Presidential Authority to Settle the Iranian Crisis

Headnotes: 

The President has the constitutional and statutory authority to enter an executive agreement with Iran which settles American citizens’ claims against Iran; claimants who receive less than the stated value of their claims should not be able to recover additional compensation from the United States government on the theory that the settlement constituted a taking under the Fifth Amendment.

The President may, through orders issued under the International Emergency Economic Powers Act (IEEPA), free currently blocked Iranian assets and effect their return to Iran, notwithstanding the existence of court orders of attachment for bidding the removal of Iranian funds from the banks holding them, by revoking the existing general license for the attachments under the Iranian Assets Control Regulations and licensing Iranian withdrawals from the blocked accounts.  Since private banks may refuse to honor withdrawal licenses after the attachments are revoked for fear of liability under state law to the attachment claimants, funds held by federal banking entities should be relied on as the source of any amounts promised to be returned forthwith to Iran.

Foreign branches of American banks are subject to orders issued under authority of the IEEPA and, once withdrawal licenses are issued, there should be no legal impediment to Iranian withdrawals from previously blocked accounts as long as previously licensed setoffs are observed.  If creditors of Iran seek to attach these accounts through actions in foreign courts, it is likely that those courts would allow their own domestic claimants a special priority.

The President may, under existing law, take several kinds of actions to assist Iran in effecting the return of the former Shah’s assets in the United States.  These actions include blocking the assets under the IEEPA to facilitate a census and prevent their removal, undertaking to aid Iran in its litigation to recover the assets, informing the court of our position on foreign sovereign immunity and act of state doctrines, or taking an assignment of its claims from Iran.  However, vesting the Shah’s assets in the government would require new legislative authority and even then would give rise to a takings claim for just compensation by the Shah’s estate.

Updated July 9, 2014