ICJ Ruling on Iran’s Proxy War: The United States Must Pay


| Apr 4, 2023

ICJ Iran

On March 30, the International Court of Justice issued a ruling on financial measures that the United States had adopted against Iranian assets. The case was brought by Iran, seeking to challenge the legality of these financial measures as a breach of the Treaty of Amity concluded between the two countries in 1955 before the United States terminated it in 2018.

The U.S. government adopted the measures in response to the Iranian-sponsored killing of U.S. service members, including the 1983 attacks on U.S. barracks in Beirut and the 1996 bombing of the Khobar Towers in Saudi Arabia. Although various sanctions have been imposed on Iran over time, the latest judgment centers on the freezing of Iranian assets under Executive Order 13599 of 2012 and the distribution of these assets through judicial enforcement for damages arising from deaths and injuries caused by acts allegedly supported by Iran.

The U.S. State Department portrayed this judgment as a major victory for the United States because the Court rejected Iran’s pleas for an order to release its frozen central bank assets. However, the Court also ordered the United States to pay compensation to Iran for an unreasonable impairment of Iranian companies’ rights in violation of the 1955 Treaty of Amity (paras. 156-57, 187, 220, and the dispositif of its judgment paras. (3)-(7)). The Court made this ruling even though the United States had reserved the right to take measures necessary to protect its essential security interests under Article XX of the Treaty of Amity.

The ruling declared unlawful certain aspects of financial measures adopted for the victims of Iran’s proxy war against the United States. The Court reached its conclusions without having any regard for Iran’s disingenuous and clandestine activities in support of surrogate armed groups to conduct hostile activities against the United States. In this respect, the judgment is far from a major U.S. victory. Rather it has significant implications, and dire consequences, for the United States and other States to defend against hybrid threats and proxy wars engaged by Iran and other recalcitrant States.

This post offers my assessment of the judgment, with a focus on the Court’s approach to the security exception under Article XX of the Treaty of Amity. As I explored in my latest monograph on the concept of security in international law published by West Point Press, the judicial approach to security-based pleas has been inconsistent and at times arbitrary, oscillating between judicial activism and conservatism. In my view, the judgment suffers the same deficiencies, failing to identify a discrete set of criteria to evaluate security-based pleas in an objective manner. As all the other issues in the case would have been moot if the security clause of the Treaty was triggered, the troublesome aspects of this adjudication are, to a large extent, due to this failure to grasp and appreciate the essence of security and its role in international law.

The Legal Character of the Security Exception Clause

The security exception clause found in Article XX of the Treaty of Amity is not unique in international law. States have reserved the right to exclude matters involving their security interests from international adjudication since the emergence of arbitration agreements as a legal means to settle international disputes. As such, Article XX of the Treaty of Amity and its equivalents in other treaties are couched in general terms. The Treaty of Amity provides in relevant part:

1. The present Treaty shall not preclude the application of measures:

(d) necessary to fulfill the obligations of a High Contracting Party for the maintenance or restoration of international peace and security, or necessary to protect its essential security interests.

The Court considered the clause as a possible defense against Iranian allegations of treaty violations (much like countermeasures or pleas of necessity – an argument conspicuously missing in this judgment), rather than treat the issue as a jurisdictional matter. In fact, the Court reached this decision early in the case when it addressed preliminary objections (paras. 45-47). The Court based this approach on its previous judgment in Paramilitary Activities where the Court rejected the idea that the security clause would restrict its jurisdiction (para. 222).

The Court justified this approach on technical grounds. The dispute settlement clause under bilateral treaties to which the United States is a party refers any dispute regarding the “interpretation and application” of the treaty to the Court. And unlike the 1994 GATT, it does not contain discretionary language (“it considers necessary”) (para. 222). However, these technical points are debatable and too subtle to deprive the security clause of its protective value by re-characterizing it as a means of legal defense.

First, the security clause is an agreement between States to protect their national security interests from international adjudication. As a treaty provision, its validity and legal effect must be determined by legal construction of the clause itself in accordance with the rule of treaty interpretation. A judicial body may exercise its authority to examine and delimit the scope of jurisdictional exclusion but this does not necessarily make the dispute over the security clause justiciable (for detailed analysis, see The Concept of Security at ch, 3). In Iranian Assets, the Court could have exercised judicial restraint, as the United States argued, by affording deference to the U.S. security assessment (U.S. Rejoinder at paras. 7.14-7.15).

Second, the absence of discretionary language in the security clause is not determinative of its legal effect on the exercise of jurisdiction by a dispute settlement body. This is because discretionary elements reside in the concept of security itself, as Judge Iwasawa recognized in his separate opinion (para. 17). Indeed, in Djibouti v. France, the Court itself afforded discretion to a State’s determination of security interests without referring to explicit discretionary language (paras. 145-48).

Third, the Court’s interpretive approach may well be adequate to legitimize the Court’s jurisdiction but converting the character of the security clause to a legal defense flies in the face of logic. Judicial inquiries into a protective clause must be limited to whether the dispute falls within or outside it. It is one thing to assert the Court’s authority to determine whether the dispute falls within or outside the protection of the security clause. It is a different matter to require a State invoking the clause to defend its security measures by shifting a burden of proof, as the Court did in the Iranian Assets judgment (para. 108).

The Assessment of “Essential Security Interests”

Having characterized the security clause as a defense, the Court placed the onus on the United States to show that Executive Order 13599 was a measure necessary to protect its essential security interests. On that basis, the Court dismissed the United States’ claims in a single sentence, stating that “it has not convincingly demonstrated that this was so” (para. 108). It failed to offer any explanation as to why the claims fell short of meeting the standard of proof and in what respect. Was it the claim that Iranian financial institutions posed threats to U.S. security interests or that sanctions were necessary to protect them? The lack of legal reasoning on these critical issues is, to say the least, puzzling.

The judgment proves more confounding in the next sentence, holding that: “Even accepting that the Respondent [United States] enjoys a certain margin of discretion, the Court cannot content itself with the latter’s assertions.” (para. 108). When a party is granted discretion, whatever decision is made within its bounds stands legally valid even if others disagree. The Court turns the meaning of discretion on its head with this judgment. As a further note, the Court points to lack of reference to security considerations in the reasons set out by the Executive Order. However, as Judge ad hoc Barkett points out (paras. 17-18), Executive Order 13599 imposes additional measures that supplement prior executive and legislative measures. It is built on Executive Order 12957 which then-President Clinton issued to deal with the unusual and extraordinary threat Iran and its support for terrorist groups posed to U.S. national security.

At the very least, the Court should have distinguished the issue of what constitutes “essential security interests” within the meaning of Article XX of the Treaty of Amity from whether financial measures are “necessary” to protect them, with a clear articulation of the applicable judicial standard for each. Judge Iwasawa is the only one on the bench who applied this two-step process (paras. 24-25).

The first stage of inquiry, as Judge Iwasawa observed, is to “assess whether the risk run by the essential security interests is reasonable” (para. 24). According to him, the ordinary meaning of the term in its context suggests that it “relates to the existential core of State functions, such as the protection of its territory and its population from external threats and the maintenance of internal public order.” As the International Criminal Tribunal for the Former Yugoslavia held in Delalić, security is not susceptible to a more concrete definition (para. 574). The concept of security has dynamically evolved and any attempt to define it, as I discussed in The Concept of Security (ch. 4, section II), is fraught with conceptual problems.

Judge Iwasawa then posited: “It is for the State invoking the exception to articulate the nature of the essential security interests at stake sufficiently precisely to demonstrate their legitimacy in light of the object and purpose of the treaty” (para. 24). Assuming, arguendo, that the security clause should operate as a legal defense, this argument is not far-fetched. When the concept of security is used as a means of justification, it naturally involves the duty to provide sufficient information and reasons for adopting derogatory measures. This is because third parties cannot otherwise make an objective determination as to whether the requisite conditions are satisfied for the valid application of the security clause (The Concept of Security at p 127).

The problem, however, is that there is no uniform standard of evidence in establishing the factual basis for justifying security measures (The Concept of Security at ch. 5, section II). Indeed, Judge Sebutinde (para. 46) and Judge ad hoc Barkett (para. 21) were both satisfied that U.S. interests in preventing the financing of terrorist activities in Iran and preventing arms trafficking fall within the category of “essential security interests” to which Article XX of the Treaty of Amity applies. If there is reasonable scope for disagreement, the Court should have carefully considered the degree of discretion and deference afforded to national authorities on the question of security interests. At the very least, the Court should have articulated the standard of evidence that the United States should have met.

Pitfalls of the Necessity Standard

The second stage of inquiry that the Court should have undertaken was whether the contested measures were “necessary” to protect the essential security interests alleged by the United States. Judge Sebutinde and Judge ad hoc Barkett considered that the United States had adequately demonstrated that Executive Order 13599 qualified as such. Judge Iwasawa, who correctly distinguished this issue from identifying “essential security interests,” examined different standards of necessity adopted in previous cases.

While acknowledging diverse standards, Judge Iwasawa expressed his view that “an international court should determine whether the measure was rational in light of a consideration of the reasonably available alternatives known to that State at the time” (para. 30). It is unclear where this standard derives from, but Judge Iwasawa plausibly drew on the standard of reasonableness applied by the Court in the Whaling Case in which he served as counsel for Japan. In that case, the Court adopted the standard of reasonableness in reviewing Japan’s decision to grant a special permit authorizing the killing, taking, and treating of whales under Article VIII of the Whaling Treaty.

However, in that case, the Court assessed the reasonableness of Japan’s whaling program because Japan agreed to it. Initially, Japan argued that the Court’s power of review was limited to ascertaining whether the decision was “arbitrary or capricious,” “manifestly unreasonable” or made in bad faith (para. 65). But, near the close of the oral proceedings, Japan changed its position and accepted that the Court could consider whether the decision was objectively reasonable and justifiable. The Court specifically noted this exchange in its judgment (para. 66) before proceeding to assess whether the whaling program was objectively reasonable (para. 67).

For this reason, the standard of rationality or objective reasonableness must be considered as a special one based on the agreement between the disputing parties, rather than setting a precedent. As Judge Owada elaborated in his dissenting opinion, the prevailing standard is whether the decision is or is not “arbitrary” or patently “out of bounds” (para. 39).

Instead, the Court could have assessed whether the financial measures enacted by Executive Order 13599 were proportionate to the objectives of preventing the financing of terrorist activities and arms trafficking. This was indeed the argument that Iran put forward (p. 40). Even though it is not expressed in the security clause, the test of proportionality is generally established as a corollary to the general constraint on the choice of means to protect security interests (The Concept of Security at p. 146).

The test of proportionality for the defense of security interests is not about ensuring a degree of equivalence between the alleged breach and remedial measures against it. Rather, proportionality in the context of a security measure is measured by reference to the legitimate purpose to be achieved, such as preventing the financing of terrorist activities. As such, it is not too stringent for security clauses as Judge Iwasawa feared (para. 26).

A range of standards could have applied to the proportionality test. For example, strict proportionality might be appropriate when security measures must be justified for sacrificing fundamental values, such as the deprivation of life in law enforcement. On the other hand, when the competing value is less fundamental, such as financial assets, security measures would be considered proportionate unless they are manifestly unreasonable (The Concept of Security at ch. 5, section IV). Although this kind of assessment would have been completely unnecessary if the security clause was appropriately characterized as a protective regime, the assessment of proportionality in this manner could have led the Court to a different conclusion.

Concluding Thoughts

Despite all the problems, the Court’s judgment is final and binding on the United States. The Court is seemingly oblivious to the fact that these financial measures were adopted in response to a series of hostile acts and threats posed by Iran through its surrogate armed groups. It is not the first time that the Court singled out one element within a multifaceted dispute, excluding other contextual elements from its view (see, for example, Judge Higgins separate opinion on the Palestinian Wall advisory opinion at para. 14). Although this limitation may well be inherent in judicial institutions as a means of dispute settlement, myopic judgments like this run the risk of undermining the confidence on the part of States in the administration of international justice systems.

The judgment unfortunately does not help promote the rule of law in international relations when we are facing the most serious challenges to it by Russia’s open aggression against Ukraine and flagrant violations of international law. Recalcitrant States would be reassured of their ability to operate at the edges of legality with impunity by exploiting legal ambiguity and plausible deniability to advance their strategic objectives. On the other hand, the United States and other law-abiding countries would find themselves in a more difficult position to protect their security interests against hybrid threats and proxy wars engaged by recalcitrant States. Although the United States continues to recognize the Court’s important role and contributions to the rule of law, we must appreciate the thin ice of normative foundations on which international relations are managed to protect the rules-based international order.


Hitoshi Nasu is a Professor of Law in the Department of Law at the United States Military Academy.


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