[House Report 106-733]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-733
======================================================================
JUSTICE FOR VICTIMS OF TERRORISM ACT
_______
July 13, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hyde, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 3485]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 3485) modifying the enforcement of certain anti-terrorism
judgments, and for other purposes, having considered the same,
reports favorably thereon with an amendment and recommends that
the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 3
Background and Need for the Legislation.......................... 3
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Oversight Findings..................................... 6
Committee on Government Reform Findings.......................... 6
New Budget Authority and Tax Expenditures........................ 7
Congressional Budget Office Cost Estimate........................ 7
Constitutional Authority Statement............................... 9
Section-by-Section Analysis and Discussion....................... 9
Agency Views..................................................... 10
Changes in Existing Law Made by the Bill, as Reported............ 21
Additional Views................................................. 25
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. ENFORCEMENT OF CERTAIN ANTI-TERRORISM JUDGMENTS.
(a) Short Title.--This Act may be cited as the ``Justice for Victims
of Terrorism Act''.
(b) Definition.--
(1) In general.--Section 1603(b) of title 28, United States
Code, is amended--
(A) in paragraph (3) by striking the period and
inserting a semicolon and ``and'';
(B) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively;
(C) by striking ``(b)'' through ``entity--'' and
inserting the following:
``(b) An `agency or instrumentality of a foreign state' means--
``(1) any entity--''; and
(D) by adding at the end the following:
``(2) for purposes of sections 1605(a)(7) and 1610 (a)(7) and
(f), any entity as defined under subparagraphs (A) and (B) of
paragraph (1), and subparagraph (C) of paragraph (1) shall not
apply.''.
(2) Technical and conforming amendment.--Section 1391(f)(3)
of title 28, United States Code, is amended by striking
``1603(b)'' and inserting ``1603(b)(1)''.
(c) Enforcement of Judgments.--Section 1610(f) of title 28, United
States Code, is amended--
(1) in paragraph (1)--
(A) in subparagraph (A) by striking ``(including any
agency or instrumentality or such state)'' and
inserting ``(including any agency or instrumentality of
such state)''; and
(B) by adding at the end the following:
``(C) Notwithstanding any other provision of law, moneys due from or
payable by the United States (including any agency, subdivision or
instrumentality thereof) to any state against which a judgment is
pending under section 1605(a)(7) shall be subject to attachment and
execution, in like manner and to the same extent as if the United
States were a private person.''; and
(2) by adding at the end the following:
``(3)(A) Subject to subparagraph (B), upon determining on an asset-
by-asset basis that a waiver is necessary in the national security
interest, the President may waive this subsection in connection with
(and prior to the enforcement of) any judicial order directing
attachment in aid of execution or execution against any property
subject to the Vienna Convention on Diplomatic Relations or the Vienna
Convention on Consular Relations.
``(B) A waiver under this paragraph shall not apply to--
``(i) if property subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular
Relations has been used for any nondiplomatic purpose
(including use as rental property), the proceeds of such use;
or
``(ii) if any asset subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular
Relations is sold or otherwise transferred for value to a third
party, the proceeds of such sale or transfer.
``(C) In this paragraph, the term `property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on Consular
Relations' and the term `asset subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular Relations'
mean any property or asset, respectively, the attachment in aid of
execution or execution of which would result in a violation of an
obligation of the United States under the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular Relations, as
the case may be.
``(4) For purposes of this subsection, all assets of any agency or
instrumentality of a foreign state shall be treated as assets of that
foreign state.''.
(d) Technical and Conforming Amendment.--Section 117(d) of the
Treasury Department Appropriations Act, 1999 (Public Law 105-277; 112
Stat. 2681-492) is repealed.
(e) Effective Date.--The amendments made by this section shall apply
to any claim for which a foreign state is not immune under section
1605(a)(7) of title 28, United States Code, arising before, on, or
after the date of enactment of this Act.
SEC. 2. PAYGO ADJUSTMENT.
The Director of the Office of Management and Budget shall not make
any estimates of changes in direct spending outlays and receipts under
section 252(d) of the Balanced Budget and Emergency Deficit Control Act
of 1985 (2 U.S.C. 902(d)) for any fiscal year resulting from enactment
of this Act.
SEC. 3. TECHNICAL AMENDMENTS TO IMPROVE LITIGATION PROCEDURES AND
REMOVE LIMITATIONS ON LIABILITY.
(a) General Exceptions to Jurisdictional Immunity of Foreign State.--
Section 1605 of title 28, United States Code, is amended by adding at
the end the following:
``(h) If a foreign state, or its agency or instrumentality, is a
party to an action pursuant to subsection (a)(7) and fails to furnish
any testimony, document, or other thing upon a duly issued discovery
order by the court in the action, such failure shall be deemed an
admission of any fact with respect to which the discovery order
relates. Nothing in this subsection shall supersede the limitations set
forth in subsection (g).''.
(b) Extent of Liability.--Section 1606 of title 28, United States
Code, is amended by adding at the end the following: ``No Federal or
State statutory limits shall apply to the amount of compensatory,
actual, or punitive damages permitted to be awarded to persons under
section 1605(a)(7) and this section.''.
Purpose and Summary
H.R. 3485 would allow victims of terrorism to satisfy
judgments against foreign states by allowing assets frozen by
the U.S. to be subject to attachment and execution. While
providing for the protection of embassies and assets necessary
for their actual operating expenses from attachment and
execution if the President deems it necessary in the interest
of national security, H.R. 3485 provides that protection is
specifically denied under the bill for proceeds from any
property which has been used for any non-diplomatic purpose
(including rental property) or for proceeds from any asset
which is sold or transferred for value to a third party.
Background and Need for the Legislation
In March 1985, Terry Anderson, an American journalist
working in Beirut, was kidnapped by agents of the Islamic
Republic of Iran. He was held captive by his kidnappers in
deplorable conditions until early December 1991.
During the 1980's, three other individuals working in
Lebanon, David Jacobsen, an administrator of the American
University hospital in Beirut, Joseph Ciccippio, a comptroller
of the America University school and hospital and Frank Reed, a
principal of a private secondary school in Beirut, were also
held captive by agents of the Islamic Republic of Iran.
In April 1995, Alisa Flatow, a 20-year-old college student
from New Jersey, was on a bus on the Gaza strip going to a
Passover holiday celebration. A terrorist from the Iranian
backed Islamic Jihad rammed his car loaded with explosives into
the bus, killing Ms. Flatow and seven others.
Two Americans studying in Israel, Matthew Eisenfeld and
Sara Duker were killed in a suicide bombing of a bus in
Jerusalem in February 1996. Those responsible were provided
training, money, and resources by Iran.
Also in February 1996, Cuban MiG aircraft shot down two
aircraft flown by the ``Brothers to the Rescue'' organization
in international airspace over the Florida Straits. Three
American citizens were killed in the attack.
After the Brothers to the Rescue incident, at a February
26, 1996, White House press briefing President Clinton stated
``I am asking that Congress pass legislation that will provide
immediate compensation to the families, something to which they
are entitled under international law, out of Cuba's blocked
assets here in the United States. If Congress passes this
legislation, we can provide the compensation immediately.''
The Brothers to the Rescue families did receive $300,000
each ($1.2 million total) out of Cuban blocked assets as, in
the President's words, a ``humanitarian gesture'' with
assurances from the Department of State that those payments
would not affect receiving their full judgment.
In 1996, the Antiterrorism and Effective Death Penalty Act
became law. That law allowed American citizens injured in an
act of terrorism or their survivors to bring a private lawsuit
against the terrorist state responsible for that act.
Upon enactment of the Antiterrorism and Effective Death
Penalty Act, several victims of terrorism or their families
filed suit against terrorist states. There are several cases
pending in U.S. courts by the families of victims of terrorism.
To date, judgments have been awarded to families of victims in
ten cases.
The three Brothers to the Rescue victims' families went to
court and on December 17, 1997, in separate but related
judgments were awarded $48 million in compensatory damages and
$132 million in punitive damages, plus nearly $20 million in
post-judgment interest and costs. The administration fought to
block the attempted attachment of any Cuban assets to satisfy
that award.
In March 1998, Alisa Flatow's family went to court and was
awarded $22.5 million in compensatory damages and $225 million
in punitive damages. The administration fought to block the
attachment of any Iranian assets to satisfy the award.
In August 1998, David Jacobsen, Joseph Ciccippio and his
wife, and Frank Reed and his wife, were awarded a total of $65
million in compensatory damages. They were not awarded any
punitive damages. The administration fought to block the
attachment of any Iranian assets to satisfy the award.
In 1999, the Congress passed Section 117 of the Fiscal Year
1999 Treasury Department Appropriations Act, mandating that the
Executive Branch must allow Americans to attach the assets of
terrorist states in the U.S. in order to collect judgments won
in Federal court. That legislation included a provision for a
Presidential waiver to block the attachment of assets if it was
in the interest of national security.
In Presidential Determination No. 99-1, the President
determined that the authority granted by Section 117 for the
attachment of assets of terrorist states in general would
impede foreign policy and therefore would not be in the
interest of national security. This determination effectively
applied the Presidential waiver in Section 117 to all judgments
attempting to attach to terrorist state assets.
On August 11, 1999, in Alejandre v. Republic of Cuba, 183
F.3d. 1277 (11th Cir. Aug. 11, 1999), the U.S. Court of Appeals
ruled that congressional intent in passing Section 117 was
unclear as to whether all blocked assets of an agency or
instrumentality of a terrorist state could be executed upon to
satisfy an Anti-Terrorism Act judgment. The Court cited the
1983 Supreme Court ruling in First National City Bank v. Banco
Para El Comercio de Cuba, 462 U.S. 611 (1983), when coming to
the conclusion that without an indication of more explicit
intent by the Congress, the court was compelled to determine
that the Foreign Sovereign Immunities Act does not intend that
there is cross-liability between parent and subsidiary entities
without the presence of fraud or a determination that the
subsidiary is an alter ego of the parent entity.
On November 15, 1999, in Stephen M. Flatow v. The Islamic
Republic of Iran, C.A. No. 97-396 (RCL), the U.S. District
Court of the District of Columbia ruled in favor of the United
States' motion to quash Mr. Flatow's attempt to attach certain
assets and monies held by the U.S. to satisfy his judgment. In
that ruling the court stated ``Because this Court finds that
Congress has not clearly and unequivocally waived the United
States' sovereign immunity, the Court grants the United States
Motion to Quash the Writ of Attachment.''
In March 2000, Terry Anderson and his family were awarded
$41.2 million in compensatory damages and $300 million in
punitive damages by the U.S. District Court for the District of
Columbia. It is expected that the Presidential waiver will be
used to the block the attachment of any Iranian assets to
satisfy their judgement as well.
On July 11, 2000, the families of Matthew Eisenfeld and
Sara Duker were awarded $327 million in compensatory and
punitive damages by the U.S. District Court for the District of
Columbia. The administration will certainly assert the
Presidential waiver to block the attachment of any Iranian
assets to satisfy their judgement as well.
The President's continued use of his waiver power has
frustrated the legitimate rights of victims of terrorism, and
thus this legislation is required. While still allowing the
President to block the attachment of embassies and necessary
operating assets, H.R. 3485 would amend the law to specifically
deny blockage of attachment of proceeds from any property which
has been used for any non-diplomatic purpose or of proceeds
from any asset which is sold or transferred for value to a
third party.
Two amendments were adopted during committee consideration.
One amendment was offerred by Congressman Bill McCollum and the
other by Congressman John Conyers.
The amendment offered by Mr. McCollum and accepted by the
committee clarifies that property properly characterized as
diplomatic under the Vienna Convention on Diplomatic Relations
or the Vienna Convention on Consular Relations is not subject
to attachment in aid of execution or execution. The
administration had concerns that the bill could be construed to
allow execution against diplomatic property under the Vienna
Convention in a way that would create a liability on behalf of
the United States. The McCollum amendment is intended to
prevent such liability.
It is important to note that for assets which could be
deemed diplomatic property and which the administration fears
execution against would violate international agreements, the
administration has not provided any evidence that the execution
of such blocked assets is inconsistent with any international
agreement. Yet, in light of concerns expressed by the
administration that execution, unlike blocking, would cause
liability, the McCollum amendment assures that the definition
of diplomatic property which is protected from execution in
H.R. 3485 is the same definition of diplomatic property in the
Vienna Convention.
The amendment offered by Mr. Conyers and accepted by the
committee would (1) provide that when a country which sponsors
terrorism and is a party in a trial brought under the Anti-
Terrorism Act does not provide the necessary evidence required
under any discovery order, the Court can impose any type of
sanction available by law on that country; and (2) provide that
no Federal or State statutory limits will apply to the amount
of compensatory, actual, or punitive damages that can be
awarded to individuals by the courts in these victim of
terrorism cases.
The committee would note that although the Congressional
Budget Office estimates the cost of H.R. 3485 at $405 million,
they admit that:
Enactment of H.R. 3485 could result in savings in
later years if future disbursements that would
otherwise have to be made under current law were
reduced because of the payments made in 2001. CBO has
no basis for estimating these effects--if any--because
they would depend on future decisions of the
international Iran-U.S. Claims Tribunal and the
responses of the United States and Iran to these
decisions.
The CBO scoring of this bill is based on all sources of
money held by the U.S. that will potentially be available to
pay out to claimants rather than actual known outlays. The
committee believes that any attempt at a definitive cost
analysis at this time on H.R. 3485 is futile due to the
uncertainty of the many factors, some of which are mentioned in
the above portion of the CBO estimate.
Hearings
The committee's Subcommittee on Immigration and Claims held
a hearing on H.R. 3485 on April 13, 2000. Testimony was
received from Terry A. Anderson; Stephen M. Flatow; Maggie A.
Khuly; and Ronald W. Kleinman, Esquire, with additional
material submitted by Robin L. Higgins; Joseph & Elham
Cicippio; Frank & Fifi Reed; David P. Jacobsen; Stewart
Eizenstat, Deputy Secretary of the Treasury; and the Honorable
Lincoln Diaz-Balart.
Committee Consideration
On June 21, 2000, the committee met in open session and
ordered favorably reported the bill H.R. 3485 with amendment by
voice vote, a quorum being present.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the committee reports that the
findings and recommendations of the committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform Findings
No findings or recommendations of the Committee on
Government Reform were received as referred to in clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the committee sets forth, with
respect to the bill, H.R. 3485, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 7, 2000.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3485, the Justice
for Victims of Terrorism Act.
If you wish further details on this estimate, we will be
pleased to provide them. The principal CBO staff contact is
Lanette J. Keith.
Sincerely,
Dan L. Crippen, Director.
Enclosure.
H.R. 3485--Justice for Victims of Terrorism Act.
H.R. 3485 would enable victims of Iranian terrorism who
have won judgments against Iran in U.S. courts to collect
monetary damages from that country--primarily by obtaining
certain funds currently held by the U.S. government. As shown
in the following table, CBO estimates that enacting this bill
would increase direct spending by about $405 million in 2001;
therefore, pay-as-you-go procedures would apply.
Although the bill would pertain to victims of other nations
that sponsor terrorism, CBO does not expect that any budgetary
effects would result from judgments against other nations. As
shown in the following table, CBO estimates that enacting this
bill would increase direct spending by about $420 million in
2001; therefore, pay-as-you-go procedures would apply.
Enactment of H.R. 3485 could result in savings in later years
if future disbursements that would otherwise have to be made
under current law were reduced because of the payments made in
2001. CBO has no basis for estimating these effects--if any--
because they would depend on future decisions of the
international Iran-U.S. Claims Tribunal and the responses of
the United States and Iran to these decisions.
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority 405 a a a a
Estimated Outlays 405 a a a a
----------------------------------------------------------------------------------------------------------------
a. H.R. 3485 could result in savings after 2001, but CBO has no basis for estimating such savings--if any--
because they would depend on future decisions made by the Iran-U.S. Claims Tribunal, the United States, and
Iran.
The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
and would not affect the budgets of state, local, or tribal
governments.
Iran is one of seven countries that is designated by the
federal government as a sponsor of terrorism. (The provisions
of H.R. 3485 would apply to the other six nations as well;
however, according to information from the Department of State,
the only budgetary effect of S. 1796 the bill would involve
primarily affect assets of Iran.) Under current law, victims of
state-sponsored terrorism may pursue claims against that
state's government in U.S. courts. Information from the
Department of State indicates that victims of Iranian terrorism
have won punitive and compensatory damages in U.S. courts that
exceed $650 million.
The U.S. government currently holds, in the Foreign
Military Sales (FMS) Trust Fund, about $400 million on behalf
of Iran previously paid by Iran for the purchase of military
equipment that was not delivered. The disposition of those
funds is currently before the Iran-U.S. Claims Tribunal, an
international body established to settle disputes between the
two nations. Under current law, victims of terrorist acts may
attach, by judicial order, property of the Iranian government
held by the United States. Victims, however, have been unable
to obtain payment in satisfaction of those judgments because
the funds they have attached are protected by the federal
government's sovereign immunity. As a result, those judgments
remain unpaid.
By explicitly waiving the federal government's sovereign
immunity, H.R. 3485 would remove a barrier to the execution of
the victims' judgments., resulting That action would likely
result in the payment of these the judgment claims from the FMS
Trust Fund. As a result, CBO estimates that enacting this
provision would increase direct spending by $400 million in
fiscal year 2001. CBO cannot determine whether the payment of
these claims to terrorist victims would reduce, eliminate, or
leave unaltered the any liability of the United States to Iran,
which is yet to be determined by before the Iran-U.S. Claims
Tribunal. Thus, it is possible that some or all of the funds we
estimate will be paid to victims of terrorism under this bill
could be offset by a reduction in payments that would be made
from the FMS Trust Fund to Iran under current law. CBO,
however, has no basis for predicting the future decisions of
the Iran-U.S. Claims Tribunal, nor the response of the federal
governments to such decisions.
The bill would also make possible the attachment of rental
proceeds from leasing Iranian diplomatic property in the United
States. Under current law, the President has authority to
preclude such assets from attachment and execution to satisfy
judgments against states that sponsor terrorism. H.R. 3485
would limit that authority for rental proceeds. Based on
information from the Treasury Department, CBO estimates the
value of such rental proceeds in this country that could be
seized under this provision to be about $5 million.
The United States has a custodial responsibility under
international agreements to maintain diplomatic assets
belonging to Iran; therefore, the federal government would
likely be liable to Iran for the loss of this $5 million from
rental proceeds. If those amounts are seized, CBO anticipates
that the United States would have to promptly reimburse Iran
for their value.
On May 3, 2000, CBO transmitted a cost estimate for S.
1796, the Justice for Victims of Terrorism Act, as reported by
the Senate Committee on the Judiciary on March 9, 2000. S. 1796
would have limited the President's authority to preclude most
Iranian diplomatic property in the United States from
attachment and execution to satisfy judgements against Iran.
H.R. 3485 would limit the President's ability to preclude only
the rental proceeds of such property. Because of that
limitation, CBO estimates that H.R. 3485 would result in about
$15 million less in direct spending than S. 1796.
The CBO staff contacts for this estimate are Lanette J.
Keith and John R. Righter, and Joseph C. Whitehill. This
estimate was approved by Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the committee finds the authority for
this legislation in Article 1, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1(a). Short Title
This subsection provides that the short title of the
legislation is the ``Justice for Victims of Terrorism Act''.
Section 1(b). Definition
This subsection indicates that only part of the statutory
definition of ``agency or instrumentality of a foreign state''
shall apply to any case concerning the attachment and execution
of property in the United States of a foreign state based on a
judgement against that foreign state for personal injury or
death that was caused by an act of torture, extrajudicial
killing, aircraft sabotage, hostage taking, or the provision of
material support or resources for such acts by an official,
employee, or agent of a foreign state.
The new definition provides that an entity can be deemed an
agency or instrumentality of the foreign state which sponsored
the terrorist act regardless of where that entity is
incorporated.
This subsection also includes a technical and conforming
amendment to 28 U.S.C. 1391(f)(3) to change ``1603(b)'' to
``1603(b)(1)''.
Section 1(c). Enforcement of Judgments
This subsection states that moneys due from or payable by
the U.S. to any foreign state which sponsors terrorism and has
a judgment pending against it for a terrorist act shall be
subject to attachment and execution as if the U.S. were a
private entity.
The subsection also provides that, when it is determined
that a waiver is necessary in the interest of national
security, the President may waive this subsection and protect
any property subject to the Vienna Convention on Diplomatic
Relations or the Vienna Convention on Consular Relations from
attachment and execution to satisfy a judgment as well as any
funds necessary for actual operating expenses of those
properties. If these properties have been used for any
nondiplomatic purpose (including use as rental property), the
proceeds of that use are not subject to such a waiver of this
subsection. Additionally, this waiver does not apply to any
proceeds from the sale or transfer to a third party of these
properties.
Finally, this subsection provides that there is cross
liability between any agency or instrumentality of a foreign
state and the foreign state itself. This provision specifically
provides that a judgment against a foreign state that sponsors
terrorism can be executed against assets of an agency or
instrumentality of that foreign state even if there is no proof
of fraud or any proof that the agency or instrumentality is an
alter ego of the foreign state. This is intended to allow
collection on judgments even in light of First National City
Bank v. Banco Para El Comercio de Cuba, 462 U.S. 611 (1983).
Section 1(d). Technical and Conforming Amendment
This subsection repeals Section 117(d) of the Treasury
Department Appropriations Act of 1999.
Section 1(e). Effective Date
This subsection provides that all amendments made in
Section 1 of the bill will apply to any claim involving a
foreign state that sponsors terrorism which arose before, on,
or after the date of enactment of this legislation.
Section 2. Technical Amendments to Improve Litigation Procedures and
Remove Limitations on Liability
Subsection (a) would amend 28 U.S.C. 1605 to provide that
when a country which sponsors terrorism is a party in a trial
brought under the Anti-Terrorism Act and does not provide the
necessary evidence required under any discovery order, the
Court can impose any type of sanction available by law on that
country. Subsection (b) would amend 28 U.S.C. 1606 to provide
that no Federal or State statutory limits will apply to the
amount of compensatory, actual, or punitive damages that can be
awarded to individuals by the courts in these victims of
terrorism cases.
Agency Views
TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT, DEFENSE DEPARTMENT;
UNDER SECRETARY FOR POLICY WALTER SLOCOMBE; AND STATE DEPARTMENT UNDER
SECRETARY FOR POLICY THOMAS PICKERING TESTIMONY BEFORE THE HOUSE
COMMITTEE ON THE JUDICIARY SUBCOMMITTEE ON IMMIGRATION AND CLAIMS
Mr. Chairman and Members of the Committee:
We are submitting this joint testimony as envisaged by the
letters of Deputy Secretary Eizenstat of April 12 to Committee
Chairman Hyde and Subcommittee Chairman Smith in response to
letters to Secretary Summers and Secretary Albright from
Chairman Hyde, inviting them or their designees to testify
before this subcommittee on April 13 concerning H.R. 3485, the
``Justice for Victims of Terrorism Act.'' Deputy Secretary
Eizenstat has worked extensively on this issue for the
Administration over the past 18 months, and we, on behalf of
our Departments, join him in presenting our views on this
proposed legislation. We share your goal that U.S. victims of
terrorism and their families receive justice and compensation
for their suffering. We are actively engaged with the Congress
in ongoing discussions to resolve the complex issues identified
and to address the needs of victims of terrorism. We also
appreciate the opportunity to submit this statement into the
record.
Let us begin by expressing the Administration's and our own
genuine and personal sympathy to victims of international
terrorism--an evil that this administration has led the world
in combating. It is the responsibility of the United States
Government to do everything possible to protect American lives
from international terrorism and other heinous acts. People
like Mr. Flatow, Mr. Anderson, Mr. Cicippio, Mr. Jacobsen, and
Mr. Reed and their families, and the families of the Brothers
to the Rescue pilots, deserve support in their goal of finding
fair and just compensation for their grievous losses and
unimaginable experiences. Those of us who have met with them
have been touched by their suffering and impressed with their
strength and determination to seek justice. We understand their
frustrations and the frustrations that have led the sponsors of
this legislation to introduce it. We are dedicated to working
with the Congress to achieve the goal of obtaining compensation
for the victims and their families. But we feel strongly that
this must be done in a way that is consistent with the broad
national interests and international obligations of the United
States.
It is obvious that the states involved here--states that we
have publicly branded as sponsors of terrorism--do not view the
United States as a friendly environment in which to conduct
financial transactions. As part of our efforts to combat
terrorism, we impose a wide range of economic sanctions against
state sponsors of terrorism in order to deprive them of the
resources to fund acts of terrorism and to affect their
conduct. Because of these measures, terrorism-list states
engage in minimal economic activity in the United States. In
many cases, the only assets that states which sponsor terrorism
have in the United States are either blocked or diplomatic
property. Such property should not be available for attachment
and execution of judgments, for very good reasons involving the
interests of the entire nation, which are described in detail
below. As much as we join the sponsors of this bill in desiring
to have victims of international terrorism and the heinous acts
of the Cuban Air Force compensated, it would be unwise to
ignore these reasons and prejudice the interests of all our
citizens for this purpose.
This question is complex and fraught with difficulties. For
this reason, last year, we proposed, among other things, that a
commission be established to review all aspects of the problems
presented by acts of international terrorism. Such a commission
would have specifically studied the issue of compensation with
the goal of recommending proposals to the President and to the
Congress to help the victims and their families receive
compensation in a manner that would not impinge upon important
U.S. national interests. While this proposal was not taken up,
we believe this approach still has merit.
H.R. 3485, though born of good intentions, is fundamentally
flawed. The legislation would have five principal negative
effects, all of which would be seriously damaging to important
U.S. interests, and would, at the end of the day, result in
substantial U.S. taxpayer liability.
First, blocking of assets of terrorist states is one of the
most significant economic sanctions tools available to the
President. The proposed legislation would undermine the
President's ability to combat international terrorism and other
threats to national security by permitting the wholesale
attachment of blocked property, thereby depleting the pool of
blocked assets and depriving the U.S. of a source of leverage
in ongoing and future sanctions programs, such as was used to
gain the release of our citizens held hostage in Iran in 1981
or in gaining information about POW's and MIA's as part of the
normalization process with Vietnam.
Second, it would cause the U.S. to violate its
international treaty obligations to protect and respect the
immunity of diplomatic and consular property of other nations,
and would put our own diplomatic and consular property around
the world at risk of copycat attachment, with all that such
implies for the ability of the United States to conduct
diplomatic and consular relations and protect personnel and
facilities.
Third, it would create a race to the courthouse benefiting
one small, though deserving, group of Americans over a far
larger group of deserving Americans. For example, in the case
of Cuba, many Americans have waited decades to be compensated
for both the loss of property and the loss of the lives of
their loved ones. This would leave no assets for their claims
and others that may follow. Even with regard to current
judgment holders, it would result in their competing for the
same limited pool of assets, which would be exhausted very
quickly and might not be sufficient to satisfy all judgments.
Fourth, it would breach the long-standing principle that
the United States Government has sovereign immunity from
attachment, thereby preventing the U.S. Government from making
good on its debts and international obligations and potentially
causing the U.S. taxpayer to incur substantial financial
liability, rather than achieving the stated goal of forcing
Iran to bear the burden of paying these judgments. The
Congressional Budget Office (``CBO'') has recognized this by
scoring the legislation at $420 million, the bulk of which is
associated with the Foreign Military Sales (``FMS'') Trust
Fund. Such a waiver of sovereign immunity would expose the
Trust Fund to writs of attachment, which would inject an
unprecedented and major element of uncertainty and
unreliability into the FMS program by creating an exception to
the processes and principles under which the program operates.
Fifth, it would direct courts to ignore the separate legal
status of states and their agencies and instrumentalities,
overturning Supreme Court precedent and basic principles of
corporate law and international practice by making state
majority-owned corporations liable for the debts of the state
and establishing a dangerous precedent for government owned
enterprises like the U.S. Overseas Private Investment
Corporation (``OPIC'').
As the Washington Post observed in a fall 1999 editorial,
``Victims of terrorism certainly should be compensated, but a
mechanism that permits individual recovery to take precedence
over significant foreign policy interests is flawed.'' The
proposed legislation would indeed seriously compromise
important national security, foreign policy, and other clear
national interests, and discriminate among and between past and
future U.S. claimants.
For all these reasons, explained in more detail below, the
Administration strongly opposes the proposed legislation.
(1) Attachment of Blocked and Diplomatic Property and the Elimination
of the Effectiveness of Our Blocking Programs
The Administration has grave concerns with the provisions
of the proposed legislation that seek to nullify the
President's waiver of the 1998 FSIA amendments and thereby
permit attachment of blocked and diplomatic property.
The ability to block assets represents one of the primary
tools available to the United States to deter aggression and
discourage or end hostile actions against U.S. citizens abroad.
Our efforts to combat threats to our national security posed by
terrorism-list countries such as Iraq, Libya, Cuba, and Sudan
rely in significant part upon our ability to block the assets
of those countries.
Blocking assets permits the United States to deprive those
countries of resources that they could use to harm our
interests, and to disrupt their ability to carry out
international financial transactions. By placing the assets of
such countries in the sole control of the President, blocking
programs permit the President at any time to withhold
substantial benefits from countries whose conduct we abhor, and
to offer a potential incentive to such countries to reform
their conduct. Our blocking programs thus provide the United
States with a unique and flexible form of leverage over
countries that engage in threatening conduct.
The Congress has recognized the need for the President to
be able to regulate the assets of foreign states to meet
threats to the U.S. national security, foreign policy, and
economy. In both the International Emergency Economic Powers
Act and the Trading with the Enemy Act, the Congress has
provided the President with statutory authority for regulating
foreign assets. On the basis of this authority and foreign
policy powers under the Constitution, Presidents have blocked
property and interests in property of foreign states and
foreign nationals that today amount to over $3.5 billion.
The Supreme Court has also recognized the importance of the
President's blocking authority, stating that such blocking
orders ``permit the President to maintain the foreign assets at
his disposal for use in negotiating the resolution of a
declared national emergency. The frozen assets serve as a
`bargaining chip' to be used by the President when dealing with
a hostile country.'' Dames & Moore v. Regan, 453 U.S. 654, 673
(1981).
The leverage provided by blocked assets has proved central
to our ability to protect important U.S. national security and
foreign policy interests. The most striking example is the Iran
Hostage Crisis. The critical bargaining chip the United States
had to bring to the table in an effort to resolve the crisis
was the almost $10 billion in Iranian Government assets that
the President had blocked shortly after the taking of our
embassy. Because the return of the blocked assets was one of
Iran's principal conditions for the release of the hostages, we
would not have been able to secure the safe release of the
hostages and to settle thousands of claims of U.S. nationals if
those blocked assets had not been available. This settlement
with Iran also resulted in the eventual payment of $7.5 billion
in claims to or for the benefit of U.S. nationals against Iran.
In the case of Vietnam, the leverage provided by
approximately $350 million in blocked assets, combined with
Vietnam's inability to gain access to U.S. technology and
trade, played an important role in persuading Vietnam's
leadership to address important U.S. concerns in the
normalization process. These concerns included assistance in
accounting for POWs and MIAs from the Vietnam War, accepting
responsibility for over $200 million in U.S. claims which had
been adjudicated by the Foreign Claims Settlement Commission,
and moderating Vietnamese actions in Cambodia.
In addition, blocked assets have helped us to secure
equitable settlements of claims of U.S. nationals against such
countries as Romania, Bulgaria, and Cambodia in the context of
normalization of relations. These results could not have been
achieved without effective blocking programs.
However, our blocking programs simply cannot function, and
cannot serve to protect these important interests, if blocked
assets are subject to attachment and execution by private
parties, as the proposed legislation would permit. The need to
deal with the increasing demands for information on assets,
blocked and unblocked, of these terrorism-list governments as
monetary judgments are awarded would seriously disrupt the
operations of the Treasury Department in administering the
blocking programs. These demands would greatly impair
Treasury's investigative functions through the release of
deliberative process and enforcement-related materials thereby
divulging sensitive operational details and raising important
issues of confidentiality with U.S. banks and others who
provide information on assets. Additionally, the ability to use
blocked assets as leverage against foreign states that threaten
U.S. interests is essentially eliminated if the President is
unable to preserve and control the disposition of such assets.
Private rights of execution against blocked assets would
permanently rob the President of the leverage blocking provides
by depleting the pool of blocked assets.
In the Cuban and Iranian contexts, for example, the value
of judgments (including both compensatory and punitive damages)
won by the Brothers to the Rescue families exceeds the total
known value of the blocked assets of Cuba in the United States,
and the value of the judgment won by the Flatow family, or the
former Beirut Hostages, exceeds the total known value of the
blocked assets of the Government of Iran in the United States.
Attachment of these blocked assets to satisfy private judgments
in these and similar cases would leave no remaining assets of
terrorism-list governments in the President's control, denying
the President an important source of leverage and seriously
weakening his hand in dealing with threats to our national
security.
In addition, the prospect of future attachments by private
parties would place a perpetual cloud over the President's
ongoing control of all blocked assets programs. This would
further undermine the President's ability to use such assets as
leverage in negotiations, even where attachments had not yet
occurred.
Put simply, permitting attachment of blocked assets would
likely seriously undermine the use of our blocking programs as
a key tool for combating threats against our national security
and, in the Iranian context, would not even achieve the goal of
full payment of the compensatory damages of all existing
judgments against Iran.
(2) Our Obligation and Interest in Protecting Diplomatic Property
The proposed legislation also could cause the United States
to violate our obligations under international law to protect
diplomatic and consular property, and would undermine the legal
protections for such property on which we rely every day to
protect the safety of our diplomatic and consular property and
personnel abroad. Even though the current legislation arguably
provides protection for a slightly broader range of diplomatic
property than previous legislative proposals, it is still
fundamentally flawed in its failure to permit the President to
protect properties, including consular properties, some
diplomatic bank accounts, diplomatic residences, and properties
of foreign missions to international organizations, which
international law obligates us to protect.
The United States' legal obligation to prevent the
attachment of diplomatic and consular property could not be
clearer. Protection of diplomatic property is required by the
Vienna Convention on Diplomatic Relations, to which the United
States and all of the states against which suits presently may
be brought under the 1996 amendments to the FSIA are parties.
Under Article 45 of the Vienna Convention on Diplomatic
Relations we are obligated to protect the premises of
diplomatic missions, together with their real and personal
property and archives, of countries with which we have severed
diplomatic relations or are in armed conflict. This would
include diplomatic residences owned by the foreign state.
Likewise, under Article 27 of the Vienna Convention on
Consular Relations, the same protection is required for
consular premises, property, and archives. Attachment of any of
the types of property covered by the Vienna Conventions on
Diplomatic and Consular Relations could place the United States
in violation of our obligations under international law.
The proposed legislation would only permit the President to
ensure the protection of a narrow portion of the property
covered by the Vienna Conventions, and would thereby place the
United States in violation of our legal obligations. In
addition, the proposed legislation as drafted could cause us to
breach our obligations to ensure the inviolability of missions
to the United Nations, pursuant to the UN Headquarters
Agreement and the General Convention on Privileges and
Immunities.
Our national interest in the protection of diplomatic
property could not be clearer or more important. [Italic for
emphasis] The United States owns over 3,000 buildings and other
structures abroad that it uses as embassies, consulates,
missions to international organizations, and residences for our
diplomats. The total value of this property is between $12 and
$15 billion.
Because we have more diplomatic property and personnel
abroad than any other country, we are more at risk than any
other country if the protections for diplomatic and consular
property are eroded. [Italic for emphasis] If we flout our
obligations to protect the diplomatic and consular property of
other countries, then we can expect other countries to target
our diplomatic property when they disagree strongly with our
policies or actions. Defending our national interests abroad at
times makes the United States unpopular with some foreign
governments. We should not give those states who wish the
United States ill an easy means to strike at us by declaring
diplomatic property fair game.
In the specific case of Iran, attachment of Iran's
diplomatic and consular properties could also result in
substantial U.S. taxpayer liability. Iran's diplomatic and
consular properties in the United States are the subject of a
claim brought by Iran against the United States before the
Iran-U.S. Claims Tribunal. The Iran-U.S. Claims Tribunal is an
arbitration court located at The Hague in the Netherlands. It
was established as part of the agreement between Iran and the
United States that freed the U.S. hostages in Iran and resolved
outstanding claims that were then pending between the United
States and Iran. Pursuant to this agreement and awards of the
Tribunal, Iran has paid $7.5 billion in compensation to or for
the benefit of U.S. nationals. The Tribunal also has
jurisdiction over certain claims between the two governments.
Although we are contesting Iran's claim vigorously, the
Tribunal could find that the United States should have
transferred Iran's diplomatic and consular property to it in
1981. If it does so and the properties are not available
because they have been liquidated to pay private judgments, the
U.S. taxpayer would have to bear the cost of compensating Iran
for the value of the properties. Under the Algiers Accords,
Tribunal awards against the governments are enforceable in the
courts of any country, under the laws of that country.
(3) Equity Among Claimants
We are also deeply concerned that the proposed legislation
would frustrate equity among U.S. nationals with claims against
terrorism-list states. It would create a winner-take-all race
to the courthouse, arbitrarily permitting recovery for the
first, or first few, claimants from limited available assets,
leaving other similarly-situated claimants with no recovery at
all. In fact, it would take away assets potentially available
to them.
However, the Alejandre, Flatow, and Anderson cases do not
represent the only claims of U.S. nationals against Cuba and
Iran. No other claimants would benefit at all from the proposed
legislation; indeed this legislation would seriously prejudice
their interests.
In the case of Cuba, the U.S. Foreign Claims Settlement
Commission (``FCSC'') has certified 5,911 claims of U.S.
nationals against the Government of Cuba, totaling
approximately $6 billion with interest, dating back to the
early 1960s. Contrary to statements made at the April 13
hearing, these include not just expropriation claims, but also
the wrongful death claims of family members of two individuals
whom the Cuban Government executed after summary trial for
alleged crimes against the Cuban state. Other claims relate to
the Castro Government's seizure of homes and businesses from
U.S. nationals. These claimants have waited over 35 years
without receiving compensation for their losses. This bill will
not help them at all.
The same situation applies with respect to Iran. In
addition to the Flatow and Anderson plaintiffs, who have
judgments for compensatory and punitive damages totaling $589
million, former hostages who were held captive in Lebanon--
David Jacobsen, Joseph Cicippio, Frank Reed, and their
families--collectively have won a judgment against Iran
totaling $65 million. Additional suits against Iran are
currently pending in the Federal District courts.
Moreover, given the nature of these regimes, it remains
possible that in spite of our substantial efforts to combat
terrorism, foreign terrorist states will commit future acts in
violation of the rights of U.S. nationals, which may give rise
to claims against them. If such incidents occur, these
claimants will also have an interest in being compensated.
Against this background, in which outstanding judgments for
compensatory and substantial punitive damages far exceed
available funds, the proposed legislation would permit the
first claimants to reach the courthouse to deplete all the
available assets of terrorism-list governments, leaving nothing
for other similarly situated claimants to satisfy even
compensatory damages they are awarded. Satisfaction of the
judgments in the Alejandre, Flatow, and Anderson cases would
come at the expense of all other claimants against Cuba and
Iran, both past and future.
In sum, permitting the attachment of blocked and diplomatic
properties in individual cases, as the proposed legislation
would do, would undermine our ability to combat threats to our
national security, violate our obligations under international
law, place our diplomatic and consular properties and personnel
abroad at risk, and lead to arbitrary inequities in the
treatment of similarly-situated U.S. nationals with claims
against foreign governments.
(4) Breaching the Sovereign Immunity of the United States
We are equally concerned about the provision of the
proposed legislation that would permit garnishment of debts of
the United States. Not only would this provision breach the
long-established principle that the United States Government
has sovereign immunity from garnishment actions, it would
seriously undermine our Foreign Military Sales program, which
is an important tool supporting U.S. national security policy
and strategy, by creating an exception to the processes and
principles under which the program operates that has not
existed in the program's 40-year history.
By allowing plaintiffs to attempt to tap the FMS Trust Fund
to satisfy their judgments, the entire FMS program would be
jeopardized as foreign customers question whether funds they
are required to pay under the FMS program might be at risk of
diversion or attachment. H.R. 3485 would therefore inject a
major element of uncertainty and unreliability into the FMS
program.
Additionally, foreign governments make pre-payments into
the FMS Trust Fund to ensure payment of U.S. suppliers for
products and services provided to foreign governments in USG-
approved sales of defense products and services. Under section
37 of the Arms Export Control Act, these funds are available
solely for payments to U.S. suppliers, and for refunds to
foreign purchasers in connection with such sales. If the FMS
Trust Fund can be exposed to attachment through an act of
Congress for purposes other than ensuring payment for arms
sales, not only may foreign governments simply question the
wisdom of engaging in such transactions with the United States,
but payments to U.S. suppliers would be threatened.
The proposed legislation also will negatively affect our
defense industrial base. If passed as currently written, not
only will U.S. defense firms be uncertain about whether and
when they will be paid, but our ability to maintain open
production lines needed to support the U.S. military, which the
FMS program greatly facilitates, also would be disrupted.
We have heard that the intent of the proposed legislation
is to ``make terrorist states pay.'' However, exposing the
Iranian FMS Trust Fund account (``Iran FMS account'') to
attachment will not cause Iran to pay. Here too, at the end of
the day, the U.S. taxpayer will bear this burden if this fund
is tapped. The United States will have to pay Iran whatever
amount in the Iran FMS account is held by the Iran-U.S. Claims
Tribunal to be owed to Iran. The current balance of the Iran
FMS account, which is approximately $400 million, is the
subject of Iran's multi-billion dollar claim against the United
States before the Tribunal, arising out of the Iran FMS
program. Depleting Iran's FMS account through attachment by the
plaintiffs in no way discharges any obligation to Iran the U.S.
Government may ultimately be determined to have by the
Tribunal. And if Iran prevails on its claims, it can seek to
enforce its award against U.S. property anywhere in the world,
since the awards of the Iran-U.S. Claims Tribunal are
enforceable in the courts of any country. Any Tribunal award
that cannot be satisfied from the Iranian FMS account will have
to be satisfied with U.S. government funds. Thus American
taxpayers, rather than Iran, would actually pay under H.R.
3485. CBO's cost estimate for the bill has been confirmed that
the legislation would cost the Treasury, and hence the
taxpayer, $420 million, most of which is associated with the
FMS Trust Fund.
This provision is also of particular concern because it
would prevent the United States from meeting its obligations to
make payments in satisfaction of awards the Tribunal renders
against the United States. Instead, the proposed legislation
would permit private parties to garnish the funds of the U.S.
Government in order to collect such payments before they reach
Iran. Even without this change in the law, there have been
efforts in the Flatow case to garnish the payment of a $6
million Tribunal award in Iran's favor.
It is important to understand that allowing private
litigants to garnish amounts we owe Iran under Tribunal awards
would not discharge the U.S. Government's liability to Iran to
pay such money. For example, if the efforts in the Flatow case
had succeeded, the Flatow family would have received $6
million, but the United States still would have owed Iran $6
million under the unpaid award. And again because the awards of
the Iran-U.S. Claims Tribunal are enforceable in the courts of
any country, Iran can seek to enforce awards against U.S.
property in other countries if we do not pay them voluntarily.
[Italic for emphasis]
Permitting garnishment of the payment of such awards could
thus result in the U.S. taxpayer paying twice: once when a
private claimant garnishes the payment, and a second time upon
Iran's successful enforcement of the still unsatisfied award
against us abroad. Because the judgments against Iran received
by these plaintiffs total in the hundreds of millions of
dollars, permitting garnishment of debts owed by the United
States to Iran as a means of satisfying these judgments could
cost the U.S. taxpayer hundreds of millions of dollars.
Finally, while we are vigorously contesting all of Iran's
claims at the Tribunal, if we are unable to pay even the
smallest awards against us, our position before the Tribunal in
all other claims will clearly be undermined.
(5) Eliminating Legal Separateness of Agencies and Instrumentalities
There are also significant problems with the provision of
the proposed legislation that would change the way the FSIA
defines a foreign state's agencies and majority-owned or
controlled instrumentalities for terrorism-list countries where
there is a terrorism-related judgment against it. This
provision would overturn the Congress's own considered judgment
when it passed the FSIA in 1976, as well as existing Supreme
Court case law and basic principles of corporate and
international law. In addition, it would prejudice the
interests of U.S. citizens and corporations who invest abroad.
This provision would make corporations that are majority-
owned or controlled by a terrorism-list foreign government
liable for terrorism-related judgments awarded against that
government. The Congress recognized the danger of this position
when it passed the FSIA in 1976. The Conference Report to that
bill observed that ``[i]f U.S. law did not respect the separate
juridical identities of different agencies or
instrumentalities, it might encourage foreign jurisdictions to
disregard the juridical divisions between different U.S.
corporations or between a U.S. corporation and its independent
subsidiary.''
We are concerned that this proposal to disregard separate
legal personality, although limited in the bill to terrorism-
list states and their majority owned entities, could create the
perception that the United States is unreliable as a location
for banking or investment. Especially for companies with
linkages to foreign governments, such a provision could be
viewed as an expansion of U.S. economic sanctions. It could
raise concerns about the United States as a safe financial
center and about the likelihood of possible legal actions
against their assets in the United States. This perception
could undermine the competitive ability of U.S. financial firms
to lead privatizations abroad and to attract banking business
and investments to the United States.
In addition, if the United States were to ``pierce the
corporate veil'' in this manner, there could well be similar
actions in foreign countries. Foreign countries may enact
similar changes to their law or foreign courts might disregard
the separate status of private, U.S. owned companies in cases
where a litigant had a judgment against the U.S. Government.
Compared to the billions of dollars the United States
Government and private U.S. interests have invested abroad, the
blocked assets of terrorism-list state entities, agencies, and
instrumentalities located in the United States are small. In
the case of Iran, we do not have a comprehensive picture of
Iranian assets in the United States that might be affected by
this proposed legislation. There is currently no blocking of
Iranian assets in the United States (other than the residual of
property blocked during the Hostage Crisis), and thus no
obligation on the part of U.S. persons to report specific
information on them.
U.S. citizens, corporations, the United States Government,
and taxpayers have far more money invested abroad than those of
any other country, and thus have more to lose if investment
protections such as those provided by the presumption of
separate status is eroded. [Italic for emphasis] If we saddle
the investors of other countries with the debts of foreign
governments with which they are co-investors, as the proposed
legislation would do, then we can expect U.S. investors and
taxpayers to pay a considerably higher price when other
governments follow our example.
Finally, disregarding separate legal personality as
provided for in this proposal could possibly lead to
substantial U.S. taxpayer liability for takings claims in U.S.
courts and possibly before international fora.
We are grateful for this opportunity to address a very
important subject involving the fight against terrorism,
compensation for victims, and critical national interests.
Unfortunately, however, the concerns raised here indicate that
the 1996 amendment waiving sovereign immunity and creating a
judicial cause of action for damages arising from acts of
terrorism has not met its goals of providing compensation to
victims and deterring terrorism. In fact, if blocked assets
were exhausted to compensate the families, which would be the
result of this bill, the leverage to affect the conduct of the
terrorism-list states would be lost along with the blocked
assets. We are not happy that these suits have not led to
recovery for families who have brought cases under the 1996
amendment. A system that has to date left no recovery option
other than one that conflicts with U.S. national interests and
would result in substantial U.S. taxpayer liability is not an
acceptable system.
We have been giving this a very hard look and have been
working with several members of Congress to address this
difficult problem. We are anxious to continue doing so.
Together, we hope to formulate immediate and longer-term
approaches that will address the concerns--of compensation for
terrorist acts and the U.S. national interests and
international obligations--that we all share in a much more
satisfactory way. Most importantly, we believe that, for a
workable and effective solution, we need a careful and
deliberative review of the issues, informed by our experience
since the 1996 amendment.
As mentioned earlier, we suggested last year that the
Administration and Congress commit to a joint commission to
review all aspects of the problem, and to recommend to the
President and the Congress proposals to find ways to help these
families receive compensation, in a way consistent with our
overall national interests and international obligations. We
believe that this is the best way to deal with these issues and
that it therefore merits further consideration. We believe that
such a commission should be one of stature and with the right
expertise to confront all the hard issues we have discussed
today--including the lack of effective remedies in these cases
because of sanctions against terrorism-list countries under
U.S. law, which are absolutely necessary to maintain.
A fundamental principle for this joint commission--by
definition--would be the need to inventory outstanding claims
and develop an effective and fair mechanism for compensation of
victims of terrorism. The commission should be encouraged to
think broadly, including consideration of avenues other than
the judicial one created by the 1996 amendment.
We hope discussions on the Commission and the broader issue
of compensation for victims of terrorism will yield a solution
that best addresses all parties' respective interests. Again,
we are committed to working together with you, members of this
Subcommittee, and others to find non-legislative and
legislative means to achieve our shared goal of fair and just
compensation for victims of terrorism.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 28, UNITED STATES CODE
* * * * * * *
PART IV--JURISDICTION AND VENUE
* * * * * * *
CHAPTER 87--DISTRICT COURTS; VENUE
* * * * * * *
Sec. 1391. Venue generally
(a) * * *
* * * * * * *
(f) A civil action against a foreign state as defined in
section 1603(a) of this title may be brought--
(1) * * *
* * * * * * *
(3) in any judicial district in which the agency or
instrumentality is licensed to do business or is doing
business, if the action is brought against an agency or
instrumentality of a foreign state as defined in
section 1603(b)(1) of this title; or
* * * * * * *
CHAPTER 97--JURISDICTIONAL IMMUNITIES OF FOREIGN STATES
* * * * * * *
Sec. 1603. Definitions
For purposes of this chapter--
(a) * * *
[(b) An ``agency or instrumentality of a foreign state''
means any entity--] (b) An ``agency or instrumentality of a
foreign state'' means--
(1) any entity--
[(1)] (A) which is a separate legal person,
corporate or otherwise, and
[(2)] (B) which is an organ of a foreign
state or political subdivision thereof, or a
majority of whose shares or other ownership
interest is owned by a foreign state or
political subdivision thereof, and
[(3)] (C) which is neither a citizen of a
State of the United States as defined in
section 1332(c) and (d) of this title, nor
created under the laws of any third country[.];
and
(2) for purposes of sections 1605(a)(7) and 1610
(a)(7) and (f), any entity as defined under
subparagraphs (A) and (B) of paragraph (1), and
subparagraph (C) of paragraph (1) shall not apply.
* * * * * * *
Sec. 1605. General exceptions to the jurisdictional immunity of a
foreign state
(a) * * *
* * * * * * *
(h) If a foreign state, or its agency or instrumentality, is
a party to an action pursuant to subsection (a)(7) and fails to
furnish any testimony, document, or other thing upon a duly
issued discovery order by the court in the action, such failure
shall be deemed an admission of any fact with respect to which
the discovery order relates. Nothing in this subsection shall
supersede the limitations set forth in subsection (g).
Sec. 1606. Extent of liability
As to any claim for relief with respect to which a foreign
state is not entitled to immunity under section 1605 or 1607 of
this chapter, the foreign state shall be liable in the same
manner and to the same extent as a private individual under
like circumstances; but a foreign state except for an agency or
instrumentality thereof shall not be liable for punitive
damages, except any action under section 1605(a)(7) or 1610(f);
if, however, in any case wherein death was caused, the law of
the place where the action or omission occurred provides, or
has been construed to provide, for damages only punitive in
nature, the foreign state shall be liable for actual or
compensatory damages measured by the pecuniary injuries
resulting from such death which were incurred by the persons
for whose benefit the action was brought. No Federal or State
statutory limits shall apply to the amount of compensatory,
actual, or punitive damages permitted to be awarded to persons
under section 1605(a)(7) and this section.
* * * * * * *
Sec. 1610. Exceptions to the immunity from attachment or execution
(a) * * *
* * * * * * *
(f)(1)(A) Notwithstanding any other provision of law,
including but not limited to section 208(f) of the Foreign
Missions Act (22 U.S.C. 4308(f)), and except as provided in
subparagraph (B), any property with respect to which financial
transactions are prohibited or regulated pursuant to section
5(b) of the Trading with the Enemy Act (50 U.S.C. App. 5(b)),
section 620(a) of the Foreign Assistance Act of 1961 (22 U.S.C.
2370(a)), sections 202 and 203 of the International Emergency
Economic Powers Act (50 U.S.C. 1701-1702), or any other
proclamation, order, regulation, or license issued pursuant
thereto, shall be subject to execution or attachment in aid of
execution of any judgment relating to a claim for which a
foreign state [(including any agency or instrumentality or such
state)] (including any agency or instrumentality of such state)
claiming such property is not immune under section 1605(a)(7).
* * * * * * *
(C) Notwithstanding any other provision of law, moneys due
from or payable by the United States (including any agency,
subdivision or instrumentality thereof) to any state against
which a judgment is pending under section 1605(a)(7) shall be
subject to attachment and execution, in like manner and to the
same extent as if the United States were a private person.
* * * * * * *
(3)(A) Subject to subparagraph (B), upon determining on an
asset-by-asset basis that a waiver is necessary in the national
security interest, the President may waive this subsection in
connection with (and prior to the enforcement of) any judicial
order directing attachment in aid of execution or execution
against the premises of a foreign diplomatic mission to the
United States, or any funds held by or in the name of such
foreign diplomatic mission determined by the President to be
necessary to satisfy actual operating expenses of such foreign
diplomatic mission.
(B) A waiver under this paragraph shall not apply to--
(i) if the premises of a foreign diplomatic mission
has been used for any nondiplomatic purpose (including
use as rental property), the proceeds of such use; or
(ii) if any asset of a foreign diplomatic mission is
sold or otherwise transferred for value to a third
party, the proceeds of such sale or transfer.
(4) For purposes of this subsection, all assets of any agency
or instrumentality of a foreign state shall be treated as
assets of that foreign state.
* * * * * * *
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SECTION 117 OF THE TREASURY DEPARTMENT APPROPRIATIONS ACT, 1999
exception to immunity from attachment or execution
Sec. 117. (a) * * *
* * * * * * *
[(d) Waiver.--The President may waive the requirements of
this section in the interest of national security.]
* * * * * * *
Additional Views
I take this opportunity to express my perspective on the
committee's consideration of the Justice for Victims of
Terrorism Act, H.R. 3485 and to describe several amendments I
made to the bill. I continue to support Congress's efforts to
ensure that victims of terrorism and their families are
compensated by the foreign states that have committed such
atrocious crimes. Monetary damages can never truly compensate
the victims and their families. What Congress can do is ensure
that judicial judgements against these terrorist nations are
enforced so that monetary awards actually hurt these terrorist
states rather than being merely a slap on the wrist.
In considering H.R. 3485, I raised two concerns with
provisions under current law that potentially restrict victims
ability to obtain compensation for terrorist attacks against
them or their family members. Both of these concerns were
incorporated in an amendment I offered that was accepted by the
Majority. In particular, I was concerned that road blocks put
up by foreign states in the course of discovery can severely
burden the litigation process to the victims' detriment.
Moreover, it is important to ensure that the continuing efforts
of Congress and numerous States to implement Federal and State
statutory caps on damage awards do not apply to U.S. victims of
terrorist attacks. A description of the history of the current
law waiving sovereign immunity for certain foreign states that
commit terrorist acts and H.R. 3485, as well as the amendment,
are detailed herein.
HISTORY OF CURRENT LAW
Until the beginning of the 1900s, the United States
afforded foreign states absolute immunity from suit in U.S.
courts as a matter of common law. With the rise of Communism
and the growth of state owned trading and shipping companies,
the United States began to recognize the restrictive theory of
foreign sovereign immunity, which permitted suits arising from
a foreign states' commercial activities. In 1952, the ``Tate
Letter'' announced that the United States would follow the
restrictive theory in making foreign sovereign immunity
determinations.\1\ In 1976, in order to promote uniform and
apolitical determinations, Congress transferred immunity
determinations from the State Department to the judiciary and
codified the restrictive theory in the Foreign Sovereign
Immunities Act (``FSIA'').\2\
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\1\ Letter from Jack B. Tate, Acting Legal Advisor, to the Attorney
General (May 19, 1952).
\2\ 28 U.S.C.A. Sec. Sec. 1602-1611. See Flatow v. Islamic Republic
of Iran, 999 F. Supp. 1 (D.C.D.C. 1998).
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Since enactment of the FSIA, U.S. courts consistently have
refused to extend the scope of the FSIA, and thus, did not find
within the FSIA the right to sue foreign states, beyond
commercial activities, to reach public acts committed by such
foreign states outside the United States. As a result, foreign
states used the FSIA as a shield against civil liability for
violations of the laws of nations committed against U.S.
nationals overseas.\3\
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\3\ See Saudi Arabia v. Nelson, 507 U.S. 349 (1993).
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The Antiterrorism and Effective Death Penalty Act of 1996
(``AEDPA'') was enacted in response to a number of terrorist
attacks against U.S. citizens abroad.\4\ AEDPA amended the FSIA
to lift the immunity of foreign states for a certain category
of sovereign acts which are repugnant to the United States and
the international community--namely acts of terrorism.\5\ AEDPA
created an exception to sovereign immunity in the case of
foreign states officially designated by the State Department as
terrorist states when the foreign state commits a terrorist
act, or provides material support and resources to an
individual or entity which commits such an act, resulting in
the death or personal injury of a U.S. citizen.
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\4\ There are several notable cases involving U.S. citizens in the
1980s and 1990s, which spurred Congress' efforts to expand the FSIA to
eliminate sovereign immunity for foreign states engaged in state-
sponsored terrorism. First, in March 1985, Terry Anderson, an American
journalist working in Beirut, was kidnaped by agents of the Islamic
Republic of Iran (``Iran''). He was held captive by his kidnappers in
deplorable conditions until early December 1991. Second, during the
1980s, three other individuals working in Lebanon, David Jacobsen, an
administrator of the American University hospital in Beirut, Joseph
Ciccipio, a comptroller of the American University school and hospital,
and Frank Reed, the principal of a private secondary school in Beirut,
were also held captive by agents of Iran. Third, in April 1995, Alisa
Flatow, a 20 year old college student from New Jersey, was on a bus on
the Gaza strip going to a Passover holiday celebration. A terrorist
from the Iranian-backed Islamic Jihad rammed his car loaded with
explosives into the bus, killing Ms. Flatow and seven others. Finally,
in February 1996, Cuban MiG aircraft shot down two aircraft flown by
the ``Brothers to the Rescue'' organization in international airspace
over the Florida Straits. Three American citizens were killed in the
attack.
\5\ Pub. L. 104-132, Title II, Sec. 221(a) (Apr. 24, 1996), 110
Stat. 1241 codified in 28 U.S.C.A. Sec. 1605 (West 2000 Supp.).
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In the 1997 Omnibus Consolidated Appropriations Act, the
``Flatow Amendment'' revised the FSIA to expressly provide that
punitive damages were available in actions brought under the
state sponsored terrorism exception to immunity.\6\ This was
done to ensure that the state sponsored terrorism exception had
a deterrent effect--the potential for substantial civil
liability. To further make the immunity exception have a real
impact on state sponsored terrorism, in 1998 Congress amended
the FSIA to allow plaintiffs holding judgements for acts of
terrorism against those states on the terrorism list to bring
enforcement actions against any blocked assets of those states.
The legislation included a waiver provision which, according to
the legislative history, was to be exercised by the President
on a limited basis and only when in the national security
interest of the United States.\7\ President Clinton in 1998
issued a Presidential Proclamation, which was a finding that it
is in the national security interest of the United States to
waive the eligibility of plaintiffs to attach ``blocked''
assets in the United States in connection with all judgements
against all terrorist states.\8\
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\6\ Pub. L. 104-208, Div. A., Title I, Sec. 101(c) [Title V
Sec. 589] (Sept. 30, 1996), 110 Stat. 3009-172 codified in 28 U.S.C.A.
Sec. 1605 note (West 2000 Supp.).
\7\ Treasury Department Appropriations Act of 1999, Pub. L. 105-
277, Title I, Sec. 117(d) codified in 28 U.S.C.A. Sec. 1610 note (West
2000 Supp.).
\8\ Determination to Waive Requests Relating to Blocked Property of
Terrorist-List States, Presidential Determination No. 99-1, 63 Fed.
Reg. 59201 (Oct. 21, 1998) codified in 28 U.S.C.A. Sec. 1610 note (West
2000 Supp.).
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There are several cases pending in U.S. courts by the
families of victims of terrorism.\9\ The plaintiffs in these
actions have been unable to collect on the judgements they
received due to impediments in attaching the assets of foreign
states. It is argued that the President's national security
waiver prevents plaintiffs from attaching certain assets
blocked, and thus held by the United States, to prevent such
assets from being returned to the foreign state. Further, there
are certain ``unblocked'' assets which are essentially
immunized from attachment because they are independent
juridical entities (e.g., an Iranian bank that does not have a
direct nexus to the terrorist act). As described below, H.R.
3485 amends the FSIA to remove the asserted impediments to
plaintiffs attaching the assets of foreign states located in
the United States.
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\9\ To date, judgements currently have been awarded to families of
victims in the following cases: (1) in March 1998, Alisa Flatow's
family was awarded $22.5 million in compensatory damages and $225
million in punitive damages; (2) the three Brothers to the Rescue
victims' families were awarded in separate, but related judgements, $48
million in compensatory damages and $132 million in punitive damages,
plus nearly $20 million in post-judgement interest and costs; (3) in
March 2000, Terry Anderson and his family were awarded $41.2 million in
compensatory damages and $300 million in punitive damages; and (4)
David Jacobsen, Joseph Ciccipio and Frank Reed were awarded a total of
approximately $20 million compensatory damages.
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SUMMARY OF THE JUSTICE FOR VICTIMS OF TERRORISM ACT, H.R. 3485
H.R. 3485 amends the applicability of the FSIA's definition
of an ``agency or instrumentality of a foreign state'' to make
clear that the U.S. located assets of corporations majority-
owned by terrorism sponsoring governments would be liable for
execution of judgement issued by U.S. courts against that
government.
H.R. 3485 directs that moneys due from, or payable by the
United States to any foreign state against which a judgment is
pending will be subject to attachment and execution in a like
manner and to the same extent as if the United States were a
private person. This provision waives the U.S. Government's
immunity from suit on funds held or collected by the U.S.
Government in connection with the activities of a foreign state
(e.g., the U.S. Government holds the revenue of certain Iranian
properties sold in the United States and are due to be paid to
Iran. Such revenue cannot be attached because the United States
is immunized from suit).
H.R. 3485 authorizes the President, upon determining on an
asset-by-asset basis that a waiver is necessary and in the
national security interest, to prevent plaintiffs from
attaching the premises of any property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on
Consular Relations. The presidential waiver would not apply to
the proceeds of: (1) any property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on
Consular Relations that has been used for any non-diplomatic
purpose (including use as rental property); or (2) a sale or
transfer of an asset subject to the Vienna Convention on
Diplomatic Relations or the Vienna Convention on Consular
Relations. This provision prevents the President from issuing a
blanket waiver and prevents the applicability of such a waiver
to proceeds from non-diplomatic activities.
H.R. 3485 treats all assets of any agency or
instrumentality of a foreign state as assets of that foreign
state. This change in the law eliminates the ``Bancec'' rule
which limits the attachment of a foreign states' assets in the
United States (e.g., a bank) only to those assets that are
connected in a significant fashion with the terrorist act. This
provision also would allow the attachment of the assets of
certain private non-profit organizations in the United States
that are allied with a foreign state and that are known to be
involved in terrorist activities.
Thus, H.R. 3485 eliminates many of the remaining barriers
to victims and their families seeking to attach the assets of,
and executing the judicial judgements against, foreign
terrorist states.\10\
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\10\ According to Treasury Deputy Secretary Stuart E. Eizenstat,
the Administration has several concerns with H.R. 3485: First, the
ability to block assets represents one of the primary tools available
to the United States to deter aggressions and discourage or end hostile
actions against U.S. citizens abroad. The bill therefore would
interfere with the President's power to block foreign assets by
subjecting the assets to attachment and execution by private parties.
Second, H.R. 3485 may result in the United States violating its
obligations under the Vienna Convention on Diplomatic Relations and the
Vienna Convention on Consular Relations to prevent the attachment of
diplomatic and consular property. Without protecting the diplomatic and
consular property of these terrorist-list countries, the Administration
argues that we should expect such countries, and possibly others, to
target our diplomatic property when they disagree strongly with our
polices or actions. Third, the first claimants who reach the courthouse
may be able to deplete the available assets of terrorism-list
governments, leaving nothing for other similarly situated claimants.
Fourth, the Administration argues that permitting the garnishment of
debts of the United States would breach the principle that the United
States government has sovereign immunity from garnishment actions.
Finally, the bill would make corporations that are majority-owned or
controlled by a terrorism-list foreign government liable for all of the
individual debts of that government. According to the Administration,
such an action would saddle the investors of other countries with the
debts of foreign governments with which they are co-investors and we
should expect U.S. investors to face the same consequences abroad.
Letter from Stuart E. Eizenstat, Deputy Secretary of the U.S. Treasury
Department, to the U.S. Senate Committee on the Judiciary (Oct. 27,
1999).
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CONYERS AMENDMENT TO H.R. 3485
In order to further assist current and future victims of
terrorism who file suits under the FSIA, I offered an amendment
approved by voice vote that reduces litigation difficulties
presented by unresponsive foreign states during the discovery
stages of litigation as well as precludes any cap on damages
awarded to victims and their families.
In cases involving foreign terrorist states, obtaining
discovery from such litigants can be difficult, if not
impossible. American citizens are subject to a very burdensome
discovery process under the FSIA and Hague Evidence Convention,
which requires the involvement of foreign courts and diplomatic
offices and are subject to foreign ``blocking statutes''
designed to thwart our discovery process. Moreover, foreign
states have substantial incentives not to respond to discovery
requests seeking information about their involvement in
terrorist activities. My amendment therefore requires that when
a foreign state fails to respond to a discovery order, the
foreign state will be deemed to have admitted the facts to
which the discovery order pertains.
The amendment also precludes the application of Federal and
Statute caps on compensatory, actual and punitive damages
awarded to victims of terrorism under the FSIA. Many States and
Congress are continually revising the law to cap or preclude
damage awards to plaintiffs, regardless of the egregiousness of
the offense. It is nearly impossible to keep track of all the
cases where this Congress and States have enacted caps on
damages, and it is now to the point where we cannot be sure
that caps on damage awards do not currently, or will not some
day in the future, apply to these types of cases. Therefore, my
amendment ensures that caps on damage awards in these cases are
not applicable.
The aforementioned changes are fully consistent with
Congressional intent regarding the FSIA. I am pleased that this
modest and common sense amendment to further help victims of
terrorism was adopted on a bipartisan basis.
John Conyers, Jr.