Message to the Congress Reporting on the National Emergency With Respect to Iran

April 22, 1985

To the Congress of the United States:

Pursuant to Section 204(c) of the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. Section 1703(c), I hereby report to the Congress on developments since my last report of October 31, 1984, concerning the national emergency with respect to Iran that was declared in Executive Order No. 12170 of November 14, 1979.

1. The Iran-United States Claims Tribunal, established at The Hague pursuant to the Claims Settlement Agreement of January 19, 1981 (the ``Algiers Accords''), continues to make progress in arbitrating the claims before it. Since my last report, the Tribunal has rendered 18 more decisions for a total of 169 final decisions. Of these, 125 have been awards in favor of American claimants; 89 were awards on agreed terms, authorizing and approving payment of settlements negotiated by the parties; and 36 were adjudicated decisions. As of March 31, 1984, total payments to successful American claimants from the Security Account stood at over $337 million. Of the remaining 44 decisions, 22 dismissed claims for lack of jurisdiction, 3 partially dismissed claims for lack of jurisdiction, 13 dismissed claims on the merits, one approved the withdrawal of a claim, four were awards in favor of the Government of Iran, and one was an award in favor of the United States Government.

2. In the past six months, there have been significant changes in the composition of the Tribunal. As I noted in my last report, Professor Karl-Heinz Bockstiegel of the Federal Republic of Germany was selected to replace President Gunnar Lagergren, who resigned effective October 1, 1984. On December 1, 1984, Professor Bockstiegel was designated President of the Tribunal, in addition to his duties as Chairman of Chamber One. On November 29, 1984, the Government of Iran appointed two new arbitrators to replace Judges Mahmoud M. Kashani and Shafei Shafeiei, whose qualifications had been challenged by the United States following their unprecedented attack on one of the third-party arbitrators, Judge Mangard, in September 1984. The two new Iranian arbitrators, Hamid Bahrami Ahmadi and Seyed Mohsen Mostafavi Tafreshi, assumed their duties on January 15, 1985. In addition, the Chairman of Chamber Two, Willem Riphagen, submitted his resignation for health reasons, effective April 1, 1985, and the Chairman of Chamber Three, Nils Mangard, has submitted his resignation for personal reasons, effective no later than July 1, 1985. Swiss lawyer Robert Briner and French law professor Michel Virally have recently accepted invitations from the U.S. and Iranian arbitrators to join the Tribunal in place of Chairmen Riphagen and Mangard.

3. In spite of the disruptions that I described in my last report, the Tribunal made some progress in arbitrating the claims of U.S. nationals for $250,000 or more. The Special Chamber, which was established to consider requests for withdrawals or terminations of claims and for awards on agreed terms, rendered 13 awards on agreed terms prior to its dissolution on January 15, 1985. With the arrival of the two new Iranian arbitrators, the Chambers have once again begun hearing and deciding cases. On March 1, the Tribunal awarded R.J. Reynolds Tobacco Co. an additional $12 million in interest on its claim, the decision in which was described in my last report. In total, more than 35 percent of the claims for over $250,000 have now been disposed of through adjudication, settlement, or voluntary withdrawal, leaving 344 such claims on the docket.

4. The Tribunal has continued with the arbitration of the claims of U.S. nationals against Iran of less than $250,000 each. In addition to 18 test cases, the Tribunal has selected 100 other claims for active arbitration. In 62 of these claims, the Department of State has submitted Supplemental Statements of Claim, containing more than 16,000 pages of text and evidence. Additional pleadings are being filed weekly. Although Iran repeatedly seeks extensions of time within which to file its responsive pleadings to these claims, the Tribunal has continued to press for their resolution. At the Tribunal, three senior legal officers and a law clerk work exclusively on these claims. Finally, since my last report, another seven of these claimants have received awards on agreed terms, bringing the total to ten.

5. The Department of State continues to coordinate the efforts of concerned governmental agencies in presenting U.S. claims against Iran as well as responses by the U.S. Government to claims brought against it by Iran. Since my last report, the Department has filed pleadings in seven government-to-government claims based on contracts for the provision of goods and services. These claims include a claim on behalf of the Agency for International Development for over $38 million based on outstanding developmental loans to the Government of Iran. In addition, the Department of State, working together with the Department of the Treasury and the Department of Justice, filed responsive pleadings in two major interpretive disputes. One related to Iran's claim to over $400 million remaining from funds transferred pursuant to the Algiers Accords for payment of Iran's syndicated debt. The other was in response to Iran's allegations that the United States breached its obligation under the Algiers Accords to terminate litigation against Iran. The Department of State also filed pleadings in four other interpretive disputes. The Tribunal held one hearing in an interpretive dispute on whether the Tribunal has jurisdiction to arbitrate approximately 111 claims brought by Iran directly against U.S. banks which do not involve standby letters of credit. Finally, two of the Tribunal's chambers have confirmed that action will be taken on or about May 20 to strike or otherwise dispose of 248 claims brought by Iran against U.S. banks based on standby letters of credit.

6. The Algiers Accords also provided for direct negotiations between U.S. banks and Bank Markazi Iran concerning the payment of nonsyndicated debt claims of U.S. banks against Iran from Dollar Account No. 2 (the interest-bearing escrow account established at the Bank of England in January 1981 with the deposit of $1.418 billion of previously blocked Iranian funds). As of April 10, 1985, three additional settlements had been reached since my last report between Iran and U.S. banks. The three settling banks, Irving Trust Company, Morgan Guaranty Trust Company, and Banker's Trust Company, received a total of $81.91 million from Dollar Account No. 2 in payment of their claims against Iran. From this amount, $73.595 million was subsequently paid by these banks to Iran in settlement of Iran's claims against them, primarily for interest on Iran's domestic deposits with these banks. (One of these banks paid Iran an additional $8.45 million from other funds.) Thus, as of April 10, 1985, there have been 29 bank settlements resulting in payments to the settling banks of approximately $1.5 billion from Dollar Account No. 2. From that amount, the banks have paid approximately $693 million to Iran in settlement of Iran's claims against them. About 17 banks have yet to settle their claims. In addition, attorneys from the Department of the Treasury and the Federal Reserve Bank of New York have been negotiating an ``Agreed Clarification'' with Bank Markazi to allow the payment from Dollar Account No. 2 of certain amounts still owing on Iran's syndicated debt.

7. There have been no changes in the Iranian Assets Control Regulations since my last report.

8. Although the attack on Judge Mangard in September seriously disrupted and delayed proceedings for three months, the Tribunal resumed full operation in January of this year and the two Iranian arbitrators who committed the attack were removed by the Government of Iran. Since that time, the Tribunal has actively pursued the arbitration of both private and government claims. Prehearing conferences and hearings that had been cancelled are being rescheduled. The Tribunal has made provision for the issuance of awards in cases heard prior to the removal of the two Iranian arbitrators and the resignations of President Lagergren and Chairmen Riphagen and Mangard. This resumption of Tribunal activities provides reason to expect that more progress will be made in the coming months.

9. Financial and diplomatic aspects of the relationship with Iran continue to present an unusual challenge to the national security and foreign policy of the United States. I shall continue to exercise the powers at my disposal to deal with these problems and will continue to report periodically to the Congress on significant developments.

Ronald Reagan

The White House,

April 22, 1985.