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Supreme Court Takes Up Issue of Money for Victims of Iran Terror

The justices of the U.S. Supreme Court face a difficult choice when lawyers for Iran's central bank appear before them Wednesday.

They could rule for the bank, making it harder for victims of terrorism to collect nearly $2 billion in Iranian assets awarded by American courts.

Or they could rule against the bank, potentially weakening the power of the federal courts.

The case involves more than 1,000 victims of terrorist attacks throughout the Middle East sponsored by Iran who have sued the Iranian government for damage awards and won. Among them were family members of 241 U.S. Marines killed in a 1983 barracks bombing in Lebanon.

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The attack was blamed on Hezbollah, the Lebanese Shiite militia backed by Iran.

Related: Supreme Court Takes Up Issue of Money for Victims of Iran Terror

Because Iran refused to pay, the victims asked a federal court to let them seize Iranian assets held by Bank Markazi in New York that were frozen by the Obama administration. While that lawsuit was pending, they persuaded Congress to pass a law in 2012 allowing them to seize the Iranian bank's money.

Lawyers for the bank claim that Congress unconstitutionally directed the courts to reach a certain outcome, violating the separation of powers and international treaties.

"Congress cannot change the law solely for one case to ensure that its favored litigant prevails," they say. "Deciding cases is a judicial function, not a legislative one."

In response, the victims say that Congress changed only the underlying law governing the assets and left the outcome of the case to federal judges. Besides, they say, Iran's responsibility to pay the victims has already been decided.

The only issue now is the availability of the frozen assets.

The U.S. Senate filed a friend of court brief on behalf of the victims. Separately four senators, including Republicans Ted Cruz and Lindsay Graham and Democrats Sheldon Whitehouse and Chris Coons, said ruling against the victims would inject "additional uncertainty into the already turbulent atmosphere of foreign affairs would impede the United States' ability to protect its own nationals in countries around the globe."

The Obama Justice Department urged the court to uphold the 2012 law, giving the terror victims access to Iran's money. The law is "a valid exercise of Congress's authority to regulate the disposition of specific foreign-state assets subject to the jurisdiction of the United States," the government said.

A decision in favor of the victims would also send a foreign policy message, says Mark Dubowitz of The Foundation for Defense of Democracies.

"It helps to establish a deterrent against future acts of terrorism. The Iranians have to understand that if they're going to engage in terrorism, there's a price to be paid for it."

If the victims lose before the Supreme Court, they can still try to get access to the frozen Iranian assets by going back to court to argue that another federal law makes the money available to them.