Amendment to Foreign Sovereign Immunities Act Makes It Easier for Victims to Recover Damages from State Sponsors of Terrorism

January 28, 2008

Victims of state-sponsored terrorism will more readily be able to recover damages from terrorist states as a result of a provision of the National Defense Authorization Act for Fiscal Year 2008, which was signed into law today. The provision amends the Foreign Sovereign Immunities Act (FSIA) by adding a new Section 1605A to Chapter 97 of Title 28, United States Code.

Gibson, Dunn & Crutcher’s Public Policy Practice Group successfully lobbied for enactment of this provision on behalf of family members of the victims of the 1983 Beirut Marine barracks bombing that killed 241 American military men who were serving in Lebanon on a peace-keeping mission. U.S. District Court Judge Royce Lamberth found in 2003 that the attack was paid for and planned by the Islamic Republic of Iran and its Ministry of Information and Security. In September of 2007 Judge Lamberth ruled that the government of Iran is liable to the families of the victims for more than $2.6 billion. However, largely because of a variety of legal obstacles, the victims have been unable to attach and execute against Iranian assets in the U.S. The new Section 1605A eliminates these obstacles.

In 1996 Congress created the “state sponsored terrorism exception” to the FSIA to permit civil suits against terrorist states by their U.S. victims. After a federal court ruled that the waiver of foreign immunity did not itself create a federal cause of action, Congress passed the “Flatow Amendment” to create such a cause of action. However, In Cicippio-Puleo v. Islamic Republic of Iran, the U.S. Circuit Court of Appeals for the District of Columbia ruled that there is no federal private right of action against foreign governments — as opposed to individuals — under the Flatow Amendment. This decision prevented judges from applying a uniform damages standard to all victims in a single case because a victim’s right to pursue an action against a foreign government depended upon applicable state law. The unfairness of this interpretation became evident when Judge Lamberth was unable to award any damages at all to family members of victims of the Beirut barracks bombing who happened to be residents of Pennsylvania or Louisiana at the time of the attack solely because the law of those states did not provide a basis for liability. Section 1605A rectifies this inequity by reaffirming the federal private right of action under the Flatow Amendment against the foreign state sponsors of terrorism themselves. 

Section 1605A facilitates victims’ collection of damages from state sponsors of terrorism by modifying the “Bancec doctrine,” named for the Supreme Court’s decision in First National City Bank v. Banco Para El Comercio Exterior de Cuba. The Bancec doctrine has protected the assets of foreign states from attachment or collection by allowing judgment creditors to attach only assets over which the foreign state exercises day-to-day managerial control. Section 1605A allows attachment of the assets of state sponsors of terrorism by their victims upon the satisfaction of a “simple ownership” test. 

Upon the filing of a notice of action in complaints that rely on the terrorism exception to the FSIA, a lien of lis pendens will automatically be established with respect to all real or tangible personal property located within the judicial district that is subject to attachment and is titled in the name of a defendant state sponsor of terrorism or any entities listed by the plaintiff as controlled by that state. 

The diplomatic and consular property of foreign states will continue to be protected from being used in any way to satisfy victims’ claims. The pre-existing authority of courts to prevent the impairment of property interests of innocent third parties is explicitly preserved. 

Section 1605A also authorizes claims for collateral property damage sustained in terrorist attacks directed against U.S. citizens. It creates a cause of action for property owners (such as airlines whose planes have been destroyed), and their insurers, against state sponsors of terrorism.

President Bush unexpectedly vetoed the defense authorization bill because of his concern that Section 1605A would allow U.S. victims of Saddam Hussein’s regime to attach the U.S. bank accounts of the current government of Iraq. Congress responded to the veto by giving the president the authority to waive the provisions of the legislation as they apply to Iraq. The provisions are unchanged as they apply to all other current and former state sponsors of terrorism, including Iran, Libya, Syria, Cuba, Sudan and North Korea. 

Section 1605A does not in any way affect the application of the FSIA to foreign states that are not state sponsors of terrorism. 

The text of Section 1605A was added by Section 1083 of the National Defense Authorization Act for Fiscal Year 2008 (H.R. 4986) which can be found on pp. 336-42 of the final version of the legislation at 

Gibson, Dunn & Crutcher LLP

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