Two recent Supreme Court rulings could be consequential for the interpretation of the Foreign Sovereign Immunities Act.
Published by The Lawfare Institute
in Cooperation With
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 .
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.” Indeed, the expropriation exception was drafted against the backdrop of modern human rights law, and the domestic takings rule had survived its advent.
Roberts then turned to the plaintiffs’ textual argument: They posited during oral arguments that the exception pointed to “‘property taken in violation of international law—not property takings in violation of international law,’” a distinction they argued shows that the exception should be read to be broader than just related to the takings of property (emphasis in the original). The court “would not place so much weight on a gerund,” Roberts wrote. Plus, he added, such a reading of the exception would broaden it to such a degree as to swallow the general immunity afforded by the FSIA. Germany’s interpretation, he wrote, was “more consistent with the FSIA’s express goal of codifying the restrictive theory of sovereign immunity.” Although the expropriation exception, he acknowledged, went beyond a wholly restrictive view by devaluing immunity for certain public acts of foreign sovereigns, the FSIA nonetheless largely codifies the restrictive theory. And, he added, adopting the plaintiffs’ interpretation would arguably “force courts themselves to violate international law” by “derogating international law’s preservation of sovereign immunity for violations of human rights law.”
Next, Roberts wrote that the plaintiffs’ position would “circumvent the reticulated boundaries Congress placed in the FSIA with regard to human rights violations.” Considering the noncommercial tort and terrorism exceptions, he noted that, where Congress did target injuries associated with human rights violations, “it did so explicitly and with precision.” Those restrictions would disappear if suits for human rights violations could be repackaged “as violations of property rights and thereby brought within the expropriation exception to sovereign immunity.”
It is also important that the court not read exceptions to foreign sovereign immunity too broadly, Roberts said, to avoid creating friction in the relations between the U.S. and other nations. Citing Kiobel , he warned about “the international discord that can result when U.S. law is applied to conduct in foreign countries.” Roberts offered what appears to be a warning:
As a Nation, we would be surprised—and might even initiate reciprocal action—if a court in Germany adjudicated claims by Americans that they were entitled to hundreds of millions of dollars because of human rights violations committed by the United States Government years ago.
There is no reason to think, he concluded, that Germany would not react in the same way if the Supreme Court recognized jurisdiction over it in this case.
After addressing the implications of broadly reading exceptions to foreign sovereign immunity, Roberts addressed the plaintiffs’ counterarguments. First, he addressed the plaintiffs’ reliance on the 2016 Foreign Cultural Exchange Jurisdictional Immunity Clarification Act. That law amended the FSIA to explain that participation in specified “art exhibition activities” does not qualify as “commercial activity” within the meaning of the expropriation exception. The plaintiffs relied on the amendment “to show that Congress anticipated Nazi-era claims could be adjudicated by way of that exception.” The court agreed that this is true with respect to claims arising from Nazi-era expropriation of foreign nationals’ art. However, the court narrowly interpreted the Clarification Act, refusing to apply it to German nationals by noting it was not the intent of Congress to support “the broad elimination of sovereign immunity across all areas of law” (emphasis in the original). In other words, the act did not change the FSIA’s requirement that the expropriation be in violation of international law, and international law does not apply to a sovereign state’s expropriation of its own citizens’ property.
The Philipp Opinion’s Implications for Simon
By holding that a foreign sovereign’s expropriation of the property of its national is not a violation of the international law of expropriation, the Supreme Court dealt a sharp blow to the Simon plaintiffs’ hopes of seeking a remedy for their claims in U.S. courts. The Philipp decision appears to foreclose avenues for relief of the plaintiffs who were Hungarian nationals at the time their property was expropriated by the Hungarian government. Interestingly, however, the Simon plaintiffs’ invocation of the expropriation exception presents a wrinkle that the court did not directly address in the Philipps opinion—the Simon plaintiffs argued they had been denaturalized by Hungary or had not been Hungarian nationals but, rather, stateless persons at the time of the expropriation. Therefore, they asserted during oral argument, even a holding in Philipp that the expropriation exception did not incorporate domestic takings should not eliminate “their chance to make their claim.”
Whether the district court agrees with that point remains to be seen. (The D.C. Circuit, which received the case on remand from the Supreme Court, on March 16 remanded the case to the district court in turn.) The first time the D.C. Circuit heard the case on appeal, it recognized the issue but did not consider it directly, because the court noted that the plaintiffs did not premise their argument for jurisdiction under the international law of uncompensated takings but, rather, on genocide. However, the Supreme Court’s framing of its holding as based on “the premise that international law customarily concerns relations among states, not between states and individuals” may make it difficult for the plaintiffs to convince the district court to adopt their position on remand.
