The decision represents a groundbreaking victory for likely an array of litigants ranging from the families of two Americans who were held hostage in Beirut to a B.C. dentist who was badly burned in a 1997 Jerusalem suicide bombing.
Some of the plaintiffs had long ago won multimillion-dollar U.S. judgments against Tehran, but then spent years in American and Canadian courts trying to collect from a regime that uses front companies to hide vast real estate and financial holdings in the West.
"I'm surprised. I'm shocked that we've gotten this far after all these years," said Joseph Cicippio, who was abducted in 1986 and held for five years by militants from Hezbollah, the Lebanese paramilitary and political group sponsored by Iran.
"Everybody had almost given up on it totally," he said in an interview Wednesday. "For so many years, nothing happened. My kids will be very happy to hear this."
Cicippio's children are among the plaintiffs who persuaded Ontario Superior Court Judge David M. Brown this week to order the liquidation of two of Iran's Canadian bank accounts and a pair of properties, one in Ottawa and one in Toronto.
Brown said the evidence was "overwhelming" that the real estate, separately registered to two Canadian corporations, actually belonged to Iran and was being used for non-diplomatic purposes.
The only other named plaintiff was Vermont-born Edward Tracy, a poet and bookseller living in Beirut who was abducted the month after Cicippio.
But it's expected that three other sets of litigants suing Iran in separate cases — including B.C. dentist Sherri Wise, badly hurt in a 1997 Hamas suicide bombing in Israel — will share in the proceeds, part of a side deal worked out between lawyers.
Judge Brown's ruling marks what is believed to be the first time in Canada that victims will collect damages from a foreign state over its support for extremist groups.
The case dates back to the Lebanon hostage crisis of the 1980s, when Hezbollah and its allies kidnapped dozens of Westerners in the Mideast country. Cicippio, an administrator at the American University of Beirut, was captured in September 1986. Tracy was abducted the next month. Both men were released in 1991, having been variously chained, beaten and threatened with death or maiming.
Tracy sued Iran over his ordeal and won an $18.5-million US judgment in 2003, satisfying an American court that Tehran had helped to arm and finance his kidnappers. Cicippio's family did likewise, winning $91 million US for emotional distress in 2005.
The plaintiffs weren't able to collect on any Iranian government assets in the U.S., however, so they brought their judgments north for enforcement. That was made possible by Parliament's 2012 passing of the Justice for Victims of Terrorism Act, which scrapped state immunity from civil lawsuits for countries deemed to be "supporting terrorism."
As a result of this week's court ruling, the Cicippio family and Tracy will get their hands on a share of a Scotiabank account containing $1.65 million and a Royal Bank account with 330,000 euros ($511,220). Both were held in the name of the Iranian Embassy in Ottawa, which was forced to close last year after the Canadian government suspended diplomatic relations and expelled Iran's envoys.
The judgment also seizes offices at 290 Sheppard Ave. W. in Toronto, valued at $1.1 million for tax purposes, and at 2 Robinson Ave. in Ottawa, assessed at $3.9 million. Both sites operated as ostensible Iranian cultural centres.
The Toronto address was owned by an Ontario corporation called Farhangeiran Inc., of which the sole director is Fazel Larijani, a member of a powerful Iranian family who counts among his brothers the Speaker of the Iranian parliament and the country's chief justice. The 5.7-acre Ottawa property was owned by an entity called the Mobin Foundation.
Iran is subject to sanctions that would normally choke its ability to hold property or carry on business in Canada other than for diplomatic reasons. But the regime has deployed a web of front companies and organizations to thwart the restrictions, experts told the court.
"Typically something we've seen done over the years is use cultural organizations, charities, Persian language centres that the government has funded as fronts, really to build up a base of operations in other countries," Mark Dubowitz, who is executive director of the Washington-based Foundation for Defence of Democracies and who provided expert evidence for the plaintiffs, told CBC News.
"But they also use that as a base for procurement, to buy material they need for their nuclear program, their ballistic missile program, their military. But also energy. The key sectors of the economy where they haven't been able to find the technologies they need due to the economic sanctions."
Similar methods have been used to shield Iran's stakes in American real estate. U.S. prosecutors last fall successfully moved to seize an $800-million Manhattan skyscraper, whose owners included a front for Iran's state bank and a foundation that was found to have laundered money and breached sanctions.
In that case, the foundation said it would appeal, but from the outset Iran ignored the Ontario Superior Court proceedings that led to this week's ruling. In the past, the Iranian Foreign Ministry has said Canadian courts "target" Iranian-owned properties and work at the behest of the federal government.
More Canadian lawsuits are still possible against Iran. Judge Brown’s ruling orders Scotiabank and RBC to disclose any other non-diplomatic accounts belonging to the regime that aren't already known. That could lead to more claims for compensation or for already awarded damages.
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