[Senate Hearing 108-214]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 108-214
 
          BENEFITS FOR U.S. VICTIMS OF INTERNATIONAL TERRORISM
=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 17, 2003

                               __________

       Printed for the use of the Committee on Foreign Relations


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate






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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)

  










                            C O N T E N T S

                              ----------                              
                                                                   Page

Allen, Hon. George, U.S. Senator from Virginia, prepared 
  statement submitted for the record.............................    39
Eizenstat, Stuart E., partner, Covington & Burling, Washington, 
  DC.............................................................    14
    Prepared statement...........................................    17
Gerson, Dr. Allan, chairman, Gerson International Law Group and 
  honors professor, George Washington University, Washington, DC.    20
    Prepared statement...........................................    29
    9/11 Families United To Bankrupt Terrorism--Position Paper, 
      July 3, 2003...............................................    22
Taft, William H., IV, the Legal Adviser, Department of State, 
  Washington, DC.................................................     2
    Prepared statement...........................................     6
    Responses to additional questions for the record by Senator 
      Allen......................................................    40
    Responses to additional questions for the record by Senator 
      Biden......................................................    43

                                 (iii)

  












          BENEFITS FOR U.S. VICTIMS OF INTERNATIONAL TERRORISM

                              ----------                              


                        THURSDAY, JULY 17, 2003

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m. in room 
SD-219, Dirksen Senate Office Building, Hon. Richard G. Lugar 
(chairman of the committee), presiding.
    Present: Senator Lugar.
    The Chairman. This hearing of the Senate Foreign Relations 
Committee is called to order. Today the committee meets to hear 
testimony on policy related to compensation for American 
victims of international terrorism. The administration has put 
forward a proposal to establish a comprehensive Federal program 
to provide benefits to terrorism victims. In the interest of 
stimulating congressional deliberations, I've introduced that 
proposal at the administration's request as Senate bill 1275.
    I'm pleased to welcome this morning Mr. William H. Taft, 
Legal Adviser to the State Department, who will explain the 
administration's proposal and the analysis behind it. I'm also 
pleased to welcome two distinguished lawyers and experts on 
compensation issues, Stuart Eizenstat and Allan Gerson, who 
will offer their perspectives on the administrations proposal.
    Members of our committee have been very interested in 
developing a workable terrorism compensation policy for United 
States citizens. Senator Allen, a member of our committee in 
particular, has been active in this area and we welcome his 
thoughts and those of all members on the subject before us.
    This hearing acknowledges an unfortunate reality. Many 
Americans have been the victims of international terrorist 
attacks during the last quarter century, and such attacks are 
unlikely to end, unhappily, in the near future. Our policies 
must account for the needs of those who have been victims of 
past attacks while preparing rationally for an uncertain 
future.
    I believe that all Senators are committed to ensuring that 
the United States has in place the most effective tools 
possible to combat terrorism and to promote the security of the 
United States. I also know that Senators are unified in their 
sympathy for American victims of terrorism and in our desire to 
see that these victims and their families receive compensation 
for their losses. The questions we must consider are what laws 
and policies will most effectively achieve those goals and how 
do we ensure that policies aimed at compensating victims of 
terrorism are consistent with broader United States national 
security interests.
    In recent years, Congress has addressed issues related to 
compensation for victims of terrorism through several pieces of 
legislation. Often such legislation has been attached to larger 
bills, sometimes late in the legislative process. This hearing 
is intended to provide our committee with an opportunity to 
examine the issue of terrorism compensation in a deliberative, 
timely, and detailed fashion.
    It's an important issue, one that deserves our careful 
consideration. Therefore, we are indebted to the witnesses who 
have come before us this morning and we look forward to their 
testimony. The first panel will be, in fact, Mr. William H. 
Taft, IV, Legal Adviser, Department of State, Washington, DC, 
and following his testimony and questioning by Senators, we 
will call upon the second panel, Mr. Eizenstat and Dr. Gerson.
    Mr. Taft, it's great to have you again before us this 
morning and we look forward to your testimony. Your entire 
statement will be made a part of the record in full and I'll 
ask you to proceed as you wish.

STATEMENT OF WILLIAM H. TAFT, IV, THE LEGAL ADVISER, DEPARTMENT 
                    OF STATE, WASHINGTON, DC

    Mr. Taft. Thank you, Mr. Chairman, and I appreciate your 
putting my complete statement, which has been provided to the 
committee, in the record, and I will summarize it here.
    I'm honored to appear before you and to testify in support 
of the bill, S. 1275. Let me begin, as you did, by expressing 
the administration's and my own personal sympathy to the 
victims of international terrorism. Over the last 25 years, we 
have all seen how Americans and our embassies and facilities 
abroad have become the targets for the most dreadful attacks. 
We all remember the sight of our embassy personnel being 
paraded before the cameras during their captivity in Iran for 
444 days, and we can not begin to imagine their suffering. 
Additional Americans were taken hostage in Lebanon and held for 
years in the most deplorable conditions. Others were killed 
while yet others have died in attacks by suicide bombers and 
acts of airline sabotage and in attacks on our embassies 
abroad.
    All of these victims and their families have suffered 
unspeakable injuries and pain. Congress has passed numerous 
pieces of legislation to make clear its intent that victims of 
international terrorism should receive some compensation. 
First, in 1996, Congress provided that civil suits against the 
terrorist parties including state sponsors of terrorism would 
hold them responsible. It passed an amendment to well 
established rules of sovereign immunity embodied in the Foreign 
Sovereign Immunities Act that removed immunity from suit for 
states designated as sponsors of international terrorism. This 
legislation opened the courts to suits against the state 
sponsors of terrorism and judgments were rendered against those 
states. It was, however, difficult for plaintiffs to actually 
collect on their judgments.
    In most cases, in fact, the defendant states have not even 
appeared in the suits, nor do these states typically have very 
many assets in the United States against which a judgment may 
be executed. What property is here is frequently blocked and 
often subject to competing claims of ownership.
    To address this situation, in the year 2000 Congress passed 
additional legislation. This act made blocked assets of Cuba 
available to pay certain outstanding judgments against that 
country. It also provided that certain plaintiffs with 
judgments against Iran could be paid out of funds from the U.S. 
Treasury, which were supplemented by a small portion of blocked 
Iranian funds. In all, approximately $377 million was paid by 
the Treasury to 13 victims or their families.
    Other plaintiffs with judgments against Iran as well as 
plaintiffs with judgments against other state sponsors of 
terrorism, however, received no payments as a result of the new 
legislation. Subsequently, Congress added two more plaintiffs 
to the list of those eligible for payments. As a result, one 
additional judgment holder against Iran received compensation. 
The other additional plaintiff is still awaiting that judgment 
in that case. This brought the total of payments from the 
Treasury for 14 victims to $386 million.
    Following the tragic events of September 11, 2001, Congress 
acted swiftly to address the immediate needs of the victims and 
families of those most terrific acts of terrorism by passing 
title IV of the Air Transportation and Safety Stabilization 
Act. It established a special master within the Justice 
Department who determines the appropriate amount to be paid in 
each individual case. The payments come from the Treasury.
    As we all know, while many have welcomed and benefited from 
this program, there has also been significant criticism of it. 
Last year, Congress addressed this subject yet again and passed 
the Terrorism Risk Insurance Act. This statute made additional 
judgment holders eligible for payments. It also made some of 
the blocked assets of terrorist parties, including those of 
state sponsors of terrorism and their agencies and 
instrumentalities available to satisfy some judgments.
    Congress has previously passed similar provisions in 1998. 
However, the bill in which those provisions were included also 
permitted the President to waive the attachment provisions, the 
provisions that provided that there could be attachment of 
blocked assets. President Clinton issued a waiver at the time 
he signed the amendment into law.
    With passage of the Terrorism Risk Insurance Act, judgment 
holders began to attach blocked assets of terrorist list states 
but with uneven results. Some who had received judgments 
against Iraq were able to satisfy their judgments from some 
$100 million in blocked Iraqi assets. All other Iraqi assets, 
however, have now been vested by the President in the United 
States, and are not available to compensate judgment holders.
    Plaintiffs with judgments against Iran are also attempting 
to attach Iranian blocked assets, but Iran has very few blocked 
assets in the United States, about $23 million, according to 
the Treasury's most recent report to Congress, and the largest 
amount of these assets are diplomatic and consular properties, 
which are subject to obligations under the Vienna Convention on 
Diplomatic and Consular Relations, and thus not subject to 
attachment under the new statute. So there is very little money 
or property available to satisfy these judgments against Iran.
    Thus, while it was Congress' intent to address the 
suffering of victims of international terrorism, the 
legislation it has passed piecemeal over the years has proven 
unsatisfactory in several respects. The current litigation-
based system of compensation is inequitable, unpredictable, 
occasionally costly to the U.S. taxpayer, and damaging to the 
foreign policy and national security goals of this country.
    First let me address the inequitable and unpredictable 
nature of the current system. While some U.S. victims have been 
successful in obtaining large default judgments, others who may 
not be able to prove who was responsible for the terrorist act 
of which they were a victim are not able to obtain court 
judgments. Yet others are barred by international agreement 
from even bringing suit. Some judgment holders have been able 
to satisfy judgments against the particular state sponsor of 
terrorism because at the time their judgments were rendered, 
there happened to be sufficient blocked assets that they could 
attach. But others have not been able to do that because the 
defendant state in their cases has few blocked assets in the 
United States.
    In addition, plaintiffs have had to compete against each 
other for satisfaction, hoping that their writs were served 
before others for attachment of the very same assets. Yet 
others have been eligible to receive payments directly from the 
U.S. Treasury, but many have received and can expect to receive 
nothing under the current system. And those victims or families 
who have received payments have received drastically varying 
amounts for similar injuries.
    Second, the current system has been costly to the U.S. 
taxpayer and will continue to be so, whether or not the funds 
come directly from the U.S. Treasury. Under the Victims of 
Trafficking Act, payments totaling, as I said earlier, $386 
million have been made from the U.S. Treasury to 14 victims. 
Continued payments in this fashion based upon compensatory 
damage awards by courts would amount to a significant drain on 
the U.S. Treasury, and while some blocked assets have been made 
available for attachment, in theory to make the terrorist party 
pay, in fact the U.S. taxpayer is most likely to end up footing 
the bill for these payments as well.
    Virtually all of the Iranian blocked property that has been 
the subject of attachments involves property that is the 
subject already of claims against the U.S. Government before 
the Iran-United States claims tribunal, where we will have to 
account for it. And when the time comes for the United States 
to demand from Iran or other states reimbursement for the 
amounts that it has paid on their behalf, there will be 
offsetting claims to cover judgments against the United States 
rendered in foreign courts. Recently, an Iranian court entered 
a default judgment against the United States in a tort case for 
$500 million.
    Third, the current system has frequently conflicted with 
foreign policy and national security interests. The U.S. 
Government blocks assets in the interests of the Nation as a 
whole. This is a powerful foreign policy tool. It is not 
intended to expropriate those assets, but to use them to 
promote important foreign policy goals. Using those assets to 
pay court judgments undermines the President's ability to use 
them in the broader interest of the Nation. For example, 
blocked Iraqi assets were needed this year for the people of 
Iraq and to support reconstruction efforts, just as blocked 
Afghan assets were needed for similar purposes in 2002 and just 
as blocked Iranian assets were held as critical leverage in 
1981 to secure the release of the hostages.
    Using blocked assets to pay claims and judgments will not 
deter terrorism. Terrorist states already know that they will 
never see the blocked assets unless they change their behavior. 
The only governments that will be hurt by the use of blocked 
assets for paying judgments will be the governments that 
replace the terrorist state governments now and end their 
country's support for terrorism.
    Congress evidently recognized that, and therefore looked to 
the administration to develop an alternative program. In 
passing the appropriations act for the Department for fiscal 
year 2002, Congress made clear its interest in a comprehensive 
program to ensure fair, equitable, and prompt compensation for 
all U.S. victims of international terrorism or their families 
that occurred or occurs on or after November 1, 1979. That date 
was in the bill.
    In June 2002, Deputy Secretary Armitage, in a letter to 
many Senators and Congressmen set out four major principles for 
a proposal that would do this. First, the program should 
provide the same benefits to those with low incomes as to those 
with greater means. Second, victims should receive benefits as 
quickly as possible without the need for litigation or a drawn-
out adjudication process. Third, the amount to be paid should 
be on a par with that provided to families of public safety 
officers killed or injured in the line of duty, a catastrophe 
for which Congress has previously determined taxpayers would 
wish to provide compensation from the Federal Government. And 
fourth, compensation would not come from blocked assets, 
thereby assuring that the practice of using blocked assets as 
leverage in the conduct of foreign policy can continue to be 
available to the President.
    Last month, we forwarded draft legislative language to you. 
We believe that the program we have proposed is the fairest and 
most equitable approach to providing benefits to victims or 
their families. It provides all victims and their families with 
predictability, so that they know up front what benefit the 
Federal Government will provide them without ever having to go 
to court or needing an attorney or needing ad hoc legislation 
from Congress for their particular situations. Importantly, for 
persons who have already filed lawsuits against terrorist 
states seeking compensation for injuries suffered in terrorist 
incidents, whether they have obtained judgments yet or not, the 
bill will not affect their ability to attach blocked assets. 
They are essentially grandfathered in this respect, losing no 
rights that they currently have.
    Let me highlight some of the major provisions of the 
program that would be established under this bill. When an act 
of international terrorism occurs, the victim or victim's 
family would receive a quick uniform payment without having to 
prove who was responsible for the act of terrorism and without 
having to bring a lawsuit and obtain a judgment. The families 
of those killed would receive the same amount that is paid to 
the families of police officers and firefighters who are killed 
in the line of duty under legislation enacted previously. That 
amount is currently $262,000 and is subject to an automatic 
escalator clause. Those injured or held hostage would receive 
up to that amount according to a schedule which would be 
established by the Secretary of State in regulations.
    The program would be administered by the State Department 
and paid for out of funds separately authorized and 
appropriated to the Department for this purpose. The U.S. 
Government would be subrogated to the extent of payments made 
to any recovery in litigation or settlement. Those who decided 
not to participate in this program could still sue to the 
extent permitted by current law, but they would not be able to 
satisfy their judgments out of blocked assets unless their 
suits have already been filed.
    The possibility that assets of terrorist states, whether 
blocked or otherwise, may be available to satisfy judgments in 
the past has, with few exceptions, led only to either of two 
results, either there turn out to be no available assets and no 
payments are made, or Congress has paid the judgments from the 
Treasury. Under our bill, the route to the Treasury will be 
short and reliable and no one will be under the illusion that 
there are terrorist state assets available to compensate them 
in the largest number of cases where there really aren't.
    We believe this program would be fair to all victims and 
their families. There would no longer be a need to try to find 
a defendant and to race to the courthouse to try to obtain a 
default judgment and then to see whether any blocked assets are 
still available for that particular country, or whether ad hoc 
legislation can be enacted to provide a Treasury payment, the 
existing system. While providing a generous benefit to victims, 
it would be less costly to the U.S. Treasury and fairer than 
paying massive default judgments to a small number of victims 
and leaving many more victims out.
    I hope that you will consider this proposal favorable. 
Thank you, Mr. Chairman, for the opportunity to appear.
    [The prepared statement of Mr. Taft follows:]

     Prepared Statement of William H. Taft, IV, the Legal Adviser, 
                          Department of State

    Mr. Chairman, I am honored to have an opportunity to appear before 
you today to testify in support of S. 1275.
    Let me begin by expressing the Administration's and my own personal 
sympathy to victims of international terrorism. Over the last 25 years, 
we have all seen how Americans and our embassies and facilities abroad 
have become the targets for the most dreadful acts of international 
terrorism. We all remember the sight of our embassy personnel being 
paraded before the cameras during their captivity in Iran for 444 days 
and can not begin to imagine the suffering to which they were 
subjected. Additional Americans were taken hostage in Lebanon, and many 
of them were held for years by their captors under the most deplorable 
conditions. Others were killed by their captors, while yet others have 
died in attacks by suicide bombers, in acts of airline sabotage, and in 
attacks on our embassies abroad. All of these victims and their 
families have suffered unspeakable injuries and pain.
    Congress has passed numerous pieces of legislation to make clear 
its intent that victims of international terrorism receive 
compensation.
    First, in 1996, Congress adopted an approach by which civil suits 
against the terrorist parties, including state sponsors of terrorism, 
would hold them responsible for their acts in the form of money 
damages. It passed an amendment to well-established rules of sovereign 
immunity embodied in the Foreign Sovereign Immunities Act that removed 
immunity from suit for states designated as sponsors of international 
terrorism as well as additional legislation, making officials, 
employees and agents of state sponsors of terrorism liable for personal 
injury or death caused by their acts of international terrorism.
    This legislation opened the courts to suits against the state 
sponsors of terrorism, and judgments were rendered against those 
states; it was, however, difficult for plaintiffs to collect on their 
judgments. In most cases, in fact, the defendant states have not 
appeared in the suits brought against them. Nor do these states 
typically have many assets in the United States against which a 
judgment may be executed, and what property is here is frequently 
blocked and often subject to competing claims of ownership.
    To address this situation, in 2000, Congress passed additional 
legislation in the Victims of Trafficking and Violence Protection Act. 
This act made blocked assets of Cuba available to pay certain 
outstanding judgments against that country. It also provided that 
certain plaintiffs with judgments against Iran could be paid out of 
funds from the U.S. Treasury supplemented by a small portion of blocked 
Iranian funds. In all, approximately $377.7 million was paid by the 
Treasury to 13 victims or their families. Other plaintiffs with 
judgments against Iran, as well as plaintiffs with judgments against 
other state sponsors of terrorism, however, received no payments as a 
result of the new legislation. An amendment to the Victims of 
Trafficking Act subsequently added two more plaintiffs to the list of 
those eligible for payments. As a result, one additional judgment 
holder against Iran received compensation; the other additional 
plaintiff is still awaiting a judgment. This brought the total of 
payments from the Treasury for 14 victims to $386 million.
    Following the tragic events of 9/11, Congress acted swiftly to 
address the immediate needs of the victims and families of those most 
horrific acts of terrorism by passing title IV of the Air 
Transportation Safety and System Stabilization Act. It established a 
Special Master within the Justice Department, who considers a variety 
of factors in determining the appropriate amount to be paid in each 
individual case. The payments come from the Treasury. As we all know, 
while many have welcomed and benefited from this program, there has 
also been significant criticism.
    Last year, Congress addressed this subject yet again and passed the 
Terrorism Risk Insurance Act. This statute made additional judgment 
holders eligible for payments under the Victims of Trafficking Act. It 
also made some of the blocked assets of terrorist parties, including 
those of state sponsors of terrorism and their agencies and 
instrumentalities, available to satisfy some of the judgments awarded 
to victims and their families. Congress had previously passed similar 
provisions in 1998, amending the Foreign Sovereign Immunities Act, to 
permit plaintiffs to satisfy judgments from blocked assets. However, 
the amendment also permitted the President to waive the attachment 
provisions in the national security interest of the United States. 
President Clinton issued a waiver upon signing the amendment into law.
    With passage of the Terrorism Risk Insurance Act, plaintiffs were 
in a position to begin attaching blocked assets of terrorist list 
states to satisfy their judgments. They have started to do this, but 
with uneven results. Certain plaintiffs who had received judgments 
against Iraq were able to satisfy their judgments from some $100 
million in blocked Iraqi assets. All other Iraqi assets, however, were 
vested by the President in the United States on March 20, 2003 and are 
not available to compensate judgment holders. They will be used to 
assist the recently liberated Iraqi people and to assist in the 
reconstruction of Iraq.
    Plaintiffs with judgments against Iran are also attempting to 
attach Iranian blocked assets. But Iran has few blocked assets in the 
United States--about $23 million, according to Treasury's most recent 
report to Congress, and the largest amount of these are diplomatic and 
consular properties subject to obligations pursuant to the Vienna 
Conventions on Diplomatic and Consular Relations, and not subject to 
attachment under the new statute. So there is very little money or 
property available to satisfy these judgments.
    Thus, while it was Congress' intent to address the suffering of 
victims of international terrorism, the legislation it passed, 
piecemeal over the years, has proven unsatisfactory in several 
respects. The current litigation-based system of compensation is 
inequitable, unpredictable, occasionally costly to the U.S. taxpayer 
and damaging to the foreign policy and national security goals of this 
country.
    First, let me address the inequitable and unpredictable nature of 
the current system. While some U.S. victims have been successful in 
obtaining large default judgments against a particular terrorist party, 
others, who may not be able to prove who was responsible for the 
terrorist act, are not able to obtain court judgments, though their 
suffering and pain are no less than those who can. And yet others are 
barred by international agreement from even bringing suit.
    Some judgment holders have been able to satisfy judgments against 
the particular state sponsor of terrorism, because at the time their 
judgments were rendered, there happened to be sufficient blocked assets 
they could attach. Others have not, because the defendant state in 
their cases has few blocked assets in the United States. In addition, 
plaintiffs have had to compete against each other for satisfaction, 
hoping that their writs were served before the others for attachment of 
the very same assets.
    Yet others have been eligible to receive payments directly from the 
U.S. Treasury. But many have received and can expect to receive nothing 
under the current system. And those victims or families who have 
received payments have received drastically varying amounts for similar 
injuries.
    According to the Washington Post, there are at present some 60 
pending terrorism-related suits, involving more than 1,500 plaintiffs, 
targeting Libya, Cuba, Iran, Iraq and other terrorist states. There may 
be many more. The current compensation system, created through 
piecemeal legislation, that encourages litigation, as I have noted, has 
been far from equitable and predictable in providing compensation to 
existing judgment holders. If the system can not meet the needs of 
existing judgment holders, it is easy to see how inadequate it will be 
in addressing the needs of those who have yet to receive judgments, or 
the needs of future victims of international terrorism.
    Second, the current system has been costly to the U.S. taxpayer and 
will continue to be so, whether or not the funds come directly from the 
U.S. Treasury. Under the Victims of Trafficking Act, payments totaling 
$386 million were made from the U.S. Treasury for 14 victims. Continued 
payments in this fashion, based upon compensatory damages awarded by a 
court, for potentially more than a thousand plaintiffs would amount to 
a significant drain on the U.S. Treasury. And while some blocked assets 
have been made available for attachment, in theory to make the 
terrorist party pay, in fact the U.S. taxpayer is most likely to end up 
footing this bill.
    Virtually all of the Iranian blocked property that has been the 
subject of attachments involves property that is the subject of claims 
against the U.S. government before the Iran-United States Claims 
Tribunal in The Hague, where we will have to account for it. Third 
parties who have interests in the property will file lawsuits for 
compensation. And when the time comes for the United States to demand 
from Iran or other states reimbursement for the amounts it has paid on 
their behalf, it will no doubt be confronted with offsetting claims to 
cover judgments against the United States rendered in other national 
courts. Recently an Iranian court entered a default judgment against 
the United States for $500 million.
    Third, the current system has frequently conflicted with broader 
foreign policy and national security interests. The U.S. government 
blocks assets in the interests of the nation as a whole. This is a 
powerful foreign policy tool. It is not intended to expropriate those 
assets, but to use them to promote important foreign policy goals. 
Using those assets to pay the court judgments of either plaintiffs 
suffering financial losses in business transactions or victims of 
terrorism, undermines the President's ability to use this tool in the 
broader interest of the nation. For example, blocked Iraqi assets were 
needed this year for the people of Iraq and to support reconstruction 
efforts, just as blocked Afghan assets were needed for similar purposes 
in 2002, and as blocked Iranian assets were held as critical leverage 
in 1981 in securing the release of the hostages.
    Using blocked assets to pay claims and judgments will not deter 
terrorism, but will reduce the incentive that blocking property 
provides to end support for terrorism. Terrorist states already know 
that they will never see the blocked assets unless they change their 
behavior or meet other important U.S. interests. The only governments 
that will be hurt by the use of blocked assets for paying judgments 
will be the governments that end their country's support for terrorism.
    Congress recognized that the current ad hoc, piecemeal approach to 
compensation had significant downsides and therefore looked to the 
Administration to help develop an alternative program. In passing the 
Commerce, Justice and State Appropriations Act for FY 2002, Congress 
made clear its interest in a comprehensive program to ensure fair, 
equitable, and prompt compensation for all U.S. victims of 
international terrorism (or their family members) that occurred or 
occurs on or after November 1, 1979.
    In June 2002, Deputy Secretary Armitage in a letter to many 
Senators and Congressmen set out principles for a proposal that would 
do this. The letter outlined four major principles:

          (1) that the program should provide the same benefits to 
        those with low incomes as to those with greater means;

          (2) that victims should receive benefits as quickly as 
        possible, in a stream-lined fashion, without the need for 
        litigation or a drawn-out adjudication process;

          (3) that the amount to be paid should be on par with that 
        provided to families of public safety officers killed or 
        injured in the line of duty--a catastrophe for which Congress 
        has previously determined taxpayers would wish to provide 
        compensation; and

          (4) that compensation would not come from blocked assets, 
        thereby assuring that the practice of blocking assets and using 
        them as leverage in the conduct of foreign policy can continue.

    Last month, we forwarded draft legislative language to Chairman 
Lugar that meets these principles and urged passage of such a program. 
We believe that the program we have proposed is the fairest and most 
equitable approach to providing benefits to victims or their families 
in their true time of need. It provides all victims and their families 
with predictability, so that they know up front what they are entitled 
to, without having to go to court or needing an attorney or ad hoc 
legislation from Congress for their particular situations. Importantly, 
for persons who have already filed lawsuits against terrorist states 
seeking compensation for injuries suffered in terrorist incidents--
whether they have obtained judgments yet or not--the bill will not 
affect their ability to attach blocked assets; they are essentially 
grandfathered in this respect.
    Let me highlight some of the major provisions of the program that 
would be established under S. 1275.
    When an act of international terrorism occurs, the victim, or 
victim's family would receive a quick, uniform payment, without having 
to prove who was responsible for the act of terrorism and without 
having to bring a lawsuit and obtain a judgment. We would cover acts of 
terrorism going back to the Iran embassy hostage crisis.
    The families of those killed would receive the same amount that is 
paid to families of police officers and fire fighters who are killed in 
the line of duty under legislation enacted previously. That amount is 
currently $262,000, and is subject to an automatic escalator clause. 
Those injured or held hostage would receive up to that amount according 
to a schedule to be established in regulations.
    The program would be administered by the State Department in a 
streamlined way and paid for out of funds separately authorized and 
appropriated to the Department for this purpose. The U.S. Government 
would be subrogated, to the extent of payments made, to any recovery in 
litigation or settlement.
    Those who decided not to participate in this program could still 
sue to the extent permitted by current law, but would not be able to 
satisfy judgments out of blocked assets, except where their suits have 
already been filed.
    We believe this program would be fair to all victims and their 
families. There would no longer be a need to try to find a defendant, 
and to race to the courthouse to try to obtain a default judgment, and 
then to see whether any blocked assets are still available for that 
particular country or ad hoc legislation could be enacted to provide a 
Treasury payment. While providing a benefit to victims of the same 
magnitude Congress has determined is suitable for police officers and 
firemen, it would be less costly to the U.S. Treasury and fairer than 
paying massive default judgments to a small number of victims and 
leaving all the others out. I hope you will consider this proposal 
favorably.

    The Chairman. Thank you very much, Mr. Taft, for your 
testimony. You have pointed out in a number of the paragraphs 
of your testimony that the administration opposes the use of 
blocked assets to foreign states as a source of compensation 
for victims of terrorism. You have, I think, sketched out 
accurately the predicament currently for our government as it 
deals with post-war Iraq, but likewise in previous situations.
    Let me say this as a practical example. When I visited with 
Ambassador Bremer in Baghdad about 3 weeks ago and we discussed 
the sources of money available for the governance of the 
country--quite apart from reconstruction, public safety, the 
repair of the oil wells, various other things that need to be 
done--he mentioned frequently blocked assets. He mentioned 
other assets that had come to the United States--sometimes 
simply cash out on the payment there that had been taken from 
banks and looters and all of this, this sort of one source of 
revenue.
    In due course, we anticipate that there will be sales of 
oil. In fact, the very day that I was there, blocked assets, 
that is, oil reserves in Jehon, Turkey that belonged to Iraq 
were sold, and some revenues came therefore to this provisional 
government. Now the fact is that these moneys are being 
expended. As you're pointing out, on the other hand, there may 
be victims of terrorism, American victims, who are looking to 
the so-called blocked assets of the source of payments and 
judgments of lawsuits that might be successful. At some point, 
leaving aside the issue today, the overall one, is the American 
taxpayer, who takes a look at this whole situation and asks how 
much Iraq is costing us month by month. Secretary Rumsfeld has 
asked this, but likewise so have Mr. Bremer and the civil 
authorities.
    In other words, there is one pool of money here. The 
question, as you pointed out, is that in the past it may be 
that certain lawsuits have been successful, abnormally so. 
Perhaps hundreds have been successful all together, with a 
great division among rich and poor, some were lucky, with a 
timely filing, or whatever happened to be the circumstance. 
Finally at the end of the day the blocked assets have to be 
replaced if we're to have a relationship with the country. 
Right now, we have an active one with what we hope will be a 
new democracy and a new day in Iraq. These are not free funds; 
they're being replaced even as we speak; they're being used 
essentially.
    Now, as I gather, one of the nubs of this proposal of our 
government is to try to bring some order out of this chaos by 
saying the blocked assets are there for use of American 
diplomacy, American security, treaties that may be formed with 
future governments--preferably ones that are more favorable--
but they are not available for victims' compensation. 
Essentially we're going to try to get some regularization of 
the process so that the rich and the poor all have an 
opportunity. Yet we want to take a look at some other more 
recent cases, that is, victims of terrorist violence in New 
York City, for example, or police officers who in the course of 
duty have met a terrible fate.
    I don't want to oversimplify, but essentially the policy 
drives that. That is, this bill that I've introduced at the 
behest of the administration--because we have had already an 
active debate on the floor last Wednesday and Thursday when we 
took up the State Department authorization, the foreign 
assistance, and the Millennium Challenge Account--progressed 
through 56 amendments, and several of them dealt with this 
subject. I pointed out that we were going to have a timely 
hearing, and that is why I'm conducting one this morning. 
Although you are the only witness for the moment and I am the 
only Senator, the fact is this is very important business 
because something is going to happen here. We have a 
legislative vehicle in motion, and many Senators have already 
made proposals augmenting whatever may have been done by 
Senators in the past. The conference and finally a bill signed 
by the President has to conform, I would think, roughly to what 
you are suggesting this morning, or else it simply won't work 
given the President's budget, our foreign policy with Iraq, and 
a good number of other situations.
    Now, let me ask, if this is the case, how did you arrive at 
the amount of compensation that would come to victims? What are 
the guidelines, the models, the profiles of what would be fair 
to everybody involved, given many countries now, and as I said 
in my opening statement, a quarter century really of American 
history that this encompasses.
    Mr. Taft. Now, Senator, let me say first of all that I 
think your holding this hearing is the right way to go about 
it. Although the Congress has passed, as I was surveying them, 
perhaps 5 or 6 different bills over the past 6 or 7 years, I 
really don't think that there has been actually a hearing on 
proposed legislation on any of those bills that was passed, and 
yet this is a complicated problem.
    The fact that the legislation has had to be amended and 
changed and altered so many times suggests that holding a 
hearing and really looking at the problem whole is the right 
way to go, and so I compliment you and the committee on doing 
that here, and I would hope that this process would continue, 
and obviously Senators have many different ideas, and 
Congressmen as well, as to how to approach this problem, but 
the way to sort those out is not at 2 a.m. on some other 
totally unrelated bill putting in an amendment to deal with a 
small part of this problem. The way to do it is to look at it 
whole and come up with a proper program.
    Now you asked specifically about, and there are obviously a 
lot of decisions that have to be made to go into this, which 
are not easy: the definition of who is eligible for the 
program, the definition of what events will be covered where, 
and the one that you asked about certainly is what amount is 
reasonable. In considering that, we looked at the different 
judgments that had been given and the different programs that 
already exist for some guidance. We wanted to have a generous 
amount and we wanted to have a uniform amount. Those were some 
principles that we said and we wanted to have, I think it's 
fair to say also, an affordable amount, an amount that a 
person, a taxpayer, a schoolteacher in Indianapolis who pays 
taxes and wants to do something for people, thinks is a 
reasonable amount for them to be contributing to help, but not 
something that would shock them and be more than they think 
maybe they should be pitching in to that particular tragedy.
    And one of the places that we looked, and what we found 
that we thought was a sensible place to be in that regard, was 
the Public Safety Officers Program, and it provides more than a 
quarter of a million dollars now to people who are killed in 
the line of duty, people who are in a profession that we very 
much admire and require and respect and who suffer a 
catastrophe. It looked to us as if that was a reasonable amount 
which the Congress had previously approved in that situation 
and was affordable and yet generous, and that was why we came 
up with that figure.
    The Chairman. Well, Mr. Taft, from the testimony you've 
given, about $370 million, more or less, has been paid out, and 
did you say to 13 victims?
    Mr. Taft. There are, I believe it's 14 have been given, of 
whom 13 have already collected.
    The Chairman. Obviously just doing the math you get to 
enormous awards. Now in what way were these 13 or 14 victims 
different substantially from everybody else who may be ready to 
file a suit now? In other words, this is quite a past history 
of sort of an average of over $20 million or close to $30 
million a person.
    Mr. Taft. It is in that range. There were some judgments, 
although the judgments are very unequal even in that group. I 
think some have received over $50 million, one payment, and 
some down in the single digit millions, so there is a variety 
even within there, but the average is in the $20 to $30 million 
range for each. I think----
    The Chairman. Well, what were the circumstances----
    Mr. Taft [continuing]. If you look, though, I mean we have 
so many of these cases now out there. It's calculated there are 
perhaps over 1,500 victims suing already now and to pay each of 
them $20 million is not something that I think the Congress 
would support or that people would say should happen, and yet 
if you do the real average payment, it's not in the $20 million 
range because you've got hundreds of people out there who are 
receiving nothing at all, I mean we've got perhaps 200 people 
who have received payments and the rest, 1,000, 1,200 people 
have gotten nothing. And so the average is not quite what it 
appears.
    The Chairman. So you're attempting to say that there ought 
to be a compensation figure that appears at least to the 
American people in fairness to be a generous amount, but one 
which ultimately the American people are going to have to pay. 
In other words, there's a supposition that somehow out there 
there is Iraqi money, Iranian money, other kinds of moneys that 
can be siphoned off without effect to deficits here, taxpayer 
money that comes and goes for the education, health and welfare 
of our country. And what you're saying is that that doesn't 
work out that way. Temporarily you may be able to attach 
something, but then you have retaliation, you finally have 
regularization with a country and offsetting suits there and 
elsewhere that finally eliminate it. This was not free money, 
however you might have attached it at the moment, and however 
compassionate the cause. Unfortunately, there never will be 
enough of it given the number of victims of terrorism in a 
dangerous world. We must bring some sense of justice so that 
individuals do not have to sue the Department of the Treasury 
or have to worry through the process of having a special act of 
Congress. or have to approach their Senator at 2 a.m. on the 
floor on some strange bill in order to get personal relief; 
this is the way some of this happens. Senators are constituent-
oriented. They have a sense of compassion. It doesn't matter 
what the bill is. Given the rules of the Senate, amendments, as 
we saw last Wednesday and Thursday--56 of them in 24 hours--
come and go pretty fast.
    Yet you're saying, as opposed to things being handled that 
way, there ought to be certainty for victims and their 
families, for procedure, and likewise a quickness in terms of 
receiving the compensation. When the loss is acute, the needs 
are there. I don't want to oversimplify the proposal, but 
that's what I gather is the heart of what you're doing.
    Mr. Taft. And I guess only one other thing, Mr. Chairman, 
it ought to be for everybody. There are an awful lot of people 
who, many more people, I mean four, five times as many people 
who've received payments who have not, just nothing, and why 
they haven't is in part because they don't know the right 
people, in part because they don't know, they can't bring their 
cases because they're not sure who was responsible for it, and 
so forth, and yet they're very--each case is, the payment that 
we've come up with is an across-the-board approach. Obviously 
this is not to say that each of these cases is the same. 
They're all different and they're all dreadful in their own 
way, but we thought in terms of what the Federal benefit should 
be to address this, which the Congress has made clear it wants 
to do something for this. Whenever the question has been raised 
directly, will you do something for this victim, the answer is 
yes, we want to, and the votes, you've seen them on the floor, 
they're 90 to nothing. And so we agree with that. We want to do 
something too, but we want to do something that's affordable 
and we want to do it for everybody.
    The Chairman. Well I appreciate very much, first of all 
that you have a comprehensive statement that's a part of our 
record, and likewise your own summation of that, which I 
believe covered the salient points. You've outlined those 
carefully. The purpose of this colloquy, literally, is simply 
to illuminate once again the important points of universality, 
the certainty of payment, the fairness, the criteria for 
finally getting some judgments to all of the people who might 
be involved as opposed to a few who might have the benefit a 
specific bill offered, often--as we have both suggested--almost 
in the dead of night, often as an amendment to a bill that was 
nonrelevant, without having hearings on this subject or any 
general conversation with the American public about what we 
were doing.
    That is the purpose of this hearing. You've contributed 
mightily to the success of that endeavor and I appreciate your 
testimony.
    Mr. Taft. Well thank you very much, Mr. Chairman. If you 
have any questions or other members of the committee of course 
have questions, we'll be glad to answer them for the record.
    The Chairman. And we will keep the record open for another, 
we'll say 48 hours, because Senators who have not been able to 
attend the hearing this morning but are interested in this 
issue may very well want to raise questions through their 
correspondence with you. And if you would respond promptly, we 
would appreciate it to complete the record.
    Mr. Taft. We will certainly do that and I appreciate the 
opportunity. Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    The chair would like to now call our second panel, composed 
of Mr. Stuart E. Eizenstat, partner of Covington & Burling, 
Washington, DC, and Dr. Allan Gerson, chairman of Gerson 
International Law Group and honors professor, George Washington 
University, Washington, DC.
    Gentlemen, we appreciate your coming to the hearing this 
morning. Both of you have appeared with our committee before 
and we have always profited from your counsel. Likewise we've 
admired your own contributions to public service, which have 
been very substantial throughout the years. I'd like for you to 
testify in the order that I introduced you. Let me say at the 
outset that your full statements will be a part of the record 
and you may proceed in any way you wish to either summarize or 
illuminate the points that you have made.
    Mr. Eizenstat.

STATEMENT OF STUART E. EIZENSTAT, PARTNER, COVINGTON & BURLING, 
                         WASHINGTON, DC

    Mr. Eizenstat. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify and I'm pleased that the administration 
has decided to tackle this issue because, in effect, in 1996, 
Congress passed a right to sue for money damages against 
terrorist parties including state sponsors of terrorism without 
really providing an effective remedy. And we've all been 
searching since then for the appropriate way to deal with this.
    During my service in the Clinton administration, both as 
Under Secretary of State and as Deputy Secretary of the 
Treasury, I worked closely on issues concerning the 
compensation of victims of international terrorism, in 
particular the 2000 Victims of Terrorism and Violence Act, what 
we called Mack-Lautenberg, with a particular focus on the 
merits of using blocked assets of state sponsors of terrorism 
to achieve such compensation. May I also say for the record 
that I've also represented private parties, two families who 
were connected with the 2002 terrorist legislation that was 
passed in 2002.
    Then, as now, ensuring proper compensation for terrorism 
victims presents a great challenge due to several factors. 
First, while in some instances blocked foreign state assets may 
be used to satisfy personal injury claims as the Clinton 
administration did with Congress for the use of Brothers to the 
Rescue pilot families killed by the Cuban Air Force, such use 
of blocked assets on a routine basis has the potential to 
weaken the ability of the U.S. Government to conduct foreign 
policy and to promote national security and thus should be 
subject to Presidential waiver authority wherever it's granted. 
Second, large sums from the U.S. Treasury as a source of 
compensation places an undue burden on U.S. taxpayers, and 
third, the limited pool of potentially available blocked assets 
for compensating terrorist victims can create an undesirable, 
unseemly, and unfair race to the courthouse to obtain and 
satisfy awards.
    In light of these challenges, the creation of an 
administrative alternative to litigation for international 
terrorism claims against foreign states, by providing prompt 
and consistent awards to victims, could bring some relief, Mr. 
Chairman, from the pressures that litigation of such claims at 
times has placed on U.S. foreign policy, the U.S. Treasury, and 
on the equitable distribution of awards. At the same time, 
however, any administrative alternative should offer, I think, 
a genuine alternative to, rather than outright replacement for 
the litigation of international terrorist claims against 
foreign states. Rather than foreclosing all access to blocked 
assets, regardless of the circumstances of a given act of 
terrorism or the country or group involved, I think a more 
balanced approach, and one frankly more likely to pass 
congressional muster, would be to ensure strong Presidential 
waiver authority which could be exercised on a case-by-case 
basis when warranted by U.S. national security interests.
    By creating balanced options between litigation and 
administrative proceedings, the victims of terrorism would be 
provided with a genuine choice between two courses of action, a 
choice which could then be determined by the facts and 
circumstances of each individual claim. Moreover, given the 
demanding standard under the act S. 1275 for demonstrating a 
so-called act of international terrorism, keeping the courts 
open to international terrorist claims, in particular those 
that would be excluded from administrative proceedings, would 
take on greater importance. May I also say that any changes to 
current law that may be required should be applied only 
prospectively and should not impact on any pending cases, and I 
believe the legislation deals with that.
    Let me now deal with some specifics. First, the importance 
of blocked assets for U.S. foreign policy. Consistent with the 
views expressed during my service in the Clinton 
administration, indeed before this very committee, blocked 
foreign state assets remain, Mr. Chairman, a potentially 
powerful tool to advance U.S. foreign policy and national 
security interests. Just two examples of the key role they can 
play, one in which I was involved when we first met--I think 
you may have still been the mayor of Indianapolis at that 
time--when I was President Carter's chief domestic adviser, and 
that was to gain the release of U.S. citizens held hostage in 
Iran. I think, Mr. Chairman, had we not had those blocked 
assets available, we may never have gotten our hostages out. 
And later in the Clinton administration, the fact that we had 
Vietnamese blocked assets I think was a clear incentive to 
persuade the Vietnamese leadership during the normalization 
process to address important U.S. concerns, including 
accounting for POWs and MIAs.
    Simply said, blocked foreign state assets, by providing 
important leverage for negotiations with foreign states or, as 
illustrated by President Bush's appropriate blocking of Iraqi 
and Afghan assets, in that case providing emergency funds for 
the reconstruction efforts of friendly successor states, 
contribute importantly to U.S. foreign policy and national 
security interests, and therefore need to be taken great 
account of.
    Second is to maintain a proper balance between 
administrative and litigation alternatives. Fully recognizing, 
as I've just done, the importance of blocked foreign state 
assets for U.S. foreign policy and national security interests, 
in my view, any proposed administrative alternative to 
litigation should be precisely that, a genuine alternative 
rather than an outright replacement of U.S. courts as a proper 
forum to resolve terrorist claims involving foreign states.
    To achieve that balance between administrative and 
litigation alternatives, permit me to highlight the following 
considerations. First, we should make the administrative 
proceeding genuine. We should incentivize people to try to take 
the administrative route, and frankly we're not going to do 
that by an award of $262,000. It's too small and when we 
compare that, for example, to the $1.85 million average under 
the 9/11 compensation fund, let alone the amounts that can 
sometimes be awarded in courts, this is, I think, too low a 
standard of recovery to permit people to genuinely be channeled 
into this administrative process.
    I think the analogy between the public officers who serve 
their communities by placing themselves in harm's way--and 
that's how the administration came to the $262,000 figure--and 
private citizens who have not taken on such duties to the 
public seems to me not an appropriate analogy. In other words, 
police officers, firefighters, and so forth know that they're 
placing themselves daily in harm's way. That's not the case 
with private citizens who are completely innocent, and I think 
the analogy breaks down at that point.
    Administrative determinations, in addition, should not 
reverse existing court determinations. A particularly important 
category of claims under the act would be persons holding 
favorable but unsatisfied court judgments who subsequently 
decide to obtain an administrative award. The administrative 
entity, I believe, Mr. Chairman, should not be in a position to 
reverse a court's determination by declining to find an act of 
international terrorism. Court findings, in effect, should be 
grandfathered.
    Third, the administrative determination should be subject 
to review. This is expressly not permitted. I think under the 
Administrative Procedure Act, that could be an internal review.
    Fourth, a subjective requirement that terrorism victims be 
targeted on account of their U.S. nationality, which is what 
the act requires, is not workable. As drafted, only those 
terrorism victims specifically targeted as U.S. nationals would 
satisfy the definition of an act of international terrorism and 
give rise to the administrative award. This is dramatically 
narrower than the existing definition under the Foreign 
Sovereign Immunities Act, which requires an extrajudicial 
killing without the need to show a specific intent to kill on 
account of U.S. nationality.
    As with court actions under the Foreign Sovereign 
Immunities Act, administrative proceedings should cover all 
American victims, regardless of whether the terrorist 
specifically targets their victims as U.S. nationals. For 
example, you could have a tourist who is in Israel, who is 
killed, as an American he might not have been targeted as a 
U.S. national, but he should recover.
    Fifth, the importance of blocked assets for U.S. foreign 
policy and national security interests I think can be 
adequately addressed through Presidential waiver authority 
without the need to foreclose all access to blocked assets, 
which I think will run up against political opposition.
    In 1998 and in 2000, President Clinton exercised his wavier 
authority, Mr. Chairman, on grounds of national security to 
prevent the attachment of foreign state assets to satisfy 
international terrorism awards against foreign states. That 
waiver authority was provided by legislation passed in 1998 and 
in 2000. And more recently, Section 201 of the Terrorism Risk 
Act of 2002, the President retains that waiver authority to 
prevent on grounds of national security the attachment of 
foreign assets covered by the Vienna Convention. What I'm 
suggesting is a broader waiver authority, not just limited to 
consular properties, but all blocked assets.
    I would favor maintaining broad Presidential waiver 
authority exercised on a case-by-case basis to safeguard 
against the distribution of blocked assets undermining U.S. 
foreign policy and national security interests. Reliance on 
strong, broad Presidential waiver authority rather than blanket 
elimination of access to blocked assets would help keep U.S. 
courts as a viable alternative to the administrative system, 
but at the same time give the President the discretion to make 
sure that the foreign policy interests of the country were not 
affected if blocked assets were inappropriate to use.
    Serious concerns over using blocked assets of foreign 
states are, I think, less of a problem in dealing with blocked 
assets of private terrorist groups like HAMAS, but here at the 
same time, Presidential waiver authority is essential. Although 
S. 1275 would not prevent claimants from attempting to satisfy 
judgments by pursuing commercial purpose assets of a foreign 
state located in the U.S., a strategy I would support, such 
assets can, as Will Taft said, be difficult to locate and 
secure, and the limited potential for executing such commercial 
assets would not likely have a large impact on overall 
litigation prospects.
    In short, I think we can advance the important goals 
driving the administrative process that again I applaud the 
administration for suggesting, without at the same time 
completely denying court access to all victims of terrorism 
against foreign states by eliminating any hope of satisfying a 
judgment through the execution of blocked assets. A case-by-
case approach with broad Presidential waiver authority I think 
is the proper balance.
    Let me close by commending the administration for their 
efforts for trying to come up with a process that is now, as 
Will Taft properly said, fraught with all sorts of 
uncertainties and conflicting legislation, just entirely too ad 
hoc, while at the same time providing a genuine choice between 
administrative proceedings and courts. A robust, viable option, 
one again that would pay a sufficient amount to incentivize 
people to take it, would have the advantage of encouraging 
claimants to opt for administrative relief rather than pursue 
litigation, with all the attendant difficulties of attempting 
to attach blocked assets of foreign states which at times don't 
even exist or have been vested for other purposes, as with Iraq 
and Afghanistan, or again have serious national security 
concerns attached to them.
    It's always a pleasure to appear before you as I've done 
many times and I thank you for your attention.
    [The prepared statement of Mr. Eizenstat follows:]

    Prepared Statement of Stuart E. Eizenstat, Partner, Covington & 
                        Burling, Washington, DC

    Mr. Chairman, thank you for the opportunity to appear before you 
today to testify on S. 1275.
    During my service in the Clinton Administration, in particular 
during my tenure as Deputy Secretary of the Treasury, I worked closely 
on issues concerning the compensation of victims of international 
terrorism, with a particular focus on the merits of using blocked 
assets of state sponsors of terrorism to achieve such compensation. 
Then, as now, ensuring proper compensation for terrorism victims 
presented a great challenge, due to several factors: first, while in 
some instances blocked foreign state assets may be used to satisfy 
personal injury claims (as the Clinton Administration agreed with 
Congress to use for the families of the Brothers to the Rescue pilots 
killed by the Cuban Air Force), such use of blocked assets on a routine 
basis has the potential to weaken the ability of the U.S. Government to 
conduct foreign policy and to promote national security, and thus 
should be subject to Presidential waiver authority; second, very large 
sums from the U.S. Treasury as a source of compensation places an undue 
burden on the U.S. taxpayer; third, the limited overall pool of 
potentially available assets for compensating terrorism victims can 
create an undesirable, unseemly, and unfair race to the courthouse to 
obtain and satisfy awards.
    In light of these challenges, the creation of an administrative 
alternative to litigation for international terrorism claims against 
foreign states, by providing prompt and consistent awards to victims of 
international terrorism, could bring some relief from the pressures 
that litigation of such claims at times has placed on U.S. foreign 
policy, the U.S. Treasury, and on the equitable distribution of awards.
    At the same time, however, any administrative alternative should 
offer a genuine alternative to, rather than replace outright, the 
litigation of international terrorism claims against foreign states. 
Rather than foreclosing all access to blocked assets, regardless of the 
particular circumstances of a given act of international terrorism, in 
my view a more balanced approach would be to ensure strong Presidential 
waiver authority to be exercised on a case-by-case basis when warranted 
by U.S. national security interests. By creating balanced options 
between litigation and administrative proceedings, victims of 
international terrorism would be provided with a genuine choice between 
the two courses of action, a choice which could then be determined by 
the particular facts and circumstances of each individual claim, rather 
than by the absence of any real hope for enforcing a court award 
obtained in litigation. Moreover, given the demanding standard under S. 
1275 for demonstrating an ``act of international terrorism,'' keeping 
the courts open to international terrorism claims--in particular those 
claims that would be excluded from administrative proceedings--takes on 
even greater importance.
    1. the importance of blocked assets for u.s. foreign policy and 
                      national security interests
    Consistent with the views expressed during my service in the 
Clinton Administration, blocked foreign state assets remain a 
potentially powerful tool in the advancement of U.S. foreign policy and 
national security interests. The Supreme Court, in the 1981 Dames & 
Moore decision, recognized that blocked assets may serve as a 
``bargaining chip to be used by the President when dealing with a 
hostile country.'' As two examples of the key role blocked assets can 
play in U.S. negotiations with foreign states, blocked assets enhanced 
the U.S. Government's ability, when I served in the Carter White House, 
to gain the release of U.S. citizens held hostage in Iran in 1981, and 
helped to persuade the Vietnamese leadership, during the normalization 
process between the United States and Vietnam, to address important 
U.S. concerns, including accounting for POW's and MIA's. More recently, 
this past March President Bush set aside blocked Iraqi assets for use 
in the Iraqi reconstruction effort; similarly, last year President Bush 
freed up blocked Afghan assets for reconstruction efforts in 
Afghanistan. Simply, blocked foreign state assets, by providing 
important leverage for negotiations with foreign states (or, as 
illustrated by Iraq and Afghanistan, by providing emergency funds for 
the reconstruction efforts of friendly successor states), contribute to 
U.S. foreign policy and national security interests.
       2. the importance of maintaining a proper balance between 
administrative and litigation alternatives for international terrorism 
                                 claims
    Fully recognizing the importance of blocked foreign state assets 
for U.S. foreign policy and national security interests, in my view any 
proposed administrative alternative to litigation of international 
terrorism claims should be precisely that: a genuine alternative to, 
rather than an outright replacement of, U.S. courts as a forum for 
resolving international terrorism claims involving foreign states. To 
achieve a proper balance between administrative and litigation 
alternatives for international terrorism claims, I would like to 
highlight the following considerations.
    The award available under administrative proceedings must be 
significant. For claimants to invest time and energy in developing a 
claim--whether administrative or in litigation--awards of significant 
value must be available. Accordingly, the proposed administrative award 
under S. 1275 of $262,000 to families of victims killed by acts of 
international terrorism is far too small and needs to be substantially 
increased to contribute to the viability of the administrative 
proceedings as an arbiter of international terrorism claims. 
Recognizing that the $262,000 figure has been proposed to match current 
U.S. law on compensation available to families of public safety 
officers killed in the line of duty--including those killed on 
September 11th--the amount remains sharply less than standard court 
awards of compensatory compensation for deaths of family members caused 
by international terrorism, which consistently total several million 
dollars. The $262,000 amount also contrasts with the average award of 
approximately $1.85 million (and ranging in excess of $6 million) paid 
from the September 11th Victims Compensation Fund. Moreover, the 
analogy between, on the one hand, public officers who serve their 
communities by placing themselves in harm's way, and on the other, 
private citizens who have taken on no such duty to the public, is less 
than clear. At a minimum, additional funds should be made available to 
compensate claimants who have endured lengthy delays in securing awards 
for acts of international terrorism.
    Admittedly, the certainty of the administrative award helps to 
balance the modest amount with far larger, but far less certain, court 
awards; nevertheless, larger administrative awards would provide added 
weight and legitimacy for the new administrative process, and thereby 
invite additional terrorism claims.
Administrative determinations on ``international terrorism'' should not 
        reverse existing court determinations
    A particularly important category of claims under S. 1275 would be 
persons holding favorable, but unsatisfied, court judgments who 
subsequently decide to obtain an administrative award. For such claims, 
the administrative entity should not be in a position, in effect, to 
reverse a court's determination by declining to find ``an act of 
international terrorism'' giving rise to the claim: court findings on 
acts of state-sponsored terrorism should be grandfathered as such under 
the administrative process.
Administrative determinations should be subject to review
    To better establish the legitimacy of a newly-created 
administrative entity for processing international terrorism claims, 
and for consistency with the Administrative Procedure Act, some form of 
review of administrative decisions is required.
A subjective requirement that a terrorism victim be targeted on account 
        of their U.S. nationality would be unworkable
    As drafted, only those terrorism victims targeted specifically as 
U.S. nationals would satisfy the definition of an ``act of 
international terrorism'' and thus give rise to an administrative 
award. This standard is unworkable, and dramatically narrower than the 
existing definition under the Foreign Sovereign Immunities Act, which 
requires an ``extrajudicial killing'' without the need to show a 
specific intent to kill on account of U.S. nationality. As with court 
actions under the Foreign Sovereign Immunities Act, administrative 
proceedings should cover all American victims of international 
terrorism, regardless of whether the terrorist actors specifically 
targeted their victims as U.S. nationals. The challenge of satisfying 
such a narrow, subjective standard would ultimately exclude significant 
numbers of legitimate international terrorism claims from the 
administrative process, such as those with dual citizenship or U.S. 
citizens touring abroad, not necessarily targeted as U.S. nationals, 
and underscores the importance of keeping U.S. courts open to 
international terrorism claims brought by Americans against foreign 
states.
The importance of blocked assets for U.S. foreign policy and national 
        security interests may be adequately addressed through the 
        President's waiver authority under current law, without need to 
        foreclose all access to blocked assets
    In both 1998 and 2000, President Clinton exercised his waiver 
authority on grounds of national security to prevent the attachment of 
foreign state assets to satisfy international terrorism awards against 
foreign states. Such waiver authority had been provided by legislation 
passed in 1998 (Section 117 of the Treasury and General Government 
Appropriation Act of 1999) and 2000 (Section 2002 of the Victims of 
Trafficking and Violence Protection Act of 2000). More recently, under 
Section 201 of the Terrorism Risk Insurance Act of 2002, the President 
retains waiver authority to prevent, on grounds of national security 
and on a case-by-case basis, the attachment of foreign state assets 
subject to the Vienna Conventions on Diplomatic Relations and Consular 
Relations. More generally, President Bush's decisions to vest blocked 
Afghan and Iraqi assets for the reconstruction of those countries 
illustrate the President's authority to determine on national security 
grounds the ultimate use of blocked foreign state assets.
    As a balanced response to the potential U.S. interests implicated 
by the use of blocked assets to satisfy international terrorism awards, 
I would favor maintaining broad Presidential waiver authority, 
exercised on a case-by-case basis, to safeguard against distribution of 
blocked assets that undermines U.S. foreign policy and national 
security interests. Reliance on strong Presidential waiver authority, 
rather than the blanket elimination of access to blocked assets, would 
help to keep U.S. courts as a viable alternative to the administrative 
system that S. 1275 would create. If the Presidential waiver authority 
provided under Section 201 of the Terrorism Risk Insurance Act proved 
to be insufficient for safeguarding U.S. foreign policy and national 
security interests, the proper response, in my view, would be to 
strengthen the President's waiver authority, rather than completely 
seal off blocked foreign state assets from American victims of 
international terrorism and thereby eliminate any legitimate prospects 
for successful terrorism litigation against a foreign state.
    Serious concerns over using blocked assets of foreign states, which 
I have discussed, present much less of a problem in dealing with 
blocked assets of private terrorist groups like HAMAS. Here, we are 
much less likely to have future diplomatic relations or to want to use 
the funds for diplomatic purposes. At the same time, here too 
Presidential waiver authority would be essential for future suits. For 
example, if the funds are needed to release U.S. hostages. Again, the 
Presidential waiver, not a blanket prohibition on use of blocked 
assets, would be the more reasonable approach.
    Although S. 1275 would not prevent claimants from attempting to 
satisfy judgments by pursuing commercial-purpose assets of a foreign 
state located in the United States--a strategy that I would support--
such assets can be quite difficult to locate and secure, and the 
limited potential for executing such commercial assets would not likely 
have a large impact on overall litigation prospects. The prospects for 
international terrorism litigation against a foreign state, where there 
is absolutely no hope of attaching blocked assets of that state, would 
be limited at best.
    We can advance the important goals driving the administrative 
alternative--safeguarding U.S. foreign policy and national security 
interests, more equitable distribution of compensation, and reduced 
burden on the U.S. taxpayer--without, in effect, denying court access 
to all international terrorism claims against foreign states by 
eliminating any hope for satisfying a judgment through the execution of 
blocked assets. A case-by-case approach to blocked assets would leave 
open the courts for exceptional claims whose underlying facts and 
parties we may not be able to anticipate at this time and whose 
particular circumstances may call for a unique response. Moreover, 
given the demanding subjective standard for an ``act of international 
terrorism'' under S. 1275 as currently drafted (requiring an act to be 
committed on account of the victim's U.S. nationality), maintaining the 
potential of court access for all American victims of international 
terrorism takes on even greater importance.
    I commend the Administration's efforts, and yours, to promote 
important U.S. interests and to achieve greater equity for the victims 
of such unspeakable events, while providing a genuine choice between 
administrative proceedings and the courts for American victims of 
state-sponsored terrorism. A robust, viable administrative option would 
have the advantage of encouraging claimants to opt for administrative 
relief rather than pursue litigation, with all of the difficulties of 
attempting to attach blocked assets of a foreign state, which at times 
no longer exist or have been vested for other purposes. Thank you Mr. 
Chairman for the opportunity to appear before you today.

    The Chairman. Well, thank you very much, Mr. Eizenstat.
    Dr. Gerson.

 STATEMENT OF DR. ALLAN GERSON, CHAIRMAN, GERSON INTERNATIONAL 
 LAW GROUP AND HONORS PROFESSOR, GEORGE WASHINGTON UNIVERSITY, 
                         WASHINGTON, DC

    Dr. Gerson. Thank you, Mr. Chairman, and thank you very 
much for this invitation to appear before the Foreign Relations 
Committee on S. 1275, which, I believe, can fairly be described 
for what it is: a no-fault terrorism bill.
    Today, Mr. Chairman, no American is immune from the scourge 
of an international terrorist front committed to global jihad. 
Despite the courageous steps undertaken by the President of the 
United States and our valiant men and women in uniform, the 
truth is that the threat remains. Eternal vigilance and a 
readiness to use all the tools at our disposal is more 
indispensable than ever. And that, Mr. Chairman, is why the 
introduction of S. 1275 is so perplexing, especially to the 
American victims of terrorism, who see themselves in the 
vanguard of those determined to prevent a repetition of the 
horrors that befell them.
    Inexplicably, the sponsors of S. 1275 would undo much of 
what has been accomplished in the last decade. They would undo 
the right accorded to the victims and their families to hold 
the murderers and their sponsors accountable in U.S. courts of 
law. That empowerment of the families of the victims goes far 
beyond the issue of compensation and it is one that Congress, 
the courts, and indeed the President have recognized since 
1991.
    And so I ask, why would anyone want to undo this march of 
progress? Why would the United States State Department take the 
lead in introducing such a measure? And if I may, Mr. Chairman, 
note from your own op-ed in today's Washington Post when you 
spoke, in a very different situation, about time for the United 
States to lead, I would like to suggest too that what the 
United States State Department does with respect to leading or 
not leading on the issue of accountability affects vital U.S. 
national security interests.
    I appear today, Mr. Chairman, not only as an advocate. 
Together with my co-lead counsel who is here today, Mr. Ron 
Motley, we proudly represent approximately 4,000 families of 9/
11 victims in their suits against the financiers of terrorism, 
and share the families' outrage that anyone would propose a 
bill which undermines the viability of such suits. But I also 
appear, if I may say so, as an individual who, as a scholar and 
former government official, has been involved in efforts to 
address a balance between the needs of diplomatic flexibility 
and the demands of justice.
    But Mr. Chairman, I submit that S. 1275 has nothing 
whatsoever to do with balance. I submit that S. 1275 is nothing 
less than a setback in the war against terrorism. I also submit 
that S. 1275, and I use this word advisedly and regretfully, is 
deceptive. It purports to provide the families of victims with 
additional rights when it in fact deprives them of hard-won 
rights. Instead of addressing the moral and the legal right of 
the victims, and indeed of all Americans to know the details 
regarding the perpetrators and circumstances of the atrocity, 
it would cover them up as a way of achieving a political 
compromise.
    This is not what the families of 9/11 want. This is not 
what the American families that are victims to terrorism 
believe in. As a compromise with terrorism, and it is not, I 
submit, what the Congress or indeed the President had in mind 
when he declared a war against terrorism on all fronts.
    It is touted that the families of the victims will be the 
beneficiaries of this bill. But they themselves deny it. And, 
they have never been consulted on it. They do not want a no-
questions-asked instrument. They want a mechanism suited to 
discovering the truth. They want accountability. They want 
punitive damages. S. 1275 gives them none of that. Indeed, and 
I want to emphasize this point, if the bill was intended to be 
truly humanitarian, to provide benefits to all, it would give 
them a true choice without strings attached. But this bill is 
full of strings.
    A position paper on S. 1275 prepared by the 9/11 Families 
United to Bankrupt Terrorism detailing the specific flaws of S. 
1275 has already been distributed to this committee and I would 
hope that it might be made available as part of the official 
record.
    The Chairman. It will be made a part of the record in full.
    Dr. Gerson. Thank you, Mr. Chairman.
    [The position paper referred to follows:]

       9/11 Families United To Bankrupt Terrorism--Position Paper

                              3 July 2003

                senate bill 1215--the saudi bailout bill
    Let's assume that sometime in the next two years, Osama bin Laden 
carried out his plan to fly an aircraft into the CIA headquarters in 
Langley, Virginia as Abdul Hakim Murad, an Al-Qaeda operative, said bin 
Laden intended to do in his confession to U.S. authorities in 1995. 
Under proposed Senate Bill 1275, the liability for Osama bin Laden, the 
terrorists who carried out the attack, and the charities and wealthy 
individuals who financed the attack would be limited to a death benefit 
of $250,000.00 per victim. This amount is far below the penalties that 
courts have imposed against terrorists and their financiers in anti-
terrorism suits. The financial dis-incentive to sponsor terrorism will 
be removed if this bill is passed. The financiers of terrorism will 
realize that continuation of such dastardly operations remain 
relatively cost free. And, more Americans will die. S. 1275 would 
reward, not punish, terrorism. Such is the Orwellian inversion of 
purposes which this bill presents under the guise of providing an 
additional benefit to the American victims of terrorism.
    The Congressional independent investigation of the September 11th 
attacks concluded several months ago and still the 9/11 Families United 
to Bankrupt Terrorism await the results of the investigation. The delay 
has been caused by a reluctance on the part of some government 
officials to publish, among other things, the ties that Saudi-based 
charities, government officials and members of the royal family have to 
terrorists and how the September 11th hijackers received their funding. 
In the same obstructive spirit the State Department offers S. 1275.
    This proposed bill is offensive to the 4,000 member strong 9/11 
Families United to Bankrupt Terrorism and all other families victimized 
by terrorist attacks. The bill seeks to retroactively eliminate the 
entire body of international jurisprudence enacted to protect terrorist 
victims including the Foreign Sovereign Immunities Act, 28 U.S.C. 1605; 
Torture Victim Protection Act, 28 U.S.C. 1350; Alien Tort Claim Act, 28 
U.S.C. 1350 and the Anti-terrorism Claims Act, 18 U.S.C. 2333. Most 
importantly, the proposed bill breaches the credo of the U.S.A. Patriot 
Act--``Uniting and Strengthening America by Providing Appropriate Tools 
Required to Intercept and Obstruct Terrorism.'' See USA Patriot Act, 
Title X, 2001. The Patriot's Act emboldens the anti-terrorism statutes 
and the numerous cases which have interpreted these statutes:

        All Americans are united in condemning, in the strongest 
        possible terms, the terrorists who planned and carried out the 
        attacks against the United States on September 11, 2001, and in 
        pursuing all those responsible for those attacks and their 
        sponsors until they are brought to justice.

    USA Patriot Act of 2001, Title X, Sec. 1002. To successfully wage a 
war on terrorism we must use every weapon in our arsenal including the 
civil justice system. ``The only way to imperil the flow of money and 
discourage the financing of terrorist acts is to impose liability on 
those who knowingly and intentionally supply the funds to the persons 
who commit the violent acts.'' Boim v. Quranic Literacy Institute, et 
al., 291 F.3d 1000 (7th Cir. 2002). The State Department's proposed 
bill is also inconsistent with the position taken by the Department of 
Justice in its amicus brief filed on November 14, 2001 in Boim. The 
Department of Justice wrote: ``the Government believes that this 
provision [Section 2333(a)] can be an effective weapon in the battle 
against international terrorism; it fights terrorism by discouraging 
those who would provide financing for this activity.'' In S. 1275 the 
State Department has crippled plaintiffs ability to use this weapon 
against the financiers of terrorism. Why would we now, when our nation 
and its citizens are threatened most disarm an effective force in 
combating terrorism?
    Presently, victims of terrorism may bring a cause of action in the 
United States against a terrorist or any individual or entity that 
knowingly provides support to a terrorist or terrorist organization. 
Victims may also pursue civil litigation against a foreign state 
designated as a state sponsor of terrorism that engages in the 
terrorist activity. This bill seeks to completely supplant these rights 
and remedies retroactively with a no-fault black-lung type federal 
fund.
    If this proposed bill were passed it might impair our ability to 
pursue our terrorist lawsuit against the financiers of the September 
11th attacks. Most importantly, S. 1275 would hurt all Americans as the 
families of 9-11 are but the spear-holders for a national effort to 
deter terrorism by placing the price of terrorism not on the shoulders 
of the families of the victims, or on the back of US taxpayers, but on 
the back of those responsible.
  compensation amounts are grossly inconsistent with traditional tort 
                                 values
    Victims of a terrorist attack, under this proposed bill, would file 
a claim and would receive a death benefit equaling two-hundred and 
fifty thousand dollars ($250,000.00), adjusted annually for inflation. 
This amount bears no relationship to civil damage awards and is 
entirely inconsistent with awards which have previously been rendered 
in litigation brought by victims of terrorist activities:
    In Smith v. Islamic Emirate of Afghanistan, et. al, (Case: 01 Civ 
10132), U.S. District Court, Southern District of New York, determined 
that the September 11th attacks were acts of international terrorism 
and that two family victims of the attacks were decreed entitled to the 
following damage amounts:

Family of George Eric Smith:

        Economic Damages: $1,113,280
        Pain & Suffering: $1,000,000
        Al Qaeda Additional Liability: $4,229,560

Iraq Additional Liability:

        Marion Thomas (wife): $3,000,000
        Raymond Anthony Smith (Father): $1,000,000
        Deborah Sallad (sibling): $500,000
        Raymond Smith (Relation Unknown): $250,000

Family of Timoth Soulas:

        Economic Losses: $15,139,203
        Pain & Suffering: $3,000,000
        Al Qaeda Additional Liability: $36,278,406

Iraq Additional Liability:

        Katherine Soulas (wife): $10,000,000
        Father: $3,000,000
        Children: $3,000,000 (each child)
        Siblings: $2,000,000 (each sibling)

    The compensation amount authorized by S. 1275 is grossly unfair. 
The amount contemplated is far short of the true value of such claims 
in the civil justice system. The proposed compensation amount falls 
below even the amounts authorized by the Victims Compensation Fund. 
Even the VCF, which has been greatly criticized by many 9/11 families, 
offers greater compensation benefits than the proposed bill.
    The Victims Compensation Fund has created such anxiety and angst 
among victims' families that it has proven to be an ineffective tool to 
compensate families fairly and to assist them in their time of grief. 
See generally, Kolbert, Elizabeth, ``The Calculator: How Kenneth 
Feinberg determines the value of three thousand lives,'' The New 
Yorker, November 25, 2002; Chen, David, ``Fund for Terror Attack 
Victims Offers Awards in 14 Test Cases,'' New York Times, September 30. 
2002.
    There is already a system in place to fairly evaluate damages 
suffered by a family. Juries everyday contemplate the loss and 
suffering that victims have endured and award damages, when 
appropriate, after a fair evaluation of all of the evidence. Any 
attempt to create a no-fault compensation system with pre-set awards 
creates a series of problems which we have seen repeatedly in asbestos 
bankruptcies, coal] miners' black lung cases, and allergic reactions to 
vaccine cases. First, the awards will be unfair to some claimants. With 
this bill, the awards are so low that it would be unfair to every 
claimant. Second, plaintiffs and victims do not have the opportunity to 
tell the story of their loved one's death and hold accountable the 
terrorist. Third, victims are robbed of the discovery process and an 
opportunity to uncover who was involved, why the terrorist attack 
occurred, how it could have been prevented, and who was responsible for 
financing the attacks. What almost all victims and the families of 
victims seek are: 1) exposure of those responsible for their loss; 2) 
accountability of all responsible parties; 3) compensation for the harm 
they have suffered; and 4) punishment of responsible parties to deter 
such actions in the future. This proposed bill deprives victims of 
these opportunities.
                            punitive damages
    No-fault compensation schemes deprive victims of the right to seek 
punitive damages. Punitive damages are a proven means by which to deter 
intentional and reckless conduct. There is no case in which punitive 
damages are more warranted and essential as a case involving terrorism. 
Deprivation of this right will foreclose all meaningful opportunities 
for victims to hold terrorists accountable and deter future terrorist 
attacks.
   parents, siblings and aliens would not be entitled to compensation
    The proposed bill limits the number and types of persons who are 
eligible to file a claim for compensation for a terrorist act. S. 1275 
provides compensation only for United States nationals and limits 
recovery to one claim per decedent. Foreign nationals, who are injured 
in a terrorist attack in the United States, have the right to bring a 
cause of action against the terrorists, their financiers and state 
sponsors of terrorism pursuant to the Torture Victim Protection Act and 
the Alien Tort Claims Act. Nevertheless, such victims are not entitled 
to compensation under the proposed Bill. In addition, the nuclear 
family, where a close familial relationship exists, whether foreign or 
domestic, may bring an individual action pursuant to the Foreign 
Sovereign Immunities Act. Thus, under current law, spouses, children, 
parents and siblings of a decedent may bring an individual cause of 
action. The proposed bill robs these individuals of their current right 
to seek compensation for their losses.
frozen assets should be used to compensate victims of terrorist attacks
    Section 14 of S. 1275 eliminates provisions of the Foreign 
Sovereign Immunities Act and the Terrorism Risk Insurance Act of 2002 
which guaranteed that victims of a terrorist act could satisfy a 
judgment rendered in their favor against assets of the culpable party 
seized by the United States government. Thus, while the proposed bill 
claims to permit victims a choice to either pursue litigation or file a 
claim for compensation through a federal fund, S. 1275 removes the 
means by which victims may be compensated through litigation. Depriving 
injured parties a meaningful remedy in litigation is depriving victims 
of their right to litigate.
    The State Department for decades has attempted to interfere with 
victims' efforts to pursue litigation against individuals and foreign 
states that sponsor terrorism. The security of Americans is the first 
responsibility of government. Instead, the State Department in 
sponsoring this bill has made paramount its own security in exercising 
monopolistic power over anything involving smooth diplomatic relations. 
But smoothness has its price. The State Department always seeks to use 
seized assets as a diplomatic negotiating chip. There is no place for 
diplomacy with terrorists.
                              subrogation
    Even for the brave victims who may pursue litigation, the United 
States government reserves the right to subrogate, to the extent of 
payments made under the program, the victims' claims.
    To the extent Section 11 implies that the United States government 
will prosecute terrorist financiers for theft support of a terrorist 
act and use the funds recovered to finance this program, it is 
disingenuous. It has been over one and a half years since the September 
11th terrorist attacks and there has not been a single prosecution of a 
financier of the attacks. The United States government has recovered 
evidence linking, charities, banks and certain members of the Saudi 
royal family to funding Al-Qaeda and HAMAS. In fact, there are Internet 
home pages in Saudi Arabia boasting of compensation that will be 
awarded to families of suicide bombers. The United States government, 
however, has not conducted a single prosecution.
    Under this proposed bill, even if the United States government 
began to conduct such an operation and seized some assets in 
satisfaction of terrorist attacks, the amount of money offered, 
$250,000.00, is far too low to have any deterrent effect. Seizure of 
$250,000.00 per claimant will not deter these wealthy contributors to 
terrorism. This pittance amount suggested in the bill will make any 
meaningful investigation of terrorism cost prohibitive. Collecting 
evidence will far exceed the cost of the subrogated amount.
          little incentive for united states government action
    The United States government, to date, has failed to trace the 
roots of the September 11th attacks to its financial base. We believe 
the reason for this inaction is that the base of terrorism resides 
within Saudi Arabia. ``For years, individuals and charities based in 
Saudi Arabia have been the most important source of funds for al-Qaeda; 
and for years, Saudi officials have turned a blind eye to this 
problem'' See, Council on Foreign Relations, Independent Task Force on 
Terrorist Financing, at 9. As further evidence that officials within 
the U.S. government will not permit a true investigation into Saudi 
Arabia's role in sponsoring terrorism, the final report of Congress' 
investigation of the September 11th attacks has not been published. 
Press reports indicate that the report will disclose ``additional ties 
between the Saudi royal family, government officials and terrorists.'' 
See, attached Frank Davies, ``U.S. Report on 9/11 to be `Explosive,' '' 
Miami Herald, (July 10, 2003). S. 1275 is a back door attempt by the 
State Department to increase bureaucracy and hide from the American 
people the true means by which terrorism is financed. Victims of a 
terrorist attack must be able to engage in discovery, to voice their 
grief and to face their tormentors, without the impediment of often 
illusory diplomatic obstacles. For this reason the State Department 
should welcome, not deprive private citizens of their duly enacted 
rights to pursue claims against terrorists and their financiers in US 
courts of law. Private citizens must not be deprived of their right to 
pursue litigation against terrorists and their financiers. This 
proposed bill should be completely shredded and sent back to the State 
Department forthwith.
    In 1990 and 1992 Senator Charles Grassley introduced Antiterrorism 
legislation ``to empower victims with all the weapons available in 
civil litigation . . . and accord the victims of terrorism the remedies 
American tort law.'' See 137 Cong. Rec. 8143 (1991). The Senate report 
on the legislation stated that by imposing ``liability at any point 
along the causal chain of terrorism, it would interrupt, or at least 
imperil, the flow of money.'' S. Rep. 102-342, at 22. What has changed 
between 1990 and 2003?

   February 26. 1993--Bombing of the World Trade Center--6 
        murdered and 1,042 injured.

   June 25, 1996--Bombing of the Khobar Towers--19 murdered and 
        370 injured.

   August 7, 1998--East Africa Embassy Bombings--391 murdered 
        and over 5,000 injured.

   October 12, 2000--Bombing of the USS Cole--17 murdered and 
        39 injured.

   September 11, 2001--Attacks in Washington, New York and 
        Pennsylvania--2,915 murdered and thousands injured.

   October 12, 2002--Bombing in Bali, Indonesia--181 murdered 
        and 250 injured.

   May 12, 2003--Bombings in Riyadh, Saudi Arabia--34 murdered 
        and 194 injured.

   May 16, 2003--Bombings in Morocco--43 murdered and over 100 
        injured.

    Do these thousands of deaths justify allowing foreign nationals, 
like Osama bin Laden and states to gain economic freedom for their 
atrocities at a cost of $250,000 per dead American? The State 
Department says so. The 9/11 Families United to Bankrupt Terrorism say: 
No.

    Dr. Gerson. On my part, I should like to focus on the 
national security dimension of this issue, and to show that the 
interests of security and the interests of justice are not only 
joined here at the hip, but are inextricably linked.
    Of course, the President's prerogatives in foreign affairs 
calls for diplomatic flexibility. We all recognize that, but it 
is not an unfettered right. Mr. Eizenstat has tried to draw or 
approach this by way of reaching a balance, but that is not 
what S. 1275 is about. Under S. 1275, under section 114 of that 
bill, it would put off limits to terrorism's victims blocked or 
frozen assets. But they do not belong to the executive branch. 
The Constitution permits appropriation of such assets for 
public purposes. The congressional enacted scheme for blocking 
assets aimed at keeping it from our enemies; not at making it 
unavailable for American claimants. Its purpose was not to 
create a slush fund for the Executive.
    Moreover, Mr. Chairman, I submit that section 114 would 
essentially gut the effective work of Congress which has 
encouraged the use of civil litigation against terrorism. It 
would mean that you could not recover through normal execution 
of a judgment, as going against blocked assets may be the only 
way to accomplish such recovery. In this way, S. 1275 is an 
effort by the State Department to overturn everything that 
Congress has done since 1991. And, to do that, they are willing 
to create and administer a new no-fault terrorism victims' 
compensation system.
    The State Department would argue, and indeed Mr. Taft has 
this morning, that the current scheme rewards those that get 
first to blocked assets. Mr. Eizenstat has characterized that 
as, ``an unseemly race to the courthouse.'' But I would also 
note that Mr. Taft's testimony dwells simply on default 
judgments, largely against Iran, judgments that have been 
satisfied by the United States Treasury. And, if that is the 
problem, it should be labeled as such and addressed as such.
    But S. 1275 represents something entirely different. 
Instead, the State Department approach in S. 1275 is so 
sweeping that it would remove all deterrents against the 
financing or sponsors of terrorism. As S. 1275 now stands, the 
American taxpayer would pay the victims of terrorism. The 
result is the best of all possible worlds for terrorists 
themselves. They can victimize at will, secure in the knowledge 
that it is the U.S. Treasury, not their assets, that would be 
called upon to pay the price. The result, Mr. Chairman, I 
submit, is cost-free terrorism. It is precisely the opposite of 
what the President and the Treasury Department and the FBI have 
been struggling so hard to accomplish in the aftermath of 9/11.
    Toward this purpose, S. 1275 would set up a new office at 
the State Department to determine on a case-by-case basis 
whether an international terrorist act occurred. In doing so, 
it goes even beyond the 1996 amendments to the 1976 Foreign 
Sovereign Immunities Act. These amendments, which were inserted 
at the demand of the State Department, arrogated to it and not 
the courts the determination of which states are in fact state 
sponsors of terrorism. Rather than simply naming terrorist 
states, S. 1275 is open-ended, insofar as the Secretary of 
State will make a determination on a case-to-case basis as to 
whether an act of terrorism occurred.
    But Mr. Chairman, the most invidious aspect of S. 1275 is 
its no-fault premise. In this way, it would neutralize the 
deterrent power, and I emphasize that, the deterrent power of 
civil litigation. How does that advance the national interest? 
How does that provide security for more Americans? And although 
this bill, as has been mentioned, does not directly affect the 
families of 9/11 as it does not apply to anti-terrorism actions 
filed before submission of S. 1275, the families of 9/11 are 
concerned above all with a sound national anti-terrorism 
policy. And for that reason, Mr. Chairman, I say that S. 1275 
represents nothing less than the latest skirmish in a long 
clash of what I would call cultural wars. You will have to 
choose, and all the Senators will have to choose, which one is 
to prevail. One culture, I submit, is the culture of 
accountability, where the rule of law and the co-relative 
rights of civil actions are fundamental. And, in the 
countervailing culture, which supports S. 1275, expediency is 
supreme.
    Now, Mr. Chairman, I make these remarks today not to demean 
the State Department but to explain its institutional 
shortcomings. The irony is that the projection abroad of 
American values of accountability and truth telling, to which 
the State Department is ostensibly fully committed, is in fact 
compromised by S. 1275. And I say this, Mr. Chairman from 
recent experience. Shortly before the Iraq war, I was asked by 
the State Department to go to Geneva as counsel to my former 
boss, Ambassador Jeane Kirkpatrick, whom I had served when she 
was Ambassador to the United Nations. She had been selected by 
the President to lead the U.S. delegation to the U.N. Human 
Rights Commission, and our job there was to promote on an 
international scale the U.S. commitment to the rule of law as 
part of its commitment to human rights, and we did so by 
fending off attacks by such so-called U.S. allies as Saudi 
Arabia, who sought at the very same time to condemn the U.S. 
engagement in Iraq.
    But how, I ask, can we present one face abroad and another 
at home? At a time when our government favors the establishment 
of truth commissions in Africa and cooperation with U.N. war 
crimes tribunals for the Balkans, Rwanda, and Sierra Leone, 
what lesson would we send to the world about our commitment to 
accountability and truth telling when we seek, as does S. 1275, 
to eviscerate the civil justice system approach and replace it 
with one of no fault?
    Professors Steven Ratner and Jason Abrams, in their book, 
Accountability for Human Rights Atrocities in International 
Law: Beyond the Nuremberg Legacy, write: ``Accountability helps 
build a culture of respect for human rights. It can signal to 
future violators of human rights that their actions will not 
simply be forgotten by some political compromise.'' But I 
submit that S. 1275 is all about political compromise. S. 1275 
would allow the violators of human rights to be forgotten. And 
again, I ask for what purpose?
    In 1999, as was pointed out, the Senate Judiciary Committee 
endorsed measures to enable victims of terrorism to execute on 
judgments against the frozen assets of terrorist-linked 
entities. Then in 1999, as today, I found myself shoulder to 
shoulder with my friend and colleague, Stuart Eizenstat, taking 
opposite positions on this particular issue. But those measures 
which enable the families of victims to go after frozen assets 
were indeed enacted into law. And yet today, 4 years after 9/11 
we find ourselves here again, this time with the State 
Department trying to undo what was then wrought.
    Although S. 1275 postures itself as providing a benefit to 
victims of terrorism through the choice of compensation from a 
government plan, it in fact deprives such victims and their 
families of their existing hard-won rights. It would award them 
up to $250,000, and I will allow, if I may, Stuart Eizenstat's 
testimony to speak for itself on what a paltry sum that is.
    But in exchange, and this is the point I want to make, in 
exchange for that paltry sum, they would be forfeiting their 
precious, hard-fought right to sue. Instead of treating family 
members as they deserve, which is as partners in the war 
against terrorism, it would relegate them to the status of 
victims of but another crime.
    In 1996, a coalition of families--including those of 
victims of the Pan Am 103 bombing that I represented; of the 
1995 Oklahoma Federal office building bombing; the family of 
Leon Klinghoffer, who was pushed off his wheelchair from the 
deck of the Achille Lauro; and the families of Americans held 
hostage by Iranian guerrillas in Beirut--held up during the 
Senate hearings on the 1996 Anti-Terrorism Act a simple sign. 
It read in its simplicity, ``Give Us Our Day In Court.'' They 
got that day through passage of the 1996 Anti-Terrorism and 
Effective Death Penalty Act. They got it through the 
receptivity of the American courts to entertain suits for 
treble damages against non-state actors through the 1991 Anti-
Terrorism Act. They got it through judicial receptivity to 
actions under the much older Alien Tort Claims Act. And all of 
this activity was blessed and reinforced by Congress through 
passage in the aftermath of 9/11 of the 2001 USA PATRIOT Act. 
And now, S. 1275 would seek to take much of that away.
    There can, I submit, be no effective day in court when the 
frozen assets of a defendant are declared off limits, and 
that's what this bill does. It declares them off limits, 
period. It does not provide for any particular schemes, as Mr. 
Eizenstat has discussed; it simply says they are off-limits. 
Moreover, the oblique language of section 14 is so broad as to 
erase any any logical tie to the legitimate needs of diplomatic 
flexibility.
    I ask this: what possible legitimate foreign policy 
objective could possible be promoted by putting the assets of 
known terrorist organizations that the United States designates 
as terrorist organizations, like al-Qaeda and Hamas beyond the 
reach of collection? And yet that's what S. 1275 purports to 
do. For this reason, and others, S. 1275 sets back the clock 
instead of moving it ahead.
    If I may conclude with an episode. In the summer of 1992, 
in a U.S. courtroom not too far from here in a case involving 
the then single largest attack on American civilians, I 
represented an individual named Bruce Smith who had lost his 
wife on Pan Am 103 as it exploded over Lockerbie, Scotland, on 
December 21, 1988. His aim was simple: to hold the Government 
of Libya accountable for civil damages in a U.S. court of law. 
It had nothing to do with American compensation. Libya had 
already been indicted by both the United States and the U.K. in 
separate criminal proceedings. Nevertheless, my former 
colleagues at the U.S. Department of Justice, acting on behalf 
of the U.S. Department of State, saw fit to intervene in that 
case, not for the benefit of the families of the American 
victims, but on behalf of the principle espoused by the 
Government of Libya: sovereign immunity, the outmoded 18th 
century concept that nations are sovereign, responsible only to 
themselves, and obligated to no one for the wrongs they may 
commit.
    That absolutist view was overcome through passage of the 
1996 Anti-Terrorism and Effective Death Penalty Act. But Mr. 
Chairman, I fear, and I say this regretfully, that ever since 
that day the State Department has waged a rear-guard effort to 
do away with the concept of civil suits against foreign 
entities, governmental or otherwise, implicated in the 
sponsorship or promotion of terrorism. That effort, which S. 
1275 represents, if allowed to succeed, would set back a decade 
of historical advances.
    In conclusion, S. 1275, in purporting to provide benefits 
when it in fact takes them away, and purporting to address 
American families' while in fact derogating from the very 
concept of accountability on which the rule of law is based, 
and then putting on the American taxpayers' shoulders the 
financial obligations which should rest on the shoulders of 
those who perpetrated the crime, robs the American people of 
their right to justice.
    Justice for the families of 9/11, as is the case with 
regard to the families of Pan Am 103 and other terrorist 
outrages, is inextricably linked to serving a preventive or 
deterrent function. It is in this way that U.S. national 
security and the interests of justice on behalf of families of 
terrorism are simultaneously furthered.
    For these reasons, Mr. Chairman, I say that S. 1275 simply 
does not deserve serious consideration. Thank you very much, 
Mr. Chairman.
    [The prepared statement of Dr. Gerson follows:]

Prepared Statement of Dr. Allan Gerson, Chairman, Gerson International 
     Law Group and Honors Professor, George Washington University, 
                             Washington, DC

    Chairman Lugar, Distinguished Senators:
    I thank you for your invitation to appear before this hearing of 
the Senate Foreign Relations Committee on S. 1275. Today, no American 
is immune from the scourge of an international terrorist front 
committed to global jihad. Despite the courageous steps undertaken by 
the President of the United States and our valiant men and women in 
uniform, the truth is that the threat remains. Eternal vigilance and 
the readiness to use all the tools at our disposal is more 
indispensable than ever. That is why the introduction of S. 1275 is so 
perplexing, especially to the American victims of terrorism who see 
themselves in the vanguard of those determined to prevent a repetition 
of the horrors that befell them.
    Inexplicably, the sponsors of S. 1275 would undo much of what has 
been accomplished in the last decade. They would undo the right 
accorded to the victims and their families to hold the murderous 
sponsors and perpetrators of terrorism accountable in US courts of law. 
That empowerment, that goes far beyond the issue of compensation, is 
one that Congress, the Courts, and the President have recognized since 
1991.
    Why would anyone want to undo this march of progress? Why would the 
US State Department take the lead in introducing such a measure?
    To shed light on these questions I appear here today not only as an 
advocate who, together with my co-lead counsel, Ron Motley, proudly 
represent approximately 4,000 families of 9-11 victims in their suit 
against the financiers of terrorism. I appear, too, as someone who has 
long been involved, as a scholar and former government official, in 
efforts to address a balance between the needs of diplomatic 
flexibility and the demands of justice. But S. 1275 has nothing to do 
with balance.
    S. 1275 is a setback in the war against terrorism.
    S. 1275 is, moreover, inherently deceptive. It purports to provide 
the families of victims with additional rights; in fact, it deprives 
them of their hard-won rights. Instead of addressing the moral and 
legal right of the victims to know the details regarding the 
perpetrators and the circumstances of the atrocity, it would cover them 
up as a way of achieving a political compromise. This is not what 
Congress or indeed the President had in mind in declaring a war against 
terrorism on all fronts.
    It is touted that the families of the victims will be the 
beneficiary of this bill. But they themselves deny it, and indeed have 
never been consulted on it. They do not want a no-questions-asked 
instrument. They want a mechanism suited to discovering the truth. They 
want accountability. They want punitive damages. S. 1275 gives them 
none of that. Indeed, if its scope were truly humanitarian, it would 
give them a true choice without strings attached. It would allow, for 
those needy enough to apply to the new government fund, an obligation 
to repay the taxpayer advance if they ever succeed in obtaining a 
judgment or settlement.
    A Position Paper on S. 1275 (``The Saudi Bailout Bill'') by the 9/
11 Families United To Bankrupt Terrorism detailing the specific flaws 
of S. 1275 has already been distributed to this Committee, and I hope 
that it will be made available as a part of the official record. On my 
part, I should like to focus on the national security dimension of the 
issue, and to show that here the interests of security and the 
interests of justice are joined at the hip.
    Of course, the President's prerogatives in foreign affairs call for 
diplomatic flexibility. But that is not an unfettered right. Blocked or 
frozen assets, which section 14 of S. 1275 would put off-limits to 
terrorism's victims, do not belong to the Executive Branch. The 
Constitution permits appropriation of such assets for public purposes. 
The congressionally enacted scheme for blocking assets aimed at keeping 
it from our enemies, and at making it available for American claimants. 
Its purpose was not to create a slush fund for the Executive.
    Moreover, section 14 would gut the effective work of Congress in 
encouraging the use of civil litigation against terrorism. It would 
mean that you could not recover through normal execution of a judgment, 
as going against blocked assets may be the only way to accomplish such 
recovery. In this way, S. 1275 is an effort by the State Department to 
overturn everything Congress has done since 1991, and to do that they 
are willing to create and administer a new no-fault terrorism victims' 
compensation system.
    State would argue that the current scheme rewards those that get 
first to blocked assets. But the State Department approach would remove 
all deterrents against the financing or sponsoring of terrorism. As S. 
1275 now stands, the American taxpayers would pay the victims of 
terrorism. The result is the best of all possible worlds for 
terrorists. They can victimize at will, secure in the knowledge that it 
is the US Treasury, not their assets, that would be called upon to pay 
the price. The result is cost-free terrorism. It is precisely the 
opposite of what the President and the Treasury Department and FBI have 
been struggling so hard to accomplish in the aftermath of 9-11.
    S. 1275 would, moreover, set up a new office at the State 
Department to determine on a case-by-case basis whether an 
international terrorist attack occurred. It even goes beyond the 1996 
amendments to the 1976 Foreign Sovereign Immunities Act, inserted at 
the demand of the State Department, arrogating to it, and not the 
courts, the determination of which states are in fact state-sponsors of 
terrorism. Rather than simply naming terrorist states, S. 1275 is open-
ended insofar as the Secretary of State will make a determination on a 
case-by-case basis as to whether an act of terrorism occurred.
    But the most invidious aspect of S. 1275 is its no-fault premise. 
In this way it would neutralize the deterrent power of civil 
litigation. How does that advance the national interest? How does that 
provide security for more Americans? Although this bill does not 
directly affect the families of 9-11, as it does not apply to anti-
terrorism actions filed before submission of S. 1275, the families of 
9-11 are concerned above all with a sound national anti-terrorism 
policy. And, knowing the history of this bill, they have reason to fear 
that even the effective date is not secure.
    Distinguished Senators, S. 1275 represents no less than the latest 
skirmish in a clash of cultures. You will have to choose which one is 
to prevail. One is the culture of accountability where the rule of law 
and the correlative rights of civil actions are fundamental. In the 
countervailing culture, expediency is supreme.
    These remarks are not meant to demean the State Department but to 
explain its institutional shortcomings. The irony is that the 
projection abroad of the American values of accountability and ``truth-
telling,'' to which the State Department is ostensibly committed, is 
compromised by S. 1275. I say this from recent experience. Shortly 
before the outset of the Iraq war, I was asked by the State Department 
to go to Geneva as counsel to my former boss, Ambassador Jeane 
Kirkpatrick, who had been selected by the President to lead the US 
delegation to the UN Human Rights Commission. Our job was to promote, 
on an international scale, the US commitment to the rule of law. We did 
so while fending off attacks US ``allies'' such as Saudi Arabia who 
sought to condemn the US engagement in Iraq. But how can we present one 
face abroad and another at home? At a time when our government favors 
the establishment of truth commissions in Africa and cooperation with 
UN war crimes tribunals for the Balkans, and Rwanda, and Sierra Leone, 
what lesson would we send to the world about our commitment to 
accountability and truth-telling when we seek, as does S. 1275, to 
eviscerate the civil justice system approach and replace it with one of 
no-fault?
    Professors Steven Rather and Jason Abrams have pointed out in 
``Accountability for Human Rights Atrocities in International Law 
beyond the Nuremberg Legacy'' that: ``Accountability helps build a 
culture of respect for human rights . . . It can signal to future 
violators of human rights that their actions will not simply be 
forgotten by some political compromise.'' But S. 1275 is all about 
political compromise.
    S. 1275 would in this way allow the violators of human rights to be 
forgotten. Again, for what purpose? In 1999 the Senate Judiciary 
Committee endorsed measures to enable victims of terrorism to execute 
on judgments against the frozen assets of terrorist-linked entities. 
Those measures were enacted into law. Today, four years later, after 9-
11, we find ourselves here again: this time, with the State Department 
trying to undo what was then wrought.
    Although S. 1275 postures itself as providing a benefit to victims 
of terrorism through the choice of compensation from a government plan, 
it, in fact, deprives such victims and their families of their existing 
hard-won rights. It would accord them $250,000. But in exchange, they 
would forfeit their precious right to sue. Instead of treating family 
members as partners in the war against terrorism, it would relegate 
them to the status of victims of but another crime.
    In 1996, a coalition of families--including those of the victims of 
Pan Am 103, the 1995 Oklahoma Federal Office Building bombing, the 
family of Leon Klinghoffer who was pushed in his wheelchair off the 
deck of the Achille Lauro, and the families of Americans held hostage 
by Iranian guerrillas in Beirut--held up during the Senate hearings on 
the 1996 Anti-Terrorism Act a simple sign. It read: ``Give Us Our Day 
In Court.''
    They got that day in court through passage of the 1996 Anti-
Terrorism and Effective Death Penalty Act. They got it through the 
receptivity of American courts to entertain suits for treble damages 
against non-state actors through the 1991 Anti-Terrorism Act. They got 
it through judicial receptivity to actions under the much older Alien 
Tort Claims Act. All of this activity was blessed and reinforced by 
Congress through passage, in the aftermath of 9-11, of the 2001 U.S.A 
Patriot Act. Now, S. 1275 would take much of that away.
    There can be no effective day in court when the frozen assets of a 
defendant are declared off limits. Moreover, the oblique language of 
Section 14 is so broad as to erase any logical tie to the legitimate 
needs of diplomatic flexibility. What possible legitimate foreign 
policy objective would be promoted by putting the assets of known 
terrorist organizations like al Qaeda and Hamas beyond the reach of 
collection?
    For this reason and others, S. 1275 sets back the clock instead of 
moving it ahead.
    In the summer of 1992 in a US courtroom not too far from here in a 
case involving the then single largest attack on American civilians, I 
represented an individual, Bruce Smith, who had lost his wife on Pan Am 
103 as it exploded over Lockerbie, Scotland on December 21, 1988. His 
aim was to hold the government of Libya accountable for civil damages 
in a US court of law. Libya had already been indicted by both the 
United States and the UK in separate criminal proceedings. 
Nevertheless, my former colleagues at the US Department of Justice, 
acting on behalf of the US Department of State, saw fit to intervene in 
that case, not for the benefit of the families of the American victims, 
but on behalf of the principle espoused by the government of Libya: 
sovereign immunity, the outmoded eighteenth century concept that 
nations are sovereign, responsible only to themselves and obligated to 
no one for the wrongs they may commit. That absolutist view was 
overcome through passage of the 1996 Anti-Terrorism and Effective Death 
Penalty Act. Ever since, I fear, however, the State Department has 
waged a rear-guard effort to do away with the concept of civil suits 
against foreign entities, governmental or otherwise, implicated in the 
sponsorship or promotion of terrorism. That effort, if allowed to 
succeed, would set back a decade of historical advances.
    S. 1275, in purporting to provide benefits when it in fact takes 
them away, in purporting to express American values while in fact 
derogating from the very concept of accountability on which the rule of 
law is based, and in putting on the American taxpayers' shoulder the 
financial obligation which should rest on the shoulders of those who 
perpetrated the crime, robs the American people of their right to 
justice. Justice for the families of 9-11, as is the case with regard 
to the families of Pan Am 103 and other terrorist outrages, is 
inextricably linked to serving a preventive or deterrent function. In 
this way, US national security and the interests of justice on behalf 
of the families are simultaneously furthered.
    S. 1275 does not deserve serious consideration.
    Thank you.

    The Chairman. Well thank you very much, Dr. Gerson. As 
you've noted, you and Mr. Eizenstat have argued before our 
committee before, and we have benefited from those diverse 
views.
    Let me ask, just as a layperson in all of this, certainly 
as you pointed out those who came to hearings before had signs 
that this is fundamental for American justice, and that this is 
something that has a strong appeal to each one of us as 
legislators. As you pointed out, in the 1996 act, to some 
extent that opportunity was there. At least as we've 
established in the case of Iran, there were some substantial 
blocked assets. Over $370 million of them have been paid to 
certain victims.
    One of the problems that strikes me as a layperson is, 
taking a look at the profile of the terrorists who flew into 
the World Trade Center, one can say, I suppose, even if those 
individual men had no particular net worth that was 
identifiable, no assets could be attached because they in fact 
perpetrated the devastation not only on the building but then 
the victims that were a consequence of that. As you've pointed 
out, Dr. Gerson, backing them, at least as we've alleged, were 
al-Qaeda operatives. There might be some assets there, despite 
allegations that S. 1275 sort of puts those off limits. I would 
just say as a practical matter--and I've sat through many 
hearings trying to establish how in the world the United States 
is going to get cooperation from other countries in blocking 
the transfer of assets, even finding assets--maybe the 
assumption is correct, out there somewhere, in markets or in 
however these assets might occur, that al-Qaeda has something 
that could be attached, that could somehow be of availability 
for a day in court for the victims of 9/11.
    Now, as we've all pointed out, the 9/11 victims are not a 
part as we understand it of the S. 1275 legislation. As you 
say, their interest is justice for everybody and deterrence 
against terrorism. Yet at the same time, just as a practical 
matter, as we think about deterrence against terrorism, and war 
against terrorism, it appears to me that if the hijackers are 
an indicator, we may be facing persons who are certainly not 
attached to a nation-state, that may be loosely attached to a 
cell of al-Qaeda if we can establish that. Therefore you can 
have a day in court, but the prospects of there being any 
relief are pretty dim. Nor, at least as I understand the 
profiles of the hijackers, would they have been deterred by any 
of the legislation that we're talking about today. That is not 
really a part of their ethos, so they go ahead and go in the 
World Trade Center anyway and kill Americans and people from 
other nations.
    Thus I understand the general principle, but in terms of 
the application of terrorism as we are fighting it now, it may 
miss the mark. As I understand, this may be expedient, S. 1275. 
It just says, regardless of who these hijackers were, whether 
they knew about the law or they were deterred, whether they 
belong to anybody, there ought to be some relief for victims 
that is fairly certain. Furthermore, in one form or another, 
this is going to be paid for by the American taxpayer, as 
you've said.
    As I read Mr. Eizenstat's testimony, plus other available 
testimony before the committee on this issue in the past, the 
American taxpayer picks up the tab in any event, one way or 
another. You can attach the assets, but in due course the 
offsets, as treaties come about, as new governments are 
rehabilitated or what have you, mean that essentially this 
wasn't free money. Maybe the State of Iran is deterred, or 
Libya, or Iraq. These are nation-states in the classic sense 
that we've thought about this. Now, given the sub-nationals, 
the cells, the rest of it, even that becomes murkier in terms 
of the deterrent aspect against terrorism.
    Thus what the State Department has done, as I understand 
their rationale, is taken into account the thousands of victims 
and the probable desire for fairness among the victims, the 
lack of certainty certainly, the years that may go by even if 
you get your day in court and you get a judgment of getting 
anything, and maybe not even deterrence, because the whole 
scheme of terrorism changes. At least the State Department is 
saying that we will guarantee that American citizens will get 
something.
    Mr. Eizenstat has testified, and you have sort of agreed 
with part of that testimony, well if the compensation is 
$252,000 or $262,000, that's too little. Essentially $1.8 
million is being mentioned with regard to certain victims of 9/
11. Mr. Eizenstat is saying that if you're going that route, 
the sum ought to be higher, and likewise there ought to be so-
called flexibility, so that you are not bound to that 
particular situation, but you have the ability to try out some 
other remedy. However, if the incentive that comes from the 
higher figure is such, more victims would settle at that point. 
People would find their cases closed earlier. Still you have 
either option beyond those options that the State Department's 
bill has.
    If you will discuss with me for a moment, Dr. Gerson, the 
whole idea of prevention and deterrence as well as, without 
arguing for or against expediency or certainty, or however one 
wants to characterize the State Department, why it is a bad 
thing if this brings about some justice in a fairly certain 
timely way for thousands of people who otherwise, despite all 
protestations of the legal system, are not getting any justice, 
any compensation of anything in the current situation.
    Dr. Gerson. Thank you, Mr. Chairman. I'd be very pleased to 
respond. As I understood it, you raised two questions. One, 
what is the linkage to deterrence by the kinds of civil suits 
that families of the victims of terrorism have brought and 
continue to bring? Second, why is it such a bad thing to 
provide some measure of relief to the families of victims? If I 
might, I'll respond to both questions in turn.
    With regard to deterrence, it is true, Mr. Chairman, that 
the world has changed and that we have many more non-state 
actors. But it has not changed in one fundamental aspect: The 
non-state actors continue to be funded by governments. As Tom 
Friedman pointed out in a piece in the New York Times not too 
long ago, 95 percent of all terrorism continues to be 
governmental-sponsored terrorism or somehow government-related 
terrorism. In our particular suit on behalf of 9/11 families 
entitled Burnett vs. Baraka Investment and others, we have 
named nearly 200 different defendants, and these defendants are 
the ones that financed terrorism. We can not deal with 
terrorism without dealing with how it is financed. That's the 
essence of this suit.
    We have in the audience today, Mr. Chairman a family 
member, Matt Sellito, who lost his son tragically at the World 
Trade Center. I heard him speak not too long ago, and if I can 
paraphrase him, he said the following. He said the perpetrators 
of that dastardly deed did a terrible, terrible thing, but 
their sin is even compounded by the sins of those who financed 
them, the cold-blooded handlers. These are the people that we 
are going after. It's not the funds that al-Qaeda may have here 
that we are after. It's the funds that the financiers have that 
are of interest in order to shut down the financing of 
terrorism. Unless you shut that down we are not effective. And 
this has been recognized. Mr. David Aufhauser, the General 
Counsel of the Treasury Department spoke here in Congress not 
too long ago and he said exactly the same thing: We can not 
address the issue of terrorism without closing down the 
financing of terrorism. That's what this lawsuit seeks to do. 
And it will have a deterrent impact, we believe, in that 
regard.
    The Chairman. On that point now, the 200 defendants 
mentioned might have some funds, but as a practical matter, how 
do you get your hands on any of the assets of these people? I'm 
just inquiring after looking at this from the standpoint of our 
Intelligence Committee or Foreign Relations Committee, with one 
hearing after another of how you block transfers, how you even 
identify where the money is. I mean, you can name 200 out 
there, but physically how do you get any assets from any of 
these people?
    Dr. Gerson. Well, our job has been to identify the enormous 
quantity of assets that they have in the United States and to 
make sure that the price for the terror that they helped commit 
is going to be a price that they're going to pay through civil 
damages. Those assets are substantial. They have been 
identified in the United States and elsewhere. And, insofar as 
we are dealing with corporate interests as well, banks, 
institutions, and so-called charities that have any business in 
the United States, if they refuse to honor a judgment duly 
entered by a court of the United States they will never be 
allowed to do business in the United States again. And, if I 
may say so, they really have no place to take their money. We 
do have treaties with other countries. Those assets will be 
chased down wherever they are.
    For this reason, Mr. Chairman, I believe that civil actions 
constitute a very, very effective tool and a deterrent. Having 
been involved in the Pan Am 103 case, that's hopefully reaching 
a conclusion, I think everyone will say that it was the fact 
that Libya's assets and their ability to do business with the 
United States was jeopardized constituted the economic 
considerations that forced them to have a change of policy.
    Now, Mr. Chairman, I would like to address the other point 
that you made, which is why S. 1275 is a bad thing. It's a bad 
thing for a simple reason: It's deceptive. It's not a gift. 
It's a gift with terrible strings attached. The families that 
waved the sign that day that said ``Give Us Our Day In Court'' 
will now have taken away their day in court because S. 1275 is 
not without strings. And the string that are attached to it 
make you forfeit your right to sue. You know, there is the 
government compensation fund that applies to the families of 
the victims of 9/11. That doesn't have a string attached. This 
would have that string attached. And it would lure families in 
their desperate hour of need, when they are emotionally 
distraught, into believing that they are getting some relief 
when in fact they are forfeiting their most precious asset.
    I need to say this too, Mr. Chairman, having worked with 
families of victims now for some time. Many of these families 
would say, we want their money and then as soon as we get it 
we'd like to burn it. Money is not what their objective is. 
This is not about money. This is about accountability. They 
want to know the truth, and the American people want to know 
the truth. This bill, if we shed all the rhetoric, is about 
eliminating the truth because it will serve as a deterrent to 
civil actions and that's a terrible thing for America.
    Mr. Eizenstat. May I make a comment? First of all, just a 
clarification, and I think it shows the difficulty and the 
complication. In our 2000 legislation, which I helped to 
negotiate with Senators Mack and Lautenberg, the $377 million 
which has been paid was not paid out of Iranian assets, it was 
not paid out of Iranian assets, it was paid out of U.S. 
Government assets in an amount equivalent to the amount that 
Iran had deposited in the foreign military sales account and 
which was a matter of litigation in The Hague.
    What we did in that case, and this is why it's not 
completely, I think Allan is overstating it a bit, it's not 
completely a sort of a free hand for the terrorist state, is 
that in that legislation, and it would be provided in S. 1275 
as well, the U.S. Government is subrogated to the right of the 
plaintiffs to sue the ultimate terrorist state. So I would hope 
under the 2000 legislation that if at some point in time we in 
fact normalize relations with Iran that this would be one of 
the claims that would be lodged, so that Iran would have to 
know that we were not going to forget this.
    But again I think that the complication is evident here. 
According to the Treasury in their latest report to the 
Congress, Iran has only about $23 million in blocked assets so 
I don't believe, as Allan says, that one should be foreclosed 
from going to court. I think that there should be a right under 
certain circumstances to get blocked assets, subject again very 
importantly to this Presidential waiver. But I think that it's 
oftentimes, as you're suggesting, a chimera. These blocked 
assets are very limited, sometimes they don't exist at all, and 
at the very least having a clear administrative process with an 
adequate payment level would provide some measure of certainty, 
and I would hope that a lot of claimants would take that rather 
than the uncertainty and the litigation fees and the attorneys' 
costs and so forth.
    I at the same time don't think they should be foreclosed 
from taking that route so long as the President has the 
authority to say, in a particular case, we believe that these 
blocked assets serve a national security purpose and that they 
therefore shouldn't be subject to attachment for a judgment, 
and claimants would have to make that decision as to whether 
they want to take that risk. There will be some instances, and 
we've done it in the Cuban case where we actually used blocked 
assets and we didn't exercise the waiver, President Bush, I 
think again showing the fine balance.
    My understanding is that for some of the outstanding 
claimants in 2003, he permitted the use of the blocked assets 
in a limited amount, I think it was up to $100 million, but 
then foreclosed it for other matters because he wanted to use 
the Iraqi assets for the reconstruction of the country, and 
that, I think, is a very important national purpose.
    The Chairman. Well, you both have illustrated the dilemma 
that the Congress has in legislating this issue. If we leave 
things as they are, then presumably victims of terrorism--
whether it's non-state or state and so forth--have their day in 
court, their ability to sue. The United States, if it's 
fortunate, can chase down assets and may or may not find any, 
or find foreign policy objectives as in the case of Iraq, as it 
tries now to compromise. The President apparently puts $100 
million over if it might be used for victims, but the rest is 
to reconstruct the country because that's pretty important in 
terms of world peace and national objectives. Those foreign 
policy objectives are always going to be fairly important. With 
Iran, for example, if we were to come hypothetically into some 
diplomatic relationships beyond those which we have, it's 
probably going to center for a moment around whether Iran 
forgoes its nuclear experiment and movement toward what many 
alleged before this committee is an attempt to move toward 
producing nuclear weapons. It's a very serious issue.
    The compensation of victims of terrorism is a very serious 
issue. Perhaps you give the President the opportunity to make 
the choice and he says, well, as much as I think there ought to 
be some assets available for the victims, at the same time, 
nuclear weapons might annihilate all of us. This is a tough 
choice but it is nevertheless what I'm I'm trying to sort out. 
Both of you--in your experience in various administrations, and 
in responsibilities you've had--have had to deal with this. I'm 
dealing with this as a citizen amateur this morning, just 
trying to ferret out how in the world an ordinary citizen who's 
a victim of terrorism is ever likely to be compensated.
    It may be, as you've pointed out, Dr. Gerson, that this is 
not the interest of any of the victims, but rather their 
interest in getting the satisfaction of a judgment that 
somebody's responsible, even if there's not a dime available. 
Maybe this is what this is about. Perhaps that can be achieved 
in the current legislation, that is, there'll be some 
satisfaction, a course of rule in favor of the victims. Yet 
they should not anticipate--in this world at least--any 
compensation unless American taxpayers decide to appropriate 
substantial sums of money. That's essentially what the State 
Department bill does. I think both of you pointed out in 
various ways that, either rightly or wrongly, for good or for 
bad, we're talking about a transfer of funds from some American 
citizens to others. Those who are going to get the money have 
suffered because of some totally extraneous act of their lives. 
They or their loved ones just were in the wrong place at the 
wrong time.
    Now, beyond that, you've said, Dr. Gerson, that this could 
apply even to an American tourist who's caught in the crossfire 
of a terrorist act in Israel, or elsewhere, as I understand it 
and maybe it should. Yet that's an even broader application 
than the 9/11 situation or the Pan Am aircraft. In other words, 
we would once again need to come to some definition. The State 
Department has defined it, as you've indicated, far too 
narrowly in terms of circumstances. That may be so; it may not 
be. The purpose of the hearing is to try to refine where one 
ought to be on this issue.
    As a practical matter, it's still sort of centered on the 
thought of whether justice is served if there is very little 
possibility of compensation for anybody despite the prospect 
that you have the right to sue and wait and wait and hope that 
somehow the world will provide. I don't think the world will. 
I'm sort of pragmatically thinking probably the American 
Government would do so in a systematic way if people are in 
fact to get some compensation. So have another go at that if 
you will.
    Mr. Eizenstat. May I take a stab at that? I mentioned that 
you and I came in contact first during the Carter years. Let's 
take a hypothetical based on an actual situation. We had the 
hostages taken, 444 days.
    The Chairman. Yes.
    Mr. Eizenstat. We froze Iranian assets. Let's assume, Mr. 
Chairman, at that point, that Congress had passed what it did 
in 1996 20 years later and had already allowed suits in an 
amendment to the Foreign Sovereign Immunities Act against Iran. 
And let's assume that those hostages had filed the suits and 
gotten the default judgment and the President's sitting there 
in the White House trying to negotiate the release of the 
hostages, and the victims have gotten large judgments against 
Iran pursuant to what Congress later passed.
    It's this kind of dilemma that to me means that the 
President should have the authority to make that kind of 
balanced judgment. Perhaps in that situation he would have 
decided that the hostages should get some amount, as President 
Bush did with the Iraqi situation. But certainly, had all of 
those assets been consumed by lawsuits, we would have been 
devoid of what was an absolutely critical tool to get those 
hostages released.
    So I think really when Congress legislates here, and I 
think it should, because there's just no certainty, I think 
that creating an administrative forum with an adequate 
compensation system is important. Preserving the right to sue 
is also important, but then if that right to sue is going to be 
satisfied out of blocked assets, the President for sure ought 
to be able to make that judgment. That's what he's paid for. 
That kind of balance that I'm suggesting would have been a 
difficult balance in 1980, 1981, but one in the end that he 
would have been called upon to make, and I think only he could 
make that.
    The Chairman. Dr. Gerson.
    Dr. Gerson. Mr. Chairman, let me first comment on your use 
of the phrase ``amateur'' to describe your involvement in this 
field. You are anything but an amateur and you of course 
understand the complexities of the legislative process. Having 
said that, may I suggest that the best way to deal with this 
issue is simply to get S. 1275 off the table. It simply is the 
wrong vehicle for addressing any of the issues that we have 
discussed today. The purpose of S. 1275, as I tried to point 
out, is simply to continue a very long war that the State 
Department has waged against having any U.S. claimants become 
involved in what they consider the exclusive monopolistic 
prerogative of the State Department in dealing with foreign 
affairs. We are way beyond that, yet that is what this bill 
represents.
    In terms of the specifics, I personally am opposed to 
having the U.S. taxpayers pay anything to the families of 
victims. The vast majority of the families of terrorism do not 
want anything like this. They want the price to be paid by the 
perpetrators. They don't want money from the U.S. Treasury. If 
they are to get money from the U.S. Treasury because it is 
necessary to provide some emergency relief, it should be 
labeled properly as such without deceptive advertising, and 
there should be no strings attached.
    Mr. Eizenstat has, my friend Stu has spoken a lot about the 
Presidential waiver authority, and that's fine, but it doesn't 
have anything to do with S. 1275. I used to serve in the Reagan 
administration at one point as the Deputy Assistant Attorney 
General for Legal Counsel, and my job was to expand the 
President's prerogatives, and very often I would use the word 
IEEPA, which was not a cry of horror, it simply stood for the 
International Economic Emergency Powers Act. And the President 
has ample authority in specific circumstances, in specific 
circumstances, to make his case that his foreign policy 
prerogatives require a special treatment in a particular case.
    But that's not what S. 1275 does. S. 1275 is a blanket 
omnibus bill that would put all frozen assets off limits, 
including, which is the most invidious aspect of it, not only 
the assets of foreign countries, but also the assets of 
terrorist organizations, and there's no, absolutely no sound 
foreign policy objective that can be served by having the 
President wield increased flexibility with regard to 
negotiating with terrorist groups.
    So, again, for these reasons I submit that we're dealing 
with the wrong vehicle to accomplish these ends. S. 1275 has 
nothing to do with balancing legitimate foreign policy 
considerations, the interests of flexibility and diplomacy that 
we all acknowledge the President is entitled to. This is the 
wrong vehicle. It should be gutted. It should not be discussed 
as the basis for any further discussions in the Congress.
    Mr. Eizenstat. Mr. Chairman, I've suggested some 
significant changes that could be made, but I think it's a 
basis to at least begin the discussion. I think it's incorrect 
to suggest that there should be no administrative remedy, 
because I think without that administrative remedy, as you've 
very cogently suggested, victims in the end may think that 
there's a pot of gold at the end of the rainbow when there 
isn't.
    I also think that to suggest, as I assume that Allan is 
doing, that in all cases willy nilly that those who have a 
default judgment against either a terrorist organization or a 
state sponsoring them should be able to attach frozen assets or 
blocked assets without any consideration of the foreign policy 
implications also goes too far. And that's why what I'm 
suggesting is building on this administrative remedy that the 
administration has suggested, making it a more viable 
alternative by increasing the amounts and incentivizing people 
to take it, allowing suits, not cutting off suits, but giving 
the President the authority in terms of satisfying any judgment 
out of blocked assets the right to balance in a particular 
case, and he might decide with Hamas or a terrorist group, we 
don't have any interests, we're not going to normalize 
relations with them. In other instances he may decide an 
extraordinary case like the Cuba case, OK, we'll let frozen 
assets be used, but he should have the authority, as President 
Clinton did to waive in 1998 and 2000, and in effect as 
President Bush did in 2003 to say no, there are supervening 
uses for these: leverage for normalization, leverage for 
hostages, rebuilding a country, as in Afghanistan and Iraq.
    Without that kind of balance, then I think, you know, we're 
not going down the right path, but I do think that this is a 
good faith effort by the administration to try to begin putting 
these issues into context, and although, again, I have 
suggested modifications to it, I would hate to see Congress 
just abandon it and say, OK, we're just going to continue this 
ad hoc process and what will happen is when a lawsuit's filed 
and Allan gets a judgment, they'll be back here looking for 
some additional legislation in terms of finding an asset to 
attach or whatever, we'll be right back into the same issue. So 
we might as well get on it, try to deal with it, and try to 
incentivize people to go, without foreclosing a court action, 
into an administrative route.
    Dr. Gerson. If I could just respond briefly, Senator. With 
all due respect to my colleague, Stu Eizenstat, the President 
already has the authority. He doesn't need S. 1275. S. 1275 is 
not about that. Second, he suggests that S. 1275 represents a 
good faith effort. I've tried to make it clear in context, in 
the historical context, that this is not a good faith effort, 
that it is really not about compensating the families of 
victims. It is about freezing the families totally out of the 
foreign policy process at a time when it has been demonstrated 
and in which the Congress has repeatedly affirmed, most 
recently through the 2001 USA PATRIOT Act, that the families 
have a rightful role to play in the war against terrorism, and 
that civil litigation is one component.
    Stuart, you don't have to be afraid that I'm going to be 
back here before Congress if I win a judgment. The amount of 
money that can possibly be frozen with regard to the defendants 
that we have sued is minuscule and if you want to drop S. 1275 
on that basis, I'm willing to talk to you about that.
    Thank you.
    The Chairman. Well, I thank both of you gentlemen for your 
testimony, as well as Mr. Taft on behalf of the State 
Department. You have helped us make an important record for 
this legislation including advice for any other modifications 
to it or for none at all, as you've suggested, Dr. Gerson, 
which may be the best alternative. You certainly have given us 
a great deal to think about. I will share your testimony and 
the findings of the hearing with the other members of our 
committee as they help me determine whether we should progress.
    For the moment, our hearing is adjourned.
    [Whereupon, at 11:17 a.m., the committee adjourned, to 
reconvene subject to the call of the Chair.]
                              ----------                              


             Additional Statement Submitted for the Record


               Prepared Statement of Senator George Allen

    Mr. Chairman, I appreciate the opportunity to comment on the 
Benefits for Victims of International Terrorism Act (S. 1275). To 
begin, I would like to commend the chairman for focusing on this issue 
and holding this hearing. Many victims of international terrorism 
reside in the Commonwealth of Virginia and have been seeking 
restitution for many years. Virginians were victims of the 9/11 
attacks, the attack on the U.S.S. Cole, the hijacking of TWA flight 
847, and the Iran Hostage Crisis, just to name a few.
    I have personally been involved in this issue since I first took 
office as a United States Senator. I have met with victims, victims' 
families, victims' groups and their various representatives. I have 
also maintained an ongoing dialog with the administration regarding 
this issue. I am particularly pleased that the State Department Legal 
Advisor is here to defend his Department's proposal. His presence, and 
the positive and proactive step of finally sending a proposal to the 
Congress allows me some hope that there will be a sincere dialog on 
this most important issue.
    Last year, along with Senator Harkin and a bipartisan group of our 
colleagues in the Senate, I introduced a bill to clear the way for the 
use of terrorist assets to be used to satisfy judgments against State 
sponsors of terrorism who have been held liable for damages against 
Americans in United States federal courts. The language of our bill was 
introduced as an amendment to the Terrorism Risk Insurance Act, and it 
was approved by the Senate by a vote of 81 to 3. The House of 
Representatives voted to instruct conferees to retain the Senate 
amendment by a vote of 373 to O.
    The State Department's arguments were thoroughly debated last year, 
and the Congress acted firmly to support a victims' rights to pursue 
justice over State's objections. Having said this, however, I 
understand some support for a minimum guaranteed disbursement to all 
American victims of terrorism. I believe with appropriate changes, S. 
1275 can be an act that provides the necessary assistance to victims of 
international terrorism, provided, however, that it in no way 
jeopardizes the right of victims to pursue legal recourse through our 
court system under the 1996 Antiterrorism amendment to the Foreign 
Sovereign Immunities Act, as amended in 1998, 2000, and 2002.
    I do, however, have serious concerns about the bill as introduced 
in the Senate. The policy reflected in the laws in place today is 
sound. But since this policy is a composition of amendments over many 
years, I welcome this initiative to clarify the process. In short, the 
policy must not deny American victims the rights that they currently 
have, but can include a form of disbursement program as proposed by the 
State Department. My specific comments and concerns are include:

   Participation in the disbursement program must be an option 
        and not a substitute for the current system. For example, it 
        must be clear that a victim who participates in the 
        administrative proposal will not be prohibited from bringing a 
        civil action in federal courts.

   The 1996 Antiterrorism Act created a federal cause of action 
        against State sponsors of terrorism. Under the act, and the 
        subsequent amendments to it, American victims of State 
        sponsored terrorism may bring suit against the foreign 
        sovereign and attach its assets, including those regulated by 
        the U.S. Government, held here in the United States.

   The determination or a terrorist event must be appealable.

    A payment under the current proposal should be viewed as assistance 
and, as such, should not bar an American's ability to prosecute foreign 
State sponsors of terrorism and the individuals responsible for their 
suffering. If in fact a victim successfully prosecute his or her claim 
and receives compensation, moneys provided under this proposal should 
be returned to the Treasury.
    Congress has made its intentions clear that the U.S. Government 
should not bar the use of terrorist assets to compensate victims. We 
should not burden U.S. taxpayers for the terrorist acts of foreign 
nations in the event adequate assets of these nations are under the 
control of the U.S. Government.
    The State Department has opposed every effort to attach the 
regulated, blocked and frozen assets of State sponsors of terrorism. 
They have made their views known, yet the Congress has overwhelmingly 
acted to allow attachment in satisfaction of judgments against State 
sponsors of terrorism. This bill should not be yet another chance to 
undo past legislation, but must only be an opportunity to add to and 
improve upon current law and policy.
    Lastly, the current proposal gives the Department of State the 
responsibility to receive, examine, adjudicated and render final 
decisions with respect to claims filed. Such a program cannot be 
handled by the State Department. Instead, this function should be 
performed by the Justice Department which has much more expertise in 
these matters. In fact, the Foreign Claims Settlement Commission is one 
option for administration of this program. The State Department's 
administration of the proposal has the potential to create the 
appearance of a conflict of interest because of the Department's 
dealings with those foreign sovereigns that had been designated State 
sponsors of terrorism.
    Mr. Chairman, I look forward to working with you and members of the 
committee to develop a comprehensive program that addresses the rights 
and needs of American victims of terrorism to pursue justice, while 
minimizing the exposure to the U.S. taxpayer, and emphasizes 
accountability for State sponsors of terrorism and those who victimize 
innocent Americans.
                              ----------                              


       Responses to Additional Questions Submitted for the Record


 Responses of William H. Taft, IV, Legal Adviser, Department of State, 
  to Additional Questions for the Record Submitted by Senator George 
                                 Allen

    Question 1. Mr. Taft, I understand the position of your Department 
and the Treasury Department is that under all circumstances the use of 
terrorist assets regulated, to include ``blocked'' and ``frozen'' 
assets, to satisfy claims of U.S. nationals undermines U.S. foreign 
policy and national security interests. But this has not always been 
the position of the Treasury and State Departments, as I understand the 
situation.

   Are you aware that, in 1994, Mr. Newcomb of Treasury's 
        Office of Foreign Assets Control testified that there was a 
        ``longstanding U.S. Government policy of preserving blocked 
        assets as a pool against which all claimants are given an 
        opportunity to seek recovery''?

   Could you please explain how your current position to defeat 
        use of blocked assets is consistent with this ``longstanding'' 
        U.S. government policy?

   To the extent it is not consistent, what has changed since 
        1994?

    Answer. I am not aware of Mr. Newcomb's testimony. I would refer 
any questions you may have regarding his testimony to the Treasury's 
Office of Foreign Assets Control. Perhaps the comment refers to the 
historical fact that the United States has often retained blocked 
assets as frozen pending negotiation of a lump-sum claims settlement 
agreement with the foreign government when relations are normalized, at 
which time we have obtained the agreement of that government to use 
some or all of the assets to pay claims. This approach often furthers 
the foreign policy interests of the United States as well as the 
interests of claimants. The Executive Branch's policy that blocked 
assets are to be preserved to further U.S. foreign policy and national 
security interests is longstanding; naturally, where possible, we seek 
to protect the interests of all categories of U.S. claimants as well.
    As I stated in my testimony, the ability to block, and keep 
blocked, a foreign state's assets is one of the primary and most 
powerful foreign policy tools available to the President to deter 
aggression and discourage or end hostile actions by such states against 
U.S. citizens.
    The leverage provided by blocked assets has proved central to our 
ability to protect important U.S. national security and foreign policy 
interests.
    I note, in particular, the critical role that blocked assets played 
in normalization with Vietnam after its assets had been blocked for 
some 20 years. Not only did the blocked assets persuade Vietnamese 
leadership to address important U.S. concerns, including accounting for 
POWs and MIAs and moderating Vietnamese actions in Cambodia, they also 
aided in the conclusion of a favorable claims settlement agreement, 
worth over $200 million in U.S. claims, as had been adjudicated by the 
Foreign Claims Settlement Commission.
    As the Vietnam claims settlement illustrates, the leverage gained 
by blocked assets can promote a settlement of claims. The Department 
believes that if blocked assets are to be factored in to the payment of 
claims, they should not be used on an ad hoc basis. Rather, they should 
be preserved, and when circumstances warrant, be factored in to an 
overall settlement of outstanding claims of our nationals upon 
normalization.

    Question 2. Mr. Taft, in proposing the Iraq Claims Act in 1994, 
State proposed that the adjudication of claims be submitted to the 
Foreign Claims Settlement Commission. Now you propose to establish some 
sort of adjudication authority in the State Department.

   Aren't we just creating new bureaucracy in placing this 
        authority in the State Department when the Foreign Claims 
        Settlement Commission is already in place and has the resources 
        and expertise needed to evaluate and adjudicate these claims?

   What expertise does State have in adjudicating individual 
        claims by terrorism victims? Isn't it better to place this 
        function within the expertise of the Foreign Claims Settlement 
        Commission?

   Given the clear antipathy of the State Department to these 
        claims of terrorism victims, why should victims believe that 
        their claims will be fairly adjudicated by the State Department 
        was Congress to agree to this portion of your proposal?

    Answer. In 1993 and 1995, the Department had proposed legislation 
that would have directed the Foreign Claims Settlement Commission 
(``FCSC'') to adjudicate all pre-Gulf War claims against the Government 
of Iraq. This would have covered primarily commercial and expropriation 
claims, along the lines of claims covered by other titles in the 
International Claims Settlement Act of 1949, as amended. FCSC decisions 
would have been based on evidence presented in each case, and would 
have served as the basis for pro-rata compensation of claims; this 
would have been the sole recourse allowed to those claimants. While the 
bill passed the House in 1994, it was never passed by the Senate and 
was never enacted.
    The current legislative proposal (S. 1275) is different. It would 
provide a benefit available to all victims of international terrorism 
since 1979. Rather than require adjudication on a case-by-case basis, 
the legislation would treat all victims the same, and would thus 
provide simplified and expedited relief. While substantial staffing 
might be needed in the initial years of the program to set up the 
program and deal with cases from 1979 to present, once that is dealt 
with we envisage that staffing requirements would be small.
    While the State Department works closely with the FCSC and fully 
supports it as a suitable mechanism for the adjudication of 
international claims, the State Department also has long and deep 
experience in handling international claims on behalf of U.S. citizens. 
For example, the Office of International Claims and Investment Disputes 
has administered claims programs with respect to Iraq, Iran, Germany 
and Egypt, among many others. The Department considers supporting U.S. 
citizens' claims under international law one of its important 
functions.
    It is incorrect to say that the State Department has any antipathy 
to victims of terrorism. The program the Department proposes in S. 1275 
would provide payment to hundreds of victims who presently have no 
prospect of receiving any compensation from any source.

    Question 3. In the Iraq Claims Act, the State Department never 
proposed to be given authority to set fees of attorneys and agents 
representing claimants.

   Why is this provision necessary?

   Assuming that this type of provision is necessary, isn't 
        there a distinction between future assets and existing cases--
        in other words, is it constitutional to authorize an agency to 
        interfere with fee arrangements that have already been 
        established before the date of enactment and already performed 
        in whole or part by attorneys representing the claimants in 
        court, as opposed to setting the terms for future retention 
        agreements?

    Answer. In contrast to the ``Iraq Claims Act,'' S. 1275 would 
establish a new, publicly-funded benefits program in which victims of 
terrorism would have the option of participating. The program is 
intended to provide a streamlined process for awarding benefits that is 
not dependent on the expenditure of attorneys fees in order to obtain 
payment. In this regard, it is certainly appropriate for Congress to 
want to ensure that claimants receive as much of the benefits to which 
they are entitled under the program as possible. Section 12 of S. 1275, 
which authorizes the Secretary to issue rules with respect to the 
nature and maximum amount of fees that an agent may charge for 
representing a claimant, is modeled after a similar provision in the 
Public Safety Officers' Benefits Program (42 U.S.C. 3796c(a)).
    In addition to the Public Safety Officers' Benefits Program, 
Congress has lawfully authorized or provided for the regulation of 
agents' fees in a number of other contexts, including under 22 U.S.C. 
1623(f), which imposes a 10% fee cap on claims brought before the 
Foreign Claims Settlement Commission. See, e.g., 38 U.S.C. 5904(d) 
(veteran's benefits); 42 U.S.C. 300aa-15 42 U.S.C. 406(a) (social 
security claims); see also 20 C.F.R. 725.366 (coal mining disability).
    Any fees that would be capped under rules issued pursuant to 
Section 12, would be for work performed in connection with obtaining 
benefits under a program that has yet to be established. If the program 
is established and a person chooses not to participate in it, such 
rules would obviously have no legal effect on contractual arrangements 
that he or she may have entered into in connection with other efforts 
to seek compensation. Similarly, even if a person accepts benefits 
under the program, such rules would not affect contractual arrangements 
for representation in connection with litigation that he or she would 
still be entitled to pursue, i.e., suits against entities other than 
those set forth in section 12(c)(2)

    Question 4. As I read the current language of the bill, as 
introduced, the Treasury will pay compensation to American victims--
thereby increasing the deficit--and once the payment is made, a 
responsible state sponsor of terrorism is immune from suit. Isn't this 
creating an incentive rather than a deterrent for state sponsors of 
terrorism?

   You state that the blocked assets of terrorist states should 
        not be used for compensation. Has the U.S. government used any 
        of the regulated, frozen or blocked assets for any purpose such 
        as compensation to U.S. corporations? (If yes, what?)

   What accounting is done for frozen and blocked assets 
        accounts? And for whom? I notice that the annual Treasury 
        Department report details only aggregate values. What 
        congressional committee exercises oversight over these 
        accounts? How are they audited and how frequently? Please 
        include Iran's sub account in the Foreign Military Sales 
        Account program in your response.

   Why are active duty military excluded under the current 
        proposal when they're not excluded from the 1996 Antiterrorism 
        Act? Shouldn't there be a distinction to military in uniform 
        engaged in combat and Americans who may be employed by the U.S. 
        military, but engaged in noncombat operations? Think about the 
        inequity of excluding an American service member on vacation, 
        for example, as you provide your answer.

    Answer. Making blocked assets available to pay terrorism claims 
will not have the desired effect of deterring terrorism. Blocking by 
itself achieves the goal of denying state sponsors of terrorism the 
benefits of the assets blocked for as long as they act in ways 
antagonistic to U.S. interests. A permanent taking of those assets 
would not constitute any greater denial of benefits and thus would not 
increase the deterrent effect on the state involved. Indeed, as noted 
above, Israel's compensation program for victims of terrorism appears 
to be based upon payments made by the state. In developing such a 
program, I doubt that Israel believes that it is creating an incentive 
for stata sponsors of terrorism. Tough sanctions and strong preventive 
measures affecting security and terrorists' ability to raise funds and 
operate are the best available means to deter terrorism.
    Blocked assets have not been used to pay compensation to U.S. 
corporations, outside of the general claims settlements, referred to 
above.
    Since blocked assets are not U.S. funds, and are not expended by 
the United States, naturally they are not accounted for in federal 
authorizations and appropriations. The Department of the Treasury's 
Office of Foreign Assets Control regulates such assets and imposes 
reporting requirements on holders. That Office provides an Annual 
Report to Congress concerning blocked assets of terrorist parties and 
state sponsors of terrorism.
    As Judge Lamberth held in Flatow v. Islamic Republic of Iran, 74 
F.Supp.2d 18 (D.D.C. 1999), Iran's sub account in the Foreign Military 
Sales program is U.S. Government property and, therefore, does not 
constitute blocked funds.
    The Defense Department takes the position that active duty military 
should not be included in S. 1275. The Defense Department provides 
benefits for the injury or death of its military personnel, whether or 
not they are killed in combat.

                                 ______
                                 

 Responses of William H. Taft, IV, Legal Adviser, Department of State, 
 to Additional Questions for the Record Submitted by Senator Joseph R. 
                               Biden, Jr.

    Question 1. Under Section 7(a) of S. 1275, benefits are to be 
awarded ``in the same manner and the same amount'' as death benefits 
are paid under the Public Safety Officers' Benefit Program (42 U.S.C. 
3796 et seq.). Under 42 U.S.C. 3796(f), benefit payments are ``in 
addition to any other benefit that may be due from any other source'' 
(with certain exceptions set forth in the statute). Other provisions of 
federal law, however, appear to limit recovery by federal employees for 
other death or injury benefits (e.g., 5 U.S.C. 8116(b)), which requires 
beneficiaries eligible for benefits under more than one statutory 
provision to elect which benefits they shall receive). What is the 
intention of the administration with regard to benefits received by 
eligible federal employees under S. 1275? Is it intended that they 
could receive benefits under both S. 1275 and other applicable 
provisions of federal law?

    Answer. Except as otherwise provided for in S. 1275, benefits 
received by persons, including federal employees, are intended to be in 
addition to other amounts received from other sources, including under 
the Federal Employees' Compensation Act (FECA), private employer 
insurance programs, etc. If benefits received under S. 1275 were to 
reduce or preclude receipt of other benefits, then the meaningful 
relief S. 1275 is intended to provide could be substantially reduced. 
Further, while 5 U.S.C. 8116 provides that the right to compensation 
benefits under FECA is exclusive and in place of other legal liability 
of the United States, it does not affect rights of recovery against 
unrelated third parties. In contrast, section 12(c)(2) of S. 1275 would 
require persons accepting benefits to forego suit against a foreign 
state or government or its agencies or instrumentalities. If other 
benefits were to be reduced by S. 1275 payments, persons might very 
well be dissuaded from participating in the Benefits for Victims of 
International Terrorism Program and choose instead to pursue litigation 
against foreign state or government actors. This in turn would undercut 
S. 1275's goal of moving away from a litigation-based system that has 
proved inequitable, unpredictable, costly to the U.S. taxpayer, and 
damaging to U.S. foreign policy and national security goals.

    Question 2. a. The number of pending cases against state sponsors 
of terrorism of which the Department of State is aware; and
    b. Cases in which plaintiffs have received judgments against states 
sponsors of terrorism but in which they have not recovered damages or 
received payments under the authority of recent congressional 
enactments cited in your testimony (and the amount of damages awarded 
in each cases).

    Answer. a. The Department of State is aware of 61 pending cases 
against state sponsors of terrorism. Because the U.S. Government is not 
a party to these suits, we are not served in the cases. It is, 
therefore, possible that there are others of which we are not aware.
    b. We are aware of 14 outstanding judgments against state sponsors 
of terrorism for which plaintiffs have not recovered damages or 
received payment through congressional enactment. The total amount of 
damages awarded in those cases is $71 billion (including $9.4 billion 
in compensatory damages and $61.7 billion in punitive damages).

    Question 3. Under Section 4(a) of S. 1275, in every instance in 
which there is a ``terrorist incident,'' the Secretary of State must, 
in consultation with various other cabinet secretaries, determine 
whether the incident constitutes an act of international terrorism 
under the definition of the bill. Who will make the threshold 
determination that a ``terrorist incident'' has occurred? Is that power 
solely vested in the Secretary?

    Answer. Yes, the decision is vested solely with the Secretary of 
State, who will make his decision in consultation with the Attorney 
General and the Secretaries of Defense, Homeland Security and the 
Treasury.

    Question 4. Under Section 4(a) of S. 1275, there is no procedure 
set forth for a reconsideration of a negative determination in the 
event that new evidence emerges that suggests the incident was, in 
fact, an act of international terrorism. How does the Department 
envision handling such cases?

    Answer. If new information were made available, the Secretary could 
make a new determination as to whether an act of international 
terrorism occurred. While not addressed by the statutory language of 
the bill, this situation could be addressed in the rules and procedures 
that the Secretary may issue as necessary to carry out the act pursuant 
to Section 12 of the bill (``the Administration Procedures'').

    Question 5. Under Section 3(a) of S. 1275, an act of international 
terrorism requires that the act be directed ``in whole or in part at 
the United States'' or at an individual ``because of that person's 
status as a U.S. national.''
          a. How will such intent be determined?
          b. Could this definition exclude cases--such as bombings of 
        buses in Israel on which U.S. nationals are passengers--in 
        which U.S. plaintiffs have previously sought recovery against 
        state sponsors of terrorism?

    Answer. The determination of intent would be made based upon the 
facts involved in the incident, similarly to the manner in which the 
determination of whether an ``act of terrorism'' had occurred would be 
made.
    The intent component of the definition of an act of international 
terrorism is designed to include the maximum number of U.S. victims who 
become victims because the terrorists target U.S. nationals or the U.S. 
Government. Victims who are not so targeted are not subject to these 
same considerations. A U.S. national who is randomly injured or killed 
by an act of terrorism not targeted at Americans or the U.S. Government 
is in the same situation as an American who is injured or killed by 
some other event abroad, such as during a robbery or a civil 
disturbance. The losses resulting from both events are tragic for the 
victims and their families.
    If, for example, a bus that was generally known to carry American 
tourist or student passengers was the subject of a terrorist bombing, 
the act would qualify. If, on the other hand, the bus was known to 
regularly carry only foreign nationals, and an American happened to be 
riding the bus at the time of the incident, it would not be covered. I 
would note, however, the potential for compensation through programs in 
countries where the attack took place, such as the Israeli program 
described in Answer #6.

    Question 6. Do you know how other states which have long dealt with 
terrorism--such as the United Kingdom and Israel--address the issue of 
compensation for victims of terrorism, if at all? If so, please provide 
a summary of such programs.

    Answer. We do not have much information concerning how other 
countries deal with issues related to compensation for acts of 
terrorism. I would refer you to one useful law review article we have 
been able to locate, entitled ``Providing Compensation for Harm Caused 
by Terrorism: Lessons Learned in the Israeli Experience'' by Hillel 
Sommer, 36 Indiana Law Review 335 (2003). The article describes the 
main difference between Israel's program and the September 11 Fund. It 
says that ``the Israeli program is a permanent system, continually in 
place, the result of extensive and lengthy consultation, rather than an 
ad hoc quick fix arrived at under severe time constraints in the 
emotional aftermath of major terrorist attacks and causing multiple 
issues of inequity.''
    The article also states that in addition to Israeli citizens and 
residents, all foreign nationals harmed by a hostile act while in 
Israel or in the Territories administered by Israel are also eligible 
for compensation, provided that they entered Israel legally. Thus, U.S. 
nationals who become victims in Israel, but who may not be covered by 
S. 1275 because they were not targeted as U.S. nationals, may be 
eligible for compensation under the Israeli program.
    We are not aware of any states that rely on victims bringing suits 
against foreign states in their courts to provide compensation for 
their injuries.

    Question 7. To what degree were the U.S. nationals who were 
hostages in the U.S. Embassy in Iran compensated by the U.S. government 
and under what authority?

    Answer. In 1980, while the hostages were still in captivity, 
Congress passed the Hostage Relief Act, which provided some 
compensation regarding tax liabilities and other benefits. In 1981, 
following their release, the President established a special commission 
to make recommendations as to how the hostages should be compensated 
for their ordeal. The commission issued its report that same year and 
recommended that additional compensation be paid. It was also noted 
during hearings on the Algiers Accords before the Senate Foreign 
Relations Committee that ``[t]raditionally American hostages and 
prisoners of war have not looked to the country of their detention, but 
have looked to the United States for compensation.'' (Hearings before 
the SFRC, p. 49 (Feb. 17, 19 & 25, Mar. 11, 1981).)
    In 1986, the Victims of Terrorism Compensation Act was enacted. 
Section 802 provided for payments to the hostages of ``$50 for each day 
any such individual was held captive,'' section 803 provided for 
additional compensation to include medical, educational and other 
benefits. Pub.L. 100-399, Sec. Sec. S802,803, Stat. 853 (1986). The 
hostages received compensation according to these laws, which amounted 
to an average total amount of $50,000 per individual.

    Question 8. Would assets of terrorist organizations (which are not 
sovereign states) that are frozen or blocked in this country by statute 
or Executive Order be available to compensate victims of terrorism? 
Under what authority? Did the Administration consider including such a 
provision in its legislative proposal?

    Answer. Based on the language of section 14 of the bill, assets of 
any terrorist party, including non-state parties, would not be 
available for attachment under Terrorism Risk Insurance Act (TRIA) or 
the Foreign Sovereign Immunities Act (FSIA). Our real focus, however, 
was in providing victims or their families with an immediate benefit 
and steering them away from the often unsatisfactory experience of 
pursuing litigation against state sponsors of terrorism and 
particularly, attachment against blocked assets. It would also allow 
compensation for terrorist acts committed by groups with no state 
sponsor. I would note that section 12(b)(2) provides that anyone who 
accepts benefits may not begin or maintain a civil action for the act 
of terrorism against a foreign state or the United States. It does not 
prevent individuals from suing non-state terrorist parties.
    Making non-state terrorist party assets available for the fund from 
which payments would be made merits consideration. We have actually 
begun looking at this question and have some initial observations. 
First, though terrorist party interests in property are blocked, as 
with blocked assets of states, there may be ownership and other claims 
by third parties to those assets. Second, there may be other statutes 
or regulations that already provide for the disposition of those assets 
that would conflict with this idea. The Patriot Act, for example, 
provides that such assets may be forfeited, but it is not clear whether 
once forfeited, they are to be used for some other designated purpose. 
But as I indicated, this idea merits further consideration and 
consultation with other elements of the Executive Branch.

    Question 9. Why will the program be funded out of the State 
Department budget? Will additional resources be sought for this purpose 
in the Department budget if S. 1275 is enacted?

    Answer. Because the program addresses international terrorism and 
implicates U.S. foreign policy and national security considerations, 
the Administration decided that the Victims of International Terrorism 
Benefit Fund (``Fund'') should be located in the International Affairs 
150 Account. Under the proposed legislation, the Fund would receive an 
appropriation separate and additional to other Department 
appropriations; awards and the administration of the program would be 
funded exclusively out of the Fund. Thus, additional resources will 
need to be appropriated for the Fund for the program to function if S. 
1275 is enacted.

    Question 10. What are the anticipated costs of administering the 
program contemplated by S. 1275?

    Answer. We anticipate that more administrative resources would need 
to be devoted to the program particularly during the first two-three 
years in order to start up the program, including developing rules and 
regulations. Also, because the program would cover acts of 
international terrorism dating back to November 1, 1979, we expect that 
there would be a large number of requests for Secretarial 
determinations of terrorist acts and an even larger number of 
retroactive claims to process during this initial three-year period. In 
order to handle this up-front workload, we anticipate that the average 
annual cost of administering the program for the first 3 years would be 
approximately $1,333,000, which would include the hiring of 5 new 
attorneys, 4 analysts or paralegals, and 2 support staff. Of course, 
the level of future terrorist attacks could have an impact on the 
program's administrative costs.

    Question 11. Section 10(a)(3) of S. 1275 would authorize the use of 
``unexpended balances of expired appropriations available to the 
Department'' for payment of awards under this program. If the 
legislation were enacted today, what would be the anticipated amount of 
such balances that would be available?

    Answer. Unexpended balances of expired appropriations include the 
amount of unobligated appropriations and undelivered orders outstanding 
for Congressional appropriations provided to the Department. These 
accounts incur adjustments for obligations and expenditures relating to 
undelivered orders for goods or services ordered but not yet received 
for five years after the availability of a fixed appropriation account 
ends, at which time the accounts are cancelled. At the end of FY 2002, 
the Department cancelled $45 million in FY 1997 expired appropriations. 
Based on experience, we project that a similar amount will be cancelled 
in FY 2003.

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