As long as the government of Iran is recognized by the United States, it is entitled to maintain a lawsuit in any state or federal court; however, there is a substantial argument that the Iranian government’s suit against the Shah to recover allegedly misappropriated governmental funds should be stayed or dismissed without prejudice in light of Iran’s massive breaches of its treaty obligations to the United States and international law.
The courts have recognized the appropriateness of deferring to the Executive’s foreign policy determinations in connection with claims or defenses based on doctrines of foreign sovereign immunity or act of state.
The Government’s concerns over the effect of the litigation on our foreign policy provide a sufficient basis to support its standing to intervene in Iran’s suit against the Shah, and there is precedent to support its intervention and assertion of cross-claims unrelated to the controversy in suit.
A respectable argument can be made that the Shah enjoys sovereign immunity from suit, under the 1976 Foreign Sovereign Immunities Act as well as customary international law, and the actions complained of appear to be acts of state. However, the present government of Iran may be able to waive the application of either of these doctrines to defeat its claims against the Shah, since both exist for the benefit of the state in question and not for the individuals who lead it.