ISFAHAN, IRAN - MARCH 30, 2005: A worker stands inside of an uranium conversion facility just outside the city of Isfahan. The U.S. government is considering using a powerful national security law to halt a private lawsuit against a non-profit group, United Against A Nuclear Iran, according to a source familiar with the case. Getty Images

The U.S. government is considering using a powerful national security law to halt a private lawsuit against a non-profit group, United Against A Nuclear Iran, according to a source familiar with the case.

Greek businessman and ship owner Victor Restis last year sued UANI for defamation after the New York-based group, whose advisors include former intelligence officials from the United States, Europe and Israel, accused him of violating sanctions on Iran by exporting oil from the country.

Earlier this year, U.S. government lawyers declared their interest in the lawsuit, warning that information related to UANI could jeopardize law enforcement activities.

An intervention by the government in a private civil lawsuit is rare, and its use of a privilege under state secrets statutes to clamp down on the case would be a highly unusual move. Other cases where the government has invoked the privilege include lawsuits filed against the National Security Agency in the wake of leaks to journalists by former NSA contractor Edward Snowden.

A spokeswoman for the U.S. Department of Justice declined to comment on the case.

A spokesman for UANI declined to comment on the potential action by the Justice Department.

Restis' lawyer, Abbe Lowell, also declined to comment, but pointed to court filings in which he argued that the state secrets privilege could not be used without the government first explaining the true nature of its relationship to UANI.

Restis denies doing illegal business with Iran. As part of the lawsuit, his lawyers have demanded that UANI produce whatever evidence it had that Restis was violating the sanctions and explain where it came from.

Iran denies Western accusations that it has been seeking the capability to assemble nuclear weapons. Diplomatic talks between Iran and the United States, France, Russia, Britain, China and Germany are expected to resume in September, with the aim of reaching a settlement by Nov. 24 that would scale back Iran's nuclear program in exchange for lifting sanctions.

An effort by government lawyers to mediate a settlement between UANI and Restis appears to have failed, the source said.

UANI advocates economic pressure on Iran to keep the country from building a nuclear arsenal. One of the group's tactics is to name and shame companies and people who do business in Iran.

UANI has a small budget. It spent $1.5 million in 2013, according to its tax filings. The group, however, uses sources such as commercially sold satellite imagery for its campaigns.

Among its advisory board members are Meir Dagan, the former director of the Israeli intelligence agency Mossad, and August Hanning, the former director of Germany's Federal Intelligence Service.

Its chief executive, Mark Wallace, is also the CEO of Tigris Financial Group, an investment company backed by the billionaire American gold investor Thomas Kaplan. Restis did not originally name Kaplan in the defamation lawsuit, but his lawyer is seeking to depose Kaplan as part of the proceedings.

The government and lawyers for UANI have previously sought to delay evidence gathering in the case. UANI lawyers have told the court they could not produce certain documents requested by Restis because they would reveal U.S. government secrets.

In March, a Justice Department lawyer wrote to U.S. District Judge Edgardo Ramos, who is presiding over the case in Manhattan, confirming the government's interest and requesting a temporary halt to proceedings while the government decided what to do. Ramos granted the stay, but ordered the government to explain why it wanted the material suppressed.

In an April 9 letter, Assistant U.S. Attorney Michael Byars wrote that the material in question could be protected under a privilege designed to prevent the public release of law enforcement techniques, confidential sources, undercover operatives and active investigations. But if it invoked the powerful state secrets privilege, the government would be claiming the information would not only interfere with law enforcement efforts but also jeopardize national security.

The government has until Sept. 12 to decide whether to use the state secrets privilege.

The privilege can be used to block the release of information in a lawsuit, but the government has also used it to force the dismissal of lawsuits. It is unclear whether the privilege would be applied only to certain information in the Restis case or whether it would cause the case to be closed completely.

The case is Restis et al v. American Coalition Against Nuclear Iran Inc, (dba United Against A Nuclear Iran) et al, in U.S. District Court for the Southern District of New York, No. 13-05032.

(Editing by Grant McCool)