Talking or Taking? The US-Iranian Dispute over Diplomatic Property

There’s been lots of recent buzz suggesting that the U.S. might start “talking with the enemy” (a.k.a. Iran). I suspect folks favoring such talks will groan when they hear CNN’s story of how an Iranian court is prepared to hand over the U.S. embassy in Tehran to an Iranian man, Hossein Alikhani, who successfully sued the United States in Iranian courts over a 1992 detention by U.S. officials. After having his case dismissed by U.S. courts, Alikhani reportedly received an award of over $500 million in Iran that he is now trying to execute. But the only U.S. assets over which the Iranian court has any control is the old U.S. embassy property in Tehran (infamous for the Iranian takeover that led to the Hostage Crisis, the embassy is still owned by the United States, although it currently houses a government-backed militia). The United States has rejected Iranian demands for payment and emphasized Iran’s obligations under Article 45 of the Vienna Convention on Diplomatic Relations (VCDR), which provides that even “if diplomatic relations are broken off between two states . . . [t]he receiving State must . . . respect and protect the premises of the mission, together with its property and archives.”



Beyond Iran’s potential violation of the VCDR, what makes this story interesting is the reciprocity angle. As the CNN story recounts, Alikhani is quite open in asserting that his suit was a reaction to Congress’ move in 1996 to remove sovereign immunity for Iran and other “state sponsors of terrorism” in certain terrorism-related U.S. suits (i.e., those involving death or injury resulting from acts of torture, extrajudicial killing, aircraft sabotage, hostage taking, etc.). This exception to sovereign immunity opened the door to a slew of lawsuits against Iranian agencies and officials as well as Iran itself. For example, the Flatow family’s suit against Iran for complicity in their daughter’s death via a 1998 suicide bus bombing in Israel resulted in an award against Iran to the tune of roughly $250 million.



Thus, the Iranian suit seems to be a “two can play this game” effort to dissuade such U.S. lawsuits. I suspect the idea is that as the awards pile up in the United States, Iran is signaling that its legal system can do the same thing. Now, I would not suggest there’s any moral equivalence in the sorts of suits for which sovereign immunity is being waived by U.S. courts and Alikhani’s complaint (he was detained for 105 days following his arrest in a sting operation involving the purchase of oil-field equipment in Florida for shipment to Libya allegedly in violation of U.S. sanctions). But, as a structural matter, once the United States decides to allow suits against sovereigns for conduct beyond the usual exceptions available under the restrictive theory of sovereign immunity, I don’t think we should be surprised to see other states reciprocate, even if their intentions are much less pure than those that motivated the changes to U.S. law.



The real issue in both cases, however, is one of enforcement. And, here I think any Iranian claim to reciprocity, while superficially appealing, is ultimately unavailing. It’s true that the U.S. Congress has certainly shown little sympathy to protecting Iran’s property in the United States (e.g., two mansions on Embassy Row in Washington, along with apartments in Chicago, New York and other cities where Iran used to have consulates). In 2002, Congress passed, and the President signed into law, P.L. 107-297, which, among other things, subjected Iranian property in the United States to execution or attachment, subject to a Presidential waiver in the interest of national security. But that waiver explicitly excluded properties subject to “the Vienna Convention on Diplomatic Relations . . . that [have] been used by the United States for nondiplomatic purposes (including use as rental property).” Not surprisingly, it turns out that much of the Iranian property had been rented out, suggesting Congress wanted such property subject to attachment (I suspect, however, that the Executive Branch would argue a Presidential waiver for these properties would hold since they were rented to ensure the properties’ maintenance in accordance with U.S. duties under VCDR Article 45, i.e., they were rented for diplomatic, as opposed to nondiplomatic, purposes).



Interestingly, however, even with this 2002 statute, it appears that none of Iran’s properties have been turned over to claimants. Instead, the federal government has been “buying” judgments off claimants in accordance with another statute — the Victims of Trafficking and Violence Protection Act (“VTVPA”), P.L. 106-386. That statue provides a substitute mechanism for claimants to collect 100 or 110% of their compensation awards (punitive awards are not subject to the buy-out). In exchange, claimants effectively waive their right to further enforce their judgments or to seek attachment of any of Iran’s diplomatic property (the statute’s waiver actually applies to property that is subject to a claim before an international tribunal, which, coincidentally, covers all Iranian property given a pending Iranian suit over these properties before the U.S.-Iran Claims Tribunal).



So, the bottom line is that in order to avoid turning over Iranian diplomatic property to claimants and thus breaching VCDR Article 45, the Executive Branch has gone through significant (and expensive) contortions. Hundreds of millions of U.S. taxpayer dollars have been handed over to claimants (by 2003, $350 million had already been paid out). Combined with the political heat they’ve taken over these efforts given the claimants’ sympathetic causes and Congress’s clear disposition to favor those claimants’ interests, I wonder whether an Iranian attachment of the U.S. embassy might push the Executive Branch to a boiling point. Indeed, if Iran does turn over the U.S. embassy in Tehran to execute an Iranian judgment, couldn’t the United States argue that as a reprisal, it would be lawful for it to turn over Iran’s U.S. properties to waiting claimants? If U.S. and Iranian officials are serious about talking in the weeks and months ahead, they should make efforts to nip this looming legal controversy in the bud. I don’t know that it would really carry over into issues like Iraq, but it certainly won’t make the very folks we’re asking to talk to one another – the diplomats – any less favorably disposed to those they’ve spent years regarding as an enemy.