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45 All Hearing Memorial1


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TABLE OF CONTENTS

INTRODUCTION........................................................................................................................ 2

SUMMARY OF ARGUMENT.................................................................................................... 2

FACTUAL BACKGROUND OF IRAN'S U.S. LITIGATION................................................. 5

I. Iran's Litigation Pursuant to Point IV of the General Declaration.................................... 5

A. Islamic Republic of Iran v. Mohammed Reza Pahlavi and Farah Diba Pahlavi, No. 22013/79 (N.Y. Sup. Ct.)...................................................................................................... 6

B. Islamic Republic of Iran v. Ashraf Pahlavi, No. 4432/80 (N.Y. Sup. Ct.).......... 11

C. Islamic Republic of Iran v. Fatemah Pahlavi and 59 Others, No. 81 Civ. 0186 (S.D.N.Y.) and No. 28127/81 (N.Y. Sup. Ct.).............................................................................. 12

D. Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.). 14

II. Iran's Other Litigation Relating to Pahlavi Assets........................................................... 18

A. Islamic Republic of Iran and Bank Mellat v. Shams Pahlavi, No. WEC 070089 (Cal. Super. Ct.)........................................................................................................................ 18

B. Bank Melli Iran & Bank Mellat v. Shams Pahlavi, No. 92-CV-5479 (C.D. Cal.) 19

ARGUMENT............................................................................................................................... 21

I. The United States Has Complied Fully with Its Paragraph 12 and 13 Obligations to Freeze and to Collect Information Concerning U.S. Assets Controlled by the Shah's Estate or His Close Relatives Served as a Defendant in U.S. Litigation......................................................................... 23

A. Under Paragraph 12 of the General Declaration, the Estate of the Shah and the Shah's Close Relatives Are Treated Identically......................................................................... 23

B. "Served as a Defendant" Should Be Given Its Ordinary Meaning Under U.S. Law.............................................................................................................................. 31

C. The Obligations to Freeze and Require Reports About Shah-Related Assets Are Explicitly Tied to Iran's Prosecution of U.S. Litigation to Obtain Those Assets................. 36

D. In Each Case Where Iran Served As a Defendant Either the Shah's Estate or a Close Relative, the United States Froze the Assets Controlled by that Defendant, Required Reporting, and Transmitted the Information to Iran .................................................................... 40

II. The United States has Complied Fully With Its Paragraph 14 Obligations to Facilitate Iranian Litigation in U.S. Courts.................................................................................................. 42

A. Paragraph 14 Does Not Require U.S. Courts to Provide Iran a Forum in which to Bring Lawsuits................................................................................................................ 44

1. Paragraph 14 Provides that the United States Will Facilitate Actions by Making Known to U.S. Courts that Suits Should Not Be Barred by Foreign Sovereign Immunity Principles or the Act of State Doctrine.................................... 44

2. Iran Has Not Identified a Single Instance in which the United States Failed to Make Known to an Appropriate U.S. Court that Iran's Claims Should Not Be Considered Legally Barred by Sovereign Immunity Principles or the Act of State Doctrine 49

B. The Refusal by a U.S. Court to Enforce Iranian Judgments or Decrees Does Not Violate the Accords Because Paragraph 14 Provides Only that U.S. Courts Shall Be Notified that Such Judgments and Decrees Should Be Enforced in Accordance with U.S. Law..... 50

III. Point IV of the General Declaration Does Not Incorporate, Either in Substance or in Spirit, the Fourth Condition of the November 1980 Majlis Resolution............................................ 54

CONCLUSION........................................................................................................................... 61

BEFORE THE

IRAN-UNITED STATES CLAIMS TRIBUNAL

The Hague

The Netherlands

_________________________________

)

Islamic Republic of Iran, )

)

Claimant, )

)

v. ) Case No. A/11

) Full Tribunal

United States of America, )

)

Respondent. )

_________________________________)

HEARING MEMORIAL AND EVIDENCE OF THE UNITED STATES

ON THE ISSUE OF LIABILITY

The Islamic Republic of Iran ("Iran") filed its Statement of Claim in this case on January 19, 1982 (Doc. 1). The United States filed its Statement of Defense on June 16, 1983 (Doc. 6). Two years later, on June 25, 1985, Iran filed its Reply (Doc. 58). The Rejoinder of the United States was filed on April 7, 1986 (Doc. 64). On September 13, 1993, the Tribunal issued an Order bifurcating these proceedings to separate liability from damages (Doc. 84). On September 14, 1995, Iran filed its Hearing Memorial and Evidence on the Issue of Liability (Doc. 105). In accordance with the Tribunal's Order of September 18, 1996, the United States submits its Hearing Memorial and Evidence on the Issue of Liability.
INTRODUCTION

In its Statement of Claim, Iran asserted that the United States violated certain of the obligations imposed by Point IV of the General Declaration of the Algiers Accords. Point IV consists of five paragraphs relating to "the Return of the Shah's Assets" (paragraphs 12 through 16). In this Hearing Memorial, we will demonstrate that the United States has complied with each of the obligations undertaken by it in Point IV. We will do so by looking first to the good faith interpretation of the ordinary meaning of the text of Point IV, in context and in light of its object and purpose. We will also look to the negotiating history of the Accords, and will provide the Tribunal with the affidavit of the United States' lead negotiator, Secretary of State Warren Christopher.[1]

SUMMARY OF ARGUMENT

In the Majlis Resolution of November 1980, the Majlis demanded that the United States confiscate and return to Iran the Pahlavi family assets. Throughout the negotiations leading to the conclusion of the Algiers Accords, the United States made clear that the United States Constitution prohibited the Executive Branch from unilaterally transferring such assets because only the courts acting independently could order the transfer of such property. The United States also made clear that Iran would have to undertake litigation to pursue its claims to any property located in the United States, but that the United States could not guarantee that Iran would be successful in its litigation. Iran then demanded a $10 billion guarantee against the chance that it might lose in its litigation. The United States refused to make that guarantee because it would have been akin to paying ransom for the release of the hostages. Ultimately, Iran agreed to take its chances in U.S. courts, and the United States agreed to provide the assistance specified in Point IV of the General Declaration.

In this case, Iran seeks to obtain what it tried but failed to obtain during the negotiation of Point IV of the General Declaration: a guarantee by the United States of the return to Iran of the alleged wealth of the late Shah and his family. Point IV contains no such guarantee or obligation. Instead, Point IV requires Iran to undertake certain specific actions to initiate and prosecute U.S. litigation to recover the assets of the Shah's estate and the Shah's close relatives. The United States' obligations under Point IV are directly tied to steps Iran must first take in its U.S. litigation. Until Iran accomplishes these steps, none of the Point IV obligations of the United States is triggered.

Only after Iran takes the necessary steps to litigate its claims to the late Shah's wealth (and that of his family) in U.S. courts are the United States' obligations triggered. These obligations are specific and carefully circumscribed: under Paragraphs 12 and 13, the United States is obligated to freeze and require reporting about "property and assets in the United States within the control of the estate of the former Shah or of any close relative of the former Shah served as a defendant in U.S. litigation brought by Iran to recover such property and assets as belonging to Iran." (General Declaration ¶ 12.)

The record demonstrates that the United States lived up to its obligations. In each instance where Iran brought litigation to recover such property and assets, and served as a defendant the estate of the former Shah or any close relative of the former Shah, the United States implemented a freeze as to that property and those assets. In each such instance, the freeze order remained in effect until such litigation was finally terminated, as required by Paragraph 12. Likewise, in each instance the reporting requirements of Paragraph 13 were properly implemented and the information gathered by the United States was transmitted to Iran.

The obligations imposed by Paragraph 14 were also properly carried out by the United States. Under Paragraph 14, the United States agreed to make known to appropriate U.S. courts that Iran's claims should not be barred either by sovereign immunity principles or by the act of state doctrine, and that Iranian decrees and judgments relating to Pahlavi assets should be enforced by U.S. courts in accordance with U.S. law. The United States fully complied with its Paragraph 14 obligations by notifying U.S. courts in every case in which Iran requested such a statement. Moreover, not a single U.S. court ever held that Iran's litigation was barred either by sovereign immunity principles or by the act of state doctrine. Further, as provided in Paragraph 14, the U.S. courts properly applied U.S. law to Iran's litigation to enforce domestic Iranian judgments and decrees.

The United States met each of its Point IV obligations. Now that Iran has failed in its U.S. litigation efforts -- an outcome that both sides knew was possible, but the risk of which was undertaken by Iran -- Iran is asking this Tribunal to shift Iran's burden to the United States. Iran is effectively seeking the guarantee that it failed to obtain in Point IV. Its claim should be dismissed.

FACTUAL BACKGROUND OF IRAN'S U.S. LITIGATION

I. Iran's Litigation Pursuant to Point IV of the General Declaration.

After claiming that the late Shah and his family had billions of dollars of stolen assets located in the United States,[2] the United States is aware of only four lawsuits filed by Iran to recover any of these assets.[3] All four lawsuits have been finally terminated; Iran failed to secure a judgment against any of the defendants. The procedural history of each of the lawsuits is described below.

A. Islamic Republic of Iran v. Mohammed Reza Pahlavi and Farah Diba Pahlavi, No. 22013/79 (N.Y. Sup. Ct.)

Iran filed this case against the Shah and the Empress on November 28, 1979, in the Supreme Court, County of New York.[4] When Iran attempted to serve the defendants, both contested service -- i.e., asserted that the court lacked jurisdiction because they had not been served in accordance with applicable law.[5] (Notice of Motion and Memorandum in Support of Defendants' Motion to Dismiss, Islamic Republic of Iran v. Mohammed Reza Pahlavi and Farah Diba Pahlavi, No. 22013/79 (N.Y. Sup. Ct.) (Jan. 10, 1980), attached as Exhibit 4.) In the same motion, the defendants also sought to dismiss the case based on the doctrine of forum non conveniens.[6]

In July 1980, the Shah died in Egypt. (Doc. 6, Statement of Defense at Exhibit 23.) On September 5, the United States requested the Court to stay all proceedings in order to avoid prejudicing efforts to resolve the hostage crisis. The Court granted a stay, and proceedings recommenced only after the Accords entered into force in January 1981.

On March 16, 1981, at a hearing to schedule further proceedings, the Court for the first time considered the effect of the Shah's death on the lawsuit, and invited Iran to apply to the Court for the appointment of an administrator who could appear in the lawsuit on behalf of the Shah's estate.[7] (Doc. 6, Statement of Defense at Exhibit 8.) Iran understood the requirements of New York law and, in March of 1981, petitioned the court in which the action against the Shah was pending to appoint an administrator to represent the Shah's estate. (Doc. 6, Statement of Defense at Exhibit 9.) In its papers, Iran asserted that "it will be impossible for the Government of the United States to carry out its obligations in the instant case unless a representative is appointed to represent the decedent." (Id., ¶ 14.) Iran's representative described this circumstance as a "compelling reason for the appointment of a representative of the estate". (Id., ¶ 12.) Iran's position in 1981 was thus consistent with the U.S. position: the United States' obligation to freeze the assets under the control of the estate of the Shah was dependent upon Iran prosecuting litigation against the estate of the Shah.

Shortly after proceedings resumed, Iran requested the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) to freeze the assets of the Shah's estate and of Farah Diba Pahlavi. (Doc. 1, Statement of Claim at Exhibit 7.) OFAC, however, declined to freeze or gather information concerning the assets because service remained contested by Farah Diba Pahlavi, and service had not even been attempted on the Shah's estate.

Ultimately, the New York trial court dismissed the case on the basis of forum non conveniens, i.e., that New York was not an appropriate forum to litigate Iran's claims, because, the court found, "this case has no connection with New York and none is alleged, save for the suggestion that the Shah deposited funds in banks located in this State." (Doc. 6, Statement of Defense at Exhibit 15.) The court went on to deny the request for appointment of an administrator for the Shah's estate because the evidence submitted was "wholly inadequate to establish that the Shah owned any property of any kind within this jurisdiction

. . ." (Id.) In the same order, the Court rejected Farah Diba Pahlavi's challenge to service of process.

Iran appealed the decision on the forum non conveniens dismissal, and the Empress appealed the determination that service had been proper. (Doc. 58, Reply at Exhibit 7.) Iran did not, however, appeal the decision not to appoint an administrator. Both the New York state intermediate court of appeal and the New York Court of Appeals (the highest New York state appeals court) affirmed the dismissal on forum non conveniens grounds. The New York Court of Appeals also dismissed Iran's appeal as to the late Shah because no party defendant had been substituted for him. Neither appellate court reached the service issue raised by the Empress. The United States Supreme Court denied review on January 7, 1985.

After the New York state trial court denied its petition to appoint an administrator to represent the Shah's estate, Iran filed a similar petition for appointment of an administrator with the Surrogate Court in New York.[8] After a careful review of the evidence presented by Iran, the Surrogate Court found that Iran

has not made sufficient allegations to warrant the appointment of an administrator. Most of the allegations contained in the petition are a rehash of claims submitted to the Supreme Court and found lacking there. None of the allegedly new material forms the basis for a claim that the decedent had property here. . . . the decedent was a non domiciliary who, after leaving Iran, spent more time in Mexico, Panama and Egypt than he did in New York [citation omitted]. The petition indicates that the distributees of the decedent are residents of Egypt and Switzerland.

(Doc. 64, Rejoinder at Exhibit 2.) Once again, Iran failed to appeal this decision.[9]

Iran's failure to appeal either of the decisions to deny the appointment of a representative for the estate of the Shah allowed these decisions to become final.[10] Iran should be bound by the factual determinations -- made by two independent courts -- that the evidence submitted by Iran did not show that the Shah, at his death, owned any property in New York.

Because Iran failed to show that there was any property of the late Shah's remaining in New York, no administrator was ever appointed, and no estate was ever constituted. Without the appointment of an administrator to represent the estate, and service of the estate as a defendant, the United States' obligations as to property controlled by the estate (if the estate controlled any property) were never triggered.

B. Islamic Republic of Iran v. Ashraf Pahlavi, No. 4432/80 (N.Y. Sup. Ct.)

On February 25, 1980, Iran filed suit against Ashraf Pahlavi, the sister of the Shah, in the Supreme Court, County of New York. These proceedings were stayed from October 1980 through February 1981. (Doc. 58, Reply at Exhibit 8.) In March 1981 Iran informed the U.S. Government that Ashraf Pahlavi had filed a motion to dismiss, but had not contested the effectiveness of service. (Letter from Paul O'Dwyer to Dennis M. O'Connell (Mar. 19, 1981), attached as Exhibit 5.) Because Ashraf Pahlavi had been "served as a defendant," in May 1981 OFAC froze Ashraf Pahlavi's assets and instituted the reporting requirements of Paragraph 13.[11] (Doc. 6, Statement of Defense at Exhibits 6, 7.) Iran admits that the information reported to the Treasury was transmitted to it. (Doc. 58, Reply at 26.)

In November 1982, the Supreme Court, County of New York rejected Ashraf Pahlavi's motion to dismiss. (Doc. 58, Reply at Exhibit 8.) Ashraf Pahlavi appealed and, in March 1984, the New York Appellate Division reversed the lower court and dismissed the case on the basis of forum non conveniens. (Id.) The New York Court of Appeals affirmed the dismissal. (Doc. 64, Rejoinder at Exhibit 3.) As required by the Accords, the freeze on Ashraf Pahlavi's assets remained in place until the litigation was finally terminated. (See General Declaration, ¶ 12.) At that time, the freeze was dissolved. (Iranian Assets Control Regulations, 56 Fed. Reg. 40552 (Aug. 15, 1991), attached as Exhibit 6.)

C. Islamic Republic of Iran v. Fatemah Pahlavi and 59 Others, No. 81 Civ. 0186 (S.D.N.Y.) and No. 28127/81 (N.Y. Sup. Ct.)

On January 13, 1981, Iran filed suit against 60 relatives of the late Shah in the Federal District Court for the Southern District of New York. (Civil Court Cover Sheet, Islamic Republic of Iran v. Fatemah Pahlavi and 59 Others, No. 81 Civ. 0186 (S.D.N.Y.) (Jan. 13, 1981), attached as Exhibit 7.) On December 15, 1981, Iran voluntarily dismissed the case of its own accord. (Notice of Dismissal, Islamic Republic of Iran v. Fatemah Pahlavi and 59 Others, No. 81 Civ. 0186 (S.D.N.Y.) (Dec. 15, 1981), attached as Exhibit 8.)[12] On that same date, Iran filed suit, naming the same defendants, in the Supreme Court, County of New York. Iran failed to serve any of the defendants, but attempted to accomplish substitute service by publication. (See Doc. 64, Rejoinder at Exhibit 4.) In December 1982, one of the defendants, Gholam Reza Golsorkhi, moved to vacate the attempted service by publication and to dismiss the complaint for lack of jurisdiction. Although not raised as a defense by the defendant, the court sua sponte dismissed the case based upon forum non conveniens, following the reasoning of the previous dismissals in the cases against the Shah and Ashraf Pahlavi. (Id.) No appeal was taken by Iran, no defendant was ever effectively served, and no freeze was ever instituted.

D. Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)

On June 30, 1981, Iran filed suit against Shams Pahlavi in Los Angeles Superior Court.[13] (See Doc. 58, Reply at Exhibit 10.) In December 1981, Iran received an ex parte order permitting service by publication. In April 1982, Shams Pahlavi filed a motion challenging the sufficiency of service. On June 7, 1982, counsel for Iran requested OFAC to freeze the assets of Shams Pahlavi in light of the two cases pending in California. (Doc. 58, Reply at Exhibit 12.) Because service was contested by Shams Pahlavi, OFAC did not freeze her assets. (Doc. 58, Reply at Exhibit 13.)

In December 1990, after numerous delays and appeals by both sides, the California courts ultimately determined that Iran had served Shams Pahlavi as a defendant. (Doc. 105, Iran's Hearing Memorial at 48.) However, counsel for Iran delayed a further six months before, on June 7, 1991, it notified OFAC that the courts had determined Shams Pahlavi had been served, and requested that OFAC freeze the assets of Shams Pahlavi. (Letter from Steven D. Atkinson to Loren Dohm (June 7, 1991), attached as Exhibit 9.) Within two months, on August 15, 1991, OFAC imposed a freeze on Pahlavi's assets and implemented the reporting requirements of Paragraph 13. (See Exhibit 6.)

In June 1991, the Superior Court issued an Order requiring Iran to post an $80,000 bond.[14] (Minute Order of Judge Irving Shimer,[15] Islamic republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)(June 20, 1991), attached as Exhibit 11.) In August 1991, Iran amended its complaint to include a claim that the court should recognize and enforce against Shams Pahlavi's assets in the United States a 1979 Iranian decree confiscating from the Pahlavi family all assets allegedly taken from Iran.

Iran requested that the United States file a Suggestion of Interest making known to the court both that the Iranian decree should be enforced in accordance with U.S. law and that Iran should not be required to post the bond. (Letter from Patrick A. Gunn to Michael Dennis (Aug. 6, 1991), attached as Exhibit 12.) On September 27, 1991, the United States filed a Suggestion of Interest stating that Paragraph 14 of the General Declaration provides that Iran may seek to enforce Iranian decrees in United States courts in accordance with U.S. law. (Doc. 105, Iran's Hearing Memorial at Exhibit 4.) Although not required by Point IV, the Suggestion of Interest further indicated that Iran should not be required to post a bond in its litigation.

In March 1991, Shams Pahlavi, in accordance with U.S. law, sought discovery[16] from Iran by filing a Request for Production of Documents in connection with issues raised by the Iranian decree, including authentication and production of the decree itself. Iran refused to comply with Shams Pahlavi's discovery request, and, in accordance with applicable law, Shams Pahlavi filed a motion for an order to compel discovery in May 1992.

On May 7, 1992, counsel for Iran again contacted the Department of State with a request for a Suggestion of Interest indicating that the Algiers Accords precluded the California court from issuing discovery orders. (Letter from Patrick A. Gunn to Michael Dennis and Paul D. Scott (May 7, 1992), attached as Exhibit 13.) The United States declined to file such a statement. In June 1992 -- in accordance with U.S. law -- the Court granted Shams Pahlavi's request for an order compelling discovery in connection with issues raised by the Iranian decree. (Minute Order of Judge Irving Shimer, Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)(June 2, 1992), attached as Exhibit 14.)

After Iran again refused to comply with the court's order, Shams Pahlavi filed a motion to dismiss the action. (Notice of Motion to Dismiss, Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)(Aug. 20, 1992), attached as Exhibit 15.) The trial court granted the motion to dismiss for Iran's failure to comply with the discovery order. (Judgment, Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)(Sept. 17, 1992), attached as Exhibit 16.) The lower court's judgment was affirmed on appeal by the California Court of Appeals and review was denied by the California Supreme Court. (Islamic Republic of Iran v. Shams Pahlavi, No. 8072484 (Cal. Ct. App. Mar. 9, 1994), attached as Exhibit 17; Islamic Republic of Iran v. Shams Pahlavi, No. S039302 (Cal. June 30, 1994), attached as Exhibit 18.) The litigation was finally terminated on November 14, 1994 upon the denial by the United States Supreme Court of Iran's request for review. (See Exhibit 19.)

II. Iran's Other Litigation Relating to Pahlavi Assets.

The United States is aware of two other cases in which Iran brought actions against Shams Pahlavi in connection with her alleged failure to repay commercial loans taken from Iranian banks. As discussed in more detail below, these two cases do not fall within the description of litigation covered by Point IV. We include them here because Iran has relied upon these cases in its Hearing Memorial.

A. Islamic Republic of Iran and Bank Mellat v. Shams Pahlavi, No. WEC 070089 (Cal. Super. Ct.)

On July 30, 1981, Iran and Bank Mellat filed a breach of contract complaint against Shams Pahlavi in California Superior Court. According to Iran's complaint, Shams Pahlavi had defaulted on a contract obligation to repay $5,000,000 to Bank Mellat by September 30, 1981. (Complaint, Islamic Republic of Iran and Bank Mellat v. Shams Pahlavi, No. WEC 070089 (Cal. Super. Ct.)(July 30, 1981), attached as Exhibit 20.) This case is plainly outside the litigation described in Point IV. It was not "litigation brought by Iran to recover such property and assets as belonging to Iran." (General Declaration, ¶ 12.) Instead, it was an attempt to recover on a contract claim based upon a loan made by an Iranian bank. Under Point IV, the United States did not undertake any obligations with respect to contract claims brought by Iran. This case was ultimately dismissed on forum non conveniens grounds.

B. Bank Melli Iran & Bank Mellat v. Shams Pahlavi, No. 92-CV-5479 (C.D. Cal.)

In September 1992, Bank Melli and Bank Mellat brought suit against Shams Pahlavi in the United States District Court for the Central District of California to enforce various Iranian court judgments dating from 1982 and 1986 against Shams Pahlavi. (Complaint to Obtain Domestic Judgment, Bank Melli Iran & Bank Mellat v. Shams Pahlavi, No. 92-CV-5479 (C.D. Cal.)(Sept. 9, 1992), attached as Exhibit 21.)[17] This case is also plainly outside the litigation described in Point IV. As an action based upon a contract claim, it was not "litigation brought by Iran to recover such property and assets as belonging to Iran." (General Declaration, ¶ 12.) Further, it was not an action to enforce "Iranian judgments or decrees relating to" assets located in the United States allegedly belonging to Iran. (Id., ¶ 14.)

Shams Pahlavi responded by filing a motion to dismiss the complaint on the grounds, inter alia, that the Iranian judgments were obtained without due process of law because she would not have received a fair trial in Iran. (Notice of Motion and Motion to Dismiss Complaint, Bank Melli Iran & Bank Mellat v. Shams Pahlavi, No. 92-CV-5479 (C.D. Cal.)(Feb. 11, 1993), attached as Exhibit 22.) In support of her motion, Shams Pahlavi appended reports from the United States Department of State which made generalized statements concerning the judicial system in the Islamic Republic of Iran. (Id.) In response, the banks objected to the due process inquiry and maintained that Iranian courts adjudicated Shams Pahlavi's cases through processes consistent with United States fair trial standards.

The trial court requested comment on the due process issue from the United States Department of State. The Department responded to the trial court's inquiry by sending the court additional generalized reports as well as a declaration from the former Director of the Department's Office of Northern Gulf Affairs concerning the judicial system in the Islamic Republic of Iran. (Doc. 105., Iran's Hearing Memorial at Exhibit 8.) On January 10, 1994, the trial court granted summary judgment against the banks, holding that Shams Pahlavi could not receive a fair trial in Iranian courts and that therefore the Iranian judgments and decrees could not be enforced against Shams Pahlavi in accordance with U.S. law. (Order Granting Defendant's Motion to Dismiss, Bank Melli Iran & Bank Mellat v. Shams Pahlavi, No. 92-CV-5479 (C.D. Cal.)(Jan. 10, 1994), attached as Exhibit 23.) This decision was affirmed on appeal. (Bank Melli Iran & Bank Mellat v. Shams Pahlavi, 58 F.3d 1406 (9th Cir. 1995), attached as Exhibit 24.) The United States Supreme Court denied the banks' request for review. (See Exhibit 25.)

ARGUMENT

This Tribunal has repeatedly recognized that the touchstone for interpreting the Algiers Accords is Article 31(1) of the Vienna Convention on the Law of Treaties,[18] which provides that a treaty shall be "interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."[19] In applying the Vienna Convention to the Algiers Accords, the Tribunal has further recognized that, because Iran and the United States negotiated the Accords through intermediaries, "[t]he terms themselves should be given primary weight in the analysis of the text." United States v. Iran, DEC No. 37-A17-F, ¶ 9, reprinted in 8 Iran-U.S. C.T.R. 189, 200-201 (May 13, 1985). Applying the familiar standards of Article 31(1) to the text of Point IV demonstrates that the United States' obligations are explicitly tied to Iran's efforts to transfer property from the Shah and his family through U.S. litigation. Further, the facts -- which are largely undisputed -- establish that the United States has complied with each of the obligations imposed by Point IV.

To avoid the import of these facts, Iran has attempted to transform the U.S. obligations under Point IV in five different ways. First, despite the ordinary meaning of the text, Iran argues that the Shah's assets are treated differently than the assets of the Shah's close relatives. Second, Iran argues that the phrase "served as a defendant" should be interpreted to mean attempted to serve as a defendant. Third, Iran asserts that the reporting requirements of Paragraph 13 are unrelated to Iran bringing litigation in U.S. courts. Fourth, Iran argues that the United States agreed that U.S. courts would hear Iran's claims to enforce domestic Iranian judgments and decrees without reference to U.S. law. Finally, Iran argues that the United States agreed to guarantee the return to Iran of the Shah's assets. Each of Iran's contentions is belied by the good faith interpretation of the ordinary meaning of the text of Point IV, in context and in light of its object and purpose. To the extent that there might be any ambiguity, both the negotiating history and the parties' conduct immediately after the Accords entered into force reinforce the ordinary meaning textual analysis.

I. The United States Has Complied Fully with Its Paragraph 12 and 13 Obligations to Freeze and to Collect Information Concerning U.S. Assets Controlled by the Shah's Estate or His Close Relatives Served as a Defendant in U.S. Litigation.

The United States has complied fully with its Paragraph 12 and 13 obligations to freeze and to collect information concerning U.S. assets controlled by the Shah's estate or his close relatives served as a defendant in U.S. litigation. As described below, upon the making of the certification described in Paragraph 3 of the General Declaration that the hostages had been released from Iran,[20] the United States undertook to freeze and to collect information concerning such assets whenever Iran served as a defendant either the Shah's estate or his close relatives in litigation of the sort described in Paragraph 12.

A. Under Paragraph 12 of the General Declaration, the Estate of the Shah and the Shah's Close Relatives Are Treated Identically.

The ordinary meaning of the text of Paragraph 12 supports the conclusion that the Shah's estate and the Shah's close relatives are treated identically -- i.e., that either must be served as a defendant to trigger the freeze and information gathering requirements. This similar treatment is clearly reflected in the language of Paragraph 12: the obligations as to the property of the Shah's estate and the property of the Shah's close relatives are dependent upon Iran having "served as a defendant" either the Shah's estate or the close relative, as the case might be. Thus, Paragraph 12 provides that:

. . . the United States will freeze, and prohibit any transfer of, property and assets in the United States within the control of the estate of the former Shah or of any close relative of the former Shah served as a defendant in U.S. litigation brought by Iran to recover such property and assets as belonging to Iran. As to any such defendant, including the estate of the former Shah, the freeze order will remain in effect until such litigation is finally terminated. . . .

The ordinary meaning of the first sentence is that the United States will freeze property controlled by the estate of the Shah or a close relative only after the estate or the close relative has been served as a defendant.

The second sentence in Paragraph 12 leaves no doubt that the "served as a defendant" language in the first sentence applies to both the Shah's estate and the Shah's close relatives: "As to any such defendant, including the estate of the former Shah, the freeze order will remain in effect until such litigation is finally terminated." (Emphasis added.) Plainly, the phrase "such defendant, including the estate of the former Shah" refers to the "served as a defendant" phrase in the first sentence -- the Shah's estate could not be a defendant unless it had been served. Further, the last phrase of the second sentence of Paragraph 12 also explicitly ties the freeze obligations to litigation: "the freeze will remain in effect until such litigation is finally terminated." Thus, interpreting Paragraph 12 by looking to the ordinary meaning of its terms leads to the conclusion that the "served as a defendant" requirement applies to both the estate of the former Shah and the Shah's close relatives.

The context of Paragraph 12 -- the remainder of Point IV -- reinforces this interpretation. Like Paragraph 12, the remainder of the Point IV obligations treats litigation involving the Shah's estate and litigation involving the Shah's close relatives in the same manner. Paragraphs 14 and 15 make no distinction between the Shah's estate and the Shah's close relatives. Instead, the United States' obligations in Paragraph 14 (to inform U.S. courts that neither sovereign immunity nor act of state would bar Iran's claims, and that Iranian decrees and judgments relating to assets allegedly belonging to Iran should be enforced in accordance with U.S. law) apply to "any litigation of the kind described in Paragraph 12". The United States' obligation in Paragraph 15 (to guarantee enforcement of final U.S. court judgments relating to the Shah or his family's assets to the extent that property or assets exist in the United States) applies to any final judgment.

The object and purpose of Point IV -- to create a mechanism whereby Iran could receive a measure of United States' assistance in its efforts to pursue allegedly stolen assets in U.S. litigation -- also confirms the ordinary meaning of the terms of Paragraph 12. In order to pursue its claims to the assets of the Shah's estate or the Shah's family, Iran had to pursue litigation. In order to pursue litigation, Iran had to serve as a defendant the person or entity that controlled the property it sought to recover.

To the extent that there is any ambiguity in Paragraph 12, the negotiating history of the Accords (i.e., the preparatory work) confirms that the phrase "served as a defendant" applies to both the estate of the Shah and the Shah's close relatives.[21] One of the United States' interests was to ensure that those from whom Iran sought assets would receive due process in U.S. courts. As Secretary Christopher explains in his affidavit, "we stressed [to the Algerians] that litigation brought by Iran to recover such assets would be subject to all traditional elements of Constitutional due process, and particularly stressed the need to afford due process guarantees to defendants in such U.S. litigation." (Exhibit 1, Christopher Affidavit, ¶ 11.) This concern applied equally to the Shah's estate and the Shah's close relatives; thus, the U.S. negotiators sought to ensure that the Shah's estate and the Shah's close relatives were treated equally under Point IV. (Id., ¶ 16.) Moreover, Iran's interests were the same for both the Shah's estate and the Shah's close relatives: to recover assets allegedly belonging to Iran. (Majlis Resolution, ¶ 4.)

Further, when the U.S. initially responded to the Majlis Resolution, it only discussed blocking property under the control of the Shah's estate. When Iran objected, noting that the close relatives were not mentioned, the United States indicated that it was willing to treat the property of the close relatives in the same manner as the property of the Shah's estate. (Doc. 6, Statement of Defense at Exhibit 4.) Secretary Christopher confirms that, "[a]s we discussed with the Algerians, under this paragraph it was our intention, in terms of the requirement of service of process, that both the estate of the Shah and the close relatives of the Shah would be treated identically. In both cases, the defendants (the estate or the close relatives) had to be served in accordance with U.S. law in order to provide due process and to trigger any obligation to block assets." (Exhibit 1, Christopher Affidavit, ¶ 16.) Likewise, Secretary Christopher explains that "in Paragraph 13 of the General Declaration, the United States undertook only to collect information on 'property and assets referred to in Paragraph 12' -- meaning, once service had been effected, property and assets in the control of the Shah's estate or of any close relative so served." (Id., ¶ 26.)

Despite the straightforward language used in Paragraph 12, Iran argues that the United States undertook differing obligations in relation to the property in control of the estate of the Shah and the property in control of the Shah's close relatives. Iran concedes, as it must, that the phrase "served as a defendant" applies to the Shah's close relatives,[22] but asserts that the estate of the Shah would not have to be served prior to the implementation of a freeze on assets controlled by it. In its attempt to disconnect the service requirement from the Shah's estate, Iran does not rely upon the ordinary meaning of Paragraph 12. Instead, Iran attempts a convoluted parsing of the text that is neither ordinary nor persuasive.[23] (Doc. 58, Reply at 50-53; Doc. 105, Iran's Hearing Memorial at 9-12.) To bolster its argument, Iran relies upon the initial offers made by the United States at the outset of the negotiations. (Doc. 105, Iran's Hearing Memorial at 35-36.) Iran argues that, because the United States initially offered to initiate a freeze as to the Shah's assets -- without any express link to Iran's prosecuting litigation in U.S. courts -- that the Accords must be read to incorporate that position.

It is undisputed, however, that Iran rejected the U.S. offer to impose a freeze in the manner suggested in the draft Executive Orders of November 10 and December 3, 1980. This Tribunal should not countenance Iran's blatant attempt to rewrite the Accords to incorporate a requirement that Iran rejected, and that was not included in the Accords. In his affidavit, Secretary Christopher describes the evolution of the U.S. position on this point:

In late December, as noted above, the Iranian side indicated that it no longer wished to negotiate on the basis of draft Executive Orders, at which point the U.S. team decided to proffer certain "declarations" that could be issued by the Algerians and adhered to by both sides (thus avoiding the difficulty created by Iran's refusal to sign an agreement that would also be signed by the United States). Obviously we realized that the new General Declaration would have to deal in some fashion with the problem of the Shah's assets, but in drafting that declaration we decided to take a new approach that differed from that taken during our original (and rejected) Executive Order approach. Realizing how important it was that Iran recognize the principle that only the U.S. Judicial Branch (not the Executive Branch) could bring about a transfer of assets controlled by the estate of the late Shah or his family, our draft of the General Declaration took the position that the U.S. Executive Branch would take action with respect to those assets only in the context of litigation initiated by Iran in the U.S. courts. We clearly explained this new position to the Algerians when we discussed Point IV of the General Declaration with them.

(Exhibit 1, Christopher Affidavit, ¶ 12.) Secretary Christopher's testimony thus supports and confirms the textual analysis of Paragraph 12.

Significantly, this interpretation has consistently been the position of the United States -- commencing with its adherence to the Accords, and long before Case No. A/11 was filed. On February 1, 1981, less than two weeks after the entry into force


of the Accords, Secretary Christopher, in testimony before the U.S. Congress, indicated that

the Shah's estate and the property of his close relatives will have the full protection of due process of law with respect to claims against their properties by Iran.

It is true that under the declarations the United States has agreed to take certain actions in connection with lawsuits brought by Iran involving the Shah's wealth, but these commitments are carefully limited, carefully circumscribed.

Statement of Hon. Warren M. Christopher, Hearings Before the House Comm. on Foreign Affairs, 97th Cong., 1st Sess. 141 (Feb. 19, 1981)(emphasis added), attached as Exhibit 26.

Likewise, Secretary Christopher explained that "the requirement for the disclosure of information regarding the property of the former Shah or his family arises only upon the commencement of litigation and the proper service of defendants" in litigation brought to recover such property and assets as belonging to Iran. Id. at 142 (emphasis added). These statements by the United States' lead negotiator -- long before any dispute arose between the parties, and immediately following the entry into force of the Accords -- provide significant evidence of the intention of the parties.

Interpreting in good faith the ordinary meaning of the text of Paragraph 12, in context and in light of its object and purpose, leads to the inevitable conclusion that the Shah's estate and the close relatives were treated equally: either had to be served as a defendant before the obligations of the United States were triggered. To the extent that there might be any ambiguity, the negotiating history confirms this conclusion. Before any freeze obligation arose as to any property, the person or entity in control of that property had to be "served as a defendant" in litigation brought by Iran to recover that property as belonging to it.

B. "Served as a Defendant" Should Be Given Its Ordinary Meaning Under U.S. Law.

The ordinary meaning of "served as a defendant" can only be its meaning under U.S. law, because the litigation contemplated by Point IV is litigation brought by Iran in U.S. courts. The phrase "served as a defendant" is a commonly used term of art.[24] "Served" means delivering documents according to the statutory mandate so that notice is provided to the defendant, and jurisdiction over that defendant is obtained by the court. Mullane v. Central Hanover Bank and Trust, 339 U.S. 306, 314 (1950); Attwell v. LaSalle Nat. Bank, 607 F.2d 1157 (5th Cir. 1979), cert. denied, 445 U.S. 954 (1980). The court has no power to adjudicate a claim against a defendant unless it has jurisdiction over him. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969).[25]

In support of its argument that "served as a defendant" means "attempted" to serve as a defendant, Iran argues that the service requirement was only meant to "name" those close relatives whom Iran believed possessed stolen assets. Iran contends that once an individual was "named" as a defendant, the freeze obligations would be triggered. (Doc. 105, Iran's Hearing Memorial at 20-22.) This argument must be rejected because it is contrary to the most basic application of Article 31 of the Vienna Convention: it is not a good faith reading of the ordinary meaning of "served as a defendant" in the context of the Accords. If the parties had meant to condition the United States' obligations on merely naming persons as defendants, they could have said so. They did not. Rather, the parties agreed that before any freeze obligations were triggered, Iran had to do more than just name defendants -- it had to serve them.

It is significant that, in its entire discussion of the meaning of "served as a defendant" in its Hearing Memorial, Iran fails to cite any U.S. law. Plainly, the phrase must be interpreted according to U.S. law -- both the text of Paragraph 12 and the context of Point IV support this conclusion. Until Iran served the estate of the Shah as a defendant, no U.S. obligations as to the property controlled by the estate arose. Similarly, as Iran concedes, until Iran served a close relative of the Shah as a defendant, no Point IV obligations arose as to property controlled by that close relative. Under U.S. law, one is not "served as a defendant" unless all of the requirements for service are met; attempted service will not suffice.

Secretary Christopher's testimony confirms this interpretation:

In [his 1995] affidavit, Mr. Nabavi also states that the Iranian negotiators "did not have the slightest impression that the freeze of property and assets of the Pahlavi family would be in any way related, including the requirement of bringing litigation and service of process, to the U.S. judiciary." (1995 Affidavit, at pp. 16-17.) To the contrary, we made clear to our Algerian intermediaries that such lawsuits must be initiated and such service effected before the freeze obligation would operate. As I noted above, we knew that Iran had experienced U.S. counsel to advise them, and we assumed that Iran understood the significance of the legal terms included in the General Declaration. "Served as a defendant" means what it says -- i.e., effectively served in accordance with U.S. law. "Served as a defendant" does not mean, as Mr. Nabavi would have it, attempted to serve as a defendant. This is clearly reflected in the final text of Paragraph 12.

(Exhibit 1, Christopher Affidavit, ¶ 23.)

Indeed, Iran goes so far as to assert, citing Mr. Nabavi's testimony, that the clause "served as a defendant" in Paragraph 12 "had neither been discussed nor mentioned in any of the written or oral communications of the parties" (1995 Nabavi Supplementary Affidavit at 20, Doc. 105, Iran's Hearing Memorial at Exhibit 1), and appeared for the first time in the final text of the Algiers Accords. (Doc. 105, Iran's Hearing Memorial at 35.) This assertion is wrong. The phrase "served as a defendant" appeared in the first draft declaration provided to Iran through the Algerians on December 30, 1980, and the final language agreed to by the parties in Point IV is identical to that which appeared in the first draft. (Affidavit of Roberts B. Owen, attached as Exhibit 27.)

In this connection, Mr. Nabavi further asserts that Iran "trusted that the text of the Algiers Declarations written by the United States would simply memorialize the parties' agreements . . ." (Doc. 105, Iran's Hearing Memorial at 35.) Mr. Nabavi's testimony is not credible.[26] Surely Mr. Nabavi is not asking this Tribunal to believe that Iran never read Point IV or the Declarations prior to adhering to them. In fact, the Tribunal has already tacitly rejected Mr. Nabavi's theory by holding that, because the Accords were (at Iran's insistence) negotiated by intermediaries, "[t]he terms themselves should be given primary weight in the analysis of the text." United States v. Iran, DEC No. 37-A17-FT, ¶ 9, reprinted in 8 Iran-U.S. C.T.R. 189, 200-201 (May 13, 1985).

Moreover, Iran was well aware of the significance of service during the negotiations that led to the issuance of the Accords. Both the Shah and the Empress had challenged service in the case brought by Iran and pending in New York. (Doc. 105, Iran's Hearing Memorial at 44.) Further, Iran was no stranger to litigation in U.S. courts. At the time the Accords were adhered to, Iran was involved in more than 400 lawsuits pending in U.S. courts. (See Doc. 1132, Claimant's Consolidated Submissions, Case No. A/15(Part IV), at Exhibit 1 (Affidavit of Thomas G. Shack)(Feb. 16, 1993); see also Doc. 1224, A Brief Response to Respondent's Consolidated Final Response (Doc. 1195), Case Nos. A/15(Part IV) and A/24, at attached Affidavit of Counsel (Mar. 31, 1993).) Indeed, Iran itself had, in some of those cases, challenged service.[27] As noted by Secretary Christopher, Iran was advised by experienced, competent U.S. counsel. (Exhibit 1, Christopher Affidavit, ¶ 18.) For Iran now to assert that it was somehow surprised by the idea that service necessitates conformance with U.S. requirements for effective service is not only disingenuous, it is not credible.

C. The Obligations to Freeze and Require Reports About Shah-Related Assets Are Explicitly Tied to Iran's Prosecution of U.S. Litigation to Obtain Those Assets.

As we have demonstrated in sections A and B, supra, the ordinary meaning of the text of Paragraph 12 explicitly conditions the operation of the United States' freeze of assets upon Iran having served as a defendant the estate of the Shah or the Shah's close relatives in U.S. litigation to recover such assets as belonging to Iran.

So too, the ordinary meaning of the text of Paragraph 13 explicitly conditions the initiation of reporting requirements upon Iran having served as a defendant the estate of the Shah or the Shah's close relatives in U.S. litigation to bring about the return of such assets as belonging to Iran. Paragraph 13 provides:

Upon the making by the Government of Algeria of the certification described in Paragraph 3 above, the United States will order all persons within U.S. jurisdiction to report to the U.S. Treasury within 30 days, for transmission to Iran, all information known to them, as of November 3, 1979, and as of the date of the order, with respect to the property and assets referred to in Paragraph 12. Violation of the requirement will be subject to the civil and criminal penalties prescribed by U.S. law.

The reporting requirements of Paragraph 13 are directly tied to the conditions imposed by Paragraph 12 -- i.e., the reporting requirements apply only "with respect to the property and assets referred to in Paragraph 12." (General Declaration, ¶ 13.) The property and assets referred to in Paragraph 12 are "property and assets in the United States within the control of the estate of the former Shah or of any close relative of the former Shah served as a defendant in U.S. litigation brought by Iran to recover such property and assets as belonging to Iran." (General Declaration, ¶ 12.) Thus, before the United States must require reporting about any property, the person or entity that controls that property must be served as a defendant in litigation brought by Iran to recover the property as belonging to it.

Iran's argument that the reporting requirement is not contingent upon service is not a good faith interpretation of the ordinary meaning of the text of Paragraph 13, because it eliminates Paragraph 13's reference to Paragraph 12, and instead asserts that the reporting requirements of Paragraph 13 are unqualified. Iran has constructed an inventive post hoc explanation of the reporting requirements. Iran now argues that the reporting requirements were included solely to allow Iran to identify assets so that it could pursue litigation in the United States and around the world, wherever Shah-related property might be found. (Doc. 105, Iran's Hearing Memorial at 25-26.) Unfortunately for Iran, the text of Point IV is directly contrary to this assertion: only "property and assets in the United States" are covered by the freeze and reporting requirements. Moreover, the freeze and reporting requirements are directly conditioned upon Iran's prosecution of U.S. litigation.

The negotiating history confirms this textual analysis, and demonstrates that Iran's argument is unfounded. Iran insisted over and over during the negotiations that the United States would have to impose a freeze on assets, followed by an outright transfer of these assets to Iran. (Id. at 63-64.) The United States -- not Iran -- introduced the idea of requiring reporting about Shah-related assets. (Id. at Exhibit 1, p. 15.) These reporting requirements were explicitly tied to Iran's litigation. (Exhibit 1, Christopher Affidavit, ¶¶ 26, 28.) There is no evidence that Iran told the Algerians -- nor that the Algerians informed the U.S. negotiators -- that it conceived of the reporting requirements as a method to facilitate its litigation in the United States and around the world.

Iran's argument is also belied by the fact that it would not have been practicable for the United States to have imposed reporting requirements upon property belonging to unknown persons. (See Exhibit 1, Christopher Affidavit, ¶¶ 21, 22, 25.)[28] Until Iran prosecuted litigation, the identities of all of those Iran asserted to be "close relatives" could not be known by the United States.

Contrary to Iran's unsupported conjecture about the reporting requirements, Secretary Christopher has explained how and why all of the U.S. actions in relation to the Shah's assets -- including the reporting requirements -- were linked to Iran's litigation. Because the U.S. negotiators realized

how important it was that Iran recognize the principle that only the U.S. Judicial Branch (not the Executive Branch) could bring about a transfer of assets controlled by the estate of the late Shah or his family, our draft of the General Declaration took the position that the U.S. Executive Branch would take action with respect to those assets only in the context of litigation initiated by Iran in the U.S. courts. We clearly explained this new position to the Algerians when we discussed Point IV of the General Declaration with them.

(Exhibit 1, Christopher Affidavit, ¶ 12.)

Secretary Christopher also describes how the information gathering obligations were directly tied to Iran's effective service of the Shah's estate and close relatives:

With respect to the information gathering provisions, Mr. Nabavi again asserts that the Iranians assumed that the United States had agreed to an unconditional and immediate undertaking to gather information because such action was within the authority of the Executive Branch and need not be tied to proceedings in the U.S. judiciary. (1995 Affidavit, at pp. 18-19.) I again must disagree with Mr. Nabavi. In January, we indicated our position that the information gathering obligation would only operate after Iran initiated lawsuits and effectively served as defendants either the Shah's estate or his close relatives (or both) in litigation to recover property and assets as belonging to Iran. As I explained above, both the information gathering and the freeze obligations described in Point IV were directly dependent upon Iran's effecting service on the Shah's estate or close relative. This position was made perfectly clear to our Algerian intermediaries and accepted in the text of Paragraphs 12 and 13.

(Id., ¶ 28.)

The obligations imposed upon the United States by Paragraphs 12 and 13 are explicitly tied to Iran's litigation in U.S. courts. Only after Iran has "served as a defendant" the Shah's estate or the Shah's close relatives must the United States impose a freeze upon and gather information concerning assets controlled by the person or entity served.

D. In Each Case Where Iran Served As a Defendant Either the Shah's Estate or a Close Relative, the United States Froze the Assets Controlled by that Defendant, Required Reporting, and Transmitted the Information to Iran.

It is undisputed that, of the four lawsuits brought by Iran to recover "property and assets as belonging to Iran", Iran only effected service on two defendants.[29] The first defendant served by Iran was Ashraf Pahlavi in Islamic Republic of Iran v. Ashraf Pahlavi, No. 4432/80 (N.Y. Sup. Ct.). In March 1981 Iran informed OFAC that Ashraf Pahlavi had filed a motion to dismiss, but had not contested the effectiveness of service. Because Ashraf Pahlavi had been "served as a defendant," in May 1981 OFAC froze Ashraf Pahlavi's assets and instituted the reporting requirements of Paragraph 13. (Doc. 6, Statement of Defense at Exhibit 6.) The information reported to the Treasury was transmitted to Iran. (Doc. 58, Reply at 26.) As required by the Accords, the freeze on Ashraf Pahlavi's assets remained in place until the litigation was "finally terminated." (General Declaration, ¶ 12.) At that time, the freeze was dissolved. (See Exhibit 6.) None of these facts is disputed by Iran.

The second defendant served by Iran was Shams Pahlavi in Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489, (Cal. Super. Ct.). After OFAC learned that the California courts determined that Iran had served Shams Pahlavi as a defendant, OFAC imposed a freeze on Pahlavi's assets, and implemented the reporting requirements of Paragraph 13. (See Exhibit 6.) The freeze and reporting obligations were imposed within two months of Iran's informing OFAC that the courts had determined that service had been effected.[30] (See Exhibit 9.) The information was transmitted to Iran.[31] The freeze remained in effect until after this litigation was "finally terminated." Once again, these facts are undisputed by Iran.

As demonstrated above, the United States' obligations under Paragraphs 12 and 13 are directly dependent upon Iran having served as a defendant the Shah's estate or the Shah's close relatives in litigation brought by Iran to recover assets controlled by the estate or the close relative. It is undisputed that Iran never served the Shah's estate as a defendant. In those two cases where Iran served a close relative of the Shah as a defendant, the United States froze the assets, required reporting within 30 days, subject to the civil and criminal penalties prescribed by U.S. law, transmitted the reported information to Iran, and kept the freeze order in place until the litigation was finally terminated. Thus, the United States fulfilled each of its obligations under Paragraphs 12 and 13. Accordingly, Iran's claims under Paragraphs 12 and 13 should be dismissed.

II. The United States has Complied Fully With Its Paragraph 14 Obligations to Facilitate Iranian Litigation in U.S. Courts.

Paragraph 14 contains two distinct obligations. The first concerns steps to be taken by the United States in relation to two specific defenses to Iran's litigation. According to Paragraph 14

. . . the United States will make known, to all appropriate U.S. courts, that in any litigation of the kind described in Paragraph 12 above the claims of Iran should not be considered legally barred either by sovereign immunity principles or by the act of state doctrine . . .

The second concerns steps to be taken by the United States in connection with Iranian litigation seeking to enforce domestic Iranian judgments and decrees. Paragraph 14 further provides that

. . . the United States will make known, to all appropriate U.S. courts . . . that Iranian decrees and judgments relating to such assets should be enforced by such courts in accordance with United States law.

The United States has plainly complied with the dictates of Paragraph 14. It was not "appropriate" for the United States to "make known" to any court that it should not consider the defenses of act of state or foreign sovereign immunity because no U.S. court considered either of these defenses. Further, in the one case where Iran requested such a statement, the United States filed a Suggestion of Interest making known that the court should enforce Iranian judgments and decrees in accordance with U.S. law.

Because Iran cannot demonstrate that the United States has violated any provision found in Paragraph 14, it attempts to create new obligations not found in the text of Paragraph 14. First, Iran argues that Paragraph 14 obligates the United States to guarantee Iran a judicial forum in which to pursue litigation to recover property and assets belonging to Iran, and that the United States has violated this obligation because U.S. courts have now dismissed all claims filed by Iran to recover property and assets allegedly stolen by the Shah and his close relatives. Second, Iran argues that Paragraph 14 obligates U.S. courts to provide more favorable treatment to Iranian actions to enforce domestic Iranian judgments and decrees than to the enforcement of other foreign judgments, and that the United States has violated this obligation because Iran's two enforcement actions did not succeed.

Both of Iran's arguments with respect to Paragraph 14 fail because Iran has premised them on obligations that find no support in the ordinary meaning of the text of Paragraph 14. Contrary to Iran's assertions, the United States has fully complied with its commitments under Paragraph 14 of the General Declaration.

A. Paragraph 14 Does Not Require U.S. Courts to Provide Iran a Forum in which to Bring Lawsuits.

1. Paragraph 14 Provides that the United States Will Facilitate Actions by Making Known to U.S. Courts that Suits Should Not Be Barred by Foreign Sovereign Immunity Principles or the Act of State Doctrine.

Paragraph 14 provides that the United State will:

. . . make known, to all appropriate U.S. courts, that in any litigation of the kind described in Paragraph 12 above the claims of Iran should not be considered legally barred either by sovereign immunity principles or by the act of state doctrine. . . .

General Declaration, ¶ 14.[32]

The ordinary meaning of Paragraph 14 with respect to the bringing of lawsuits by Iran against the estate of the Shah and the Shah's close relatives to recover such property and assets as belonging to Iran could not be more clear: the United States agreed to make known to appropriate U.S. courts that they should not allow defendants to invoke foreign sovereign immunity or act of state as defenses in the litigation. The paragraph says nothing about guaranteed access to courts in the United States, nor does it address any other defenses. For this Tribunal to find merit in Iran's argument, it would have to rewrite Paragraph 14 to include a clause providing such guaranteed access.

The negotiating history confirms the ordinary meaning of Paragraph 14. The U.S. negotiators, throughout the negotiations, made clear that only a U.S. court -- independently of the Executive Branch -- had the constitutional authority to effect the return of property. Thus, the U.S. negotiators emphasized, it was incumbent upon Iran to pursue litigation in such courts if it wished to pursue the return of such assets. (Exhibit 1, Christopher Affidavit, ¶ 33.) The United States negotiators made equally clear that the Executive Branch of the federal government could take limited steps to facilitate such actions. (Id., ¶ 29.)

Despite the specific language of Paragraph 14, Iran argues that Paragraph 14 places upon the United States an obligation to "make available to Iran domestic United States courts in which Iran could pursue its claims to the Pahlavi assets on the merits." (Doc. 58, Reply at 86.) In effect, Iran argues that the United States agreed to ensure that U.S. courts would hear and decide cases, and that Iran would recover Pahlavi assets. Iran's interpretation is wrong. The United States did not and could not agree to this. As Secretary Christopher explains:

As we repeatedly stressed to the Algerian intermediaries, given the constitutional limitations on the Executive Branch and the constitutionally based separation of powers between the Executive and Judicial Branches of government, we could not do more than provide only limited assistance in these lawsuits. It is beyond the constitutional authority of the Executive Branch to require the Judicial Branch to hear and decide cases, and we did not agree to attempt the impossible.

(Exhibit 1, Christopher Affidavit, ¶ 29.)

Paragraph 14 explicitly recognizes this limitation: the United States only agreed that it would "make known, to all appropriate U.S. courts" that the courts "should not" consider two specific defenses, and that the courts "should" enforce certain Iranian decrees and judgments "in accordance with United States law." Paragraph 14 does not contain any commitment as to what the U.S. courts would do because, as Secretary Christopher points out, the United States "did not agree to attempt the impossible." (Id.)

Of course, the U.S. negotiators only made these commitments because they believed that U.S. courts would follow the suggestions made by the Executive Branch.[33] In fact, that is what happened. No U.S. court considered the defenses specified in Paragraph 14, and the U.S. courts enforced Iranian judgments and decrees "in accordance with United States law."

Iran's conduct during the negotiations supports this interpretation and evidences its understanding that the United States never indicated its willingness to guarantee Iran a forum in which to bring its claims. Iran's insistence during negotiations upon a $10 billion guarantee because of the "uncertainty of the outcome of the legal proceedings instituted, or to be brought in the United States"[34] clearly shows that it realized the risk of an adverse result in litigating in the United States. The United States' flat refusal to provide any such guarantee clearly shows that the United States refused to bear the risks associated with such litigation. The text of Point IV establishes that Iran agreed to bear the risk of losing such litigation.

Iran's conduct immediately following the entry into force of the Algiers Accords also demonstrates that Iran itself understood the limited nature of the United States' obligations under Paragraph 14 with respect to the facilitation of Iran's litigation. In a brief filed by Iran shortly after the entry into force of the Algiers Accords, Iran stated to a U.S. court that:

[t]he Declaration and Executive Order do not purport to guarantee Iran this forum for adjudication of its claims.[35]

Iran's statement could not more clearly show that Iran itself understood that Paragraph 14 did not seek to guarantee Iran a forum in United States courts. As the Tribunal is aware, under Article 31(3)(b) of the Vienna Convention, Iran's conduct can be considered to confirm this interpretation of Paragraph 14.[36] See, e.g., Iran v. United States, AWD No. 529-A15-FT, ¶ 48, reprinted in 28 Iran-U.S. C.T.R. 113, 129 (May 6, 1992).

2. Iran Has Not Identified a Single Instance in which the United States Failed to Make Known to an Appropriate U.S. Court that Iran's Claims Should Not Be Considered Legally Barred by Sovereign Immunity Principles or the Act of State Doctrine.

The United States has clearly complied with its Paragraph 14 obligations to make known to appropriate U.S. courts that foreign sovereign immunity principles and the act of state doctrine should not be considered to bar Iranian litigation. No defendant ever raised, and no court ever considered, either of these defenses. Iran cannot dispute these facts. Because these defenses were never at issue, it was neither appropriate nor necessary for the United States to file suggestions of interest. In fact, Iran got more than it bargained for: no U.S. court in which Iran brought litigation to recover property and assets as belonging to Iran dismissed a claim based upon a defense of foreign sovereign immunity or act of state.

Despite the clear language of Paragraph 14, Iran argues that the United States' obligation to file suggestions of interest is not limited to the two defenses listed in Paragraph 14. The only evidence Iran points to, however, is the United States' Suggestion of Interest in Iran v. Shams Pahlavi. (Doc. 105, Iran's Hearing Memorial at 54-55.) Iran's reliance on the Suggestion of Interest filed in the Shams Pahlavi case, however, as evidence of a greater commitment is misplaced. The United States filed a Suggestion of Interest in the Shams Pahlavi case in order to make known the position of the United States that Iranian decrees should be enforced in accordance with United States law -- not in order to preclude the use of further defenses in litigation. The fact that the United States went beyond the obligations imposed by Point IV, and attempted to assist Iran in its litigation, should not redound to its detriment.

Iran's assertion that U.S. courts should not have considered the doctrine of forum non conveniens is equally unavailing. Iran itself was aware that forum non conveniens was likely to be raised as a defense to litigation in the United States, because the Shah and his wife had filed a motion to dismiss the New York case upon forum non conveniens grounds on January 20, 1980 -- a full nine months before the beginning of negotiations through the Algerian intermediaries. (See Exhibit 4.) Given the pendency of this motion in Iran's own case, Iran cannot now argue that the parties intended, sub silentio, to create any obligation with respect to this defense -- or any others not specified in Paragraph 14. Clearly, Iran was on notice during negotiations that such a defense could be raised in other litigation, and Iran should not now be allowed to divine an obligation on the part of the United States with respect to forum non conveniens when Iran itself chose not to address the issue during negotiations.

B. The Refusal by a U.S. Court to Enforce Iranian Judgments or Decrees Does Not Violate the Accords Because Paragraph 14 Provides Only that U.S. Courts Shall Be Notified that Such Judgments and Decrees Should Be Enforced in Accordance with U.S. Law.

With respect to the enforcement of Iranian judgments and decrees relating to assets allegedly illegally taken by the late Shah or his close relatives from Iran, the Accords obligate the United States to

. . . make known, to all appropriate U.S. courts, that in any litigation of the kind described in Paragraph 12 above . . . that Iranian decrees and judgments relating to such assets should be enforced by [U.S.] courts in accordance with United States law.

General Declaration, ¶ 14.[37]

Iran argues that Paragraph 14 obligates U.S. courts to provide more favorable treatment to Iranian actions to enforce domestic Iranian judgments and decrees than the enforcement of other foreign judgments, and that the United States has violated this obligation by allowing its courts to dismiss Iran's two enforcement actions. Again, Iran's interpretation of Paragraph 14 is incorrect.

The plain text of Paragraph 14 clearly defines the scope of the obligation: in U.S. court proceedings in which Iran seeks to enforce a domestic Iranian judgment or decree, the United States shall notify the court that the judgment should be enforced in accordance with United States law.

The negotiating history confirms this interpretation. By including the condition that such judgments should be enforced "in accordance with United States law," the Accords reflect the fact that U.S. courts asked to enforce a foreign judgment or decree must provide the constitutional due process protections so carefully described to the Algerian intermediaries during the negotiation of the Accords. As Secretary Christopher recounts, Paragraph 14

was no guarantee of enforcement, for the simple reason that -- as we made clear to the Algerian intermediaries -- U.S. courts have long regarded U.S. law as precluding enforcement of foreign judgments rendered without providing defendants protections that meet our own constitutional due process standards.

(Exhibit 1, Christopher Affidavit, ¶ 30)

The United States has fully complied with its Paragraph 14 enforcement obligations in the two cases in which Iran sought to enforce an Iranian judgment or decree in United States courts. In Iran v. Shams Pahlavi, Iran sought to recover assets allegedly embezzled from the Iranian Treasury by Shams Pahlavi, the sister of the former Shah. (Doc. 58, Reply at Exhibit 10.) Iran's claim was in part based upon a decree issued by the Ruhollah Moussavi Khomeini which purportedly confiscated "all properties of the Pahlavi Dynasty, its branches, agents and affiliates who during their illegal rule embezzled it from the Treasury." (See Second Amended Complaint, Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.)(Aug. 1, 1991), attached as Exhibit 29.)

At Iran's request, the United States filed a Suggestion of Interest in Iran v. Shams Pahlavi on September 27, 1991. (See Exhibit 12; Doc. 105, Iran's Hearing Memorial at Exhibit 4.) In that Suggestion of Interest, the United States indicated to the court that the Iranian decree should be enforced in accordance with United States law. (Doc. 105, Iran's Hearing Memorial at Exhibit 4.) On its face, Paragraph 14 only obligates the United States to state its position that Iranian decrees are to be enforced in accordance with United States law. The United States fulfilled its obligation by stating its position. Ultimately, however, Iran's complaint in this case was dismissed precisely because Iran refused to follow United States law by refusing to comply with the court's order compelling discovery. (See supra pp. 14-17.) Thus, Iran's failed attempt to enforce this decree had nothing to do with any alleged violation of the Accords by the United States -- the court dismissed the case because Iran itself refused to attempt enforcement "in accordance with U.S. law."

The only other case in which Iran asserts it attempted to enforce an Iranian judgment pursuant to Paragraph 14 is Bank Melli Iran & Bank Mellat v. Shams Pahlavi. There, the plaintiff banks brought suit in 1992 to enforce domestic Iranian judgments against Shams Pahlavi for her alleged default on a promissory notes issued in 1982 and 1986. (See Exhibit 21.) As noted above, this case does not fall within the description of litigation covered by Point IV because it was an action to enforce an Iranian judgment for damages in a breach of contract claim. It was not, as is required by Paragraph 14, an action to enforce "Iranian judgments or decrees relating to" assets located in the United States allegedly belonging to Iran. There, counsel for Iran did not even request a Suggestion of Interest from the United States on the question of the enforceability of the domestic Iranian judgment. Nevertheless, as in Iran v. Shams Pahlavi, the court enforced the Iranian judgment in accordance with U.S. law. After consideration, the court dismissed the banks' enforcement proceeding, determining that the Iranian judiciary could not have afforded Shams Pahlavi due process protections in the various judicial proceedings in Iran. (See Exhibit 25 at 1413.) The lower court's decision was affirmed on appeal, and the United States Supreme Court denied the banks' request for review. (See Exhibit 25.)

United States law has long provided the federal courts authority to refuse to enforce a foreign judgment on the grounds that foreign proceedings do not afford the party against whom enforcement is sought protection that meets U.S. Constitutional standards. Hilton v. Guyot, 159 U.S. 113, 205-206 (1895), see also Restatement (Third) of the Foreign Relations Law of the United States § 482(1)(a)(1987). The application of U.S. law was accepted by Iran in Point IV. The courts therefore acted consistently with the Accords in finding that U.S. law precluded enforcement of the judgments underlying the Bank Melli claim.

III. Point IV of the General Declaration Does Not Incorporate, Either in Substance or in Spirit, the Fourth Condition of the November 1980 Majlis Resolution.

In the preceding sections, we have demonstrated that a good faith interpretation of the ordinary meaning of the terms of Point IV of the General Declaration establishes that all of the obligations undertaken by the United States are explicitly tied to Iran taking specific steps to prosecute litigation in U.S. courts. We have also shown that the United States complied with each of the obligations undertaken by it. Iran makes one further argument, however, that is not even arguably based upon a good faith reading of the text of Point IV.

As in its earlier pleadings, Iran in its Hearing Memorial argues that the General Declaration, by virtue of its preambular language,[38] incorporates the fourth point of the Majlis Resolution, which called for the immediate seizure and transfer to Iran of all property and assets of the Shah and his family.[39] (Doc. 105, Iran's Hearing Memorial at 66-67.) As in earlier pleadings, Iran also points to the United States' November 11, 1980 acceptance "in principle" of the Majlis Resolution as the basis for ending the hostage crisis as further evidence that the United States, in Point IV, implicitly accepted the Iranian demand set out in the fourth condition of the Majlis Resolution.[40] (Id.)

Iran's assertion that the United States accepted the Majlis Resolution is unfounded. The United States refused Iran's repeated demand that the United States agree to provide for the immediate and unconditional return of the assets of the Pahlavi family. This refusal is clear from the ordinary meaning of the text of Point IV, from the negotiating history of Point IV, and from Iran's own conduct following the entry into force of the Accords.

As this Memorial has shown in previous sections, the plain language of Point IV -- the text agreed upon by the parties -- governs its interpretation and clearly spells out the limited and conditional steps that the United States agreed to take in order to assist Iran in litigation designed to effectuate the return of Pahlavi assets. Point IV nowhere expressly includes or incorporates any commitment to return Pahlavi assets.

The context of the General Declaration as a whole further confirms that the ordinary meaning of the text of Point IV does not include a commitment to return Pahlavi assets. Where the United States agreed to order the transfer of assets to Iran, it did so expressly in clear and detailed terms. Thus, Paragraphs 2 through 9 of the General Declaration established a mechanism through which the United States itself would return Iranian assets located in the Federal Reserve Bank, foreign branches of U.S. banks, U.S. branches of U.S. banks and elsewhere. In this context, had the United States agreed to a similar transfer of Pahlavi assets, it would have done so expressly.

In addition to ignoring the ordinary meaning of the text of Point IV, Iran's textual argument is based upon an untenable interpretation of both the preamble to the General Declaration and the United States' November 11, 1980 response to the fourth condition. The preamble does not expressly include point four of the Majlis Resolution as an "instrument" of the Algiers Accords. Rather, the preamble recognizes the historical fact that Iran and the United States agreed that the Majlis Resolution would serve as the "framework" for negotiations to resolve the hostage crisis, a fact that is also reflected in the United States' acceptance "in principle" of the resolution as a basis upon which to discuss the release of the hostages. Both statements indicate a readiness on the part of the United States to include, within the ambit of the negotiations, discussions centered on Iran's demand that the wealth of the Pahlavi family be returned to Iran. In no way, however, does the ordinary meaning of this language indicate that the United States accepted the substance of the fourth condition of the Majlis Resolution in the final text of the Accords. In fact, such an interpretation would ignore the ordinary meaning of the text agreed to by the parties in Point IV.

An analysis of the negotiating history as a supplementary means to interpret Point IV confirms this textual analysis. The United States made it absolutely clear throughout the negotiations that it did not -- and could not -- accept the demand spelled out in the fourth condition of the Majlis Resolution, and it is clear that Iran understood the United States' position.

Throughout the negotiating process, the United States made clear to Iran that it did not intend to and would not pay ransom for the hostages. As Secretary Christopher describes,

the United States negotiators, from the very beginning of the negotiations, indicated basic limitations that would constrain the United States in the negotiation of any agreement for the safe return of the hostages. First and foremost, it was our steadfast position that the United States would not pay ransom to Iran for the release of the hostages. We never deviated from this position, and it is reflected in the final text of the Accords. As stated in Paragraph A of the General Declaration, the agreement attempted to restore Iran's financial position, "in so far as possible, that which existed prior to November 14, 1979." Agreeing to return (or guarantee the return of) the Shah's assets would have put Iran in a better position than it occupied on November 14, 1979, and would have been akin to paying ransom.

(Exhibit 1, Christopher Affidavit, ¶ 6.)

That Iran understood this in the early stages of negotiations is evidenced both by the United States' initial responses to the Majlis Resolution and by Iran's rejection of the proposals contained in the United States responses.

Iran submitted the Majlis Resolution to the United States through the Government of Algeria on November 3, 1980. (Doc. 6, Statement of Defense at Exhibit 1.) The initial proposal of the United States concerning Pahlavi assets was set forth in a position paper given by the United States to Algeria in Algiers on November 10, 1980. (Id. at Exhibit 2.) The position paper was accompanied by a series of proposed Executive Orders, one of which dealt with the purported assets of the late Shah's estate. (Id.)

Iran responded on November 26 by rejecting the United States proposal, stating:

[r]egretfully, the American response and its attachments . . . were not to the point, rather they offered new proposals which were different from that of the Consultative Assembly's resolutions, and in several cases the matters are either left obscure, or even not mentioned.

(Doc. 6, Statement of Defense at Exhibit 3.) Simply stated, Iran rejected the November 11 United States proposals because it believed that the response fell short of the demands set out in the fourth condition of the Majlis Resolution.[41] Thus, at the time the United States accepted "in principle" the Majlis Resolution as the basis for ending the crisis, Iran knew that the United States had not (and would not) agree to the fourth condition of the Majlis Resolution.

Following this rejection, the United States offered a new set of proposals on December 2 with respect to the issue of the Shah's assets. (Id. at Exhibit 4.) Again, however, Iran rejected the United States proposal. On December 19, Iran responded by publicly demanding the confiscation of Pahlavi assets in the United States, and demanding -- for the first time -- that the United States deposit $10 billion with the Government of Algeria to guarantee the return of such assets, a demand that the United States negotiators flatly refused. (Exhibit 1, Christopher Affidavit, ¶ 31.) As Secretary Christopher explains:

Our rejection of Iran's request that the United States guarantee the return of the Shah's assets reflects our unwavering position that we would not pay ransom to Iran for the release of the hostages. Instead of the guarantee sought by Iran, we agreed that the United States would provide limited, specific assistance to Iran in its prosecution of U.S. litigation. The United States' agreement to provide that assistance was an unusual undertaking, and one not entered into lightly. In return, Iran agreed to assume the risk of litigating its alleged rights to the assets of the Shah and his family in U.S. courts.

(Id. ¶ 33.) Thus, the negotiating history confirms what is clear from the text of the Accords: the United States never agreed to return or guarantee the return of Pahlavi assets.[42]

Iran's conduct immediately following the entry into force of the Algiers Accords clearly displays that Iran itself understood the limited nature of the United States' obligations under Point IV. As the United States has shown, Iran displayed its understanding that Point IV obligations were dependent upon Iran first bringing suit against a legally designated representative of the Shah's estate. Further, Iran's subsequent conduct indicates its understanding that no obligation with respect to the close relatives of the Shah would be triggered unless and until Iran first served such close relatives in litigation to effect the return of allegedly stolen property. Iran itself has admitted in these proceedings that it must first serve close relatives in domestic U.S. litigation before the United States freeze obligations would be triggered. (Doc. 1, Statement of Claim at 11.)[43]

CONCLUSION

Iran would have this Tribunal believe that the United States' interpretation of Point IV of the General Declaration of the Algiers Accords has "emptied Point IV of . . . any practical effect." (Doc. 105, Iran's Hearing Memorial at 76.) In fact, Point IV establishes a mechanism through which Iran may avail itself of a variety of assistance from the United States Government in its efforts to recover Pahlavi assets in domestic U.S. litigation. Specifically, Iran bargained for and received from the United States:

-- A commitment to freeze assets controlled by the estate of the Shah or any of his close relatives served as a defendant in U.S. litigation, pending the outcome of that litigation.

-- A commitment to collect information on assets controlled by the estate of the Shah or any of his close relatives served as a defendant in U.S. litigation and to transmit that information to Iran.

-- A commitment to notify U.S. courts that Iran's claims should not be considered legally barred by sovereign immunity principles or the act of state doctrine.

-- A commitment to notify U.S. courts that Iranian judgments and decrees should be enforced in U.S. courts in accordance with U.S. law.

-- A commitment to guarantee enforcement of final U.S. court judgments ordering transfer of assets to Iran to the extent that such assets remained in the United States.

Each of these obligations represents a significant undertaking on the part of the United States to provide Iran assistance that it could not otherwise receive in the context of litigating claims.

Iran fails, however, to acknowledge that, in order to get this assistance, it accepted the burden -- and risk -- of initiating and pursuing litigation in United States courts designed to effectuate the return of such property and assets before the U.S. obligations would be triggered. The express language of Point IV -- fully corroborated by the evidence presented by both sides as to the negotiating history and subsequent conduct of the parties -- unambiguously ties each of the obligations to Iranian litigation.

As the foregoing has shown, the United States fully complied with Point IV of the General Declaration of the Algiers Accords by providing Iran with the specific assistance provided by Point IV whenever appropriate in its U.S. litigation. No breach has been shown. Accordingly, Iran's claim should be dismissed.

Respectfully submitted,

Sean D. Murphy

Agent of the United States

Counsel:

Michael J. Matheson

Sally Rider

Joshua L. Dorosin

BEFORE THE

IRAN-UNITED STATES CLAIMS TRIBUNAL

The Hague

The Netherlands

_________________________________

)

Islamic Republic of Iran, )

)

Claimant, )

)

v. ) Case No. A/11

) Full Tribunal

United States of America, )

)

Respondent. )

_________________________________)

HEARING MEMORIAL AND EVIDENCE OF THE UNITED STATES

ON THE ISSUE OF LIABILITY

Sean D. Murphy

Agent of the United States

Counsel:

Michael J. Matheson

Sally Rider

Joshua L. Dorosin



[1] Affidavit of Warren Christopher (hereinafter "Christopher Affidavit"), attached as Exhibit 1.

[2] Iran has never supplied a scintilla of evidence -- to this Tribunal or to any U.S. court -- to substantiate these exorbitant allegations. According to the London-based newspaper AL-MAJALLAH, an internal Iranian investigation conducted in 1979 by then-Prime Minister Mehdi Bazargan concluded that the Pahlavi family had, during its entire reign, diverted a maximum of $500 million. (See Dr. 'Ali Nurizadeh, Iran: Wealth of Revolution Fat Cats Tops Wealth of Pahlavi Family -- Tale of Corruption in the Ayatollah's Republic, AL-MAJALLAH, Sept. 30, 1995 at 34-36, translated in F.B.I.S. Daily Report 63-64 (Dec. 8, 1995), attached as Exhibit 2.) This internal Iranian investigation severely undermines the credibility of Iran's repeated -- but unsupported -- claims that the Shah had billions of dollars of assets in the United States alone. Even if the $500 million figure is accurate (a fact the United States does not concede) there is no evidence that any of this alleged wealth was, at the time the Accords were adhered to, located in the United States.

[3] In addition to these four lawsuits, Iran, along with Bank Melli and Bank Mellat, filed suit against Shams Pahlavi to recover on a contract claim for alleged failure to pay on several promissory notes. Shams Pahlavi's assets were already frozen at the time the banks sought to enforce the Iranian judgment. (Iranian Assets Control Regulations, 61 Fed. Reg. 8216 (Mar. 4, 1996), attached as Exhibit 3.) Shams Pahlavi died on February 29, 1996, the day before the freeze was lifted.

[4] The Supreme Court is the State of New York's court of first instance with general jurisdiction. See, e.g., Kolomick v. New York Air National Guard, 642 N.Y.S.2d 915, 917 (N.Y. App. Div. 1996).

[5] A discussion of the meaning of "service" is found infra at pp. 31-33.

[6] In the United States, forum non conveniens refers to the discretionary power of a court to decline jurisdiction over a cause of action when the convenience of the parties and the ends of justice would be better served if the action were brought in another forum. Although the precise parameters of the rule vary depending upon the jurisdiction, courts in the United States generally determine whether to invoke forum non conveniens by employing a balancing test in which the interests of the litigants in choosing the forum are weighed against the public interest of the forum state in adjudicating the claim. See 5(a) Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure § 1352 (1990); see also Gary B. Born and David Westin, International Litigation in United States Courts 275 (1992).

[7] Under United States federal law, when a defendant in a pending lawsuit dies, the court lacks jurisdiction to proceed against that defendant. See, e.g., Smith v. Planas, 151 F.R.D. 547, 549 (S.D.N.Y. 1993); Bass v. Attardi, 868 F.2d 45, 50 (3d Cir. 1989).

The law in the State of New York (the only jurisdiction where Iran brought suit against the Shah) is consistent with this federal law. See, e.g., In re Einstoss' Estate, 257 N.E.2d 637, 641 (N.Y. 1970) (if party dies during pendency of action, action abates as to him and must be dismissed unless it is revived by substituting representative of estate); Jordan v. Estate of Newman, 432 N.Y.S.2d 746, 747 (1980) (all proceedings in action against deceased party after his death and before substitution of personal representative are null and void); 100 West 72nd Street Associates v. Murphy, 545 N.Y.S.2d 901, 904 (1989) (one cannot sue a dead person without naming estate through personal representative); Wisdom v. Wisdom, 488 N.Y.S.2d 682, 684 (1985) (just as death of principal generally revokes authority of agent, so death of a party to a lawsuit revokes power of attorney to act for deceased party).

[8] The Surrogate Court is a court of limited jurisdiction. See, e.g., Stortecky v. Mazzone, 85 N.Y.2d 518, 524 (N.Y. 1995). In New York, the Surrogate Court has jurisdiction over actions and proceedings relating to the affairs of decedents, probate of wills and administration of estates not within the exclusive jurisdiction of the Supreme Court.

[9] Iran had a right, under New York law, to appeal the Surrogate Court's decision denying the petition for appointment of an administrator. Cf. In re Dankerl's Estate, 207 N.Y.S.2d 514 (N.Y. App. Div. 1960).

[10] The United States is not aware of any other individual or entity having requested the appointment of a representative or administrator for the Shah's estate. This fact undermines Iran's repeated assertions -- without any evidence to support them -- that the Shah had a vast amount of property in the United States at the time of his death.

[11] Iran argues that the two-month delay between OFAC learning that Ashraf Pahlavi had been served and OFAC's imposition of a freeze on her assets somehow violated the Accords. The Accords, however, do not make the U.S. freeze obligations immediate once Iran has served an entity as a defendant. (See General Declaration, ¶ 12.) Moreover, Iran cannot point to any harm from the short delay: Ashraf Pahlavi was required to report on property in her control located in the United States as of November 3, 1979 and as of the date of the Order. Iran does not and cannot point to any assets that escaped the freeze because they were removed from the United States between March 1981 (when OFAC learned of service) and May 1981 (when OFAC imposed the freeze). The freeze was ultimately dissolved after Iran failed to obtain any judgment requiring the transfer of assets to Iran.

[12] In its Notice of Dismissal, Iran admitted that "[n]o service was made on any defendant." (See Exhibit 8.) This conduct completely undercuts Iran's assertions that any delay by the United States in freezing assets of the Shah's close relatives allowed those relatives to remove or transfer their assets from the United States. Plainly, because Iran chose to delay prosecuting litigation against the relatives, to the extent that these relatives had not already done so, they had ample time to remove or transfer any property they might have held in the United States long before any freeze obligations on the part of the United States could have arisen.

[13] On the same day, Iran, together with Bank Mellat, filed a claim in California Superior Court asserting that Shams had defaulted on a promissory note issued by Bank Omram, Bank Mellat's predecessor. See Islamic Republic of Iran and Bank Mellat v. Shams Pahlavi, discussed infra p. 18.

[14] Counsel for Shams Pahlavi requested a bond to secure payment of her costs in defending the action against the Islamic Republic of Iran pursuant to Section 1030 of the California Civil Procedure Code, arguing that:

Section 1030 requires non-resident plaintiffs to post a bond or file an undertaking to ensure that a resident defendant will be paid his or her recoverable costs. The only showing required is that plaintiff reside out of state and that there be a "reasonable possibility that the moving defendant will obtain judgment in the action." Cal.Civ.Proc.Code § 1030(b); Shannon v. Sims Service Center, 164 Cal.App.3d 907, 913, 210 Cal.Rptr. 861 (1985).

(Memorandum of Points and Authorities in Support of Defendant Princess Shams Pahlavi's Motion for Order Requiring Plaintiff to File an Undertaking for Costs [C.C.P. § 1030], Islamic Republic of Iran v. Shams Pahlavi, No. WEC 069489 (Cal. Super. Ct.) (Mar. 20, 1991), attached as Exhibit 10.)

[15] Iran attempts to divert the Tribunal from the issues at hand by focusing on remarks made by Judge Shimer during one hearing. (See Doc. 105, Iran's Hearing Memorial, at 94-95 and Exhibit 10.) In fact, the judge made the remarks highlighted by Iran in the process of ruling in favor of Iran on a motion by Shams Pahlavi.

[16] In the United States, discovery is a pre-trial device by which each party to litigation may obtain facts and information about the case from other parties in order to assist that party's preparation for trial. Tools of discovery include: depositions upon oral and written questions, written interrogatories, production of documents or things, and requests for admission. Courts have broad authority to compel parties to submit to discovery requests and to sanction parties for failure to submit to such requests. California law authorizes courts to compel discovery, Section 2031, and further authorizes the courts to terminate an action for failure of a party to comply with an order compelling discovery. Section 2023. Cal. Civ. Proc. Code §§ 2031, 2023 (West 1995).

[17] Plaintiffs sought to enforce, among other judgments, a judgment received against Shams for default on the loan that provided the basis for Bank Mellat's earlier suit in California court. Iran has provided no explanation for the delay of six to ten years between obtaining the Iranian judgments and seeking to enforce them in U.S. court.

[18] Vienna Convention on the Law of Treaties, May 23, 1969, U.N. Doc. A/Conf. 39/27, 1155 U.N.T.S. 332 (hereinafter "Vienna Convention").

[19] See Iran v. United States, AWD No. 382-B1-FT, ¶ 47, reprinted in 19 Iran-U.S. C.T.R. 273, 287 (Aug. 31, 1988); United States v. Iran, DEC No. 37-A17-FT, ¶ 9, reprinted in 8 Iran-U.S. C.T.R. 189, 200 (May 13, 1985); Iran v. United States, AWD No. ITL 63-A15-FT, ¶ 17, reprinted in 12 Iran-U.S. C.T.R. 40, 46 (Aug. 20, 1986); Iran v. United States, DEC No. 32-A18-FT, at 14, reprinted in 5 Iran-U.S. C.T.R. 251, 259-260, 273 (Apr. 6, 1984); Iranian Customs Administration v. United States, AWD No. 172-B3-3, at 5, reprinted in 8 Iran-U.S. C.T.R. 89, 92 (Apr. 17, 1985).

[20] As occurs elsewhere in Points II and III of the General Declaration, Paragraphs 12 through 14 of Point IV expressly provide that the United States' commitments would only arise upon the certification by the Algerian Government that the U.S. hostages had been released. These commitments, however, remained contingent upon Iran serving as a defendant the Shah's estate or the Shah's close relatives.

[21] Article 32 of the Vienna Convention provides that "recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion" to confirm the meaning resulting from the application of Article 31, or to determine the meaning when the application of Article 31 leads to an ambiguous or absurd interpretation.

[22] Doc. 105, Iran's Hearing Memorial at 2; Doc. 1, Statement of Claim at 11.

[23] As we pointed out in our Rejoinder, Iran's argument that the phrase "estate of the former Shah" simply means "property and assets of the former Shah" cannot withstand even minimal scrutiny. (Doc. 64, Rejoinder at 18-22.) If Iran's interpretation were correct, Paragraph 12 would apply the freeze obligations to "property and assets . . . within the control of the [property and assets] of the former Shah". This reading plainly is not a good faith interpretation of "estate" in accordance with its ordinary meaning. Instead, Iran's interpretation is nonsensical.

[24] Indeed, although its precise requirements vary among international agreements, the concept of "service" is a well developed principle in private international law. See Hague Conference on Private International Law; Final Act of Tenth Session, Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, November 15, 1965, 4 I.L.M. 338, 341 (1965); Lugano Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, Sept. 16, 1988, 1988 O.J. (L 319) 9, 28 I.L.M. 620 (1989); Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, Sept. 27, 1968, 8 I.L.M. 229 (1969).

[25] The requirements of service are more fully discussed in the United States' Statement of Defense. (Doc. 6, Statement of Defense at 45-51.)

[26] Likewise, Mr. Nabavi's assertion that there was no relationship between the freezing of assets and Iranian litigation is obviously untrue. Iran has previously admitted -- contrary to Mr. Nabavi's testimony -- that "[t]he requirement that the defendants must be served before their property is frozen is applicable . . . to the former Shah's close relatives. . ." (Doc. 1, Statement of Claim at 11.) In view of the numerous inconsistencies and incredible statements made by Mr. Nabavi, his testimony should not be relied upon by the Tribunal.

[27] See, e.g., New England Merchants National Bank v. Iran Power Generation and Transmission Company, 495 F.Supp. 73 (S.D.N.Y. 1980). In Iran Power, over thirty actions pending in U.S. District Courts were consolidated for the purpose of conducting a hearing with respect to multiple motions made by Iranian defendants contesting sufficiency of service. Iranian defendants argued in these cases that the courts could not exercise jurisdiction because plaintiffs had not complied with the service requirements of the Foreign Sovereign Immunities Act.

Iran's position that it did not know the legal significance of the term "service of process" is, in light of its knowledge that the Shah and Empress had contested service and in light of Iran's own use of the defense in litigation commenced prior to the negotiations, untenable.

[28] Iran has unpersuasively asserted that, during the negotiations, it supplied the Algerians with a list of the Shah's close relatives. Iran has never produced the list it allegedly provided and the U.S. negotiators never received such a list. Instead, "[t]hrough the Algerians, the Iranians provided us with a list of categories of close relatives in their legal system, e.g., brother, brother-in-law, former brother-in-law. We never received a list of named individuals whom Iran considered to be close relatives, nor any general information as to the total number or locations of persons Iran considered to be close relatives of the Shah." (Exhibit 1, Christopher Affidavit,

¶ 20.)

[29] Although in Iran v. Mohammed Reza Pahlavi and Farah Diba Pahlavi the trial court found service on the Empress to be valid in the same order in which it dismissed the case on forum non conveniens, the Empress cross-appealed this decision and thus service remained contested. The service issue became moot because the appellate courts affirmed the dismissal.

[30] As with the case of Ashraf Pahlavi, Shams Pahlavi was required to "report to the U.S. Treasury within 30 days . . . all information known to" her with respect to property in her control located in the United States as of November 3, 1979 and as of the date of the order. Iran has not pointed to any assets that escaped the freeze because they were removed during the period between Iran's notification of service and the imposition of the reporting requirement two months later.

[31] In fact, when Shams Pahlavi did not file her report within the 30 days required by the OFAC regulations, OFAC imposed a $1,000 penalty on Shams Pahlavi. Thus, the United States fulfilled its obligation under Paragraph 13 that violation of the reporting requirement "will be subject to the civil and criminal penalties prescribed by U.S. law." (See Doc. 6, Statement of Defense at Exhibit 6.)

[32] President Carter implemented the provisions of Paragraph 14 by issuing Executive Order 12284. Section 1-104 of Executive Order 12284 provided:

The Attorney General of the United States having advised the President of his opinion that no claim on behalf of the Government of Iran for recovery of property described in section 1-101 of this order should be considered legally barred either by sovereign immunity principles or by the act of state doctrine, the Attorney General is authorized and directed to prepare, and upon the request of counsel representing the Government of Iran to present to the appropriate court or courts within the United States, suggestions of interest reflecting that such is the position of the United States . . .

Executive Order 12284, Section 1-104. (Doc. 6, Statement of Defense at Exhibit 5.)

[33] As the United States indicated in its Rejoinder, both the sovereign immunity and act of state defenses are based upon considerations of foreign policy, an area in which the Executive Branch of the United States Government has great expertise and one in which courts in the United States have granted great deference to the Executive. It was for this reason that the negotiators identified these two narrow defenses as ones on which the Executive could express its opinion. In contrast, the forum non conveniens defense is based primarily upon considerations of judicial economy and fairness, areas in which the judiciary has the greatest expertise and in which Executive Branch interference would likely be both ignored and resented. (Doc. 64, Rejoinder at 6 n.2.)

[34] 1995 Nabavi Supplementary Affidavit at 10. (Doc. 105, Iran's Hearing Memorial at Exhibit 1.)

[35] Memorandum in Further Opposition to Defendants' Motion to Dismiss Islamic Republic of Iran v. Mohammed Reza Pahlavi and Farah Diba Pahlavi, No. 22013/79 (N.Y. Sup. Ct.)(Mar. 13, 1981), attached as Exhibit 28 at p. 5. Although Iran later made inconsistent arguments in other cases, the fact remains that Iran itself explicitly acknowledged that the Accords do not require the U.S. courts to guarantee access for the adjudication of claims.

[36] Indeed, Iran's subsequent statement in U.S. judicial proceedings should estop it from now arguing that Paragraph 14 includes a guarantee that United States courts will be available for Iran's litigation against the Shah's estate and close relatives. See Cheng, General Principles of Law as Applied by International Courts and Tribunals, 141-42; see also Raygo Wagner Equip. Co. v. Iran Express Terminal Co., AWD No. 30-16-3, at n.7, reprinted in 2 Iran-U.S. C.T.R. 141, 149 n.3 (Mar. 18, 1983)(Mosk, concurring and dissenting).

[37] In order to implement this provision, President Carter issued an Executive Order which provided that, upon the request of counsel representing the Government of Iran, the Attorney General will prepare and submit suggestions of interest stating that it is the position of the United States that "Iranian decrees and judgments relating to the assets of the former Shah and [relatives of the former Shah] should be enforced by courts in accordance with United States law." Executive Order 12284, Section 1-104. (Doc. 6, Statement of Defense at Exhibit 5.)

[38] The preamble to the General Declaration states that the Government of Algeria issued the General Declaration after "consult[ing] extensively with the two governments as to the commitments which each is willing to make in order to resolve the crisis within the framework of the four points stated in the resolution of the Islamic Consultative Assembly of Iran."

[39] Point four of the Majlis Resolution provided as follows:

Restoration and reimbursement of all the properties of the deceased Shah and recognizing and validating all the proceedings of the Government of Iran in connection with its sovereignty for confiscation of all the properties of the deceased Shah and his close relatives whose properties, according to the provisions of the laws of Iran, belong to the Iranian Nation and edicting decree by the President of the United States of America confirming recognition and attachment of such properties, as well as taking all the administrative and legal proceedings required for transference of such properties and assets to Iran.

Majlis Resolution, ¶ 4. (Doc. 6, Statement of Defense at Exhibit 1.)

[40] In its Hearing Memorial, Iran similarly argues that the United States' acceptance of this condition within the context of Point IV has created an "obligation of result" on the part of the United States to return to Iran Pahlavi family assets allegedly taken from Iran's treasury. (Doc. 105, Iran's Hearing Memorial at 61-69.) Like its argument that the United States accepted the Majlis Resolution, this is contrary to the language of the Accords, the negotiating history, and Iran's conduct.

[41] In its response, Iran then expressly stated three ways in which the United States response fell short. Response of the Government of Iran to Position of the United States on the Fourth Majlis Condition, November 26, 1980. (Doc. 6, Statement of Defense at Exhibit 3.)

[42] Indeed, the U.S. negotiators, as they made clear to the Algerians, did not believe that the Pahlavi family had any significant assets in the United States. (Exhibit 1, Christopher Affidavit, ¶¶ 13, 19.)

[43] Iran's subsequent conduct should estop it from now arguing that Point IV reflects an unconditional acceptance on the part of the United States of the Majlis Resolution's demand for the immediate return of Pahlavi assets. As Iran has already admitted in these proceedings that the United States' obligations were conditioned upon steps that Iran must first take in domestic U.S. litigation, it should be estopped from arguing now to the contrary. American Bell International, AWD No. 255-48-3, ¶ 16, reprinted in 12 Iran-U.S. C.T.R. 170, 175 (Oct. 17, 1986).



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