Order Code RS22094
Updated April 29, 2008
Lawsuits Against State Supporters of
Terrorism: An Overview
Jennifer K. Elsea
Legislative Attorney
American Law Division
Summary
A 1996 amendment to the Foreign Sovereign Immunities Act (FSIA) enables
American victims of international terrorist acts supported by certain States designated
by the State Department as supporters of terrorism — Cuba, Iran, North Korea, Sudan,
Syria, and previously Iraq and Libya — to bring suit in U.S. courts to seek monetary
damages. Despite congressional efforts to make blocked (or “frozen”) assets of such
States available for attachment by judgment creditors in such cases, plaintiffs
encountered difficulties in enforcing the awards. Congress passed, as part of H.R. 1585
(the National Defense Authorization Act for FY2008 (NDAA)), an amendment to the
FSIA to provide a federal cause of action against terrorist States and to facilitate
enforcement of judgments. After the President withheld approval of the NDAA based
on the possible impact the measure would have on Iraqi assets, Congress passed a new
version, H.R. 4986 (P.L. 110-181), which includes authority for the President to waive
the FSIA provision with respect to Iraq. This report provides an overview of these issues
and relevant legislation (H.R. 5167). These issues are covered in greater depth in CRS
Report RL31258, Suits Against Terrorist States by Victims of Terrorism, by Jennifer K.
Elsea. This report will be updated.
In 1996 Congress amended the FSIA to allow civil suits by U.S. victims of terrorism
against designated State sponsors of terrorism (DSST)1 responsible for, or complicit in,
such terrorist acts as torture, extrajudicial killing, aircraft sabotage, and hostage taking.
28 U.S.C. § 1605(a)(7). Congress also abrogated the immunity of foreign State assets
under the FSIA to satisfy judgments awarded under the terrorism exception. 28 U.S.C.
§ 1610. After a court found that the abrogation of sovereign immunity did not itself create
a cause of action, Congress passed the “Flatow Amendment” (28 U.S.C. § 1605 note), to
create a cause of action for such cases. Courts initially interpreted the statute as creating
a cause of action against foreign States and their agencies and instrumentalities, although
its plain language referred only to officials, employees, and agents of such States.
1 The list, established by the State Department, currently includes Cuba, Iran, North Korea,
Sudan, and Syria. Iraq was removed from the list in 2004; Libya was removed in 2006.

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Numerous court judgments, generally rendered after the defendants’ default, ensued,
resulting in substantial awards to plaintiffs.
The nature of lawsuits against DSSTs changed significantly after the D.C. Circuit
Court of Appeals held that neither the terrorism exception to the FSIA nor the Flatow
Amendment created a private right of action against the foreign government itself,
including its agencies and instrumentalities. Consequently, most plaintiffs asserted causes
of action under domestic state laws, which resulted in some disparity in the relief
available to victims injured due to similar or even the same acts of terrorism. Courts
nevertheless continued to award sizable judgments against DSSTs and their officials,
which now amount to nearly $18 billion in damages, most of which has been assessed
against Iran. (See CRS Report RL31258, Suits Against Terrorist States by Victims of
Terrorism
, by Jennifer K. Elsea.)
Enforcement of Judgments Against Terrorist States
While winning judgments against terrorist States never posed insurmountable
obstacles, enforcing those judgments has proven more arduous, primarily due to the
scarcity of assets within U.S. jurisdiction that belong to States subject to economic
sanctions and the immunity from attachment that assets frozen by sanctions regulations
enjoyed. Successive Administrations opposed allowing the use of frozen assets of foreign
States to satisfy judgments out of concerns for treaty obligations to protect foreign
diplomatic and consular properties, the desire to maintain the blocked assets for
diplomatic leverage, and the concern that permitting the attachment of such assets would
expose U.S. assets abroad to reciprocal action. Notwithstanding these objections,
Congress has repeatedly stepped in to make more foreign assets available for judgment
creditors, and appropriated some $400 million to pay portions of certain judgments
against Iran with the understanding that the President would seek to recover that amount
from Iran. Consequently, some plaintiffs were able to collect portions of their judgments,
while others were stymied. Some of the assets associated with DSSTs remained off-limits
because they were not “blocked” within the meaning of the relevant statute; because
plaintiffs had waived their right to attach the assets in question when they accepted
payment from U.S. funds; because the assets were not subject to the exception to
immunity or were exempted by presidential waiver; or because the United States validly
possesses the property and successfully asserted U.S. sovereign immunity.
The National Defense Authorization Act for FY2008
In order to assist plaintiffs, Congress passed a measure as part of H.R. 4986 (P.L.
110-181, § 1083), to create a new section 1605A in title 28, U.S. Code. Section 1083
incorporates the terrorist State exception to the FSIA previously codified at 28 U.S.C.
§ 1605(a)(7), and a new cause of action against DSSTs, in lieu of the Flatow Amendment,
which allows U.S. nationals (and non-U.S. nationals working for the U.S. government
overseas) who are harmed by terrorism to seek compensatory as well as punitive damages
(which are not ordinarily available against foreign States). The provision also seeks to
make more assets associated with State sponsors of terrorism available for attachment in
aid of execution of terrorism judgments, and to permit some plaintiffs to refile claims.

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President Bush vetoed the original version of the NDAA, H.R. 1585, on the stated
basis that the FSIA amendments would threaten Iraq’s economic security. Congress
responded with the new version, which authorizes the President to waive any provision
of § 1083 with respect to Iraq. It also encourages the President to negotiate a settlement
of outstanding terrorism claims against Iraq. It is unclear whether pending cases will be
extinguished, in the event a waiver is issued, or whether any Iraqi assets will remain
available for attachment by judgment holders under other provisions of law.
New 28 U.S.C. § 1605A(g) provides for the establishment of a lien of lis pendens
with respect to all real or tangible personal property within the judicial district that is
subject to attachment in aid of execution and is titled in the name of a defendant State or
any entities listed by the plaintiff as “controlled by” that State. Ordinarily, lis pendens in
civil litigation is used to put third parties on notice that the property is the subject of
litigation, which effectively prevents the alienation of such property, although it is not
technically a lien. Under the new provision, the clerk of the district court is required to
file the notice of action indexed by listing the defendant and its controlled entities. This
may relieve plaintiffs of the burden of identifying specific property in the notices, but it
is unclear what further measures might be required to ensure adequate notice is afforded
to prospective purchasers under the procedure or how it is to be determined without
further process that the property is in fact subject to attachment. In the case of State
sponsors of terror, whose property for the most part is already subject to substantial
limitations on transactions, the primary utility may be the establishment of a line of
priority among lien-holders. However, in the case of States that are no longer subject to
terrorism sanctions, such as Libya, the provision could impede trade.
New 28 U.S.C. § 1610(g) provides that the property of a foreign State against which
a judgment has been entered under section 1605A (or predecessor provision), or of an
agency or instrumentality of such a foreign State, “including property that is a separate
juridical entity or is an interest held directly or indirectly in a separate juridical entity,”
is subject to attachment in aid of execution and execution upon that judgment, regardless
of how much economic control over that property the foreign government exercises and
whether the government derives profits or benefits from it. The President has no waiver
authority (except with respect to Iraq). The provision may enable a plaintiff to “pierce the
corporate veil”of a corporation owned, in whole or in part, by a judgment debtor State
without having to demonstrate to the court that the presumption of independent status
should be overridden. It could also be read as an effort to make any entity in which the
judgment debtor State (including its separate agencies and instrumentalities) has any
interest liable for the terrorism-related judgments awarded against that State. On the other
hand, § 1610(g) states that nothing in it is to be construed as superceding the authority of
a court to protect interests held by a person “who is not liable in the action giving rise to
a judgment.”
Section 1610(g) also makes a property that is regulated by reason of U.S. sanctions
available to satisfy terrorism judgments. It does not explicitly waive U.S. sovereign
immunity, but appears designed to defeat provisions in the sanctions regulations that
make blocked property effectively immune from court action. In this respect, it echoes
language in § 1610(f)(1) (which is not in effect because it was waived by President
Clinton), except that § 1610(g) applies only to regulated property rather than property that

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is blocked or regulated pursuant to sanctions regimes,2 and it would not be subject to the
presidential waiver in § 1620(f)(3). Unlike § 201 of TRIA (28 U.S.C. § 1610 note), the
new language applies to regulated rather than blocked assets and it allows assets to be
attached in aid of enforcing punitive damages.
The new provisions apply to any claim arising under them as well as to any action
brought under former 28 U.S.C. § 1605(a)(7) or the Flatow Amendment that “relied on
either of these provisions as creating a cause of action” and that “has been adversely
affected on the grounds that either or both of these provisions fail to create a cause of
action against the state,” and that is still before the courts “in any form,” including appeal
or motion for post-judgment relief. In cases brought under the older provisions, the federal
court in which the claim originated is required, on motion by the plaintiffs within 60 days
after enactment, to treat the case as if it had been brought under the new provisions,
apparently to include reinstating a vacated judgment. The measure waives a defendant’s
“defenses of res judicata, collateral estoppel and limitation period” in any reinstated
action. The provision also permits the filing of new cases involving incidents that are
already the subject of a timely-filed terrorism action under the FSIA, notwithstanding the
limitation time for filing, so long as the related action is filed within 60 days after
enactment (January 28, 2008) or entry of judgment in the original action. Several actions
have been filed under this provision, including some lawsuits by plaintiffs who have
already won significant judgments under the previous law.
While § 1083(c) refers to “pending cases,” it appears to cover finally adjudicated
cases in which litigants have filed a motion for relief from final judgment after appeals
are exhausted. To the extent the provision is read to require courts to reopen final
judgments or reinstate vacated judgments, it may be vulnerable to invalidation as an
improper exercise of judicial powers by Congress.3 A similar objection may be raised
regarding the waiver of legal defenses: while it seems well-established that Congress can
waive defenses in actions against the United States, an effort to abrogate legal defenses
of other parties could raise constitutional due process and separation of powers issues. It
may be that no cases qualify for reopening under this provision because the plaintiffs
would have had to have filed a motion prior to the enactment of P.L. 110-181. However,
if previous lawsuits can be filed again as “related actions” under § 1083(c)(3), then
plaintiffs who file prior to the deadline can bring new actions regardless of the reason
their original case was unsuccessful or perhaps even if their case yielded an award. It is
unclear whether such lawsuits would count as “refiled actions” for the purpose of
abrogating the defendant’s legal defenses under § 1803(c)(2)(B).
2 TRIA § 201(d)(2) defines “blocked asset” to mean property seized or frozen pursuant to certain
sanctions, but not property that may be transferred pursuant to a license that is required by statute
other than the International Emergency Economic Powers Act (IEEPA) or the United Nations
Participation Act of 1945. It also excludes diplomatic or consular property being used solely for
diplomatic or consular purposes from the definition of “blocked asset.” TRIA does not refer to
regulated assets, so it is unclear whether “blocked” and “regulated” are mutually exclusive terms,
or whether “blocked” assets would be considered to be “regulated” as well. Assets regulated
pursuant to IEEPA presumably mean those that are licensed for transfer.
3 See Plaut v. Spendthrift Farms, 514 U.S. 211 (1995).

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The new federal cause of action may make judgments against DSSTs heftier and
easier to obtain, but whether such judgments will be easier to enforce seems less certain.
The result may be an increase in debts owed by those States without a sufficient increase
in assets available to cover them, which could amplify competition among plaintiffs and
lead to calls for further congressional action. Transactions with debtor States are likely
to increase only with respect to States that are no longer subject to anti-terrorism
sanctions, in which case the use of their assets to satisfy judgments may act as a barrier
to trade despite the lifting of sanctions. The presidential waiver for Iraq permits the
President to protect Iraqi assets from attachment to satisfy any outstanding judgments.
H.R. 5167 has been introduced in the House to repeal the presidential waiver provision.
Effect of the Waiver of § 1083 on Cases Pending Against Iraq
Section 1083(d) authorizes the President to waive any provision of §1083 with
respect to Iraq if he determines that a waiver serves the United States’ national security
interest and promotes U.S.-Iraq relations, the waiver will promote reconstruction and
political development in Iraq, and Iraq continues to be a reliable ally and partner in
combating terrorism. The waiver applies retroactively regardless of its effect on pending
cases.
On the day the President signed the FY2008 NDAA into law, the White House
signed a waiver,4 apparently foreclosing any refiling of the lawsuit by former prisoners
of war against Iraq and Saddam Hussein for their mistreatment during the first Gulf War,5
and possibly resulting in the dismissal of pending claims against Iraq under the FSIA
terrorism exception (as previously in force). Final judgments against Iraq are not affected,
but will remain difficult to enforce. Iraqi government assets used for commercial purposes
in the United States that are not subject to the protection of E.O. 13303, which covers the
Development Fund for Iraq and all interests associated with Iraqi petroleum and
petroleum products, may be subject to attachment and execution on valid terrorism
judgments against Iraq under 28 U.S.C. § 1610. The President could, however, issue
another executive order to protect all Iraqi assets from attachment to satisfy judgments.
Administration Proposal to Waive § 1083 for Libya
U.S. businesses seeking to establish a commercial relationship with Libya have
expressed concern that § 1083 will harm U.S.-Libya trade.6 The Bush Administration,
which has touted renewed U.S. investment in Libya and growth in bilateral trade as
beneficial to the U.S. economy and as important tools for reestablishing relations with a
reformed state sponsor of terrorism, appears to share their view. Plaintiffs with open
4 Presidential Determination No. 2008-9 of January 28, 2008, Waiver of Section 1083 of the
National Defense Authorization Act for Fiscal Year 2008, 73 Fed. Reg. 6,571 (2008) (waiving
all provisions of § 1083 with respect to Iraq).
5 Acree v. Republic of Iraq, 370 F.3d 41 (D.C. Cir. 2004), cert. denied, 544 U.S. 1010 (2005).
6 Correspondence from the U.S.-Libya Business Association, the National Foreign Trade Council,
the National Association of Manufacturers, and the United States Chamber of Commerce to U.S.
Secretary of State Condoleezza Rice, February 28, 2008 (urging the Administration to seek
waiver authority with respect to Libya). For more information about U.S.-Libya relations, see
CRS Report RL33142, Libya: Background and U.S. Relations, by Christopher M. Blanchard.

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cases and final judgments against Libya appear to take the view that any detriment to
U.S.-Libya trade would be a useful means of pressuring the Libyan government into
compensating victims of its terrorist activities.7
Section 1083 could have an adverse effect on U.S. trade with Libya because of its
previous designation as a state sponsor of terrorism. Nearly $1.7 billion has been awarded
against Libya, with an additional $5.3 billion awarded against certain named Libyan
officials, and some 20 additional cases are pending. While new lawsuits are barred six
months after a State’s terrorist designation has been rescinded, new cases based on a
terrorist act that is or was already the subject of a lawsuit under the prior terrorism
exception to the FSIA were permitted up to March 28, 2008, and may be filed within 60
days of the date of entry of judgment in the original lawsuit. Accordingly, Libya remains
subject to lawsuits based on acts of terrorism that occurred while it was designated a State
sponsor of terrorism until 60 days after the entry of final judgment in pending cases.
New § 28 U.S.C. § 1610(g) could make commercial transactions more difficult if
plaintiffs file liens of lis pendens or seek to attach Libyan assets. Judgment holders will
likely seek to attach goods purchased by Libya as well as financial instruments used to
pay for goods or services or to secure contract performance. If judgment holders succeed
in seizing property or debts in the possession of a U.S. company, Libya could seek to hold
the company liable for breach of contract for failing to make payment or delivery, or it
could seek to justify its own breach or early termination of a contract, which could also
result in losses to the U.S. company involved. While it seems likely that a U.S. court
would not find the U.S. company in breach of contract for having submitted to a judicial
order, the contract in question may call for disputes to be resolved according to foreign
law or in a foreign forum or through international arbitration, in which case the outcome
is less certain. If Libya chooses not to open accounts or establish standby letters of credit
in financial institutions subject to U.S. jurisdiction, U.S.-Libya trade could become more
difficult and riskier for the U.S. companies involved, or Libya may avoid risk by choosing
business partners outside the United States.
The Administration proposes amending FY2008 NDAA § 1083 to include a new
waiver provision to permit an exception with respect to all states whose designation as
sponsors of terrorism has been rescinded if the President determines that the waiver is in
the national security interest of the United States.8 The Administration’s proposal does
not include a requirement similar to the Iraq waiver that the President determine that the
former state sponsor of terrorism is a U.S. ally in the fight against terrorism or that
democracy will be promoted. The temporal scope of the proposed waiver authority is
identical to the Iraq waiver provision in § 1083(d)(2), and the congressional notification
requirement is the same, as is the sense of the Congress that the Administration should
work with governments for whom a waiver is executed to settle meritorious claims
against them. If Congress amends § 1083 as proposed and the President executes a
waiver, pending lawsuits will likely be dismissed and existing judgments will be more
difficult or impossible to enforce.
7 See Eric Lipton, Libya Seeks Exemption for Its Debt to Victims, N.Y. TIMES, April 22, 2008.
8 Text of the Administration proposal was included in the correspondence from U.S. Secretary
of State Condoleezza Rice, U.S. Secretary of Defense Robert Gates, U.S. Secretary of Energy
Samuel Bodman, and U.S. Secretary of Commerce Carlos Gutierrez to Speaker of the House
Nancy Pelosi, Senate Majority Leader Harry Reid, et al., March 18, 2008.