Legality of the International Agreement with Iran and Its Implementing Executive Orders (II)

Legality of the International Agreement with Iran

and Its Implementing Executive Orders

Executive orders providing for the establishment o f escrow accounts with the Bank of

England and the Central Bank o f Algeria, directing the transfer o f previously blocked

Iranian government assets to those accounts, and nullifying all interests in the assets

other than the interests of Iran and its agents, are within the President’s authority under

the International Emergency Economic Powers Act (IEEPA ). Banks and other holders

o f Iranian assets need not await formal vacation of court-ordered attachments before

complying with transfer orders, since they as well as Executive Branch officials are

relieved from any liability for actions taken in good faith in reliance on the IEEPA.

Executive order prohibiting the prosecution o f any claims against Iran arising from the

hostage seizure, and terminating any previously instituted judicial proceedings based on

such a claim, is within the President's authority under the IE E PA and the Hostage

Act. The order does not purport to preclude any claimant from petitioning Congress

for relief in connection with his claim, nor could it constitutionally do so.

Provisions of executive order blocking property of the former Shah’s estate and that of

his close relatives, and requiring all persons subject to the jurisdiction of the United

States to submit to the Secretary o f the Treasury information about this property to be

made available to the government of Iran, are within the President’s authority under

the IEEPA. Proposed order also directs the Attorney General to assert in appropriate

courts that claims of Iran for recovery of this property are not barred by foreign

sovereign immunity or act of state doctrines, and asserts that all Iranian decrees

relating to the former Shah and his family should be enforced in courts of the United

States.

The President has constitutionally and congressionally conferred authority to enter an

agreement designating the Iran-United States Claims Tribunal as the sole forum for

determination of claims by the United States or its nationals against Iran, and to confer

upon the Tribunal jurisdiction over claims against the United States.

January 19, 1981

T h e P r e s id e n t

T h e W h it e H o u se

M y D e a r M r . P r e s i d e n t : I have been asked for my opinion con­

cerning the legality of certain actions designed to resolve issues arising

from the detention in Iran of 52 American hostages, including the

diplomatic and consular staff in Tehran.

An international agreement has been reached with Iran. The agree­

ment, which consists of four separate documents, commits the United

States and Iran to take specified steps to free the hostages and to

resolve specified claims between the United States and its nationals and

Iran and its nationals. These documents embody the interdependent

13

commitments made by the two parties for which Algeria has been

acting as intermediary.

T he first document is captioned “Declaration of the Government of

the Dem ocratic and Popular Republic of Algeria” (Declaration). The

Declaration provides, first, for nonintervention by the United States in

the internal political and military affairs of Iran.

Second, the Declaration provides generally for return of Iranian

assets. The transfer utilizes the Central Bank o f Algeria as escrow agent

and the Bank of England in London as depositary: their obligations and

powers are specified in tw o other documents, the “Escrow Agreement”

and the “Depositary Agreement.” Separate timetables and conditions

are described for assets in the Federal Reserve Bank of New York

(Fed), in foreign branches of United States banks, and in domestic

branches of United States banks, and for other financial assets and other

property located in the United States and abroad. The transfer of the

assets in the Fed and in the foreign branches to the Bank of England is

scheduled to take place first. Upon Iran’s release of the hostages, the

Central Bank o f Algeria, as escrow agent, shall direct the Bank of

England, under the terms o f the Escrow and Depositary Agreements,

to disburse the escrow account in accordance with the undertakings of

the United States and Iran with respect to the Declaration.

T he transfer from the Central Bank of Algeria to Iran of the assets

presently in the domestic branches will take place upon Iran’s establish­

ment with the Central Bank of Algeria of a Security Account to be

used for the purpose of paying claims against Iran in accordance with a

Claims Settlement Agreement set forth in the fourth document, which

is captioned “Declaration o f the Government of the Democratic and

Popular Republic of Algeria Concerning the Settlement of Claims by

the Governm ent of the United States of America and the Government

of the Islamic Republic o f Iran” (Claims Settlement Agreement). The

Claims Settlement Agreement provides for the establishment of an Iran-

United States Claims Tribunal, which will have jurisdiction to decide

three categories o f claims: (1) claims by United States nationals against

Iran and claims by Iranian nationals against the United States, and

counterclaims arising out of the same transaction or occurrence, for

claims and counterclaims outstanding on the date of the A greem ent;1

(2) official claims of the governments of the United States and Iran

against each other arising out of contracts for the purchase and sale of

goods and services; and (3) any dispute as to the interpretation or

performance of any provision of the Declaration.

■Two categories o f claims are specifically excluded: (1) claims relating to the seizure or detention

o f the hostages, injury to United States property or property within the compound of the embassy in

T ehran, and injury to persons or property as a result of actions in the course o f the Islamic Revolution

in Iran which were not actions of the government of Iran and (2) claims arising under the terms of a

binding contract specifically providing that any disputes thereunder shall be within the sole jurisdic­

tion o f the com petent Iranian courts^

14

Third, the Declaration provides for nullification of trade sanctions

against Iran and withdrawal of claims now pending in the International

Court of Justice. The United States also agrees not to prosecute its

claims and to preclude prosecution by a United States national or in the

United States courts of claims arising out of the seizure of the embassy

and excluded by the Claims Settlement Agreement.

Fourth, the Declaration provides for actions by the United States

designed to help effectuate the return to Iran of the assets of the family

of the former Shah.

A series of executive orders has been proposed to carry out the

domestic, and some foreign, aspects of the international agreement. It is

my opinion that under the Constitution, treaties, and laws of the United

States you, your subordinates, the Fed, and the Federal Reserve Board

are authorized to take the actions described in the four documents

constituting the international agreement and in the executive orders.2

I shall first examine the proposed executive orders and consider them

as to form and legality. Subsequently I shall consider certain questions

which arise from other proposed actions and documents related thereto.

1. The first proposed executive order is captioned “Direction Relat­

ing to Establishment o f Escrow Accounts.” Under it, the Secretary o f

the Treasury is authorized to direct the establishment of an appropriate

escrow agreement with the Bank of England and with the Central Bank

of Algeria to provide as necessary for distribution of funds in connec­

tion with the release of the hostages. The Escrow Agreement provides,

among other things, that certain assets in which Iran has an interest

shall be credited by the Bank o f England to an escrow account in the

name o f the Central Bank of Algeria and transferred to Iran after the

Central Bank of Algeria receives certification from the Algerian gov­

ernment that the 52 hostages have safely departed from Iran.

The International Emergency Economic Powers Act (IEEPA), 50

U.S.C. §§ 1701-1706 (Supp. I 1977), provides you with authority,

during a declared national emergency, to direct transactions and trans­

fers of property in which a foreign country has an interest under such

regulations as you may prescribe. As the proposed order recites, such

an emergency has been declared. IE E PA was the authority for the

blocking order of November 14, 1979, Executive Order No. 12,170,

which asserted control over Iranian government assets. Moreover, the

statute known as the Hostage Act, 22 U.S.C. § 1732, authorizes the

President, when American citizens are unjustly deprived of liberty by a

foreign government, to use such means, not amounting to acts of war,

as he may think “necessary and proper” to bring about their release.

The phrase “necessary and proper” is, of course, borrowed from the

Constitution, and has been construed as providing very broad discre­

8 Documents testifying to the adherence to the agreement by both the United States and Iran will

also be executed; these documents present no substantive legal issues.

15

tionary powers for legitimate ends. U.S. Const. Art. I, §8, cl. 18;

McCulloch v. Maryland, 17 U.S. (4 W heat.) 316 (1819). Establishment of

the escrow account is directed to the release o f the hostages. This order

thus falls within your powers under these A cts.3

It is approved as to form and legality.

2. The second proposed executive order is captioned “Direction to

T ransfer Iranian Government Assets.” The Fed is directed to transfer

to its account at the Bank o f England, and then to the escrow account

referred to in paragraph 1, the assets of the government of Iran, as

directed by the Secretary o f the Treasury. The order also revokes the

authorization for, and nullifies all interests in, the frozen Iranian gov­

ernm ent property except the interests o f Iran and its agents. The effect

of this order will be to void the rights of plaintiffs in any possible

litigation to enforce certain attachments and other prejudgment reme­

dies that were issued against the blocked assets following the original

blocking order.

I believe that this provision is lawful for several reasons. I am

informed, first, that the Iranian funds on deposit in the Fed are funds of

the Bank Markazi, the Central Bank o f Iran. As such, they are clearly

not subject to attachment. T he Foreign Sovereign Immunities A ct of

1976 specifically states that the property of a foreign central bank held

for its ow n account shall be immune from attachment and execution

unless that immunity has been explicitly waived. 28 U.S.C. §1611(b). It

is my view that there has been no such waiver.

Even assuming, arguendo, that the attachments are not precluded by

28 U.S.C. § 1611(b), there is power under IE E PA to nullify them or to

prevent the exercise of any right under them. Under IEEPA , the

President has authority in time of emergency to prevent the acquisition

of interests in foreign property and to nullify new interests that are

acquired through ongoing transactions. The original blocking order

delegated this power to the Secretary of the Treasury, who promul­

gated regulations prohibiting the acquisition, through attachment or any

other court process, of any new interest in the blocked property. The

effect o f these regulations was to modify both the substantive and the

procedural law governing the availability of prejudgment remedies to

creditors o f Iran. The regulations contemplated that provisional reme­

dies might be permitted at a later date but provided that any unauthor­

ized remedy would be “null and void.” 31 C.F.R. § 535.203(e).

Subsequently, all of the attachments and all of the other court orders

against the Iranian assets held by the Fed were entered pursuant to a

general license or authorization given by the Secretary o f the Treasury

effective Novem ber 23, 1979. This authorization, like all authorizations

issued under the blocking regulations, may be revoked at any time in

3 A lthough I do not specifically discuss the applicability of the Hostage Act to the other proposed

orders described in this opinion, I believe that it generally supports their issuance.

16

accordance with 31 C.F.R. § 535.805, which expressly provides that

any authorization issued under the blocking order could be “amended,

modified, or revoked at any time.” See Orvis v. Brownell, 345 U.S. 183

(1953). The regulations did not purport to authorize any transaction to

the extent that it was prohibited by any other law (other than IEEPA ),

such as the Foreign Sovereign Immunities A ct.4 31 C.F.R. § 535.101(b).

Upon revocation, the exercise or prosecution of any interests created

by the outstanding attachments and other orders will be unauthorized.

The orders themselves will no longer confer any enforceable right upon

the creditors. Indeed, because IEEPA expressly grants to the President

a power of nullification, the interests created by these provisional reme­

dies are themselves subject to nullification, in addition to nullification

by the revocation of the underlying authorization. In this respect the

President’s power under IE E PA is analogous to his constitutional

power to enter into international agreements that terminate provisional

interests in foreign property acquired through domestic litigation if

necessary in the conduct of foreign affairs. See The Schooner Peggy, 5

U.S. (1 Cranch) 103 (1801). The nullification of these interests is an

appropriate exercise of the President’s traditional power to settle inter­

national claims. United States v. Pink, 315 U.S. 203 (1942); United States

v. Belmont, 301 U.S. 325 (1937).

Upon the direction of the Secretary of the Treasury, the Fed will be

free to transfer the Iranian assets; the attachments and other prejudg­

ment encumbrances will have been rendered unenforceable by the con­

temporaneous change in law. Moreover, the Fed may comply with the

Secretary’s directive without litigating in advance the issue of the

Secretary’s authority to nullify the provisional interests. IE E PA explic­

itly states, and the proposed order affirms, that “ [n]o person shall be

held liable in any court . . . for anything done or omitted in good faith

in connection with the administration of, or pursuant to and in reliance

on, [IEEPA] or any regulation, instruction, or direction issued under

[IEEPA].” 50 U.S.C. § 1702(a)(3). I believe that Congress intended this

provision to relieve holders of foreign property, as well as individuals

administering or carrying out orders issued pursuant to IEEPA , from

any liability for actions taken in good faith in reliance on IE E PA and

presidential directives issued under IEEPA . This provision protects not

only the Fed and the Federal Reserve Board but Executive Branch

officials as well. In my opinion, this provision is valid and effective for

that purpose.

4 In New England Merchants National Bank v. Iran Power Generation and Transmission Co.. 502 F.

Supp. 120 (S.D.N.Y 1980), the district court took the position that the freeze order under IEE PA

took precedence over the Foreign Sovereign Immunities Act, thus removing Iran’s immunity. Assum­

ing, arguendo, the correctness of that position, the legal effect of the totality of actions dicussed herein

would be to reinstate Iran's immunity, thereby removing the ratio decedendt of the district court’s

decision.

17

Similarly, the Secretary himself is empowered, in my opinion, to

nullify these provisional interests and to license the transfer of the assets

w ithout submitting the issue to litigation and without insisting that the

Fed refuse any transfer until all objections to the transfer have been

definitively rejected by the courts. As noted, the interests, if any,

created by these prejudgment remedies were created upon the condi­

tion that the authority for the underlying transactions might be revoked

“at any time”; and that condition may be invoked without delay. The

powers that the Constitution gives and the Congress has given the

President to resolve this kind o f crisis could be rendered totally ineffec­

tive if they could not be exercised expeditiously to meet opportunities

as they arise. The primary implication o f an emergency power is that it

should be effective to deal with a national emergency successfully.

United States v. Yoshida International, Inc., 526 F.2d 560, 573 (C.C.P.A.

1975).

M oreover, the Fed may transfer the assets before the outstanding

court orders have been formally vacated. When a supervening legisla­

tive act expressly authorizes a course of conduct forbidden by an

outstanding judicial order, the new legislation need not require the

persons subject to it to submit the m atter to litigation before pursuing

the newly authorized course. See Pennsylvania v. Wheeling & Belmont

Bridge Co., 59 U.S. (18 How.) 421 (1855). I believe that this case is

closely on point. A valid executive order has the force of a federal

statute, superseding state actions to the extent that it is inconsistent.

Contractors Association o f Eastern Pennsylvania v. Secretary o f Labor, 442

F.2d 159, 166 (3d Cir.), cert, denied, 404 U.S. 854 (1971). Thus, the

holding of the Wheeling case applies here.

The order is approved as to form and legality, and actions taken

consistent with and pursuant to it will be lawful and valid.

3. The third proposed executive order is captioned “Direction to

Transfer Iranian Government Assets Overseas.” In general, it directs

branches of United States banks outside the country to transfer Iranian

governm ent funds and property to the account of the Fed in the Bank

o f England. The transfer is to include interest at commercially reason­

able rates from the date of the blocking order. The Secretary o f the

Treasury shall determine when the transfers shall take place. Any

banking institution that executed a set-off against Iranian funds after

entry of the blocking order is directed to cancel the set-off and to

transfer the funds in the same manner as the other overseas deposits.

The Iranian funds in the branches o f American banks overseas were

subject to the November 1979 blocking order. Subsequently, the Secre­

tary of the Treasury licensed foreign branches and subsidiaries of

American banks to set off their claims against Iran or Iranian entities by

debit to the blocked accounts held by them for Iran or Iranian entities.

31 C.F.R. §535.902. As a result of this license, American banks with

18

branches overseas set off various debts owing to them by Iran and

Iranian entities. I understand that most of the debts were loans origi­

nally made from offices in the United States and that most of the

overseas deposits were in branches located in the United Kingdom. The

banks with overseas Iranian accounts set off amounts owing not only to

them directly but to other banks with whom they were participants in

syndicated loans. The banks have acted on the assumption that any loan

made to Iran or an Iranian entity could be set off against any account

of Iran or an Iranian entity or enterpise on the theory that, as a result

of the control of the Iranian economy by the government of Iran and

nationalization of private enterprises, all such entities and enterprises

were the same party for purpose of setting off debts. In addition, the

banks accelerated the amounts due on loans that were in default, and,

under the doctrine of anticipatory breach, set off loans that had not

come due.

The blocking order delegated to the Secretary o f the Treasury the

authority to license the set-offs to the extent that the executive order

prevented them. The license did not, however, determine whether the

set-offs were valid under any other law. 31 C.F.R. §535.101(b). I

understand that Iran and its entities are contesting in litigation overseas

whether the set-offs are lawful. T he issues include the proper situs of

the debts, identity of the parties, the propriety of acceleration, and the

anticipation of breach.

IE E PA authorizes the President, under such regulations as he may

prescribe, to nullify and void transactions involving property in which a

foreign country has an interest and to nullify and void any right re­

specting property in which a foreign country has an interest. 50 U.S.C.

§ 1702. Either analysis is appropriate here: Iran had an interest in the

original set-off transaction and continues to have an interest both in the

amounts in the accounts which have and have not been set off. The

latter, as noted, are the subject o f litigation abroad. See 31 C.F.R.

§§ 535.311-312. C f Behring International v. Miller, 504 F. Supp. 552

(D.N.J. 1980) (holding that Iran continues to have interest in a trust

account created to pay debt). The very use o f the words “nullify” and

“void” persuades me that Congress intended to authorize the President

to set aside preexisting transactions.5

As noted, the order also requires the overseas banks, when transfer­

ring the Iranian assets, to include interest on those assets from Novem­

ber 14, 1979, at commercially reasonable rates. I understand that in

most cases the accounts in overseas branches of American banks are

interest-bearing. To the extent that they are not, such interest represents

5 I believe that the present case is distinguishable in several respects from that in Brownell v.

National City Bank, 131 F. Supp. 60 (S D.N.Y. 1955). There, the district court concluded that the

mere revocation of a license did not serve to void a preexisting and apparently uncontested set-off; the

bank, moreover, had no opportunity to recoup its potential loss by bringing the loan current.

19

the benefit realized by the banks from holding the blocked Iranian

assets which, under the law of restitution, should accrue to the owners

o f the assets. Cf. Phillips Petroleum Co. v. Adams, 513 F.2d 355 (5th

Cir.), cert, denied, 423 U.S. 930 (1975). As such, the interest or benefit

realized by the banks is property in which Iran has an interest.6

F o r these reasons, I believe that you are thus authorized under

IE E P A to compel the transfer o f both principal and interest to the

Federal Reserve account at the Bank o f England as provided by the

order and to nullify or prevent the exercise o f any interests in this

property by anyone other than Iran. I also believe, as discussed in

paragraph 2 above, that 50 U.S.C. § 1702(a)(3) relieves from liability

anyone taking action in good faith under this executive order.7

The proposed order is approved as to form and legality, any actions

taken consistent with and pursuant to it will be lawful and valid.

4. The fourth proposed executive order is captioned “Direction to

Transfer Iranian Government Assets Held by Domestic Banks.” The

proposed order directs American banks in the United States with Ira­

nian deposits to transfer them, including interest from the date of

blocking at commercially reasonable rates, to the Fed, which will hold

the funds subject to the direction o f the Secretary o f the Treasury.

As discussed in paragraphs 2 and 3, the President has power under

IE E P A to direct the transfer of funds of Iran, including interest, and to

nullify or prevent the exercise of any interests of anyone other than

Iran in Iranian property. Actions taken in good faith pursuant to this

order will be, as discussed above, immune from liability.

The order is approved as to form and legality, and actions taken

consistent with and pursuant to it will be lawful and valid.

5. The fifth proposed executive order is captioned “Direction to

Transfer Iranian Government Financial Assets Held by Non-Banking

Institutions.” This order is similar to the order described in paragraph 4

except that it requires the transfer to the Fed of funds and securities

held by non-banking institutions. The President has the power to direct

the transfer of funds and securities o f Iran held by non-banking institu­

tions, and actions taken in good faith pursuant to this order shall

likewise enjoy the immunity from liability as reflected in 50 U.S.C.

§ 1702(a)(3).

The proposed order is approved as to form and legality, and actions

taken consistent with and pursuant to it will be lawful and valid.

6 See also Art. VII(2)(b) of the T reaty of Amity, Economic Relations, and Consular Rights Aug 15,

1955, United States-Iran, 8 U S T . 901, 905, T.l.A.S. No. 3853.

7 Cf. Cities Service Co. v. McGrath, 342 U.S. 330, 334-36 (1952). It is my opinion that a person who

has taken action in compliance with this executive order and is subsequently finally required by any

court to pay amounts with respect to funds transferred pursuant to this executive order will have the

right as a m atter o f due process to recover such amount from the United States to the extent of any

double liability.

20

6. The sixth proposed executive order is captioned “Direction to

Transfer Certain Iranian Government Assets.” The order would require

anyone in possession or control of property owned by Iran, not includ­

ing funds and securities, to transfer the property as directed by the

Iranian government. The order recites that it does not relieve persons

subject to it from existing legal, requirements other than those based on

IEEPA . It does, however, nullify outstanding attachments and court

orders in the same manner as does the order discussed in paragraph 2.

For the reasons discussed in the preceding paragraphs, the President

has power under IE E PA to order the transfer of property owned by

Iran as directed by Iran and to nullify outstanding attachments and

court orders related to such property. Actions taken in good faith

pursuant to this order shall likewise enjoy the immunity from liability

as reflected in 50 U.S.C. § 1702(a)(3).

The order is approved as to form and legality, and actions taken

consistent with and pursuant to it will be lawful and valid.

7. The seventh proposed executive order is captioned “Revocation of

Prohibitions against Transactions Involving Iran.” It revokes the prohi­

bitions of Executive O rder No. 12,205 of April 7, 1980; Executive

Order No. 12,211 of April 17, 1980; and Proclamation 4702 o f Novem­

ber 12, 1979. The two executive orders limited trade with and travel to

Iran. The proclamation restricted oil imports from Iran. It is my under­

standing that although the prohibitions are revoked, the underlying

declarations o f emergency remain in effect.

The order is approved as to form and legality.

8. The eighth proposed executive order is captioned “Non-Prosecu-

tion of Claims of Hostages and for Actions at the United States Em ­

bassy and Elsewhere.” The order directs the Secretary o f the Treasury

to promulgate regulations prohibiting persons subject to United States

jurisdiction from prosecuting in any court or elsewhere any claim

against Iran arising from the hostage seizure on November 4, 1979, and

the occupation of the embassy in Tehran, and also terminating any

previously instituted judicial proceedings based upon such claims.

The President has the power under IEEPA and the Hostage A ct to

take steps in aid of his constitutional authority8 to settle claims of the

United States or its nationals against a foreign government.9 Thus, he

has the right to license litigation involving property in which a foreign

national has an interest, as described in paragraph 2. That license can be

suspended by the Executive acting alone. New England Merchants N a­

tional Bank v. Iran Power Generation and Transmission Co., 508 F. Supp.

47 (S.D.N.Y., 1980) (Duffy, J.). But see National Airmotive Corp. v.

6See, e.g.. Restatement (Second) of Foreign Relations Law of the United States §213 (1965).

9 IEEPA was drafted and enacted with the explicit recognition that the blocking of assets could be

directly related to a later claims settlement. H. R. Rep. No. 459, 95th Cong., 1st Sess 17 (1977); S.

Rep. No. 466, 95th Cong., 1st Sess. 6 (1977). See 50 U.S.C. § 1706(a)(1) (authorizing continuation of

controls, after the emergency has ended, where necessary for claims settlement purposes).

21

Government and State o f Iran, 499 F. Supp. 401 (D.D.C., 1980) (Greene,

J .).10

T he order is approved as to form and legality.

9. The final proposed executive order is captioned “Restrictions on

the Transfer o f Property of the Form er Shah of Iran.” It invokes the

blocking powers of IE E PA to prevent transfer of property located in

the United States and controlled by the Shah’s estate or by any close

relative until litigation surrounding the estate is terminated. The order

also invokes the reporting provisions o f IEEPA , 50 U.S.C. § 1702(a)(2),

to require all persons subject to the jurisdiction of the United States to

submit to the Secretary o f the Treasury information about this property

to be made available to the government of Iran. The property involved

is property in which “[a] foreign country or a national thereof’ has an

interest. Restrictions on transfer and reporting requirements therefore

fall within the authority provided by IEEPA .

The order would further direct me, as Attorney General, to assert in

appropriate courts that claims of Iran for recovery of this property are

not barred by principles of sovereign immunity or the act of state

doctrine. I have previously communicated to you and to the Depart­

ment o f State my view to this effect (based on advice furnished to me

by the Office o f Legal Counsel and the Civil Division of this Depart­

ment) and will so assert in appropriate proceedings. The proposed

order also recites that it is the position of the United States that all

Iranian decrees relating to the assets of the former Shah and his family

should be enforced in our courts in accordance with United States law.

T he proposed order is approved as to form and legality.

10. The other questions relate to the Claims Settlement Agreement. I

conclude that you have the authority to enter an agreement designating

the Iran-United States Claims Tribunal as the sole forum for determina­

tion o f claims by United States nationals or by the United States itself

against Iran and to confer upon the Tribunal jurisdiction over claims

against the United States, including both official contract claims and

disputes arising under the Declaration.

T he authority to agree to the establishment of the Tribunal as an

initial m atter cannot be challenged. The Claims Settlement Agreement

falls squarely within powers granted to the Executive by the Constitu­

tion, by treaty, and by statute.

As a step in the reestablishment of diplomatic relations with Iran, the

Claims Settlement Agreement represents an appropriate exercise of the

President’s powers under Article II of the Constitution to conduct

foreign relations. M oreover, by Article XXI(2) o f the 1957 Treaty with

101 note that the issue of appropriate compensation for the hostages will be considered by a

Commission on Hostage Compensation established by separate executive order. Moreover, this eighth

order does not, o f course, purport to preclude any claimant from presenting his claim to Congress and

petitioning for relief; nor could it constitutionally do so.

22

Iran, the Senate gave its agreement for the two nations to settle dis­

putes as to the interpretation or application of the treaty by submission

to the International Court o f Justice or by any “pacific means.” 11

Arbitration by the Iran-United States Claims Tribunal is a .pacific means

of dispute settlement. Finally, by the Hostage Act, 22 U.S.C. § 1732,

Congress has conferred upon the President specific statutory powers

applicable to this crisis. The agreement to resolve by arbitration the

disputes now obstructing the release o f the hostages is a proper exercise

o f this power.

I note in conclusion the congruence o f your constitutional powers

and the congressionally conferred authority. In this situation, o f course,

your authority is at its maximum. Youngstown Sheet & Tube Co. v.

Sawyer, 343 U.S. 579, 635-36 (1952) (Jackson, J., concurring).

The specific jurisdiction conferred upon the Tribunal must be further

examined. The first category of claims, the private claims based on

debts, contracts, expropriations, o r other measures affecting property

rights, includes both claims by United States nationals against Iran and

claims by Iranian nationals against the United States. The former are

referrable to the Tribunal under the constitutional authority to settle

claims recognized in United States v. Pink, 315 U.S. 203 (1942), and

United States v. Belmont, 301 U.S. 324 (1937). See also Restatement

(Second) of Foreign Relations Law o f the United States § 213 (1965).12

From these claims are excluded claims arising out of the seizure of

the embassy and claims on binding contracts providing for dispute

resolution solely by Iranian courts. Again, the power to settle claims

includes the pow er to exclude certain claims from the settlement proc­

ess. Cf. Aris Gloves, Inc. v. United States, 420 F.2d 1386 (Ct. Cl. 1970).

Moreover, the exclusion is not intended to be a final settlement or

determination of these claims. I understand that the claims based on the

seizure will be given separate consideration, see note 10 supra. I note

also that the exclusion o f the claims on binding contracts that provide

the exclusive procedure for dispute resolution does not adversely affect

any option that these claimants would have had prior to the hostage

crisis and all the actions taken in response to it. These claimants are not

disadvantaged by the Claims Settlement Agreement; as to them, the

status quo as of the time that the hostages were taken is merely

preserved.

11 Art. XXI(2) provides:

Any dispute between the High Contracting Parties as to the interpretation or applica­

tion of the present Treaty, not satisfactorily adjusted by diplomacy, shall be submitted

to the International Court o f Justice, unless the High Contracting Parties agree to

settlement by some other pacific means.

Because the Treaty provides for peace and friendship between the two nations, trade and commercial

freedom, protection and security o f nationals, prom pt and just compensation for the taking o f

property, and the absence o f restrictions on the transfer o f funds, the disputes to be referred to the

Tribunal are disputes “as to the interpretation or application o f the . . . Treaty."

11Here again, your constitutional powers are supplemented by statute. S et note 9, supra.

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T he latter claims in the first category, the claims by Iranian nationals

against the United States, and also the official claims in the second

category by Iran against th e United States, are referrable to the Tribu­

nal for adjudication under the same authority. The President’s power to

refer these claims to binding arbitration as part o f an overall settlement

of our disputes with Iran is within the authority conferred on him by

the T reaty and the Hostage Act and is also within his sole authority

under A rticle II of the Constitution. Any award made by the Tribunal

against the United States w ould create an obligation under international

law. Such obligations have invariably been honored by the Congress in

our constitutional system.

T he rem ainder of the claims in this second category are official

claims o f the United States against Iran. The submission of the claims to

the Tribunal is a matter fo r the Executive’s sole determination in the

conduct of foreign relations.

Finally, jurisdiction over the third category o f claims, consisting of

disputes as to the interpretation or performance of the Declaration, is

appropriately conferred upon the Tribunal incident to the exercise of

the pow er to agree to the Declaration in the first instance.

F o r these reasons, I conclude that the United States may enter into

the international agreement and that you have legal authority to issue

all o f these documents and executive orders.

Respectfully,

B e n j a m i n R. C iv il e t t i

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