Bloomberg: US plans revival of prize courts to seize Iranian oil tankers

The U.S. Justice Department is preparing to revive long-dormant maritime prize courts to streamline the military seizure of Iranian oil tankers and cargo as U.S. property, three people familiar with the plans told Bloomberg.

The initiative, coordinated with the Pentagon, is intended to strengthen the U.S. blockade of Iran and help offset the cost of the conflict. The unfinalized plans would provide federal prosecutors with a faster route to claim oil and other cargo taken from enemy or neutral vessels, with proceeds from subsequent sales transferred to the U.S. Treasury.

Aaron Reitz, the U.S. attorney in Houston whose office is working with DOJ headquarters, confirmed that the department is “now reviving” prize courts, describing them as an “ancient body of maritime law.”

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

Prize courts were common during 18th- and 19th-century naval warfare but have largely disappeared since the Spanish-American War of 1898 and have been entirely dormant since World War II. The United States has instead relied in recent decades on civil forfeiture proceedings to seize ships and assets linked to sanctions violations.

The Justice Department is considering the Southern District of Texas as the venue, two people said. The Houston-based district includes the country’s largest petrochemical complex near the 50-mile Houston port, which can store large quantities of crude oil. Prize proceedings can be brought in any district with jurisdiction over the port where a captured vessel is taken.

The approach could face substantial legal and operational challenges. Neither DOJ, the Navy nor the judiciary has modern experience with prize proceedings. Ship owners and victims of Iranian terrorism are among those expected to challenge seizures.

“This really is a historical area of law that is not tested in modern times,” said Allison Luzwick, a Holland & Knight maritime lawyer. She said modern international and wartime law would become relevant in any proceedings involving vessels seized under Prize Act authority.

The administration has intercepted and seized several Iranian-owned or Iran-linked ships since imposing a blockade in April. In one case, DOJ sought to liquidate a Venezuelan supertanker supporting Iran, but third-party claims from the shipping company and Iranian terrorism victims have complicated the civil forfeiture process.

Prize proceedings could limit such outside claims and accelerate transfers to the Treasury, lawyers said.

Eugene Kontorovich, a George Mason University law professor, said: “It helps offset the price of the war. 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.”

Critics warn that the plan could trigger challenges over whether the United States is engaged in hostilities covered by the Prize Act and whether congressional authorisation is required.

Jill Goldenziel of the National Defence University warned that while the policy could deter neutral vessels from violating the blockade, it “could also open the door for China to apply prize law against the United States — a dangerous proposition for U.S. and neutral merchants in any war with China.”

By Tamilla Hasanova