Next to Pearl Harbor and 9/11, the Iranian seizure of the U.S. Embassy in Tehran on November 4, 1979 and the detention of fifty-two American diplomats for 444 days constituted the most consequential foreign attack on the United States in modern American history. Mark Feldman’s oral history provides a riveting account of the fraught diplomacy that finally freed the hostages as well as the novel legal work that protected the financial interests of American banks, investors, and contractors. As a deputy legal adviser in the State Department, Feldman was deeply involved in managing the legal issues arising from U.S. sanctions against Iran and the main drafter of the critical claims agreement with Iran. As acting legal adviser in the first months of the Reagan administration, he had a lead role in implementing the Algiers Accords.
Iran refused to engage with the Carter administration until September 1980 and waited until the eve of the U.S. presidential election in November to negotiate through the government of Algeria. There were no direct negotiations between Washington and Tehran. As Feldman recounts, Iran tabled a Christmas surprise coupling agreement to arbitrate American claims with a demand for a twenty-four-billion-dollar deposit supposedly covering Iranian assets frozen by the United States and stolen by the former Shah. At this point, President Carter made the decision to ignore impossible demands. An Algerian delegation was summoned to Washington for consultation and Deputy Secretary Warren Christopher led an inter-agency team to Algiers for the duration of Carter’s term.
The Algiers Accords consist of two Declarations issued by Algeria—accepted by the United States and Iran—providing for the release of the hostages, lifting of the Iranian asset freeze, payment of loans to American banks, and creation of an international tribunal (backed by a billion dollar fund) for the settlement of American property and contract claims. The Accords were implemented in the United States by executive orders later upheld by the Supreme Court. To be successful, the Iran Claims Agreement had to deal with complex substantive and procedural issues in a few pages that would protect U.S. interests in a variety of contingencies and that could be understood and accepted by a hostile, revolutionary regime. The final text runs less than four pages.
As Feldman’s oral history describes, however, implementing the Accords required marshaling eight billion dollars of Iranian assets overnight. A team of lawyers worked in the Cabinet room on inaugural eve as bands played for Ronald Reagan outside the windows, and later that night President Carter had to intervene personally to transfer billions from American banks when the telex codes did not work properly. Still, Iran held the hostages’ plane on the ground until President Reagan was inaugurated at noon, January 20, 1981.
Feldman and dozens more attorneys in government and private practice helped policy makers manage the Iran Hostage crisis. Furthermore, Feldman’s oral history demonstrates the immense diversity of the work that lawyers pursue in the Department of State in relation to foreign affairs. It describes his engagement with POWs in Vietnam; the Hijacking agreement with Cuba; Panama Canal treaties; investment disputes in Peru and Chile; the 1970 UNESCO Cultural Property Convention; maritime boundary negotiations with Canada, Mexico, and Cuba; foreign bribery scandals and the FCPA; and the Foreign Sovereign Immunities Act of 1976. This oral history is a must-read for those interested in careers that tie together law, foreign affairs, and public service.
Mark Feldman’s interview was conducted by Robin Matthewman beginning on April 28, 2021.
Read Mark Feldman’s full oral history HERE.
Read more about the Iran hostage crisis: Iran Hostage Crisis Part I and Part II, The Iran Hostage Crisis as Seen from the Home Front, 444 Days Memoirs of an Iranian Hostage, Lack of Confidence in Government Protection, and Canadian Caper Argo and Escape from Iran.
Drafted by Evan Clark
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Excerpts from Feldman Oral History:
“Attachments were a two-edged sword. They helped pressure Iran to release the hostages and complicated achieving that goal by bringing the claims of American citizens secured by attachments to the fore.”
Early Responses to the Crisis:
Q: Mark, were you still working at the State Department on November 4, 1979?
FELDMAN: Yes, I was. I’ll never forget that date. A group of Iranian students overran the American embassy in Tehran and took fifty-two U.S. diplomats hostage. This action precipitated a drama that captivated the nation for 444 days and made Jimmy Carter a one-term president. There is a straight line between the hostage crisis in 1979–80 and the hostility between Iran and America today.
It is hard to recreate the atmosphere of those 444 days. There were yellow ribbons everywhere, and the whole nation was riveted to newscaster Ted Koppel’s daily, late night TV show dedicated to the hostage crisis.
When the embassy was first taken, the administration expected the leader of Iran, Ayatollah Khomeini, to restore order. After all, the seizure of an embassy was an extraordinary violation of international law. But Khomeini did the opposite. The regime embraced the student action and rejected all efforts to open negotiations for almost a year. Anti-American passions were so high in Iran that the most radical mullahs were able to exploit the crisis to purge all the moderates in the Khomeini coalition.
Q: Why were anti-American passions so high?
FELDMAN: That is a long story dating back to 1953 when the U.S. and the UK toppled the Mossadegh regime and installed Reza Pahlavi as Shah. The immediate catalyst was Carter’s decision to allow the ailing Shah to come to the United States for medical attention when he was forced from the Peacock Throne by the Khomeini revolution. A great deal has been written about the Carter administration’s handling of Khomeini’s return from exile to Iran and of the hostage crisis itself. We can’t cover all that ground here, but I’ll make a few personal observations on the question of whether Jimmy Carter lost Iran.
I agree with the critics on two points: one, the emergence of Islamic Iran has been a disaster for America and the world; two, the administration was not paying enough attention as the Shah’s regime collapsed in 1978 and Khomeini returned home to screaming thousands. President Carter and his top aides were preoccupied with an extraordinary agenda including the Panama Canal, China, and the Mid-East, and it didn’t help that Ambassador William Sullivan and Carter’s National Security Adviser Zbigniew Brzezinski were at cross-purposes. However, America does not control history. In this case, as in China in the 1940s, internal forces controlled events. I am particularly troubled by the charge that Carter lost Iran by failing to urge the Shah to suppress the demonstrations by military force. Experts say that neither the Shah nor the army were up to that task. I ask who could think Carter should have recommended slaughtering the population. The Shah was through; thousands were in the street. A blood bath would have left an indelible stain on our country, and there is no reason to believe it would have led to a good result.
Q: Why don’t you begin by describing your role in the hostage crisis and, perhaps, give us an outline of the topics you want to cover.
FELDMAN: To begin, I have to say that my work on the Iran hostage crisis for the Carter administration, although a small part of the larger effort, was the most absorbing and satisfying work of my career. I don’t think historians appreciate what a success it was for the administration to bring the hostages home safely without paying ransom and, in the process, to obtain billions in compensation for American investors, contractors and banks. The most detailed account of the hostage crisis and the Algiers Accords is found in American Hostages In Iran: The Conduct of a Crisis [Yale 1985] put together by the Council on Foreign Relations. I get a footnote at p. 312.
It was thrilling for me to stand among the crowd at the White House to welcome the diplomats home on January 28, 1981. As reported on the Times front page:
“In an emotion-charged ceremony on the South Lawn of the White House, President Reagan today welcomed home the 52 Americans formerly held hostage in Iran and promised ‘swift and effective retribution’ for attacks on American Government employees in foreign lands. Earlier, thousands of citizens waving yellow ribbons and balloons cheered the former hostages through the streets of Washington as a motorcade led by Vice President Bush bore the freed Americans to a private reception by President and Mrs. Reagan in the Blue Room of the White House. Mr. and Mrs. Reagan watched from an upstairs window with tears in their eyes as the motorcade rolled slowly up a drive lined by a Marine honor guard. Moments later, as the couple shook hands with the former hostages in the Blue Room, Mrs. Reagan suddenly exclaimed ‘Oh, I can’t stand this!’” and began hugging and kissing the freed Americans.” Howell Raines, Special To the New York Times, Jan. 28, 1981.
Standing against the White House wall near the line of marine guards, I couldn’t help noticing when a cigarette pack fell out of a marine’s cap. His commander, not amused, speared the pack with his sword; the marine broke into sweat.
Q: Can you explain the role you had in helping to resolve the hostage crisis?
FELDMAN: To put my work in context, hundreds of lawyers in various government agencies and the private sector played a role in this drama. From day one, the policy of the Carter administration was to obtain the safe return of the hostages without paying ransom to terrorists or otherwise embarrassing the United States. On November 14, 1979, President Carter issued an Executive Order [EO] freezing Iranian assets in the United States and in U.S. banks abroad and imposing a sweeping embargo on U.S. trade with Iran. It took a long time, but this economic pressure eventually bore fruit in forcing Iran to negotiate. As time passed, it became clear that a hostage agreement would have to deal with the financial issues as well.
As a deputy to Legal Adviser Roberts Owen, I worked with Treasury on the regulations implementing the sanctions [trade embargo and asset freeze], helped manage the government’s response to the numerous lawsuits brought by private parties in the United States, and consulted with dozens of lawyers in the private sector representing banks, investors and contractors with claims against Iran. Looking back, my principal contributions were one, drafting the Iran-U.S. Claims Agreement incorporated in the Algiers Accords and two, implementing the accords as acting legal adviser in the first months of the Reagan administration. That involved presenting the accords to Congress and the incoming administration, helping to draft regulations implementing the accords, and establishing the Iran Claims Tribunal at The Hague. See Testimony on Algiers Accords [Iran Claims Tribunal], Hearing, Senate Foreign Relations Comm., 97 Cong., 1s Sess., February 17, 1981 pp. 185-191.
Q: Were you involved in the decision to freeze Iranian assets?
FELDMAN: No, and I was shocked that the announcement by the secretary of the treasury pretended that Iranian assets were frozen because of financial issues with Iran, not because Iran occupied our embassy and held American diplomats hostage. Apparently, Secretary William Miller was concerned that freezing foreign bank deposits in the United States for political reasons would spook foreign depositors, particularly Saudi Arabia, and damage our banks. In my view, the pretext lacked all credibility and undercut our strong legal rationale for vigorous counter-measures. Happily, that theory soon disappeared from our pronouncements.
Q: When did you first become involved?
FELDMAN: In December 1979, when Iran’s central bank, Bank Markazi, sued the United States in London and Paris to block President Carter’s order freezing Iranian deposits in U.S. banks in England and France. The suit was a serious challenge to the extra-territorial application of U.S. sanctions which was often a sensitive issue with close U.S. trading partners. An interagency team led by Assistant Attorney General Alice Daniels was sent to London to seek assistance from HMG with the courts. For me, the highlight of the trip was a conference with Sir Patrick Neill, Warden of All Souls at Oxford. Daniels was hoping to persuade the UK government to ask the High Court [then the trial court] to apply the act of state doctrine to bar judicial review of the Carter freeze order. She asked Neill to prepare a legal opinion for the British authorities. We sat around a large, wooden, round table in the All Souls conference room while Sir Patrick wrote out his opinion in long hand on a yellow pad––a charming scene, out of Dickens. I should add that I very much enjoyed being hosted by Kingman Brewster, a professor of mine at Harvard Law, who was Carter’s ambassador to the Court of St. James.
Q: Did the mission succeed?
FELDMAN: Not in the way we asked for. The Brits took the position that there was no act of state doctrine in English law and that it would be inappropriate for the government to intervene with the judiciary. [Whatever the case in 1979, I understand that English law now recognizes the act of state doctrine in some form.] However, the suit never troubled us. The deposits frozen by President Carter in London remained frozen for the duration of the crisis. As far as I know, there were no proceedings in the case. HMG has its own way of dealing with problems like this.
In France, likewise. I went to Paris from London on a solo mission to meet with U.S. Ambassador Arthur Hartman to see what could be done with the French government. I knew Hartman well from the Vietnam days when he was a senior assistant to Under Secretary Nicolas Katzenbach, and I enjoyed seeing him in Paris. So, I stood by while he visited the Foreign Ministry—the Quai D’Orsay. When Arthur came back, he said, “Okay,” and I said, “Thank you.” The deposits frozen in France remained frozen for the duration. By the way, Hartman went on to be U.S. ambassador to Moscow, and we became neighbors in DC when I moved in with Mimi Feinsilver in 2011. Washington can be a small town.
Q: What happened next?
FELDMAN: Around this time I had a tense conversation with my boss, Bob Owen. The White House was frustrated that Khomeini refused to talk with us or to any intermediary and was becoming nervous as the crisis dominated the news. I casually mentioned that this could go on for a long time. I told him that I had been through a similar situation in the Johnson administration when North Korea captured a U.S. intelligence ship, the Pueblo, and held on to the crew for almost a year. Bob was a calm person, but this upset him. We did not know it, but the worst was yet to come.
Q: The disaster in the desert?
FELDMAN: Exactly, but I’m getting ahead of my story. The next date on my legal calendar is December 19, 1979.
Q: What happened then?
Assets and Claims
FELDMAN: On that day, Treasury authorized private litigants to file suits against Iranian entities, including prejudgment attachments of Iranian assets frozen in the United States. This order unleashed a flood of litigation that became a big part of my Iran workload. The original Iran Asset regulations issued by the Treasury Office of Foreign Assets Control [OFAC] prohibited all transactions involving interests in Iranian property including attachments by claimants. When the administration’s hopes for the prompt release of the hostages faded, the decision was made to turn up economic pressure by unleashing private claims in U.S. courts. Hundreds of suits were filed by parties hoping to establish priority in case the government authorized execution down-the-road.
Q: Why did these suits increase your workload?
FELDMAN: Good question. Every action brought in the United States against a foreign government or government agency falls under the Foreign Sovereign Immunities Act of 1976 [FSIA]. [Remember, I helped draft that statute.] The FSIA is a complex measure that leaves many questions open for judicial decision. Every action brought against Iran raised difficult questions of interpretation important to the U.S. government and to all of our trading partners. And judges confronted with difficult questions in a sensitive diplomatic environment were quick to ask for the State Department’s views.
The White House established an interagency committee chaired by Associate Attorney General John Shenefield to coordinate the government’s response. I prepared the first draft of answers to judicial inquiries, but it quickly became apparent that many of these questions raised serious conflicts of interest between the government and the claimants. For diplomatic and political reasons, it was untenable for the administration to side with Iran on these issues.
Q: How did the administration deal with that?
FELDMAN: The minute White House Counsel Lloyd Cutler saw the problem, he decided we could not answer these questions. We had to ask the courts to suspend proceedings in these cases for some period of time. The Justice Department duly asked the courts for suspension, but some judges refused. To the best of my recollection, we did not address those questions while the hostages were held in Tehran.
Q: Did the attachments complicate the negotiations as well?
FELDMAN: They did. Attachments were a two-edged sword. They helped pressure Iran to release the hostages and complicated achieving that goal by bringing the claims of American citizens secured by attachments to the fore. We knew Iran would insist on the return of its assets and termination of litigation as a condition of returning the hostages. From the outset, the administration had linked the asset freeze not only to release of the hostages but to protection of the interests of American nationals with claims against Iran. There were two basic options for a claims settlement: either a lump sum payment or a complex procedure for binding third-party arbitration. International claims was an important part of my portfolio in the Office of the Legal Adviser, so I began looking at past precedents going back to the Mexican petroleum expropriations in the early 1900s. My workload also included numerous consultations with claimants, particularly when negotiations finally began in November 1980.
Q: What numbers are we talking about here? How big was the pool of Iranian assets as compared to the amount of the claims?
FELDMAN: Everyone kept asking those questions. The numbers were huge, but it was extremely difficult to obtain firm figures. Estimates of frozen assets ranged up to twelve billion dollars. Ultimately, the figure was around nine billion. U.S. bank claims for outstanding loans were four billion, and there were potentially billions more for expropriated investments, including petroleum interests, and the claims of American contractors who had had a major stake in the Iranian economy under the Shah. The Khomeini regime targeted American interests early on and many of these claims arose before the hostage-taking. Whatever American business activity remained was seized or shuttered after the Carter freeze order on November 14, 1979.
Q: What’s the next date on your calendar?
FELDMAN: April 7, 1980. Before then, the administration was busy with numerous initiatives, diplomatic and otherwise, to open negotiations with Khomeini. All failed, including a personal mission by UN Secretary General Kurt Waldheim in January and a UN Commission in March. On April 7, Khomeini slammed the door, ruling that the hostages would remain in the hands of the students and their fate would be determined by the Majlis [parliament] to be convened in May. The next day President Carter broke relations with the Islamic Republic, expelled Iranian diplomats and, I presume, turned to the military option.
Q: That did not go well.
Desperate Measures: Rescue Attempt Fails
FELDMAN: Many people believe that Jimmy Carter lost his presidency on April 24, 1980 when a secret mission by the Army’s Delta Force to extract the hostages from Tehran crashed and burned in the Iranian desert with eight American fatalities. A 2020 film titled Desert One presents a detailed and vivid description of the military operation.
Q: Were you involved in planning the rescue mission?
FELDMAN: No. The first inkling I had came from the German Foreign Office a few days before the event. I happened to be in Bonn on other business with the head of the North American desk, a certain Herr von Richtofen, grandson of the famous World War I ace pilot, the Red Baron. He asked me whether the legal office had heard anything about military options to rescue the hostages. I said, “Not a word.” He replied, “Just what I was afraid of.”
Q: Where were you when the news broke?
FELDMAN: With my wife, Marcia, in Paris at the Hotel Crillon. She had been traveling in Portugal with Edward P. Morgan for the German Marshall Fund, and I scheduled my visit to Bonn so we could meet in Paris. We were stunned by the disaster. It was a national humiliation and we worried that the Iranians might retaliate against the hostages.
Q: Yes. That was a very dramatic failure and highly embarrassing for the United States. Didn’t Secretary of State Cyrus Vance dissent and resign over it?
FELDMAN: Yes. But he told Carter privately before the operation saying he would resign whether the operation succeeded or failed.
Senator Edward Muskie of Maine became secretary for the remainder of Carter’s term.He was a delightful person. Personally, I thought the mission was extremely dangerous and could have turned out worse. If Delta Force had reached Tehran, the hostages might have been killed. And I worried that the White House might have been influenced by domestic political considerations.
“I always hoped that the small claims could be settled by lump-sum agreement with Iran, and I was gratified when that was accomplished.”
Drafting the Iran-U.S. Claims Agreement:
Q: So, what happened next?
FELDMAN: One development was the beginning of informal talks between American banks and the Iranian Bank Markazi that contributed eventually to the financial piece of the Algiers Accords. From my perspective, a key development occurred in June when Treasury asked Roberts Owen to begin drafting an arbitration agreement to submit to Iran. The administration had concluded that it would be impossible to negotiate a comprehensive financial settlement before the election. Treasury hoped to negotiate payment of the bank loans and to establish a process to resolve the claims of American investors and contractors. Initially, Owen called on Jerry Rosberg, our counselor on international law, to draft the agreement. I pitched in and together we prepared a twenty-five page document before negotiations began. We’ll spend a lot of time on the claims agreement. First, though, let’s get to the Iranian decision to negotiate.
Q: Meanwhile, the Shah died in July?
FELDMAN: Yes, but the first hints of a break in the stalemate didn’t come until September—through a German channel.
On September 12, 1980, Khomeini announced four conditions for release of the hostages. Khomeini’s four points were: one, return of the Shah’s wealth to Iran; two, cancellation of U.S. claims against Iran; three, unfreezing Iran’s assets in the United States; four, U.S. guarantees of non-interference in Iran’s internal affairs. The Majlis approved these conditions on November 2, 1980––two days before the U.S. presidential election. On November 3, we received a diplomatic note from Algeria confirming that Iran was ready to negotiate on the basis of the four points through the good offices of the Algerian government. The hostage negotiations proceeded to conclusion via mediation by Algeria. There were no direct contacts between Washington and Tehran.
Q: So, Carter was running for reelection and on November 4, Ronald Reagan was elected president. Whether successful or not, the attempt to release the hostages was going to affect the elections somehow. How did that play out?
FELDMAN: The election and the inauguration set a deadline. President Carter told the Iranians that any agreement with his administration would have to bring the hostages home by January 20. Reagan let it be known that he was not necessarily committed to negotiations. He wanted Carter to resolve the issue.
The political question remains controversial. Some years’ later, Gary Sick, who had the Iran portfolio on Carter’s NSC staff, wrote a book about the October Surprise propounding the thesis that the Reagan campaign, particularly George H.W. Bush, had contacted Iran to dissuade them from resolving the hostage crisis before the U.S. election in the way that the Nixon campaign had encouraged South Vietnam’s President Thieu not to negotiate peace with Hanoi before the 1968 election. This charge was rejected by a bipartisan study, but new information has raised serious questions.
Q: What do you think about that? Do you think that happened?
FELDMAN: The evidence is suggestive. I remember being astonished that the Republican National Committee put out a press release in September 1980 welcoming Khomeini’s four points and urging President Carter to accept them. That was impossible. We could not waive all U.S. claims or return the Shah’s wealth to Iran.
Q: How did we respond to the Iranians’ four points?
FELDMAN: Deputy Secretary Warren Christopher carried the U.S. response to Algiers on November 10. That was the first step in a complex negotiation with many moving parts and dramatic twists culminating with the release of the hostages on January 20, 1981, minutes after President Reagan’s inauguration. We can’t cover the whole scenario here. Let’s turn to the claims negotiation which was my central focus.
The Iran-U.S. Claims Agreement
As I said before, Jerry Rosberg and I began work on a draft arbitration agreement in June and developed a twenty-five page draft that provided the following: Property and contract claims of U.S. nationals would be submitted for binding arbitration to an international tribunal composed of nine members: three appointed by Iran, three by the United States and three neutrals appointed by the six. The tribunal would sit in The Hague and would follow the arbitration rules adopted by the United Nations Commission on International Trade Law [the UNCITRAL Rules]. Awards would be paid from an escrow account funded by frozen Iranian assets. Claimants with large claims would present their claims directly to the Tribunal. The United States government would represent claims under 250,000 dollars. Among other details, the tribunal would generally function in chambers of three arbitrators.
The key concepts were one, the awards had to be final, binding, enforceable, and, hopefully, funded in advance; two, the process had to work even if the Iranians defaulted and never appeared in The Hague––the UNCITRAL Rules provided for majority awards; three, the Tribunal needed considerable authority, independent of the Parties, to manage its own affairs and procedures. To that end, the agreement specifies that the Tribunal can adapt the terms of the UNCITRAL rules if it chooses. I always hoped that the small claims could be settled by lump-sum agreement with Iran, and I was gratified when that was accomplished.
Q: I take it the twenty-five page draft was superseded.
FELDMAN: Right. We never tabled that document. I think the team was working off a one-page concept paper, but I don’t have it. The Iranians finally agreed to claims arbitration and an escrow account on December 21, 1980, but coupled those concessions with an unexpected, unacceptable demand for a twenty-four billion dollar deposit [fourteen billion dollar frozen assets plus ten billion dollars for the Shah’s wealth]. As part of President Carter’s final effort to salvage the negotiations, an Algerian delegation came to Washington on Christmas day. For good reasons, Christopher decided that the Algerians could not handle a twenty-five page draft in this context and asked Bob Owen to boil it down. One day Bob called me into his office and handed me a hand-written, one-page draft. He said, Chris asked me to draft a short claims agreement and not to talk to anyone about it. I’m going to confide in you. Please make it better, but don’t talk to anyone about this. I said I would try, but I didn’t think we could do it with one page.
But, thanks to the in-depth work that Jerry Rosberg and I had done, I was able to come up with something that worked. As I recall, my first cut was about four pages and the draft Bob presented to the Algerians was about eight. This assignment also gave me the opportunity to make some changes in the text to address issues that had come up in the negotiations, including some creative language on the law to be applied by the tribunal. If we have time, we can get into some of that later. I discussed drafting the claims agreement at an NYU [New York University] Conference, Revolutionary Days: The Iran Hostage Crisis and the Hague Claims Tribunal, A Look Back [Juris 1996] at pp. 91-111.
Q: Did you get to meet with the Algerians?
FELDMAN: Yes. I had a useful discussion with them over lunch, and I was invited to pop-in to the negotiations for a few minutes when the claims agreement came up. My main take-away there was to shorten the agreement again. The Algerians didn’t think the Iranians could handle eight pages of legalese. The final text is only three and a half pages, but we preserved all the essentials.
Q: What were the substantive concerns of the Iranians to the draft, if any?
FELDMAN: As I recall, the Algerians raised two main Iranian concerns: the tribunal should not be open to U.S. companies controlled by third country nationals, or to claims under contracts providing for exclusive jurisdiction of Iranian courts. The first was easily fixed; the second bedeviled us to the end.
Q: Was the agreement reciprocal?
FELDMAN: Of course. It applied to claims of American nationals against Iran and to claims of Iranian nationals against the United States. Further, Iran insisted that the agreement include inter-governmental claims, e.g., for undelivered aircraft sold to the Shah. The tribunal is still working on the latter as we speak––forty years later.
Q: What about hostage claims? I guess they had to be waived?
FELDMAN: Yes. There was no choice. That was the price of freedom for the hostages. We understood that the families had been briefed and accepted the necessity. As you know, in recent years, hostage claims have become a political problem.
Q: Why was the tribunal located in The Hague?
FELDMAN: Jerry Rosberg and I picked The Hague and the UNCITRAL Rules, because we thought Iran would be more likely to accept them than any alternative. The Hague was, and is, the historic location of major international tribunals including the World Court and, today, the International Criminal Court [ICC]. Many American attorneys, including Lloyd Cutler, would have preferred London for the amenities and because their firms had offices there. Frankly, I never knew that Christopher suggested London to the Iranians. That was a non-starter. To my knowledge, every paper presented to Iran named The Hague.
“The Majlis insisted on excluding contracts with Iran court clauses from the jurisdiction of the tribunal. That was a major problem; we didn’t know how many there were and what language was used.”
Overcoming an Eleventh-Hour Curveball:
Q: Let’s go back to the Christmas surprise. How did the Carter team deal with that?
FELDMAN: Basically, by following the Kennedy-Khrushchev precedent for resolving the Cuban Missile Crisis. They ignored the hostile rhetoric and impossible demands. At President Carter’s direction, Christopher, Owen and the team flew to Algiers on January 7, 1981 to confer directly with Algerian Foreign Minister Benyahiya. They expected a short visit, but stayed in Algiers until January 21, 1981 after the Reagan inauguration.
Q: What were you doing during those fourteen days?
FELDMAN: Well, Bob Owen was with the first team in Algiers. Bill Lake, his principal deputy, was in London with the second team [mostly Treasury] negotiating financial issues with the U.S. banks, the Iranian central bank, and coordinating with the Bank of England. I was the State attorney on the home [third] team following the negotiations hour-by-hour, coordinating positions with the White House, Treasury, and Justice, and providing advice/instructions to the delegation. My main role in this phase was working on Iranian changes to the claims agreement with WH Counsel Lloyd Cutler and Rich Davis, assistant secretary of treasury.
Q: Were you satisfied with the agreement?
FELDMAN: It was a great success, particularly the escrow fund to pay awards, unprecedented in international claims practice, and amazing given the leverage Iran had with the hostages. Warren Christopher and co. did a phenomenal job. Unfortunately, though, the Iranians surprised us by unilaterally submitting the agreed text to the Majlis at the last moment. The Majlis insisted on excluding contracts with Iran court clauses from the jurisdiction of the tribunal. That was a major problem; we didn’t know how many there were and what language was used.
Q: How did the U.S. respond?
FELDMAN: This was a bitter pill to swallow, but time had run out. The best we could do was to add a few words to help claimants argue that the radical courts of revolutionary Iran could not perform the function American contractors had bargained for. The tribunal did not buy my theory, but took care to minimize the damage. I discussed these issues, and my difference with my former boss, George Aldrich, in Ted L. Stein on the Iran-U.S. Claims Tribunal––Scholarship par Excellence, 61 Washington Law Review 997 .
Q: Okay. The claims agreement was finalized in the last hours of the Carter administration. But that was only one piece of the settlement.
FELDMAN: Yes. The package included two declarations issued by the government of the Democratic and Popular Republic of Algeria to the government of the Islamic Republic of Iran and the government of the United States of America and three supporting technical arrangements. The Algiers Accords were initialed by Warren Christopher in Algiers, formally accepted by President Carter and entered into force as an international agreement between Iran and the United States all on the same day, January 19, 1981.
Q: There must have been a huge scramble to marshal the Iranian assets and to organize the safe return of the hostages.
FELDMAN: It was a madhouse. Dozens of people worked around the clock for two days while the Carter administration was packing up and the Reagan crowds began celebrating the inauguration.
Q: What were the major problems?
FELDMAN: The financial settlement was extremely complex. It covered billions of dollars of blocked Iranian assets of different kinds located in different countries to be distributed to different parties on a prescribed timetable. Dozens of private banks, the Federal Reserve Bank of New York, and the Bank of England were engaged. Distribution had to be organized on a schedule that would assure the United States that no assets would be released to Iran until the hostages departed Iranian airspace, and the Iranians needed assurance that they would receive the promised assets promptly on release of the hostages. The trigger finally agreed was certification by the Bank of England that it had in hand mixed assets aggregating to 7.955 billion dollars.
This was all too complicated for me to follow, but I remember one episode that demonstrates how fragile this whole structure was. The Iranian assets needed to trigger release of the hostages were being transferred to the Bank of England overnight, January 19-20, pursuant to bank instructions sent by tested [coded] telex. Unfortunately, some of the telex codes were not properly transmitted. Billions were involved and banks, including the NY Federal Reserve Bank, hesitated to proceed without proper documentation. Around two am the morning of January 20, I called into the Operation Center to see how things were progressing and happened to hear a fragment of conversation between President Carter and Ernie Patrikis, counsel for the NY Fed. Ernie was quite concerned. Carter told Ernie to lie down and take a nap; he, the president, would take care of the problem. Later, I read that Treasury Secretary William Miller made the necessary calls.
Q: So, it must have been a great relief when word finally came that the hostages had been released.
FELDMAN: Yes, and it was sad that the Iranians delayed their release until President Reagan had become president.
I would like to say a word about Inauguration Eve. A large group of us were gathered in the Cabinet Room near the Oval Office working on the executive orders and other documents that would be needed the next day—assuming always that Iran did not renege and the hostages came home. It was Jimmy Carter’s last night in the White House, and he stopped by and looked in on us wondering, I imagine, who were these strangers in his home. I had never seen President Carter before, and he seemed forlorn. It was a sad moment. And it became weird as we worked into the evening. Inaugural crowds were gathering. Bands played outside the windows and there were fireworks. The next day I came back to the White House for some reason and all the wall hangings had been changed. This was now Ronald Reagan’s house.
“Second, we had to draft implementing regulations to be issued by the Treasury Office of Foreign Assets Control [OFAC] that would protect the interests of U.S. nationals as best we could while complying with the Accords and maximizing prospects for approval by the Supreme Court in the challenge certain to come from some U.S. companies.”
Making Judicious Choices to Secure the Accords’ Approval:
Q: Come January 20, Ronald Reagan was president, and Mark Feldman was acting legal adviser of the State Department.
FELDMAN: True. I can’t recall who informed me or whether there was a formal announcement. I served in that capacity until mid-May, 1981.
Q: What more needed to be done to implement the accords?
FELDMAN: A great deal. First, the accords had to be approved by the Reagan transition team—led for L by Paul Wolfowitz and Alan Keyes—and reviewed by Congress. We briefed the Senate on February 17, 1981, Hearing, Senate Foreign Relations Comm., 97 Cong., 1s Sess., February 17, 1981 pp. 185-191, and the Reagan administration approved the accords on February 19.
Q: Was there any doubt the Reagan administration would approve the accords?
FELDMAN: Not a great deal, but we were nervous. They did not like some of the text relating to the Shah and asked whether Reagan might legally reject the accords on grounds of duress. Arthur Rovine, assistant legal adviser for treaty affairs, recounts that he told the transition team that might be a possibility, but asked why President Reagan would want to reject the claims agreement that provided U.S. claimants a funded process for compensation.
Second, we had to draft implementing regulations to be issued by the Treasury Office of Foreign Assets Control [OFAC] that would protect the interests of U.S. nationals as best we could while complying with the Accords and maximizing prospects for approval by the Supreme Court in the challenge certain to come from some U.S. companies. I consulted with the stakeholders and worked with Treasury and Justice on the USG positions. See, e.g., Symposium on the Settlement with Iran, University Miami Law School, Lawyer of the Americas, U Miami J. Int’l Law [Special Issue, Spring 1981].
Third, we had to establish the Claims Tribunal at The Hague. That was a big project.
Q: What were some of the legal issues before the Supreme Court?
FELDMAN: The administration was confident that it had plenary authority to deal with the frozen assets under the International Economic Emergencies Act of 1977, 50 U.S.C. § 1701 et seq and constitutional authority to settle private American claims against Iran relying on Article II and State Department practice from the founding of the republic. But we understood that claimants could argue that the executive could not foreclose remedies provided by the Foreign Sovereign Immunities Act of 1976, if any, and were concerned that some claims might not meet the jurisdictional standards for the tribunal. Rejection by the Supreme Court would have been a disaster.
Q: So, how did you deal with that concern?
FELDMAN: At my suggestion, the Orders and Regulations were careful not to challenge the jurisdiction of the courts in these cases. Rather, we asserted the foreign affairs power to establish rules of decision for the courts. Also, instead of terminating access to the courts, we suspended access pending recourse to the tribunal. Both formulations helped persuade the Supreme Court to approve the Accords as a proper exercise of presidential power. See Dames & Moore v. Regan, 453 U.S. 654 . Iran later persuaded the Claims Tribunal that “suspension” did not satisfy our commitment to terminate all litigation against Iran in U.S. courts; the Tribunal assessed a small monetary penalty for the inconvenience to Iran.
Q: Okay. Let’s talk about establishing the Claims Tribunal. What did that involve?
FELDMAN: To begin, I appointed Arthur Rovine to be the first U.S. agent at the tribunal and David Stewart to the new position of assistant legal adviser for international claims and investment disputes. L/CID became an important piece of the L [Office of the Legal Adviser, Department of State] infrastructure eventually taking on the NAFTA Chapter 11 workload for the U.S. government. The most difficult piece in the first weeks was the appointment of three Americans to sit on the tribunal. The lead candidate was Howard Holtzman, an experienced arbitrator who became a mainstay of the tribunal. I got into trouble with the DC Circuit and the Reagan team by nominating Judge Malcolm Wilkie, a respected moderate Republican who was sitting on cases in Senior status on the Court of Appeals. That provoked a call from Chief Judge McGowan to Deputy Secretary Judge Clark, a long-time Reagan crony, complaining that the court was short-handed. Eventually, we filled that slot by appointing George Aldrich, a long time deputy legal adviser. He wanted the job and the Reagan team was glad to see him leave his work on the Law of the Sea Convention. The White House nominated Richard Mosk, son of a prominent California jurist, to the third position.
Q: Did you go to The Hague before leaving the department?
FELDMAN: Oh, yes. There were a lot of organizational issues to be worked out with the Dutch government and the Iranians. I made a trip to The Hague with Arthur Rovine and Howard Holtzman to begin that process in April or May. Arthur had the lead on most of the issues including persuading the Netherlands Bank to manage the tribunal’s escrow account, arranging quarters for the tribunal in the Peace Palace and office space for the U.S. agent and staff. At this point, I can’t remember all the issues, but I recall spending a long night drafting with Arthur and Howard in Holtzman’s hotel room. We should have booked a suite. Mrs. Holtzman ended up crashing in the bathtub.
CURRICULUM VITAE HIGHLIGHTS
AB in French with Distinction in Government [Vichy: The War Within a War], Wesleyan University-High Honors, Phi Beta Kappa, 1953–57
Diplôme, École Supérieure Pour la Préparation et Perfectionnement des Professeurs de Français à l’Étranger-Sweet Briar Junior Year Abroad; French government scholar; auditor L’École Supérieure de Science Politique, 1955–1956
LLB, Harvard Law School-magna cum laude, Law Review, 1957–1960
Joined the U.S. Department of State 1965
Attorney-Adviser, L/Far East Affairs, 1965–1967
Assistant Legal Adviser, Inter-American Affairs, 1968–1974
Assistant Legal Adviser Security and Consular Affairs, 1967–1968
Deputy Legal Adviser and Acting Legal Adviser, 1974–May 1981