[Weekly Compilation of Presidential Documents Volume 43, Number 52 (Monday, December 31, 2007)]
[Pages 1641-1642]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Memorandum to the House of Representatives Returning Without Approval 
the ``National Defense Authorization Act for Fiscal Year 2008''

December 28, 2007

    I am withholding my approval of H.R. 1585, the ``National Defense 
Authorization Act for Fiscal Year 2008,'' because it would imperil 
billions of dollars of Iraqi assets at a crucial juncture in that 
nation's reconstruction efforts and because it would undermine the 
foreign policy and commercial interests of the United States.
    The economic security and successful reconstruction of Iraq have 
been top priorities of the United States. Section 1083 of H.R. 1585 
threatens those key objectives. Immediately upon enactment, section 1083 
would risk the freezing of substantial Iraqi assets in the United 
States--including those of the Development Fund for Iraq (DFI), the 
Central Bank of Iraq (CBI), and commercial entities in the United States 
in which Iraq has an interest. Section 1083 also would expose Iraq to 
new liability of at least several billion dollars by undoing judgments 
favorable to Iraq, by foreclosing available defenses on which Iraq is 
relying in pending litigation, and by creating a new Federal cause of 
action backed by the prospect of punitive damages to support claims that 
may previously have been foreclosed. This new liability, in turn, will 
only increase the potential for immediate entanglement of Iraqi assets 
in the United States. The aggregate financial impact of these provisions 
on Iraq would be devastating.
    While my Administration objected to an earlier version of this 
provision in previous communications about the bill, its full impact on 
Iraq and on our relationship with Iraq has become apparent only in 
recent days. Members of my Administration are working with Members of 
Congress to fix this flawed provision as soon as possible after the 
Congress returns.
    Section 1083 would establish unprecedented legal burdens on the 
allocation of Iraq's funds to where they are most needed. Since the fall 
of Saddam Hussein, I have issued Executive Orders to shield from 
entanglement in lawsuits the assets of the DFI and the CBI. I have taken 
these steps both to uphold international legal obligations of the United 
States and to remove obstacles to the orderly reconstruction of Iraq. 
Section 1083 potentially would place these crucial protections of Iraq's 
core assets in immediate peril, by including a provision that might be 
misconstrued to supersede the protections I have put in place and to 
permit the judicial attachment of these funds. Iraq must not

[[Page 1642]]

have its crucial reconstruction funds on judicial hold while lawyers 
argue and courts decide such legal assertions.
    Moreover, section 1083 would permit plaintiffs to obtain liens on 
certain Iraqi property simply by filing a notice of pending action. 
Liens under section 1083 would be automatic upon filing a notice of a 
pending claim in a judicial district where Iraq's property is located, 
and they would reach property up to the amount of the judgment 
plaintiffs choose to demand in their complaints. Such pre-judgment 
liens, entered before claims are tested and cases are heard, are 
extraordinary and have never previously been available in suits in U.S. 
courts against foreign sovereigns. If permitted to become law, even for 
a short time, section 1083's attachment and lien provisions would impose 
grave--indeed, intolerable--consequences on Iraq.
    Section 1083 also includes provisions that would expose Iraq to 
increased liability in lawsuits. Contrary to international legal norms 
and for the first time in U.S. history, a foreign sovereign would be 
liable for punitive damages under section 1083. Section 1083 removes 
defenses common for defendants in the United States--including res 
judicata, collateral estoppel, and statutes of limitation--upon which 
the Iraqi government has relied. And section 1083 would attempt to 
revive a $959 million judgment against the new democratic Government of 
Iraq based on the misdeeds of the Saddam Hussein regime.
    Exposing Iraq to such significant financial burdens would weaken the 
close partnership between the United States and Iraq during this 
critical period in Iraq's history. If Iraq's assets are frozen, even 
temporarily, that could reduce confidence in the Iraqi dinar and 
undermine the success of Iraq's monetary policy. By potentially forcing 
a close U.S. ally to withdraw significant funds from the U.S. financial 
system, section 1083 would cast doubt on whether the United States 
remains a safe place to invest and to hold financial assets. Iraqi 
entities would be deterred from engaging in commercial partnerships with 
U.S. businesses for fear of entangling assets in lawsuits. Section 1083 
would be viewed with alarm by the international community and would 
invite reciprocal action against United States assets abroad.
    The adjournment of the Congress has prevented my return of H.R. 1585 
within the meaning of Article I, section 7, clause 2 of the 
Constitution. Accordingly, my withholding of approval from the bill 
precludes its becoming law. The Pocket Veto Case, 279 U.S. 655 (1929). 
In addition to withholding my signature and thereby invoking my 
constitutional power to ``pocket veto'' bills during an adjournment of 
the Congress, I am also sending H.R. 1585 to the Clerk of the House of 
Representatives, along with this memorandum setting forth my objections, 
to avoid unnecessary litigation about the non-enactment of the bill that 
results from my withholding approval and to leave no doubt that the bill 
is being vetoed.
    This legislation contains important authorities for the Department 
of Defense, including authority to provide certain additional pay and 
bonuses to servicemembers. Although I continue to have serious 
objections to other provisions of this bill, including section 1079 
relating to intelligence matters, I urge the Congress to address the 
flaw in section 1083 as quickly as possible so I may sign into law the 
National Defense Authorization Act for Fiscal Year 2008, as modified. I 
also urge the Congress to ensure that any provisions affecting 
servicemember pay and bonuses, as well as provisions extending expiring 
authorities, are retroactive to January 1, 2008.
                                                George W. Bush
The White House,
December 28, 2007.

Note: An original was not available for verification of the content of 
this memorandum.