* Bill could unfreeze $1.75 billion for 1983 bomb victims
* Washington suspects Iran role in US Marine barracks attack
* Iran says sovereign immunity doctrine protects from payout
By Basil Katz
NEW YORK, Aug 24 One way to win a court case is
to get the United States Congress to change the rules of the
A little-noticed provision tucked into the latest Iran
sanctions bill may have done just that for American victims of a
1983 bombing of the U.S. Marine Corps barracks in Beirut.
The sanctions bill, signed by President Barack Obama on Aug.
10, set out additional penalties against Tehran to curb the
country's nuclear ambitions.
The bill also specifically disarms claims the Central Bank
of Iran has made in a legal battle in federal court in Manhattan
over $1.75 billion in securities frozen in a New York bank
account that the central bank says it owns.
The plaintiffs in that case are trying to get Tehran,
through the Central Bank of Iran, to pay damages for Iran's
suspected role in helping Hezbollah carry out the barracks
attack during the civil war in Lebanon.
The $1.75 billion was uncovered by the U.S. Treasury
Department in 2008 and sits in a New York branch of Citibank,
part of Citigroup. Treasury says the money is effectively
The Beirut plaintiffs' lawsuit, filed in 2010, argues that
the funds should go toward paying a $2.65 billion damages award
they obtained against Iran in 2007 and have so far been unable
In court papers, the Central Bank of Iran has argued that
the funds are off limits from seizure under the doctrine of
sovereign immunity, which holds that foreign states or their
agents are not subject to another nation's laws.
But Section 502 of the sanctions law, officially known as
the Iran Threat Reduction and Syria Human Rights Act of 2012,
takes direct aim at that defense.
The section specifically declares that the Central Bank of
Iran "is not immune" under the Foreign Sovereign Immunities Act
of 1976, the U.S. law that Iran's central bank claims protects
its funds from seizure.
It also states that the "financial assets that are
identified" in the Manhattan case "shall be subject to execution
or attachment ... to satisfy any judgment to the extent of any
compensatory damages awarded against Iran."
Over the years, there have been billions of dollars in
default judgments against Iran levied by U.S. courts in favor of
Americans, but never collected. Language in the latest sanctions
bill, which could be subject to legal challenge, appears to have
brought the plaintiffs in the Manhattan case closer to seizing
actual funds than in any other case.
David Lindsey, a New York-based lawyer for the Central Bank
of Iran, also known as Bank Markazi, acknowledged that the new
sanctions law could affect the Manhattan case.
"The purpose of this 10th inning change in the law was to do
away with our defenses," Lindsey said. "No allegations have ever
been made that the Central Bank of Iran was involved in the 1983
attack," he said.
Steven Perles, a lawyer for the Beirut plaintiffs, declined
comment. The case was brought on behalf of Deborah Peterson, the
personal representative of one of the deceased servicemen, and
encompasses hundreds of individual plaintiffs.
"If this section stands, it does seem to overcome any
defenses Iran might have," said Julian Ku, a professor at
Hofstra University's School of Law.
Ku, who called the statute modification "unusual," said that
"if the payment is made, I think it would be the first such
payment, and certainly the largest ever paid out in a U.S. court
To be sure, the plaintiffs must file supplemental briefs in
light of the new legislation, and the judge must eventually
decide whether to order that the funds be turned over - a
process that could still take years.
A BIG ASSIST FROM CONGRESS
While Congress has previously intervened to help terrorism
victims obtain compensation from foreign states, it is rare for
a law to directly address an active case, legal experts said.
"There is precedent for massive payouts, but this is a
little bit unusual because it changes a law about Iranian
sovereign immunity in just one case," said Roger Alford, a
professor at the University of Notre Dame Law School. "How did
the lawyers get Congress to do that?"
The amendment was introduced last winter by Senator Robert
Menendez, a New Jersey Democrat. A senior aide to Menendez said
the lawmaker's efforts were spurred on by a visit from a
victim's family from his home state.
The aide, who spoke on condition of anonymity, said the
purpose of the legislation was to ensure that claims against
Iran were in fact actionable.
"The amendment sends a message not just to Iran but to the
other states that support terrorism that the U.S. will allow the
seizure and attachment of assets to satisfy judgments against
those countries," the aide said.
Experts and lawyers involved in such cases said the
defendants in the Manhattan case may seek to challenge the
constitutionality of Congress changing the statute, but that
this would likely be a losing battle. One way would be to argue
that the legislative branch had improperly interfered with
Lindsey, the lawyer for the Iran bank, would say only that
"Iran is studying the new legislation to decide its next steps
in the litigation."
'INNOCENT THIRD PARTY'
There is another wrinkle in the claims over the $1.75
billion held in a Citibank account. The money was deposited
there by Luxembourg-based bank Clearstream, which holds Iranian
funds in accounts in Luxembourg.
Clearstream said in court papers in July that if it is
forced to turn over the $1.75 billion in New York, it may be
barred from docking an equivalent sum from a Bank Markazi
account in Europe because of European sanctions against Iran.
Clearstream has argued that since the Iranian assets were
booked in Europe, they could not be considered to be in the
The sanctions law, however, said that a sum held in the
United States that was "equal in value" to Iranian assets held
abroad could be attached.
A spokesman for Clearstream's law firm, White & Case,
Ever since the Menendez amendment was introduced, other
groups of plaintiffs who have won judgments against Iran have
expressed interest in getting a piece of any possible payout.
Lawyers close to the case in New York say the $1.75 billion
would currently be shared among about 1,350 people, which
includes families of victims of a 1996 truck bomb attack at a
U.S. military complex in Khobar near the Saudi Arabian oil city
of Dhahran. The attack killed 19 soldiers and injured nearly
The aide to Menendez said lawyers for the 1,350 people had
brokered a sharing agreement for the funds should they be turned
Five days after Obama signed the sanctions bill, the
Peterson plaintiffs sued London-based bank Standard Chartered
seeking compensation over its concealment of
Iran-linked transactions, citing the Beirut bombing, which
killed 241 U.S. servicemen.
Iran denies that it wants to develop nuclear weapon
technology. But its refusal to limit and be more transparent
about its nuclear activity has led to increasingly tough
Experts say the U.S. State Department has been reluctant to
push for enforcement of existing money judgments against Iran
because they could serve as a potential lever in negotiations
with Tehran, while levying the $1.75 billion would have only a
"While the assets involved are substantial," said Suzanne
Maloney, a former State Department adviser who now works at the
Brookings Institution's Saban Center for Middle East Policy, "I
don't believe they are perceived as a meaningful bargaining chip
with Tehran on the nuclear issue or other elements of concern
with respect to Iranian policy."
The case is Peterson v. Islamic Republic of Iran, U.S.
District Court for the Southern District of New York, No.