On March 30, Washington and Tehran both declared victory after the International Court of Justice (ICJ) ruled on disputed Iranian assets frozen by the United States. The top U.N. court rejected Iran’s bid to unfreeze some $2 billion in central bank funds held in a Citibank account in New York. But it also ordered the United States to compensate Iranian companies for illegally blocking other assets.
The disagreement dated back to 2016, when the U.S. Supreme Court upheld a judgement that held Iran financially responsible for terrorist attacks, including the 1983 Beirut Marine Corps barracks bombing. Hezbollah, a Shiite political movement and militia backed by Tehran, was responsible for the deaths of 241 American troops.
Suing Iran for financial damages was one of few mechanisms that the United States could use to seek recompense for attacks. Iran had refused to comply with past judgments, so lawyers searched for Iranian assets frozen in the United States. U.S. courts planned to use the funds held by Citibank to compensate victims of Iran-sponsored terrorist attacks. Iran filed a lawsuit against the United States in the ICJ later in 2016.
In 2023, the ICJ said that it could not order Washington to release the funds because it did not have jurisdiction over central bank assets. The ruling was “a significant blow to Iran’s attempt to avoid its responsibility” for terrorist attacks, Deputy State Department spokesman Vedant Patel said in a statement.
But the U.N. court also ruled that Washington had illegally allowed U.S. courts to block assets of some Iranian companies. The moves violated the 1955 Treaty of Amity, which was signed more than two decades before the Islamic Revolution and the subsequent souring of relations between the two countries. The United States unilaterally announced the termination of the treaty in 2018.
Yet the ICJ ruled that the treaty was still valid and held Washington responsible for compensating Iranian companies. The court will determine the exact amount at a later date. The ICJ decision was “proof of the Islamic Republic of Iran’s righteousness and the violations by the U.S. government,” Iran’s foreign ministry said in a statement. The following is the summary of the ruling with reactions from the United States and Iran.
International Court of Justice
Objection to the Court’s jurisdiction ratione materiae: question whether Bank Markazi is a “company” within the meaning of the Treaty of Amity
“The first objection concerns the question whether Bank Markazi is a “company” within the meaning of the Treaty of Amity. Indeed, the rights and protections guaranteed by Articles III, IV and V of that instrument are for the benefit of “nationals” (a term used in the Treaty to describe natural persons) and “companies”.
“The Court notes in this regard that the only activities on which Iran relies to found the characterization of Bank Markazi as a “company” consist in the purchase, between 2002 and 2007, of 22 security entitlements in dematerialized bonds issued on the United States financial market and in the management of proceeds deriving from those entitlements. In the opinion of the Court, these operations are not sufficient to establish that Bank Markazi was engaged, at the relevant time, in activities of a commercial character. Indeed, the operations in question were carried out within the framework and for the purposes of Bank Markazi’s principal activity, from which they are inseparable. They are merely a way of exercising its sovereign function as a central bank, and not commercial activities performed by Bank Markazi “alongside [its] sovereign functions”.
“The Court concludes from this that Bank Markazi cannot be characterized as a “company” within the meaning of the Treaty of Amity. Consequently, the objection to jurisdiction raised by the United States with regard to Iran’s claims relating to alleged violations of Articles III, IV and V of the Treaty of Amity predicated on treatment accorded to Bank Markazi must be upheld, and the Court finds that it has no jurisdiction to consider those claims.”
Objection to admissibility based on the failure to exhaust local remedies
“The Court then turns to the question whether, as the United States argues, Iran’s claims must be rejected on the ground that the Applicant failed to exhaust local remedies before seising the Court.
“The Court recalls that, under customary international law, when a State brings an international claim on behalf of one or more of its nationals on the basis of diplomatic protection, local remedies must be exhausted before the claim may be examined. It adds that this requirement is deemed to be satisfied when there are no available local remedies providing the injured persons with a reasonable possibility of obtaining redress.
“The Court observes that, in this case, each time an Iranian entity sought to have a federal legislative provision set aside by a court on the ground that it ran counter to the rights enjoyed by that entity under the Treaty of Amity, the court, after finding that the provision at issue was not contrary to the Treaty, referred to the jurisprudence whereby courts are, in any event, obliged to apply the federal statute when it was enacted after the treaty (which is the case for the provisions at issue in these proceedings). Given the combination of the legislative character of the contested measures and the primacy accorded to a more recent federal statute over the treaty in the jurisprudence of the United States, it appears to the Court that, in the circumstances of the present case, the companies in question had no reasonable possibility of successfully asserting their rights in United States court proceedings.
“The Court thus concludes that the objection to admissibility based on the failure to exhaust local remedies cannot be upheld.”
Cessation of internationally wrongful acts
The Court first considers Iran’s claim relating to the cessation of internationally wrongful acts. It recalls in this regard that the State responsible for the internationally wrongful act is under an obligation to cease that act, if it is continuing. Such an obligation exists only if the violated obligation is still in force. In the present case, this condition is not met, since the Treaty of Amity is no longer in force. The United States denounced the Treaty by giving notification of its denunciation to Iran on 3 October 2018, so that the Treaty ceased to have effect a year later in accordance with the provisions of Article XXIII, paragraph 3, thereof. It follows that Iran’s request relating to the cessation of internationally wrongful acts must be rejected.
Compensation for the injury suffered
The Court then turns to the question of compensation for the injury suffered. It notes that Iran is entitled to compensation for the injury caused by violations by the United States that have been ascertained by the Court. It observes that the relevant injury and the amount of compensation may be assessed by the Court only in a subsequent phase of the proceedings. It therefore decides that, if the Parties are unable to agree on the amount of compensation due to Iran within 24 months of the date of the present Judgment, the Court will, at the request of either Party, determine the amount due on the basis of further written pleadings limited to this issue.
“Finally, the Court considers the question of satisfaction. It recalls in this regard that the offering of a formal apology by the State having committed the wrongful act may, in appropriate circumstances, constitute a form of satisfaction that the injured State is entitled to claim further to a finding of wrongfulness. In the circumstances of this case, the Court considers that a finding, in the present Judgment, of wrongful acts committed by the United States is sufficient satisfaction for the Applicant.”
U.S. Department of State
March 30, 2023: “Today the International Court of Justice issued a judgment in the Certain Iranian Assets case rejecting the vast majority of Iran’s case under the now-terminated Treaty of Amity. This is a major victory for the United States and victims of Iran’s State-sponsored terrorism.
“Iran sought to use the Treaty to challenge payments to U.S. victims of Iran-sponsored terrorism who obtained U.S. court judgments against Iran. The decision today is a significant blow to Iran’s attempt to avoid its responsibility, in particular to the families of U.S. peacekeepers who were killed in the 1983 bombing of the Marine Corps barracks in Beirut.
“The United States recognizes the Court’s important role and contributions to the rule of law. And the United States commends the Court’s ruling related to Bank Markazi. We are disappointed that the Court has concluded that the turnover of assets of other Iranian agencies and instrumentalities to U.S. victims of Iran’s sponsorship of terrorism was inconsistent with the Treaty. U.S. courts directed the turnover of assets to victims pursuant to U.S. laws that have helped those and other victims of State-sponsored terrorism receive compensation for the grave losses that they and their families have suffered. As the United States made clear in its arguments to the Court, the Treaty was never intended to shield Iran from having to compensate U.S. victims of its sponsorship of terrorism.
“The Court’s decision was clear that it will have no impact on the U.S. laws that allow U.S. victims of terrorism to seek compensation from Iran or any other State sponsor of terrorism in U.S. courts going forward, in light of the Treaty’s termination.
“The United States continues to strongly support victims of terrorism, and we stand with those who seek to hold Iran and all State sponsors of terrorism accountable.”
Iranian Foreign Ministry
March 30, 2023: “The ruling of the International Court of Justice on March 30, 2023 is another proof of the Islamic Republic of Iran’s righteousness and the violations by the US government.
“In the ruling on Thursday, the ICJ rejected all the defenses and claims of the US government and dismissed Washington’s rationales.
“The ICJ stressed that the US government has violated its international commitments and reiterated that the US government's obligations laid out in Article 3 (paragraph 1), Article 4 (paragraphs 1 and 2) and Article 10 of the Treaty of Amity, Economic Relations and Consular Rights between Iran and the US on August 15, 1955 and that the court has established the international responsibility of the US government in this regard.
“After ascertaining the international responsibility of the US government, the ICJ required that Washington make reparations.
“The Islamic Republic of Iran believes that the ruling issued by the International Court of Justice shows the solidity of Iran’s arguments and the righteousness of Iran's request.
“In this important verdict, the ICJ correctly rejected all the fake defenses of the US. It also underlined the violation by the US of its commitments and recognized Iran as the rightful side. The fact that court’s ruling requires the US to make reparations for the losses is the key reason for the legitimacy of the Islamic Republic of Iran’s demand.
“The Islamic Republic of Iran considers claiming the rights of the country’s people as an inherent duty and will use all diplomatic, legal and judicial means to demand the rights of the honorable people of Iran and the national interests of all Iranians.”