Suspension of the Foreign Sovereign Immunities Act in Litigation Involving Iranian Assets It is doubtful that the International Em ergency Econom ic Powers A ct can be utilized to override conflicting provisions of a com prehensive and specific federal statute such as the Foreign Sovereign Immunities Act, particularly w here such action is not dem on strably necessary to dealing with the underlying national emergency. July 22, 1980 MEMORANDUM OPINION FOR THE ATTORNEY GENERAL We have been asked to address the question whether the President has the authority under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701 (Supp. I 1977), to suspend the Foreign Sovereign Immunities Act of 1976 in litigation now pending against Iran. We assume that this action would effectively bar Iran from assert ing a sovereign immunity defense both as to attachment and on the merits. The complete suspension of the Immunities Act would include provisions providing procedures for obtaining jurisdiction and related matters, such as service, e.g., 28 U.S.C. §§ 1330, 1608, which presum ably ought to be left in place if the litigation is to proceed. Moreover, since, prior to the Immunities Act, there was absolute immunity from execution against a foreign sovereign,1 we assume that the provisions of the Act permitting the possibility of execution would remain. We first analyze IEEPA to see if the power to affect sovereign immunity is a possible use of its power and then discuss its relationship to the Immunities Act. The IEEPA, as we have discussed previously,2 provides very broad power for the President in dealing with property in which any foreign country has an interest during a national emer gency. 50 U.S.C. § 1702(a)(1)(B). The emergency declared on Novem ber 14, 1979, with respect to Iran (Exec. Order 12,170, 3 C.F.R. 457 (1979)) is sufficient to invoke these powers as to Iranian property blocked by that order. Under the statute, the President may “regulate, . . . nullify, void, prevent or prohibit, . . . exercising any right, power, or privilege with respect to . . . any property in which any foreign xSee K ahale & Vega, Immunity and Jurisdiction: Toward a Uniform Body o f Law in Actions Against Foreign States. 18 Colum. J- T ransnat’l L. 211, 217 (1979). 2See, e.g., M em orandum Opinion for the A ttorney G eneral, June 25, 1980 [“ Presidential Pow er To Regulate D om estic Litigation Involving Iranian Assets,” p. 236, supra].
244 country has any interest, . . . with respect to any property, subject to the jurisdiction of the United States.” In determining the intent of Congress, we began with the literal meaning of the words employed to provide a threshold determination. United States v. Yoshida International, Inc., 526 F.2d 560, 573 (C.C.P.A. 1975) (upholding import surcharge under Trading with the Enemy Act). The literal language would permit the President to prohibit the Iranian government from exercising the right or privilege of invoking sovereign immunity in any lawsuit where its property subject to U.S. jurisdiction, i.e., blocked assets, is concerned. There is no indication that IEEPA or its predecessor, the Trading with the Enemy Act, have ever been used for this purpose nor is there any evidence that this use was anticipated when the IEEPA was passed.3 This, by itself, would not be fatal since IEEPA is an emergency statute and one does not expect, from its very nature, that Congress will anticipate all of the ways in which it will be used. Id. at 573, 576, 578. Moreover, the crucial language in IEEPA was taken from the Trad ing with the Enemy Act, 50 U.S.C. App. § 5(b). There is a long history under the former of the Act being used in the broadest manner which its language would bear. Its use over the years shows its expansion as a result of continuing interplay between the Executive and Congress. See “Emergency Power under §5(b) of the Trading with the Enemy Act” in S. Rep. 549, 93d Cong., 1st Sess. 184 (1973); 42 Op. Att’y Gen. 363 (1968) (upholding Foreign Direct Investment Program); Letter from Antonin Scalia, Assistant Attorney General, Office of Legal Counsel, to the General Counsel, Department of Commerce, Sept. 29, 1976 (valid ity of export controls), reprinted in International Trade Reporter’s U.S. Export Weekly, Oct. 19, 1976, No. 128 (“ 1976 OLC Letter”); Cf. United States v. Yoshida International, supra, collecting cases at note 16. Although enactment of IEEPA represented a reaction to this use, Congress did not narrow the pertinent language.4 Instead, it sought to control the use of emergency power through the use of procedural requirements for emergency declarations, 50 U.S.C. § 1701, and imposi tion of congressional consultation and reporting requirements. 50 U.S.C. § 1703. See also National Emergencies Act, 50 U.S.C. § 1601 et seq., which asserts a congressional veto procedure for national emergen 9A n argum ent m ight be made, how ever, that freezing Iranian funds and then rem oving imm unity is tantamount to seizure. T he legislative hsitory of IE E P A show s that seizure w as not authorized. Revision o f Trading with the Enemy Act; Markup before the House International Relations Committee, 95th Cong., 1st Sess. 2, 4, 20 (1977). T he differences betw een the proposal and seizure are sufficient, how ever, so that w e do not think that the legislative history by itself w ould be determ inative. W hen property is seized, it is taken directly by the governm ent w ithout judicial process. Here the govern ment w ould not take the property and the courts would make determ inations in the usual manner. 4Certain changes w ere made, such as exclusion of w holly domestic transactions from coverage in peacetime, but they are not crucial here. Com pare 50 U.S.C. § 1702(a)(1) w ith 50 U.S.C. App. § 5(b)(1). 245 cies. Thus, if only IEEPA were involved, a persuasive argument could be made that the sovereign immunity defense could be denied Iran. The more difficult question is whether IEEPA can be used to over ride the Immunities Act. Prior to its enactment, decisions concerning whether sovereign immunity should apply were made on a case-by-case basis through a quasi-judicial procedure at the State Department. If the State Department decided to grant immunity, it would ask the Justice Department to file a suggestion of immunity with the court in which the action was pending. The suggestion was considered binding on the courts, whether positive or negative. Victory Transport, Inc. v. Comisaria General, 336 F.2d 354, 358 (2d Cir. 1964), cert, denied, 381 U.S. 934 (1965).
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Suspension of the Foreign Sovereign Immunities Act in Litigation Involving Iranian Assets It is doubtful that the International Em ergency Econom ic Powers A ct can be utilized to override conflicting provisions of a com prehensive and specific federal statute such as the Foreign Sovereign Immunities Act, particularly w here such action is not dem on strably necessary to dealing with the underlying national emergency. July 22, 1980 MEMORANDUM OPINION FOR THE ATTORNEY GENERAL We have been asked to address the question whether the President has the authority under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701 (Supp. I 1977), to suspend the Foreign Sovereign Immunities Act of 1976 in litigation now pending against Iran. We assume that this action would effectively bar Iran from assert ing a sovereign immunity defense both as to attachment and on the merits. The complete suspension of the Immunities Act would include provisions providing procedures for obtaining jurisdiction and related matters, such as service, e.g., 28 U.S.C. §§ 1330, 1608, which presum ably ought to be left in place if the litigation is to proceed. Moreover, since, prior to the Immunities Act, there was absolute immunity from execution against a foreign sovereign,1 we assume that the provisions of the Act permitting the possibility of execution would remain. We first analyze IEEPA to see if the power to affect sovereign immunity is a possible use of its power and then discuss its relationship to the Immunities Act. The IEEPA, as we have discussed previously,2 provides very broad power for the President in dealing with property in which any foreign country has an interest during a national emer gency. 50 U.S.C. § 1702(a)(1)(B). The emergency declared on Novem ber 14, 1979, with respect to Iran (Exec. Order 12,170, 3 C.F.R. 457 (1979)) is sufficient to invoke these powers as to Iranian property blocked by that order. Under the statute, the President may “regulate, . . . nullify, void, prevent or prohibit, . . . exercising any right, power, or privilege with respect to . . . any property in which any foreign xSee K ahale & Vega, Immunity and Jurisdiction: Toward a Uniform Body o f Law in Actions Against Foreign States. 18 Colum. J- T ransnat’l L. 211, 217 (1979). 2See, e.g., M em orandum Opinion for the A ttorney G eneral, June 25, 1980 [“ Presidential Pow er To Regulate D om estic Litigation Involving Iranian Assets,” p. 236, supra].
244 country has any interest, . . . with respect to any property, subject to the jurisdiction of the United States.” In determining the intent of Congress, we began with the literal meaning of the words employed to provide a threshold determination. United States v. Yoshida International, Inc., 526 F.2d 560, 573 (C.C.P.A. 1975) (upholding import surcharge under Trading with the Enemy Act). The literal language would permit the President to prohibit the Iranian government from exercising the right or privilege of invoking sovereign immunity in any lawsuit where its property subject to U.S. jurisdiction, i.e., blocked assets, is concerned. There is no indication that IEEPA or its predecessor, the Trading with the Enemy Act, have ever been used for this purpose nor is there any evidence that this use was anticipated when the IEEPA was passed.3 This, by itself, would not be fatal since IEEPA is an emergency statute and one does not expect, from its very nature, that Congress will anticipate all of the ways in which it will be used. Id. at 573, 576, 578. Moreover, the crucial language in IEEPA was taken from the Trad ing with the Enemy Act, 50 U.S.C. App. § 5(b). There is a long history under the former of the Act being used in the broadest manner which its language would bear. Its use over the years shows its expansion as a result of continuing interplay between the Executive and Congress. See “Emergency Power under §5(b) of the Trading with the Enemy Act” in S. Rep. 549, 93d Cong., 1st Sess. 184 (1973); 42 Op. Att’y Gen. 363 (1968) (upholding Foreign Direct Investment Program); Letter from Antonin Scalia, Assistant Attorney General, Office of Legal Counsel, to the General Counsel, Department of Commerce, Sept. 29, 1976 (valid ity of export controls), reprinted in International Trade Reporter’s U.S. Export Weekly, Oct. 19, 1976, No. 128 (“ 1976 OLC Letter”); Cf. United States v. Yoshida International, supra, collecting cases at note 16. Although enactment of IEEPA represented a reaction to this use, Congress did not narrow the pertinent language.4 Instead, it sought to control the use of emergency power through the use of procedural requirements for emergency declarations, 50 U.S.C. § 1701, and imposi tion of congressional consultation and reporting requirements. 50 U.S.C. § 1703. See also National Emergencies Act, 50 U.S.C. § 1601 et seq., which asserts a congressional veto procedure for national emergen 9A n argum ent m ight be made, how ever, that freezing Iranian funds and then rem oving imm unity is tantamount to seizure. T he legislative hsitory of IE E P A show s that seizure w as not authorized. Revision o f Trading with the Enemy Act; Markup before the House International Relations Committee, 95th Cong., 1st Sess. 2, 4, 20 (1977). T he differences betw een the proposal and seizure are sufficient, how ever, so that w e do not think that the legislative history by itself w ould be determ inative. W hen property is seized, it is taken directly by the governm ent w ithout judicial process. Here the govern ment w ould not take the property and the courts would make determ inations in the usual manner. 4Certain changes w ere made, such as exclusion of w holly domestic transactions from coverage in peacetime, but they are not crucial here. Com pare 50 U.S.C. § 1702(a)(1) w ith 50 U.S.C. App. § 5(b)(1). 245 cies. Thus, if only IEEPA were involved, a persuasive argument could be made that the sovereign immunity defense could be denied Iran. The more difficult question is whether IEEPA can be used to over ride the Immunities Act. Prior to its enactment, decisions concerning whether sovereign immunity should apply were made on a case-by-case basis through a quasi-judicial procedure at the State Department. If the State Department decided to grant immunity, it would ask the Justice Department to file a suggestion of immunity with the court in which the action was pending. The suggestion was considered binding on the courts, whether positive or negative. Victory Transport, Inc. v. Comisaria General, 336 F.2d 354, 358 (2d Cir. 1964), cert, denied, 381 U.S. 934 (1965). Political judgments and foreign relations consider ations often entered into such decisions and the practice was much criticized for its inherently political nature.5 As a result, the Executive proposed the Immunities Act to free itself from making ad hoc diplo matic decisions in these matters: Today, when a foreign state wishes to assert immunity, it will often request the Department of State to make a formal suggestion of immunity to the court. Although the State Department espouses the restrictive principle of im munity, the foreign state may attempt to bring diplomatic influences to bear upon the State Department’s determina tion. A principal purpose of this bill is to transfer the determination of sovereign immunity from the executive branch to the judicial branch, thereby reducing the for eign policy implications of immunity determinations and assuring litigants that these often crucial decisions are made on purely legal grounds and under procedures that insure due process. The Department of State would be freed from pressures from foreign governments to recog nize their immunity from suit and from any adverse con sequences resulting from an unwillingness of the Depart ment to support that immunity. . . .U .S. immunity prac tice would conform to the practice in virtually every other country—where sovereign immunity decisions are made exclusively by the courts and not by a foreign affairs agency. H.R. Rep. No. 1487, 94th Cong., 2d Sess. 7 (1976).6 Congress also made clear its intention “to preempt any other State or Federal law . . . for according immunity to foreign sovereigns.” Id. at 12. 5K ahale & Vega, supra note 1 at 216. 6 In proposing the legislation to the Congress, a joint State-Justice letter noted its broad purpose: “ to facilitate and depoliticize litigation against foreign states." 1975 Digest o f U.S. Practice in Int'l L. 346. See also Jurisdiction o f U.S. Courts in Suits Against Foreign States. Hearings on H.R. 11315 before the Subcommittee on Administrative Law and Governmental Relations o f the House Judiciary Committee. 94th Cong., 2d Sess. at 26, 27, 29, 34 (1976).
246 The question thus arises as to whether, having removed immunity decisions from foreign policy considerations in 1976, Congress author ized the President to make exceptions when it passed IEEPA in 1977. Clearly, any emergency statute affects existing rights under other laws. The language of IEEPA, in its reference to regulating and voiding rights and privileges relating to property, recognizes that pre-existing rights arising from other laws will be affected. The Iranian assets freeze, for example, clearly takes precedence over the banking laws and contract law regarding the rights of depositors to withdraw money from banks. A recent case upholding a novel use of the Trading with the Enemy Act stated, “if every law applicable to tranquil times were required to be followed in emergencies, there would be no point in delegating emergency powers and no adequate, prompt means for deal ing with emergencies.” Yoshida, 526 72d. at 583. At the same time, the court in Yoshida took great pains to show that the 1971 import sur charge was designed so as not to conflict with the specific tariff rates that had been enacted by Congress. Id. at 577-78. We know of no case where IEEPA or the Trading with the Enemy Act was used in a situation which brought it into direct conflict with a comprehensive and specific federal statute, such as the Immunities Act. The Trading with the Enemy Act was used on a number of occasions to provide export controls when Congress had allowed export control legislation to expire but there was no legislation forbidding such controls and no indication that Congress, by permitting expiration, opposed such con trols. See 1976 OLC Letter, supra. For these reasons, it is our judgment that it is quite doubtful that IEEPA can be utilized to override the highly specific provisions of the Immunities Act. In any event, we would question the wisdom of attempting to invoke IEEPA in a case in which it cannot be forcefully maintained that the President’s action is, in some important and demon strable way, necessary to dealing with the underlying emergency. While it might be possible to sustain in court the use of IEEPA if that action were essential to resolving the hostage crisis, it seems to us highly unlikely that we would succeed where the action is at best peripheral to the crisis. The primary implication of an emergency power is that it should be effectively designed to deal with a national emergency. Lichter v. United States, 334 U.S. 742, 782 (1948). Here, where the assets are already frozen and the Administration has the discretion to seek legislation to seize the assets, it will be difficult to demonstrate the necessity for the attenuated assertion of power. L arry A . H am m ond Acting Assistant Attorney General Office o f Legal Counsel 247