U.S. Joins Effort to Bar Claims on Iraqi Coffers

The New York Times

December 10, 2008 –  George Charchalis says he has never really recovered from the ordeal he endured after Saddam Hussein’s Iraq invaded Kuwait in August 1990.

He hid for more than a month in Kuwait City but was ultimately arrested, “roughed up pretty good” and taken to Iraq. He was held there for nearly three months as a human shield against American bombing.

After the 2003 invasion of Iraq, Mr. Charchalis, now 78, had every reason to believe that he and 240 other Americans held during the Persian Gulf war of 1991 would be compensated under expansive laws that allow Americans to claim assets of foreign governments like Iraq’s. President Bush, after all, had seized Iraqi assets just before the war and paid other people used as human shields nearly $100 million.

But, illustrating the stark trajectory of the Bush administration’s policy in Iraq, the president has joined a new effort to block further claims, at least for the immediate future. The rationale is that the claims – some small like Mr. Charchalis’s, others amounting to billions of dollars – could bankrupt the Iraqi government, endanger its fragile democracy and virtually shut government business, even oil exports.

So Mr. Bush supports extending powerful legal measures put in place by the United Nations Security Council in 2003 to protect Iraq against such claims. With the administration’s blessing, Iraq asked the Council to renew the protections for another year.

“With oil revenues generating more than 95 percent of the government’s resources,” Prime Minister Nuri Kamal al-Maliki of Iraq wrote to the Council on Tuesday in a letter obtained by The New York Times, “these claims could affect reconstruction and economic transformation taking place in Iraq, and consequently constitute a grave threat to Iraq’s stability and security, and therefore to international peace and security.”

Some of those with claims say that Mr. Bush’s reversal amounts to a betrayal of Americans who were harmed by the former government and who once enjoyed the moral and legal support of the American government.

“I applaud the toppling of Saddam,” said Clifford Acree, a retired Marine pilot who was held as a prisoner of war by Iraq and tortured in 1991. “I welcome the development of democracy in Iraq.

“I just don’t want to ignore what was done,” he said. “I just don’t want to give the Iraqis a free pass when it comes to accounting for the past.”

Iraq’s foreign minister, Hoshyar Zebari, said Iraq would like to settle the claims if they could be reduced substantially through negotiations, perhaps as part of an all-encompassing package like the settlement with Libya in the case of Pan Am Flight 103.

Meanwhile, Mr. Zebari said, Iraq cannot risk the shutdown of government operations and thus intends to press for a vote by the Security Council before it adjourns for the year.

“This extension will give us some relief for another year, give us some breathing space,” he said.

A White House spokesman, Gordon D. Johndroe, said the administration supported the extension for now, but also “made it clear to the Iraqis that it is important to address the legitimate claims of our citizens.”

The scope of the claims, and the politically charged nature of some, could make a resolution difficult.

Iraq still owes some $26 billion on claims, mainly from Kuwait, that have been handled by the United Nations Compensation Commission, a body set up in 1991 to deal with reparations.

Iraq also has about $50 billion in debts to other countries. Iraq’s finance minister, Bayan Jabr, said Iraq also owed as much as $7 billion to private companies.

Legal challenges could expose Iraq to still more. Kuwait Airways also won a roughly $1 billion judgment in Britain against Iraq’s national airline in a case stemming from the first gulf war. Amid the welter of American lawsuits are some that claim that Mr. Hussein’s government had a hand in international terrorist acts, including the attacks of Sept. 11, 2001.

Although international law binds them to Mr. Hussein’s debts, senior Iraqi officials are increasingly reluctant to pay for Hussein-era abuses.

The United Nations protections against international claims and seizures of assets were part of the Security Council resolutions that authorized the American military presence in the country. President Bush then provided a second layer of protection by signing an executive order essentially saying that Iraqi money in the United States could not be seized. He worked with Congress to further reduce the risk to the money.

Iraq and the United States signed new agreements in November to establish the new conditions for American troops to remain in Iraq for the next three years. But the financial protections expire with the Council resolution on Dec. 31, and Mr. Bush’s executive order expires in May 2009.

The expiration of the United Nations mandate also raises other issues. The Council resolutions created a structure for handling Iraq’s oil revenues. The revenues go to an account called the Development Fund for Iraq at the New York Federal Reserve Bank. Five percent of the fund is diverted to the compensation commission to pay off the reparations.

Iraq made it clear that it wanted to reduce or eliminate the percentage set aside for claims.

“This is obscene that Iraq has to pay 5 percent of Iraqi oil revenues to pay these claims,” said a senior Iraqi official, speaking on the condition of anonymity because of delicate relations between Iraq and Kuwait. “At a time when we are so desperate for funding for our own reconstruction and security, it would be smarter for the Kuwaitis to invest in the future of Iraq rather than profiting from the miseries of the past.”

They have also suggested that the United Nations board that oversees the oil money, now run by Western financial experts, be replaced with one consisting of Iraqis and probably led by Abdulbasit Turki Saeed, president of the Board of Supreme Audit. The United States is opposed, administration officials said, leaving the outcome unclear. Mr. Maliki, in his letter to the Security Council, did not request a change but rather an extension.

The risk to Iraq’s assets is far from theoretical.

After Kuwait Airways won judgments against Iraq and its national airline, a Canadian court ruled last summer that the Kuwaitis could seize passenger jets that Iraq was having built under a contract with Bombardier, a Canadian company.

The legal foundations for the claims date from the 1990s, when Congress enacted a law allowing Americans to sue foreign governments accused of sponsoring terrorism, including Iraq. Claims under the law were largely symbolic, because they involved cases against governments that refused to recognize the American jurisdiction. But in 2002, Mr. Bush signed legislation allowing payment for judgments from the frozen assets of terrorist states.

In 2003, on the eve of the Iraq war, he seized more than $4 billion in frozen Iraqi assets in the United States and paid a portion – $96 million – to 180 Americans held as human shields who had won court judgments.

He distributed the rest to the provisional authorities in newly occupied Iraq, and in May 2003, he waived Iraq’s liability under the laws, effectively blocking payment for additional claims.

That left claims like Mr. Charchalis’s in limbo.

Mr. Charchalis was part of a second group of 240 human shields whose case had not yet been heard when the first group received its payment from Iraq’s foreign assets. A landscape architect, Mr. Charchalis had gone to Kuwait to work on a project to turn the desert into gardens.

He was arrested a month after Iraq’s invasion in August 1990 and taken to Baghdad, then to a chemical plant near Samarra, where he was held until Dec. 2, when he and 14 others were released after an appeal from the former boxer Muhammad Ali.

Mr. Charchalis, now living on Social Security, criticized the administration for taking Iraq’s side and disputed the notion that his claim would undermine Iraq’s ability to rebuild.

“It just seemed terribly unfair that an American citizen couldn’t get compensation when we’re over there spending, what, $10 billion a month,” he said.

A lawsuit involving 17 prisoners of war has been even more vexing for Mr. Bush because of the political delicacy of opposing Americans who were shot down during the Persian Gulf war of 1991 and tortured in Iraqi captivity. In 2002, they won a default judgment against Mr. Hussein’s government, and in July 2003, a court awarded them $959 million.

After Mr. Hussein’s fall, however, Mr. Bush’s administration fought efforts to pay the claim. Later in July 2003, the Court of Appeals in Washington ruled that the plaintiffs should look elsewhere for payment, effectively dismissing the case.

In 2007, lawmakers passed an amendment that would have revived the cases and allowed the claimants to go after Iraqi assets in American banks and elsewhere. But Mr. Bush vetoed the bill after, officials said at the time, Iraq complained that the law would force it to remove its money from American banks.

John Norton Moore, director of the Center for National Security Law at the University of Virginia School of Law, who represents the prisoners of war, said the administration had made no effort to force Iraq to settle the claims.

“The fairness for American prisoners of war, tortured by the enemy is a matter of national honor,” he said. “It is not only wrong to put the debts of corporations like Hyundai ahead of prisoners who were tortured. It is an insult to the nation.”

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