Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., No. 98-CV-1165-B (S.D. Cal. Nov. 27, 2013) [click for opinion]
Ten American citizens sued to enforce judgments against Iran based on injuries arising out of the country's terrorist activities. To satisfy the judgments, the Americans sought to attach a $2.8 million award Iran's defense ministry had obtained in an arbitration (and subsequently confirmed) against Cubic Defense Systems in connection with military contracts between Iran and Cubic. The defense ministry opposed the motion on the basis of sovereign immunity and the Algiers Accords, an international agreement between Iran and the United States.
As authority for the right to attachment, the Americans cited 28 U.S.C. § 1610(g) of the Foreign Sovereign Immunities Act of 1976 ("FSIA"), which allows terrorism victims to attach "the property of a foreign state." The defense ministry argued that this section was not available to the Americans because the property at issue must have been used in connection with a "commercial activity." The court rejected the defense ministry's position because the commercial-activity restriction applies to other subsections of Section 1610, not to the subsection the Americans invoked. Furthermore, the court noted, recent amendments to Section 1610(g) evince Congress's intent to expand the power of victims of state-sponsored terrorism to attach any property in the United States as long as the foreign states has "simple ownership" of the asset. (The court also found that Section 201 of the Terrorism Risk Insurance Act of 2002 ("TRIA"), which allows victims of terrorism to attach assets, provided authority for attachment of the award.)
The court rejected the defense ministry's argument based on the Algiers Accord. The purpose of the Accord was to restore the financial position of Iran to that which existed before November 14, 1979, when the U.S. imposed an asset freeze on Iran to punish it for holding the American embassy hostage. The defense ministry argued that Iran's financial position included the amount of the arbitration award on the Cubic contracts, which had been executed and substantially performed before November 14, 1979. The court disagreed in light of Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Elahi, 566 U.S. 366 (2009), in which the Supreme Court held that attachment depends upon the property identified as the asset in question. In this case, the asset in question was the 1998 judgment enforcing the Cubic arbitration award, not Iran's interest in the contracts giving rise to the arbitration dispute.