In the Feb. 19 news article, “Cornell University Alum Fined $17 Million for Iran Deal,” Professor John J. Barcelo III, Law, is spot on in finding it “really astounding … that [Balli] could have been involved in a violation of that kind.” You don’t need a distinguished professor of law to tell you that a billion dollar business like Balli would know better than to sell Boeing 747s to Iran in breach of US sanctions. Which is precisely why Balli Aviation’s “deal” was never about selling aircraft to Iran in breach of US sanctions.
The confusion arises from the use of the term “export” which, to a layman, signifies a sale and purchase (or physical trade) of goods across international borders. That is not how the U.S. regulations necessarily define exports and our settlement with the U.S. authorities does not remotely suggest that Balli Aviation sold its aircraft to Iran. Balli Aviation legally and beneficially owned its fleet of aircraft at all material times.
And Professor Barcelo is also right to state that “they should have had good legal advice and should have been told by their lawyers…” Balli Aviation was indeed advised by the top aviation law firm in the U.K., Norton Rose, in connection with leasing three of the aircraft to an Armenian operator which serviced the civilian passenger traffic under arrangements with a local operator. Even an Engineering graduate could figure out that 747s flying into and out of international airports were there to be seen by all. If Balli Aviation had thought that there was anything wrong with its deal, it would not have done it in the first place.
So if we thought there was nothing wrong with our deal why did we end up with a U.S. problem which required a $17 million settlement?
Let me start by stating something which is obvious: there is a conflict of law in what is permitted in carrying out this type of a transaction for a British company, like Balli Aviation, under the law which definitely applies to us, which is British, EU and International law (the law arising from UN resolutions) and what is permitted under U.S. law applying normally to U.S. corporations or individuals who are citizens or residents of the U.S. For example, no U.S. carriers are allowed to service the territory of Iran. European carriers can and routinely do.
What Balli Aviation did was standard civil aviation practice under British, EU and International law. The U.S., however, reserves the right to claim extra-territorial jurisdiction over non-U.S. entities (such as Balli Aviation) for enforcement of its law in support of U.S. policy objectives. As Professor Barcelo would tell you, the U.S. claim to jurisdiction over international companies operating outside the territory of the United States is generally neither accepted, nor enforced, by other countries for classical reasons of exercise of sovereignty over their own subjects.
As a group operating on a global platform and employing thousands of people around the world we are aware of, and understand, the U.S. position and sensitivities. In entering into this deal, Balli Aviation thought the deal structure was compliant with U.S. law although passenger capacity was provided by the Armenian operator to Iranian traffic. The U.S. regulators disagreed when they investigated the case (with our cooperation) and ruled that even as a British company we needed a license from them to engage in this particular business. We understood where they came from and respected their position. We, then, collectively decided that it was more desirable to settle and draw a line under the case instead of engaging in dispute and litigation.
I hasten to add that we are not the only international business to settle claims with the U.S. government in recent times: many international banks and other large publicly traded companies have chosen to make, and keep, their own peace with the U.S. by entering into similar arrangements.
Professor John Weiss, history, is not right in suggesting that this specific case was driven by U.S. concerns on dual use of aircraft as our aircraft were used for civilian traffic under English law leases. He is right in doubting the effectiveness of unilateral sanctions or sanctions in general. The history of sanctions in the 20th and 21st centuries has shown that sanctions usually punish the population at large more than the governments which they target.
I have not made any comments to the press and have declined all requests for interviews on this case, but my Cornell education and my exposure to the U.S. dream at a young age have been greatly instrumental to my success in my adult life. I therefore thought I owed it to my alma-mater’s daily publication to set the record straight.
Vahid Alaghband ’74 is the founder and Chairman of Balli Group PLC. Balli Group PLC can be contacted at firstname.lastname@example.org. Guest Room appears periodically this semester.
Original Author: Vahid Alaghband