FSIA and Attaching Assets of State Instrumentalities

The Supreme Court in the case of Ministry of Iran v. Elahi, rendered a rather insignificant decision last week regarding the FSIA and state instrumentalities. At issue was whether claimants could attach Iranian assets in the United States to satisfy various successful terrorism judgments. Problem was, the asset was an arbitral award in favor of the Iranian Ministry of Defense. The relevant provision at issue was Article 1610(b)(2) of the FSIA, which provides that “any property in the United States of an agency or instrumentality of a foreign state engaged in commercial activity in the United States shall not be immune from attachment.” The Ninth Circuit held that the Ministry was an agency or instrumentality within the meaning of that provision.

Iran and the United States both argued that the Ministry is not an agency or instrumentality, but rather an integral part of the state itself, and therefore the property of the Ministry is not subject to attachment under 1610(b). The Supreme Court did not agree or disagree, but sent the case back to the Ninth Circuit for clarification of that question. “[I]n implicitly concluding that the Ministry was an ‘agency or instrumentality’ of the Republic of Iran within the meaning of § 1610(b), the Ninth Circuit either mistakenly relied on a concession by respondent [Elahi] that could not possibly bind petitioner [Ministry of Defense], or else erroneously presumed that there was no relevant distinction between a foreign state and its agencies or instrumentalities for purposes of that subsection.” Of course, if the Ministry of Defense establishes that it is part of the state itself, and not an agency or instrumentality, then the terrorist victims lose their claim for attachment under 1610(b).

It is worth noting that these particular assets — monies owed to the Ministry by virtue of an arbitral award — were a rather unusual basis for attachment. Therefore many of the other grounds for attachment under Article 1610 that might typically be implicated were not. It is also worth noting that these claimants are only seeking to enforce the punitive damage component of the terrorist judgments. The compensatory component of the judgments were already paid directly by the United States, which will pursue reimbursement against Iran.