Recent Supreme Court Rulings on the Foreign Sovereign Immunities Act

The U.S. Supreme Court building in Washington, D.C. (Ron Coleman, https://tinyurl.com/8p4wkd8b; CC BY-NC 2.0, https://creativecommons.org/licenses/by-nc/2.0/) On Feb. 3, in a unanimous decision written by Chief Justice John Roberts, the Supreme Court held in Federal Republic of Germany v. Philipp that U.S. courts did not have jurisdiction over claims against Germany asserted by the heirs of German Jewish art dealers who were compelled to sell property to the German state of Prussia during the Nazi regime. Philipp concerned the expropriation exception to the Foreign Sovereign Immunities Act (FSIA), which notes that U.S. courts may have jurisdiction over foreign sovereigns when property is taken in violation of international law. In issuing its decision, the Supreme Court found that the expropriation exception does not apply to a foreign sovereign’s takings of its own nationals’ property.  The court’s decision in Philipp similarly undercuts the jurisdictional basis Jewish Holocaust survivors had asserted as part of their World War II-era claims against Hungary in the related case of Hungary v. Simon . In a per curiam opinion issued the same day as Philipp, the Supreme Court remanded Simon to the D.C. Circuit for further proceedings. This post will discuss the background of both Philipp and Simon before turning to the Supreme Court’s opinion in Philipp . It will conclude with an analysis of the Philipp opinion’s consequences for the remand in Simon .  Background The Foreign Sovereign Immunities Act The FSIA , enacted in 1976, created a baseline presumption that foreign states are not subject to the jurisdiction of U.S. courts. The law carves out exceptions to that immunity, however, if the sovereign’s actions fall under one of the specific categories of foreign state activity found in Section 1605. The plaintiffs in Philipp and Simon relied on one of those exceptions, the “expropriation exception,” in advancing their claims against Germany and Hungary. The expropriation exception provides that U.S. courts may exercise jurisdiction over foreign sovereigns in cases “in which rights in property taken in violation of international law are in issue.”  Federal Republic of Germany v. Philipp Philipp concerns the Guelph Treasure , a 42-piece collection of medieval religious art with an estimated worth of a quarter of a billion dollars, which is currently on display in the Museum of Decorative Arts in Berlin. The plaintiffs are the heirs of a consortium of German Jewish art dealers, which purchased the artifacts in 1929 before selling them to the state of Prussia in 1935. At issue was whether Hitler’s government compelled the three-firm consortium to sell the artifacts. Prior to litigating in the United States, the plaintiffs initially brought their claims before the German government’s “Advisory Commission on the return of cultural property seized as a result of Nazi persecution, especially Jewish Property.” Known as the Limbach Commission , the advisory commission was established pursuant to the principles of the Washington Conference on Nazi-Confiscated Art. After the Limbach Commission determined that the sale was fair and that the art need not be returned, the plaintiffs filed suit in U.S. federal court against the Federal Republic of Germany and the Stiftung Preussischer Kulturbesitz, the federal body responsible for the operation of the Berlin museum currently housing the artifacts. The heirs contended that the exception applied because the coerced sale of their property “constituted an act of genocide,” which violated international human rights law. Germany, by contrast, argued that the exception referenced the international law of property, which is shielded by the “domestic takings rule.” This rule provides, in Roberts’s words, that “a foreign sovereign’s taking of its own nationals’ property remains a domestic affair,” beyond the purview of international law.  The U.S. District Court for the District of Columbia determined that the defendants were not entitled to sovereign immunity and rejected their motion to dismiss, though it granted their motion for interlocutory appeal in 2017. Subsequently, the D.C. Circuit affirmed the district court’s denial of the defendants’ motion to dismiss, holding that the expropriation was an initial step of the Holocaust and that a seizure amounting to genocide violates international law regardless of the victim’s nationality. Additionally, in Phillip v. Fed. Republic of Germany , the circuit court denied the defendants’ petition for a rehearing en banc in spite of a supporting brief on behalf of the United States. Germany petitioned the Supreme Court for a writ of certiorari. Hungary v. Simon Like Philipp , Simon also arose from Holocaust-era claims. In Simon , a group of Jewish survivors of the Holocaust in Hungary brought a putative class action against the Hungarian government seeking redress for the expropriation of their property during the Holocaust. In this instance, the plaintiffs did not first pursue remedies in the Hungarian legal system. The 14 named plaintiffs were Hungarian nationals or resided in Hungary-annexed territories prior to the war, and they all became citizens of Canada, Australia or Israel following the war. The district court initially dismissed the plaintiffs’ claims against Hungary for lack of subject matter jurisdiction, but the D.C. circuit reversed and sent the case back to the district court. The district court again dismissed the case, relying instead on the doctrine of international comity-based abstention and the doctrine of dismissing a case to allow another, better-suited forum to hear the case. A divided panel of the D.C. Circuit again reversed the district court. On Dec. 7, 2020, the Supreme Court heard oral argument about whether a U.S. court that has a jurisdictional basis for hearing a suit against a foreign sovereign can nevertheless decline to exercise that jurisdiction for reasons of international comity. The Court’s Ruling in Philipp The opinion in Phillip analyzed both international and domestic law, with the court determining that neither supported the descendants’ claims. Justice Roberts initially focused on the historical foundations of international law, known originally as the “law of nations,” observing that it “customarily concerns relations among sovereign states,” rather than those between states and individuals. In this context, a sovereign’s taking of a foreign national’s property would implicate international law only because the mistreatment of a foreign national constitutes an affront to the foreign national’s sovereignty. “A domestic taking by contrast did not interfere with relations among states,” noted Roberts. Further, as international law “increasingly came to be seen as constraining how states interacted not just with other states, but also with individuals,” the domestic takings rule retained its salience. The international law of human rights arising after World War II was generally silent with respect to property rights. In that period, international tribunals continued to invoke the domestic takings rule. As Roberts observed, some who criticized the treatment of property rights in international law “did so on the ground that all sovereign takings were outside the scope of international law.”  The opinion next discussed the evolution of U.S. jurisprudence and legislation with respect to the issue. Banco Nacional de Cuba v. Sabbatino , which arose from the nationalization of American sugar interests in Cuba after the Cuban revolution, provided an early example of the Supreme Court’s unwillingness to intercede in the debate over the justiciability of sovereign takings as it invoked the act of state doctrine. This doctrine precludes a court from sitting in judgment of acts undertaken by a foreign sovereign on its own territory. In response, Congress constrained the court, passing the Second Hickenlooper Amendment in the Foreign Assistance Act of 1964. That act prevents application of the act of state doctrine in the event that a state’s taking is “in violation of the principles of international law.” As Roberts observed, “[N]othing in the Amendment purported to alter any rule of international law, including the domestic takings rule.” Congress employed language nearly identical to that in the Second Hickenlooper Amendment in drafting the FSIA 12 years later. Additionally, in Republic of Austria v. Altmann , the court noted that it had declined to extend its application to expropriations impacting a country’s own nationals.  Rejecting the heirs’ request that the court deem the forced sale an act of genocide, Roberts noted that the expropriation exception references the international law of expropriation rather than of human rights. “We do not look to the law of genocide to determine if we have jurisdiction of the heirs’ common law property claims. We look to the law of property.” Indee
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