Almost two months ago we witnessed the birth of a sanctions regime. Yet with sanctions, as in life, birth and death are two sides to the same coin. And so we say farewell to the Highly Enrich Uranium (“HEU”) Agreement Assets Control Regulations, 31 C.F.R. Part 540.
I can’t say I’m particularly familiar with Part 540, or that I’ve ever dealt with it at all. This isn’t all that surprising since it is not actually a true “sanctions” regime. Unlike every other sanctions regime, the HEU program was not designed to seize assets linked to some nefarious purpose or regime, rather it was intended to shield assets from U.S. plaintiffs’ lawyers. Clearly the definition of “national emergency” is… subject to broad interpretation.
The impetus Part 540’s creation is a 1993 agreement between the U.S. and the Russian Federation whereby Russia would convert 500 tons of weapons grade uranium from decommissioned nuclear warheads into low enriched uranium, and then sell that fuel to the United States for use in commercial reactors. However, civil suits filed against Russia targeted the payments and in order to keep the agreement running smoothly, President Clinton issued Executive Order 13159 in June 2000 declaring a national emergency and creating a blocking regime. The key section of the EO states:
In order to ensure the preservation and proper and complete transfer to the Government of the Russian Federation of all payments due to it under the HEU Agreements… all property and interests in property of the Government of the Russian Federation directly related to the implementation of the HEU Agreements that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons, including their overseas branches, are hereby blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. Unless licensed or authorized pursuant to this order, any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is null and void with respect to any property or interest in property blocked pursuant to this order.
President Obama extended the program with Executive Order 13617 in June 2012
In many ways, the HEU program is a direct result of the landmark Dames & Moore v. Regan Supreme Court case. In that case, plaintiffs who had received judgments against Iran following the 1979 Revolution sought to receive compensation from blocked Iranian funds and property in the United States. The Reagan administration, in order to implement the Algiers Accords, sought to release the funds and suspend claims against Iran in U.S. courts.
Under the International Emergency Economic Powers Act, the underlying legal basis for almost all U.S. sanctions programs, the President is granted the authority to
“(B) investigate, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest.
In ruling in favor of the government, Chief Justice Rehnquist wrote
This Court has previously recognized that the congressional purpose in authorizing blocking orders is “to put control of foreign assets in the hands of the President . . . .” Propper v. Clark, 337 U. S. 472, 493 (1949). Such orders permit the President to maintain the foreign assets at his disposal for use in negotiating the resolution of a declared national emergency.
Because the President’s action in nullifying the attachments and ordering the transfer of the assets was taken pursuant to specific congressional authorization, it is “supported by the strongest of presumptions and the widest latitude of judicial interpretation, and the burden of persuasion would rest heavily upon any who might attack it.” Youngstown, 343 U. S., at 637 (Jackson, J., concurring).
The blocking of Russian assets in order to shield them from judicial attachment is possible because the Supreme Court ruled that IEEPA grants the Executive almost complete discretion as to the disposition of blocked funds. Admittedly ,the HEU program took this principle to an extreme in that its purpose was not to address the threat of a hostile regime or category of nefarious non-state actors as in other sanctions regimes, but rather to protect diplomatic agreement with non-hostile state.
Stepping back, it’s hard not to appreciate an example of such creative lawyering. So goodbye Highly Enrich Uranium (“HEU”) Agreement Assets Control Regulations, we hardly knew ye.