Blocked Assets in the United States

Execution of Judgments in § 1605A FSIA Cases

Blocked assets

According to research about Blocked assets from the Federal Judicial Center:In practice, the complicated interplay between TRIA and amended § 1610 has given rise to a number of sharply litigated issues. One set of issues involves the particular assets to which the provisions apply. For example, the U.S. District Court for the Southern District of New York addressed the attachment of funds frozen under the Cuban Assets Control Regulations in Weininger v. Castro,368 reading TRIA to permit enforcement of a judgment against a foreign state by execution against the blocked assets of that state’s agency or instrumentality. The court stated, “[W]here a judgment against a terrorist party exists, not only its blocked assets, but the assets of its agencies and instrumentalities can be used to satisfy the judgment.” 369 In Weininger, the plaintiffs sought to enforce a judgment against the Republic of Cuba by seizing funds held in accounts at JPMorgan Chase Bank; these funds were alleged to be owed to various agencies and instrumentalities of the Cuban government, but the accounts had been frozen under the Cuban Assets Control Regulations. The court concluded that the plain language of TRIA § 201(a) permits execution against funds held by or owed to those agencies and instrumentalities.370 The court found that the rationale in the Supreme Court’s decision in First National City Bank v. Banco Para El Comercio Exterior de Cuba371 (recognizing the independence of separate government instrumentalities) did not apply in the TRIA context.The assets must be identified with specificity and proven to be those of the state sponsor and/or its agencies or instrumentalities. Thus, in Bennett v. Islamic Republic of Iran,372 the U.S. District Court for the Northern District of California found that TRIA’s requirements had not been satisfied because the plaintiffs had failed to demonstrate that the assets in question were owned by Iran or its agencies or instrumentalities. In that case, plaintiffs attempted to enforce default judgments rendered by the U.S. District Court for the District of Columbia against “tangible and/or intangible assets” held in two banks which, they alleged, were blocked by the U.S. government and which were owned by, or had a nexus with, the Islamic Republic of Iran and its agents and instrumentalities. Because the plaintiffs had provided only “vague, indeterminate information,” the court said, it was unable to determine whether there were in fact any “blocked assets” of Iran within TRIA’s scope. Moreover, while TRIA does not require the separate agency or instrumentality to be a named party to the litigation resulting in the judgment, the assets of that separate agency or instrumentality must also have been “blocked.” In Weinstein v. Islamic Republic of Iran, the Second Circuit held that the requirements of § 201(a) had been satisfied because the assets of an Iranian bank held by a New York bank had been blocked by Executive Order.373 Even though the Iranian bank had not been a named party to the original litigation or the resulting judgment, it had conceded its status as an agency or instrumentality of the Government of Iran and thus met the explicit language of TRIA.374 At least one court has read TRIA narrowly to exclude from its reach assets blocked under other authority than TWEA and IEEPA.

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Extent of property interest

According to research about Blocked assets from the Federal Judicial Center:One sharply contested set of questions concerns the extent of the terrorist party’s interest in the blocked assets required for attachment and the appropriate choice of law in making this determination. In Calderon-Cardona v. JPMorgan Chase Bank, N.A., the court rejected the plaintiffs’ argument that TRIA should be interpreted to reach any asset in which the terrorist party “has a property interest.”376 The plaintiffs included victims of a terrorist attack in Israel and their families seeking to satisfy a judgment against the Democratic Republic of Korea and its main intelligence agency by seizing accounts at various banks containing funds (wire transfers) that had been blocked pursuant to the North Korea Sanctions Regulations. 377 The court said that in order to be subject to execution under TRIA § 201, “the blocked assets of that terrorist party” must be both “blocked assets” and assets “of that terrorist party.”378 However, TRIA itself does not define “property” or “property interest”; nor does it preempt state law. The court looked to relevant New York law, under which the word “of” signifies “ownership.”379 The plaintiffs could not prove that North Korea owned the proceeds of the electronic funds transfers (EFTs) that had been blocked pursuant to OFAC sanctions, and as a result TRIA was inapplicable. In its analysis of this issue, the Calderon-Cardona court rejected an earlier Southern District of New York decision, Hausler v. JPMorgan Chase Bank, N.A., which held that § 201 preempts state law and, when read in conjunction with the Cuban Assets Control Regulations,380 extends to assets in which a terrorist party has an interest, even if they are not owned by that party.381 Following Calderon- Cardona, the Hausler court again addressed the issue, in a related proceeding, and responded by reiterating its conclusion that TRIA does preempt state property law and permits execution against assets from blocked EFT accounts from banks that were admittedly agencies and instrumentalities of the Cuban government. 382 On the first issue, the Hausler court stated: In essence, the TRIA, supplemented by the [Cuban Assets Control Regulations] and the OFAC procedures, represents Congress’s policy determination that under some circumstances, such as those prevailing here, in a choice between a claim to assets asserted by a victim of an act of a terrorist state and embodied in a judgment interest obtained under federal law, and a claim of an interest in the same assets arising from a commercial transaction and asserted under state law, the federal interest is superior and must be given priority in any court dispute over release of the assets.As of December 2013, the appeal from Calderon-Cardona and the second Hausler decision remained pending before the Second Circuit.384 However, the reasoning in Calderon-Cardona was followed by the court in Rubin v. Islamic Republic of Iran,385 in which the plaintiffs obtained a default judgment against Iran and sought to execute it against antiquities that were in the possession of the Museum of Fine Arts and Harvard University but were allegedly the property of Iran. Noting that TRIA does not specify the mechanism for execution and attachment, the district court looked to Massachusetts law to discern the meaning of property “of the defendant.” Under Massachusetts law, this phrase means “belonging to the defendant.” 386 On appeal, the First Circuit affirmed the district court’s decision but on a narrower ground.387 The court of appeals agreed with the U.S. government’s position (submitted in a brief amicus curiae) that TRIA’s terms permit attachment only of “the blocked assets of [the] terrorist party”388 and TRIA “does not give judgment creditors a property interest in blocked assets greater than that of the terrorist party itself.”389 Therefore, the government argued, TRIA does not permit plaintiffs “to attach the artifacts possessed by the Museum if those assets are not owned by Iran.”390 The court declined to reach the question of ownership (or whether that should be decided under state or f
ederal law), however, because it found that Iran had never asserted a claim to (or directed the transfer of) the antiquities in question; as a result, ownership of those antiquities was not “contested” within the meaning of OFAC regulations, and they were not “blocked” for TRIA purposes.391 The U.S. District Court for the District of Columbia has also addressed these issues in Estate of Heiser v. Islamic Republic of Iran.392 Chief Judge Lamberth agreed with Calderon-Cardona on the question of the necessary ownership interest, concluding that “Congress intended to permit terrorist victims to execute on only the assets ‘of’—or, in other words, ‘belonging to’—the terrorist state committing the act.”393 On the issue of applicable law, he agreed with Hausler, holding that TRIA § 201 and FSIA § 1610(g) “implicate exclusively federal interests and, therefore, preempt District of Columbia law.”394 The U.S. Court of Appeals for the District of Columbia Circuit affirmed this decision on the first point (noting that nothing in the relevant legislative histories suggests congressional intent to enable attachment of property not owned by the foreign states in question) but said that because §§ 201 and 1610(g) are controlling as a matter of federal law, “it is not correct to treat this as an issue of preemption.”

Blocked Assets

Blocked Assets in the United States

Execution of Judgments in § 1605A FSIA Cases

Blocked assets

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Popular Topics related with Blocked assets

Extent of property interest

Resources

See Also

Popular Topics related with Blocked assets