Following the recent Supreme Court decision in Bank Markazi v. Peterson – in which the Court held that § 8772 of the Iran Threat Reduction Act (“TRA”) did not violate separation of powers and thus certain assets held on behalf of Bank Markazi (Iran’s Central Bank) were subject to attachment and execution in aid of terrorism-related judgments held against Iran in U.S. courts – Iran threatened to bring suit against the United States before the International Court of Justice (“ICJ”) for acting in violation of a fundamental principle of international law that foreign sovereigns are immune from the jurisdiction of the courts of another. Last week, Iran made good on that threat and instituted suit against the United States before the ICJ.

Iran’s lawsuit is premised on the claim that the U.S. acted in violation of certain provisions of the 1955 Treaty of Amity, Economic Relations, and Consular Rights between the U.S. and Iran. (The 1955 Treaty of Amity, despite being observed only in the breach, has served as the jurisdictional basis for both the Case Concerning U.S. Diplomatic and Consular Staff in Tehran (1980) and the Oil Platforms Case (2003). Iran is reliant on the Treaty to establish jurisdiction before the ICJ because the U.S. revoked compulsory jurisdiction before the Court in 1986.) Moreover, Iran argues that certain provisions of the 1955 Treaty effectively incorporate the principle of sovereign immunities.

Most relevant to the theme of this blog, though, Iran is effectively challenging the legality of Executive Order 13599, which blocks the property and interests in property of the Government of Iran and Iranian financial institutions located within the United States or within the possession or control of a U.S. person, wherever located.  Executive Order 13599 survived the recent nuclear accord between the United States, other major world powers, and Iran, and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has created a separate EO 13599 List to ensure that U.S. persons are cognizant of their obligations to block the property of designated entities (or any other persons or entities regarded as Government of Iran or an Iranian financial institution) and to provide ease-of-use.

Specifically, in its lawsuit, Iran alleges that Executive Order 13599 breaches U.S. obligations under the 1955 Treaty of Amity by “fail[ing] to respect the right of [Iran and Iranian State-owned companies, including Bank Markazi] to acquire and dispose of property and [by] appl[ying] [] restrictions to such entities on the making of payments and other transfers of funds to or from the [United States].” In doing so, Iran contends, the U.S. has “interfer[ed] with the freedom of commerce” promised under the 1955 Treaty of Amity.  This is, fairly stated, a full-forced challenge to the legality of Executive Order 13599 under U.S. treaty obligations.

I will refrain from delving into the merits of Iran’s claim (at least until we see further pleadings), though I would note that certain provisions in the 1955 Treaty of Amity will provide the United States with a defense against such claim (e.g., Art. XX(1)(d), which states that the Treaty “shall not preclude the application of measures…necessary to protect its essential security interests.”).  While we should expect the United States to first challenge the jurisdiction of the Court to rule on the matter in the first instance, there is no doubt that the U.S. legal team will argue that the 1955 Treaty of Amity expressly permits the United States to take such measures — such as Executive Order 13599 — that it believes “essential” to its security interests.  Considering the fact that EO 13599 was issued under a finding of national emergency by the U.S. President, there is undoubtedly some credence to this view.  How the court deals with it — and if it even deals with it — will prove interesting viewing over the coming years.

Nonetheless, this is the first occasion that I can remember on which an international court will adjudicate the lawfulness of a U.S. blocking sanctions program.  The ICJ will do so by viewing the blocking program against U.S. treaty obligations.  Provided jurisdiction is established, the case will be remarkable for this feature alone.