Dismissing US objections, judges at the International Court of Justice on Wednesday ruled that the United Nations body has jurisdiction to hear a claim by Iran to recover $1.75 billion in assets frozen by Washington.
Chief judge Abdulqawi Ahmed Yusuf said the UN's top court "unanimously rejects the preliminary objections to admissibility raised by the United States of America".
The ruling by the International Court of Justice dismisses USA objections and opens the way for the court to hear the case on its merits, a process that could take years.
In a ruling issued on Wednesday, the 15-member court in The Hague said Tehran can proceed with a bid to recover the assets, which Washington says must go to victims of attacks blamed on Iran.
The court also "finds that it has jurisdiction" to rule on the case, which was filed by Iran in 2016, Yusuf said at the end of an hour-long reading of the judgment.
Tehran filed the case in 2016 based on the 1955 Treaty of Amity between Iran and the U.S., a bilateral agreement that Washington withdrew from past year.
Tehran said the United States had illegally seized Iranian financial assets and those of Iranian companies.
Service members pick through debris following the bombing attack at the U.S. Marine Corps barracks in Beirut, Lebanon, on October 23, 1983.
The United States announced in October that it was pulling out of the Treaty of Amity after the ICJ in a separate case ordered Washington to lift nuclear-related sanctions on humanitarian goods for Iran.
Wednesday's ruling threatens to throw more fuel on the fire after a decision in October when the court ordered the U.S. to lift sanctions on humanitarian goods for Iran.
Tensions between Tehran and Washington are already high around the anniversary of the 40th anniversary of the Iranian revolution. Its rulings are binding and can not be appealed, but it has no means of enforcing them.
Last October, Iran called the 2016 Supreme Court ruling an "illegal" breach of a 1955 treaty on economic relations with the United States, with Washington scrapped immediately after Iranian lawyers presented the argument.
The United Nations' highest court upheld one U.S. objection to its jurisdiction, but it rejected another and said the third objection should be discussed at a later stage in the case.
The ruling rejected an argument by US officials that the court does not have the authority to make such a move.
US Secretary of State Mike Pompeo had added at the time that "we owe it to our fallen heroes, their families, and the victims of Iran's terrorist activities to vigorously defend against the Iranian regime's meritless claims... in The Hague".
Iran has argued that sanctions imposed in May by the administration of US President Donald Trump also violate terms of the 1955 Amity Treaty.