US Aims to Revive Civil War-Era Court to Claim Iran Oil as Prize

The Justice Department is preparing to activate a long-dormant maritime war court to streamline military capture of Iranian oil tankers as US prizes, according to three people familiar with the plans.

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

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

The unfinalized plans, if adopted, would offer a faster path for federal prosecutors to claim oil and other cargo taken from enemy or neutral vessels as US property. The seized goods would then be sold with proceeds transferred to the treasury.

The anticipated revival is the second time this year the administration has turned to an obscure court system to carry out 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 prize court’s use, maritime lawyers and former prosecutors said. DOJ, the US Navy, and the judiciary would also face operational hurdles carrying out a court process with which they have zero experience.

“This really is a historical area of law that is not tested in modern times,” said Allison Luzwick, a Holland & Knight attorney specializing 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 combat, prize courts have gone largely unused since the Spanish-American War of 1898 and lain entirely dormant since World War II. In recent decades, the US has shifted to relying on civil forfeiture law as the mechanism for seizing ships and obtaining their assets to enforce sanctions violations.

DOJ’s planning, which has been coordinated with the Pentagon, comes as US forces have intercepted and seized multiple Iranian-owned or linked ships since imposing a blockade in April.

Legal experts see civil forfeiture as an imperfect model for US interests in choking the economy of Iran and other adversaries.

In one ongoing case, the seizure of a Venezuelan supertanker that supported Iran led to DOJ filing a civil complaint seeking to liquidate the ship and cargo as US proceeds.

Multiple third parties, including the shipping company and families of Iranian terrorism victims holding judgments for payouts under a different statute, have intervened, bogging down that process.

Prize authority, while coming with its own legal risks, would entail a less complicated transfer of proceeds, allowing the US to mitigate the risk of outside claimants slowing down the sale, said Luzwick and other lawyers.

DOJ has focused on the Southern District of Texas federal trial court as the venue, said two of the people, who like others spoke anonymously about sensitive deliberations.

The Houston-based district is home to the nation’s largest petrochemical complex, located off Houston’s 50-mile port, which can store large volumes of crude.

Prize courts can function out of any US district court that has jurisdiction over the port in which the captured ship is taken. Once the district court adopts a set of rules for the proceedings, it could then adjudicate a prize claim filed by the US attorney.

Outside parties, including ship owners, could still enter an appearance and object to the capture, but their arguments would be limited compared to forfeiture cases, said Luzwick and her firm’s maritime litigation partner Michael Frevola.

In Southern Texas, the responsibility for filing claims would fall on Reitz, who was appointed in July and maintains close ties to department officials in Washington from his brief stint last year as head of DOJ’s Office of Legal Policy.

Supporters describe prize law’s benefits of expediting the process of transferring the proceeds from oil tanker cargo into the US treasury. The move may also send a global signal of President Donald Trump’s intent 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’s Antonin Scalia School of Law. “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 would invite legal challenges as to whether the US is engaged in hostilities that give rise to the Prize Act and whether the lack of congressional authorization of the conflict renders captures unlawful.

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

Although it would “send a strong message to non-sanctioned, neutral merchant ships bound for Iranian ports not to violate the U.S. blockade,” Goldenziel wrote, 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.”