79–006

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:

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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.

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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

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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

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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 nondiplomatic 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.

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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.

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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.

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[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 TreasVerDate 11-MAY-2000 17:30 Jul 15, 2000 Jkt 079006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR733.XXX pfrm02 PsN: HR733
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ury 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.

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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 letVerDate 11-MAY-2000 17:30 Jul 15, 2000 Jkt 079006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR733.XXX pfrm02 PsN: HR733
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ters 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

12

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 preceVerDate 11-MAY-2000 17:30 Jul 15, 2000 Jkt 079006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\HR733.XXX pfrm02 PsN: HR733
13

dent 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

14

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 enforcementrelated 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.

15

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.

16

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

17

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

18

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

19

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 instrumentalVerDate 11-MAY-2000 17:30 Jul 15, 2000 Jkt 079006 PO 00000 Frm 00019 Fmt 6659 Sfmt 6602 E:\HR\OC\HR733.XXX pfrm02 PsN: HR733
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ities 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

21

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

* * * * * * *

§ 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

* * * * * * *

§ 1603. Definitions

For purposes of this chapter—

(a) * * *

22

ø(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—

ø(1)¿ (A) which is a separate legal person, corporate or

otherwise, and

ø(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

ø(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 countryø.¿;

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.

* * * * * * *

§ 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).

§ 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.

* * * * * * *

23

§ 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 ø(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 assetby-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.

* * * * * * *

24

SECTION 117 OF THE TREASURY DEPARTMENT

APPROPRIATIONS ACT, 1999

EXCEPTION TO IMMUNITY FROM ATTACHMENT OR EXECUTION

SEC. 117. (a)***

* * * * * * *

ø(d) WAIVER.—The President may waive the requirements of this

section in the interest of national security.¿

* * * * * * *

(25)

1Letter from Jack B. Tate, Acting Legal Advisor, to the Attorney General (May 19, 1952). 2 28 U.S.C.A. §§ 1602–1611. See Flatow v. Islamic Republic of Iran, 999 F. Supp. 1 (D.C.D.C.

1998).

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

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 activiVerDate 11-MAY-2000 17:30 Jul 15, 2000 Jkt 079006 PO 00000 Frm 00025 Fmt 6601 Sfmt 6601 E:\HR\OC\HR733.XXX pfrm02 PsN: HR733
26

3See Saudi Arabia v. Nelson, 507 U.S. 349 (1993). 4There 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. 5Pub. L. 104–132, Title II, § 221(a) (Apr. 24, 1996), 110 Stat. 1241 codified in 28 U.S.C.A.

§ 1605 (West 2000 Supp.). 6Pub. L. 104–208, Div. A., Title I, § 101(c) [Title V § 589] (Sept. 30, 1996), 110 Stat. 3009–

172 codified in 28 U.S.C.A. § 1605 note (West 2000 Supp.). 7Treasury Department Appropriations Act of 1999, Pub. L. 105–277, Title I, § 117(d) codified

in 28 U.S.C.A. § 1610 note (West 2000 Supp.).

8Determination 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.

§ 1610 note (West 2000 Supp.).

ties, 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

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.

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

27

9To 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.

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.

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

28

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 coinvestors 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).

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

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

29

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.

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