Treaties and Irrelevance: Understanding Iran's Suit Against the U.S. for Reimposing Nuclear Sanctions

As the United States gradually reimposes sanctions following its withdrawal from the Iran nuclear deal (formally  the Joint Comprehensive Plan of Action, or JCPOA), the other parties to the agreement are beginning to advance their own legal measures in response. The European Union is set to activate its "Blocking Regulation" to protect EU companies doing business with Iran from U.S. sanctions. Iran just initiated proceedings against the United States in the International Court of Justice (ICJ) to enjoin the reinstatement of U.S. nuclear sanctions. The case tees up an interesting question: whether, under international law, a treaty can be abrogated because too much has changed in the relationship between the parties. In other words, can a treaty become inapplicable because it is simply irrelevant?

The Return of Nuclear Sanctions

As I explained in this Lawfare post, the U.S. sanctions regime against Iran consists of statutory sanctions and sanctions imposed pursuant to executive orders under the International Emergency Economic Powers Act, as well as individual designations of natural and legal persons (also pursuant to executive orders). Doing business with designated individuals could trigger secondary sanctions, such as those provided for in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. These secondary sanctions effectively cut off the access of third parties that do business with designated persons and entities to the U.S. market. To implement the JCPOA, the Obama administration exercised waivers included in a number of statutes imposing sanctions against Iran. It also rescinded several executive orders and de-listed hundreds of designated persons and entities. 

When President Trump pulled the United States out of the JCPOA in May, he announced that all nuclear sanctions lifted pursuant to the JCPOA would be reimposed. The Treasury Department's Office of Foreign Asset Control issued guidance the same day detailing the process for re-imposing the sanctions. The guidance stated that sanctions would not be fully reimposed immediately in order to allow the private sector to wind down business in Iran. This winding-down period is 90 to 180 days, depending on the type of activity. The first batch of sanctions should therefore be reimposed on Aug. 6, and all sanctions lifted under the JCPOA should be back in place by Nov. 4.  However, some JCPOA sanctions relief, including licenses to sell civilian aircraft to Iran, was revoked soon after Trump's announcement.

The other parties to the JCPOA—Germany, the United Kingdom, France, Russia, China and the EU—have made clear that they remain committed to the agreement despite the U.S. withdrawal. Iran was not quite as explicit about its commitment and has demanded compensation from the other parties for the losses it expects to incur due to the U.S. withdrawal and reimposed sanctions.

Iran Goes to the ICJ. Again.

While Iran has not pulled out of the agreement so far, other steps it has taken in response to the U.S. withdrawal include going to court. Iran initiated proceedings against the United States before the ICJ on July 16 over the expected reinstatement and escalation of nuclear sanctions. Since the U.S. withdrew from compulsory ICJ jurisdiction in 1986, Iran cited the 1955 bilateral Treaty of Amity, Economic Relations, and Consular Rights between itself and the United States as the basis for the court's jurisdiction. Article XXI(2) of the treaty grants the ICJ jurisdiction over disputes concerning interpretation and application of the treaty unless the parties agree to settlement by other means. Iran also requested that the court issue provisional measures to prevent the United States from reimposing sanctions. On Wednesday, the President of the ICJ delivered an "urgent communication" to U.S. Secretary of State Pompeo, urging the United States to avoid any steps that would render the court's decision on provisional measures ineffective.

In its application, Iran argues that the reasons the United States cited for reimposing sanctions are unfounded. The International Atomic Energy Agency repeatedly confirmed its compliance with the JCPOA Iran says, and the other parties to the agreement have endorsed the IAEA findings. Iran then describes the significant harm its economy has already suffered from the expected return of U.S. nuclear sanctions. Iran claims that the mere announcement that sanctions will be reimposed has created uncertainty and chilled or derailed economic cooperation, costing Iran billions in contracts and investments.

In light of the harm to its economy, Iran argues that the U.S. intention to reinstate nuclear sanctions violates the following provisions of the 1955 treaty: Article IV(1) (fair and equitable treatment of nationals and companies and their property); Article  VII(1) (no restrictions on transfers of funds to or from the territories of the parties); Articles VIII(1),(2) and IX(2) (favorable and reciprocal treatment of imports and exports); and Article X(1) ("Between the territories of the two High Contracting Parties there shall be freedom of commerce and navigation").

Two points are notable regarding the scope of the Iranian filing. First, Iran does not explicitly cite violations of the JCPOA as one of the elements of the judgment it requests, presumably because the ICJ does not have jurisdiction to entertain claims against the United States other than those based on the 1955 treaty. Therefore, the case is unlikely to settle the hotly debated question of the legal nature of the JCPOA, which the United States views as a non-legally-binding political commitment.

Second, while stating in a footnote that it believes all unilateral economic sanctions to be illegal under international law, Iran is not asking the court to declare that unilateral U.S. sanctions against it are unlawful in principle. Instead, Iran argues only that the reintroduction of sanctions lifted in the framework of the JCPOA and additional sanctions the administration vowed to impose in the future violate the 1955 treaty. Consequently, the case is not likely to provide clarity from the ICJ as to the legality under international law of the resort to unilateral economic pressure in international relations, outside the context of this specific treaty. In any event, while there has been some debate as to whether the prohibition on the use of force in international law also encompasses economic coercion, the ICJ would be hard-pressed to find that such economic pressure is unlawful. Unilateral economic sanctions have long been ubiquitous in international relations. Iran has been subject to both international and unilateral sanctions for decades.

This is the second action against the United States that Iran has brought to the ICJ in recent years. In a previous post I previewed Certain Iranian Assets (Iran v. United States), the lawsuit that Iran brought against the United States in June 2016 over the execution of judgments against Iranian property within U.S. jurisdiction. In that case, Iran argues that the United States violated the international law of state immunity from execution. Like in the new filing, Iran also cited the 1955 treaty as the basis for the ICJ's jurisdiction. Certain Iranian Assets is scheduled for oral argument at the ICJ in October. The argument will focus on jurisdictional objections raised by the United States, as I anticipated in my preliminary analysis. Although the full U.S. submission is not available on the ICJ website, one of the key U.S. arguments is likely to be that the provisions of the 1955 treaty that Iran relied on in its application simply do not apply and that the court thus lacks jurisdiction. (More on this argument in the previous post.)

In the nuclear sanctions case, however, it would be more difficult to do away with the 1955 treaty through such creative interpretation of its text. As I explain below, at least some of the 1955 treaty provisions Iran relies upon might suffice for jurisdictional purposes in light of previous ICJ interpretations. What, then, might the U.S. argue against ICJ jurisdiction?

Treaties and Irrelevance 

One potential argument could be that the circumstances that existed when the treaty was concluded have changed so dramatically as to render it inapplicable. The U.S.-Iran relationship is a far cry from what it was when the Treaty of Amity was signed in 1955. Iran, coming out of the 1953 coup orchestrated by the United States and Britain, was a monarchy. Washington had a cooperative relationship with Tehran, and the 1979 revolution that brought the current regime to power was more than two decades off . But the revolution and the standoff surrounding the Iran hostage crisis led to the severing of diplomatic relations between the two countries, followed by extensive U.S. sanctions over four decades. The recent exchange of threats between President Trump and Iran's President, Hassan Rouhani, are a bleak reminder of the current state of the U.S.-Iran relationship. 

The Treaty of Amity, as its name suggests, was predicated on the existence of an amicable relationship—indeed, a relationship—between Iran and the United States. Its first article provides that “[t]here shall be firm and enduring peace and sincere friendship between the United States of America and Iran.” The disconnect between the treaty and current realities is self-evident, which makes Iran’s reliance on the treaty, while not baseless as a matter of law, appear rather absurd.

Therefore, one could argue that the treaty is no longer applicable due to a fundamental change in circumstance and that the ICJ then lacks jurisdiction to hear the case. Convincing the ICJ of this argument, however, would not be easy.

The 1955 Treaty at the Court

For one thing, the ICJ has recognized the validity of the 1955 Treaty of Amity in cases involving Iran and the U.S. since the 1979 Iranian revolution—the turning point in the nature of the bilateral relationship. In the first post-revolution case, decided in 1980 at the height of the hostage crisis (United States Diplomatic and Consular Staff in Tehran, it was the United States that invoked the 1955 treaty against Iran. The United States successfully argued that Iran, which did not show up for the proceedings, violated its obligations under the Treaty of Amity by failing to protect U.S. diplomatic and consular staff, as well as other U.S. nationals.

The court held that the termination of diplomatic relations between the two states did not affect the validity of the 1955 treaty. "[A]lthough the machinery for the effective operation of the 1955 Treaty has, no doubt, now been impaired by reason of diplomatic relations between the two countries having been broken off by the United States," the court maintained, "its provisions remain part of the corpus of law applicable between the United States and Iran" (Paragraph 54).

A decade and a half later, in 1996, the ICJ accepted jurisdiction in the Oil Platforms case that Iran brought against the United States based on the 1955 treaty. The case concerned the U.S. destruction of three Iranian oil platforms located on the latter's continental shelf. Neither party contested that the treaty was in force between the two countries. But the U.S. objected to the court's jurisdiction on other grounds. It argued that the 1955 treaty does not apply to use of force and advanced narrow interpretations of the scope of the provisions that Iran relied on to dispute their applicability.

While the court agreed with some of the U.S. interpretations, it rejected its preliminary objection to ICJ jurisdiction. The court accepted jurisdiction based on Article X(1) of the 1955 treaty, relating to freedom of commerce. The court reaffirmed its finding in the 1980 case, Diplomatic and Consular Staff, that the 1955 treaty remains applicable, noting that "none of the circumstances brought to [the court's] knowledge in the present case would cause it now to depart from that view" (Paragraph 15). The court then found that the destruction of the Iranian oil platforms by the U.S. could theoretically affect commerce in Iranian oil and, consequently, the freedom of commerce protected by Article X(1). It opted for a capacious definition of commerce and found that the treaty prohibits any act that impedes freedom of commerce (Paragraph 50).  In the merits judgment, however, the ICJ eventually held that the destruction of the oil platforms did not in fact affect Iran-U.S. commerce in oil because such commerce had been suspended due to the U.S. oil embargo against Iran. The court elegantly sidestepped the bigger issue of the legality of the U.S. oil embargo itself under the 1955 treaty, noting that Iran did not formally argue this point (Paragraph 94).

Iran invoked Article X(1) in its new filing as well. And it seems to have a case, at least for jurisdictional purposes, based on the ICJ's Oil Platforms reasoning. The return of nuclear sanctions will cut off what little U.S.-Iran commerce JCPOA sanctions relief allowed. Under the ICJ's logic, they could therefore harm freedom of commerce between the two countries compared with the baseline of JCPOA sanctions relief. Unlike the Oil Platforms case, in the new case Iran challenges the legality of the nuclear sanctions as such. If the case reaches the merits stage, the ICJ would likely have little choice but to address their legality under the 1955 treaty directly.

Similarly, the ICJ has previously interpreted Article IV(1) of the 1955 treaty concerning equitable treatment of companies and nationals and their property, which Iran also invokes in its new filing. The ICJ held, contra to the U.S. position, that the fair treatment obligations that Article IV(1) imposes are not limited to companies and nationals that come within the territory of Iran or the United States. Rather, the court held, they provide a general guarantee of fair treatment of the nationals of each party, regardless of location (Paragraph 35). This would make it difficult for the United States to argue that sanctions generally affect Iranian nationals and entities outside the United States, and thus the 1955 treaty does not apply. 

The International Law of Treaties and Changes in Circumstances

Even setting these cases aside and assuming that the ICJ would be open to an argument that the decades that have passed since its Oil Platforms decisions merit a reevaluation of the applicability of the 1955 treaty, the United States still faces an uphill battle if it chooses to challenge the treaty's validity. While international law recognizes the possibility of treaty abrogation due to fundamental changes in circumstances, it is not very receptive to such claims.

Article 62 of the Vienna Convention of the Law of Treaties recognizes that a treaty might become inapplicable due to a fundamental change of circumstances. (The United States has not ratified the Vienna convention, but many of its provisions are widely deemed to be customary international law.) Article 62 reads:

Article 62. FUNDAMENTAL CHANGE OF CIRCUMSTANCES

1. A fundamental change of circumstances which has occurred with regard to those existing at the time of the conclusion of a treaty, and which was not foreseen by the parties, may not be invoked as a ground for terminating or withdrawing from the treaty unless:

(a) The existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the treaty; and

(b) The effect of the change is radically to transform the extent of obligations still to be performed under the treaty.

 

2. A fundamental change of circumstances may not be invoked as a ground for terminating or withdrawing from a treaty:

(a) If the treaty establishes a boundary; or

(b) If the fundamental change is the result of a breach by the party invoking it either of an obligation under the treaty or of any other international obligation owed to any other party to the treaty…

In the case of the 1955 Treaty of Amity, Article 62 of the Vienna Convention of the Law of Treaties should be read in conjunction with Article 63 of the Vienna convention. Article 63 makes clear that the severance of diplomatic and consular relations between the parties to a treaty generally cannot serve as grounds for terminating or withdrawing from that treaty. Article 63 cites two exceptions to this rule: if the existence of diplomatic relations is essential to the consent of the parties to be bound by the treaty, or if the change radically transforms the extent of the parties’ obligations.

One might ask whether the United States can rely on a claim of inapplicability due to change of circumstances despite failing to terminate the 1955 treaty, although it has been nearly four decades since the Iranian revolution. Article XXIII of the treaty outlines a process for termination by either party. The United States has had ample time and opportunity to terminate or contest the applicability of the treaty. It appears, however, that this should not be an insurmountable obstacle. According to Article 65 of the Vienna convention, "the fact that a State has not previously [given notice of its intention to terminate or withdraw from a Treaty] shall not prevent it from making such notification in answer to another party claiming performance of the treaty or alleging its violation." Theoretically, then, the United States might be able to invoke more recent developments in its relationship with Iran that occurred after the ICJ's previous judgments to challenge the validity of the 1955 treaty.

The commentary on Article 59 of the International Law Commission's 1966 Draft Articles on the Law of Treaties, titled "Fundamental Change of Circumstances," suggests that the possibility of termination or suspension due to a fundamental change in circumstances is also a principle of customary international law: Almost all modern jurists, however reluctantly, admit the existence in international law of the principle with which this article is concerned and which is commonly spoken of as the doctrine of rebus sic stantibus. . . . Just as many systems of municipal law recognize that, quite apart from any actual impossibility of performance, contracts may become inapplicable through a fundamental change of circumstances, so also treaties may become inapplicable for the same reason.  

Nevertheless, both the Vienna Convention of the Law of Treaties and the International Law Commission commentary indicate that termination due to a change of circumstances is the rare exception rather than the rule. It is easy to see why this is so. If states could rely on changes of circumstances to stop complying with treaties, especially multilateral ones, that would undermine the stability and credibility of the treaty system as an institution of international law. Moreover, treaties are generally meant to endure over long periods of time, regardless of the identity of the governments of the state parties at any given time, or of social, economic, military or political fluctuations that may occur over their lifespan. Changes in circumstances are simply built into the concept of treaties. Moreover, international law creates other pathways to terminating treaties that provide legal certainty and that do not require politically sensitive assessments of complex situations.

Therefore, the presumption enshrined in Article 62 of the Vienna Convention of the Law of Treaties as well as customary international law is that even major, unforeseeable changes in circumstances generally do not render a treaty inapplicable. A treaty would be deemed inapplicable due to a fundamental change in circumstances only if "the existence of those circumstances constituted an essential basis of the consent of the parties to be bound by the treaty" and if it radically changed the extent of their obligations under the treaty.

The United States could argue that the existence of a relationship with Iran was an essential basis of the consent of the parties to be bound by the 1955 Treaty of Amity. As the International Court of Justice itself has observed, in Article 1 of the 1955 treaty, "the two States intended to stress that peace and friendship constituted the precondition for a harmonious development of their commercial, financial and consular relations"(Paragraph 28, emphasis added). It is difficult to reconcile this statement with the current U.S.-Iran relationship. Likewise, the countries' relationship post-revolution arguably radically altered the extent of their economic and diplomatic obligations under the treaty, since permanent diplomatic ties were severed and sanctions and mutual animosity brought economic cooperation to a halt. Still, the weight of ICJ precedent, the U.S. failure to terminate the treaty and fear of undermining the international law institution of treaties are likely to tip the scales in Iran's favor, at least on the jurisdictional question.

Of course, if the ICJ reaches the merits of the case, the United States could rely on other arguments to counter Iran's claims. The U.S. would surely point out that Iran has not exactly followed the 1955 treaty to the letter either in its treatment of U.S. nationals and interests and that U.S. sanctions were meant to address Iran's own wrongful conduct. As the United States argued in Oil Platforms, "a party that has itself violated obligations identical to those that are the basis for its application is not entitled to relief … Iran had allegedly infringed itself the 'mutual and reciprocal' obligations arising from the 1955 Treaty" (Paragraph 27). The United States would also surely draw attention to Article XX(1)(d) of the 1955 treaty, which provides that the "Treaty shall not preclude the application of measures … necessary to protect [the parties’] essential security interests," such as its interest in preventing nuclear proliferation. There is much more to be said on the merits of the case, which I leave for another day.

Conclusion

While its validity would likely be difficult to challenged as a matter of law, the 1955 Treaty of Amity and its application in both Certain Iranian Assets and the new nuclear sanctions case before the ICJ are stark examples of what might be called treaty irrelevance: a decades-old treaty of friendship and cooperation between parties that have become bitter rivals, that no longer reflects the real world but somehow lives on in international law. And since it is highly doubtful that the United States would comply with a judgment in favor of Iran, much less provisional measures, one may be able to say much the same of any future ICJ judgment that may arise from it.