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After ICJ’s “Certain Iranian Assets” Judgment, Iran and United States Both Claim Victory

The International Court of Justice (ICJ) issued its judgment on the merits in Certain Iranian Assets, nearly seven years after the case between Iran and the United States was first filed. The Court found that a number of U.S. actions constituted violations of the Treaty of Amity between Iran and the United States, but that the 2018 termination of the Treaty meant that the Court could only award monetary damages and could not order cessation of the United States’ activities.

In a complex opinion touching on issues ranging from “unclean hands” to expropriation, the Court determined that it could not order the United States to unfreeze nearly $1.75 billion in Iranian central bank assets but obligated the United States to compensate Iranian companies for its sanctions and seizure of other assets. Both the United States and Iran were quick to frame the decision as a victory. The United States issued a statement calling the Court’s judgment a “major victory for the United States and victims of Iran’s State-sponsored terrorism.” Meanwhile, Iran’s Foreign Ministry said that the ICJ’s ruling proved Iran’s “righteousness and the violations by the US government.”

Factual Background and Iran’s Claims

Iran brought this case against the United States in 2016 claiming that the United States had violated both the 1955 Treaty of Amity between the two countries and international law norms on State immunity by permitting private litigants to proceed in suits against Iran and attaching seized Iranian assets to satisfy judgments against Iran obtained in those actions. 

Iran’s claims are rooted in several legislative and executive acts taken by the United States. These measures culminated in a number of default and substantial damages judgments entered by U.S. courts against Iran and Iranian State-owned entities. 

In 1996, the United States amended the Foreign Sovereign Immunities Act (FSIA) to remove immunity for States designated as “State sponsors of terrorism.” The FSIA’s terrorism exception prompted many plaintiffs to commence proceedings against Iran, which the United States designated as a “State sponsor of terrorism” in 1984, for damages caused by acts allegedly supported by Iran. 

The Terrorism Risk Insurance Act (TRIA), enacted in 2002, permitted enforcement measures for judgements entered pursuant to the 1996 amendment to the FSIA. Importantly, Section 201 of TRIA provides that in these cases, the assets of an entity designated as a “terrorist party” shall be subject to execution or attachment in aid of execution. 

As a result of President Barack Obama’s Executive Order 13599, the United States blocked all assets of the Iranian government, including those of the Central Bank of Iran (Bank Markazi) and of other financial institutions, within U.S. jurisdiction. The United States then adopted the Threat Reduction and Syria Human Rights Act (ITRSHRA), subjecting Bank Markazi’s assets to execution to satisfy default judgments against Iran. Bank Markazi challenged ITRSHRA in Bank Markazi v. Peterson, but the Supreme Court upheld the use of nearly $1.75 billion in Central Bank of Iran assets to satisfy judgments in favor of terrorism victims under the FSIA’s terrorism exception. 

As a result of these executive, legislative, and judicial acts of the United States, Iran initiated proceedings before the ICJ and argued that Iran and its entities were suffering serious and ongoing harm in violation of the Treaty of Amity. 

Jurisdiction and Admissibility

2019 Judgment on Preliminary Objections

Prior to the Mar. 30 opinion, the Court in its 2019 judgment on preliminary objections rejected the United States’ claims that it did not consent to the ICJ’s jurisdiction under the Treaty’s dispute resolution clause which conferred the Court jurisdiction over disputes arising from the Treaty. In addition to objecting the Court’s jurisdiction over the dispute, the United States filed preliminary objections to the admissibility of the case on several grounds including that Iran’s claims were beyond the scope of the Treaty and Iran’s invocation of ICJ jurisdiction, given its history of supporting international terrorism, amounted to an abuse of process. The Court unanimously dismissed United States’ admissibility objections to Iran’s claims. However, the Court determined that it lacked jurisdiction over claims that the United States violated Iran’s sovereign immunity. It also determined that a third objection on jurisdiction, over claims regarding Bank Markazi, was not of a preliminary character and saved a full decision on that objection for full development of the factual record. 

Jurisdiction over the Central Bank of Iran (Bank Markazi) 

In the Mar. 30 opinion, the Court returned to the outstanding jurisdictional question and determined that it lacked jurisdiction over Iran’s claims relating to alleged U.S. violations of the Treaty of Amity in relation to Bank Markazi. The Treaty grants benefits only to “nationals” (natural persons) and “companies.” The United States successfully argued that Bank Markazi was not a “company” within the meaning of the Treaty, and therefore, Iran’s central bank was not protected by the Treaty. This jurisdictional determination was particularly significant because it covered assets of nearly $1.75 billion dollars, representing most of Iran’s overall monetary claims.

In reaching its decision, the Court paid particular attention to the “nature” of Bank Markazi’s activities, rather than its legal personality separate from the Government of Iran. Iran contended that Bank Markazi’s investment of dematerialized bonds issued on the U.S. financial market and subsequent management of proceeds from those 22 securities qualified it as a “company” under the Treaty. 

The ICJ was unconvinced and ruled that the bank did not engage in a sufficient level of activities of a commercial character to be characterized as a “company” entitled to the Treaty’s protections. The Court ruled that Bank Markazi’s operations in the United States are “part of the usual activity of a central bank and inseparable from its sovereign function.” 

Failure to Exhaust Local Remedies

The Court rejected the United States’ objection to admissibility based on Iran’s failure to exhaust local remedies. Under customary international law, a State that initiates an international claim on behalf of its nationals based on diplomatic protection must exhaust local remedies before the claim can be heard. This requirement is also considered satisfied when there are no local remedies providing the injured persons with a reasonable opportunity to obtain redress. 

In this case, the Court remarked that each time an Iranian entity sought to have federal statutory provisions set aside by U.S. courts because they were inconsistent with rights provided by the Treaty of Amity, the U.S. court routinely applied the federal law due to it being enacted after the Treaty. Because of this, the Court concluded that the Iranian entities “had no reasonable possibility of successfully asserting their rights in United States court proceedings” and rejected the United States’ challenge to admissibility based on a failure to exhaust local remedies. 

United States’ Defenses on the Merits

The ICJ rejected three separate defenses invoked by the United States. 

First, it rejected the United States’ contention that Iran had committed an abuse of right by applying the Treaty of Amity to measures it considered to be unrelated to commerce.

The Court next dismissed the United States’ defense that its Executive Order 13599, blocking the property of the Iranian government and related financial entities, fell into two carve outs of the Treaty: measures that regulate the production of or traffic in arms and measures that are necessary for a contracting party’s essential security interests. The Court disagreed that the Executive Order fell into either of these two exceptions. It found that the measures in the Executive Order only had an indirect impact on the production of and the traffic in arms by Iran. Additionally, the Court ruled that the Executive Order was not necessary to protect the United States’ essential security interests, noting that the justifications set out in the Executive Order itself were primarily financial rather than security considerations. 

Finally, the United States asked the Court to dismiss all claims brought by Iran under the Treaty of Amity on the grounds that Iran came to the Court with “unclean hands.” The Court noted it had never upheld that “clean hands” constitutes custom or general principle of law, and that it considers the doctrine with caution. The International Law Commission (ILC) in its Responsibility of States for Internationally Wrongful Acts also declined to consider “unclean hands” as grounds for a preclusion of wrongfulness, noting it has “been invoked principally in the context of the admissibility of claims before international courts and tribunals, though rarely applied.” 

Despite its hesitancy to apply the doctrine, the Court stated that even if it were to apply “clean hands” to the case, a nexus between the wrongful conduct imputed to Iran and its claims under the Treaty of Amity would be needed. The Court determined this necessary nexus was missing and rejected the United States’ “unclean hands” defense.

Having rejected these defenses, the Court then turned to the merits of Iran’s specific claims.

Alleged Violations of the Treaty of Amity

Art. III, para. 1 and Art. IV, para. 1

Iran and the United States disagreed on the meaning of Art. III, para. 1, of the Treaty, which provided for Iranian and American companies to “have their juridical status recognized” within the territory of each contracting party. In its 2019 judgment on preliminary objections, the ICJ understood “juridical status” as a company’s own legal personality, sometimes existing as an entity distinct from its associated State. Article IV, para. 1, provides for fair and equitable treatment and prohibits the United States and Iran from taking “unreasonable or discriminatory measures” against each other’s nationals or companies. 

Iran contended that the United States disregarded the legal personality of Iranian companies within its territory and that the U.S. measures under Section 201(a) of TRIA, Section 1610(g) of the FSIA, and Executive Order 13599 were unreasonable.

The Court noted that a measure is unreasonable under the Treaty of Amity when it does not pursue a legitimate public purpose, there is no appropriate relationship between the purpose pursued and measure adopted, or it is manifestly excessive in relation to the purpose.  

Although the U.S. measures at issue might have pursued a legitimate public purpose of providing effective remedies to plaintiffs awarded damages and the attachment and execution of a liable defendant’s assets is generally an appropriate relationship with that purpose, the Court found the legislative measures to be manifestly excessive. It noted that TRIA and the FSIA employed very broad terms, capable of encompassing any legal entity regardless of the degree or type of control exercised over them by Iran. The Court ruled that the United States unjustly “lifted the corporate veil,” disregarding the separate legal personality of Iranian companies in liability judgments rendered in cases where the companies could not participate and in relation to underlying facts the companies seemed to be uninvolved in. 

Additionally, the Court found Executive Order 13599 to be manifestly excessive in relation to the purpose of responding to Iran’s “sustained support of terrorist acts” because it applied in an overinclusive manner to “any Iranian financial institution.” 

Art. III, para. 2

On Iran’s claim that the United States violated the Treaty’s guarantee of “freedom of access to the courts” and “prompt and impartial justice,” the Court found no violation committed by the United States. Although the application of law by U.S. courts was unfavorable to the Iranian companies, the ICJ noted that the rights of Iranians companies to appear before U.S. court, make legal submissions, and lodge appeals were unimpeded.

Art. IV, para. 2

By seizing and attaching the assets of Iranian companies, the Court found that the United States had committed an expropriation contrary to Article IV of the Treaty. The Court only found a violation here with respect to the United States’ measures taken under TRIA and the FSIA, but not those enacted by Executive Order 13599. 

The Court noted that a judicial decision attaching and executing property or interests in property does not per se constitute a taking or expropriation of that property. Instead, an element of illegality is required. After examining the various legislative, executive, and judicial acts taken by the United States and at issue in this case, the Court relied on its prior finding of unreasonableness to establish that the U.S. measures had not been a lawful exercise of regulatory powers and amounted to an expropriation without compensation. 

However, the Court dismissed Iran’s takings claims directed at Executive Order 13599 because Iran failed to identify affected property of Iranian companies specifically impacted by the executive order beyond Bank Markazi. Because the Court denied jurisdiction over claims related to Bank Markazi, the Court did not find the United States to have committed an unlawful expropriation with Executive Order 13599. 

On Iran’s claims that the United States failed to afford the most constant protection and security to Iranian companies as provided by Article IV, the Court stated that the United States’ obligation under the Treaty was to protect Iranian companies’ property from actual physical harm. During the proceedings, Iran asserted that the Treaty’s obligation extended beyond protection from physical harm to legal protection of property. 

The Court refused to extend the protection from physical harm afforded by Article IV, para. 2, to legal harm because of the overlap with the fair and equitable treatment provision in Article IV, para. 1, that would result from accepting Iran’s interpretation. Because the Court already determined that the U.S. measures violated fair and equitable treatment under Article IV, para. 1, it rejected Iran’s claims under Article IV, para. 2. The Court reasoned that paragraph 2 of Article IV was not intended to apply to situations covered by paragraph 1 of that article. 

Article V, para. 1

The ICJ ruled that the United States did not deprive Iranian companies the right to dispose of their property. Iran’s allegations were predicated on the same set of facts claimed in relation to Article IV, para. 2. The Court understood measures that amount to unlawful expropriation to fall outside the scope of Article V, para. 1. Because the United States’ measures were already deemed to amount to expropriation, the Court concluded that Iran had not established a violation by the United States of the right to dispose of property.

Article VII, para. 1

Under the Treaty, the United States did not improperly apply restrictions on the making of payments, remittances, and other transfers of funds. The Court rejected Iran’s interpretation of this provision as imposing a blanket prohibition on any restriction on the movement of capital. Instead, the Court understood the provision to reflect Iran and the United States’ intent to regulate exchange restrictions to preserve bilateral commerce. As Iran did not allege the United States of applying exchange restrictions, the Court dismissed Iran’s claims. 

Article X, para. 1

Finally, the Court found that the United States had violated its obligations to provide “freedom of commerce” for the Iranian companies. In the Court’s view, “commerce” applies to ancillary activities related to traditional forms of commerce, such as trade in goods. As a result, the Court understood financial transactions, such as trade in intangible assets, to be commerce protected by Article X of the Treaty. 

To find a breach under this article, the Court was convinced that the United States’ measures were actual impediments to commerce. Because it comprehensively blocked property, Executive Order 13599 qualified as an actual impediment to any financial transaction conducted by Iran or Iranian financial institutions in the United States. Additionally, the attachment and execution of assets of Iranian State-owned companies under the FSIA was also considered to be an actual impediment to the performance of commercial activities by those entities. Finally, the application of both the FSIA and TRIA by U.S. courts was also considered to be a material interference with Iranian commerce within the United States. 


Iran requested that the ICJ, having identified certain violations of the Treaty, order the United States to cease conduct that violated its Treaty obligations. However, the Court, citing the ILC Articles on State Responsibility, noted that it could order a cessation of internationally wrongful acts “only if the violated obligation is still in force.” In 2018, the United States had terminated the Treaty by giving Iran advance notice of its withdrawal, and so the Court determined that the relevant obligations were no longer in force and it could not grant Iran’s request for an order of cessation.

Finally, on the question of compensation for injury suffered, the Court recognized that the United States is obligated to compensate Iran for the violations it committed. If Iran and the United States are unable to come to an agreement on the amount within two years, the Court will determine the amount due in a subsequent phase of the proceedings. 


Institutionally, a judgment leaving both parties claiming victory is an objectively positive outcome for the ICJ. However, it is unlikely that we have seen the last of this case. Leaving the two countries to reach an agreeable amount of compensation on their own might not inspire confidence given the looming presence of the challenging dynamics between the two countries.

The largest share of assets claimed back by Iran were those associated with the Central Bank of Iran. This close to $1.75 billion dollars in assets tied to Iran’s central bank towers over the rest of assets involved in Iran’s successful allegations against the United States. Financially, the United States is off the hook for a significant amount of the assets in dispute. However, unfreezing millions of dollars in assets for Iranian use remains politically sensitive for the United States as Iran advances its nuclear program and faces international criticism for its harsh response to domestic protests sparked late last year. 

On the other hand, for a country that has sought to convey the wrongfulness of the United States’ sanctions regime against it, Iran was handed a political victory with an international court ruling that some of the United States’ measures were unlawful. The messaging games between the two countries will only continue with the ICJ’s opinion in this case.

Source : Just Security