The Supreme Court on Monday tossed out a decision by a federal appeals court in New York that would have allowed families of those killed in the 1983 attack on U.S. Marine barracks in Beirut, Lebanon, to move forward in collecting claims against Iran's central bank worth $1.68 billion.
The top court sent the case back to the 2nd U.S. Circuit Court of Appeals, directing the lower court to consider a defense spending bill President Donald Trump signed late last year that could make it easier for American courts to collect foreign assets.
The move comes amid heightened tensions between the U.S. and Iran. Iran last week carried out strikes against American forces in Iraq in retaliation for the killing of the country's top general, Qasem Soleimani, on Jan. 3.
The case was brought by victims of Iran-sponsored terror attacks, including the 1983 Beirut bombing, who have already won judgments against the country entitling them to billions of dollars in compensation. The Iran-linked truck bombing on international forces that year left 241 Americans dead.
To date, the individuals have had trouble collecting the nearly $4 billion owed to them.
But in 2017, they won a partial victory when the 2nd Circuit held that $1.68 billion owned by the Iranian central bank, Bank Markazi, and held by a Luxembourg financial institution, Clearstream Banking, could be transferred to New York under state law, citing a 2014 Supreme Court decision known as NML Capital.
The court, in an opinion authored by the late Justice Antonin Scalia, reasoned in that case that "any sort of immunity defense made by a foreign sovereign in an American court must stand on" the text of the Foreign Sovereign Immunities Act, a bill which immunizes foreign-state-owned property that is located "in the United States."
The terror victims leaned on the 2014 decision in their request that the top court let the 2nd Circuit decision stand.
"The Second Circuit's decision here was a straightforward application of NML Capital: Any claim for immunity must be based on the text of the FSIA, and the FSIA does not afford any immunity to foreign assets held outside of the United States," wrote attorneys for Deborah Peterson, whose brother James Knipple was among the Marines killed in Beirut, in court papers.
But Bank Markazi told the Supreme Court that the 2nd Circuit ruling would put the United States in violation of international law and threatened "disastrous consequences" for American foreign relations.
The Trump administration, through Solicitor General Noel Francisco, urged the justices to scrap the 2nd Circuit precedent in light of the new defense spending bill.