private property from one party to another can be ordered only pursuant to procedures which afford due process of law. Late in the negotiations Iran finally accepted that principle, and it is built into the Declarations. As a result, the Shah's estate and his close relatives will have full protection of due process of law with respect to claims against their properties by Iran.

Under the Declarations (Paras. 12-15) the United States has agreed to take certain actions in connection with any lawsuits brought by Iran regarding the Shah's wealth, but these commitments are carefully limited.

The commitment to prohibit the transfer of Shah-related property will arise only when Iran has filed a lawsuit against, and served legal process upon, an individual who is alleged to be a close relative to the Shah; only then will his U.S. property be temporarily frozen. Such a freeze order will remain in effect only until the litigation is terminated as to any such defendant. The likelihood is that, even in the absence of such a freeze order, a court would place approximately the same restrictions on the property by judicial

order.

Similarly, 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. Once a close relative of the Shah has thus been served in litigation, persons with information about property of his in the United States will be required to report it to the Treasury, but the information to be furnished to the Treasury would be available to a plaintiff in any event under normal civil "discovery" procedures. The other provisions of the Basic Declaration regarding the property of the Shah or his close relatives are in accord with existing U.S. law, and they fully protect the rights of the defendants. The United States refused to return the Shah to Iran prior to his death, and it has also steadfastly refused to confiscate and transfer his U.S. assets, insisting instead on the maintenance of the Constitutional requirements of due process of law.

Ibid., pp. 34-36.

(After the Federal Reserve Bank, in accordance with the Undertakings under the Algiers Accords, ante, had repaid from the $3.667 billion transferred to it from the Bank of England (thereafter also referred to as Dollar Account No. 1) the unpaid principal of, and interest through Dec. 31, 1980 on, bank loans owing to a banking syndicate with a U.S. bank participant, more than $4 million remained in Dollar Account No. 1. In addition, agent banks, ascertaining that non-U.S. syndicate members had been paid directly by Iran before Jan. 19, 1981, returned funds to the Federal Reserve Bank. On Oct. 25, 1982, the Government of Iran filed a claim with the Iran-United States Claims Tribunal against the United States for the remaining balance in Dollar Account No. 1 being held by the Federal Reserve Bank of New York, which with accrued interest amounted to $485,412,927.86 by Mar. 31, 1986.

On Aug. 20, 1986, in The Islamic Republic of Iran, Claimant and the United States of America, Respondent, Case No. A15 (I:G), Award No. ITL 63-A15 (I:G)-FT, the full Tribunal, by six to three, determined, among other things, that implementation of General Principle A of the General Declaration of Algiers (the first, basic Declaration) required the two Parties to enter into negotiation immediately and to negotiate in good faith with a view to achieving agreement (1) on the claims then pending against Dollar Account No. 1 and on the amount that should consequently be kept in the

Account to pay them; (2) on the amount not so needed (which upon conclusion of the agreement should be transferred to Iran); and (3) as part of the agreement, on the terms of a release by Iran of all claims against the United States for administration of Dollar Account No. 1.)

See, further, this Digest, Ch. 9, §3, ante, and this Chapter, §2, post.

Mr. Christopher continued his discussion of the results of the negotiation:

V. CLAIMS SETTLEMENT PROCEDURE

One of the most challenging issues throughout the negotiations was to provide a suitable method for U.S. nationals to pursue their commercial claims against Iran, while responding to Iran's demand for the return of its frozen assets. In order to reach agreement with Iran as to how U.S. claims would be validated and paid, it was essential to provide for a special impartial forum.

This issue was resolved through the establishment of the "IranUnited States Claims Tribunal," as provided for in the Claims Settlement Declaration. As is customary with such international tribunals, one-third of the members of the Iran-United States Tribunal will be appointed by the United States, one-third will be appointed by Iran, and one-third will be neutral. The Tribunal will function in accordance with the rules of the U.N. Commission on International Trade Law.

One of the most significant features of the Basic Declaration is its establishment of a security account for the sole purpose of paying awards made by the Tribunal against Iran. An initial deposit of $1 billion will come from Iran's deposits in U.S. branches of U.S. banks. Moreover, the security account will operate under the "bottomless pitcher" concept, in that Iran is required to maintain a minimum balance of $500 million in the account.

Once the two sides had agreed to establish the foregoing mechanism for validating and paying U.S. claims, it became possible for the United States to agree to require such claimants to move their claims from the U.S. courts to the new forum and give up any judicial attachments on Iranian properties in the United States. It should be noted, however, that U.S. claimants generally should be significantly better off with the new program than they were before the hostage crisis arose. Prior to the crisis, most of Iran's assets in the United States were protected by Iran's sovereign immunity, and for that and other reasons U.S. claimants would have faced great difficulty in actually collecting on their claims. Now, by contrast, Iran has committed itself to let the claims be both litigated before the special tribunal and paid from the bottomless pitcher.

In agreeing to this Claims Settlement Program, we recognized that some U.S. claimants would probably challenge the President's authority to proceed in this way, and the Attorney General was of course closely consulted on the question. The Attorney General's opinion of January 19, 1981, reviews the legal issues with care and comes to the clear conclusion that the President was fully authorized to bring this Claims Settlement Program into existence as he did. Without going into detail, that authority derives from the President's Constitutional power to conduct foreign rela

tions under Article II and from the authority conferred upon him by two statutes and a 1955 Treaty with Iran. I was advised before the Declarations of Algiers were initialled that the Department of Justice expected to be able to defeat all challenges to the President's authority to enter into these arrangements.

One of the questions raised with respect to these arrangements relates to the U.S. agreement to waive all damage claims by the hostages and their families against Iran. In evaluating the wisdom of that waiver, two factors should be kept in mind. First, most of the lawyers who have evaluated these potential damage claims agree that in all probability a statute enacted by Congress in 1976, the Foreign Sovereign Immunities Act, precludes the U.S. courts from hearing any such claims (because, among other reasons, they are based on torts committed outside the United States). In other words, the claims are probably without any real financial value. Second, it is quite clear that the release of the hostages could not have been achieved as it was without a waiver of the claims. In our consultations with the families of the hostages, most of them had indicated that they did not want the release of the hostages to be delayed by damage considerations. On this basis President Carter decided to waive the claims, but he also established a special commission to make recommendations to the new Administration and the Congress as to how the hostages should be compensated for their ordeal. I have every confidence that the American people will see to it that fair compensation is forthcoming.

*

The Iran Agreements, Hearings, ante, pp. 34-37.

Former Legal Adviser Owen afterwards discussed some of the legal considerations involved in drafting the two Declarations, as follows:

Preparations for the Final Drive

*

Christopher immediately began to look for new ways to convey to Iran the urgency of the situation and to focus the attention of the parties on the remaining open issues. Thus far the operative documents had taken the form of unilateral position statements by each side, but at this stage Christopher called for a new, unified document stating concretely and clearly the mutual obligations of the two governments. Since we knew that Iran would not sign an "agreement" with "the Great Satan," we invented the device of a "declaration," which would be issued by the government of Algeria and to which each of the two antagonists would then "adhere." In fact, for mechanical drafting reasons, two separate declarations were prepared. The first set forth what each side would do before, during, and after the release of the hostages (the so-called basic declaration), and the second set out the understandings on the arbitral mechanism for the settlement of claims (the socalled claims settlement declaration.) Christopher accurately anticipated that new documents of this kind would crystallize the open issues and thus expedite the negotiating process.

One of the challenges for the draftsman, incidentally, was to deal with the complex problems involved in simple terms so as to allow the documents to survive translation into French and Farsi and be clearly understood by (among others) laymen who had not been trained in the Anglo-American legal system. We recognized that, if either of the two declarations became long and complicated, it would be slightly comprehended and highly mistrusted in Tehran. For example, although the initial draft of the claims settlement declaration as prepared in the Office of the Legal Adviser of the State Department was some twenty-five pages long (very short and simple by ordinary standards), it was ultimately revised down to about three

and-a-half typewritten pages-surely one of the most concise legal documents of its kind ever written.8

The entire drafting process was fraught, to put it mildly, with technical problems. Just as one example, we were then aware that during the Shah's regime many U.S. companies, in contracting with the Iranian government, had agreed to contractual clauses (so-called Iranian-courts clauses) to the effect that, if any dispute subsequently arose under the contract, the parties would have to litigate the matter in the courts of Iran. Few, if any, of these companies had foreseen an Islamic revolution and the establishment of a radically different judicial system in Iran, and the U.S. negotiating team did not want these companies to be required to litigate their claims against the Iranian government in Iran's new revolutionary courts. We had been forewarned by the Algerians that Iran might insist on literal enforcement of all Iranian-courts clauses, but we deliberately drafted the claims settlement declaration in such a way as to allow a U.S. claimant an opportunity to try to persuade the proposed international arbitral tribunal that an Iranian-courts clause should not be treated as binding (that is, that the tribunal itself should hear his case), because the Iranian revolution had effectively destroyed the remedial mechanism to which the parties had agreed. In this and other respects the drafting of the new declarations inevitably raised the possibility of new technical disputes, but we nonetheless regarded preparation of the declarations as an essential step in accelerating the negotiations.

The principal credit for this feat of draftsmanship belongs to former Deputy Legal Adviser Mark Feldman and the State Department's then Counselor on International Law, Gerald Rosberg.

American Hostages in Iran: The Conduct of a Crisis, published by Yale University Press (1985), pp. 311-312, copyright ©1985 by the Council on Foreign Relations, Inc. Quotation used by permission of Yale University Press, Warren M. Christopher, Roberts B. Owen, and the Council on Foreign Relations.

See, further, this Digest, Ch. 9, §3, ante, and this Chapter, §2, post.

See, further, for Mr. Owen's account of the final round of negotiations, the signing of the two Declarations of the Government of the Democratic and Popular Republic of Algeria that embodied the agreements between the United States and the Islamic Republic of Iran, and the release of the hostages, ibid., pp. 312-323.

The private bank negotiations and the financial arrangements connected with the release of the hostages are discussed in American Hostages in Iran, op. cit., at Ch. 4, "The Economic and Financial Pressures: Freeze and Sanctions," ibid., pp. 173-200, by Robert Carswell, the Deputy Secretary of the Treasury, who was in charge of all economic issues relating to the crisis during the time in question, and Richard J. Davis, Assistant Secretary of the Treasury during that time, who was responsible for the financial and economic sanctions; in Ch. 5, "Crafting the Financial Settlement," ibid., pp. 201-234, also by Carswell and Davis; and in Ch. 6, “The Bankers' Channel," ibid., pp. 235-280, by John E. Hoffman, Jr., counsel for Citibank, described as “the key banking figure in the negotiations between the U.S. banks and the Iranian bankers;" ibid., p. xiii.

$2 Arbitration

Iran-United States Claims Tribunal

The (Second) Declaration of Algiers

Under the (separate) Declaration of the Government of the Democratic and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran, the United States and Iran established an international arbitral tribunal to decide claims, whether or not filed with any court, arising out of debts, contracts, expropriations, or other measures affecting property rights, with certain specified exclusions.

The Declaration consisted of eight articles, in the first of which Iran and the United States committed themselves to promote settlement of claims by the parties directly concerned and declared that any such claims not settled within six months from the date of entry into force of the agreement would be submitted to binding thirdparty arbitration in accordance with the terms of the agreement. The six-month period could be extended once by three months at either party's request (and was subsequently so extended, to October 19, 1981).

Article II established an international claims tribunal (the IranUnited States Claims Tribunal) for the purpose of deciding outstanding claims of nationals of either party against the other party, whether or not filed with any court, that arose out of debts, contracts (including transactions which were the subject of letters of credit or bank guarantees), and expropriations or other measures affecting property rights. The Tribunal also had jurisdiction over any outstanding counterclaim arising out of the same contract, transaction, or occurrence that constituted the subject matter of a claim. The following claims were excluded from the jurisdiction of the Tribunal: (1) claims described in Paragraph 11 of the (first) Declaration (see this Digest, Ch. 9, §3, ante); (2) claims arising out of actions of the United States in response to the conduct described in Paragraph 11; and (3) claims arising under a binding contract between the parties which specifically provided for any disputes thereunder to be within the sole jurisdiction of the competent Iranian courts (choice-of-forum clause) "in response to the Majlis position."

The Tribunal was also given jurisdiction over official claims of the United States and Iran against each other arising out of contractual arrangements between them for the purchase and sale of goods and services, as well as jurisdiction over any dispute as to the interpretation or performance of any provision of the (first) Declaration, as specified in Paragraphs 16 and 17 (see this Digest, Ch. 9, §3, ante).