US considers reviving dormant prize law to seize Iranian oil

The United States government is evaluating the use of an 18th-century maritime legal framework to process vessels and cargo captured during its ongoing blockade of Iran. According to reports from Bloomberg, the Justice Department and the Pentagon are preparing to invoke prize law, a system that historically permitted courts to determine whether assets seized during armed conflict could be legally transferred to the state. This mechanism was once a standard feature of naval warfare but has been largely dormant in American practice since the Second World War, having disappeared from common use after the 19th century.

The primary motivation for this legal shift is practical efficiency. Currently, the administration relies on civil forfeiture to take ownership of vessels accused of sanctions violations. These proceedings are often complex and slow, particularly when multiple parties, including shipping companies, creditors, or terrorism victims, assert competing claims to the ship or its cargo. By contrast, a prize proceeding could streamline these disputes, allowing captured oil to be sold more rapidly. The proceeds from such sales would be directed to the US Treasury, providing a direct financial benefit while simultaneously depriving Iran of valuable export revenue.

Houston is being considered as the central venue for these legal proceedings. The Southern District of Texas has jurisdiction over a major port and is located near the country’s largest concentration of petrochemical infrastructure. This geographic advantage provides the necessary capacity to receive and store substantial quantities of crude oil. Aaron Reitz, the US Attorney for the district, stated that his office is working with officials in Washington to revive prize courts. He described the concept as an ancient body of maritime law that is now being reactivated to address current security challenges.

This legal strategy forms part of a broader effort by Washington to increase economic pressure on Tehran. US forces have already intercepted Iranian-owned or Iran-linked vessels since the blockade was imposed in April. Utilising prize law would transform these captures into a more direct financial tool. Supporters of the approach argue that reviving the system reinforces the message that the US views the blockade as a serious wartime measure rather than a standard sanctions regime. It may also deter neutral commercial vessels from transporting goods that Washington believes support the Iranian economy.

However, significant legal and practical uncertainties remain. Maritime attorney Allison Luzwick noted that this is a historical area of law that has not been tested in modern times. Courts may be required to determine whether the current conflict provides sufficient legal grounds for invoking prize authority, a question complicated by ongoing debates regarding congressional authorization for hostilities. Furthermore, federal judges, prosecutors, and the Navy have virtually no contemporary experience administering such cases, meaning procedures would need to be rebuilt for modern shipping and warfare contexts.

Critics warn that normalising prize law could create a dangerous precedent. A rival power, such as China, could potentially cite US practice to justify seizing American or neutral merchant vessels during a future conflict. Shipowners and other parties with financial claims are also expected to contest the seizures. Despite these risks, the proposal offers a potentially faster method for converting captured Iranian oil into government revenue, albeit by reopening a sector of wartime law that has remained largely untouched for more than a century.