In Iran Aircraft Industries and Iran Helicopter Support and Renewal Company v. Avco Corporation, the United States Court of Appeals for the Second Circuit affirmed a decision of the United States District Court for the District of Connecticut denying enforcement of an award of the Iran-United States Claims Tribunal in The Hague under which a total of $3.5 million was awarded to two Iranian government entities on their counterclaims against Avco Corporation, which had originally brought a proceeding against them for damages. The case marks the first time that an award of this tribunal has been denied enforcement.

Iranian Claims

The Hague Tribunal, as it has come to be known, was created on January 19, 1981, by the governments of Iran and the United States to hear claims of American nationals against the Iranian government and of Iranian nationals against the American government (as well as between the two governments). Under the terms of what became known as the Algiers Accords, Iranian government entities could not directly file claims against American nationals before The Hague Tribunal. Nevertheless, shortly prior to the last day for filing claims with the Tribunal, January 19, 1982, Iranian government entities filed some 1,300 claims against American companies. Since these claims were manifestly outside the Tribunal’s jurisdiction, the files were treated by the Tribunal clerical staff as having been “lodged,” rather than filed. They remained in this limbo status until July of 1982, when their existence was alluded to in an argument in a test case before the full nine member tribunal, Oilfield of Texas Inc. v. Iran, in which the first-named of the authors hereof participated for the claimant. After the attorneys for Oilfield made a formal request to the Tribunal for production of copies of certain of the lodged files, the Agent of Iran to the Tribunal removed all 1,300 files from the Tribunal Secretariat’s premises.

The Tribunal ruled early on, however, that Iran and its controlled entities, could present counterclaims against American claimants and that the Tribunal could render a net award in their favor. There thus always existed the possibility that Iran might successfully assert counterclaims that resulted in net awards in favor of Iran and against American claimants. 

Such unpleasant consequences did in fact befall Avco in its case at the Tribunal, although it was not the first American claimant to have this kind of experience. In a previous case, Gould Marketing, Inc. v. Ministry of National Defense of Iran, an Iranian government entity also obtained a net award in its favor.