Extraterritorial Application of the U.S. Iranian Assets Control Regulations

Extract

After American diplomatic and consular personnel in Iran were taken hostage in that country, the United States Treasury on November 14, 1979 promulgated the Iranian Assets Control Regulations. The regulations were of a sweeping character and, among other things, prohibited the Government of Iran, Iranian governmental entities, and Iran’s central bank from transferring or withdrawing dollar-denominated deposits held with foreign branches and subsidiaries of U.S. commercial banks (as well as deposits with domestic offices) without authorization by the Treasury. Iran’s central bank, Bank Markazi Iran, instituted suits in London and Paris to obtain court orders for withdrawal of its funds, notwithstanding the U.S. “freeze.” Those suits were essentially mooted by the Algeria-United States-Iran declarations and agreements of January 19 and 20, 1981, which provided for transfer of these funds as part of the arrangement to release the American hostages held by the Iranian authorities. While the litigation in London and Paris is now inactive, it raised issues that deserve thought because they are not necessarily unique and may arise again in other situations.