November 20, 1987

To the Congress of the United States:

This report is made pursuant to section 204(c) of the International Emergency Economic Powers Act, 50 U.S.C. 1703(c), and, as with previous reports, discusses only matters concerning the national emergency with respect to Iran that was declared in Executive Order No. 12170 of November 14, 1979. This report covers events through October 15, 1987, including those that occurred since my last report on June 16, 1987.

1. The Iran-United States Claims Tribunal (the ``Tribunal''), established at The Hague pursuant to the Claims Settlement Agreement of January 19, 1981 (the "Algiers Accords''), continues to make progress in arbitrating the claims before it. Since my last report, the Tribunal has rendered 14 awards, for a total of 318 awards. Of that total, 237 have been awards in favor of American claimants; 142 of these were awards on agreed terms, authorizing and approving payment of settlements negotiated by the parties, and 95 were decisions adjudicated on the merits. The Tribunal has dismissed a total of 21 other claims on the merits and 44 for jurisdictional reasons. Of the 16 remaining awards, one represented a withdrawal and 15 were in favor of the Iranian claimant. As of October 9, 1987, total payments to successful American claimants from the Security Account held by the NV Settlement Bank stood at approximately $983 million.

To date, the Security Account has fallen below the required balance of $500 million seven times. Each time, Iran has replenished the account, as required by the Algiers Accords, by transferring funds from the separate account held by the NV Settlement Bank in which interest on the Security Account is deposited. Iran has also replenished the account once when it was not required by the Accords, for a total of eight replenishments. The most recent replenishment occurred on October 13, 1987, in the amount of $170,000, bringing the total in the Security Account to $500,000,000.00. The aggregate amount that has been transferred is approximately $483 million.

In claims between the two governments based on contracts, the Tribunal to date has made four awards in favor of the United States and four in favor of Iran. The Tribunal has dismissed two claims that had been filed by the United States and dismissed 11 claims that had been filed by Iran. In addition, Iran has withdrawn 13 of its government-to-government claims, while the United States has withdrawn three.

In July, the Government of Iran appointed Mr. Assadollah Nouri to replace Dr. Mohsen Mostafavi as the Iranian arbitrator in Chamber One.

2. As stated in my last report, the Tribunal continues to make progress in the arbitration of claims of U.S. nationals for $250,000 or more. Over 60 percent of the non-bank claims have now been disposed of through adjudication, settlement, or voluntary withdrawal, leaving 207 such claims on the docket. The largest of the large claims, whose progress has been slowed by their complexity, are finally being decided, sometimes with huge damage awards to the U.S. claimant. In one recent decision, a U.S. company received an award for $117 million, while another U.S. company was awarded $58 million. The Tribunal rendered interlocutory decisions on legal issues in two large oil company claims, finding liability on the part of Iran in both instances. These decisions pave the way for determinations of damages and an ultimate resolution of these cases.

3. The Tribunal also continues to process claims of U.S. nationals against Iran of less than $250,000 each. As of October 15, 1987, a total of 139 small claims have been resolved, 12 of them since my last report, as a result of decisions on the merits, awards on agreed terms, or Tribunal orders. Two contested claims were decided in awards issued by the Tribunal since my previous report, raising the total number of contested claims decided to 13, eight favoring the American claimant. These decisions will help in establishing guidelines for the adjudication or settlement of similar small claims. To date, American claimants have also received 20 awards on agreed terms reflecting settlement of claims under $250,000.

Since my last report, the three Tribunal Chambers have selected 65 claims for active arbitration, bringing the total number of small claims currently under active Tribunal consideration to 206. The Tribunal has held hearings in two of these claims since my last report, and the Department of State has filed additional pleadings in 45 such claims.

4. The Department of State continues to coordinate efforts of concerned governmental agencies in presenting U.S. claims against Iran, as well as the response of the United States Government to claims brought against it by Iran. Since my last report, the Department has filed six pleadings in government-to-government claims based on contracts for the provision of goods and services. Two such claims have been settled, so 35 government-to-government claims remain pending.

Since my last report, the Tribunal has held two hearings on government-to-government contract claims. On October 5 - 8, 1987, it heard Iran's claim against the United States for allegedly defective helicopters sold to Iran under the Foreign Military Sales program. On November 4 - 5, a hearing was held on Iran's claim for the return of military property held by the United States Government.

The Tribunal has recently issued opinions in two claims brought by Iran concerning the interpretation and/or performance of various provisions of the Algiers Accords. On May 4, 1987, the Tribunal denied Iran's request to find the United States responsible for the payment of Tribunal awards in favor of Iran against nationals of the United States. On September 30, 1987, the Tribunal issued a decision holding that it has the authority, inherent in the Algiers Accords, to award interest as compensation for damages suffered. This was the position advocated by the United States. The Tribunal further stated that each of its three chambers may decide in each case whether interest should be awarded and how it should be calculated.

5. Since my last report, two bank syndicates have been paid a total of $989,751.88 for interest accruing for the period January 1 - 18, 1981 ("January Interest''), on the basis of settlements reached with Bank Markazi Jomhouri Islami Iran ("Bank Markazi,'' Iran's central bank). These payments were made from Dollar Account No. 2 at the Bank of England. Settlements have been signed between Bank Markazi and three other bank syndicates for the payment of $691,912.40 from Dollar Account No. 2. Apparently there are certain other settlements awaiting Bank Markazi's approval.

6. Since my last report, there have been no amendments to the Iranian Assets Control Regulations, 31 C.F.R. Part 535, administered by the Office of Foreign Assets Control at the Treasury Department.

7. The situation reviewed above continues to implicate important diplomatic, financial, and legal interests of the United States and its nationals and presents an unusual challenge to the national security and foreign policy of the United States. In particular, the Iranian Assets Control Regulations issued pursuant to Executive Order No. 12170 continue to play an important role in structuring our relationship with Iran and in enabling the United States properly to implement the Algiers Accords. I shall continue to exercise the powers at my disposal to deal with these problems and will continue to report periodically to the Congress on significant developments.

Ronald Reagan

The White House,

November 20, 1987.