Morteza Nikoubazl / Reuters

Iran, Cuba, and the Supreme Court

How Terrorism Restitution Cases Limit U.S. Foreign Policy

On October 1, over the objection of the U.S. Justice Department, the U.S. Supreme Court granted a hearing to an unusual petitioner: Bank Markazi, the Central Bank of Iran. The dispute centers around a statute, passed by Congress in 2012, that effectively ordered a federal district court to distribute Bank Markazi’s assets as restitution to the survivors and families of those killed by Iranian-sponsored terrorism. If held constitutional, the statute will enable plaintiffs to get hold of $2 billion worth of bonds, currently frozen in New York City, to satisfy some of the $43.5 billion that Iran owes to American victims. Among the plaintiffs are those affected by two catastrophic bombings in Beirut in 1983, which were conducted by the Iran-funded militant group Hezbollah. The attacks killed 17 employees at the U.S. embassy and 241 others at the U.S. Marines barracks.  

The Supreme Court’s eventual decision, and the findings in many other similar cases, may provide overdue justice for terrorism victims. But these cases could become a major barrier to U.S. foreign policy, especially in light of the nuclear deal with Iran, which went into effect on October 18. Iran could potentially use ongoing disputes about these cases to shirk its obligations under the nuclear deal. Even though the deal promises to unblock Iranian funds, U.S. courts could keep Iranian assets, such as those in the Bank Markazi case, frozen. Some courts may eventually use those frozen assets to satisfy unpaid terrorism judgments—a result that would hardly constitute sanctions relief.

Similarly, these restitution cases could harm U.S.-Iranian business relations. Even after the nuclear deal is fully implemented, only narrow categories of U.S. business with Iran will be permitted, but it seems unlikely that state-owned Iranian enterprises will strike even small deals with U.S. companies if much of their revenues will go toward satisfying terrorism claims. And this isn’t just an Iranian problem. From a business perspective, these terrorism judgments present a far larger hurdle for

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