AMONG THE various provisions of the Antiterrorism and Effective Death Penalty Act of 1996 was a little-noticed section that is now causing the Clinton administration serious headaches. The law made a narrow exception to the normal immunity of foreign sovereign states to being sued for damages in U.S. courts. It made the countries that this government designates as terrorist states liable for the deaths of Americans killed outside their borders, either by the countries themselves or by terrorists backed by them.

Under the provision, families of the downed Brothers to the Rescue fliers have obtained a $188 million judgment against Cuba, and the father of a young woman killed in a bombing in Israel has won a $248 million judgment against Iran -- which sponsors terrorist groups active in Israel. Because the governments in question will not pay up, the families want to tap Cuban and Iranian assets frozen by the U.S. government. The administration, however, has gone into court to block this and now finds itself in the uncomfortable position of protecting the money of terrorist nations against recovery by victims of their violence.

The awkwardness aside, the administration is actually right. Frozen assets can be a significant bargaining chip in international relations, and it was foolish for Congress to have made the executive branch's control over these tools of diplomacy subject to liens by plaintiffs -- even highly sympathetic ones -- or the whims of federal judges. Moreover, some of the frozen assets are consular properties and giving them away could invite seizure of American diplomatic properties abroad.

The original legislation did not explicitly permit the tapping of frozen assets. But after the administration objected to initial efforts to go after these properties, Congress last year made matters worse by clarifying that such assets could be tapped -- subject to an ambiguous presidential national security waiver. President Clinton quickly exercised this waiver, and the parties now are fighting about the scope of the waiver authority. Meanwhile, Sens. Connie Mack (R-Fla.) and Frank Lautenberg (D-N.J.) are pushing another legislative clarification to prevent further administration interference.

The administration hasn't handled this matter all that well either. The president can be faulted for having signed the antiterrorism legislation knowing the faults of the provision. Moreover, comments by administration officials have lent the appearance of a bait-and-switch quality to administration policy. When the Brothers to the Rescue planes were shot down, administration officials including Mr. Clinton himself said that they meant to compensate the victims' families out of frozen Cuban assets. They didn't specifically ask for suits to be authorized -- and, in fact, opposed the provisions that made them possible and made their payments to the families separately. But the families' sense of betrayal when, after these remarks, the administration impeded their access to the blocked assets is certainly understandable.

The right answer, however, is not to exacerbate the problems with this law to satisfy these judgments. The right answer is for Congress to repeal the underlying statute or at least to clarify that the ability to seize frozen assets is subject to an unreviewable presidential waiver. Victims of terrorism certainly should be compensated, but a mechanism that permits individual financial recovery to take precedence over significant foreign policy interests is flawed.1