidental Exploration and Production Company v. Republic of Ecuador (II), I.C.S.I.D. Case No.
ARB/06/11, Award, 5 October 2012, paras. 406–409; Philip Morris v. Uruguay, I.C.S.I.D. Case No.
ARB/10/7, Award, 8 July 2016, at para. 305.
636 U.S. Counter-Memorial, p. 136, para. 14.78.
637 Ibid., p. 136, para. 14.79.
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is reviewable by the Court.638 The passage that the United States quotes from
Brownlie’s Principles of Public International Law is of no assistance to it since
this refers specifically to “taxation, trade restrictions such as quotas, revocation
of licences for breach of regulations, or measures of devaluation”, none of
which are relevant here.639
b. The second question is whether the particular measures are reasonable and
proportionate. This question is also reviewable by the Court and it is subject to
a broad standard of review.640 The measures must be suitable and necessary to
achieve the legitimate policy aim (including the unavailability of alternative
measures641), and Iranian nationals or companies must not be subjected to an
undue burden. As the Court held in Oil Platforms, “whether a given measure is
‘necessary’ is ‘not purely a question for the subjective judgment of the party
[…] and may thus be assessed by the Court”.642 This is equally true for the other
elements of the proportionality analysis.
7.16 The United States also accuses Iran of trying to “erase any meaningful line between
acts of the executive and legislative branches of government and acts of the
judiciary”.643 In its Memorial, Iran explained that the acts of the U.S. courts which
have given effect to legislative and executive acts of the United States, which are
themselves expropriatory, are capable of constituting a taking in violation of
Article IV(2). The United States, by contrast, asserts (without citing any authority)
that “decisions of domestic courts acting in the role of neutral and independent arbiters
638 See e.g. Philip Morris v. Uruguay, paras. 302-304.
639 U.S. Counter-Memorial, p. 136, para. 14.78.
640 See e.g. Philip Morris v. Uruguay, paras. 305-306.
641 Panel Report, Canada – Wheat Exports and Grain Imports, para. 6.226; Panel Report, EC –
Trademarks and Geographical Indications (US), paras 7.458–7.460; Appellate Body Report,
Dominican Republic – Import and Sale of Cigarettes, para. 70.
642 Oil Platforms (Islamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports 2003,
p. 183, para. 43. See also Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v.
France), Judgment, I.C.J. Reports 2008, p. 229, para. 145.
643 U.S. Counter-Memorial, p. 138, para. 14.81.
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of legal rights should be considered separately from legislative and executive branch
actions” and that “[s]uch decisions do not give rise to a claim for expropriation”.644
7.17 Yet the conduct of all State organs discharging judicial functions is automatically
attributable to the State and, if those organs act in a manner which is contrary to
international law (including the provisions of the Treaty), this will give rise to
international responsibility on the part of the State. Many cases have rejected the
current U.S. position and confirmed the existence of judicial expropriation.645 For
example, the tribunal in Saipem v. Bangladesh found that the conduct of the
respondent State’s domestic courts amounted to an unlawful expropriation in breach
of the relevant BIT;646 there was no additional requirement for the claimant to
establish denial of justice or exhaustion of local remedies.647
B. Breach by the USA of the prohibition of takings under Article IV(2)
7.18 The United States contends that the legislative and executive measures at issue in this
case are not expropriatory for five reasons, all of which are misconceived and should
be rejected.
7.19 The United States’ first reason is a repetition of its misconceived argument that Bank
Markazi is not an Iranian “company” for the purposes of the Treaty.648
644 Ibid. Where it considers that this advances its case, the United States in fact seeks to establish a link
between the legislative and executive measures and the judicial decisions: see ibid., p. 142, para. 14.94.
645 See Saipem v. Bangladesh, I.C.S.I.D. Case No. ARB/05/7, Award, 30 June 2009, para. 129; Sistem
Mühendislik In aat Sanayi ve Ticaret A. v. Kyrgyz Republic, I.C.S.I.D. Case No. ARB(AF)/06/1,
Award, 9 September 2009, para. 118 (“The Court decision deprived the Claimant of its property rights
in the hotel just as surely as if the State has expropriated it by decree”); Karkey Karadeniz Elektrik
Uretim A.S. v. Islamic Republic of Pakistan, I.C.S.I.D. Case No. ARB/13/1, Award, 22 August 2017,
paras. 648-649; 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, Award, 29 July 2008, para. 702-704; OAO “Tatneft”
v. Ukraine, PCA Case No. 2008-8, Award, 29 July 2014, paras. 459-461.
646 Saipem v. Bangladesh, I.C.S.I.D. Case No. ARB/05/7, Award, 30 June 2009, para. 129.
647 Saipem v. Bangladesh, Award, para. 181.
648 U.S. Counter-Memorial, p. 140, para. 14.86.
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7.20 The second reason put forward by the United States is that the measures are “directed
at enforcing judicial judgments, thereby satisfying a debt owned by Iran”, rather than
“directed at the taking of the property of Iranian companies”.649 This is to seek to gloss
over the obvious point that the measures expressly provide for this debt to be satisfied
by enforcing and executing against the property of Iranian companies which the
United States considers to be agencies or instrumentalities of Iran. In any event, the
motive for a taking is not what matters under international law.
7.21 The United States’ third reason is that the executive and legislative measures
“standing alone” are incapable of constituting a taking because the fact that they
enabled enforcement action in order to satisfy judgments entered against Iran “is far
too contingent and tenuous to constitute an expropriation under international law”650.
Yet, far from being a remote or indirect issue, the intended result of the U.S. measures
is that the property of Iranian companies be taken, and the U.S. courts have
implemented that will. Insofar as the Court considers that the executive and legislative
measures are not themselves expropriatory, these form part of a series of acts the
combined effect of which amounts to a taking.
7.22 The fourth reason the United States advances, with respect to Executive Order 13599,
is that “blocking orders […] are not expropriatory, including because they are by
nature temporary and do not themselves alter ownership of the blocked assets”.651
Expropriation is not limited, however, to situations of a change in ownership.
Executive Order 13599 (as well other “blocking” measures such as TRIA) entails a
taking because it “blocks” all property of the relevant Iranian companies located in
the territory of the United States. The United States does not dispute that “blocked”
assets may not be transferred, paid, exported, withdrawn or otherwise dealt with.652
There measures are temporary only in the most technical sense that the United States
could repeal them if it chose to do so. Both E.O. 13599 and Section 502 ITRSHRA
were introduced in 2012 and have remained in force since (i.e. for around 8 years to
649 Ibid., p. 140, para. 14.87.
650 Ibid.
651 U.S. Counter-Memorial, p. 141, para. 14.88.
652 See Iran’s Memorial, p. 4, para. 1.12, footnote 9.
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date). In these circumstances, the Iranian companies have been “radically deprived of
the economic use and enjoyment of its [property], as if the rights related there […]
had ceased to exist”.653
7.23 The United States’ fifth reason is its invocation of the police powers doctrine,
characterising the U.S. legislative measures as having been enacted “to provide
victims of terrorist acts with the ability to obtain redress from the sponsors of those
acts, including Iran”.654 However, as already noted, the United States has made no
serious attempt to establish a sound basis for invocation of police powers, even if such
were applicable, and in particular has not shown that the legislative measures are
reasonable and proportionate. As follows from the breach of Article IV(1), they are
unreasonable (see paras. 6.86-6.94 above). Further, the measures are not suitable to
achieve their stated aim since they wrongly conflate the relevant Iranian companies
with the Iranian State, in disregard of their separate juridical status, and those
companies are subjected to an undue burden, i.e. the measures are disproportionate.
This is especially so as the Iranian companies were not even alleged to have been
involved in the alleged wrongdoing of Iran which was the subject of the underlying
liability judgments. Rather, the Iranian companies have been targeted on the sweeping
basis that they are agencies or instrumentalities of Iran whose separate juridical status
has been abrogated pursuant to the U.S. measures. The only exception concerns the
purported, and absurd, liability findings against the Iranian companies in the
proceedings concerning the terrorist acts of 11 September 2001.
7.24 Moreover, the United States also seeks to pass over in two short paragraphs its judicial
measures implementing the executive and legislative measures by seizing the property
of the Iranian companies and ultimately ordering its turning over to the various
plaintiffs. The contention that the judicial measures cannot entail takings because the
executive and legislative measures were taken in the exercise of police powers adds
653 See U.S. Counter-Memorial, p. 139, para. 14.82 citing Glamis, para. 357. Multiple tribunals have come
to the same conclusion using similar language: see e.g. Electrabel S.A. v. The Republic of Hungary,
I.C.S.I.D. Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November
2012, para. 6.62 and the authorities citied therein.
654 U.S. Counter-Memorial, p. 141, para. 14.90.
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nothing.655 Likewise, the United States’ submission that “the overall impact of the
measures should be considered economically neutral: the reduction in assets held by
Iran’s agencies and instrumentalities is offset by a [commensurate] reduction in Iran’s
liabilities” merely assumes the legitimacy of disregarding the separate juridical status
of the relevant Iranian companies and conflating them with the Iranian State.656 In any
event, the United States points to no authority in support of its unorthodox approach
of looking at the “overall impact”.
SECTION 3.
BREACH BY THE UNITED STATES OF IRAN’S ENTITLEMENT FOR ITS COMPANIES
AND NATIONALS TO BE PERMITTED TO LEASE, ACQUIRE AND DISPOSE OF
PROPERTY
7.25 The United States attempts to limit the scope Article V(1) in three ways, in both
respects reading in restrictive wording for which there is no basis in the Treaty text.
Article V(1) states:
“Nationals and companies of either High Contracting Party shall be permitted,
within the territories of the other High Contracting Party: (a) to lease, for
suitable periods of time, real property needed for their residence or for the
conduct of activities pursuant to the present Treaty; (b) to purchase or otherwise
acquire personal property of all kinds; and (c) to dispose of property of all kinds
by sale, testament, or otherwise. The treatment accorded in these respects shall
in no event be less favorable than that accorded nationals and companies of any
third country.”
7.26 First, as to the circumstances in which a Treaty Party will be in breach of the obligation
to “permit” the nationals and companies of the other Party to dispose of property of
all kinds by sale, testament, or otherwise, the United States contends that this will only
be engaged when the relevant national or company has actually attempted to dispose
of its property and has been prevented from doing so. This is an attempt to exclude
from the scope of Article V(1) measures – such as those at issue in the present case –
which expressly prohibit a Party’s nationals or companies from disposing of their
property, thereby rendering such disposal impossible. The United States’ position
655 Ibid., p. 142, para. 14.94.
656 Ibid., p. 143, para. 14.95.
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rests on an artificial and empty distinction – the imposition of such a sweeping
prohibition not only makes disposal impossible but also renders any attempt at
disposal futile. Iran’s position is not based on an expansive interpretation of the word
“permitted” as encompassing “facilitated”.657
7.27 Second, the United States contends that the entirety of the provision is reducible to a
protection on the basis of most-favoured-nation treatment.658 In other words, it
contends that the first sentence of Article V(1) is qualified by the second sentence.
This is to ignore the ordinary meaning of the Treaty text and, rather than giving effect
to the context,659 it renders redundant the drafters’ separation of the provision into two
sentences and the repetition of the mandatory term “shall” in both sentences. Meaning
and effect is to be given to the actual text by interpreting this as providing for two
related but distinct obligations. That the second sentence supplements the first
sentence is evident from the use of the linking phrase “[t]he treatment accorded in
these respects” and the phrase “in no event”.
7.28 Third, linked to the protection which is afforded on the most-favoured-nation
treatment basis, the United States contends that Iran must show that the relevant
Iranian companies have been treated less favourably than the companies of a third
State which are “in a like situation”.660 This, again, is to attempt to read into
Article V(1) language which is not there but which may be found in other treaties
(such as in Article 1103 of the NAFTA which uses the phrase “in like circumstances”).
The second sentence of Article V(1) will be breached if Iranian companies have been
treated less favourably than “companies of any third country”. The provision contains
no additional limitation or qualification. Thus, there is no need for Iran to show that
“an agency or instrumentality of a state sponsor of terrorism […] received better
treatment than the companies that are the subject of its Article V(1) claims”.661 It is
sufficient for Iran to show that the companies of a third State holding property in the
657 Cf. ibid., p. 144, para. 15.4.
658 Ibid., pp. 143-144, para. 15.1 and 15.5.
659 Cf. ibid., p. 144, para. 15.5.
660 Ibid., p. 145, paras. 15.8-15.9.
661 Ibid., p. 145, para. 15.9.
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United States are not subject to the same restrictions with respect to disposal of that
property as the Iranian companies at issue here, and this is plainly the case.
7.29 Once the United States’ incorrect interpretation falls, it becomes clear that the United
States has no defence to Iran’s claims under Article V(1) with respect to its companies
that, as the intended effect of the U.S. legislative and executive measures as
implemented by the U.S. courts, have been deprived of their right to dispose of their
property as they see fit.
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CHAPTER VIII.
THE BREACHES OF ARTICLES VII(1) AND X(1) OF THE TREATY OF
AMITY
SECTION 1.
ARTICLE VII(1) OF THE TREATY OF AMITY: BREACH BY THE UNITED STATES OF
IRAN’S ENTITLEMENT TO FREEDOM, INCLUDING FOR ITS COMPANIES AND
NATIONALS, FROM RESTRICTIONS ON THE MAKING OF PAYMENTS, REMITTANCES
AND OTHER TRANSFERS OF FUNDS TO OR FROM THE TERRITORY OF THE UNITED
STATES
A. Article VII(1) of the Treaty of Amity
It is recalled that, pursuant to Article VII(1):
“Neither High Contracting Party shall apply restrictions on the making of
payments, remittances, and other transfers of funds to or from the territories of
the other High Contracting Party, except (a) to the extent necessary to assure the
availability of foreign exchange for payments for goods and services essential to
the health and welfare of its people, or (b) in the case of a member of
the International Monetary Fund, restrictions specifically approved by the
Fund.”
In its Memorial, Iran demonstrated that, pursuant to its ordinary meaning,
Article VII(1) establishes a general prohibition of “restrictions” on the making of
payments, remittances, and other transfers of funds to or from the territory of the
United States and/or Iran. The United States does not disagree that the prohibition in
the first sentence of Article VII(1) is drawn very broadly through use of the term
“restrictions”, which is unqualified. However, while purporting to criticise Iran for
adopting an “improper and opportunistic reading of the Treaty”,662 the United States
seeks impermissibly to rewrite the first sentence as if it read:
“Neither High Contracting Party shall apply exchange restrictions on the
making of payments, remittances, and other transfers of funds in foreign
662 U.S. Counter-Memorial, p. 152, para. 16.14.
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exchange to or from the territories of the other High Contracting Party, except
[…]”
The United States seeks to justify this attempted rewriting, which “ignores [the]
text”,663 on the basis that the exceptions in Article VII(1) and also
Articles VII(2) and (3) expressly refer to “exchange restrictions”.664 But this merely
demonstrates that certain types of restrictions are permitted with respect to foreign
exchange and that, where the Treaty Parties intended to refer to “exchange
restrictions”, they did so expressly. It is, of course, correct that Article VII(1) is to be
read in its context, but this confirms that the first sentence establishes a very broad
prohibition, with the rest of Article VII(1) as well as paragraphs (2) and (3) being
concerned solely with permitted exceptions in terms of certain “exchange
restrictions”. In this way, Article VII is indeed to be read as a “cohesive unit with one
paragraph informing the meaning of the others”.665
The sole authority relied upon by the United States for its restrictive interpretation is
a statement in the 1929 case of Payment of Various Serbian Loans to the effect that:
“special words, according to elementary principles of interpretation, control […]
general expressions”.666 This approach was not codified in the Vienna Convention,667
was not referred to in the International Law Commission (‘ILC’)’s Commentaries on
the preceding Draft Articles,668 and was understandable on the facts of that case since
the issue was whether references in the bonds to “francs” should be read consistently
with references to “gold francs”. The present case, however, is very different because
the broad word “restrictions” is not equivalent to a reference to a specific currency
(“francs”) as to which there was no suggestion in the relevant text that the parties were
then seeking to make a specific exception with respect to gold francs.
663 Ibid., p. 152, para. 16.14.
664 Ibid., p. 147, paras. 16.4-16.5.
665 Ibid., p. 151, para. 16.11.
666 Ibid., p. 147, para. 16.6 referring to Payment of Various Serbian Loans Issued in France (France v.
Kingdom of the Serbs, Croats, and Slovenes), 1929 P.C.I.J. Series A, No. 20.
667 Cf. Article 34 regarding the special meaning of words.
668 Serbian Loans was cited in connection with other rules such as when preparatory works may be resorted
to: see Yearbook of the International Law Commission (1966), Vol. II, p. 223. [The principle does not
appear to have been discussed at the Vienna Conference.]
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Further, the United States dedicates a number of paragraphs to an account of the
negotiating history of Article VII.669 This, however, is inconclusive at best. The fact
that the heading of the provision in certain documents was “exchange control” is of
no assistance, not least since no such heading was included in the final version of the
Treaty of Amity.670 Likewise, the fact the Parties at times referred to the provision as
“relating to” exchange restrictions, or that Iran expressed concerns about not
permitting exchange restrictions, is both unsurprising and immaterial: much of the
provision is concerned with exchange restrictions specifically and in great detail.
Contrary to the United States’ assertion, nothing in the travaux it has put forward
confirms its current view that the first sentence is concerned with restrictions to
foreign exchange only.
The United States also appears to suggest that the U.S. measures at issue do not fall
within the broad prohibition on restrictions on transfers of funds because they are
“simply designed to enable the enforcement of valid court judgments”.671 The
prohibition, however, applies irrespective of the motive of the relevant restriction.
B. Violation of Iran’s entitlement to freedom, including for its companies and
nationals, from restrictions on the making of payments, remittances and other
transfers of funds to or from the territory of the United States
The United States contends that the U.S. measures “do not constitute restrictions on
payments, remittances or transfers to or from the territories of the other High
Contracting Party”.672 This is to ignore Iran’s obvious practical point that the effect of
the U.S. legislative and executive measures is that funds transferred to the United
States in future will be “blocked” and made subject to enforcement, whilst funds
already in the United States are already “blocked” and made subject to actual or
threatened attachment, execution and dissipation, and their payment or transfer to the
669 U.S. Counter-Memorial, pp. 148-152, paras. 16.7-16.13.
670 Cf. ibid., p. 148, para. 16.7.
671 Ibid., p. 146, para. 16.2.
672 Ibid., p. 152, para. 16.16.
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territory of Iran is an impossibility.673 The express effect of assets being “blocked” is
that they “may not be transferred, paid, exported, withdrawn, or otherwise dealt in”,674
and that they become available for enforcement and execution pursuant to
Section 201 of the TRIA.
This is what has occurred. For example, the payments in respect of Bank Markazi’s
proceeds generated from the U.S. securities, which it had purchased and which
were/are at issue in the Peterson proceedings, were to be collected by Clearstream in
the United States and then deposited in Bank Markazi’s bank account in Luxembourg.
The U.S. measures have rendered such transfers impossible, instead ensuring that the
funds remained in the United States so that they were/are available for the pending
enforcement actions.
The United States contends that this restriction is imposed because the U.S. measures
are “designed to enable the enforcement of valid court judgments”, but this is to seek
to read into Article VII(1) a non-existent qualification by reference to motive.675
The United States provides no support for its assertion that Iran seeks to “expand
Article VII’s reach far beyond the intended scope and purpose”.676 It does not point,
for example, to any evidence in the travaux showing that the prohibition was to apply
without prejudice to the enforcement of judgments.
It is of no assistance to the United States to say that, on the facts of a different and
hypothetical case, Iran’s approach would mean that “judgments against any Iranian
national or company could never be enforced against the assets of that national or
company if it refused to pay the judgment”.677 That is incorrect. A measure of general
673 See Iran’s Memorial, p. 111, para. 6.7.
674 U.S. Executive Order 13599, 5 February 2012, 77 Fed. Reg. 6659 (IM, Annex 22). For a definition of
“Government of Iran” in the E.O. 13599, see supra, para. 2.96b and footnote 212.
675 U.S. Counter-Memorial, p. 152, para. 16.16.
676 Ibid., p. 153, para. 16.16.
677 Ibid., p. 152, para. 16.16.
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application introduced to ensure the payment of judgments would not be a restriction
on transfer (etc.) “to or from the territories of the other High Contracting Party”.
SECTION 2.
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
A. Article X(1) of the Treaty of Amity
Pursuant to Article X(1) of the Treaty of Amity:
“Between the territories of the two High Contracting Parties there shall be
freedom of commerce and navigation.”
The United States does not dispute that the Court has found that the term “commerce”
in Article X(1) “includes commercial activities in general – not merely the immediate
act of purchase and sale, but also the ancillary activities integrally related to
commerce”.678 Such ancillary activities include the products of commerce, including
debts which are owed to Iran and its nationals and companies in respect of commerce
between the territories of the Parties.
Nevertheless, the United States ignores the ordinary meaning of this provision and
instead seeks to cut its scope down to either “commerce that is related to navigation”
or, in the alternative, “trade in goods”. Both of these interpretations are contrary to the
ordinary meaning of the words “there shall be freedom of commerce and navigation”.
Moreover, as the United States appears to accept, its primary position that
“commerce” means “commerce that is related to navigation” is an attempt to re-argue
the interpretation that was specifically rejected by the Court in Oil Platforms.
678 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 819, para. 49, quoted at Oil Platforms (Islamic Republic of Iran v. United States
of America), Judgment, I.C.J. Reports 2003, p. 200, para. 80. The Court also rejected the U.S.
contentions to the effect that the term was restricted to maritime commerce.
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i. “Commerce” is not restricted to “commerce related to navigation”
Pursuant to the ordinary meaning of the words “freedom of commerce and
navigation”, Article X(1) requires both freedom of commerce “and” freedom of
navigation between the territories of the High Contracting Parties.679 Contrary to the
United States’ contention, this reading in no way “simply read[s] the term ‘navigation’
out of Article X”.680
Rather, it is the United States that seeks to rewrite the requirement for freedom of
“commerce”, which is stated in absolute terms without any qualification, as if it
instead read:
“Between the territories of the two High Contracting Parties, there shall be
freedom of commerce that is related to navigation.”
If the Treaty Parties had agreed significantly to limit “freedom of commerce” in this
way, they would have done so expressly.
Notwithstanding the United States’ attempt to use different terminology, there is no
material difference between its current argument that “commerce” is limited to
“commerce related to navigation” and its position before the Court in Oil Platforms
that “commerce” is restricted to “maritime commerce”.681 Indeed, its current position
rests on the contextual argument that: “Aside from Paragraph 1, every paragraph in
Article X explicitly focuses on vessels”.682
In a passage which the United States notably does not cite, the Court expressly rejected
that argument reasoning that:
679 This is also apparent from Article X(3), which refers to the liberty of vessels to “come with their cargoes
to all ports, places and waters […] open to foreign commerce and navigation”.
680 U.S. Counter-Memorial, p. 157, para. 17.9.
681 See Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection,
CR 96/13 (Crook), pp. 30-31: “In Article X(1), the parties did not agree to protect commerce in the
abstract sense of all economic activity. Rather through the totality of Article X, they agreed to take
specified practical steps in operating their ports and in regulating navigation. These are spelled out in
the five specific paragraphs, in Article X, which give concrete meaning to the general goal set by
Article X(1).”
682 U.S. Counter-Memorial, p. 155, para. 17.4.
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“The Court must indeed give due weight to the fact that, after Article X,
paragraph 1, in which the word ‘commerce’ appears, the rest of the Article
clearly deals with maritime commerce. Yet this factor is not, in the view of the
Court, sufficient to restrict the scope of the word to maritime commerce, having
regard to other indications in the Treaty of an intention of the parties to deal
with trade and commerce in general. The Court also takes note in this connection
of the recital in Article XXII of the Treaty which states that the Treaty was to
replace, inter alia, a provisional agreement relating to commercial and other
relations, concluded at Tehran on 14 May 1928. The Treaty of 1955 is thus a
Treaty relating to trade and commerce in general, and not one restricted purely
to maritime commerce.
Also to be considered is the entire range of activities dealt with in the Treaty –
as, for example, the reference in Article IV to the freedom of companies to
conduct their activities, to enjoy the right to continued control and management
of their enterprises, and ‘to do all other things necessary or incidental to the
effective conduct of their affairs’.
In these circumstances, the view that the word ‘commerce’ in Article X,
paragraph 1, is confined to maritime commerce does not commend itself to the
Court”683
In its Judgment on Preliminary Objections, the Court recalled and endorsed its earlier
interpretation of Article X(1) in Oil Platforms.684
Remarkably, the United States now asks the Court to “revisit” its prior interpretation
of Article X(1) (and its specific rejection of the U.S. position) without even attempting
to engage with the Court’s reasoning. It puts forward no reason why the Court should
depart from its carefully considered view in Oil Platforms. Rather, the United States
simply reiterates its previous arguments as to context,685 invokes a self-serving
account of its own understanding during the negotiation of the Treaty,686 and (without
mentioning this fact) relies on the same commentary it had put before the Court, which
the Court no doubt considered carefully, in Oil Platforms.687
683 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 817, paras. 41-43. See also Oil Platforms (Islamic Republic of Iran v. United
States of America), Judgment, I.C.J. Reports 2003, p. 199, para. 80.
684 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 34, para. 78.
685 U.S. Counter-Memorial, p. 155, para. 17.4.
686 Ibid., pp. 155-156, paras. 17.5-17.8.
687 Each of the authorities referred to at U.S. Counter-Memorial, p. 156, para. 17.8 (the Sullivan Study and
the writings of Walker and Piper) were relied upon in the U.S. oral submissions in Oil Platforms: see
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Further, the fact that Iran may have expressed particular concerns regarding the nondiscriminatory
treatment of vessels (as proposed in the later paragraphs) sheds no light
on its understanding of the term “commerce” in Article X(1).688 If anything, this
merely highlights that the Treaty Parties agreed without difficulty on the use of the
broad term “commerce” in that provision. Likewise, the United States is not assisted
by a table of contents to an earlier draft of the Treaty which labelled Article X as
“Navigation”.689 No such table of contents or heading to the provision is found in the
final version of the Treaty.
The United States also seeks to distinguish Oil Platforms on the basis that “the factual
allegations [in that case] focused on activity in the Persian Gulf, ensuring that Iran’s
Article X claim at least retained some connection to a navigational context”.690 This,
however, played no part in the Court’s reasoning and its interpretation, applying the
rules codified in the Vienna Convention, of the word “commerce”.
ii. “Commerce” is not restricted to “trade in goods”
The United States is also wrong to suggest that the term “commerce” in Article X(1)
is restricted to “trade in goods”.691 Although this is presented as an alternative
interpretation, it is merely an attempt by the United States to recast its primary position
that “commerce” means “commerce related to navigation” (which is in turn the same
as its position in Oil Platforms that “commerce” means “maritime commerce”). Thus,
the United States again places great weight on the subsequent paragraphs of Article X
as supposedly demonstrating that “it is a navigation provision” and “taking in context,
Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, CR 96/13
(Crook), p. 30. In any event, these materials do not assist the United States. For example, the
observation recorded in the Sullivan Study that Article X “is considered as having special relevance to
seaborne traffic” does not amount to a statement that the word “commerce” in Article X(1) is so limited.
Likewise, the observation in the Senate report that Article X “details the rights of vessels flying the
flag of either party in the ports of the other and in general provides national and most-favoured-nation
treatment, except for coastwise, inland and fishing traffic” is an accurate summary of the detailed
provisions in Article X(2) to (4).
688 See U.S. Counter-Memorial, p. 155, para. 17.6.
689 Ibid., p. 155, para. 17.5.
690 Ibid., p. 157, para. 17.9.
691 Ibid., pp. 157-158, paras. 17.10-17.13.
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the type of commerce that Article X(1) refers to is the type of commerce that can take
place via vessel: trade in goods”.692 The “alternative” interpretation therefore adds
nothing and fails for the reasons already referred to (see paras. 8.15–8.23 above).
In any event, this alternative interpretation should also be rejected for additional
reasons.
First, as to context, the United States recognises that Article VIII addresses the entry
and treatment of goods, and Article IX addresses customs administration. If the Parties
had agreed to limit Article X(1) to trade in goods, they would have said that expressly
(using the same language as in those other provisions or by way of a cross-reference
to those provisions), but they did not do so. To give to Article X(1) its ordinary
meaning is not to “swallow up these other provisions”,693 and no good faith
interpretation of Article X(1) would lead to it somehow cutting across or being
inconsistent with Articles VIII and IX, which appears to be what the United States is
suggesting.
Second, contrary to the United States’ contention, the Court’s Judgment in Oil
Platforms provides no support for such a narrow reading. The fact that the specific
facts of that case involved allegations regarding trade of Iranian oil is immaterial to
the Court’s reasoning. As Iran noted in its Memorial, the Court specifically reasoned
that: “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’ […]”.694
a. Remarkably, the United States does not refer to this passage in its Counter-
Memorial.
b. Moreover, the Court also considered that the Treaty of Amity is “a Treaty
relating to trade and commerce in general” and considered that the freedom of
692 U.S. Counter-Memorial, p. 157, para. 17.11.
693 Ibid., p. 161, para. 17.24.
694 See Iran’s Memorial, p. 113, para. 6.13 referring to Oil Platforms (Islamic Republic of Iran v. United
States of America), Preliminary Objection, Judgment, I.C.J. Reports 1996, p. 818, at para. 45.
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companies to conduct their activities under Article IV (none of which
necessarily involve trade of goods) informed the meaning of the word
“commerce”.695
Third, even if the United States were correct that “what was contemplated when the
Parties negotiated the Treaty of Amity”696 was that the word “commerce” referred to
“trade of goods”697 (which could not be accepted), this would still not assist the United
States. In accordance with the Court’s established jurisprudence, the term
“commerce” must be understood as having the meaning it bears when the Treaty is to
be applied. Today, as the Court recognised in Oil Platforms, international “commerce”
is widely understood as encompassing e.g. modern financial operations.
a. This follows from the Court’s acceptance in the Dispute regarding Navigational
and Related Rights that the term “comercio” (“commerce”) is a generic term
“referring to a class of activity” (i.e. commerce) and the fact that, like the
1958 treaty at issue in that case, the Treaty of Amity was intended to be of
continuing duration (as follows from the terms of Article XXII698 and the object
of “firm and enduring peace and friendship” recorded in Article I: see para. 6.28
above).699 The Court rejected the argument that “comercio” in the phrase
“navigation for the purpose of commerce” was limited to trade in goods, finding
that it encompassed other activities that are commercial in nature, i.e. engaged
in for profit-making purposes.700
b. The Court’s reasoning applies with even greater force in the present case since
the formula used in Article X(1) (“freedom of commerce and navigation”) is
695 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 817, para. 41.
696 U.S. Counter-Memorial, p. 158, para. 17.13.
697 See ibid., p. 153, para. 17.2.
698 Article XXII provides that the Treaty “shall remain in force for ten years and shall continue in force
thereafter until terminated as provided herein”.
699 The Treaty, in fact, endured for more than sixty years before the United States issued its notification of
termination in response to the Court’s Order on Provisional Measures in the Alleged Violations case.
700 Dispute regarding Navigational and Related Rights (Costa Rica v. Nicaragua), Judgment, I.C.J.
Reports 2009, p. 244, paras. 70-71.
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broader than that at issue in Dispute regarding Navigational and Related Rights
(“navigation for the purposes of commerce”). Iran referred to this case in its
Memorial. The United States has elected not to engage with this point.
Fourth, the United States contends that “Iran has provided no examples of an instance
in which Article X(1) or its equivalent has been interpreted to mean anything other
than the movement of goods between countries”.701 This is misconceived. Iran’s
interpretation reflects the ordinary meaning of the words in their context and in light
of the Treaty’s object and purpose (as confirmed by the Court in Oil Platforms). In
these circumstances, Iran does not also need to show that its interpretation is supported
by any subsequent practice in the application of the treaty which establishes the
agreement of the parties regarding its interpretation. No doubt if the United States had
been able to identify subsequent practice in support of its interpretation, it would have
done so.
iii. The territorial limitation
In its Memorial, Iran noted that: “the Court has emphasised that Article X(1) protects
‘freedom of commerce’ that is ‘[b]etween the territories of the two High Contracting
Parties’, as opposed to commerce that involves a series of discrete sales via actors in
third States”.702 The United States is incorrect that “Iran’s Memorial does not even
attempt to address Article X(1)’s important territorial limitation”.703 Rather, it is the
United States that has elected to ignore paragraphs 6.15 to 6.18 of Iran’s Memorial
which address precisely this issue.
The United States contends that Article X(1) requires freedom of “direct trade”
between the territories of the Parties only.704 As Iran noted in its Memorial, on the
very different facts of the Oil Platforms case, the Court held that a series of distinct
transactions involving the sale of Iranian oil and ultimate purchase by a customer in
701 U.S. Counter-Memorial, p. 158, para. 17.13.
702 Iran’s Memorial, p. 113, para. 6.15.
703 Ibid., p. 159, para. 17.15.
704 Ibid., p. 158, para. 17.14.
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the U.S. is not “commerce” between Iran and the United States.705 The Court did not,
however, make a more general finding that only “direct trade” or “direct commerce”
is covered by Article X(1).
Further, the United States has not seriously responded to Iran’s reliance on the Court’s
reasoning in Nicaragua as demonstrating the breadth of acts that may interfere with
international law rights to freedom of commerce.706 Nor has it sought to rebut Iran’s
position that “the mining of a port where trade takes place can be seen as a physical
equivalent to the automatic ‘blocking’ and/or seizure of all assets of Iran and Iranian
companies, including where a given State-owned Iranian bank provides a necessary
gateway to commerce”.707 Notably, the United States does not dispute that
Article X(1) covers legal impediments to commerce, and merely says that the
provision has previously been considered in the context of physical impediments and
that Iran’s interpretation is “novel”.708 Of course, that merely reflects the rarity with
which a provision such as Article X(1) has come before this Court, and in contending
that “there appears to be no limit as to what Iran construes as a potential impediment
to commerce”709 is seeking to divert attention away from Iran’s interpretation of
Article X(1) pursuant to the usual rules on treaty interpretation and Iran’s application
of this provision by reference to the very specific and unusual facts of the current case.
Additionally, insofar as the United States suggests that Article X(1) is limited to “the
commercial relationship between the Parties” (i.e. the Iranian State and the United
States), this is incorrect.710
705 Iran’s Memorial, pp. 113-114, para. 6.15.
706 See ibid., pp. 114-115, paras. 6.17-6.18.
707 Ibid., pp. 114-115, para. 6.18.
708 U.S. Counter-Memorial, p. 161, para. 17.22.
709 Ibid.
710 Ibid., p. 161, para. 17.21.
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B. Violation of Iran’s entitlement to freedom of commerce between the territories
of Iran and the United States, under Article X(1) of the Treaty of Amity
The United States does not engage with the argument that, at a very obvious level, the
U.S. measures “blocking” and/or seizing the assets of Iranian companies and
disregarding their separate juridical status have rendered impossible commerce
between the territories of the two Treaty Parties so far as concerns the Iranian
companies who have been targeted.711 Such assets includes the products of commerce
between Iran and the United States in relation to the contractual debts owed by U.S.
companies to: (a) TIC (debts owed by Sprint), (b) Bank Melli (debts owed by Visa,
Franklin and MasterCard), and (c) the Ministry of Defence712 (debts owed by Cubic
and now represented by a favourable arbitral award) in respect of services provided
by those U.S. companies in Iran.
That the U.S. measures negate the rights of Iran and Iranian companies under
Article X(1) is also evident, for example, from the fact that in February 2018 (prior to
the U.S. withdrawal from the JCPOA) the U.S. courts ordered Boeing to disclose to
the plaintiffs in the Shlomo Leibovitch case documents concerning the sale of aircraft
to Iran, a transaction which had earlier been licensed by the United States.713 As this
example illustrates, the United States is incorrect to assert that “measures applying to
terrorism-related litigation have too tenuous a connection” to commerce between the
territories of the Treaty Parties.714
The United States also emphasises the complexity of its internal law with respect to
so-called “U-turn transactions”.715 This does not engage with the obvious point that
until 2008 the United States allowed commerce between the territories of the Parties
which made use of the U-turn arrangement while, thereafter, the U.S. measures treated
711 See Iran’s Memorial, p. 116, para. 6.19(b)-(c).
712 It is noted that the Ministry of Defence (‘MODAFL’) is not designated in the Annex to Security Council
1373 (2006).
713 Leibovitch v. Islamic Republic Iran, 297 F. Supp. 3d 816 (N.D. Ill. 2018) (IR, Annex 81).
714 U.S. Counter-Memorial, p. 161, para. 17.21.
715 Ibid., pp. 159-160, paras. 17.16-17.17.
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the assets which were at issue in the Peterson litigation as the property of Bank
Markazi with the U.S. courts making a finding to this effect. It is no answer to this for
the United States to reiterate its incorrect position that Article X(1) concerns “direct
commerce” only.716 The relevant securities in which Bank Markazi had an interest
were issued in the United States by U.S. entities (the FRBNY or the DTC) and they
were purchased by Bank Markazi which negotiated the purchase price and paid in
U.S. dollars using the services of Clearstream, which also then managed the securities
and collected interest from the U.S. depositories in the United States and credited
Bank Markazi’s bank account in Luxembourg. Citibank, a U.S. company, held the
relevant securities in the U.S. and charged fees for its services.717 Thus, the transaction
was direct commerce between the territories of Iran and the United States with Bank
Markazi instructing an agent for the specific purpose of completing the transaction.
This is very different from the “series of commercial transactions” concerning the sale
of Iranian oil at issue in the Oil Platforms case.718
Finally, the United States’ contention that Article X(1) is inapplicable to the U.S.
measures because they govern terrorism-related litigation adds nothing to its position
that the provision covers only “direct commerce” and “trade in goods”.719
716 Ibid., p. 160, para. 17.19.
717 It is a matter of public knowledge that Citibank charges a fee for such services: see the model Global
Custodial Services Agreement; The Endowment PMF Master Fund, L.P., clause 16, (IR, Annex 110):
“The Client agrees to pay all fees, charges and obligations incurred from time to time for any services
pursuant to this Agreement as determined in accordance with the terms of the fee agreement separately
provided to the Client, together with any other amounts payable to the Custodian under this Agreement.
The Client agrees that the Custodian may debit the Cash Account to pay any such fees, charges and
obligations. The Client agrees that all fees and amounts paid to the Custodian shall be payable without
deduction for Taxes, which are the responsibility of the Client.” It is to be noted that the Order dated
9 July 2013 of the U.S. District Court required Citibank to “deposit the Blocked Assets, plus all accrued
interest thereon to date, minus any reasonable fees calculated thereon”: Peterson v. Islamic Republic
of Iran, Bank Markazi, Citibank and Clearstream, U.S. District Court for the Southern District of New
York, Order Entering Partial Final Judgment Pursuant to Fed. R. Civ. P.54(b), Directing Turnover of
the Blocked Assets, Dismissal of Citibank with Prejudice and Discharging Citibank from Liability,
9 July 2013, No. 10-cv-4518-KBF, p. 8, para. 3 (IR, Annex 43). See also Application of Fund Trustee
Pursuant to Section 5.6 of the Fund Agreement for Approval of Settlement with Citibank, N.A. on
Claim to Recover Costs Assessed Against the Segregated Account and for Approval of Trustee’s
Counsel’s Application for Attorney’s Fees, 17 May 2019, p. 6 referring to Citibank fees for, inter alia,
“holding the levied-upon Bonds” (IR, Annex 68).
718 See Iran’s Memorial, pp. 113-114, para. 6.15 referring to Oil Platforms (Islamic Republic of Iran v.
United States of America), Judgment, I.C.J. Reports 2003, p. 201, para. 83.
719 See U.S. Counter-Memorial, pp. 160-161, paras. 17.21-17.25.
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PART II.
THE OTHER U.S. DEFENCES DOES NOT BAR
IRAN’S CLAIMS
CHAPTER IX
THE DUTY TO EXHAUST LOCAL REMEDIES
DOES NOT BAR IRAN’S CLAIMS
As part of its strategy of narrowing Iran’s claims down to near vanishing point by
ignoring the actual terms of Iran’s Application and Memorial, the United States
presents Iran’s case as being essentially one of diplomatic protection. It asserts that
“for Iran to bring any claims on behalf of [Iranian] companies, international law
requires that Iran first demonstrate that the companies have exhausted their remedies
in the United States […] With very few exceptions, the Iranian companies have not
exhausted their local remedies”.720 This argument is based on a mischaracterisation of
the facts underlying Iran’s claims and on a flawed approach to the law on diplomatic
protection.
In its Memorial, Iran clearly set out the nature of its claims:
“Iran thus claims both in its own right and on behalf of the Iranian companies
impacted by the U.S. measures at issue in this case. As to the former, it is
emphasised that the harm inflicted by the U.S. measures on Iran is qualitatively
different from the harm inflicted upon individual Iranian companies. The harms
arise from an attempt to seize property of the Iranian State by imposing liability
upon entities that the Treaty requires (inter alia) to be regarded as separate from
the State and to seize their property, under U.S. law. It is an attempt to put
pressure upon the Iranian State by targeting entities in which the Iran State has
an economic interest, in breach of various U.S. obligations under the Treaty.”721
720 U.S. Counter-Memorial, p. 72, para. 10.1.
721 Iran’s Memorial, p. 120, para. 7.8 (emphasis added).
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Iran’s claims are State-to-State claims concerning U.S. violations of obligations owed
directly to Iran under the Treaty of Amity.722 The rights of Iran with respect to the
treatment to be afforded to the Iranian State exist in parallel with the rights of Iran
with respect to the treatment to be afforded to its companies and nationals under the
Treaty. This is not a case of diplomatic protection requiring the exhaustion of local
remedies.
This chapter will first show that local remedies have, in any event, been pursued and
exhausted, and this pursuit has demonstrated that there are no reasonably available
remedies in the U.S. legal system for Iran and its companies723 and/or the local
remedies provide no reasonable possibility of such redress.724 It will then explain that,
the Court may rule on the violation of rights of a State arising from injuries suffered
directly or indirectly by that State, without requiring the prior exhaustion of local
remedies.
SECTION 1.
LOCAL REMEDIES HAVE BEEN EXHAUSTED TO THE EXTENT THAT THEY ARE
REASONABLY AVAILABLE
Iranian companies Bank Markazi and Bank Melli tried to obtain redress through local
remedies and in fact exhausted all the avenues that had been left open to them. The
experience of these companies with the U.S. legal system confirms the absence of the
reasonable possibility of effective redress in domestic courts for Iran or any of its
companies.
Bank Markazi, the Central Bank of Iran, challenged its individualised, discriminatory
and retroactive treatment under the ITRSHRA before the District Court, the Court of
722 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), Judgment, 8 November 2019, p. 46, para. 130.
723 Ahmadou Sadio Diallo (Republic of Guinea v. Democratic Republic of the Congo), Preliminary
Objections, Judgment, I.C.J. Reports 2007, p. 60, para. 44.
724 Ibid.; International Law Commission, Draft articles on diplomatic protection, with commentaries, U.N.
Doc. A/61/10 (2006), Articles 14 and 15.
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Appeals for the Second Circuit, and the U.S. Supreme Court.725 As explained in the
next section, Section 502 of the ITRSHRA guaranteed that Bank Markazi would lose
its case, removing all its potential defences with retroactive effect.
Bank Melli, one of the first banks ever incorporated in Iran and a state-owned
company, appeared in the Weinstein and Bennett cases to challenge the attachment of
its property to satisfy a terrorism-based judgment against Iran: but this was also to no
avail. The District Court and the Courts of Appeals for the Second and Ninth Circuits
considered that Congress had made clear its intent that assets of any entity regarded
by U.S. law as an “instrumentality” of an alleged terrorist State were available to
satisfy the “terrorism judgment” against the State itself, even though Bank Melli was
not named as a defendant in any of the cases against Iran and was not itself alleged to
have been involved in any underlying terrorist activity.726 TRIA § 201(a) and FSIA
§ 1610(g) pre-determined the outcome. Petition for certiorari to the U.S. Supreme
Court was denied.727
The experiences of Bank Markazi and Bank Melli confirmed that a well-established
exception to the local remedies rule excludes the application of the rule in this case.
As Article 15(a) of the ILC Draft Articles on Diplomatic Protection provides,
“Local remedies do not need to be exhausted where:
(a) there are no reasonably available local remedies to provide effective redress,
or the local remedies provide no reasonable possibility of such redress”.728
The United States argues that the “[e]xhaustion of local remedies is excused only in
relatively rare circumstances where remedies are ‘obviously ineffective’ or ‘obviously
725 The District Court observed that Bank Markazi “filled the proverbial kitchen sink with arguments”:
quoted in Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016)
pp. 9-10 (IM, Annex 66).
726 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) (IM, Annex 64);
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) at pp. 7-12 (IM, Annex 47).
727 Filed 26 December 2019, denied 30 March 2020.
728 International Law Commission, Draft articles on diplomatic protection, with commentaries,
U.N. Doc. A/61/10 (2006), p. 20, Article 15.
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futile’”.729 But the “obvious futility” test was rejected by the ILC in its commentary
on Draft Article 15 because it “sets too high a threshold”.730 The correct test is as
expressed in ILC Draft Article 15(a), and it requires the taking into account of the
availability of remedies and of the possibility of effective redress. In applying the test,
the Court is to assume that Iran’s claims are meritorious.731
The ILC observes that the exception to the duty to exhaust local remedies has been
applied in cases in which
“the local court has no jurisdiction over the dispute in question; the national
legislation justifying the acts of which the alien complains will not be reviewed
by local courts; the local courts are notoriously lacking in independence; there
is a consistent and well-established line of precedents adverse to the alien; the
local courts do not have the competence to grant an appropriate and adequate
remedy to the alien; or the respondent State does not have an adequate system
of judicial protection.”732
Many of these scenarios apply to the situation facing Iranian companies seeking
remedies in the United States. Most strikingly, local remedies provide no reasonable
possibility of effective redress because the acts complained of by Iranian companies
consist of U.S. legislation (as well as executive and judicial measures) and actions
mandated by it, which bind the domestic courts. As the Tribunal held in the
Arbitration under Article 181 of the Treaty of Neuilly, non-exhaustion of local
remedies cannot be pleaded when recourse to national courts offers no possibility of
obtaining justice because these courts are bound by national legislation: “the rule of
exhaustion of local remedies does not apply generally when the act charged consists
of measures taken by the government or by a member of the government performing
729 U.S. Counter-Memorial, pp. 73-74, para. 10.3.
730 International Law Commission, Draft articles on diplomatic protection, with commentaries,
U.N. Doc. A/61/10 (2006), p. 77, para. (3).
731 International Law Commission, Draft articles on diplomatic protection, with commentaries,
U.N. Doc. A/61/10 (2006), p. 79, para. (4), citing Finnish Ships Arbitration, (1934) 3 R.I.A.A. 1479,
at p. 1504 and the Ambatielos Claim (Greece v United Kingdom), 12 R.I.A.A. 83 (1956), pp. 119-120.
732 International Law Commission, Draft articles on diplomatic protection, with commentaries, U.N. Doc.
A/61/10 (2006), p. 79, para. (3) (footnotes omitted).
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his official duties. There rarely exist local remedies against the acts of authorised
organs of the state”.733
In Ambiente Ufficio S.p.A. v. Argentine Republic, the Tribunal, chaired by Judge
Simma, applied the ILC’s “well-reasoned and well-balanced restatement of the
threshold applicable to the futility exception”.734 The Claimant argued that the futility
exception applied because, inter alia, a specific Argentinian law “shut[] the door to
any possibility to obtain redress […] since it prevented the domestic courts from
fulfilling the very functions the recourse to domestic courts prerequisite was said to
serve”.735 In addition, the Supreme Court of Argentina had taken a legal stance that
“demonstrated that any bondholder attempting to obtain payment by resorting to the
domestic courts of Argentina would face a rejection of his claims, so that any such
attempt would have constituted a totally useless and frustrating exercise”.736 The
Tribunal accepted these arguments and concluded that “having recourse to the
Argentine domestic courts and eventually to the Supreme Court would not have
offered Claimants a reasonable possibility to obtain effective redress from the local
courts and would have accordingly been futile.”737 Similarly in this case, specific U.S.
legislation as well as a Supreme Court judgment have rendered local remedies futile
As set out in Chapter II of this Reply, the impugned U.S. measures have created a
discriminatory and comprehensive regime applicable to Iranian companies that is in
practice not reviewable in the local courts, takes away the competence of local courts
to grant an appropriate and adequate remedies, and removes any semblance of judicial
protection from Iranian companies subject to the regime. The fact that U.S. courts are,
in the words of Ambiente v Argentina, “prevented from fulfilling the very functions
the recourse to domestic courts prerequisite was said to serve”738 is openly
733 “Principal Question”, (1934) American Journal of International Law, vol. 28, no. 4, pp. 773-807, at
p. 789.
734 Ambiente Ufficio S.p.A. v. Argentine Republic, I.C.S.I.D. Case No. ARB/08/9, Decision on Jurisdiction
and Admissibility, 8 February 2013, para. 610.
735 Ibid., para. 615.
736 Ibid., para. 616.
737 Ibid., para. 620.
738 Ibid., para. 615.
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acknowledged by the courts. For example, in a judgment of 9 March 2020, the U.S.
District Court for the District of Columbia held:
“Having already concluded that the Court possesses subject-matter
jurisdiction, little else is required to show that the Levinsons are entitled to
relief. 28 U.S.C. § 1605A(c). The private right of action in the FSIA terrorism
exception provides that a foreign government is liable to a U.S. citizen “for
personal injury or death caused by an act of torture, extrajudicial killing, aircraft
sabotage, hostage taking, or the provision of material support or resources for
such an act.” 28 U.S.C. § 1605A(a)(1), (c). As a result, ‘a plaintiff that offers
proof sufficient to establish a waiver of foreign sovereign immunity under
§ 1605A(a) has also established entitlement to relief as a matter of federal law’
if the plaintiff is a citizen of the United States. Fritz, 320 F. Supp. 3d at 86–87;
see Hekmati, 278 F. Supp. 3d at 163 (‘Essentially, liability under § 1605A(c)
will exist whenever the jurisdictional requirements of § 1605A(a)(1) are
met.’).”739
The U.S. observation that “in many cases the [Iranian] entity simply did not appear to
oppose attachment”740 ignores the reality of the legal regime that has been created,
targeting Iran and its companies, and the hopelessness of their position under U.S.
law. It is disingenuous for the United States to state that “the U.S. judicial system has
always been available to Iran and its nationals to pursue their legal interests”741 when
the Chief Justice of its own Supreme Court is on the record as stating that there has
been “unconstitutional interference with the judicial function, whereby Congress
assumes the role of judge and decides a particular pending case in the first instance”.742
He observed that
“however difficult it may be to discern the line between the Legislative and
Judicial Branches, the entire constitutional enterprise depends on there being
such a line. The Court’s failure to enforce that boundary in a case as clear as this
reduces Article III [of the Constitution] to a mere ‘parchment barrier [] against
the encroaching spirit’ of legislative power.”743
739 Levinson, et al. v. Islamic Republic of Iran, U.S. District Court for the District of Columbia,
Memorandum Opinion, 9 March 2020, No. 1:17-cv-00511, p. 25 (IR, Annex 82 – emphasis added).
740 U.S. Counter-Memorial, p. 75, para. 10.9.
741 Ibid., p. 75, para. 10.10.
742 Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), Chief Justice
Roberts dissenting (joined by Justice Sotomayor), p. 7 (IM, Annex 66).
743 Ibid., p. 14 (IM, Annex 66).
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As Iran set out in its Memorial – and in Chapter VI of this Reply –, Iranian companies
have been “singled out in order to deny to them generally available and elementary
defences” such as the recognition of their juridical status (including their separate
legal personality) and the absence of responsibility for the debts of third persons.744
U.S. legislation has “gone so far as to target one specific case involving an Iranian
company (Bank Markazi in the Peterson I case, through Section 502 of the
ITRSHRA), removing all available defences through legislation, with retroactive
effect”, including the removal of the ability to rely on “elementary legal principles
such as res judicata, limitation of action, and collateral estoppel”.745 The joint
dissenting opinion of Chief Justice Roberts and Justice Sotomayor described how
Section 502 of ITRSHRA rendered any challenges by Bank Markazi futile in the U.S.
courts:
“Section [502] does precisely that, changing the law—for these proceedings
alone—simply to guarantee that respondents win. The law serves no other
purpose—a point, indeed, that is hardly in dispute. As the majority
acknowledges, the statute ‘sweeps away … any … federal or state law
impediments that might otherwise exist’ to bar respondents from obtaining Bank
Markazi’s assets […]”.746
In these circumstances, and regardless of the matter of constitutionality under U.S.
law (which could no longer be tested after the majority decision in Peterson I), these
statements show in the clearest possible terms how exhaustion of local remedies has
been rendered futile. The futility of local remedies has only become more entrenched.
As noted above,747 there is also a separate enforcement proceeding in the Peterson II
case in which judgment creditors of Iran have been seeking to execute their billiondollar
default judgments against Iran, against proceeds owned by Bank Markazi. In
December 2019, the U.S. Congress enacted Section 1226 of NDAA 2020 in the same
way as it did with respect to Bank Markazi’s securities at issue in the Peterson I
744 Iran’s Memorial, pp. 97-98, para. 5.45. See above Chapter VI, para. 6.86.
745 Ibid., pp. 96-97, para. 5.44.
746 Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), Chief Justice
Roberts dissenting (joined by Justice Sotomayor) at p. 7 (IM, Annex 66).
747 See paras. 2.97-2.108 above.
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case.748 Congress thus intervened in a case while it was actually pending before a U.S.
Court “simply to guarantee that respondents win”.749 Congress amended a law that
had been designed to guarantee that the Peterson I plaintiffs win against Bank
Markazi, to ensure that the Peterson II plaintiffs obtain the turnover of the Bank’s
bond proceeds to satisfy judgments against Iran. As a result of that amendment, the
U.S. Supreme Court remanded the case to the Court of Appeals, to proceed on the
basis of the newly amended law.
Other Iranian companies whose assets were taken pursuant to judgments did not
appear before U.S. courts because it was obviously a futile exercise due to the laws
enacted by Congress such as TRIA and 2008 FSIA’s amendments and the legal stance
of the courts in the cases against Bank Markazi and Bank Melli.750
SECTION 2.
IRAN’S CLAIMS DO NOT REQUIRE THE EXHAUSTION OF LOCAL REMEDIES
Local remedies have been exhausted. Further pursuit of a remedy is futile. But even
if local remedies had not been exhausted in all U.S. proceedings relevant to Iran’s
claims, this case “concerns the position of Iran and the protections to which it [i.e.,
Iran] and Iranian companies are entitled under the 1955 Treaty of Amity; […] Iran
has been singled out by the United States for this unlawful treatment at great, and
increasing, cost to Iran’s economy.”751
It is trite law that in direct international claims, brought by a State in respect of injury
to itself caused by another State, the exhaustion of local remedies rule is not
applicable. In its commentary on the Draft Articles on Diplomatic Protection, the ILC
explains:
748 See para. 2.107 above.
749 Bank Markazi v. Peterson, et al., U.S. Supreme Court, 20 April 2016, 578 U.S. 1 (2016), Chief Justice
Roberts dissenting (joined by Justice Sotomayor) at p. 7 (IM, Annex 66).
750 See para. 6.100 above.
751 Iran’s Memorial, p. 3, para. 1.10 (emphasis added).
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“Paragraph 3 [sc. of Article 14 of the Draft Articles] provides that the exhaustion
of local remedies rule applies only to cases in which the claimant State has been
injured “indirectly”, that is, through its national. It does not apply where the
claimant State is directly injured by the wrongful act of another State, as here
the State has a distinct reason of its own for bringing an international claim.”752
In the context of the jurisprudence of the Court, the present case falls in the category
of claims in which there is an injury to the State which in part consists in, and is
interdependent with, the injuries to companies that are nationals of the State. In other
words, while in principle an injury to an individual company may in fact be entirely
negligible as far as its actual impact upon the State is concerned, but could nonetheless
be taken up as an indirect claim under international law, there may be injuries to a
company or companies which have, for example, such a serious impact upon the State
as such and its economy as to constitute an direct injury to the State; and remedies for
such injuries may be pursued by the State by means of a direct claim under
international law.
In the Avena case, Mexico asked the Court to adjudge and declare that the United
States, in failing to comply with Article 36, paragraph 1, of the Vienna Convention on
Consular Relations, has “violated its international legal obligations to Mexico, in its
own right and in the exercise of its right of diplomatic protection of its nationals”.753
The Court observed that
“the individual rights of Mexican nationals under paragraph 1(b) of Article 36
of the Vienna Convention are rights which are to be asserted, at any rate in the
first place, within the domestic legal system of the United States. Only when
that process is completed and local remedies are exhausted would Mexico be
entitled to espouse the individual claims of its nationals through the procedure
of diplomatic protection. In the present case Mexico does not, however, claim
to be acting solely on that basis. It also asserts its own claims, basing them on
the injury which it contends that it has suffered, directly and through its
nationals, as a result of the violation of the United States of the obligations
incumbent upon it under Article 36, paragraph (1) (a), (b) and (c).”754
752 International Law Commission, Draft articles on diplomatic protection, with commentaries,
U.N. Doc. A/61/10 (2006), p. 79, para. (9).
753 Avena and Other Mexican Nationals (Mexico v. United States of America), Judgment, I.C.J. Reports
2004, p. 23, para. 14(1).
754 Ibid., pp. 35-36, para. 40 (emphasis added).
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In Avena and LaGrand, as in the present case, the provisions of the relevant treaty
create individual rights for the nationals concerned, which also secure important
interests of and may be invoked by their national State.755 Consequently, in the words
of the Court in Avena, violations of the rights of the nationals may
“entail a violation of the rights of the sending State, and […] violations of the
rights of the latter may entail a violation of the rights of the individual. In these
special circumstances of interdependence of the rights of the State and of
individual rights, Mexico may, in submitting a claim in its own name, request
the Court to rule on the violation of rights which it claims to have suffered both
directly and through the violation of individual rights conferred on Mexican
nationals under Article 36, paragraph 1 (b). The duty to exhaust local remedies
does not apply to such a request. Further, […] the Court does not find it
necessary to deal with Mexico's claims of violation under a distinct heading of
diplomatic protection.”756
The fact that a claim refers to the effect of measures upon named companies does not
mean that the claim is necessarily an indirect claim. As was noted above, the injury to
the State and the violation of the State’s right may consist in whole or in part in injuries
that were proximately inflicted upon particular companies. The detail put forward by
Iran in its pleadings on the impact of U.S. measures on Iranian companies constitute
demonstrations or illustrations of the U.S. breach of its obligations owed directly to
Iran under the Treaty.
Consistent with this approach, in its recent Judgment in Ukraine v. Russian
Federation, the Court considered that violations of the rights of individual Ukrainian
nationals were illustrative of the pattern of conduct that Ukraine alleged constituted a
breach of the relevant treaty, and did not trigger the application of the rule on
exhaustion of local remedies:
“The Court notes that, according to Ukraine, the Russian Federation has
engaged in a sustained campaign of racial discrimination, carried out through
acts repeated over an appreciable period of time starting in 2014, against the
Crimean Tatar and Ukrainian communities in Crimea. The Court also notes that
the individual instances to which Ukraine refers in its submissions emerge as
illustrations of the acts by which the Russian Federation has allegedly engaged
in a campaign of racial discrimination. It follows, in the view of the Court, that,
755 Ibid., citing also LaGrand (Germany v United States of America), Judgment, I.C.J. Reports 2001,
p. 494, para. 77.
756 Avena and Other Mexican Nationals (Mexico v. United States of America), Judgment, I.C.J. Reports
2004, p. 36, para. 40 (emphasis added).
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in filing its Application under Article 22 of CERD, Ukraine does not adopt the
cause of one or more of its nationals, but challenges, on the basis of CERD, the
alleged pattern of conduct of the Russian Federation with regard to the treatment
of the Crimean Tatar and Ukrainian communities in Crimea. In view of the
above, the Court concludes that the rule of exhaustion of local remedies does
not apply in the circumstances of the present case.”757
There are losses sustained by specific Iranian companies as a result of the U.S.
measures, in respect of which Iran will particularise its claims at a later stage in these
proceedings.758 Iran’s case is, however, focused on the duties owed by the United
States to the State of Iran and on the damage inflicted on Iran-U.S. commercial
relations generally and on the ‘non-material’ or ‘moral’ damage sustained by Iran.
The object and purpose of the Treaty of Amity includes removing obstacles to
commerce between the two peoples. Iran’s claim is, fundamentally, about the right of
Iran to insist upon the observance of the agreed rules and principles according to
which each of the Parties to the Treaty of Amity is bound to treat any and all
companies of the other Party. It is this general attack upon Iran and its rights that is
evident in the general legal measures adopted by the United States and is illustrated
by particular violations of the rights of specific Iranian companies.
In the two cases concerning injury to corporations cited by the United States, in which
the Court has found it necessary for the local remedies to have been exhausted, the
principal or only claim has been one of indirect injury to the State. Indeed, both cases
were named after the companies whose rights were at issue – Interhandel and ELSI.
In the Interhandel case, the United States raised the failure by Switzerland to exhaust
local remedies as a preliminary objection. The Court clarified that it was an objection
to admissibility and proceeded to answer it. It noted that “the Swiss Government
appears to have adopted the cause of its national, Interhandel, for the purpose of
securing the restitution to that company of assets vested by the Government of the
United States. This is one of the very cases which give rise to the application of the
rule of the exhaustion of local remedies”.759 In fact, Switzerland had labelled as the
757 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), Judgment, 8 November 2019, p. 46, para. 130.
758 Iran’s Memorial, pp. 118-119, paras. 7.1-7.6.
759 Interhandel Case, Judgment of March 21st, 1959, I.C.J. Reports 1959, pp. 28-29.
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first of its “Principal Submissions” the submission that the United States was under
an obligation to restore the assets of Interhandel. Its “Alternative Principal
Submission” was a request for the Court to declare that the property, rights and
interests of Interhandel in a German corporation “have the character of non-enemy
(Swiss) property” and that the United States was consequently acting contrary to its
obligations in refusing to return the property.760
In the ELSI case, a Chamber of the Court rejected the argument of the United States
that part of its claim was premised on the violation of a treaty and that it was therefore
unnecessary to exhaust local remedies. The Chamber had “no doubt that the matter
which colours and pervades the United States claim as a whole, is the alleged damage
to Raytheon and Machlett [United States corporations]”.761 In its submissions, the
United States had sought a declaration that Italy had breached a bilateral treaty and
supplement thereto and that owing to these violations
“the United States is entitled to reparation in an amount equal to the full
amount of the damage suffered by Raytheon and Machlett as a consequence,
including their losses on investment, guaranteed loans, and open accounts,
the legal expenses incurred by Raytheon in connection with the bankruptcy,
in defending against related litigation and in pursuing its claim, and interest
on such amounts computed at the United States prime rate from the date of
loss to the date of payment of the award, compounded on an annual basis.”762
The single-minded, company-focused submissions of Switzerland in Interhandel and
of the United States in ELSI contrast with the submissions of Iran in this case, which
are not in any way limited to the alleged damage suffered by one or two Iranian
companies as a result of the U.S. measures.
Iran’s submissions in its Application amply demonstrate that Iran’s claims go to
measures that impact on Iran and its companies broadly, and are not confined to one
company or one incident:
“[…] Iran respectfully requests the Court to adjudge, order and declare as
follows:
760 Ibid., pp. 12-13.
761 Ibid., p. 43, para. 52.
762 Ibid., p. 22, para. 11(2).
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(a) That the Court has jurisdiction under the Treaty of Amity to entertain the
dispute and to rule upon the claims submitted by Iran;
(b) That by its acts, including the acts referred to above and in particular its (a)
failure to recognize the separate juridical status (including the separate legal
personality) of all Iranian companies including Bank Markazi, and (b) unfair
and discriminatory treatment of such entities, and their property, which impairs
the legally acquired rights and interests of such entities including enforcement
of their contractual rights, and (c) failure to accord to such entities and their
property the most constant protection and security that is in no case less than
that required by international law, (d) expropriation of the property of such
entities, and (e) failure to accord to such entities freedom of access to the US
courts, including the abrogation of the immunities to which Iran and Iranian
State-owned companies, including Bank Markazi, and their property, are
entitled under customary international law and as required by the Treaty of
Amity, and (f) failure to respect the right of such entities to acquire and dispose
of property, and (g) application of restrictions to such entities on the making of
payments and other transfers of funds to or from the USA, and (h) interference
with the freedom of commerce, the USA has breached its obligations to Iran,
inter alia, under Articles III (1), III (2), IV (1), IV (2), V (1), VII (1) and X (1)
of the Treaty of Amity;
(c) That the USA shall ensure that no steps shall be taken based on the executive,
legislative and judicial acts (as referred to above) at issue in this case which are,
to the extent determined by the Court, inconsistent with the obligations of the
USA to Iran under the Treaty of Amity;
[…]
(e) That the USA (including the US courts) is obliged to respect the juridical
status (including the separate legal personality), and to ensure freedom of access
to the US courts, of all Iranian companies, including State-owned companies
such as Bank Markazi, and that no steps based on the executive, legislative and
judicial acts (as referred to above), which involve or imply the recognition or
enforcement of such acts shall be taken against the assets or interests of Iran or
any Iranian entity or national;
(f) That the USA is under an obligation to make full reparations to Iran for the
violation of its international legal obligations in an amount to be determined by
the Court at a subsequent stage of the proceedings. Iran reserves the right to
introduce and present to the Court in due course a precise evaluation of the
reparations owed by the USA; and
(g) Any other remedy the Court may deem appropriate.”763
In sum, the United States’ argument that Iran is under a duty to exhaust local remedies
and has not discharged this duty must fail. The discriminatory scheme targeting Iran
and its companies prevents U.S. courts from providing effective redress. The judicial
outcome has been pre-determined, sometimes expressly in respect of the specific
763 Iran’s Application, pp. 16-17, para. 33. See also submissions in Chapter VIII above.
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cases. As the United States admits764 in respect of key cases every avenue of the U.S.
legal system has been explored, exhausted and found to be ineffective. These cases
concern the Central Bank of Iran, Bank Markazi, and the important state-owned bank,
Bank Melli. Finally, Iran’s claims arise from injuries to the State itself, which in part
consists in, and is interdependent with, the injuries to its companies. The local
remedies rule is therefore inapplicable in the first place.
764 U.S. Counter-Memorial, pp. 75-76, para. 10.1.
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CHAPTER X.
ARTICLE XX(1) OF THE TREATY OF AMITY DOES NOT BAR IRAN’S
CLAIMS WITH REGARD TO E.O. 13599
10.1 The United States contends that “Executive Order 13599 falls within two of Article
XX(1)’s exceptions, and that Article XX(1) accordingly bars any claim by Iran
premised on that Executive Order.”765 The United States’ position is that E.O. 13599,
issued on 5 February 2012 and implementing Section 1245 of the 2012 NDAA,766
explicitly recognises a connection between the alleged deceptive financial practices
used by Iranian institutions and the alleged Iranian illicit activities.767The United
States alleges that Iran supported terrorism and violated missile and arms trafficking
obligations and that the United States “needed to take measures” to address these
violations.768
10.2 Iran recalls that its claims involve a number of U.S. executive, judicial and legislative
measures. Only a small part of its complaints is linked to E.O. 13599, which blocks
the property of Iran and Iranian financial institutions. By denying the separate juridical
status of Iranian companies, E.O. 13599 constitutes a breach of Article III(1), V and
X(1) of the Treaty of Amity, among many other breaches claimed by Iran.769 The U.S.
defence on Article XX(1) therefore only concerns a very limited aspect of Iran’s
claims. In any case, Iran shows in the present Chapter that both defences invoked by
the United States, based on Articles XX(1)(c) and (d) of the Treaty of Amity, are
unsubstantiated and must be rejected.
765 Ibid., p. 76, para. 11.2.
766 Section 1245(b) of the 2012 NDAA states that “[t]he Financial sector of Iran, including the Central
Bank of Iran, is designated as a primary money laundering concern […] because of the threat to
government and financial institutions resulting from the illicit activities of the Government of Iran,
including […] efforts to deceive responsible financial institutions and evade sanctions” (IM, Annex
17).
767 U.S. Counter-Memorial, pp. 79-81, para. 11.9.
768 Ibid., p. 81, para. 11.10.
769 See Chapters IV, VII and VIII above.
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SECTION 1.
ARTICLE XX(1)(C) DEFENCE REGARDING ARMS TRAFFICKING IS UNFOUNDED
10.3 Article XX(1)(c) provides:
“1. 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.”
10.4 The United States argues that:
“[s]ubparagraph (c) of Article XX(1) excludes from the Treaty’s scope any
measures ‘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.’ Executive Order 13599
is a measure that the United States imposed to address Iran’s evasion of U.S.
and international sanctions relating to its development of ballistic missiles and
its provision of arms and other support to militant and terrorist groups.”770
10.5 This extract from the U.S. Counter-Memorial puts very strikingly the discrepancy
between the U.S. argument and the provision on which it is allegedly based. On the
one hand, the United States explains that the 1955 Treaty of Amity does not preclude
measures regulating the production or traffic in arms, and on the other hand, it alleges
that this defence would cover a measure that does not itself actually regulate arms, nor
relates to arms, but which is imposed with the goal of addressing another State’s
behaviour relating to arms.
10.6 There can be no surprise that the United States does not even try to interpret
Article XX(1)(c) but limits itself to a long litany of serious allegations according to
which Iran is involved in arms production and traffic.771 The only U.S. attempt to
bring Executive Order 13599 within the ambit of the provisions of Article XX(1)(c)
is the following: the Executive Order is said to be part of the “regulatory scheme”
because it “works in conjunction with other proliferation- and terrorism-related
measures to deter – and thus to ‘regulate’ within the meaning of the Treaty – Iranian
770 U.S. Counter-Memorial, p. 82, para. 11.11 (emphasis added).
771 Ibid., pp. 82-86, paras. 11.11-11.18.
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pursuit of ballistic missiles […]”.772 The argument is ill-founded: Executive Order
13599 does not regulate the production of or traffic in arms, it provides for sanctions
which are, if at all, very indirectly related to arms. This is not a regulation within the
meaning of Article XX(1)(c). Such a regulation would be for instance a ban or
limitation of the export of U.S. arms to Iran.773
10.7 Following the U.S. line of argumentation, any measure regulating any sort of activity,
taken with the underlying goal of influencing the production of or traffic774 in arms
by or with Iran would be covered by the defence in Article XX(1)(c). But Article
XX(1)(c) reads “measures regulating the production of or traffic in arms”. It does not
read “measures regulating anything which has a more or less remote relation with the
production of or traffic in arms”. As is clear from any fair reading, Executive Order
13599 does not provide for any kind of regulation of the actual production or traffic
in arms.
10.8 It is noted that in the six pages of the U.S. Counter-Memorial arguing that “Executive
Order 13599 was Promulgated to Address Iran’s Illicit Activities, Including Arms
Production and Trafficking, Support for Terrorism and Terrorist Financing, and the
Pursuit of Ballistic Missile Capabilities”775, the United States does not refer once to
the text of Executive Order 13599 to make its point, let alone engage in an
interpretation of Article XX(1)(c).
10.9 The text of Executive Order 13599 is strikingly absent from the argument – for good
reason: none of its provisions, in full or in part, regulates arms production or
trafficking. None of the words, “arms”, “weapons” or “ammunition” appears in the
text of the Order. Its section 1 provides in relevant part:
“All property and interests in property of the Government of Iran, including the
Central Bank of Iran […] [and] of any Iranian financial institution […] are
772 U.S. Counter-Memorial, p. 86, para. 11.18.
773 Such a ban on export of arms and military equipment from US and anywhere in the world to Iran is
actually already in place since the U.S. Embassy crisis in Tehran. It is outside the scope of the present
case.
774 The term “commerce” is used for “traffic” in the French version of the Treaty of Amity (IM, Annex 1).
775 U.S. Counter-Memorial, Chapter 11, Section A.
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blocked and may not be transferred, paid, exported, withdrawn, or otherwise
dealt in.”776
This has nothing to do with the alleged arms production and trafficking and is
irrelevant to the exception contained in Article XX(1)(c).
10.10 Further, if it were accepted, the U.S. allegations would mean that by signing the Treaty
of Amity in 1955, the United States considered that Iran could challenge its
implementation by objecting to the production of arms in the U.S. In other words, as
now interpreted by the United States, the Treaty would have permitted Iran lawfully
to block the assets of all U.S. companies involved in one way or another in the U.S.
nuclear weapons programme. This does not make any sense and it is in direct
contradiction with the U.S. position regarding subparagraph (d). On the one hand, the
United States argues that Article XX(1)(c) recognises the right of one Party to regulate
the production of arms of the other Party, notwithstanding the fact that the production
of arms is at the very heart of the sovereign rights of that other Party,777 including its
right to security. Yet, on the other hand, it contends that Article XX(1)(d) is an
expression of the unquestionable capacity of one State to decide what is necessary to
protect its security, without any control by the judge.
10.11 The U.S. view is, moreover, contradicted by the history of this type of clause. States,
and particularly the United States, have always wanted to exclude the issue of arms
from their treaties of amity and commerce, because arms represent a special category
of goods on which they are eager to keep full control.778
776 Executive Order 13599, 5 February 2012, 77 Fed. Reg. 6659 (IM, Annex 22).
777 Of course, the production of some category of arms is prohibited in international law, but this is not
relevant here since the U.S. contention is that Article XX(1)(c) permits a Party to regulate the
production of any sort of arm by the other Party, whether or not prohibited by international law.
778 This was already the case in 1778 in the Treaty of Amity and Commerce between the United States and
France, which is the ancestor of the post-World War II FCN treaties and whose Article 26 provided:
“This Liberty of Navigation and Commerce shall extend to all kinds of Merchandizes, excepting those
only which are distinguished by the name of contraband; And under this Name of Contraband or
prohibited Goods shall be comprehended, Arms, great Guns, Bombs with the fuzes, and other things
belonging to them, Cannon Ball, Gun powder, Match, Pikes, Swords, Lances, Spears, halberds,
Mortars, Petards, Granades Salt Petre, Muskets, Musket Ball, Bucklers, Helmets, breast Plates, Coats
of Mail and the like kinds of Arms proper for arming Soldiers, Musket rests, belts, Horses with their
Furniture, and all other Warlike Instruments whatever.” (Treaty of Amity and Commerce Between The
United States and France, 6 February 1778, available at avalon.law.yale.edu/18th_century/fr1788-
1.asp).
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10.12 At the time of conclusion of the 1955 Treaty of Amity, the U.S. law then in force was
contained in the Munitions Control Act of 1947. The Presidential Memorandum
introducing the Act stated that it was concerned with “supervising this country’s
international traffic and trade in arms and munitions of war” and that it applied to
“anyone engaged in manufacturing, exporting, or importing” arms in the United
States. Thus, the purpose of this legislation was formally stated to be:
“to authorise supervision of the exportation of arms, ammunition, implements
of war related commodities, and the importation of arms, ammunition, and
implements of war; to provide for the registration, under certain conditions, of
manufacturers, exporters, importers, and certain dealers in munitions of war;
and to provide for obtaining more adequate information concerning the
international traffic in arms.”779
President Truman made clear that he wanted his Government to:
“have control over traffic in weapons which will permit [it] to act in accordance
with [its] position in the United Nations and will be adaptable to the changes in
the international situation. Therefore, there must be new legal provisions
enabling the exercise of discretion in the granting or rejecting of applications
for export or import licenses for arms, ammunition, and implements of war and
related items.”780
10.13 Article XX(1)(c) is the logical continuity in international law of the U.S. internal
position. Nothing in the FCN treaties concluded by the United States precludes the
United States’ right to regulate its own production/manufacturing of arms, nor its
ability to export/import these arms in accordance with its international policy and
regulations, and it is obvious that the United States’ reserved right also benefits its
contracting party. This cannot be reconciled with the U.S. argument according to
which it could arbitrarily decide economic and financial sanctions in response to
conduct of the other Party concerning the other Party’s (alleged) arms production.
10.14 The United States also seeks to rely on various resolutions of the U.N. Security
Council to justify its asserted application of Article XX(1)(c) to the challenged
779 Munitions Control Act of 1947, Message from The President of the United States transmitting a
proposal for legislation to control the exportation and importation of arms, ammunition, and
implements of war, and related items, and for other purposes, 15 April 1947, U.S. Department of State
Bulletin, Vol. XVI, No. 408, 27 April 1947, p. 750 (IR, Annex 8) (emphasis added).
780 Ibid, p. 751.
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measures.781 However, a comparison between the cited resolutions of the U.N.
Security Council (more specifically, Resolutions 1747 (2007) and 1929 (2010)), on
the one hand and what the Executive Order effectively regulates on the other hand is
telling. It precisely shows that, contrary to the invoked resolutions, which do call
States to regulate production of and trafficking in arms, the Executive Order does
nothing of the kind, which confirms that it was not taken with the purpose to enforcing
such regulation.782
10.15 Already in the case concerning Military and Paramilitary Activities in and against
Nicaragua, the Court made clear that the defence contained in Article XX(1)(c) only
applies to measures that are directed to the production of or traffic in arms – not to
any measures that could have had an impact on Nicaragua’s own production of arms.
Noting that “[i]n its Counter-Memorial on jurisdiction and admissibility, the United
States relied on paragraph 1(c) as showing the inapplicability of the 1956 FCN Treaty
to Nicaragua’s claims”, the Court narrowed down the potential scope of the defence,
and clarified that “[t]his paragraph appears however to be relevant only in respect of
the complaint of supply of arms to the contras.”783 This finding is equally relevant in
the present case. The defence provided for in Article XX(1)(c) has a clear meaning
and cannot defeat a claim challenging measures which are unrelated to the purpose of
this provision.
SECTION 2.
ARTICLE XX(1)(D) DEFENCE REGARDING U.S. ESSENTIAL SECURITY INTERESTS
IS UNFOUNDED
10.16 Article XX(1)(d) of the Treaty of Amity provides:
“1. The present Treaty shall not preclude the application of measures:
781 U.S. Counter-Memorial, p. 77, para. 11.4.
782 As a reminder: by its Resolution 2231 of 10 July 2015, the Security Council decided that “[t]he
provisions of resolutions 1696 (2006), 1737 (2006), 1747 (2007), 1803 (2008), 1835 (2008), 1929
(2010) and 2224 (2015) shall be terminated” (para. 7(a)).
783 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America).
Merits, Judgment, I.C.J. Reports 1986, p. 140, para. 280 (emphasis added).
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(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.”
10.17 According to the United States, “Executive Order 13599 is a measure necessary to
protect the United States’ essential security interests and is therefore not subject to the
Treaty’s substantive provisions for the independent reason that it falls within the
exception under Article XX(1)(d)”.784 This allegation is based on an erroneous
interpretation of this provision.
10.18 First of all, it is worth noting that the United States still argues that Article XX(1)
“simply removes such measures from the scope and application of the Treaty”,785
while the Court expressly said the contrary:786 Article XX(1) “afford[s] the Parties a
defence on the merits”.787 The question, therefore, is whether the violations of the
Treaty arising from the U.S. challenged measures fall within the scope of one of the
defences contained in Article XX(1), correctly interpreted “in good faith in
accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose.”788
784 U.S. Counter-Memorial, p. 86, para. 11.19.
785 Ibid., p. 87, para. 11.21.
786 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 25, para. 45; Alleged Violations of the 1955 Treaty of Amity,
Economic Relations, and Consular Rights (Islamic Republic of Iran v. United States of America),
Provisional Measures, Order of 3 October 2018, I.C.J. Reports 2018, p. 635, para. 41; Oil Platforms
(Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment, I.C.J. Reports
1996, p. 811, para. 20; 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.
787 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 25, para. 47.
788 Vienna Convention on the Law of treaties, Article 31(1).
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A. Article XX(1)(d) is not self-judging
10.19 Although the United States does not straightforwardly assert that it considers Article
XX(1)(d) to be self-judging, its interpretation of that provision amounts to such a
contention since it asks the Court to recognize that:
a. “[t]he Article XX(1)(d) exception is broad and a high degree of deference is due
to the State invoking it.”;789
b. this provision establishes “a State’s ‘paramount right’”;790
c. “the wide latitude that Parties invoking Article XX(1)(d) have been understood
to have to determine their essential security interests and the matters necessary
to protect them.”;791
d. “[t]he United States’ determination to this effect warrants substantial
deference”;792
e. “the phrase ‘its essential security interests’ makes clear that it is the assessment
of the Party invoking the defence that is most relevant. Whether a situation
implicates ‘its security interests’ and whether the interests at stake are
‘essential’ to that Party are not questions in the abstract but instead must be
viewed from the perspective of the Party invoking the defence – based on its
specific circumstances, and its own perception of those circumstances.”793
10.20 Contrary to these assertions, the Court already made clear that a clause such as
Article XX is not a self-judging clause. In the Nicaragua case, it stated that “the Court
has first to determine whether the actions of the United States complained of as
789 U.S. Counter-Memorial, p. 86, para. 11.20.
790 Ibid., p. 87, paras. 11.21 and 11.22.
791 Ibid., p. 88, para. 11.23.
792 Ibid., p. 88, para. 11.24.
793 Ibid., p. 90, para. 11.29.
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breaches of the 1956 FCN Treaty have to be regarded as “measures [...] necessary to
protect its essential security interests”.794 The same holds true in the present case: it is
for the Court, not the United States, to determine whether the actions of the United
States complained of as breaches of the Treaty of Amity must be regarded as
“necessary to protect its essential security interests”.
10.21 The non-self-judging character of similar clauses has also been highlighted several
times by investment treaty tribunals. For instance in the CC/Devas (Mauritius) v. India
case, the tribunal had to determine whether “India (or Peru, or any other State having
a treaty with a similar provision [to Article 11(3) of the Treaty795]) can dismiss any
case simply by saying that it considers the actions forming the basis of the claim to be
in its ‘essential security interests’”.796 The Tribunal answered:
“Indeed, it is well established by judgments of the International Court of Justice
(the ‘ICJ’) and investment arbitration awards that, unless a treaty contains
specific wording granting full discretion to the State to determine what it
considers necessary for the protection of its security interests, national security
clauses are not self-judging. Turning to the text of Article 11(3) of the Treaty, it
plainly does not contain any explicit language that the Tribunal would regard as
granting discretion of that nature to the State.”797
This same argument invoking State sovereignty and its wide margin of manoeuvre,
which would allow it to decide subjectively what is necessary or not, has also been
raised by Argentina before several international tribunals. All these tribunals denied
to the defendant State the possibility to decide for itself and with conclusive effect
whether the challenged measures were necessary or not.798
794 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America),
Merits, Judgment, I.C.J. Reports 1986, pp. 135-136, para. 271.
795 Mauritius-India BIT (1998), Article 11 (3) “The provisions of this Agreement shall not in any way limit
the right of either Contracting Party to apply prohibitions or restrictions of any kind or take any other
action which is directed to the protection of its essential security interests, or to the protection of public
health or the prevention of diseases in pests and animals or plants.”
796 CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius
Limited v. Republic of India, PCA Case No. 2013-09, Award on Jurisdiction and Merits, 25 July 2016,
para. 218.
797 Ibid., para. 219 (emphasis added).
798 CMS Gas Transmission Company v. The Argentine Republic, I.C.S.I.D. Case No. ARB/01/8, Award,
12 May 2005, paras. 370-373; Enron Creditors Recovery Corporation (formerly Enron Corporation)
and Ponderosa Assets, L.P. v. Argentine Republic, I.C.S.I.D. Case No. ARB/01/3, Award,
22 May 2007, para. 331; Sempra Energy International v. Argentine Republic, I.C.S.I.D. Case
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B. The court must determine whether the alleged measure was necessary to
protect essential security interests
10.22 When “interpreted in good faith in accordance with the ordinary meaning to be given
to the terms of the treaty in their context and in the light of its object and purpose”799
the significance of Article XX(1) of the Treaty of Amity leaves no room for doubt:
the measures concerned must be “necessary to protect [the] essential security
interests” of the High Contracting Party invoking them as a defence. In other words,
there must be a link between the measures in question and the alleged essential
security interests. In the present case, it is for the United States to establish that such
a link exists and it is for the Court to determine whether the plea of necessity invoked
by the United States has been substantiated.
10.23 The U.S. unwillingness to engage in a proper interpretation of Article XX(1)(d) is
apparent through its reading of the Court’s Judgment in Djibouti v. France. It only
retains two words, “wide discretion” from the relevant passage, while, notably, the
Court put the emphasis on its duty to assess the reality of the necessity to protect
essential security interests. This is all the more noticeable as, in that case, Article 2(c)
of the Convention concerning judicial assistance in criminal matters of 27 September
1986 between Djibouti and France provides that “[j]udicial assistance may be refused
[…] [i]f the requested State considers that execution of the request is likely to impair
its sovereignty, security, public policy or other essential interests”.800 Not only is the
expression “likely to impair its […] security […] or other essential interests” much
wider than “necessary to protect its essential security interests”, but also, and
decisively, the Treaty of Amity does not of course contain any formula equivalent to
the italicised expression. In any event, the Court stressed that “this exercise of
discretion is still subject to the obligation of good faith codified in Article 26 of the
1969 Vienna Convention on the Law of Treaties (see Certain German Interests in
No. ARB/02/16, Award, 28 September 2007, para. 388; Continental Casualty Company v. Argentine
Republic, I.C.S.I.D. Case No. ARB/03/9, Award, 5 September 2008, paras. 189-195; El Paso Energy
International Company v. Argentine Republic, I.C.S.I.D. Case No. ARB/03/15, Award, 31 October
2011, para. 609.
799 Article 31 of the Vienna Convention on the Law of Treaties.
800 Convention concerning judicial assistance in criminal matters of 1986 between France and Djibouti,
1695 U.N.T.S. 297 at p. 304 (emphasis added).
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Polish Upper Silesia, Merits, Judgment No. 7, 1926, P.C.I.J., Series A, p. 30, and Free
Zones of Upper Savoy and the District of Gex, Judgment, 1932, P.C.I.J., Series A/B,
No. 46, p. 167 […]).”801 The Court also stressed that such an assessment requires
objective proof showing “that the reasons for refusal to execute the letter rogatory fell
within those allowed for in Article 2”.802 In the present case, the United States does
not even attempt to establish a meaningful relationship between the measures
complained of and its alleged essential security interest.
10.24 In a recent award, a PCA Tribunal interpreting Article 12 of the Germany-India BIT
worded in terms similar to Article XI of the U.S.-Argentina BIT commented on the
requirements concerning “essential security interests” and establishing that measures
are “necessary” as follows:
a. “In respect of the existence of essential security interests, the Tribunal
accept[ed] that a degree of deference is owed to a state’s assessment”;
b. But it immediately added: “[h]owever, such deference cannot be unlimited”;
c. Then, basing itself on an ECtHR decision in which the Court held that the notion
of national security cannot be stretched “beyond its natural meaning”,803 the
Tribunal stated that:
“the limits of essential security interests contemplated in Article 12 cannot
be stretched beyond their natural meaning. For the Tribunal, the natural
meaning of the treaty terms requires the presence of interests concerned
with security (as opposed to other public or societal interests) that are
“essential”, i.e. that go to the core (the “essence”) of state security.”804
d. Finally, with respect to the requirement that the prohibition or restriction be
imposed only “to the extent necessary for” the protection of such essential
security interests, the Tribunal also considered that “the deference owed to the
801 Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v. France), Judgment, I.C.J.
Reports 2008, p. 229, para. 145.
802 Ibid.
803 C.G. and Others v. Bulgaria, European Court of Human Rights, Application No. 1365/07, Final
Judgment, 24 July 2008, para. 43.
804 Deutsche Telekom v. India, PCA Case No. 2014-10, Interim Award, 13 December 2017, para. 236.
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state cannot be unlimited, as otherwise unreasonable invocations of Article 12
would render the substantive protections contained in the Treaty wholly
nugatory.”; and it concluded:
“239. To assess the necessity of the measures to safeguard the state’s
essential security interests, the Tribunal will thus determine whether the
measure was principally targeted to protect the essential security interests
at stake and was objectively required in order to achieve that protection,
taking into account whether the state had reasonable alternatives, less in
conflict or more compliant with its international obligations.”805
10.25 The United States does not even try to argue that the measures were objectively
required or that there were no reasonable alternatives open to it. Nor does it discuss
what is objectively necessary to protect its security interests, or what can be
considered to be an essential security interest.
C. The measures were not necessary to protect the U.S. essential Security
interests
10.26 As to whether the United States’ essential security interests are engaged in this case,
it is true that the Court has considered that such concept “certainly extends beyond the
concept of an armed attack, and has been subject to very broad interpretations in the
past”.806 This finding was made in relation to Article XXI(1)(d) of the 1955 FCN
Treaty between Nicaragua and the United States, which is drafted in the same way as
the provision under discussion. But it must be noted that the Court immediately
clarified that it was up to the Court:
“to assess whether the risk run by these ‘essential security interests’ is
reasonable, and secondly, whether the measures presented as being designed to
protect these interests are not merely useful but ‘necessary’”.807
10.27 In other words, any margin of appreciation as to “essential security interests” is far
from being unlimited, as the Court has again explained in a particularly clear manner
805 Ibid., paras. 234-239 (emphasis added).
806 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America).
Merits, Judgment. I.C.J. Reports 1986, p. 117, para. 224.
807 Ibid.
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in the case concerning Certain Questions of Mutual Assistance in Criminal Matters
between Djibouti and France, on which the United States relies.808
10.28 The United States asserts, as if it could not be challenged, that it:
“unquestionably has an essential security interest in preventing terrorist attacks
that target the United States, its nationals, and its interests abroad, including by
preventing the provision of arms, materiel, training, and funds to terrorist groups
and suppressing the use of money laundering and other deceptive financial
practices to finance terrorism”809
and that:
“[i]t has a similarly clear essential security interest in halting Iran from
advancing its ballistic missile program”.810
10.29 Iran does not argue that the generalised U.S. allegations concerning terrorism and
alleged ballistic missile programs could not be related to its security. But this is not
the question before the Court. The key question is whether U.S. essential security
interests were engaged in 2012 when it issued E.O. 13599 to block the assets of all
Iranian financial institutions. The United States does not explain in its pleading what
an essential security interest is, nor what essential security interests could have been
engaged when it took these measures in 2012, let alone does it seek to establish a link
between the security interests invoked and the measure which was decided.
10.30 The main point here is that to allege that confiscating or blocking the assets of
commercial banks is necessary to preserve U.S. essential security interests is artifice.
10.31 It is for the United States to establish, and for the Court to assess, whether the measures
were “necessary” to protect these interests. The United States only explains that it was
trying to achieve foreign policy goals with “earlier measures targeting Iran’s illicit
conduct”811 and that, because of the alleged lack of effectiveness of these earlier
measures, it had to introduce E.O. 13599. This in no sense answers the critical question
808 U.S. Counter-Memorial, p. 88, para. 11.23.
809 Ibid., p. 88, para. 11.25.
810 Ibid.
811 Ibid., p. 93, para. 11.35.
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of why E.O. 13599 was “necessary” to protect the alleged essential security interests.
The United States does not even explain what “necessary” means or what the criteria are
for measures to be considered “necessary” by the Court.
10.32 In considering whether E.O. 13599 was “necessary” to protect the alleged essential
security interests of the United States, it is useful to ask whether this measure was
objectively required in order to achieve the protection, taking into account whether
the United States had reasonable alternatives which would have been less in conflict
or more compliant with its international obligations under the Treaty. As to this, it is
worth noting that, while the United States seeks to rely on an alleged international
concern with respect to preventing alleged terrorist attacks and Iran allegedly
advancing a ballistic missile program, no State and no international organisation has
considered it necessary (let alone lawful and appropriate), to take measures equivalent
to those indicated in E.O. 13599.
10.33 It is striking that, with regard to allegations of terrorism, the United States is relying
on U.N. Security Council Resolutions in 1995 and 2001812 and, with respect to
allegations concerning ballistic missiles, the United States cites Resolution 1929
(2010). Under these resolutions, the freeze of the assets of the entities was subject to
two alternative conditions. First, the entities sanctions were required first to have been
designated by the Security Council or its Committee. Second, the sanctions were
restricted to entities which were considered to have been engaged in, directly
associated with, or provided support for, Iran’s proliferation sensitive nuclear
activities or the development of nuclear weapon delivery systems.813
10.34 The key difference between the UNSC measures and E.O. 13599 is that the UNSC
measures froze the assets of targeted and (so far as the Security Council was concerned),
relevant Iranian entities while the E.O. 13599 concerns the assets of untargeted and
irrelevant Iranian institutions. By doing so, E.O. 13599, sets the stage for a permanent
confiscation of Iranian companies’ assets through the execution of judgments against
812 Ibid., p. 89, para. 11.27.
813 See UNSC Resolutions 1737 (2006), para. 12; Resolution 1803 (2008), para. 10 and Resolution 1929
(2010), para. 21.
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these companies. E.O. 13599 fits into a pre-existing scheme814 of U.S. measures
designed to establish blocked funds as a pool of assets which any judgment creditor who
has been awarded compensation against Iran can access at wish and which have no link
whatsoever with their particular case. Such decisions have no regard to the exclusive
purpose set out in Article XX, paragraph 1, of the Treaty of Amity: i.e., the preservation
of the essential security interests of the Party invoking that provision.
10.35 In order to achieve the alleged aims, it could not be “necessary” to target all Iranian
financial institutions given that the alleged essential interests concern acts allegedly
being carried out by Iran, not a series of separate legal entities. By referring to a whole
package of unfounded allegations against Iran, the United States seeks to avoid the
appropriate legal assessment of the necessity of the measures. The United States
cannot expect the Court to accept that its essential security interests were engaged in
2012 on the basis of such general allegations. It is notable that no other State, nor the
Security Council, has taken such extreme measures.
10.36 It is also revealing that the only fact on which the United States relies happened in
2016, four years after the imposition of E.O. 13599.815 As the Court already declared
in the Nicaragua case:
“In approaching this question, the Court has first to bear in mind the
chronological sequence of events. If the activities of the United States are to be
covered by Article XXI of the Treaty, they must have been, at the time they
were taken, measures necessary to protect its essential security interests. Thus
the finding of the President of the United States on 1 May 1985 that “the policies
and actions of the Government of Nicaragua constitute an unusual and
extraordinary threat to the national security and foreign policy of the United
States”, even if it be taken as sufficient evidence that that was so, does not justify
action by the United States previous to that date”.816
10.37 Moreover, in terms of the U.S. measure chosen by it to achieve the alleged aims, it is
not merely a question of this being radically in conflict with the substantive provisions
of the Treaty, it also leads to the abrogation of the immunity to which Iran is entitled
814 See, e.g., Iran’s Memorial, pp. 31-32, paras. 2.36-2.37.
815 U.S. Counter-Memorial, p. 90, para. 11.28.
816 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America).
Merits, Judgment. I.C.J. Reports 1986, p. 141, para. 281.
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as a matter of customary international law. A measure “necessary” for the purposes
of Article XX(1)(d) could not be one that cut across fundamental principles of
international law.
10.38 There is an important parallel to the Nicaragua case. There the Court found:
“Since no evidence at all is available to show how Nicaraguan policies had in
fact become a threat to ‘essential security interests’ in May 1985, when those
policies had been consistent, and consistently criticized by the United States, for
four years previously, the Court is unable to find that the embargo was
‘necessary’ to protect those interests”. 817
10.39 The same basic point applies. For many years (many more than four) the United States
had been making allegations regarding Iranian support of terrorism and production of
ballistic missiles. There was nothing in 2012 that suddenly made the extraordinary
measure of E.O. 13599 “necessary”.
10.40 Not only was the measure not objectively necessary, E.O. 13599 was not even relevant
to address the U.S. alleged essential security interests. The question must be asked: how
could indistinctly blocking the assets of Iran and all Iranian financial institutions be
relevant to preserving the U.S. security interests? The answer is fairly obvious: it is not.
10.41 As is apparent from the above:
a. E.O. 13599 does not regulate the production of, or traffic in, arms and as such,
it does not fall under the provisions of Article XX(1)(c);
b. As a non-self-judging provision, Article XX(1)(d) requires the Court to evaluate
the measures taken by the United States;
c. These measures, including E.O. 13599, were not taken in 2012 because U.S.
essential security interests were engaged but for U.S.’ internal policy purposes;
and
d. In any event, these measures were not necessary for protecting US essential
security interests, and the United States bears the burden to prove otherwise.
817 Ibid., p. 141, para. 282.
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CHAPTER XI.
THE UNITED STATES’ UNCLEAN HANDS AND ABUSE OF RIGHTS
DEFENCES ARE INADMISSIBLE AND UNFOUNDED
11.1 The United States tries to divert the attention of the Court away from its task of
interpreting or implementing the Treaty, as set out in Article XXI(2) of the Treaty, by
contending again and again that what Iran seeks in this case is not what Iran repeatedly
says that it seeks, namely a judgment of the Court holding that the United States’
international responsibility is engaged because of its breaches of the Treaty of Amity,
and drawing the consequence of such responsibility. This is a sort of mantra in U.S.
pleadings, already repeated during the preliminary objections phase, according to
which Iran is not really invoking the Treaty with the aim of having its treaty rights
respected; rather, Iran is somehow improperly using the Treaty as a “shield”.818
11.2 On the basis of this recurring allegation, the United States seeks to develop two legal
arguments based on two partly overlapping “doctrines”: the doctrine of “clean hands”,
and the doctrine of “abuse of rights”. Iran will respond to these defences in turn below.
SECTION 1.
THE UNITED STATES’ UNCLEAN HANDS DEFENCE
11.3 According to the United States:
“Following the Court’s Preliminary Objections Judgment, and in light of that
judgment, the United States now advances Iran’s unclean hands as a defense on
the merits, rather than as an objection to admissibility. The United States asks
that the Court reject Iran’s claims on the basis that the U.S. measures that Iran
challenges are a response to Iranian supported terrorist acts directed at the
United States and its nationals.”819
11.4 In so doing, the U.S. overlooks the crucial fact that the objection on unclean hands
has already been decided by the Court in its Judgment on the U.S. preliminary
objections.
818 U.S. Counter-Memorial, p. 166, para. 18.12.
819 Ibid., p. 54, para. 8.4.
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11.5 Iran accepts that submissions aiming at the inadmissibility of the Application do not
coincide with a plea on the merits and that the matter is not res judicata in the technical
sense although the Court has already squarely dismissed the U.S. argument. But this
does not mean that the Parties may, at the merits stage, ignore the reasoning at the root
of the Court’s Judgment on preliminary objections in the case. Yet, in the present case,
the United States limits itself to asserting that the Court “should dismiss Iran’s claims
on the basis that the impugned U.S. measures are in response to Iran’s conduct”,820
without referring to the Court’s findings and arguments in its decision on preliminary
objections.821
11.6 However, much of the reasoning of the Court’s 2019 Judgment is equally valid for the
merits on the one hand and the admissibility of the Application on the other. Thus, the
Court made it abundantly clear “that the United States has not argued that Iran,
through its alleged conduct, has violated the Treaty of Amity, upon which its
Application is based”;822 this is a determinative finding in dismissing the U.S. claim
based on the clean hands doctrine either as a preliminary matter or on the merits.
11.7 Moreover, the Respondent strikingly distorts the unclean hands doctrine as interpreted
by the case-law of this Court and other international courts and tribunals. While
acknowledging that:
“the Court has not previously applied the doctrine of unclean hands [and] that
some doubt has been expressed about the doctrine’s scope and status”,823
the U.S. alleges that the Court has discretion in applying the doctrine of unclean hands,
while taking into account considerations of justice and fairness.
820 Ibid., p. 54, para. 8.23.
821 Ibid., Chapter 8.
822 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 44, para. 122.
823 U.S. Counter-Memorial, p. 54, para. 8.5.
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11.8 The United States makes three arguments trying to show that the Court should apply
the unclean hands doctrine:824
a. States have relied in the past on the clean hands doctrine before international
courts and tribunals which would establish it as part of positive international
law (Section 1);
b. the doctrine is received as a kind of general principle of international law
(Section 2); and
c. it applies absent an express treaty provision and absent any direct link between
the alleged violation and the conduct of which the Respondent complains
(Section 3).
A. International courts and tribunals have not applied the clean hands doctrine
despite many invocations by states
11.9 As a result of a distorted analysis of the case-law of this Court and other tribunals
mainly based on truncated quotes of the selected decisions, the Respondent comes to
the conclusion that although many States have relied on the unclean hands doctrine,
this doctrine “has never [been] rejected […] as a matter of principle”825 and is
recognised as a principle of equity.
11.10 Besides the fact that equity is not a source of public international law,826 it is worth
stressing that while the clean hands doctrine has been raised by States in many cases
both at the preliminary and at the merits stage, as noted by the ILC in the commentary
of its 2001 Articles on State Responsibility, “[t]he so-called ‘clean hands’ doctrine
has been invoked principally in the context of the admissibility of claims before
824 Ibid., pp. 54-59, paras. 8.5-8.12.
825 Ibid., p. 56, para. 8.9.
826 Equity was the exclusive basis of the two Mixed Claims Commissions invoked by the United States
(U.S. Counter-Memorial at pp. 57-58, para. 8.10) Good Return and the Medea, Opinion of the
Commissioner, Mr. Hassaurek, 8 August 1865, page. 107; Frierdich and Co. Case, Opinion of Umpire,
31 July 1905, p. 54. Moreover, when the relevant passages of these two very ancient opinions – which
the United States only quotes very partially – are read in their entirety, they are much less coinciding
with the U.S. thesis than it alleges.
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international courts and tribunals, though rarely applied.827 It […] does not need to be
included” among the circumstances precluding wrongfulness.828
11.11 The Second report on State responsibility of the last Special Rapporteur of the ILC on
the issue sheds more light on the resistance of the Commission vis-à-vis the notion of
clean hands:
“Even within the context of diplomatic protection, the authority supporting the
existence of a doctrine of ‘clean hands’, whether as a ground of admissibility or
otherwise, is, in Salmon’s words, ‘fairly long-standing and divided’.829
It deals largely with individuals involved in slave-trading and breach of
neutrality, and in particular a series of decisions of the United States-Great
Britain Mixed Commission set up under a Convention of 8 February 1853 for
the settlement of shipowners’ compensation claims. According to Salmon, in
the cases where the claim was held inadmissible:
‘In any event, it appears that these cases are all characterized by the fact
that the breach of international law by the victim was the sole cause of the
damage claimed, [and] that the cause-and-effect relationship between the
damage and the victim’s conduct was pure, involving no wrongful act by
the respondent State.
When, on the contrary, the latter has in turn violated international law in
taking repressive action against the applicant, the arbitrators have never
declared the claim inadmissible.830”831
827 Fn. 319 in the original text: “See J. J. A. Salmon, “Des ‘mains propres’ comme condition de recevabilité
des réclamations internationales”, Annuaire français de droit international, vol. 10 (1964), p. 225;
A. Miaja de la Muela, “Le rôle de la condition des mains propres de la personne lésée dans les
réclamations devant les tribunaux internationaux”, Mélanges offerts à Juraj Andrassy (The Hague,
Martinus Nijhoff, 1968), p. 189, and the dissenting opinion of Judge Schwebel in Militarv and
Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America). Merits,
Judgment. I.C.J. Reports 1986, pp. 392–394.”
828 ILC Articles on State Responsibility in ILC Yb 2001, Vol. II, Part 2, Report of the Commission to the
General Assembly of its 53rd Session (2001), commentary of Chapter V, p. 72, para. (9).
829 Fn. 666 in the original text: “Salmon, “Des ‘mains propres’ comme condition de recevabilité des
réclamations internationales”, p. 249.”
830 Fn. 667 in the original text: “Ibid., p. 259. See also Garcia-Arias, “La doctrine des ‘clean hands’ en
droit international public”, p. 18; and Miaja de la Muela, “Le rôle de la condition des mains propres de
la personne lésée dans les réclamations devant les tribunaux internationaux”.”
831 Second report on State responsibility, by Mr. James Crawford, Special Rapporteur, 17 March, 1 and 30
April, 19 July 1999, pp. 82-83.
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11.12 For its part the Court has never accepted an argument based on the clean hands
doctrine.832 As noted by the United States, “[a]t least 13 different States have sought
to rely on it before the Court in a range of different contexts”.833 In many of those
cases, States had raised a clean hands objection but the Court did not even refer to it
in its Judgment.834
11.13 This case-law is far from establishing that the clean hands doctrine has been accepted
in positive international law as a defence for preventing the examination of a case by
international courts and tribunals. Whether at the preliminary stage or as an argument
on the merits, there is no so-called clean hands doctrine that could lead the Court to
“reject Iran’s invocation of the Treaty pursuant to the doctrine of unclean hands”.835
The Court should apply the same ruling to the same argument that the United States
already raised as an admissibility objection as the arbitral tribunal did in the Guyana
v. Suriname case:
“The Tribunal’s ruling on this issue extends both to Suriname’s admissibility
argument based on clean hands and to its argument that clean hands should be
considered on the merits of Guyana’s Third Submission to bar recovery.”836
11.14 Even accepting arguendo that the clean hands doctrine were to be found in
international law, its status and exact contours are certainly subject to debate.837 In
832 For other cases, outside the World Court, where international tribunals did not deal with the issue, see
e.g.: Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, I.C.S.I.D. Case No. ARB/07/24,
Award, 18 June 2010, para. 317; Rusoro Mining Ltd. v. Bolivarian Republic of Venezuela, I.C.S.I.D.
Case No. ARB(AF)/12/5, Award, 22 August 2016, para. 492; Blusun S.A., Jean-Pierre Lecorcier and
Michael Stein v. Italian Republic, I.C.S.I.D. Case No. ARB/14/3, Award, 27 December 2016, para.
273.
833 Ibid.
834 Legality of Use of Force (Yugoslavia v. Spain), Provisional Measures, Order of 2 June 1999, 1. C. J.
Reports 1999, raised by Belgium, the United States, the United Kingdom, Portugal, the Netherlands,
Germany and Canada; Barcelona Traction, Light and Power Company, Limited, Preliminary
Objections, Judgment, I.C.J. Reports 1964, p. 6, raised by Spain; Application of the Interim Accord of
13 September 1995 (the former Yugoslav Republic of Macedonia v. Greece), Judgment of 5 December
2011, I.C.J. Reports 2011, raised by Greece; Certain Activities Carried Out by Nicaragua in the Border
Area (Costa Rica v. Nicaragua) and Construction of a Road in Costa Rica along the San Juan River
(Nicaragua v. Costa Rica), Judgment, I.C.J. Reports 2015, raised by Nicaragua.
835 U.S. Counter-Memorial, p. 54, para. 8.3.
836 Delimitation of maritime boundary (Guyana v. Suriname), PCA Case No. 2004-04, Award,
17 September 2007, para. 422.
837 Glencore Finance (Bermuda) Ltd. v. Plurinational State of Bolivia, PCA Case No. 2016-39, Procedural
Order No. 2 (Decision on Bifurcation), 31 January 2018, paras. 45-47.
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any case, the case-law cited by the United States only suggests that, if at all applicable,
the clean hands doctrine would only apply when the conduct alleged against the
applicant State is closely related to the obligation whose violation is alleged.838
11.15 As Iran had recalled in its Observations and Submissions on the U.S. Preliminary
Objections,839 the case-law of the IUSCT is not more favourable than that of this Court
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”.840 It must be
noted that the doctrine was relied on by Iran in very different factual contexts; as
explained in the next paragraph of the Aryeh case on which the United States relies,
this concerned specific claims by Iranian nationals who had obtained benefits based
on their Iranian nationality and later made claims to recover those benefits based on
their U.S. nationality.841 Moreover, the United States omits to mention that, in all three
cases it relies upon, the Tribunal refused to apply the doctrine:
a. 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”;842
b. In Karubian, the Tribunal dismissed the claim based on abuse of right (not
specifically clean hands) in light of the general limitations applying to claims
by Iranian dual nationals. The Tribunal held that “[i]f the Tribunal were to allow
[the Claimant] to recover against the Respondent in these circumstances, it
would be permitting an abuse of right”;843 and
838 See below paras. 11.27-11.28.
839 See Iran’s Observations and Submission, paras. 8.14. For the convenience of the Court, Iran reiterates
below its argument (which it has nothing to change).
840 U.S. Preliminary Objections, p. 58, para. 6.32.
841 Moussa Aryeh v. The Islamic Republic of Iran, Award No. 583-266-3, 25 September 1997, 33 Iran-
U.S. C.T.R. 368, at p. 387, para. 62 (U.S. PO, Annex 187).
842 Moussa Aryeh v. The Islamic Republic of Iran, Award No. 583-266-3, 25 September 1997, 33 Iran-
U.S. C.T.R. 368, at p. 387, para. 62 (U.S. PO, Annex 187).
843 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, para. 161 (U.S. PO, Annex 189).
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c. 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”.844
11.16 The United States also relies on various other investment cases in which States have
raised a clean hands objection. In particular, it places weight on the Final Award of
15 December 2014 of the UNCITRAL tribunal in Al-Warraq v. Indonesia. It omits to
mention that the tribunal in that case based its use of the clean hands doctrine not on
a general principle of law but on the express text of Article 9 of the OIC Agreement,845
the agreement at issue, to conclude to the application of the clean hands doctrine.846
As noted by the arbitral Tribunal in South American Silver Limited v. Bolivia, in that
case:
“The only exception would seem to be the Al-Warraq case where the tribunal
majority considered that the clean hands doctrine made the claimant’s claims
inadmissible. However, in the dispositif of its decision, the tribunal referred
expressly to Article 9 of the OIC Agreement as the basis to conclude that the
claimant was not entitled to any damages in respect of the breaches of the fair
and equitable treatment standard, and not that its claims were inadmissible due
to the clean hands doctrine. Therefore, the Al-Warraq tribunal’s decision also
fails to prove the acceptance and application of the above-mentioned principle
under international investments law.”847
11.17 Similarly, the case of the Copper Mesa Mining Corporation v. Ecuador, does not help
the United States. In that case, the defendant had invoked the clean hands doctrine;848
but the tribunal did not address the argument and applied the principle of estoppel
(regarding Ecuador’s lack of complaints over many years),849 basing itself on
844 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, at p. 155, para. 92 (U.S. PO, Annex 188).
845 “The investor shall be bound by the laws and regulations in force in the host state and shall refrain from
all acts that may disturb public order or morals or that may be prejudicial to the public interest. He is
also to refrain from exercising restrictive practices and from trying to achieve gains through unlawful
means.”
846 Hesham Talaat M. Al-Warraq v. The Republic of Indonesia, UNCITRAL Case, Award, December 15,
2014, paras. 648 and 683(6).
847 South American Silver Limited (Bermuda) v. The Plurinational State of Bolivia, PCA Case No. 2013-
15, Award, 30 August 2018, para. 449 (footnotes omitted).
848 Copper Mesa Mining Corporation v. Republic of Ecuador, PCA Case No. 2012-02, Award, 15 March
2016, para. 5.36.
849 Ibid., paras. 5.61 and 5.63
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Article 39 of the ILC Articles on contributory fault, not the so-called clean hands
doctrine.850
B. There is no general principle of law recognising
the clean hands doctrine
11.18 The United States considers that the Court should apply the doctrine since this
doctrine is applied by domestic jurisdictions, referring to the U.S. Federal Circular of
2018, as well as cases in the United Kingdom, Australia, Canada, Pakistan and South
Africa851 – a list of States significantly limited to common law countries, thus
excluding treating the doctrine as a general principle of law under Article 38,
paragraph 1(c) of the Court’s Statute.
11.19 This defence lies on a pure petitio principii and wrongly assumes that because the
clean hands doctrine applies in certain domestic systems, it is transposable at the
international level. It adds the incorrect allegation that the doctrine can be assimilated
to a general principle of law – it cannot.
11.20 As convincingly demonstrated by the arbitral tribunal in South American Silver
Limited (Bermuda) v. Bolivia, the clean hands “doctrine” – as the word “doctrine”
implies – is not a general principle of international law that can be applied in the
absence of an express treaty clause.852
11.21 In that case, the tribunal did not accept that “the clean hands doctrine is part of
international public policy or constitutes a principle of international law applicable to
the present case that defeats the jurisdiction of the Tribunal or affects the admissibility
850 Copper Mesa Mining Corporation v. Republic of Ecuador, PCA Case No. 2012-02, Award, 15 March
2016, para. 6.97.
851 U.S. Counter Memorial, p. 58, para. 8.11.
852 South American Silver Limited (Bermuda) v. The Plurinational State of Bolivia, PCA Case No. 2013-
15, Award, 30 August 2018, para. 471.
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of the claims filed by the Claimant”.853 Before reaching this conclusion, the arbitral
tribunal convincingly explained at some length that:
“it is undisputed that general principles of law require certain degree of
recognition and consensus.3 According to the Respondent, the analysis of these
principles should principally consider ‘the practice of the States.’ […]
Bolivia asserted that the clean hands doctrine is widely recognized in civil law
and common law systems, and cites some decisions of the British House of
Lords and the French Court of Cassation, as well as scholarly articles on the
existence of the principle in the United States and Germany. In the opinion of
this Tribunal, these are insufficient and not determinative regarding the alleged
status of the clean hands doctrine as a general principle of international law
under the terms of article 38(1)(c) of the ICJ Statute.
The Respondent also invoked various international court and tribunal decisions
that would confirm that the clean hands doctrine is a principle of international
law. In particular, Bolivia cited various opinions by members of the PCIJ and
the ICJ that, in its view, defend the ‘clean hands’ doctrine. However, these are
individual or dissenting opinions that do not seem even to reflect the majority
position of the respective courts in connection with the application of the clean
hands doctrine. In fact, this doctrine was not applied in any of the decisions the
Respondent cited as grounds to decline jurisdiction or to declare the
inadmissibility of the claims.
Bolivia also referred to various investment arbitration tribunal decisions that, in
its view, rejected an investor’s claims based on the clean hands doctrine. The
Tribunal has reviewed these decisions and finds that they do not support the
premise that the clean hands doctrine is a general principle of international law.
In fact, the Respondent invoked tribunals that reached their respective
conclusions based on the appropriate treaty provisions or the applicable national
law without basing their decisions on the clean hands doctrine or advancing it
as a general principle of international law.
[…]
The Respondent also referred to certain authors who have stated that the clean
hands doctrine constitutes a principle of international law. However, as the
Claimant notes, those same authors recognize that the existence and application
of this doctrine, as a matter of international law, are still controversial.”854
853 Ibid., para. 453.
854 Ibid., paras. 445-451 (footnotes omitted). For similar doubts as to the reception of the doctrine of clean
hands in international law, see, e.g.: Delimitation of maritime boundary (Guyana v. Suriname), PCA
Case No. 2004-04, Award, 17 September 2007, paras. 418-421; Niko Resources (Bangladesh) Ltd. v.
Bangladesh Petroleum Exploration & Production Company Limited (“Bapex”) and Bangladesh Oil
Gas and Mineral Corporation (“Petrobangla”), I.C.S.I.D. Case No. ARB/10/11 and No. ARB/10/18,
Decision on Jurisdiction, 19 August 2013, paras. 477-478.
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11.22 Similarly, in the Yukos case, the arbitral tribunal declared that it was:
“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.” 855
11.23 In the present case, the United States takes a position which is in all respects similar
to that taken by Bolivia in South American Silver Limited or by Russia in Yukos. That
position calls for the same answer: absent an express clause in the treaty, there is no
room for the doctrine of clean hands as a general principle of law.
C. The United States does not allege that Iran violated the Treaty of Amity
on which its claim is based
11.24 Even if the United States were to establish that the clean hands doctrine is established
in public international law, it would have to be acknowledged that it can only be
applied with the utmost caution and under strict conditions. The United States tries to
neutralise these limitations by asserting that:
“In essence, the doctrine of unclean hands affords the Court discretion,
exercisable on the basis of considerations of equity and good faith, to deny a
party’s request for relief where that party has engaged in serious misconduct or
wrongdoing that has a sufficiently close connection to the relief sought.”856
855 Yukos Universal Limited v. The Russian Federation, PCA Case No. AA 227, Final Award, 10 July
2014, pp. 431-432, paras. 1358-1363 (emphasis added).
856 U.S. Counter-Memorial, p. 55, para. 8.8.
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11.25 Equity and good faith cannot be invoked before a court or tribunal in themselves. They
must be linked with a violation or violations of the treaty allegedly breached. As the
Court explained in the Land and Maritime Boundary between Cameroon and Nigeria
case:
“This being so, in bringing proceedings before the Court, Cameroon did not
disregard the legal rules relied on by Nigeria in support of its second objection.
Consequently, Nigeria is not justified in relying on the principle of good faith
and the rule pacta sunt servanda, both of which relate only to the fulfilment of
existing obligations. The second branch of Nigeria’s objection is not
accepted.”857
Similarly, in the Louisa case, the ITLOS found that Article 300 of UNCLOS:858
“cannot be invoked on its own. It becomes relevant only when ‘the rights,
jurisdiction and freedoms recognised’ in the Convention are exercised in an
abusive manner.”859
11.26 Recently, in the Jadhav case, Pakistan asked the Court to dismiss India’s claims on
the basis of the clean hands doctrine, as well as the principles ex turpi causa non oritur
actio (from a dishonourable cause an action does not arise) and ex injuria jus non
oritur (law does not arise from injustice).860 As it did in Certain Iranian Assets, the
Court maintained that the clean hands doctrine is not capable of rendering the
Application inadmissible:
“The Court does not consider that an objection based on the ‘clean hands’
doctrine may by itself render an application based on a valid title of
jurisdiction inadmissible. It recalls that in the case concerning Certain
Iranian Assets (Islamic Republic of Iran v. United States of America), it ruled
that ‘even if it were shown that the Applicant’s conduct was not beyond
reproach, this would not be sufficient per se to uphold the objection to
admissibility raised by the Respondent on the basis of the clean hands
doctrine’ (Preliminary Objections, Judgment of 13 February 2019,
857 Land and Maritime Boundary between Cameroon and Nigeria, Preliminary Objections, Judgment,
I.C.J. Reports 1998, p. 304, para. 59 (emphasis added).
858 Article 300 of UNCLOS reads: “States Parties shall fulfil in good faith the obligations assumed under
this Convention and shall exercise the rights, jurisdiction and freedoms recognized in this Convention
in a manner which would not constitute an abuse of right.”
859 The M/V "Louisa" Case (Saint Vincent and the Grenadines v. Kingdom of Spain), ITLOS Case No. 18,
Judgment, 28 May 2013, para. 137; see also ITLOS, The M/V "Virginia G" Case (Panama/Guinea-
Bissau), Judgment, 14 April 2014, paras. 378-401; The M/V "Norstar" Case (Panama v. Italy),
Judgment, Preliminary Objections, 4 November 2016, ITLOS Rep. 2016, p. 74, para. 131; Annexe VII
Tribunal, Award, 5 September 2016, Duzgit Integrity, paras. 216-218.
860 Jadhav Case (India v. Pakistan), Judgment, 17 July 2019, p. 18, para. 59.
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para. 122). The Court therefore concludes that Pakistan's objection based on
the said doctrine must be rejected.”861
11.27 Strict conditions were also enunciated in the Niko Resources case – in which the
tribunal expressed doubt as to the positive existence of the principle – and which the
United States only refers to in a misleading way:862
“479. Concerning the substantive content of the [clean hands] principle in
international law, it has been summarised by Fitzmaurice:
‘He who comes to equity for relief must come with 'clean hands'. Thus a
State which is guilty of illegal conduct may be deprived of the necessary
locus standi in judicio for complaining of corresponding illegalities on
the part of other States, especially if these were consequential on or were
embarked upon in order to counter its own illegality - in short were
provoked by it.’863
480. As shown by this quotation, the application of the principle requires some
form of reciprocity, so much so that, in his Individual Opinion in the Diversion
of Water from the Meuse case, Hudson assimilated it to the Roman law principle
of the exceptio non adimpleti contractus.864 In that case, the claimant State
sought to prevent the defendant State from making use of waters from the Meuse
which it considered contrary to a treaty; but the claimant State itself was making
use of the waters in a similar manner. Similarly, the case of unclean hands to
which Judge Schwebel referred in his dissenting opinion in the Military and
Paramilitary Activities case concerned acts of aggression which he saw on the
side of the claimant State in relation to those of the defendant State.865
481. When considering the defendant State’s admissibility argument based on
clean hands, the UNCLOS Arbitral Tribunal [in Guyana v. Suriname], dealing
with this doctrine ‘to the extent that such a doctrine may exist in international
law’, referred to three criteria which it had extracted from those cases in which
reference to the doctrine had been made, in particular the developments in the
opinion of Judge Hudson: (i) the breach must concern a continuing violation,
(ii) the remedy sought must be ‘protection against continuance of that violation
861 Ibid., p. 18, para. 61.
862 U.S. Counter-Memorial, p. 57, para. 8.10.
863 Fn 321 in the original text: “Fitzmaurice, ‘The General Principles of International Law’, 92 Recueil des
Cours (1957) 119 (citations omitted)”.
864 Fn 322 in the original text: “The diversion of water from the Meuse (Netherlands v. Belgium), (1937)
PCIJ, Series A/B, No. 70, Individual Opinion by Mr Hudson, p. 77”.
865 Fn 323 in the original text: “Military and Paramilitary Activities in and against Nicaragua (Nicaragua
v. United States of America), Merits, Judgment, I.C.J. Reports 1986, Dissenting Opinion of Judge
Schwebel, p. 25”.
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in the future’, not damages for past violations and (iii) there must be a
relationship of reciprocity between the obligations considered.866”867
11.28 Exactly as in the Niko Resources case, the U.S. arguments do “not meet the criteria
which Judge Hudson and the UNCLOS Arbitral Tribunal identified for the application
of the doctrine in international law”.868 In the present case, the violations on which the
Respondent relies, which are not accepted by Iran, do not meet any of those criteria
and, therefore, are not to be characterised as involving unclean hands.
11.29 Considered in isolation, paragraph 328 of the Fraport award of 10 December 2014,
which is also invoked by the United States,869 seems to accept the application of a
clean hands doctrine independently of any legality requirement in the treaty.870
However, in paragraphs 331 and 332, the tribunal applies the legality requirement “at
the time the investments were made”, which implies that there is a strict condition of
relationship between the alleged violation and the alleged unclean hands. It is not the
case that any aspect whatsoever of the claimant’s behaviour could be cited as the basis
for an application of the legality requirement, but only, when the claimant is an
investor, its behaviour concerning “the essence of the investment” that it claimed to
be protected by the Treaty.
11.30 As shown in the present Section:
a. Even if States have, on occasions, relied on the so-called clean hands doctrine
before international courts and tribunals, it has never been applied or recognised
by this Court or by any court or tribunal in a State-to-State case;
866 Fn 324 in the original text: “Guyana v. Suriname, Award of 17 September 2007, paragraphs 420-421”.
867 Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration & Production Company
Limited (“Bapex”) and Bangladesh Oil Gas and Mineral Corporation (“Petrobangla”), I.C.S.I.D.
Case No. ARB/10/11 and No. ARB/10/18, Decision on Jurisdiction, 19 August 2013, paras. 479-481.
868 Ibid., para. 483.
869 U.S. Counter-Memorial, p. 57, para. 8.10.
870 Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines (II), I.C.S.I.D. Case
No. ARB/11/12, Award, 10 December 2014, para. 328.
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b. Absent a specific clause in the treaty which is alleged to have been violated,
even if it were to be applied, the clean hands doctrine could in any event only
be invoked under very strict criteria which are in no way fulfilled in the present
case.
SECTION 2.
THE SO-CALLED “ABUSE OF RIGHTS” DEFENCE RAISED BY THE UNITED STATES
11.31 The United States contends, finally that Iran’s claims in the current proceedings
constitute an “abuse of right”, and that Iran should be “precluded from exercising any
of its rights under the Treaty in this case on that basis”.871 According to the
Respondent:
“There are two distinct but complementary reasons for which Iran runs afoul of
that prohibition [on the abuse of rights]. First, Iran impermissibly seeks to
stretch the rights under the Treaty of Amity to apply to factual circumstances
that the Parties obviously never intended them to address. Second, it is an abuse
of rights for Iran to seek to prosecute rights as a shield against its accountability
for its wrongful acts. The rights under the Treaty cannot be invoked to protect
Iran from its unlawful conduct outside the framework of the Treaty. Against the
background of the extraordinary circumstances of this case, either ground
provides a sufficient basis for the Court to dismiss Iran’s claims.”872
11.32 On examination, the U.S. submission regarding Iran’s alleged “abuse of rights”
appears to be nothing but a relabelling of the Respondent’s abuse of process objection,
which has already been rejected by the Court at the preliminary objections phase, as
demonstrated in subsection A below. This second attempt is no better founded than
the previous one: as explained in subsection B below, the very idea that underlies the
notion of “abuse of rights” excludes its application in the present case.
871 U.S. Counter-Memorial, p. 162, para. 18.1.
872 Ibid., p. 162, para. 18.3.
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A. The United States merely relabels as “abuse of rights” the “abuse of process”
objection already rejected by the Court
11.33 In claiming that Iran claims should be rejected as an abuse of rights, the United States
puts forward the same admissibility defence, now relabelled as an “abuse of rights”,
that it submitted during the preliminary objections phase and that was rejected by the
Court in its Judgment of 13 February 2019. But relabelling an “abuse of process”
claim into an “abuse of right” claim is a question of form only. The nature of the
argument is the same and the United States cannot ignore the clear reasoning of the
Court in its Judgment on Preliminary Objections.
11.34 The identity between the two arguments raised by the United States is self-evident
from the fact that they were first presented together in exactly same manner. In its
Preliminary Objections, the United States contended that:
“Iran’s reliance on the Treaty to found the Court’s jurisdiction in this case
constitutes an abuse of right”,873
and developed the very same argument that it now advances in its Counter-Memorial:
a. First, the United States earlier contended that the Iranian claims were outside
the intended scope of the 1955 Treaty of Amity since, according to the U.S.
preliminary objections, “[t]his dispute has nothing to do with the interests
protected by the Treaty”.874 This is now the first aspect of the U.S. claim of
abuse of rights, which reads: “the Parties did not intend the substantive
protections set out in the Treaty of Amity to be available for exercise in the
factual circumstances and legal context present in this case”.875
b. Secondly, the U.S. preliminary objections claimed that “Iran may wish to
regard the Treaty as a vehicle for waging this wider strategic dispute [b]ut to
permit Iran to do so in the present case would subvert the purpose of the
873 U.S. Preliminary Objections, p. 4, para. 1.9.
874 Ibid., p. 53, para. 6.17.
875 U.S. Counter-Memorial, p. 165, para. 18.10.
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Treaty”.876 In the same manner, the United States now contends in its Counter-
Memorial that Iran is seeking to exercise its rights in the present proceedings
for “improper purposes” and should, therefore, not be allowed to benefit from
the protection of the Treaty.877
11.35 Then, during the oral pleadings on its preliminary objections, the United States had to
take into account the recent decision in the Immunities and Criminal Proceedings
case, in which the Court recalled that a claim of abuse of rights “cannot be invoked as
a ground of inadmissibility when the establishment of the right in question is properly
a matter for the merits”.878 But, rather than withdrawing its preliminary objection, the
United States decided to relabel it as an “abuse of process” claim, indicating that:
“this is an abuse of process objection; it is not an abuse of right objection. Iran’s
case does not come properly within the scope of the Treaty of Amity.
Accordingly, Iran’s invocation of Article XXI (2) of the Treaty, that is, the
compromissory clause, in order to found the jurisdiction of the Court is an abuse
of process”.879
11.36 The Court examined the U.S. defence to the admissibility of the Iranian claims, noted
that “there [were no] exceptional circumstances which would warrant rejecting Iran’s
claim on the ground of abuse of process”,880 and rejected this preliminary objection.
11.37 In its Counter-Memorial, the United States now puts forward the very same claim that
“Iran’s case does not come properly within the scope of the Treaty of Amity”,881 or as
it is now formulated, that Iran is seeking to “stretch the rights under the Treaty of
Amity to apply to factual circumstances that the Parties obviously never intended to
address” and to invoke these rights “to protect Iran from its unlawful conduct outside
876 U.S. Preliminary Objections, p. 50, para. 6.10; see also U.S. Preliminary Objections, p. 50, para. 6.12.
877 U.S. Counter-Memorial, pp. 166-167, paras. 18.12-18.13.
878 Immunities and Criminal Proceedings (Equatorial Guinea v. France), Preliminary Objections,
Judgment, I.C.J. Reports 2018, p. 337, para. 151.
879 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Hearing of 8 October
2018, CR 2018/28 (Sir Bethlehem), p. 35, para. 2.
880 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 35, paras. 114-115.
881 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Hearing of 8 October
2018, CR 2018/28 (Sir Bethlehem), p. 35, para. 2.
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the framework of the Treaty”.882 However, the Respondent attempts to differentiate
its present position from the claim of “abuse of process” brought during the
preliminary objection phase, on the basis that the earlier defence was rooted in an
abuse of procedural rights, while the present “abuse of rights” defence concerns the
“exercis[e by Iran of its] substantive rights under the Treaty of Amity”.883 This
distinction is, however, disingenuous.
11.38 Indeed, the U.S. so-called “abuse of rights” claim is not concerned with an alleged
abuse of substantial rights. The United States does not argue that the substantive
provisions invoked by Iran – namely, the right to recognition of the juridical status of
Iranian companies (Article III(1)), the right of access to domestic courts granted to
Iranian nationals and companies (Article III(2)), the right to protection owed to the
properties of Iranian nationals and companies (Article IV(1)), the right for Iranian
nationals and companies to purchase or lease property within the territory of the
United States (Article V(1)), the right not to submit to certain monetary restrictions
regarding transfer of funds (Article VII(1)) or the right to enjoy freedom of commerce
between the territories of the two parties (Article X(1)) – have been abused by Iran,
and that it should be held responsible for such abuse,884 or even that Iran should be
deprived of the benefit of such treaty rights. Incidentally, such a position could hardly
have been advanced since the United States has prevented and continues to prevent
Iran and Iranian companies from benefiting from these substantive rights.
11.39 Instead, the United States contends that Iran is using its procedural right, under Article
XXI(2) of the Treaty of Amity, to bring a dispute before the Court regarding the
interpretation or application of these substantive provisions, for purposes that would
be beyond the scope of this Treaty and alien to the purposes for which this Treaty was
882 U.S. Counter-Memorial, p. 162, para. 18.3.
883 U.S. Counter-Memorial, title of Section B of Chapter 18, p. 165; the United States uses the terms
“substantive rights” or “substantive protection” 18 times in the sole Chapter 18.
884 A. Kiss, “Abuse of Rights”, in Max Planck Encyclopedia of Public International Law, O.U.P., Dec.
2006, para. 32. As expressed by the WTO Dispute settlement Body in United States—Import
Prohibition of Certain Shrimp and Shrimp Products case : “[a]n abusive exercise by a member of its
own treaty right results in a breach of the treaty rights of the other members and, as well, a violation of
the treaty obligation of the Member so acting” (World Trade Organization Appellate Body, United
States – Import prohibition of certain shrimp and shrimp products, 12 October 1998, para. 158).
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established. Such a claim, which “goes to the procedure before a court or tribunal”,885
is substantially the same as the one brought by the Respondent as a preliminary
objection under the label “abuse of process” and rejected by the Court.886
11.40 In sum, while at the same time ignoring the Court’s rejection of the “abuse of process”
objections that it raised during the preliminary phase, the United States is now
bringing to the Court a defence:
a. between the exact same parties, with the United States as the claimant to the
defence and Iran as the defendant;
b. based on the same legal – and unfounded – grounds that Iran’s case falls beyond
the scope of the 1955 Treaty and is aimed at achieving improper purposes; and
c. with the same object, namely that Iran should be “precluded” from exercising
any of its rights under the Treaty.
Yet, the United States suggests that the Court should not adopt the same reasoning
and reach the same conclusion that it did in its Judgment on preliminary objections.
Such an assumption is intrinsically defective, all the more since the U.S. so-called
“abuse of rights” defence is just as unsubstantiated as its earlier “abuse of process”
objection.
B. The U.S. so-called “abuse of right” defence is not founded in law
and in facts
11.41 When the Court comes to consider “Iran’s exercise of the substantive treaty right on
which it relies to assess whether it offends the prohibition on the abuse of rights”, as
requested by the United States,887 it will find that contrary to the U.S. assertion, (1) the
885 Immunities and Criminal Proceedings (Equatorial Guinea v. France), Preliminary Objections,
Judgment, I.C.J. Reports 2018, p. 336, para. 150.
886 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections,
Judgment, I.C.J. Reports 2019, p. 35, paras. 114-115.
887 U.S. Counter-Memorial, p. 162, para. 18.2.
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doctrine of “abuse of rights” in international law, and (2) the facts of the present case
lead inevitably to the rejection of the U.S. defence.
i. The doctrine of the abuse of rights has never been upheld
in an inter-State dispute
11.42 The doctrine of “abuse of rights” has been defined as follows:
“In international law, abuse of rights refers to a State exercising a right either in
a way which impedes the enjoyment by other States of their own rights or for
an end different from that for which the right was created, to the injury of
another State”.888
11.43 As an application of the general principle of good faith,889 the doctrine of “abuse of
rights” rests on the assumption that it cannot be excluded that a State might act in bad
faith and exercise its rights in an abusive manner, to the prejudice of other States. But
requests based on this doctrine, in relation to which such abuse cannot be presumed
and must be substantiated, have never been upheld in inter-State disputes, notably
before the International Court of Justice.
11.44 Indeed, given its nature, the doctrine of “abuse of right” could only have an
exceptionally limited application in inter-State disputes. As noted by Georg
Schwarzenberger:
“The suggestion of bad faith is ‘highly odious’. Even if a State is reasonably
convinced of the bad faith of another State, the presumptions in favour of good
faith and law-abidingness impose such a heavy burden of proof on any State
which makes such an allegation, that, only on rare occasions, States are likely
to choose this line of argument”.890
Also, as put by an author the United States refers to:
“International courts and tribunals have to presume that states act in good faith.
To do otherwise would call the honour of states into question, risk introducing
888 A. Kiss, “Abuse of Rights”, in Max Planck Encyclopedia of Public International Law, O.U.P.,
Dec. 2006; see also, Michael Byers, “Abuse of Rights: An Old Principle, A New Age”, 47 McGill L.J.
389, 431 (2002) (U.S. CM, Annex 238).
889 World Trade Organization Appellate Body, United States – Import prohibition of certain shrimp and
shrimp products, 12 October 1998, at para. 158.
890 G. Schwarzenberger, “The fundamental principles of international law”, RCADI, 1955, vol. 87, p. 308.
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political and diplomatic factors into the judicial process, impede international
relations and increase the danger of escalation.”891
11.45 The World Court itself has frequently recalled that there can be no presumption of an
abuse of rights.892 It has been the case, for instance:
a. In the case of the Free Zones of Upper Savoy and the District of Gex, in which
the Court emphasised that “an abuse cannot be presumed by the Court”;893
b. In the Case concerning Certain German Interests in Polish Upper Silesia
(Merits), where the P.C.I.J. remarked that “such misuse cannot be presumed,
and it rests with the party who states that there has been such misuse to prove
his statement”.894
11.46 The Court has also set strict conditions for a claim of abuse of rights to be upheld. In
the Case concerning Certain German Interests in Polish Upper Silesia (Merits), the
P.C.I.J. rejected the Polish claim of a German abuse of rights after noting that “the act
in question does not overstep the limits of the normal administration of public
property” and that 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”.895 The same test has been applied ever
since by the Court and this has led to the dismissal of each of the various abuse of
rights claims that were brought before it.896
891 M. Byers, “Abuse of Rights: An Old Principle, A New Age”, 47 McGill L.J. 389, 431 (2002), p. 412
(U.S. CM, Annex 238).
892 The principle that an abuse cannot be presumed was recently reiterated in Immunities and Criminal
Proceedings (Equatorial Guinea v. France), Preliminary Objections, Judgment, I.C.J. Reports 2018,
p. 335, para. 147.
893 Case of the Free Zones of the Upper Savoy and the District of Gex, Merits, Judgment of 7 June 1932,
P.C.I.J. Series A/B, No. 46, p. 167.
894 Ibid., p. 30 (emphasis added).
895 Ibid., pp. 37-38.
896 For a partial list of claims of abuse of rights brought before the International Court of Justice, see
M. Byers, “Abuse of Rights: An Old Principle, A New Age”, 47 McGill L.J. 389, 431 (2002), pp. 397-
398 (U.S. CM, Annex 238).
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11.47 The conclusion to be drawn is that, in inter-State disputes, the Party that invokes an
abuse of rights must meet a high threshold. It is for the Party putting forth a claim of
abuse of rights to meet the “heavy burden of proof”897 that such an abuse exists. As a
consequence, claims of abuse of rights have never been upheld in inter-State disputes,
including before the Court.
11.48 In this respect, the examples of “successful applications of the doctrine [of abuse of
rights]”898 invoked by the United States in its Counter-Memorial, are not only taken
from outside the scope of inter-State litigation, but they also do not demonstrate that
this doctrine has evolved toward a broader application. Indeed, a closer examination
of these examples shows that these are cases where abuse of rights was upheld on the
basis that an “investor who is not protected by an investment treaty [had]
restructure[ed] its investment in such a fashion as to fall within the scope of protection
of a treaty”899, internationalising a purely internal dispute, in order to benefit from the
protection of a treaty giving it access to international arbitration.900 Such behaviour is
“designed to procure […] an illicit advantage and to deprive the other of an advantage
to which it was entitled”,901 i.e. the protection of an international arbitration process
for the investor, that the state party to the arbitration agreement had excluded for
domestic disputes.
11.49 Therefore, in order for its so-called “abuse of rights” defence to be successful, the
United States would need to prove that, in this specific case, whereas the Court has
897 G. Schwarzenberger, “The fundamental principles of international law”, RCADI, 1955, vol. 87, p. 299.
898 U.S. Counter-Memorial, p. 164, footnote 536.
899 Philip Morris Asia Ltd. v. Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction
and Admissibility (Dec. 17, 2015), para 539, Mobil Corporation, Venezuela Holdings, B.V., Mobil
Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd.,
and Mobil Venezolana de Petróleos, Inc. v. Bolivarian Republic of Venezuela, I.C.S.I.D. Case
No. ARB/07/27, Decision on Jurisdiction, 10 June 2010, para. 205 (“the Tribunal considers that to
restructure investments only in order to gain jurisdiction under a BIT for such disputes would constitute,
to take the words of the Phoenix Tribunal, “an abusive manipulation of the system of international
investment protection under the I.C.S.I.D. convention and the BITs”).
900 Capital Financial Holdings Luxembourg S.A. v Cameroon, I.C.S.I.D. Case no. ARB/15/18, 22 June
2017, para. 362; see also Phoenix Action, LTD. v. Czech Republic, I.C.S.I.D. Case no. ARB/06/5, 15
April 2009.
901 Case concerning certain German Interests in Polish Upper Silesia, Merits, Judgment of 25 May 1926,
P.C.I.J. Series A, No. 7, pp. 37-38.
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have found that Iran has a right to a substantive protection under the different Treaty
provisions identified in its Application, there is however clear evidence to overturn
the presumption that Iran is acting in good faith when it requests the Court to establish
whether or not its rights have been breached.
11.50 Such evidence is patently absent in the present case.
ii. Abuse of rights must be rejected in the instant case for lack of any basis
11.51 It is striking that although the United States accepts that the Party alleging an abuse
of rights must present “clear evidence in support of any underlying factual allegations”
and that there needs to be “exceptional circumstances justifying the application of the
doctrine”,902 it fails to meet either criteria in relation to both of the two “aspects” it
raises.
11.52 The first argument of the United States is that:
“the Parties did not intend the substantive protections set out in the Treaty of
Amity to be available for exercise in the factual circumstances and legal context
present in this case. The Treaty is a commercial and consular agreement. It
sought to protect the Parties’ interests in those limited fields of activity by
conferring the specific rights to substantive protection. […]
However, Iran does not seek to invoke its substantive rights for the purposes of
commerce or consular relations. … [because] On any reasonable view, the
impugned U.S. measures bear no relation whatsoever either to commerce or to
consular relations as protected under the Treaty.”903
11.53 This is inconsistent and irrelevant. There are three points.
11.54 First, it is inconsistent because this argument is not an abuse of rights defence, but,
rather, an objection to the Court’s jurisdiction ratione materiae. Indeed, it is identical
to the claim sustained by the United States in the Oil Platforms case according to
which Iran’s case was not a “dispute ‘as to the interpretation or application’ of the
902 U.S. Counter-Memorial, pp. 164-165, para. 18.5; see also Renée Rose Levy and Gremcitel S.A. v.
Republic of Peru, I.C.S.I.D. Case No. ARB/11/17, Award, 9 January 2015, para. 186 and footnote 219;
Chevron Corporation (USA) and Texaco Petroleum Company (USA) v. The Republic of Ecuador,
UNCITRAL, PCA Case No. 34877, Interim Award, 1 December 2008, para. 143.
903 U.S. Counter-Memorial, pp. 165-166, paras. 18.10-18.11.
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Treaty of 1955”,904 because, allegedly, it “b[ore] no relation to the Treaty of 1955”.905
In its judgment of 12 December 1996, the Court explained how it had to address such
an argument and, notably, held that it could not “limit itself to noting that one of the
Parties maintains that such a dispute exists, and the other denies it” but that it had to
“ascertain whether the violations of the Treaty of 1955 pleaded by Iran do or do not
fall within the provision of the Treaty”.906
11.55 In the instant case, the Court has already ascertained that, with the limitations upheld
in its judgment of 13 February 2019, the acts of which Iran complains fall within the
provision of the Treaty of Amity.907 This finding deprives the first U.S. argument of
its very substance.
11.56 Second, the U.S. accusation that “Iran does not seek to invoke its substantive rights
for the purposes of commerce” is also inconsistent. It is a fact that most of the
substantive rights in question exist for the purpose of protecting, inter alia, one Party’s
companies, and that Iran plainly invokes the benefit of the Treaty protection with
respect to the treatment by the United States of Iranian companies under Articles
III(1), III(2), IV(1), IV(2) and VI(1). It cannot be correct that, by putting this claim
before the Court, Iran’s purpose is alien to what the Treaty envisaged in terms of
commercial relations since, as recalled and discussed above,908 the Court has defined
“companies” for the purposes of the Treaty specifically in relation with their
commercial and business activities.909 Likewise, the accusation is equally manifestly
wrong concerning the invocation by Iran of a breach of Article VII(1) because the
U.S. measures have restricted payments or transfers of funds. Payments and transfers
904 Oil Platforms (Islamic Republic of Iran v. United States of America), Preliminary Objection, Judgment,
I.C.J. Reports 1996, p. 810, para. 16.
905 Ibid., p. 809, para. 14.
906 Ibid., p. 810, para. 16 (emphasis added).
907 See notably, Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary
Objections, Judgment, I.C.J. Reports 2019, p. 33, para. 99.
908 See Chapter III, Section 2.
909 In fact, the U.S. argument could be construed as claiming that the Iranian companies relevant to the
present case are not “companies” for the purposes of the Treaty, for lack of “commercial activities”.
But, as demonstrated above, the Iranian entities relevant to the present case plainly qualify as
companies under the Treaty.
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of funds are obviously crucial for any sort of commerce. Finally, Iran cannot be
accused of invoking its substantive rights for purposes that bear no relation with
commerce when it refers to Article X of the Treaty for the reason that “commerce
between the two States is severely impeded”.910
11.57 Thus, contrary to what the United States claims, in this case Iran invokes its rights
under the Treaty in the exact way intended by the Parties: Iran challenges certain
measures adopted by the United States to the extent that they removed and breached
the Treaty protections granted to Iranian companies, restricted transfers of funds and
payments and impeded commerce between the two States.
11.58 Third, as for the U.S. contention that Iran abuses its Treaty rights because “the
challenged U.S. measures [are] directed at providing a meaningful forum for U.S.
victims to obtain reparation for acts of terrorism that Iran itself has sponsored”,911 this
is irrelevant to the question of whether Iran’s claims are to be characterised as abusive.
It could be relevant – quod non – as a defence on the merits if Article XX of the Treaty
contained an exception concerning such measures, but it is plainly not the case. The
United States cannot escape this conclusion by stretching the exceptions contained in
Article XX by a broad invocation of alleged abuse of rights.
11.59 The second argument of the United States is related to what, according to the United
States, Iran “seeks” in this case. It is as follows:
“Iran’s conduct is that it seeks to exercise its substantive rights for an improper
purpose. Iran plainly attempts to circumvent its obligations to make reparation
to victims of its state-sponsored terrorist acts”.912
11.60 According to the United States, Iran’s purpose in invoking its Treaty rights would not
be the application of the Treaty in that it grants rights to Iran and Iranian nationals and
companies, but to use these rights “as a shield against its accountability for those
wrongful acts”.913 This argument is in no way better founded than the first.
910 Iran’s Memorial, p. 117, para. 6.20.
911 U.S. Counter-Memorial, p. 166, para. 18.11.
912 Ibid., p. 166, para. 18.12.
913 Ibid.
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11.61 First, what Iran seeks in this case is nothing but to invoke and benefit from the Treaty
rights and protections that the United States has agreed to in the 1955 Treaty of Amity.
Strikingly, the U.S courts which have been seised by Iranian companies never
suggested that their intent was to circumvent Iran’s obligations vis-à-vis the United
States. What is true, in sharp contrast, is that the very aim of the challenged U.S.
measures is to circumvent by all means each and every legal protection that were
available to Iranian companies, whether under U.S. laws or under the Treaty, in order
for private persons to have access to the assets of those Iranian companies. It is thus
quite remarkable to hear the United States now turning the situation to its advantage
by claiming that it is Iran which tries to circumvent the law.
11.62 Secondly, and leaving apart the fact that the United States cannot expect the Court to
take for granted its allegations regarding Iran’s involvement in sponsoring terrorism,
the second U.S. argument (which the Court will read with a sense of déjà-vu given the
preliminary objections phase) is plagued with the same inconsistencies as the first
U.S. argument. This case can is not about Iran allegedly “shielding against its
accountability for [its] wrongful acts”.914 Iran’s claims concern the protections granted
under the Treaty to Iranian companies as separate juridical entities. The judgments of
the U.S. courts that authorised the attachment of assets owned by Iranian companies
and entities or in which they held an interest, considered their proximity with the State
of Iran only and never (with the sole exception of the absurd allegations levelled
against Iranian companies in relation to the involvement of Iranian companies in the
attacks of 11 September 2001)915 their accountability in the terrorist acts for which
reparation was sought. It is therefore hard to see how, by claiming that these Iranian
entities should have benefited from the protections granted to them by the Treaty, Iran
would be “shielding against its accountability”.
11.63 Finally, while Iran invokes its Treaty rights as established by the Treaty of Amity, it
is the United States which seeks, under the guise of the doctrine of abuse of rights, to
circumvent its Treaty obligations and the Court’s decision with res judicata effect.
The sole purpose and intent of the United States in invoking the doctrine of ‘abuse of
914 Ibid.
915 See above, para. 1.16 and paras. 2.41-2.54.
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rights’ is to have the Court excuse its multiple breaches of the Treaty as if it could
benefit from some sort of circumstance precluding wrongfulness. But there is no basis
in international law for such a claim. The United States cannot rely on the doctrine of
abuse of rights as “a shield against its accountability for [its] wrongful acts”916.
11.64 Iran submits therefore that the Court should reject the U.S. so-called “abuse of rights”
claim, applying the same reasoning that justified its rejection of the U.S. “abuse of
process” objection, and because such a claim is in any event unfounded.
916 Ibid., p. 166, para 18.12.
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APPENDIX A.
THE U.S. ALLEGATIONS OF TERRORISM ARE INAPPROPRIATE AND
UNFOUNDED
A.1 As explained above,917 the United States continues the approach it adopted in the
preliminary objections phase of the case and seeks to tarnish the image of Iran and
distract attention away from the actual dispute at issue, which Iran has submitted to
the Court. Iran categorically denies all the U.S. allegations and does not intend to carry
the case to the detour the United States designed and set with the purpose of deviating
the proceeding from its main path. A few general points on these allegations, however,
will be made in the present Appendix.
A.2 First, as a general matter, the U.S. allegations emanate from the hostile policy that the
United States 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 1953,918 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 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 destabilising acts. For many years, there has been a concerted
misinformation campaign in the political vocabulary of U.S. officials, and
917 See para. 11.63.
918 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, 15 June 2017 – IOS, Annex 54).
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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 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;919 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”.920 As identified in Chapter II above,921
precisely the same pattern can be seen with respect to terrorist incident of
11 September 2001, with absurd allegations and findings being made against Iran in
Heiser and other cases, but U.S. officials later accepting the obvious fact that Iran had
no responsibility for this appalling terrorist attack.
A.5 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.922 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.923
A.6 The accusation made by the United States against other States concerning the
“sponsoring of terrorism” is likewise made in order to advance U.S. foreign policy
goals. The reality is that the United States uses the word “terrorism” as a convenient
label to attack its opponents. 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.
919 S. Robinson, “Gingrich in call to arms against Iran terror bases”, The Daily Telegraph, 5 August 1996
(IOS, Annex 22).
920 “Riyadh accepts for first time that bombers of US base were Saudi”, Agence France Press, 21 May
1998 (IOS, Annex 25).
921 See Chap. II above 2.41-2.56.
922 See e.g. J. Cook, “Trump Suggests Iran Brought Deadly Terrorist Attacks Upon Itself”,
Huffingtonpost.com, 7 June 2017 (IOS, Annex 46) or I. Tharoor, “Terror in Iran reveals the hypocrisy
of Trump and his allies”, Washington Post, 8 June 2017 (IOS, Annex 48).
923 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).
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A.7 Second, and related to the above, the process of unilaterally designating 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.924
A.8 It is interesting to note that Cuba has been recently removed from the list of “Statesponsors
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 also provides a telling example of the United States’ double-standards
when it comes to those it chooses to qualify as responsible for terrorism. 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 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.”925 A few days later, this did not
prevent the United States selling weapons, including jet fighters, to Qatar, while U.S.
diplomacy was seeking to retract these accusations.926
A.9 In another flagrant illustration of the deficiency and lack of merit in the designation
of States as “State-sponsor of terrorism”, the U.S. President has openly preferred the
U.S. massive arms deals and financial ties with Saudi Arabia ahead of the protection
of the most fundamental human rights, and has decided to turn a blind eye to the
murder of Jamal Khashoggi in the Saudi consulate in Istanbul.927 The same is true
924 F. Zakaria, “How Saudi Arabia Played Donald Trump”, Washington Post, 25 May 2017 (IOS,
Annex 45).
925 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).
926 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).
927 See W. Blitzer, CNN Aired 17 October 2018 - 13:00 ET, available at
archives.cnn.com/TRANSCRIPTS/1810/17/wolf.01.html (“PRESIDENT OF THE UNITED
STATES: Saudi Arabia's been a very important ally of ours in the Middle East. We are stopping Iran.
We’re not trying to stop. We’re stopping Iran. […] We have other very good allies in the Middle East.
But if you look at Saudi Arabia, they’re an ally and they're a tremendous purchaser of not only military
equipment but other things. When I went there, they committed to purchase $450 billion worth of things
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with respect to the Yemen crisis, where the United States has supported928 politically
and militarily its allies in their aggression and also crimes with impunity against
civilians and in particular innocent children,929 but the United States justifies its
support as a fight against terrorism.930 According to U.N. reports, over 7,500 Yemenis
children have so far been killed or wounded, 931 12.24 million children are in need of
humanitarian assistance and over 368,000 children under 5 are suffering severe
malnutrition.932
A.10 In short, it is financial and political considerations that dictate U.S. decisions to
designate (or not) States as so-called “State-sponsors of terrorism”.
A.11 Third, and again following from the above, 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 Counter-
Memorial, including the alleged actions attributed to groups such as Hezbollah or
Hamas. Furthermore, contrary to the U.S. claims, these organisations are not the
proxies of Iran or any other governments which support them. Rather, they are groups
which have been defending their country against foreign invasion and occupation.
and $110 billion worth of military. Those are the biggest orders in the history of this country, probably
in the history of the world. I don’t think there's ever been any order for $450 billion. And you remember
that day in Saudi Arabia where that commitment was made. So they're an important ally.”); NBC News,
President Trump's full, unedited interview with Meet the Press, 23 June 2019 (“But I’m not like a fool
that says, ‘We don’t want to do business with them.’ And by the way, if they don’t do business with
us, you know what they do? They’ll do business with the Russians or with the Chinese. They will buy
-- We make the best equipment in the world, but they will buy great equipment from Russia and from
China.”) available at www.nbcnews.com/politics/meet-the-press/president-trump-s-full-unedited…-
meet-press-n1020731; See also, “White House Digs Itself in Deeper on Khashoggi”, Foreign
Policy, 4 December 2018 (IR, Annex 120); “Saudi Arabia is America’s No. 1 weapons customer”, CBS
News, 12 October 2018 (IR, Annex 119).
928 The U.S. President has used his veto power four times denying withdrawal US military support and
ending weapons sales to Saudi Arabia and its allies. See, VETO—S.J. RES. 7 (PM 10) (IR, Annex 11);
VETO—S.J. RES. 38 (PM 25) (IR, Annex 12); VETO—S.J. RES. 37 (PM 24) (IR, Annex 13) and
VETO—S.J. RES. 36 (PM 23) ( IR, Annex 14).
929 See M. Bazzi, “America is likely complicit in war crimes in Yemen. It’s time to hold the US to
account”, The Guardian, 3 October 2019 (IR, Annex 131).
930 See L. Hartig, “Full Accounting Needed of US-UAE Counterterrorism Partnership in Yemen”,
justsecurity.org, 7 December 2018 (IR, Annex 121).
931 See “Over 7,500 children killed or wounded in Yemen since 2013, U.N. report says”, CBS News,
29 June 2019 (IR, Annex 126).
932 See UNICEF, “Humanitarian Action for Children in Yemen”, 2020 (IR, Annex 115).
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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.12 In keeping with the U.N. Charter and General Assembly resolutions reflecting
customary international law, Iran believes that, unlike the United States which
recognises annexation of Palestinian’s occupied territories in violation of international
law, supporting the National Liberation Movements (‘NLMs’) who are subject to alien
subjugation, domination or exploitation in the exercise of their right to selfdetermination933
or national militant groups defending their country and people
against foreign occupiers is not prohibited under international law and in the former
case is even “a right erga omnes”.934
A.13 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.935 It has been admitted that the United States supported the foundation
of terrorist organisations 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”.936
933 See, Accordance with International Law of the Unilateral Declaration of Independence in Respect of
Kosovo, Advisory Opinion, I.C.J. Reports 2010, p. 436, para. 79. See also, Legal Consequences of the
Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, I.C.J. Reports 2004,
pp. 171-172, para. 88.
934 Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory
Opinion, I.C.J. Reports 2004, pp. 171-172, para. 88.
935 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).
936 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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The current U.S. President pointed out several times during his presidential campaign
that “Obama and Hillary Clinton created ISIS”.937
A.14 Contrary to the U.S. accusations, the United States’ intervention policy in the Middle
East for decades is the real cause of destabilization and, threat to the security of the
region as manifested on many occasions. Indeed, Iran has been ensuring regional
stability and security and has countered any disruptive efforts by foreign powers in
light of its national interests and foreign policy objectives. This is evidenced by Iran's
efforts to strengthen peace and stability in Iraq, Syria and Yemen. The most recent
initiative for ensuring peace and security in the region has been proposed by Iranian
President at the 74th session on the U.N. General Assembly in New York. Addressing
the U.N. General Debate, the Iranian President proposed the Hormuz Peace
Endeavour (‘HOPE’) calling "on all eight countries in the Persian Gulf region to join
in an attempt to bring peace through dialogue.”938
A.15 The war crimes and crimes against humanity committed by the U.S. military or
through its proxies inter alia in Iraq, Afghanistan, Syria and Yemen have fomented
violence and extremism and destabilised the region;939 U.S. indiscriminate attacks
through artillery and airstrikes in the Coalition’s military campaign took the lives of
more than 1600 civilians in the Syrian city of Ragga from June to October 2017.940
The United States has also supplied the coalition forces in Yemen with weapons
specifically the laser-guided bomb manufactured by the U.S. company Raytheon
which have been used in deadly airstrike on civilians.941 The United States has
937 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).
938 See “Zarif terms presence of U.S. in region a ‘failed experience’”, IRNA, 12 October 2019
(IR, Annex 132).
939 Ibid.
940 See Amnesty International, “Syria: Unprecedented investigation reveals US-led Coalition killed more
than 1,600 civilians in Raqqa ‘death trap’”, 25 April 2019 (IR, Annex 124).
941 See Amnesty International, “Yemen: US-made bomb used in deadly air strike on civilians”,
26 September 2019 (IR, Annex 130).
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reportedly killed 115 to 149 civilians in Yemen by drone strikes.942 U.S. drone strikes
in Afghanistan also killed many civilians, most recently in September 2019 the strike
in Nangarhar province killed at least 30 innocent farmers and labourers and injured
forty.943 The U.S. Government has also conducted some 330 to 374 drone attacks in
Pakistan between 2004 and September 2013 as a result of which between 400 and
900 civilians have been killed and at least 600 people seriously injured.944
A.16 Fourth, not only has Iran always condemned terrorism in all its forms and
manifestations and has done so at the highest level,945 but Iran has been itself been a
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.946
The current U.S. Secretary of State is even willing to embrace MKO (or ‘MEK’) and
942 See “The War in Yemen, New America¸ Live statistics”, New America (available at
www.newamerica.org/international-security/reports/americas-counterterro…,
last consulted on 3 August 2020).
943 See “US drone strike intended for Isis hideout kills 30 pine nut workers in Afghanistan”, The Guardian,
19 September 2019 (IR, Annex 128).
944 See Amnesty International, “Will I Be Next?” Us Drone Strikes in Pakistan”, available at
www.amnestyusa.org/files/asa330132013en.pdf
945 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. Seyed Mohammad Khatami, Former President of the Islamic Republic
of Iran, 21 September 1988 (IOS, 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 (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).
946 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).
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take part in a meeting linked to that terrorist group as a featured speaker making false
accusation against Iran.947
A.17 As to further examples, 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 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.18 Fifth, the United States also accuses Iran of engaging proliferation of sensitive nuclear
activities and pursuing nuclear weapons. 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 are not however relevant in the current
context). Indeed, all Iran’s nuclear installations and all nuclear materials have been
under the IAEA’s constant and strict inspections. The U.N. 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.19 The main underlying reason for the dispute over alleged proliferation – which is not
before the Court – was the United States’ policy after 1979 with respect to Iran’s
peaceful program, seeking 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 rights under the NPT and IAEA agreements.948 The dispute was resolved through
the JCPOA, which inter alia reaffirmed Iran’s rights under the said agreements. The
United States, however, decided to withdraw the agreement and carry on with its
hostile policy of imposing sanctions against Iran or Iranian nationals and companies.
947 See “Iran hawks cement ties to former US-designated terrorist group”, Al Monitor, 24 September 2019
(IR, Annex 129).
948 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 would
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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It is regrettable that these matters have been placed before the Court for inappropriate,
prejudicial purposes.
A.20 Sixth, with respect to the U.S. false accusations and mischaracterisation of Iran’s
missile program it is to be emphasised that as Iran has always reiterated, in line with
its defence doctrine, its missile program is only for deterrence and defence purposes.
This defensive program should be considered in the context of threats caused by
advanced offensive weaponries including long-range missiles that the U.S. and its
allies have continually provided to Iran’s neighbouring countries in the region and
also against the background of targeting Iranian civilians and areas by missiles during
the 1980s war against Iran by Saddam Hossein’s regime which received substantial
intelligence, material and financial support from the U.S. Government at the time.
A.21 Furthermore, nothing in the Security Council resolution 2231 bars Iran from
conduction activities related to missiles which are not designed for delivering nuclear
weapons. Indeed, “the issue of missiles has never been subject to negotiations and
nothing has been approved or ratified about its prohibition for the Islamic Republic of
Iran in [U.N.] resolution 2231.949
A.22 The alleged concerns over Iran’s missile activities are exaggerated and politically
motivated. In fact, the United States’ own missile activities and its approach towards
relevant existing treaties pose a great threat to the international peace and security.
On 1 February 2019 the U.S. Government suspended its obligations under the
Intermediate-Range Nuclear Forces (‘INF’) Treaty and announced its intention to
withdraw from the treaty in 180 days which was effected on 20 August 2019. A day
after the U.S. withdrawal, “The U.S. Secretary of Defense said that he was in favor of
placing ground-launched, intermediate-range missiles in Asia relatively soon.”950 The
United States’ activities are indeed in breach of Article VI of the NPT which requires
the United States “[…] to pursue negotiations in good faith on effective measures
949 “UNSC Resolution 2231 enforces no ban on Iran's missile program: FM Zarif”, Press TV, 11 December
2018 (IR, Annex 122).
950 See Arms Control Association, “The Intermediate-Range Nuclear Forces (INF) Treaty at a Glance”,
August 2019 (IR, Annex 127); See also, “Pompeo announces suspension of nuclear arms treaty with
Russia”, CNN, 1 February 2019 (IR, Annex 133).
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relating to cessation of the nuclear arms race at an early date and to nuclear
disarmament, and on a treaty on general and complete disarmament under strict and
effective international control.”951 The recently published document by Chairman of
the Joint Chiefs of Staff entitled “Nuclear Operations” which sets forth a U.S. nuclear
doctrine has openly incited reliance on nuclear weapons. The document reads in part
as follows: “Using nuclear weapons could create conditions for decisive results and
the restoration of strategic stability. Specifically, the use of a nuclear weapon will
fundamentally change the scope of a battle and create conditions that affect how
commanders will prevail in conflict.”952 It is quite telling that the most recent U.S.
nuclear doctrine with the proposed approach has been released shortly after the U.S.
withdrawal from the INF Treaty. Thus, given the United States’ violation of its
international obligations and Security Council Resolution 2231, it is difficult to credit
the United States’ allegations over Iran’s defensive missile program as a threat to U.S.
regional and international security.
A.23 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 Iran’s dispute. 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 which has caused
tragic human loss and suffering since 1950s through a policy of terror, violence and
intimidation. This inter alia includes occupation of Iraq in 2003 which destabilised
that country and paved the way for emerging terrorist groups such as ISIS, to which
Iran has been fighting ever since.953
951 Treaty on the Non-Proliferation of Nuclear Weapons (‘NPT’), entered into force 5 March 1970,
available at www.un.org/disarmament/wmd/nuclear/npt/text.
952 See Joint Publication 3-72, “Nuclear Operations”, 11 June 2019, available at
fas.org/irp/doddir/dod/jp3_72.pdf. According to The Guardian, the “document was taken down from
the Pentagon online site after a week, and is now only available through a restricted access electronic
library. But before it was withdrawn it was downloaded by Steven Aftergood, who directs the project
on government secrecy for the Federation of American Scientists.” See, J. Borger, “Nuclear weapons:
experts alarmed by new Pentagon 'war-fighting' doctrine”, The Guardian, 19 June 2019 (IR,
Annex 125).
953 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).
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A.24 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 so-called ‘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;954 (e) the attack and
destruction of certain Iranian Naval units and several offshore oil installations in the
Persian Gulf;955 (f) the shooting down of an Iranian civil aircraft over the Persian Gulf,
killing all 300 passengers on board;956 (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 Iran957 and (h) horrific terror attack of top Iranian
commander Major General Qassem Soleimani by drone attack in Baghdad
International Airport, who had played a significant role in fighting against terrorism
in the region, and was on an official visit to Iraq.958
954 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., Congressional record, House of Representatives, H 860, 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);
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; 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).
955 See Oil Platforms (Islamic Republic of Iran v. United States of America), Judgment, I.C.J. Reports
2003, p. 161.
956 See Aerial Incident of 3 July 1988 (Islamic Republic of Iran v. United States of America), Iran’s
Application instituting proceedings before the International Court of Justice, 17 May 1989 and Iran’s
Memorial, 24 July 1990.
957 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).
958 See “Iran’s Qassem Soleimani killed in US air raid at Baghdad airport”, Al Jazeera, 3 January 2020
(IR, Annex 133); See also, the letter of Iran’s ambassador and permanent representative to the United
Nations to UN Secretary- General and President of the Security Council in “Envoy terms IRGC
commander's terror as ‘terrorist, criminal act’”, IRNA, 4 January 2020 (IR, Annex 134).
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PART III.
CONCLUSIONS
CHAPTER XII.
SUMMARY OF IRAN’S CASE AND SUBMISSIONS
SECTION 1.
SUMMARY OF IRAN’S CASE
12.1 As stated in Iran’s Memorial, this case arises from the implementation of a policy of
the United States that strips Iranian companies of respect for their rights, including
respect for their separate juridical status, violates the property rights of the State of
Iran and Iranian entities, and places numerous obstacles to commerce between Iran
and the United States, all in violation of the terms of the Treaty of Amity. One result
of this U.S. policy is that assets are being taken from Iranian companies to satisfy
judgments of the U.S. courts against the Islamic Republic of Iran in cases which
themselves offend basic principles of international law concerning due process.959
12.2 Pursuant to its policy, the United States has undertaken measures that have inflicted,
and continue to inflict, serious harm upon the Iranian economy and the Iranian
nationals and companies who make up and depend on that economy. Since Iran filed
its Application and Memorial, and addressed the preliminary objections made by the
United States, the harm caused to Iran and Iranian companies by the U.S. measures
has continued to escalate. Iran and Iranian companies face the prospect of having over
USD 50 billion of their assets seized in order to satisfy judgment debts already created
by the U.S. courts, with tens of billions of U.S. dollars in pending claims in courts in
the United States and in attempts to enforce U.S. court judgments abroad.960
959 Iran’s Memorial, p. 1, para. 1.1.
960 Attachments 1, 2, 3 and 4 to this Reply.
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12.3 Invoking incoherent and spurious allegations of terrorism against the State of Iran, the
U.S. Congress has amended U.S. law to construct a discriminatory scheme that targets
Iran and Iranian companies and deprives them of the possibility of properly defending
their legal rights before U.S. courts. This has been done for the specific purpose of
enabling plaintiffs to satisfy judgment debts in cases against the Iranian State by
seizing assets of juridically separate Iranian companies. Most prominently, the assets
of Iran’s Central Bank, Bank Markazi, have been the subject of the Peterson litigation,
with the outcome of the judicial proceedings and the seizure and disposition of
USD 1,895 billion pre-determined by the U.S. Congress directly intervening in a
pending case before the U.S. courts so as to ensure that Bank Markazi loses, in a
flagrant disregard of Bank Markazi’s entitlement to meaningful access to judicial
process in the United States.
12.4 The U.S. measures have violated multiple provisions of the Treaty of Amity and
undermined its object and purpose. Article III(1) provides for the U.S. obligation to
give legal effect within its territories to the juridical status of Iranian companies,
including the obligation to their legal separateness from the State of Iran. In its
legislation and judicial practice, the United States has disregarded the distinction
between the Iranian companies, as independent legal entities, and the State of Iran.
The abrogation of the rights of Iranian companies to recognition of their separate
juridical status also violates the unqualified obligation to afford a meaningful freedom
of access to courts to the end that impartial justice be done contained in Article III(2).
This provision has been also been breached by legislation establishing the liability of
Iranian companies for judgments rendered against the State of Iran in proceedings to
which those companies were not parties, and the enactment and implementation of
retroactive legislation enabling the seizure of such companies’ property including
through the stripping of legal rights which would otherwise be available under U.S.
law and predetermining the outcome of ongoing legal proceedings.
12.5 Three freestanding elements of Article IV(1) – fair and equitable treatment, the
prohibition on unreasonable or discriminatory measures that would impair legally
acquired rights, and effective means of enforcement for lawful contractual rights –
have been breached by U.S. legislative, executive and judicial acts. Similarly, Iran’s
entitlements to the most constant protection and security for its companies and
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nationals and freedom from expropriation of the property (including interests in
property) of its companies and nationals under Article IV(2) have been violated by
the United States. Iranian companies have been deprived of the use and enjoyment of
their property by, among other acts, Executive Order 13599, which ‘blocks’ or
‘freezes’ all property of the relevant Iranian companies located in the territory of the
United States.
12.6 Iran’s entitlement for its companies and nationals to be permitted to lease, acquire and
dispose of property is contained in Article V(1) of the Treaty of Amity. The intended
effect of U.S. legislative and executive measures as implemented by the U.S. courts
has been precisely to deprive Iranian companies of their right to dispose of their
property as they wish. Further, the general prohibition on restrictions on the making
of payments, remittances, and other transfers of funds to or from the territory of the
United States and/or Iran in Article VII(1) has also been violated by the United States.
12.7 Stepping back from the detail of U.S. legislative, executive and judicial action that
singles out Iran, the United States has created an environment that renders practically
impossible commerce between the territories of the two Parties, contrary to
Article X(1) of the Treaty of Amity. The treatment afforded to Iran, Bank Markazi
and other Iranian companies and their respective property, radically interferes with
freedom of commerce.
12.8 Although the United States has purported to withdraw from the Treaty of Amity in
order to limit its exposure to claims, Iran naturally maintains its case against the
United States. It is a case founded on already-acquired rights under the Treaty of
Amity, adjusted in the light of the Court’s Judgment on Preliminary Objections.
SECTION 2.
IRAN’S REQUEST FOR RELIEF
12.9 In paragraph 33 of its Application, Iran requested the following relief:
(a) That the Court has jurisdiction under the Treaty of Amity to entertain the
dispute and to rule upon the claims submitted by Iran;
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(b) That by its acts, including the acts referred to above and in particular its (a)
failure to recognize the separate juridical status (including the separate legal
personality) of all Iranian companies including Bank Markazi, and (b) unfair
and discriminatory treatment of such entities, and their property, which impairs
the legally acquired rights and interests of such entities including enforcement
of their contractual rights, and (c) failure to accord to such entities and their
property the most constant protection and security that is in no case less than
that required by international law, (d) expropriation of the property of such
entities, and (e) failure to accord to such entities freedom of access to the US
courts, including the abrogation of the immunities to which Iran and Iranian
State-owned companies, including Bank Markazi, and their property, are
entitled under customary international law and as required by the Treaty of
Amity, and (f) failure to respect the right of such entities to acquire and dispose
of property, and (g) application of restrictions to such entities on the making of
payments and other transfers of funds to or from the USA, and (h) interference
with the freedom of commerce, the USA has breached its obligations to Iran,
inter alia, under Articles III (1), III (2), IV (1), IV (2), V (1), VII (1) and X (1)
of the Treaty of Amity;
(c) That the USA shall ensure that no steps shall be taken based on the executive,
legislative and judicial acts (as referred to above) at issue in this case which are,
to the extent determined by the Court, inconsistent with the obligations of the
USA to Iran under the Treaty of Amity;
(d) That Iran and Iranian State-owned companies are entitled to immunity from
the jurisdiction of the US courts and in respect of enforcement proceedings in
the USA, and that such immunity must be respected by the USA (including US
courts), to the extent established as a matter of customary international law and
required by the Treaty of Amity;
(e) That the USA (including the US courts) is obliged to respect the juridical
status (including the separate legal personality), and to ensure freedom of access
to the US courts, of all Iranian companies, including State-owned companies
such as Bank Markazi, and that no steps based on the executive, legislative and
judicial acts (as referred to above), which involve or imply the recognition or
enforcement of such acts shall be taken against the assets or interests of Iran or
any Iranian entity or national;
(f) That the USA is under an obligation to make full reparations to Iran for the
violation of its international legal obligations in an amount to be determined by
the Court at a subsequent stage of the proceedings. Iran reserves the right to
introduce and present to the Court in due course a precise evaluation of the
reparations owed by the USA; and
(g) Any other remedy the Court may deem appropriate.
12.10 Iran recognises that the Court’s judgment of 13 February 2019 on Preliminary
Objections in this case, means that there must be some adjustment in the relief
requested.
- 270 -
12.11 The jurisdiction of the Court to entertain the dispute and to rule upon the claims
submitted by Iran has been established, and the Court has decided, in upholding the
second of the United States’ preliminary objections, that its jurisdiction does not
encompass claims that are predicated on the United States’ failure to accord customary
international law immunity from jurisdiction and/or enforcement to the Government
of Iran, Bank Markazi, or Iranian State-owned entities. Those elements are
accordingly removed from Iran’s request for relief.
12.12 The remaining claims, which all concern obligations imposed by the Treaty of Amity,
are maintained. It is axiomatic that, to the extent that the Court finds the United States
to have breached its obligations owed to Iran under the Treaty, certain legal
consequences follow automatically.961 In the words of the International Law
Commission,
“[t]he core legal consequences of an internationally wrongful act set out in Part
Two [of the ILC Articles on State Responsibility] are the obligations of the
responsible State to cease the wrongful conduct (article 30) and to make full
reparation for the injury caused by the internationally wrongful act (article
31).”962
Iran maintains its requests based on those two core obligations.
12.13 The U.S. measures and decisions of which Iran complains were adopted unlawfully,
and in breach of the United States’ obligations under the 1955 Treaty of Amity. That
wrong must cease: the United States must undo the unlawful measures. That
obligation is unaffected by any termination of the Treaty: the unlawful act is not
retrospectively cured by the termination of the Treaty.963
12.14 The injuries caused by the unlawful measures also remain unaffected by any
termination of the Treaty; and Iran has sustained very great material and moral injury
as a result of those measures, for which it is entitled to reparation. The United States
961 International Law Commission, Draft articles on Responsibility of States for Internationally Wrongful
Acts, with commentaries 2001, U.N. Doc. A/56/10, Article 28, and Commentary on ‘Part Two –
Content of the International Responsibility of a State’, paragraph 2.
962 Ibid.
963 International Law Commission, Draft articles on Responsibility of States for Internationally Wrongful
Acts, with commentaries 2001, U.N. Doc. A/56/10, Article 30 and Commentary thereon.
- 271 -
is obliged to make restitution, and to the extent that restitution is materially
impossible, to compensate Iran for the damage caused by the unlawful U.S. acts.964
12.15 There is, moreover, a great moral injury done to Iran that cannot be made good by
restitution or compensation. For that, Iran is entitled to satisfaction in accordance with
international law.965
12.16 As was stated in paragraph 33(f) of Iran’s Application, Iran has reserved the right to
introduce and present to the Court in due course a precise evaluation of the reparations
owed by the United States. This follows inevitably as a matter of practicality, as the
damage inflicted on Iran continues to mount. It is also a matter of efficiency in the
conduct of this litigation, as a detailed claim for reparation is better presented once
the full extent of the unlawful acts of the United States has been determined by the
Court.
12.17 Accordingly, Iran presents here its request for declarations by the Court that the
United States has acted in breach of its obligations under the Treaty of Amity, and for
an Order from the Court that the United States must forthwith put an end to the
situation brought about by its unlawful acts, and afford Iran satisfaction. Iran reserves
for a later stage in these proceedings the presentation of its claim for reparation.
964 Ibid., Articles 34, 35, 36 and 38 and the Commentary thereon.
965 Ibid., Article 37 and Commentary thereon.
- 272 -
SECTION 3.
SUBMISSIONS
12.18 On the basis of the foregoing, and reserving its right to supplement, amend or modify
the present request for relief in the course of the proceedings in this case, Iran
respectfully requests the Court to adjudge, order and declare:
a. That the United States has violated its obligations under the Treaty of Amity,
as follows:
i. That by its acts, including the acts referred to above and in particular its
failure to recognise the separate juridical status (including the separate
legal personality) of all Iranian companies including Bank Markazi, the
United States has breached its obligations to Iran, inter alia, under
Article III(1) of the Treaty of Amity;
ii. That by its acts, including the acts referred to above and in particular its
(a) unfair and inequitable treatment of such companies and their
property (including interests in property); and (b) unreasonable and
discriminatory treatment of such companies, and their property, which
impairs the legally acquired rights and interests; and (c) failure to assure
that the lawful contractual rights of such companies are afforded
effective means of enforcement, and (d) failure to accord to such
companies and their property the most constant protection and security
that is in no case less than that required by international law, and (e)
expropriation of the property of such companies, and its failure to accord
to such entities freedom of access to the U.S. courts to the end that
justice be done, as required by the 1955 Treaty of Amity, and (f) failure
to respect the right of such companies to acquire and dispose of property,
the United States has breached its obligations to Iran, inter alia, under
Articles III(2), IV(1), IV(2), and V(1) of the Treaty of Amity;
iii. That by its acts, including the acts referred to above and in particular its
(a) application of restrictions to such entities on the making of payments
- 273 -
and other transfers of funds to or from the United States, and (b)
interference with the freedom of commerce, the United States has
breached its obligations to Iran, inter alia, under Articles VII(1) and
X(1) of the Treaty of Amity;
b. That the aforementioned violations of international law entail the international
responsibility of the United States;
c. That the United States is consequently obliged to put an end to the situation
brought about by the aforementioned violations of international law, by (a)
ceasing those acts and (b) making full reparation for the injury caused by those
acts, in an amount to be determined in a later phase of these proceedings, and
(c) offering a formal apology to the Islamic Republic of Iran for those wrongful
acts and injuries;
d. That the United States shall, by enacting appropriate legislation, or by resorting
to other methods of its choosing, ensure that the measures adopted by its
Legislature and its Executive, and the decisions of its courts and those of other
authorities infringing the rights of Iran and of Iranian companies, cease to have
effect in so far as they were each adopted or taken in violation of the obligations
owed by the United States to Iran under the Treaty of Amity, and that no steps
are taken against the assets or interests of Iran or any Iranian entity or national
that involve or imply the recognition or enforcement of such acts;
e. That Iran present to the Court, by a date to be fixed by the Court, a precise
evaluation of the reparations due for injuries caused by the unlawful acts of the
United States in breach of the Treaty of Amity;
f. That the United States shall pay the costs incurred by Iran in the presentation
of this case and the defence of its legal rights under the Treaty of Amity, with
the details thereof to be presented by Iran to the Court, by a date to be fixed by
the Court;
g. Any other remedy the Court may deem appropriate.
- 274 -
- 275 -
CERTIFICATION
I, the undersigned, M. H. Zahedin Labbaf, Co-Agent of the Islamic Republic of Iran, hereby
certify that the copies of this Reply and the documents annexed in the Volumes of Annexes I
to IV are true copies and conform to the original documents and that the translations into
English are accurate translations.
- 276 -
- 277 -
LIST OF ATTACHMENTS AND ANNEXES
VOLUME I
ATTACHMENTS
Attachment 1 U.S. courts judgments against Iran & Iranian State entities as of
31 December 2019
p. 1
Attachment 2 Actions filed with U.S. courts to enforce judgments against
assets of I. R. Iran & Iranian State entities as of 31 December
2019
p. 7
Attachment 3
Actions filed in other jurisdictions for recognition &
enforcement of U.S. judgments against assets of Iran & Iranian
State entities as of 31 December 2019
p. 15
Attachment 4 Claims pending before U.S. courts against Iran & Iranian State
entities as of 31 December 2019
p. 19
ANNEXES
PART I – TREATIES AND AGREEMENTS
Annex 1 Aide Mémoire of the U.S. Embassy in Tehran, dated
20 November 1954
p. 23
PART II – DIPLOMATIC EXCHANGES
Annex 2 Diplomatic Note from the U.S. Department of State to the
Ministry of Foreign Affairs of I.R. Iran, 3 October 2018
p. 31
Annex 3 Diplomatic Note from the Ministry of Foreign Affairs of I.R.
Iran to the U.S. Department of State, 13 November 2018
p. 35
PART III – U.S. LEGISLATIVE ACTS
Annex 4 House Report, Rep. No. 1487, 94th Cong., 2d Session 7 (1976),
reprinted in 1976 U.S. Code Cong. & Ad. News
p. 41
- 278 -
Annex 5 U.S. Congressional Record – Senate, Vol. 151, part 9, 16 June
2005
p. 71
Annex 6 Oversight of the Trump Administration’s Iran Policy, Hearing
before the Subcommittee on the Middle East, North Africa, and
International Terrorism of the Committee on Foreign Affairs,
House of Representatives, One Hundred and Sixteenth
Congress, First Session, 19 June 2019, Serial No. 116-48
p. 79
Annex 7 22 U.S.C. 8772(a)(1) as amended by Section 1226 of NDAA
2020
p. 107
PART IV – U.S. EXECUTIVE ACTS
Annex 8 Munitions Control Act of 1947, Message from The President of
the United States transmitting a proposal for legislation to
control the exportation and importation of arms, ammunition,
and implements of war, and related items, and for other
purposes, 15 April 1947, U.S. Department of State Bulletin, Vol.
XVI, No. 408, 27 April 1947 (excerpts)
p. 113
Annex 9 U.S. Department of Treasury, Fact Sheet: Designation of
Iranian Entities and Individuals for Proliferation Activities and
Support for Terrorism, 25 October 2007
p. 123
Annex 10 OFAC, Final Rule amending the Iranian Transactions
Regulations, 4 November 2008, U.S. Federal Register Vol. 73,
No. 218 of 10 November 2008
p. 131
Annex 11 VETO—S.J. RES. 7 (PM 10), Message from the President of
The United States, 29 April 2019
p. 135
Annex 12 VETO—S.J. RES. 38 (PM 25) Message from the President of
The United States, 24 July 2019
p. 141
Annex 13 VETO—S.J. RES. 37 (PM 24) Message from the President of
The United States, 24 July 2019
p. 147
Annex 14 VETO—S.J. RES. 36 (PM 23) Message from the President of
The United States, 24 July 2019
p. 153
PART V – U.S. COURT DECISIONS
Annex 15 Claim of Charles Adrian Van Bokkelen v. The Government of
Hayti, Brief of Argument in Support of the Claim, 8 August
1888
p. 159
- 279 -
Annex 16 Rafii v. The Islamic Republic of Iran and The Iran Ministry of
Information and Security, U.S. District Court for the District of
Columbia, Findings of Facts and Conclusions of Law,
2 December 2002, Case No. 01-850 (excerpts)
p. 197
Annex 17 Smith, et al. v. The Islamic Republic of Afghanistan, The
Taliban, Al Qaida/Islamic Army, Sheikh Usamah Bin-Muhamed
Bin-Laden a/k/a/ Osama Bin Laden, Saddam Hussein, The
Republic of Iraq, U.S. District Court for the Southern District of
New York, 7 May 2003 as amended 16 May 2003, 262 F. Supp.
2d. 217 (S.D.N.Y. 2003)
p. 215
Annex 18 Peterson, et al. v. Islamic Republic of Iran and Iranian Ministry
of Information and Security, U.S. District Court for the District
of Columbia, Memorandum Opinion (Liability), 30 May 2003,
Case No. 1:01-cv-2094
p. 233
Annex 19 Estate of Steven Bland, et al. v. The Islamic Republic of Iran, et
al., U.S. District Court for the District of Columbia, Order
(Liability – taking judicial notice of the Peterson judgment of 30
May 2003), 6 December 2006, Case No. 1:05-cv-02124
p. 265
Annex 20 Ashton, et al. v. al Qaeda Islamic Army, et al., U.S. District
Court for the Southern District of New York, Sixth Amended
Complaint, 30 September 2005, Case No. 02-cv-6977 (excerpts)
p. 269
Annex 21 Peterson, et al. v. Islamic Republic of Iran and Iranian Ministry
of Information and Security, U.S. District Court for the District
of Columbia, Memorandum Opinion (Damages), 7 September
2007, Case No. 1:01-cv-2094 (excerpts)
p. 279
Annex 22 Levin, et al. v. The Islamic Republic of Iran et al., U.S. District
Court for the District of Columbia, Clerk’s Judgment,
6 February 2008, Case No. 05-2494
p. 301
Annex 23 Rubin, et al. v. The Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, Memorandum Order, 3 June
2008, Case No. 1:01-cv-01655
p. 305
Annex 24 Beer, et al. v. The Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, Findings of Fact and
Conclusions of Law (Liability and Damages), 26 August 2008,
Case No. 06-473
p. 313
Annex 25 Kirschenbaum, et al. v. Islamic Republic of Iran, et al., U.S.
District Court for the District of Columbia, Findings of Fact and
Conclusions of Law, 26 August 2008, Case No. 03-1708
(excerpts)
p. 333
Annex 26 Weinstein, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court, Eastern District of New York, Memorandum and
Order, 5 June 2009, Case 2:02-mc-00237-LDW
p. 347
- 280 -
Annex 27 Levin, et al. v. Bank of New York, et al., U.S. District Court,
Southern District of New York, Complaint, 22 June 2009, Case
No. 09 Civ. 5900 (excerpts)
p. 363
Annex 28 Estate of Anthony K. Brown, et al. v. Islamic Republic of Iran
and Iranian Ministry of Information and Security, U.S. District
Court for the District of Columbia, Order Granting Motion to
Enter Default Judgment and to Take Judicial Notice (of the
findings of facts and conclusions of law in the Peterson
judgment of 30 May 2003 as fully applicable to the matter),
1 February 2010, Case No. 08-cv-531
p. 387
Annex 29 Davis, et al. v. Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, (Liability – taking judicial
notice of the Peterson judgment of 30 May 2003), 1 February
2010, Case No. 07-cv-1302
p. 391
Annex 30 Valore, et al. v. The Islamic Republic of Iran, et al., Arnold
(Estate of James Silvia), et al. v. The Islamic Republic of Iran,
et al., Spencer, et al. v. The Islamic Republic of Iran et al., and
Bonk, et al. v. The Islamic Republic of Iran, et al. (consolidated),
U.S. District Court for the District of Columbia, Memorandum
Opinion (Liability and Damages), 31 March 2010, 700 F. Supp.
2d 52 5 (D.D.C. 2010), Cases No. 03-cv-1959, 06-cv-516, 06-
cv-750, and 08-cv-1273 (excerpts)
p. 395
Annex 31 Murphy, et al. v. Islamic Republic of Iran, et al., U.S. District
Court for the District of Columbia, Memorandum Opinion
(Liability and Damages), 24 September 2010, Case No. 06-cv-
596 (excerpts)
p. 405
VOLUME II
Annex 32 Kirschenbaum, et al. v. Islamic Republic of Iran, U.S. District
Court for the District of Columbia, Opinion and Order
(Liability), 15 December 2010, Case No. 08-cv-1814
p. 1
Annex 33 Kirschenbaum, et al. v. Islamic Republic of Iran, U.S. District
Court for the District of Columbia, Memorandum Opinion
(Punitive Damages), 19 May 2011, Case No. 08-cv-1814
p. 21
Annex 34 Khaliq, et al. v. Republic of Sudan, et al; Owens, et al. v.
Republic of Sudan, et al.; and Mwila, et al. v. Republic of Sudan,
et al. (consolidated), U.S. District Court for the District of
Columbia, Memorandum Opinion (Liability), 30 November
2011, Cases Nos. 10-0356, 01-2244 and 08-1377 (excerpts)
p. 27
- 281 -
Annex 35 Peterson, et al. v. Islamic Republic of Iran, et al., U.S. District
Court for the Southern District of New York, Defendant Bank
Markazi’s Memorandum of Law in Support of its Motion to
Dismiss, 15 March 2012, Case No. 10 civ 4518 (BSJ) (excerpts)
p. 51
Annex 36 Davis, et al. v. Islamic Republic of Iran and Iranian Ministry of
Information and Security, U.S. District Court for the District of
Columbia, Memorandum Opinion (Damages), 30 March 2012,
Case No. 07-cv-1302
p. 67
Annex 37 Estate of Anthony K. Brown, et al. v. Islamic Republic of Iran
and Iranian Ministry of Information and Security, U.S. District
Court for the District of Columbia, Memorandum Opinion
(Damages), 3 July 2012, Case No. 08-cv-531
p. 83
Annex 38 In Re: Terrorist Attacks on September 11, 2001 (relating to
Havlish v. Bin Laden), U.S. District Court, Southern District of
New York, Report and Recommendation to the Honorable
George B. Daniels, 30 July 2012, Case 1:03- cv-09848-GBDFM
p. 97
Annex 39 In Re Terrorist Attacks of September 11, 2001 (relating to
Havlish v. Bin Laden), U.S. District Court for the Southern
District of New York, Memorandum Decision and Order of 3
October 2012, Case 1:03-cv-09848-GBD-SN
p. 119
Annex 40 Levin, et al. v. Bank of New York, et al., U.S. District Court,
Southern District of New York, Amended Answer of JP Morgan
Chase Parties to Amended Counterclaim of Heiser Judgment
Creditors, with Counterclaims, and Amended and Supplemental
Third-Party Complaint against Judgment Creditors of Iran,
Plaintiffs Suing Iran and Account and Wire Transfer Parties
(Phase 3), 10 October 2012, No. 09 Civ. 5900 and Exhibit A
(excerpts)
p. 129
Annex 41 In Re Terrorist Attacks of September 11, 2001 (relating to
Havlish v. Bin Laden), U.S. District Court, Southern District of
New York, Order and Judgment of 12 October 2012, Case 1:03-
cv-09848-GBD-SN
p. 159
Annex 42 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court for the Northern District of California, Order
Denying Motion to Dismiss, 28 February 2013, Case 3:11-cv-
05807-CRB
p. 169
Annex 43 Peterson, et al. v. Islamic Republic of Iran, Bank Markazi a/k/a
Central Bank of Iran, Banca UBAE SpA, Citibank, N.A., and
Clearstream Banking, S.A., U.S. District Court for the Southern
District of New York, Order Entering Partial Final Judgment
Pursuant to Fed. R. Civ. P. 54 (b), Directing Turnover of the
Blocked Assets, Dismissal of Citibank with Prejudice and
Discharging Citibank from Liability, 9 July 2013, No. 10-cv-
4518-KBF, (excerpts)
p. 191
- 282 -
Annex 44 Peterson, et al. v. Islamic Republic of Iran, Bank Markazi a/k/a
Central Bank of Iran, Banca UBAE SpA, Citibank, N.A., and
Clearstream Banking, S.A., U.S. District Court for the Southern
District of New York, Order Approving Qualified Settlement
Fund, 9 July 2013, No. 10-cv-4518-KBF
p. 209
Annex 45 The Estate of Michael Heiser, et al. v. Bank of Baroda, New York
Branch, U.S. District Court, Southern District of New York,
Judgment and Order Allocating Remaining Blocked Assets, 19
August 2013, No. 11 Civ. 1602
p. 215
Annex 46 Khaliq, et al. v. Republic of Sudan, et al., U.S. District Court for
the District of Columbia, Memorandum Opinion (Damages), 28
March 2014, Case No. 10-0356
p. 219
Annex 47 Owens, et al. v. Republic of Sudan, et al., U.S. District Court for
the District of Columbia, Memorandum Opinion (Damages), 28
March 2014, Case No. 01-2244
p. 231
Annex 48 Mwila, et al. v. Republic of Sudan, et al., U.S. District Court for
the District of Columbia, Memorandum Opinion (Damages), 28
March 2014, Case No. 08-1377
p. 251
Annex 49 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. District Court for
the Southern District of New York, Amended Complaint,
25 April 2014, No. 13-cv-9195-KBF (excerpts)
p. 269
Annex 50 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. District Court for
the Southern District of New York, Opinion and Order,
20 February 2015, No. 13-cv-9195-KBF
p. 289
Annex 51 Hoglan, et al. v. Iran, et al., U.S. District Court for the Southern
District of New York, Plaintiffs Proposed Findings of Fact and
Conclusions of Law in Support of Motion for Entry of Default
Judgment, 31 August 2015, and Order of Judgment, 31 August
2015, Case No. 1:11 Civ. 7550 (GBD) (excerpts)
p. 315
Annex 52 Ashton, et al. v. al Qaeda Islamic Army, et al., U.S. District
Court for the Southern District of New York, Amended Order
of Judgment, 8 March 2016, Case No. 02-cv-6977(GBD)
p. 345
Annex 53 Hake, et al. v. Bank Markazi, et al., U.S. District Court for the
District of Columbia, Complaint, 17 January 2017, Case
No. 1:17-cv 00114 (excerpts)
p. 359
- 283 -
Annex 54 Thomas Burnett Sr., et al. v. The Islamic Republic of Iran, et al.,
U.S. District Court for the Southern District of New York,
Plaintiffs’ Motion for Judgment by Default against the Islamic
Republic of Iran, The Islamic Revolutionary Guard, and the
Central Bank of the Islamic Republic of Iran (the “Sovereign
Defendants”) and Order of Judgment dated 31 January 2017
granting Plaintiffs Motion
p. 377
Annex 55 Brooks, et al. v. Bank Markazi, et al., U.S. District Court for the
District of Columbia, Complaint, 20 April 2017, Case No. 1:17-
cv-00737 (excerpts)
p. 381
Annex 56 Holladay, et al. v. Ira,n et al., U.S. District Court for the District
of Columbia, Amended Complaint, 14 September 2017, Case
No. 1:17-cv-00915 (excerpts)
p. 395
VOLUME III
Annex 57 Field, et al. v. Bank Markazi, et al., U.S. District Court for the
District of Columbia,13 October 2017, Case No. 1:17-cv-02126
(excerpts)
p. 1
Annex 58 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. Court of Appeals for
the Second Circuit, Opinion and Order, 21 November 2017,
Case 15-0690 (excerpts)
p. 15
Annex 59 Rubin, et al. v. Islamic Republic of Iran, et al., U.S. Supreme
Court, 21 February 2018, Case No. 16-534
p. 55
Annex 60 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. Court of Appeals for
the Second Circuit, Bank Markazi’s Motion to Stay the
Mandate, 26 February 2018, Case 15-0690-cv
p. 73
Annex 61 Hoglan, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court for the Southern District of New York,
Restraining Notice to Clearstream Banking S.A., 26 March
2018, Case Nos. 1:11-cv-07550 and 1:03-md-01570
p. 83
Annex 62 Hartwick, et al. v. Iran, et al., U.S. District Court for the District
of Columbia, Complaint, 7 July 2018, Case No. 1:18-cv-01612
(excerpts)
p. 109
Annex 63 Estate of Brook Fishbeck, et al. v. Iran, et al., U.S. District Court
for the District of Columbia, Complaint, 27 September 2018,
Case No. 1:18-cv-02248 (excerpts)
p. 125
- 284 -
Annex 64 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court for the Northern District of California, Order
Granting Motion for Summary Judgment, Granting Motion for
Stay, 19 December 2018, Case 3:11-cv-05807-CRB
p. 143
Annex 65 In Re: Terrorist Attacks on September 11, 2001, Ray, et al. v.
Iran, et al., U.S. District Court for the Southern District of New
York, Complaint (made pursuant to, inter alia, the FSIA, 28
U.S.C. §§ 1605A and 1605B), 9 January 2019, Case No. 1:19-
cv-00012 (excerpts)
p. 157
Annex 66 Wise, et al. v. Bank Markazi, et al., U.S. District Court for the
District of Columbia, Complaint, 9 April 2019, Case No. 1:19-
cv-00995 (excerpts)
p. 167
Annex 67 Henkin, et al. v. Iran, et al., U.S. District Court for the District
of Columbia, Complaint, 24 April 2019, Case No. 1:19-cv-
01184 (excerpts)
p. 179
Annex 68 Deborah D. Peterson, v. Islamic Republic of Iran, Application
of Fund Trustee Pursuant to Section 5.6 of the Fund Agreement
for Approval of Settlement with Citibank, N.A. on Claim to
Recover Costs Assessed Against the Segregated Account and
for Approval of Trustee’s Counsel’s Application for Attorney’s
Fees, 17 May 2019, Case No 1:10-cv-04518
p. 193
Annex 69 Christie, et al. v. Islamic Republic of Iran, the Islamic
Revolutionary Guard Corps, and Iranian Ministry of
Intelligence & Security, U.S. District Court for the District of
Columbia, Second Amended Complaint, 28 May 2019, Case
No. 1:19-cv-01289 (excerpts)
p. 207
Annex 70 Arias, et al. v. The Islamic Republic of Iran, U.S. District Court
for the Southern District of New York, Order of Judgment as to
Liability, 9 September 2019, Case No. 1:19-cv-00041
p. 213
Annex 71 Baxter, et al. v. Islamic Republic of Iran and Iranian Ministry of
Information and Security, U.S. District Court for the District of
Columbia, Memorandum Opinion (Liability), 27 September
2019, Case No. 11-2133 (excerpts)
p. 219
Annex 72 Bennett, et al. v. The Islamic Republic of Iran et al., U.S. Court
of Appeals for the Ninth Circuit, Memorandum, 30 September
2019, No. 3:11-cv-05807-CRB
p. 239
Annex 73 Blank, et al. v. The Islamic Republic of Iran, U.S. District Court
for the District of Columbia, Complaint, 6 December 2019, Case
No. 1:19-cv-036545
p. 245
Annex 74 Clearstream Banking, Banca UBAE, Bank Markazi v. Peterson,
et al., U.S. Supreme Court, Summary Disposition Granting
Petition for Certiorari, 13 January 2020, Cases
17-1529, 17-1530, 17-1534
p. 259
- 285 -
Annex 75 Estate of Brown, et al. v. Islamic Republic of Iran and Iranian
Ministry of Information and Security, U.S District Court for the
Southern District of New York, Restraining Notice to
Garnishee, 30 January 2020, Case No. 1:13-MC-113 (excerpts)
p. 287
Annex 76 Valore, et al. v. The Islamic Republic of Iran and Iranian
Ministry of Information and Security, U.S. District Court for the
Southern District of New York, Restraining Notice to
Garnishee, 30 January 2020, Case No. 1:11-MC-217
p. 293
Annex 77 Davis, et al. v. Islamic Republic of Iran and Iranian Ministry of
Information and Security, U.S. District Court for the Southern
District of New York, Restraining Notice to Garnishee,
30 January 2020, Case No. 1:13-MC-00046 (excerpts)
p. 299
Annex 78 Estate of Stephen B. Bland, et al. v. Islamic Republic of Iranian
Ministry of Information and Security, U.S. District Court for the
Southern District of New York, Restraining Notice to
Garnishee, 30 January 2020, Case No. 1:12-MC-373 (excerpts)
p. 305
Annex 79 Aceto, et al. v. Islamic Republic of Iran, U.S. District Court for
the District of Columbia, Memorandum Opinion, 7 February
2020, Case No. 1:19-cv-00464 (excerpts)
p. 311
Annex 80 Ryan, et al. v. Islamic Republic of Iran, et al., U.S. District Court
for the Southern District of New York, Order of Partial Final
Default Judgments, 6 March 2020, Case No. 1:20-cv-00266
p. 333
Annex 81 Leibovitch v. Islamic Republic Iran, 9 March 2020, 297 F. Supp.
3d 816 (N.D. Ill. 2018)
p. 339
Annex 82 Levinson, et al. v. Islamic Republic of Iran, U.S. District Court
for the District of Columbia, Memorandum Opinion, 9 March
2020, No. 1:17-cv-00511 (excerpts)
p. 363
Annex 83 Estate of Michael Heiser, et al. v. Clearstream Banking, S.A.,
U.S. District Court for the Southern District of New York,
Granted Motion for Stay of Case, 10 March 2020, No. 19-cv-
11114
p. 369
Annex 84 In re Terrorist Attacks On September 11, 2001, relating to
Hoglan, et al. v. Iran, et al., U.S. District Court for the Southern
District of New York, Order Under 28 U.S.C. § 1610(c)
authorizing Enforcement of Judgment, 7 April 2020, Case No.
03 MDL 1570
p. 373
Annex 85 Bennett, et al. v. The Islamic Republic of Iran, et al., U.S.
District Court for the Northern District of California, Order
Granting Motion to Lift Stay and for Withdrawal, 24 April 2020,
No. 3:11-cv-05807-CRB
p. 379
- 286 -
Annex 86 Maalouf, et al. v. Islamic Republic of Iran and Iranian Ministry
of Information and Security, U.S. Court of Appeals for the
District of Columbia Circuit, Opinion, 10 May 2019, Cases
No. 18-7052 and 18-7053
p. 385
Annex 87 Opati, et al. v. Republic of Sudan, et al., U.S. Supreme Court,
18 May 2020, No. 17-1268
p. 405
Annex 88 Peterson, et al. v. Iran, Bank Markazi, Banca UBAE,
Clearstream, JP Morgan Chase Bank, U.S. Court of Appeals for
the Second Circuit, Opinion, 22 June 2020, Case 15-0690
p. 421
VOLUME IV
PART VI – DOCUMENTS REGARDING IRANIAN AND OTHER RELEVANT COMPANIES
6.1 Information about relevant Iranian companies and related entities
Annex 89 Page “History of Bank Melli” on Bank Melli’s website p. 1
Annex 90 Page “About Us” on Bank Melli PLC’s website p. 5
Annex 91 Homepage of Bank Sepah’s website p. 11
Annex 92 Page “History” on Bank Saderat’s website p. 15
Annex 93 Page “Bank Saderat Iran” on the Tehran Stock Exchange’s
website
p. 19
Annex 94 Page “EDBI at a glance” on EDBI’s website p. 23
Annex 95 Page “About us” of TIC’s website p. 27
Annex 96 Page “National Petrochemical Company – The History and
Structure” on NPC’s website
p. 31
Annex 97 Page “About Us” on Behran Oil website p. 37
Annex 98 Page “Behran Oil Company” on the Tehran Stock Exchange
website
p. 41
Annex 99 Page “Iranian Marine and Industrial Co.” on the Tehran Stock
Exchange website
p. 45
6.2 Official Documents
Annex 100 Memorandum and Articles of Association of Bank Sepah
International PLC
p. 49
- 287 -
Annex 101 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1380 (21 March
2001 - 20 March 2002)
p. 77
Annex 102 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1381 (21 March
2002 - 20 March 2003)
p. 91
Annex 103 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1382 (21 March
2003 - 19 March 2004)
p. 105
Annex 104 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1383 (20 March
2004 - 20 March 2005)
p. 119
Annex 105 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1384 (21 March
2005 - 20 March 2006)
p. 133
Annex 106 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1385 (21 March
2006 - 20 March 2007)
p. 147
Annex 107 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1386 (21 March
2007 - 19 March 2008)
p. 161
Annex 108 Balance Sheet and Profit and Loss Account of Central Bank of
the Islamic Republic of Iran as at the end of 1387 (20 March
2008 - 20 March 2009)
p. 175
Annex 109 Clearstream Banking S.A., General Terms and Conditions, 2008 p. 191
Annex 110 Global Custodial Services Agreement; The Endowment PMF
Master Fund, L.P.
p. 205
PART VII – OTHER DOCUMENTS
7.1 Official and academic sources
Annex 111 Ministry of Economy of Belgium website, “Banque-Carrefour
des entreprises et Registre du Commerce – Public Search”
p. 227
Annex 112 J. B. Moore, History and digest of the international arbitrations
to which the United States has been a party, Washington, Gov't
Print Off., Vol. II (excerpts)
p. 231
Annex 113 International Chamber of Shipping, “25 Largest Containership
Operators”, 2017
p. 281
- 288 -
Annex 114 OECD, “Chapter 2. Understanding investor demand for
government securities”, OECD Sovereign Borrowing Outlook
2019, Ed. OECD, 23 April 2019
p. 287
Annex 115 UNICEF, “Humanitarian Action for Children in Yemen”, 2020 p. 315
7.2 Press and Media
Annex 116 J. Triedman, “Can American Lawyers Make Iran Pay for 1983
Bombing?”, The American Lawyer, 30 September 2013
p. 321
Annex 117 A. Lakshmi, “India to revive Irano Hind Shipping Company”,
www.marinelink.com, 4 September 2016
p. 327
Annex 118 N. Gouette & J. Crawford, “U.S. blasts international court on
Iran ruling, pulls out of 1955 treaty”, CNN, 3 October 2018
p. 331
Annex 119 “Saudi Arabia is America's No. 1 weapons customer”, CBS
News, 12 October 2018
p. 337
Annex 120 “White House Digs Itself in Deeper on Khashoggi”, Foreign
Policy, 4 December 2018
p. 341
Annex 121 L. Hartig, “Full Accounting Needed of US-UAE
Counterterrorism Partnership in Yemen”, justsecurity.org,
7 December 2018
p. 347
Annex 122 “UNSC Resolution 2231 enforces no ban on Iran's missile
program: FM Zarif”, Press TV, 11 December 2018
p. 355
Annex 123 “Pompeo announces suspension of nuclear arms treaty with
Russia”, CNN, 1 February 2019
p. 359
Annex 124 Amnesty International, “Syria: Unprecedented investigation
reveals US-led Coalition killed more than 1,600 civilians in
Raqqa ‘death trap’”, 25 April 2019
p. 365
Annex 125 J. Borger, “Nuclear weapons: experts alarmed by new Pentagon
'war-fighting' doctrine”, The Guardian, 19 June 2019
p. 371
Annex 126 “Over 7,500 children killed or wounded in Yemen since 2013,
U.N. report says”, CBS News, 29 June 2019
p. 375
Annex 127 Arms Control Association, “The Intermediate-Range Nuclear
Forces (INF) Treaty at a Glance”, August 2019
p. 379
Annex 128 “US drone strike intended for Isis hideout kills 30 pine nut
workers in Afghanistan”, The Guardian, 19 September 2019
p. 389
Annex 129 “Iran hawks cement ties to former US-designated terrorist
group”, Al Monitor, 24 September 2019
p. 393
Annex 130 Amnesty International, “Yemen: US-made bomb used in deadly
air strike on civilians”, 26 September 2019
p. 399
- 289 -
Annex 131 M. Bazzi, “America is likely complicit in war crimes in Yemen.
It's time to hold the US to account”, The Guardian, 3 October
2019
p. 405
Annex 132 “Zarif terms presence of US in region a ‘failed experience’”,
IRNA, 12 October 2019
p. 411
Annex 133 “Iran's Qassem Soleimani killed in US air raid at Baghdad
airport”, Al Jazeera, 3 January 2020
p. 417
Annex 134 “Envoy terms IRGC commander's terror as ‘terrorist, criminal
act’”, IRNA, 4 January 2020
p. 423