Message to the Congress Reporting on Developments Concerning the Declaration of a National Emergency With Respect to Iran

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 with respect to developments between my last report of May 6 and mid-October 1982, 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, is now actively engaged in the process of arbitrating the several thousand claims filed before it by the January 19, 1982 deadline. Although it has only recently begun to schedule significant numbers of prehearing conferences and hearings on the merits, the Tribunal has rendered decisions on twelve claims of U.S. nationals against Iran. Eight of those decisions approved settlements reached by the parties directly concerned; two more represented adjudications in favor of the U.S. claimants. The remaining two resulted in the dismissal of claims for lack of jurisdiction. In total, the Tribunal has made awards of more than $7.6 million in favor of U.S claimants. The Department of State, with the assistance of the Departments of the Treasury and Justice and other concerned government agencies, continues to coordinate the presentation of U.S. claims against Iran as well as the U.S. response to claims brought by Iran, and also assists U.S. nationals in the presentation of their claims against Iran.

2. The Tribunal rendered its decision on the four issues concerning the $1 billion security account held by the N.V. Settlement Bank of the Netherlands to pay Tribunal awards against Iran. As indicated in the last report, those issues, which had not been resolved in the negotiations leading to the establishment of the security account in August 1981, involved (1) the disposition of the interest accruing on the funds in the account; (2) indemnification of the Settlement Bank and its parent, the Netherlands Central Bank, against any claims relating to the management of the security account; (3) payment of the administrative fees of the Settlement Bank; and (4) payment of settlements reached directly between U.S. claimants and Iran.

The Tribunal decided the last question first, ruling on May 14 that such settlements may be paid from the security account if the Tribunal determines that it has jurisdiction over the underlying claims and accepts the terms of the settlement agreements as the basis for rendering an award on agreed terms.

The decision on the other three issues was rendered August 3, 1982. The Tribunal decided that interest earned on the security account should continue to be credited to a separate suspense account established pursuant to the interim arrangements under which the security account had been managed since it was established. The Tribunal further decided that any such interest may be used by Iran to fulfill its obligation to replenish the security account whenever the payment of awards causes the balance to fall below $500 million. The decision thus prevents the diversion of the interest to any purpose other than payment of awards in favor of U.S. claimants, without the agreement of both the United States and Iran, until all claims are decided and all awards paid.

On the questions of management fees and indemnification, the Tribunal decided that fee payments should be shared equally by the two Governments and that indemnification should be joint and several, leaving open until an actual case arises the question of how ultimate responsibility for indemnification should be allocated between the United States and Iran.

3. The January 19, 1981 agreements with Iran also provided for direct negotiations between U.S. banks and Bank Markazi Iran concerning the repayment of non-syndicated loans and disputed interest from the $1.418 billion escrow account presently held by the Bank of England. The U.S. banks and Bank Markazi Iran continue to negotiate concerning payments out of this account.

4. Since my last semiannual report submitted to the Congress in May, there have been no transfers of assets to Iran by or through the U.S. Government under the January 19, 1981, agreements with Iran. However, I attach herewith five excerpts from the Federal Register that deal with the Iranian Assets Control Regulations. The first, published on May 24, 1982, is a requirement that holders of tangible property in which Iran had or asserted any interest report on such property to the Office of Foreign Assets Control. The purpose was to obtain information for use in promoting the resolution of disputes with Iran, preparing submissions for the Iran-United States Claims Tribunal, and formulating policies to deal with the tangible properties. The second, published on June 8, 1982, contains additional information with respect to the tangible property reports. The third was published on June 10, 1982. It is a directive license to the New York Federal Reserve Bank to deduct two percent of award amounts it receives from the security account for payment to U.S. claimants who have received awards from the Iran-United States Claims Tribunal. That two percent is for deposit in the U.S. Treasury to reimburse the U.S. Government for costs incurred for the benefit of U.S. nationals with claims against Iran. On September 14, 1982, the Administration submitted to the Congress a bill that deals with this deduction and also gives authority to the Foreign Claims Settlement Commission of the United States to receive and determine the validity and amounts of certain claims of U.S. nationals against Iran. Also, the bill authorizes the Secretary of the Treasury to reimburse the Federal Reserve Bank of New York for expenses incurred by the Bank in the performance of fiscal agency agreements relating to the settlement or arbitration of claims pursuant to the January 1981 agreements with Iran. The fourth Federal Register item revoked any authorizations for the permanent disposition, by means of a final judicial judgment or order, of interests of Iran in any standby letter of credit or similar instrument. The purpose was to preserve the status quo to permit resolution of claims involving those interests through either the Claims Tribunal or negotiations with Iran. Iran has filed more than 200 such claims with the Tribunal, and U.S. nationals also have filed a large number of claims concerning the same issues or related undertakings. U.S. account parties are still able to prevent payments to Iran by obtaining preliminary injunctions or other temporary relief, short of final dispositions, or by using procedures set forth in the Iranian Assets Control Regulations. Finally, on July 22, 1982, the Office of Foreign Assets Control published a new provision of the Iranian Assets Control Regulations that sets forth a licensing procedure for the sale and disposition of tangible property that is currently blocked because of an interest of Iran in the property. The purpose is to conserve the value of the assets and to permit the satisfaction of certain claims against the property. Licenses for such sales may be issued after a case-by-case review of license applications.

5. Several financial and diplomatic aspects of the crisis with Iran have not yet been resolved and continue to present an unusual challenge to the national security and foreign policy of the United States. By separate action, I am extending the emergency with respect to Iran beyond the November 14, 1982 anniversary. 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,

November 1, 1982.