Within the legal framework for the settlement of Iran-United States disputes and the release of the American hostages, Iran and the U.S. agreed that American claims against Iran and by Iran against the U.S. should be resolved through impartial and binding international arbitration to resolve claims and counterclaims between the two countries.

The settlement agreement between the two countries comprised two declarations of commitment signed by the parties on Jan. 19, 1981. In the first declaration (Declaration of Algiers), the U.S. and Iran made commitments regarding their future political relations, the release of U.S. nationals in Iran, and the freeing of Iranian assets. The Declaration of Algeria contains a statement of general principles, a pledge of non-intervention in Iranian affairs by the U.S., and several agreements concerning the return of Iranian assets and the settlement of U.S. claims. The second declaration, the Claims Declaration, provided for the establishment of an Iran-U.S. Claims Tribunal (Claims Tribunal) and specified, inter alia, the Claims Tribunal’s jurisdiction, the method by which its members would be selected, the applicable choice of law rules and principles, and matters of procedure.

Under Art. 2 of the Claims Declaration the Claims Tribunal was set up for the purposes of deciding claims of nationals of the U.S. against Iran and claims of nationals of Iran against the U.S., and any counterclaim which would arise out of the same contract, transaction or occurrence that constitutes the subject matter of these claims, which claims and counterclaims were outstanding on Jan. 19, 1981, whether or not filed with any court, and arises out of debts, contracts (including transactions which are the subject of letter of credit or bank guarantees). Certain groups of claims were specifically excluded from the Tribunal’s jurisdiction. It is significant that claims arising under a binding contract between the parties specifically provide for Iranian exclusive jurisdiction remained within the sole jurisdiction of the Iranian courts in accordance with the single Article Act enacted by the Majlis (Iranian Parliament) on Jan. 14, 1981. The Tribunal has jurisdiction over official claims of the U.S. and Iran against each other arising out of contractual arrangements between them for the purchase and sale of goods and services. Furthermore, the Tribunal was given jurisdiction over any dispute as to the interpretation or performance of any provision of both the Algiers Declaration and the Claims Declaration.

It should be noted that claims by banks against Iran had already been settled and the Claims Tribunal has no jurisdiction to hear claims by American banks