Effect Within the United States of Iranian Decrees
                  Confiscating the Shah’s Assets
Courts o f the United States may give effect to Iranian decrees confiscating the property
 of the late Shah and his family, and will do so if the Executive stipulates, as an integral
  part of an international agreement with Iran, that such decrees will be given
 extraterritorial effect within the United States.
                                  November 17, 1980
    MEMORANDUM OPINION FOR THE LEGAL ADVISER,
             DEPARTM ENT OF STATE
   We have explored the question whether the United States can give
effect within the United States to Iranian decrees confiscating the
property of the late Shah and his close relatives. This issue arises from
the demand of the Iranian government that we recognize the national­
ization as a condition to resuming normal relations and securing return
of the hostages. Our general conclusion is that the Executive can, as an
integral part of an agreement with Iran, stipulate that the decrees will
have extraterritorial effect and that the courts will recognize such an
agreement. On the other hand, if the government simply announces that
the decrees should be given effect here or makes such a representation
in court, the courts would not treat the position as conclusive.
   Generally, under the act of state doctrine, the courts of one nation
will not sit in judgment on the act of another nation within the latter’s
territory. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 416
(1964). However, the validity of an act of a foreign state with respect
to matters outside its territory may be examined by our courts under
applicable laws and will only be given effect if in accord with our
public policy. Restatement (Second) of Foreign Relations Law of the
United States § 43 (1965). Thus, it is not unusual to find American court
decisions not giving extraterritorial effect to foreign confiscation de­
crees. In a situation similar to the case at hand, the Second Circuit
refused to give effect to a decree by which Iraq purported to confiscate
the estate of King Faisal II, who was killed in a revolution in 1958.
Republic of Iraq v. First National City Bank, 353 F.2d 47 (2d Cir. 1965),
cert, denied, 382 U.S. 1027 (1966). Iraq sued to recover the King’s estate
in the United States. The court said that confiscation of the assets of an
individual is contrary to our public policy and sense of justice, citing
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the Due Process Clause and the prohibition against bills of attainder. Id.
at 51-52.
   The question arises as to whether the Executive can do anything to
alter such a determination. (In the Iraq case the Executive made no
attempt to indicate a federal policy on recognition of the decrees and
left the policy determination to the courts.) Although application of the
act of state doctrine “must be treated exclusively as an aspect of federal
law,” Sabbatino, 376 U.S. at 423-27, nevertheless, the Supreme Court
has concluded that the courts are not bound to follow the Executive in
cases where it makes suggestions as to whether the doctrine should
apply. First National City Bank v. Banco Nacional de Cuba, 406 U.S.
759 (1972). The filing of a suggestion of interest would not therefore
assure that the Executive’s views would be followed.
   The Iranians have also demanded that the United States issue a
proclamation dealing with the Shah’s property. In view of First Na­
tional City Bank, it is not clear that the courts would consider such a
proclamation conclusive. Thus, it would probably be treated like a
formalized suggestion of interest.1
   An executive agreement would, however, stand on a different foot­
ing. The principle has been established that federal policy must be
recognized as binding when the Executive enters an international agree­
ment which recognizes the validity of foreign expropriation decrees.
The Soviet government took power in 1918 and nationalized the assets
of many enterprises wherever situated. When the United States recog­
nized the Soviet government in 1933, it settled claims with the Soviet
Union by taking an assignment of Soviet assets in the United States.
The assignment included the nationalized property. The United States
government sued in local courts for possession of the assigned assets.
The New York courts ruled that recognition of the expropriations was
contrary to the controlling public policy, and that the United States
could take by assignment no more than the Soviet government had.
The Supreme Court reversed, holding that the assignment was a valid
exercise of the President’s foreign relations power and that the interna­
tional agreement (giving extraterritorial effect to the confiscations) was
binding on the courts. United States v. Pink, 315 U.S. 203 (1942); United
States v. Belmont, 301 U.S. 324 (1937). In the present case the United
States would presumably not be taking an assignment of the Shah’s
    1 T he language o f the International Em ergency Econom ic Pow ers A ct (IE E PA ), 50 U.S.C. § 1702
(Supp. I 1977), states that the President may “prevent . . . any . . . w ithholding of . . . any property
in w hich any foreign country . . . has any interest.” This raises the possibility that IE E P A may be
used to bolster the legal position of the Iranian authorities vis-a-vis the Shah's family. W e know of no
precedent, how ever, for the use o f either IE E P A or its predecessor, the T rading w ith the Enem y A ct,
for such a purpose and express no opinion on the question at this time. Care should be taken to make
clear that the United States is not by its own action nationalizing the Shah's assests but merely
recognizing Iran’s actions. T he treatm ent a foreign governm ent gives its ow n nationals does not in
itself raise Fifth Amendm ent questions. United States v. Belmont, 301 U.S. 324, 332 (1937).

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assets,2 but if the recognition of the expropriation were an integral part
of a claims agreement, we believe the holdings of Pink and Belmont
would apply.
   We also believe that Pink and Belmont are still controlling law.
Although these cases have been distinguished by courts refusing to give
extraterritorial effect to confiscations, in the absence of an international
agreement, they have not been questioned on their own facts. The Iraq
case, 353 F.2d at 52, affirmed that policy could be set by international
agreement:
       Such action of the Chief Executive, taken under his
       power to conduct the foreign relations of the United
       States, was considered to make the Soviet confiscation
       decrees consistent with the law and policy of the United
       States from that time forward, and, as we now know from
       Sabbatino, federal law controls.
Sabbatino itself did not deal with the extraterritorial issue, but the
holding of the case recognized, 376 U.S., at 428, that a treaty or “other
unambiguous agreement” could establish controlling legal principles in
an act of state case.3 Although a majority of the court in First National
City Bank, supra, stressed the fact that the Executive’s representations
to the courts were not to be conclusive, a fair reading of the case does
not suggest that the Court intended to limit the President’s power to
conclude international agreements or to change their effect.
                                                         John M . H arm on
                                                    Assistant Attorney General
                                                     Office of Legal Counsel




   2Conceivably this might be done as a set-off for certain claims although we do not know of its
having been proposed. It should be noted that in Belmont and Pink the net effect of recognizing the
confiscations w as to make additional assets available to U.S. claim ants, some of w hom had suffered
from other Soviet expropriations. Even if the United States does not take an assignment of these
assets, it might be argued that any potential claims pool w ith Iran has been increased by our crediting
the Iranian decree in the context o f a total settlem ent.
   ?See also W hite, J., dissenting: “ N o one seriously argued that the act of state doctrine precludes
reliance on a binational com pact dealing with the effect to be afforded or denied a foreign act of
state." Id. at 444 n. 2.

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