WHEN PRESIDENT BUSH, on the day war broke out with Iraq, ordered the seizure of $1.4 billion in Iraqi assets held in the United States, he declared that his purpose was to ensure that the funds be used "to assist the Iraqi people and to assist in the reconstruction of Iraq." A wise move -- but not because it took the funds out of Saddam Hussein's hands. The Iraqi dictator had not been able to touch this money since it was frozen during the first Gulf War 12 years ago. The threat, rather, came from lawsuits brought by American victims of Hussein's tyranny. Under a reckless spree of congressional acts since 1996, victims of terrorism, torture and other atrocities have been permitted to tap the frozen assets of terrorist-sponsoring states. By expropriating these assets -- making them, in effect, American property and no longer frozen Iraqi property -- Mr. Bush sought to ensure that they would be employed in the broader national interest, not as the vagaries of the tort system might dictate.

The 1996 law that stripped terrorist-sponsoring states of the immunity that foreign governments normally enjoy from lawsuits may seem sensible. Why shouldn't evil governments pay for the harm they do to innocent civilians? The trouble is that the countries tend not to defend against the lawsuits, and they don't pay the judgments either -- so the only way for the law to deliver the cash justice it promises is to tap these countries' frozen assets. Congress, spurred by victims and their lawyers, has made this ever easier, but at the expense of U.S. foreign policy interests -- and fairness. Some victims have won huge windfall judgments, depleting the frozen assets of the countries in question, while other victims have waited decades while their claims against those same countries have gone unsatisfied. Moreover, these assets -- as the situation in Iraq demonstrates -- are tools of international affairs. Every dollar removed from the Iraqi frozen assets, for example, is a dollar the American taxpayer will have to spend on rebuilding Iraq. Indeed, the administration left $300 million of the Iraqi assets untouched to make sure that existing judgments can be paid.

Compensating victims of terrorism is a problem that litigation cannot solve. The right answer is for Congress to create a fair and rational system of compensation that does not compromise foreign policy interests. The provisions permitting these suits should be repealed. Unfortunately, however, all the political pressure on Congress pushes in the opposite direction -- toward expansion of the ability to pursue these suits. On the first day of the Iraqi military action, the president should not have had to make sure that Saddam Hussein's already-frozen money would still be available when a new Iraq most needs it.