International Law

Freezing of Sovereign Assets: The Upcoming Case of Iranian Assets in ICJ

Smriti Jaiswal


In recent years, the assets of foreign nations have been regularly used for economic sanctioning, settling creditors, granting compensations, etc. without the owner nation’s permission. As a general rule, the practice of freezing assets which includes attachment, arrest or execution of sovereign assets is against the established principle of customary international law if the same is ordered by the judiciary (see Articles 18 and 19 of the UN Convention on the Jurisdictional Immunity of States and Their Property). However, there is lack of clarity in cases where freezing of assets is done by executive action. The case of Certain Iranian Assets is under proceedings in the International Court of Justice, which is likely to delve into this issue. This piece firstly, briefs about the case and other similar events to highlight the significance of the issue; secondly, discusses the position of customary international law on the issue; thirdly, details the complexities involved concerning the issue and finally, figures out possible solutions to conclude thereof.


Recently, Russia faced the freezing of its sovereign assets by the USA, the UK, European Commission, and few others during the war in Ukraine. International customary law prohibits the freezing of sovereign foreign assets by judicial orders, but this position leaves a gray area. This gray area pertains to the freezing of assets by the executive orders. Hence, any further development in the direction of resolving this issue is crucial in determining the position of international law.

In its latest press release dated 23 September 2022, the International Court of Justice announced that it will deliver a judgment soon on Certain Iranian Assets (Islamic Republic of Iran v. United States of America) which is under deliberation since 2016. The case concerns the seizure of Iranian Central Bank Assets by the USA. Iran contends this to be a violation of the Treaty of Amity between the USA and Iran as well as a violation of international customary law. The Foreign Sovereign Immunity Act of the USA provides immunity to foreign central bank assets from ‘attachment and execution’. However, this protection can be unilaterally waived by the USA government. Via executive order 13599, the US government did precisely this – the protection given to the Iranian Central Bank was waived and its assets were blocked on the grounds of damage caused to the USA by the terrorist attacks from Iran. This raises serious questions concerning the legitimacy of asset freezing. Though the judgment in this case will be influenced by the provisions of the Treaty of Amity also, it is likely to expound and state the position of international law with regards to sovereign asset freezing through executive action. 

Recent instances of asset freezing

Recently, the assets of Afghanistan, Venezuela, and Russia were frozen by the USA. The USA gave non-recognition of the sovereignty of governments as justification in the case of Afghanistan and Venezuela whereas the Russian assets freeze was justified as a countermeasure.  There are significant concerns about these unilateral actions by the USA where it revoked the immunity granted under its domestic law – the Foreign Sovereign Immunity Act and also, international customary law stemming from Article 2(1) of the UN Charter that upholds the sovereign equality of all member states.  Not only this, the USA has taken a step ahead and decided to utilize these assets as an attachment with judicial claims granted in lawsuits. 

Legal issues concerning these actions raise important questions– How can a government deprive the other country of its assets in absence of any official paradigm? How can a government utilize the sovereign assets of other nations by unilaterally rejecting its sovereignty? The practice not only poses a legal challenge to international customary law but also aggravates economic and humanitarian crises. Afghanistan and Venezuela, for example, suffer from huge economic crunches.

In the Indian context too, the issue holds significance in light of recent judgments by foreign courts ordering the seizure of Indian assets by Cairn for recovering the award of $1.7 billion obtained in a 2020 decision. Though this was a commercial issue, the jurisdiction of foreign courts to attach Indian assets can be questioned under international law as the foreign states along with their agencies and instrumentalities are protected under sovereign immunity..

Present Position of International Law

Nations and their assets are entitled to sovereign immunity from judicial proceedings and attachment under international customary law. There has been a similar case Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening) in ICJ where German assets were frozen by Italy and Greece for settling court claims resulting from damage caused by Germany during World War 2. The court upheld the immunity granted by international customary law to Germany against judicial proceedings and found Italy in violation of international customary law. Therefore, the judgment in the German case crystallized the position of international customary law with respect to judicial actions on foreign sovereign assets. This position is further strengthened by the UN Convention on the Jurisdictional Immunity of States and Their Property adopted by the UN General Assembly in 2004. The convention codifies the immunity of sovereign foreign assets from the judicial actions of the other nation (see Articles 5 and 6).

Though the convention is not in force yet, it substantiates the position that a foreign state does not have unilateral authority over the sovereign assets of some other nation. This position is widely constructed on the premise that there is no substantial difference between executive and judicial orders affecting foreign sovereign assets. Hence, if judicial actions against foreign sovereign assets are barred under international law, so will the actions taken by the executive. However, the position cannot be clearly established unless the judgment provides legitimacy to this wider position drawn.

Enforcing the UN Convention

The UN Convention aimed to provide legal certainty and codify the immunity of sovereign assets from proceedings in any other nation. However, the convention suffers from some serious flaws, possibly rendering it unratified by several nations.

First, the convention extends immunity to a state’s assets against judicial actions only (see Articles 5 and 6). There is no immunity from executive or legislative actions which renders the convention incapable of protecting the assets in case assets were frozen via executive orders, as happened with Afghanistan, Iran and Russia. Second, the convention allows the attachment of the state’s property where there is any loss of lives, tangible property, or injury due to “acts or omissions alleged to be attributable to the state” (see Article 12). It is not entirely clear as to what is attributable to the state. For instance, the assets of a vulnerable state can be taken away if it is unable to stop the terrorists from operating on its land and causing loss of lives and property in a foreign nation. Third, the convention assumes that sovereignty of all the states is recognized (see Article 2(b)). However, this may not be the case. USA and UK froze the assets of Afghanistan and Venezuela respectively by denying sovereignty to these countries. Countries hold discretion over the recognition of other nations. While some countries may recognize a nation as sovereign, others may not. Therefore, a country can discretionarily withdraw the recognition given to a nation and freeze its assets. This would not even violate the UN Convention as it applies to immunity given to assets of sovereign nations.

Addressing the problems with the UN Convention given above may solve some concerns of the nations but nothing can be concluded about the response of countries to the convention given the further complexities involved. First, in case a country loses a recognized sovereign government by any unlawful means then the assets may not be entrusted to the new government given the possibility of misuse of the assets. Still, the people in that country should not suffer economic or humanitarian crises due to the apprehension of misuse as happening in Afghanistan. Second, economic sanctions are frequently used as countermeasures in modern warfare without bloodshed and violence. Barring the freezing of assets completely will deprive states of nonbelligerent means of retaliation. Also, some countries use it to pressurize governments to curb the menace of terrorism where it is suspected that the government is unwilling to take any action against terrorist organizations operating from their lands. Hence, a law regarding its legitimate use should be framed and codified. Countries can be allowed to freeze assets in case of an immediate attack but in case of terrorism curb, the asset freeze should take place through a representative platform like the UN.


Owing to the increasing economic relations between the nations, clarity on the immunity of foreign sovereign assets is crucial. It needs to be ensured that the economically developed and strong nations cannot exploit the economically vulnerable nations under political, economic, constitutional, humanitarian, or any such form of crisis. This should be the collective responsibility of all nations to maintain the sanctity of international law and its enforcement. Hence, the United Nations can take the initiative to consolidate its stance on international customary law and enforce it. The case of Iranian assets is expected to crystallize the stance of international law. The UN Convention on the Jurisdictional Immunity of States and Their Property can be amended to give effect to the same and secure ratification by nations. The economies of nations will become bigger and more complex in the future where a large number of assets of a nation will be present in another nation.  Hence, clarification of the issue in form of codified law is required which can be undertaken by the UN once ICJ takes a clearer stance in the Iranian Case.

The author is an undergraduate student at the National Law School of India University, Bangalore

Categories: International Law