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Cambridge University Press
0521863511 - Iran -- United States Claims Tribunal Reports - Volume 35 - by Karen Lee
ARAMSABET, KARIMSABET, REJASABET, Claimants
THEISLAMICREPUBLIC OFIRAN, BONYAD-E-MOSTAZAFAN, Respondents
(Case Nos. 815, 816 and 817)
Chamber Two: Skubiszewski, Chairman; Aldrich, Ameli,  Members
Signed 29 June 1999 
The following is the text as issued by the Tribunal:
|For the Claimants:||Mr. Arthur W. Rovine,|
|Mr. Hamid Sabi,|
|Ms. Farkhondeh Sabi,|
|Mr. Paul Storm,|
|Mr. Charles Davidson,|
|Ms. Jayne Ressler,|
|Mr. David Schwartz,Attorneys,|
|Mr. Reja Sabet,|
|Mr. Aram Sabet,|
|Mr. Karim Sabet, Claimants,|
|Mr. Hormoz Sabet,|
|Mr. Iradj Sabet,|
|Ms. Valerie Sabet, Persons Appearing for the Claimants,|
|Mr. Victor Barnett,|
|Mr. Roger Barnett,|
|Mr. Brian Rees,|
|Mr. Peter Warren, Witnesses,|
|Mr. Robert Reilly,|
|Mr. W. Daniel Asser,|
|Mr. M. Vahman,|
|Mr. Richard Friedberg,|
|Mr. Robert Radley, Expert Witnesses.|
|For the Respondents:||Mr. Mohammad Hossein Zahedin-Labbaf, Agent of the Islamic Republic of Iran,|
|Mr. Seyfollah Mohammadi, Legal Adviser to the Agent, Prof. Joe Verhoeven, Counsel to the Agent,|
|Mr. Rodman R. Bundy,|
|Mr. Walter D. Sohier,|
|Mr. Hossein Ali Farzad,|
|Mr. Hossein Tabaie,|
|Mr. Hassan Parham,|
|Mr. Khayyam Dadash-Zadeh,|
|Dr. Rahim Davar-Niya,|
|Mr. Sayyed Majid Rouhani,|
|Mr. Abol-Fazl Kousheshi, Attorneys,|
|Mr. Ahmad Hejazi,|
|Mr. Abbas Khaje-Piri,|
|Mr. Mohsen Javaheri Mohammadi, Representatives of the Mostazafan Foundation,|
|Mr. Gholamreza Mahdavi,|
|Mr. Dariush Ashrafi, Legal Advisers to the Respondents,|
|Mr. Mehdi Iranpour, Legal Assistant to the Respondents,|
|Dr. Audrey Giles,|
|Mr. Peter A. Kalat,|
|Mr. Eric Jackson,|
|Dr. Manouchehr Pouya,|
|Dr. Manouchehr Farhang,|
|Mr. Anthony Tracy,|
|Mr. Mohammad Safari,|
|Mr. Mohammad Ghorbani Farid, Expert Witnesses,|
Mr. Philip McCreanor, Assistant to Mr. Tracy.
|i.||introduction Para.||Para. 1|
|iii.||facts and contentions||7|
|A.||Background of the Sabet Family||7|
|B.||The Claimants’ Contentions||9|
|C.||The Respondents’ Contentions||15|
|D.||Specific Contentions about Each Claimant||22|
|A.||The Nationality of the Claimants||29|
|B.||The Claimants’ Locus Standi||40|
|C.||Other Jurisdictional Issues||52|
|A.||The Claimants’ Ownership of the Shares in the Allegedly Expropriated Companies||55|
|1.||Facts and Contentions||95|
|2.||The Tribunal’s Decision||102|
|2.||Facts and Contentions||111|
|3.||Law Concerning the Attraction and Protection of Foreign Investments in Iran||115|
|4.||Law for the Expansion of Public Ownership of Productive Units||119|
|5.||The Tribunal’s Decision||124|
1. The Claimants, ARAM SABET (Case No. 815), KARIM SABET (Case No. 816), and REJA SABET (Case No. 817), claim against THE GOVERNMENT OF THE ISLAMIC REPUBLIC OF IRAN, BONYAD-E-MOSTAZAFAN, and BANK MARKAZI (collectively “the Respondents”) for the alleged expropriation, in April 1979, of their ownership interests in the following Iranian companies: Firooz Corporation, General Tire and Rubber Company, Iramoz Corporation, Irangas Company, Iran Cylinder Company, Ltd., Mina Glass Company, Nownahallan Company, Radio Television Corporation of Iran, Sabet-Pasal Company, Towlid va Tasfieh Rowghan Refining Co., and the Zamzam Bottling Companies.3 According to their final pleadings, the Claimants seek compensation in the aggregate amount of U.S. $74, 877, 231.4 They also seek interest and legal costs.
2. The Respondents assert that the Claimants are Iranian nationals. Even assuming that they were dual Iran–United States nationals during the relevant period, the Respondents argue that the Claimants were not dominant and effective United States nationals during that period, and consequently the Tribunal lacks jurisdiction over their claims. The Respondents argue in the alternative that, if the Tribunal were to find that the Claimants were dominant and effective United States nationals, then the caveat in Case No. A18 would bar their claims with respect to some of the companies in question. The Respondents also contend that the Claimants did not own the shares in question.
3. This Partial Award is made for the purpose of deciding whether the Tribunal has jurisdiction over these Cases; whether the Claimants own any or all of the property allegedly taken; whether there has been a taking of the Claimants’ property by the Government of the Islamic Republic of Iran; and whether the caveat in Case No. A18 bars any of the Claimants’ claims. The Tribunal shall determine in a subsequent award the value of any property that it finds was taken by the Government of the Islamic Republic of Iran and the amount of compensation to be awarded to the Claimants as a consequence.
II. procedural history
4. In its Orders of 3 March 1989 in these Cases, the Tribunal joined all jurisdictional issues to the merits. To avoid duplication, by an Order of the same date in Case No. 385 (Gulf Associates, Inc. and Islamic Republic of Iran, et al.), the Tribunal ruled that, because Aram, Karim, and Reja Sabet claimed to have owned Gulf Associates, Inc., the claimant in Case No. 385, evidence relating to their nationality as presented in Cases Nos. 815, 816, and 817 would be applicable equally to Case No. 385.
5. To facilitate the filing of further submissions and the conduct of the Hearing, by Order of 28 October 1994, the Tribunal consolidated Cases Nos. 815, 816, and 817.
6. On 7-10, 13-16, 20-24, 27, and 28 October 1997, a joint Hearing in Cases Nos. 385, 815, 816, and 817 was held at the Peace Palace, The Hague.
III. facts and contentions5
A. Background of the Sabet Family
7. The Claimants’ grandfather, the late Habib Sabet, was the patriarch of the Sabet family. After an impoverished childhood, Habib Sabet went on to establish – either alone or with joint venture partners – numerous Iranian companies in a wide range of fields, and he became one of the wealthiest industrialists in pre-Revolutionary Iran. Habib and his wife, the late Bahereh Khamsi Sabet, had two sons, Hormoz and Iradj. In 1941 Habib, Bahereh and their two children moved from Iran to the United States, where Habib continued to engage in business activities. Habib and Bahereh returned to Iran in 1949, but they left their two sons in the United States to continue their schooling. Both Hormoz and Iradj completed their primary, secondary, and university education in the United States but returned to Iran immediately thereafter. Upon their return – Iradj in 1956 and Hormoz in 1958 – both sons became heavily involved in the Sabet family businesses. Habib and Bahereh Sabet eventually left Iran for Paris in 1975/76, and Hormoz and Iradj assumed primary responsibility for the operation of the Sabet companies.
8. The Claimants are the three sons of Hormoz Sabet. In 1963 Hormoz married Iran Khosrowshahi, an Iranian–United States dual national who was born and raised in the United States. Reja was born to Hormoz and Iran in December of 1964 in the United States, but the family lived in Iran after Reja’s birth. Hormoz and Iran were divorced in 1967. Hormoz obtained custody of Reja, and father and son continued to live in Iran. In October 1971 Hormoz married a British citizen, Valerie Springer Osborne.6 Aram was born in the United States to Valerie and Hormoz in August of 1972. The couple, along with Reja and Aram, lived in Iran from 1972 to 1975, while taking vacations and otherwise spending considerable time in Europe and the United States. In March of 1976 Karim was born to Hormoz and Valerie also in the United States. Hormoz acquired United States nationality in 1988 while Valerie has not become a United States citizen.
B. The Claimants’ Contentions
9. In March 1973, Hormoz and Valerie purchased their own apartment in Manhattan, New York, into which they moved in 1975, after carrying out extensive renovations. They contend that they planned to make this apartment their permanent home. In this regard, Hormoz Sabet states in his affidavit:
In the mid-1970’s, I indicated to my family that I wished also to be, and currently am, engaged in other international business activities directed from New York, and to expand the operations of Gulf Associates, Inc., the New York corporation that my father founded in the 1940’s. Commencing in 1975, my wife and I decided that she and the children would live in New York year-round and permanently, and that our children would be educated there. I also intended to live in Manhattan and conduct my business affairs . . . in New York City.
. . . I spent a considerable amount of time in both Tehran, primarily to attend to business matters, and New York, while my wife and children resided only in New York. I was frequently with them in New York, while my brother Iradj and his wife remained in Iran.
10. Valerie and Hormoz contend that they moved to New York because they wanted to raise their children as Americans. In addition, the Sabet family is of the Baha’i faith, and Valerie and Hormoz maintain that discrimination against Baha’is was so severe in Iran that they feared for their children’s safety when living there. According to Valerie and Hormoz, these concerns provided another reason for moving to the United States.
11. At the Hearing Mr. Victor J. Barnett, a close friend of Iradj and Hormoz from their university days in the United States, testified that he had always considered Hormoz and his children to be distinctively American rather than Iranian, and that he had understood that they planned to live permanently in the United States.
12. In support of their contention that their parents intended to raise them as Americans, rather than as Iranians, the Claimants point to the fact that even before moving to the United States in 1975, Aram and Reja attended non-Iranian schools in Iran. They contend that English was their first language and the only language spoken in their home. Aram and Reja claim that they can speak some Persian but cannot read or write it; Karim claims that he knows no Persian at all. The Claimants contend that, because Valerie had primary responsibility for raising them, their primary influence at home came from a non-Iranian parent. To this, the Respondents reply that, because Valerie was a British national, her influence was British, rather than American.
13. Moreover, in reply to the Respondents’ argument that, because the Claimants were minors during the relevant period, the nationality of their father is decisive in determining their dominant and effective nationality, the Claimants assert that, although their father was born in Iran to Iranian parents, he had strong ties to the United States because of the significant time he spent there as a student and because of the social and economic ties he maintained with that country. Hormoz alleges that his primary language is English and that, while he speaks Persian, he can neither read nor write it; he therefore claims that he was obliged to use professional translators for his business dealings in Iran. Hormoz acknowledges that he did not acquire United States nationality until 1988, however.
14. As a legal matter, the Claimants contend that, according to Tribunal precedent, it is the nationality of the minor claimant, rather than that of his or her parents, that is relevant in determining the dominant and effective nationality of the minor claimant. In support, they rely, inter alia, on Ardavan Peter Samrad, et al. and Islamic Republic of Iran, Award No. 505-461/462/463/464/465-2 (4 Feb. 1991) (“Samrad ”), reprinted in 26 IRAN-U.S. C.T.R. 44 and Raymond Abboud, as Legal Guardian of Chrisline Arianne Abboud and Islamic Republic of Iran, Award No. 477-383-2 (16 May 1990), reprinted in 24 IRAN–U.S. C.T.R. 265.
C. The Respondents’ Contentions
15. As an initial matter, the Respondents contend that the Claimants’ claims arose on 31 October 1977, the date on which, according to the Respondents, the claims in Case No. 385 arose. The Respondents argue that the starting date of the relevant period in Case No. 385 applies to Cases Nos. 815-817, because, by Order of 3 March 1989 in Case No. 385, the Tribunal decided that the evidence concerning the nationality of the Claimants as submitted in Cases Nos. 815-17 was applicable to Case No. 385 (see supra, para. 4), and 31 October 1977 is the earliest date on which the claims in these Cases and Case No. 385 arose.
16. As to the Claimants’ dominant and effective nationality, the Respondents dispute the Sabets’ claim that they moved permanently to the United States in 1975, and they deny the Claimants’ contention that religious discrimination against the Sabets was a reason for their move to the United States. Rather, the Respondents assert that the family’s move to New York was intended merely to allow the children to attend school in the United States, while Hormoz, by his own admission, remained based in Iran until 1978.
17. The Respondents allege that the Claimants, whose family had been closely associated with the government of the Shah, remained in the United States after 1978 only to escape the Islamic Revolution, rather than because they had stronger ties to the United States. The Respondents add that any economic or social ties the Claimants might have had with the United States – such as residing and attending school there – were common to the children of many wealthy Iranians whose lives were nonetheless centered in Iran.
18. The Respondents argue, moreover, that a child’s nationality should follow that of his or her parents, because it is not possible for minors to make their own decision to form close links with any state. The Respondents therefore argue that the Claimants’ nationality should follow the Iranian nationality of their father. They also contend that the weakness of Hormoz’s ties to the United States is shown by the fact that he returned to Iran to become involved in the family businesses immediately after graduating from university, and he did not acquire United States nationality until 1988. The Respondents further point out that Hormoz had extensive economic interests and corporate responsibilities in Iran, which far outweighed his business interests in the United States, and they note that he paid Iranian, rather than United States, taxes. The Respondents conclude that the center of Hormoz’s economic life – and by extension, that of his children – was in Iran.
19. At the Hearing, counsel for the Respondents argued that the dominant and effective nationality of minor children cannot be ascertained by examining their own conduct; one must consider other factors, such as the nationality of a child’s parents and grandparents and the origin of the assets at issue. Counsel concluded that, in the present Cases, these indicators point to the Iranian nationality of the Claimants.
20. The Respondents, moreover, contend that, during the relevant period, the Claimants were not integrated into United States society, citing the following factors. First, Valerie and Hormoz were not United States citizens, and the Claimants’ family ties were not centered in the United States, as evidenced by the fact that their grandparents lived in Paris, and their uncle and cousins lived in Iran or Switzerland. Second, the Claimants did not renounce their Iranian nationality, although the Respondents concede that, because the Claimants were under 25 years of age, they could not have renounced their own nationality unless their father had renounced his nationality as well pursuant to Article 988, paragraph 3, of the Iranian Civil Code. Third, an Iranian identity card was issued to Karim after 1975, and Iranian passports were issued to Aram in August 1977, Karim in April 1976, and Reja in February and July 1976.
21. Lastly, the Respondents urge the Tribunal not to consider facts that occurred after the relevant period. The Respondents point out that, in order to be considered United States nationals within the meaning of Article Ⅶ, paragraph 1, of the Claims Settlement Declaration, the Claimants must show that they were dominant and effective United States nationals from the time their claims arose until 19 January 1981.
D. Specific Contentions about Each Claimant
1. Reja Sabet
22. The Claimant in Case No. 817, Reja Sabet, was born in the United States on 16 December 1964. Reja contends that, at the time of his birth, his father’s branch of the Sabet family was dividing its time between Iran, where his father had extensive economic interests and responsibilities associated with the Sabet family companies, and New York, where the Sabet family had owned an apartment since the early 1940s. He asserts that his mother, Iran Khosrowshahi, was born and raised in the United States; although she was of Iranian origin, she travelled to Iran for the first time in 1963, the year she married Hormoz Sabet.
23. Reja attended nursery and primary school in Iran: He attended kindergarten at the Hekmat School, Tehran, which employs a traditional Persian curriculum, and he claims to have attended primary school at the British School (1970–73) and the Tehran International School (1973–75), although the Respondents dispute this, contending that Reja attended the Hekmat School for seven years. Reja claims that during this period, he spent “almost half the year outside of Iran – primarily in the United States, and also in Europe.” Reja submits evidence that he attended gymnastics classes in New York from 1972 to 1975 and summer school during the summers of 1974 and 1975.
24. Reja claims that after moving to the United States in late 1975, he returned to Iran only once, for a brief visit in 1976. From about 1976 until the end of the relevant period, he attended schools in New York (Choate Rosemary Hall and The Browning School), completing about three and one-half school years before the commencement of the relevant period. After graduating from high school in 1982, he attended university in the United States. Thus, before the commencement of the relevant period, he lived, in total, for about eleven years in Iran (during which period he allegedly spent much time in the United States) and for about three-and-one-half years in the United States.
25. Reja asserts that his social life was centered in the United States. He claims that the process of his integration into United States society began before the relevant period and was perfected during that period. In support of this contention, Reja has provided affidavits from several family friends and from friends of his own, attesting to his integration into American society. At the Hearing, Mr. Roger Barnett testified that, during his long friendship with Reja, he always believed that Reja considered himself to be American rather than Iranian. Reja belonged to a New York sports club from 1975 until 1979. He was attended by a New York pediatrician from 1971 and a New York dentist from 1975.
26. Finally, Reja claims that he used his Iranian passport only for travel to and from Iran, in order to comply with Iranian law.
2. Aram Sabet
27. Aram Sabet, the Claimant in Case No. 815, was born in the United States on 24 August 1972. Aram claims, as Reja does, that the family was then dividing its time between Iran and the United States. See supra, para. 22. He contends that he attended a French nursery school in Iran for a brief period and thereafter attended nursery school in New York; he commenced primary school in New York in 1978. All of his subsequent schooling took place in the United States. Aram therefore lived approximately three years in Iran and approximately three-and-one-half years in the United States before April 1979, the date at which the Claimants contend their claims arose. He contends that he has never had any cultural or social attachments to Iran and was fully integrated into American society by that date.
3. Karim Sabet
28. Karim Sabet, the Claimant in Case No. 816, was born in the United States on 10 March 1976. Karim never lived in Iran and claims that he travelled to Iran only once for 2–3 weeks soon after he was born in 1976. He attended nursery school at the French-medium Lyceum Kennedy in New York beginning in 1978; his subsequent schooling also took place in the United States. Karim claims that he never attended an Iranian school or participated in any Iranian cultural activities, and that he had no social connection to Iran. Rather, he contends that all his cultural influences were American.
A. The Nationality of the Claimants
29. In its Decision in Islamic Republic of Iran and United States of America, Decision No. DEC 32-A18-FT, at 25 (6 Apr. 1984), reprinted in 5 IRAN-U.S. C.T.R. 251, 265 (“Case A18”), the Full Tribunal held that the Tribunal has jurisdiction over claims brought against Iran by Iranian–United States dual nationals only when the “dominant and effective nationality of the claimant during the relevant period from the date the claim arose until 19 January 1981 was that of the United States.” Thus, the Tribunal must first determine whether the Claimants were nationals of both the United States and Iran during the relevant period. If the Tribunal concludes that they were, it will then have to determine whether the Claimants’ United States nationality was dominant and effective during the relevant period so that the Tribunal can exercise jurisdiction over their claims.
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