US Moves to Revive Civil War-Era Prize Courts to Seize Iranian Oil

The US Justice Department is preparing to revive a long-dormant maritime war court to streamline the military seizure of Iranian oil tankers and treat their cargo as US prizes, according to three people familiar with the plans.

 

The revival of prize courts, which is expected to face legal challenges, is intended to strengthen the US blockade of Iran and help offset the cost of the conflict.

 

Aaron Reitz, the Houston-based US attorney whose office is working with the Justice Department headquarters on the initiative, confirmed that the department is “now reviving” prize courts, which he described as an “ancient body of maritime law”.

 

The unfinalised plans, if adopted, would provide federal prosecutors with a faster route to claim oil and other cargo seized from enemy or neutral vessels as US property. The seized goods could then be sold, with the proceeds transferred to the US Treasury.

 

The anticipated revival marks the second time this year that the administration has turned to an obscure court system to advance its agenda, after bringing the first-ever case before the Alien Terrorist Removal Court in July.

 

“Our national security interests may require the United States military to seize vessels or cargo supporting the enemy during military conflict,” Reitz said in a statement. “If that happens, our federal courts must be ready to adjudicate the disposition of these captured vessels and cargo.”

 

Ship owners and Iranian terrorism victims are among the potential litigants expected to challenge the use of prize courts, according to maritime lawyers and former prosecutors. The Justice Department, US Navy and judiciary would also face operational hurdles in carrying out a court process with which they have little modern experience.

 

“This really is a historical area of law that is not tested in modern times,” said Allison Luzwick, a Holland & Knight attorney specialising in the maritime industry.

 

“Great strides have been made in international law and the law of war since the late 1800s, and all of that is going to come into play when we’re actually looking at proceedings involving a vessel that is potentially seized under Prize Act authority.”

 

Once a regular feature of 18th- and 19th-century naval warfare, prize courts have largely fallen into disuse since the Spanish-American War of 1898 and have been entirely dormant since the Second World War.

 

In recent decades, the US has instead relied on civil forfeiture law to seize ships and obtain their assets in cases involving alleged sanctions violations.

 

The Justice Department's planning, coordinated with the Pentagon, comes as US forces have intercepted and seized multiple Iranian-owned or Iran-linked ships since imposing a blockade in April.

 

Legal experts regard civil forfeiture as an imperfect mechanism for advancing US efforts to squeeze Iran's economy and target other adversaries.

 

In one ongoing case, the seizure of a Venezuelan supertanker that supported Iran led the Justice Department to file a civil complaint seeking to liquidate the vessel and its cargo and transfer the proceeds to the US.

 

Several third parties, including the shipping company and families of Iranian terrorism victims who hold judgments for compensation under a separate statute, have intervened, complicating and delaying the process.

 

Prize authority, while carrying its own legal risks, could allow for a less complicated transfer of proceeds and reduce the risk of outside claimants delaying the sale, Luzwick and other lawyers said.

 

Houston Port

 

The Justice Department has focused on the US District Court for the Southern District of Texas as the venue, according to two people familiar with the plans, who, like others, spoke anonymously about sensitive deliberations.

 

The Houston-based district is home to the nation's largest petrochemical complex and encompasses the Houston port, which stretches for roughly 50 miles and has the capacity to store large volumes of crude oil.

 

Prize courts can operate through any US district court with jurisdiction over the port where a captured vessel is brought. Once the district court adopts rules governing the proceedings, it could adjudicate a prize claim filed by the US attorney.

 

Outside parties, including ship owners, could still enter an appearance and challenge the capture, but their ability to contest the seizure would be more limited than in civil forfeiture proceedings, according to Luzwick and Michael Frevola, a maritime litigation partner at her firm.

 

In the Southern District of Texas, responsibility for filing claims would fall to Reitz, who was appointed in July and maintains close ties with Justice Department officials in Washington following his brief stint last year as head of the department's Office of Legal Policy.

 

Pros and Cons

 

Supporters say prize law could expedite the transfer of proceeds from oil tanker cargoes to the US Treasury. The move could also signal President Donald Trump's intention to add a legal enforcement mechanism to bolster the US blockade.

 

“It helps offset the price of the war,” said Eugene Kontorovich, an international law professor at George Mason University's Antonin Scalia Law School.

 

“It also shows Iran that America is really treating this as a serious international blockade and is willing to use all the tools at its disposal.”

 

If established, however, the approach could trigger legal challenges over whether the US is engaged in hostilities sufficient to invoke the Prize Act and whether the absence of congressional authorisation for the conflict would make the seizures unlawful.

 

Jill Goldenziel, a law professor who trains US military leaders at the National Defense University, warned of potential repercussions in an April Forbes column.

 

Although the measure would “send a strong message to non-sanctioned, neutral merchant ships bound for Iranian ports not to violate the US blockade”, Goldenziel wrote that it “could also open the door for China to apply prize law against the United States — a dangerous proposition for US and neutral merchants in any war with China.”

 

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