Earlier this month the U.S. Supreme Court announced its decision to hear an appeal by Iran’s central bank to a decision allowing victims American victims of terrorism to receive compensation from more than $2 billion in frozen Iranian assets currently held in U.S. banks.
The lower court had ruled that more than 1,300 victims or surviving family members of attacks such as the 1983 Lebanon Marine barracks bomb and the 1996 Khobar Tower bombing in Saudi Arabia who had previously been awarded civil damages finding Iran culpable for the attacks should be able to be compensated from the frozen funds.
Bank Markazi, the Iranian Central Bank, is arguing that Congress improperly interfered in the case in 2012 by passing legislation specifically allowing the victims to seize the money, thereby violating the separation of powers by legislating the outcome of an ongoing court case.
Bank Markazi has said that these funds are a part of its foreign currency reserves, held in Citibank accounts on behalf of a Luxembourg intermediary acting on behalf of an Italian bank that works with the Iranians.
U.S. Solicitor General Donald Verrilli urged the court not to intervene in the case on behalf of the Obama Administration. The victims meanwhile are urging the Court to reject the appeal on grounds that judicial precedent clearly allows Congress to change the governing law that is applicable to an active case.
It is not clear whether the Iranians are simply trying to delay compensation long enough that they can move the money after it becomes unfrozen as a result of the recently agreed nuclear deal. What is clear is that Iran has been found culpable for civil damages in these cases and has thus far failed to pay. The U.S. Congress has decided that in such cases victims of terrorism should be able to seize the funds due to them.
As a result of the central role that the U.S. banking system plays in the global financial system, the United States government has the ability to deter, punish, and in some instances impede the actions of both private and State sponsors and financiers of terrorism. As has been discussed here in the past, it is via the regulation of national as well as the global financial systems that Western government are most able to effectively fight terrorism. If the U.S. Supreme Court begins to roll back those powers, even on a separation of powers technicality on a narrow case, it will continue to give those who wish to murder Americans recourse to also use the American financial system to fund their terror. That would be a sad precedent to set indeed.