Can Iran’s frozen assets compensate Lebanon?

The recent reports that the United States (U.S.) Department of the Treasury is exploring mechanisms to redirect Iranian assets toward compensating Gulf states affected by Iranian military attacks have reopened a broader debate about accountability, reparations, and the legal status of frozen sovereign assets.

While the immediate focus has been on the Kingdom of Saudi Arabia (KSA), the United Arab Emirates (UAE), Bahrain, Kuwait, Qatar, and Oman, the discussion inevitably raises another question: if Iranian assets can potentially be used to compensate Gulf countries for damages caused directly by Tehran, could similar arguments apply to Lebanon, which has suffered enormous destruction as a result of Iran’s long-standing support for Hezbollah?

To better comprehend and analyze the matter at hand, The Beiruter reached out to international law expert Patricia Elias for a legal consultancy.

Legal distinction between freezing and confiscating sovereign assets

A freeze is a temporary restrictive measure that prevents a state from accessing or transferring assets while ownership remains unchanged. The sovereign state retains legal title to the assets. Freezing is commonly used in sanctions regimes and is generally regarded as lawful when adopted pursuant to domestic legislation, Security Council resolutions, or recognized countermeasures.

Confiscation involves the permanent deprivation of ownership and transfer of assets to another party. Reallocation for reconstruction or compensation goes even further by using those assets to satisfy claims of third parties.

International law treats confiscation much more cautiously because sovereign assets are generally protected by the doctrine of state immunity from execution, especially central bank reserves and property used for sovereign functions.

The legal limits of asset reallocation

Under U.S. domestic law, Washington can enact legislation authorizing attachment or execution against certain Iranian assets. This has occurred in terrorism-related litigation involving Iranian assets, including the litigation surrounding Bank Markazi.

Under international law, the answer is much less clear. There is no general rule of international law allowing one state unilaterally to confiscate another state’s sovereign assets and transfer them to third parties absent:

- Consent of the affected state;

- A binding Security Council decision under Chapter VII;

- An international judgment or arbitral award;

- A recognized exception under international law.

The doctrine of sovereign immunity remains a major obstacle. International law generally protects state property, particularly central bank assets, from enforcement measures. Therefore, absent a United Nations Security Council (UNSC) mandate or international adjudication, any U.S. redirection of Iranian sovereign assets would likely remain legally controversial and vulnerable to challenge under international law.

Establishing Iran’s legal responsibility for Hezbollah’s actions

It is not automatic, given that this question falls under the law of state responsibility, with the key issue being attribution.

Under the International Law Commission’s Articles on State Responsibility (ARSIWA), a state is responsible only for conduct attributable to it. Merely financing, training, or supporting a non-state armed group does not automatically make all actions of that group legally attributable to the supporting state.

The leading ICJ case is the Nicaragua v. United States, where the Court held that financing, organizing, training, and equipping rebels was insufficient by itself to attribute all rebel conduct to the U.S. The Court required proof of effective control over the specific operations. This standard was reaffirmed in the Bosnian Genocide Case.

The ICJ’s effective-control test requires evidence that Iran directed or controlled the specific military operations that caused the damage.

Therefore, evidence likely insufficient by itself includes political support, financial assistance, weapons transfers, training, and ideological alignment. Meanwhile, those that could strengthen attribution include direct operational orders, command-and-control relationships, proof Iran directed specific attacks, evidence Hezbollah acted as a de facto organ of Iran.

A potential but difficult legal claim for Lebanon’s case?

Potentially yes, Lebanon has a viable legal claim against Iran for reconstruction costs linked to Hezbollah's military actions; it is but legally difficult.

Lebanon would need to establish 3 elements:

An internationally wrongful act:

Lebanon would need to demonstrate that Iran violated international law through conduct attributable to it. This could involve proving:

- Direction or control over Hezbollah operations.

- Violations of non-intervention principles.

- Violations of sovereignty.

- Support for internationally wrongful acts.

Attribution:

This is the central hurdle. Lebanon would need evidence satisfying either:

- The ICJ’s “effective control” standard (Nicaragua; Bosnia).

- Or another accepted attribution test.

Without attribution, the claim would likely fail.

Causation and damages:

Lebanon would then need to show:

- Direct reconstruction costs.

- Infrastructure damage.

- Economic losses.

- Humanitarian consequences attributable to the wrongful conduct.

The principle of full reparation is well established in international law.

Possible legal mechanisms that Lebanon can resort to

There exist several legal mechanisms that Lebanon can resort to.

International Court of Justice:

The most authoritative route would be proceedings before the International Court of Justice (ICJ). However, jurisdiction is a major obstacle because Iran would have to consent through:

- A treaty compromissory clause.

- A special agreement.

- A declaration accepting ICJ jurisdiction.

Ad hoc claims commission:

Lebanon and Iran could agree to establish a claims commission similar to:

- The Eritrea-Ethiopia Claims Commission.

- Other mixed claims tribunals.

It is politically unlikely but legally possible.

United Nations Security Council mechanism:

The Security Council could theoretically establish a compensation mechanism similar to the UNCC. However, this would require a Chapter VII resolution and would likely face major geopolitical obstacles.

Negotiated settlement:

Historically, many interstate reparations disputes have been resolved through diplomatic agreements rather than litigation.

Therefore, the debate surrounding the possible use of frozen Iranian assets to compensate states affected by Tehran’s actions highlights the complex intersection of international law, state responsibility, and geopolitics. While the U.S. may possess certain domestic legal tools to target Iranian assets, the international legal framework remains far more restrictive, particularly when sovereign immunity and the protection of state property are involved.

For Lebanon, the question extends beyond access to compensation and into the far more difficult realm of legal attribution. Although the country has suffered extensive destruction linked to conflicts involving Hezbollah, establishing Iran’s direct legal responsibility would require substantial evidence demonstrating effective control over the specific actions that caused the damage. International jurisprudence sets a high threshold for such claims, making success far from guaranteed.

Nevertheless, the possibility of pursuing accountability cannot be entirely dismissed. Whether through international litigation, diplomatic negotiations, a claims commission, or a future international compensation mechanism, legal avenues do exist, even if they remain politically and practically challenging. Ultimately, any effort to seek reconstruction funds from Iranian assets would depend not only on legal arguments but also on the broader balance of international power, diplomacy, and political will.