Washington said Iran's "support for international terrorism", including bombings and airline hijackings, should rule out its case at the International Court of Justice (ICJ) in The Hague.

Iran dragged Washington to the UN's top court in 2016 over a US Supreme Court ruling that the $2 billion should go to victims of attacks blamed on the Islamic republic.

Iran said the case breached a 1955 "Treaty of Amity" between Washington and Tehran signed before Iran's Islamic revolution.

Washington tore up that treaty last week after the ICJ in a separate case ordered the United States to ease sanctions reimposed on Iran by US President Donald Trump after he pulled out of Iran's 2015 international nuclear deal.

"Iran comes to the court with unclean hands. Indeed, it is a remarkable show of bad faith," Richard Visek, a US State Department legal official, told the court.

"The actions at the root of this case centre on Iran's support for international terrorism... Iran's bad acts include supports for terrorist bombings, assassinations, kidnappings, and airline hijackings," he said.

Visek also accused Iran's "most senior leaders" of the "encouragement and promotion of terrorism" and "violation of nuclear non-proliferation, ballistic missile and arms trafficking obligations".

Iran's use of the 1955 treaty to lodge the case was an "abuse of process", he added.

The ICJ was set up after World War II to rule on disputes between United Nations member states. Its rulings are binding but it has no power to enforce them.

- 'Full reparations' -

At Monday's hearing, a 15-judge bench is listening to US arguments over whether the ICJ can take up the case under its strict rules governing its procedure.

The US Supreme Court ruled in April 2016 that $2 billion in Iran's frozen assets must go to American victims of terror attacks.

These included the 1983 bombing of a US Marine barracks in Beirut, in which 241 soldiers were killed, and the 1996 Khobar Towers bombing in Saudi Arabia. In total, the decision affects more than 1,000 Americans.

Iran angrily accused Washington of breaking the 1955 treaty -- even though it was signed at the time with the pro-US regime of the Shah -- and called for the US "to make full reparations to Iran for the violation of its international legal obligations".

A decision by the ICJ's judges could take weeks or even months before being made public.

But Monday's showdown risks deepening the Trump administration's rift with international justice.

Last Wednesday, Trump's national security advisor John Bolton announced the US was not only leaving the amity treaty but also quitting the international accord relating to the UN top court's jurisdiction.

That followed Iran's shock victory last week when the ICJ ruled that the US must lift sanctions against Tehran targeting humanitarian goods like food and medicine.

The step also came after the Palestinians went to the ICJ to challenge the US move of its Israel embassy to Jerusalem.

Trump last month at the United Nations virulently rejected the authority of the International Criminal Court -- a separate court based in The Hague that the US is not a member of -- over a probe into US forces in Afghanistan.