Metropolitan News-Enterprise


Thursday, August 27, 2015


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Court: Terror Victims Can Collect Funds Owed to Iranian Bank




Persons who have obtained judgments against the Islamic Republic of Iran based on terrorist acts sponsored by that nation’s government can try to collect from moneys owed to the national bank, the Ninth U.S. Circuit Court of Appeals ruled yesterday.

Instrumentalities of a national government are not immune from the enforcement of judgments resulting from acts of terrorism, a rule that applies regardless of whether the instrumentality is an alter ego of the state, Judge Alex Kozinski wrote for the court.

Judge Susan P. Graber and Senior District Judge Dee Benson of the District of Utah, sitting by designation, concurred.

The panel affirmed an order by Senior U.S. District Judge Charles Breyer of the Northern District of California, denying Bank Melli’s motion to dismiss an effort by plaintiffs in four separate cases to collect some $17.6 million in payments that Visa Inc. allegedly owes the bank for facilitating Visa cards in Iran.

Nuclear Program

Visa has been unable to transfer the money since 2007 because of sanctions tied to Iran’s illicit nuclear program; the money has been deposited into the court’s registry. Bank Melli claims the money is not subject to the creditors’ claims because it is a legal entity independent of the Iranian government, because it doesn’t “own” the assets because they are blocked, and because the laws which the plaintiffs claim give them a right to the money were enacted after they obtained their judgments.

Those judgments, totaling more than $970 million, were based on four separate incidents in which Iran was found to be involved—the 1990 shooting of Rabbi Meir Kahane and others in New York, the 1996 bombing of the Khobar Towers in Saudi Arabia, the 2001 bombing of a Jerusalem restaurant, and the 2002 bombing of a cafeteria at Hebrew University in Jerusalem.

While the Foreign Sovereign Immunities Act contains an exception for terrorism, Kozinski explained, an anomaly in the law prevented victims from enforcing their judgments until 2002, when Congress passed the Terrorism Risk Insurance Act, or TRIA, which permits execution against “the blocked assets of [a] terrorist party” or an agency or instrumentality of such a party.

In 2008, the abrogation of asset immunity was extended, by an amendment to the Foreign Sovereign Immunities Act, to funds that are not blocked, including those held by “a separate juridical entity.”

‘Discriminatory Measures’

Kozinski said the two laws make it clear Congress intended to allow the plaintiffs to attach funds owned to a government instrumentality like Bank Melli. He rejected the bank’s claim that the attachment violates a 1955 treaty that bars “unreasonable or discriminatory measures” against Iranian companies doing business in the United States.

The treaty cannot be read as superseding the later-enacted statutes, the judge wrote.

“In any event, there’s nothing unreasonable, discriminatory or in violation of international law about waiving sovereign immunity for terrorism-based judgments,” he wrote. “Bank Melli’s assets aren’t subject to attachment because it’s an Iranian company, but because it’s an instrumentality of a state that has sponsored terrorism.”

He went on to reject the bank’s retroactivity argument, saying the statutes “do not impose retroactive liability on Iran—they merely provide a means of collection for judgments where liability has already been established.”

The question of whether the funds are “owned” by the bank, Kozinski said, must be answered under the debtor-creditor laws of California, where the money is located. The state’s Enforcement of Judgments Law makes clear that “a right to payment due or to become due” is an asset subject to attachment,” the judge noted.

The case is Bennett v. Bank Melli, 13-15442.


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