A federal appeals court in the United States has overturned a previous ruling which allowed the government to seize a Manhattan skyscraper which is allegedly controlled by Iran. The court said that it has “issues” with the original verdict.

The case goes back to June 2017, when a jury discovered that an Iranian-American charity knew that the building it owns in New York City was forty per cent owned by a front company for a state-owned bank in Iran, which violates US sanctions against the country. The US government announced its plans to seize the tower and sell it for an estimated $1 billion.

At the time of the ruling, Acting US Attorney Joon H Kim stated that the Alavi Foundation “gave the Iranian government a critical foothold in the very heart of Manhattan through which Iran successfully circumvented US economic sanctions.” Kim added that, “For over a decade, hiding in plain sight, this 36-story Manhattan office tower secretly served as a front for the Iranian government and as a gateway for millions of dollars to be funnelled to Iran in clear violation of US sanctions laws.”

On Friday last week, however, the 2nd US Circuit Court of Appeals in the city discarded that ruling unanimously by three to nil. The court said that Judge Katherine Forrest, who issued the ruling back in 2017, had made a “troubling pattern of errors on relatively straightforward issues,” referring to faults such as refusing to hear the depositions or witness testimonies by former Alavi Foundation board members and refusing to provide the Foundation an opportunity to prove that the government had filed the complaint too late.

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“Getting to any outcome requires a fair and procedurally adequate process, something that has been lacking in this case,” wrote Judge Richard Wesley. “There are no shortcuts in the rule of law. If this case returns to trial, a properly informed jury may or may not find for the government – a topic on which we have no opinion.”

Government lawyers have continued to allege that Iran has secretly controlled the building for years, having millions of dollars of rent payments funnelled to it by a partnership between Alavi and another company named Assa Corp, while essentially being a front for the interests of the Iranian state-owned Bank Melli. The Alavi Foundation, however, repeatedly denied this, and has stated that it was unaware of it.

The overturning of the ruling, which is in many ways a blow to the US government and Justice Department, comes at a time when Washington has imposed new sanctions on Tehran due to the breakdown in relations following President Donald Trump’s withdrawal from the 2015 Iranian nuclear agreement two years ago, as well as recent tensions in the Gulf.