Expulsion of Iranian diplomats sparks legal scramble for leftover assets

Share

The ejection of Iran's diplomats from Canada in September has sparked a courtroom scramble as lawyers acting for U.S. victims of Iran-sponsored terrorist attacks look north for assets to seize – including the country's now-vacant embassy in Ottawa.

Under U.S. law, victims and the families of victims of terrorist attacks linked to Iran have long been able to sue the regime in American courts, winning billions of dollars in default judgments, at least on paper, in compensation for deaths or suffering.

While some U.S. victims have managed to collect money from Iranian assets in the United States, billions of dollars are frozen and hung up in litigation. Many victims have failed to get any cash out of the Iranian government, which generally ignores the judgments and which experts say conceals its assets worldwide to evade economic sanctions.

At least four U.S. cases against Iran have been filed in Canada since September, totalling $600-million in U.S. court awards and demanding assets that include the country's embassy and its former ambassadors' residence in Ottawa.

Canada recently labelled Iran and Syria officially as countries it exempts from sovereign immunity under new legislation allowing victims of state-sponsored terrorism to sue for damages, just like in the United States.

"The legal amendments open up the door for us," said Mark Arnold, a lawyer with Gardiner Miller Arnold LLP in Toronto, who acts for terrorism victims seeking to enforce U.S. judgments against Iran in Canada. He said he has fielded about 10 inquiries from other potential plaintiffs in recent weeks.

In one case, an Ontario judge issued a sweeping order against Iran. A Toronto lawyer for the family of Marla Bennett, a California woman blown up in 2002 by a Hamas bomb while eating lunch in the cafeteria of Hebrew University in Jerusalem, secured the unusual court order last week.

The Bennetts, who won a U.S. judgment against Iran for $12.9-million (U.S.) in 2007, got an order demanding that a representative of Iran produce within 60 days details of its Canadian assets and any documents it has describing them.

After a hearing that was not attended by lawyers for Iran, Madam Justice Ellen Macdonald ordered the country not to sell or remove any asset it may have in Canada, and extended a previous order freezing the embassy property and the Iranian ambassador's residence.

The order, obtained by Toronto lawyer John Adair, also freezes two other properties, one in Ottawa and one in suburban Toronto that had served as Iranian "cultural centres" and that the Bennetts allege are owned by fronts for the Iranian government.

The assets are likely worth several million dollars, but the Bennetts are not the only litigants, and any payout might have to be shared.

Mr. Arnold acts for journalist and English teacher Alann Steen, 73, an American kidnapped in Beirut in 1987 and held for five years by Iran-sponsored Hezbollah. For the past two years, Mr. Arnold has been in Ontario courts trying to enforce a 2003 U.S. judgment awarding Mr. Steen an extraordinary $342.75-million (U.S.) for his ordeal.

That case has been joined with the $6.4-million claim of the family of David Jacobsen, who was kidnapped by Hezbollah in Beirut in 1985. Last month, Mr. Arnold refiled both cases in Ontario Superior Court.

Mr. Steen said in a phone interview from Spokane, Wash., that he was chained to a wall and beaten every day. A head injury has left him with epilepsy. He tried to escape twice, once slipping out an open window while unchained to go to the bathroom. But a taxi cab he hailed returned him to his captors.

He said he would give much of any award he receives to charity. And he said that, while some kidnapping victims remain angry, he has not: "I think after a while, they didn't even know why they had us, and it was just a matter of waiting."

Having Iran's embassy seized could be a legal headache. In 2010, the U.S. government successfully fought the Bennetts' attempt to seize Iran's long-disused embassy in Washington, which was abandoned when the U.S. broke off ties during the 1980 hostage crisis. The U.S. government argued that seizing the property violated the Vienna Convention, which forces states – even those at war – to keep foreign embassies secure if diplomatic relations are severed.

But the Bennetts' Toronto lawyer, Mr. Adair of Adair Morse LLP, argues that Canada's domestic legislation does not include those particular Vienna Convention provisions, leaving the embassy open to seizure.

"The case is very significant because it requires our courts to address whether victims of terrorism can truly obtain justice in Canada," Mr. Adair said.

James Woods, a Montreal lawyer who has acted for Iran in previous cases, declined to comment.

According to Iran's Fars News Agency, an Iranian foreign ministry spokesman in Tehran slammed the asset freeze, saying it violated the United Nations Charter and was "a blatant violation of international legal norms and regulations."

The news agency quoted Iranian foreign ministry spokesman Ramin Mehman-Parast as saying that there was a "political motive" behind the court order. And he warned that violating the principle of immunity for state-owned assets would mean the "destruction of the international system which is based on equality of sovereignty."