In the Name of the Patriot Act: That's Ours
By Mark C. Medish
Sunday, October 19, 2003; Page B05
On March 20, 2003, as the United States launched its preemptive war against Iraq, the Bush administration also mounted a raid here in the United States -- it confiscated approximately $1.7 billion in Iraqi assets that had been blocked, or frozen, since the Persian Gulf War. It closed Iraq's accounts at 18 commercial banks and moved the money to the Federal Reserve Bank of New York.
Two months later, U.N. Security Council Resolution 1483 called on all countries to transfer frozen Iraqi assets to a development fund for Iraq. But the United States had already pulled a fast one on its allies and the rest of the international community. There were no longer any such Iraqi assets in the United States; they now belonged to the U.S. Treasury, which later bypassed the fund and turned the money over to the U.S.-run occupation authorities. The administration used its own discretion alone -- without authority from or consultation with a U.S. court, an international court, the United Nations or an Iraqi government.
It was only the second time since World War II that the United States had expropriated the assets of a sovereign country, and the power to do so came largely from the USA Patriot Act, the Bush administration's primary legislative response to the terrorist attacks of Sept. 11, 2001. The bill passed by overwhelming margins with virtually no debate in a Congress that was itself under attack by anthrax-laced letters. After all, who could be against an act called patriotic? But as the far-reaching consequences of this law have become more apparent, one can only wish our legislators had taken more time to weigh its merits.
The Patriot Act is the civil equivalent of the administration's military doctrine of preemption. The U.S. government can act first and investigate later. U.S. Supreme Court Justice Antonin Scalia once observed that due process depends on how much process is due. In the Bush administration's view, the clear answer is: When it comes to homeland security, not much. Post-9/11, the state is king.
While civil rights groups have challenged aspects of the new law, from warrantless searches to seemingly unlimited detentions, other elements could have equally worrisome implications.
The Patriot Act significantly augmented the president's already broad emergency powers in the international economic sphere. For example, the act allows the president to "vest," or expropriate, the sovereign assets of other countries if he makes a finding that their governments supported terrorism. This amounts to a new doctrine of sovereign property forfeiture.
The point may seem academic, but it is not. The international legal system, of which the United States has been a prime architect for most of the past century, is built on sovereignty as a meaningful concept. But the Bush administration has taken an a la carte approach to international legal norms. The implicit message is that U.S. sovereignty is absolute; other countries' sovereignty is subject to Washington's review.
It would be one thing to expropriate the property of a country that had attacked us or our allies, as we did with the Axis powers' property during World War II. (President Roosevelt ordered the seizure of Japanese assets in July 1941 in response to Japan's invasion of French Indochina.) A theory of restitution or reparations could serve as the legal basis for such action. It is another matter to confiscate the property of a country against which we waged a war of choice for the purpose of regime change. One might not care about the demise of Saddam Hussein, but if one cares about the rule of law, sovereignty matters.
Treasury International Affairs Under Secretary John Taylor recently testified before Congress that the confiscated Iraqi money had already been "used for the Iraqi people," to pay salaries and pensions. for example. This information is not relevant to the legal question. The issue is not the good intentions or deeds of the confiscators, but who decides what happens to sovereign property. Other U.S. officials have tried to justify the expropriation by calling the assets the "ill-gotten gains of Saddam Hussein and his regime." But this doesn't matter either. For one thing, the assets were accumulated before the Gulf War, when the Reagan and first Bush administrations were cooperating with Hussein's regime.
Asset blocking is an important policy tool and has a venerable history. Confiscation does not. Perhaps the most famous case of blocking sovereign assets was the freezing of Iranian accounts after the fall of the shah. In that case, billions of dollars' worth of frozen Iranian assets were held for formal adjudication by the Iranian Claims Tribunal, which was set up by an international agreement and with the consent of Iran. After the fall of Slobodan Milosevic, frozen Yugoslav assets in the United States were eventually released to the successor states. In 2001, the United States did not expropriate the assets of the Taliban regime, but instead turned over about $250 million in gold and cash to the new government in Afghanistan.
The only exception since World War II was the confiscation and liquidation of Cuban assets by then Treasury Secretary Paul O'Neill in February 2001 to settle claims by the families of Cuban exiles whose private planes had been shot down by Cuba in February 1996. The limited authority for this action derived from special legislation enacted in 2000 to help private claimants collect on judgments against Cuba and Iran.
The U.S. asset grab has come as a surprise to many private individuals and companies seeking money from Iraq, including Americans who had been prisoners during the Gulf War and who want to collect court-awarded damages. Some of the claimants I advise had waited years for sanctions to be lifted and Iraq's assets in the United States to be unblocked. In July, a federal district judge reluctantly concluded that the POWs' claim could no longer be enforced against Iraqi assets. The judge allowed himself the comment that the government's position in the case "seems extreme."
In another case with the same legal conclusion, a federal judge wrote last month that while the need for funds to rebuild Iraq is clear, "nonetheless one wonders whether American families who lost loved ones as a result of terrorism here and abroad ought not be compensated first." On appeal, the plaintiffs were ultimately told that they "must look elsewhere." The case was striking because earlier in the proceedings, a U.S. marshal had been instructed by Attorney General John Ashcroft's Justice Department to ignore the court's attachment order that would set aside enough money to cover claims. So much for the separation of powers.
The issue of seizing sovereign assets shouldn't just matter to people with claims on the money. The powers granted under the Patriot Act threaten our system of checks and balances and should remind Congress of the importance of legislative deliberation. Patriotic impulses during times of national emergency are understandable, but in this case lawmakers were too hasty and suspended critical judgment when they should have been protecting our most cherished values, such as the rule of law.
The administration's actions do not only violate our domestic legal processes. They also show the lengths to which it will go to pursue its objectives. For $1.7 billion -- roughly the amount spent in two weeks on reconstruction in Iraq -- President Bush is willing to rewrite international norms. Since the establishment of international financial institutions and guidelines under the Bretton Woods Agreement of 1944 and the founding of the United Nations in 1945, America has, until recently, been an advocate of the law of nations. Today, thanks to the Bush team's muscular unilateralism, the international community increasingly sees us as above the law.
Finally, pragmatic self-interest is at stake. We care about international norms and formal sovereignty because the shoe can also be on the other foot. After all, what will we argue when another country determines that U.S. assets, public or private, are liable to expropriation because of a national emergency, whether real or "sexed up"?
The underlying lesson has to do with the perils of unchecked power and the sense of infallibility that characterizes Bush's governing style. Convinced of the righteousness of its cause, the administration seeks to impose global order at the expense of global rules. The result may be more global chaos, not less.
*Mark Medish is a lawyer in Washington and was a senior Treasury and National Security Council official in the Clinton administration. He represents international corporate creditors of Iraq.
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