In Federal Republic of Germany v. Philipp, a unanimous Supreme Court, in an opinion by Chief Justice Roberts, adopted a narrow reading of the Foreign Sovereign Immunities Act (FSIA)’s authorization of suits against foreign states “in which rights in property taken in violation of international law are in issue,” 28 U.S.C. § 1605 (3), to dismiss a claim brought by heirs of Jewish art dealers alleging expropriation of their valuable property by Nazi-era Germany. The decision holds that “rights of property taken in violation of international law” refers to international law principles as of the time of the FSIA’s enactment when a state’s taking of the property of its own nationals did not violate those principles rather than current international law where such claims would more likely be maintainable. The Court’s strict interpretation of when international law would permit an exception to foreign sovereign immunity fits within a larger pattern of Supreme Court decisions restricting the ability of foreign plaintiffs to bring into U.S. courts cases that have little or no connection to the United States.
The case arose out of a dispute over certain German medieval relics known as the Welfenschatz. Heirs of a consortium of art dealers comprised of Jewish German nationals alleged that the Nazi government used political persecution and threats of violence to force the sale of the relics at approximately one-third of their value. After the war, the new Federal Republic of Germany took possession of the relics and continues to display them today in a Berlin museum.
After their claim for compensation was rejected by a special German commission created to resolve Nazi-era property disputes, the heirs filed a complaint in the U.S. District Court in Washington, D.C. under common law property law asserting they were owed $250 million in compensation. Germany moved to dismiss the case citing its immunity as a sovereign under the Foreign Sovereign Immunities Act (FSIA). But both the district court and the D.C. Circuit denied this motion, ruling that the heirs’ complaint fell within the FSIA’s exception to sovereign immunity for “property taken in violation of international law” in § 1605(a)(3).
Germany had argued that the FSIA’s § 1605(a)(3) exception to sovereign immunity did not apply because the alleged expropriation was carried out by the German government against its own citizens. Under the “domestic takings” rule of international law, Germany argued, such an internal act did not violate international law and without such a violation, the exception to the FSIA could not be invoked.
The D.C. Circuit and lower court rejected this “domestic takings” rule finding that because the relics were taken as part of an act of genocide—and current international law applies to genocidal acts by a state against its own nationals—the expropriation was a violation of international law within the meaning of the exception to the FSIA. Germany sought en banc which the Court of Appeals denied, despite a long and detailed dissent from Judge Katsas who warned that the panel’s decision would “clear the way for a wide range of litigation against foreign sovereigns for public acts committed within their own territories.” Germany then sought certiorari in the Supreme Court seeking reversal of the appeals court’s interpretation of the FSIA expropriation exception while also claiming in the alternative that the Court should abstain from asserting jurisdiction as a matter of international comity.
The Court avoided the international comity question, however, because it agreed with Germany that the FSIA’s exception for “expropriation of property rights taken in violation of international law” did not apply to the heirs’ claim. It reached this conclusion by considering both the substantive content of international law as well as Congress’ intent when it created this exception to the FSIA.
The main substantive question for the Court was whether international law prohibits a state from taking the property of its own nationals. To resolve this question, the Court relied on historical sources such as the oft-cited 18th Century Swiss scholar Emmerich de Vattel as well as a 1938 statement by former Secretary of State Cordell Hull to the Mexican ambassador. Both sources established for the Court that, as a historical matter, international law did not regulate a state’s expropriation of its own citizens’ property.
The Court then considered the history and background behind Congress’ decision to create the expropriation exception to sovereign immunity. The FSIA provision was derived from the “Hickenlooper” amendment to the act of state doctrine adopted in the wake of a controversial 1964 Supreme Court decision in Banco Nacionale de Cuba v. Sabbatino. That decision gave effect to Cuba’s expropriation of U.S. citizens’ property. This history, the Court concluded, confirmed that the FSIA’s exception did not cover expropriations of the property of a nation’s own citizens.
The appellant heirs did not contest the view that international law allows domestic takings. Instead, they rested their argument on their reading of the statutory reference to “rights in property taken in violation of international law” as encompassing other applicable international legal rules. In particular, the heirs argued that the coerced sale of their property was not a mere domestic taking. Rather, it was part of a German government policy to commit genocide against Jews in Europe. Thus, the takings of the heirs’ property was intended to “deliberately inflict on a whole group conditions of life calculated to bring about its physical destruction,” as defined by the Convention on the Prevention and Punishment of the Crime of Genocide, Art. II, Dec. 9, 1948, 78 U. N. T. S. 277, 280.
The Court avoided the question of whether the coerced sale in this case constituted an act of genocide because it held that the international law of genocide was irrelevant to its analysis. Instead, the Court ruled that the exception to sovereign immunity was plainly intended to cover only violations of international law with respect to property rights. There was no indication, in the Court’s view, that the FISA exception was intended to apply to violations of other kinds of rights or other kinds of international law strictures. Thus, the guiding law for determining whether a “violation of international law” occurred here is “the law of property.”
The heirs offered a textualist reading of the provision placing extra significance on the phrase “property taken in violation of international law.” In their view, if Congress had intended to limit the expropriation exception to the law of property, it would have exempted “property takings in violation of international law”. Because Congress used the less specific phrase “property taken in violation of international law,” the heirs argued, Congress likely meant to create an exemption to sovereign immunity based on a broader set of international legal rules such as those prohibiting genocide.
The Court had little trouble dismissing this argument, suggesting it placed too much weight “on a gerund.” In the Court’s view, the FSIA provision, when read as a whole, focused solely on exempting sovereign immunity for takings of property rights and, when read as a whole, it did not evince any intention of incorporating broader international law norms. Rather, the Court suggested the best explanation of Congress’ purpose for enacting the exception was to protect the rights of U.S. citizens’ property abroad “as part of a defense of America’s free enterprise system.”
In this way, the Court held that the heirs’ interpretation was inconsistent with the FSIA’s broader statutory purpose and framework. Enacted to codify a restrictive theory of sovereign immunity to allow litigation to proceed against sovereigns for claims arising from their commercial activities, the FSIA otherwise strictly limits any claims in the U.S. for general human rights violations committed by foreign sovereigns abroad. Hence, the FSIA’s noncommercial tort exception is limited to acts that “occurred in the United States” and the exception for state sponsors of terrorism requires the President to first designate a specific foreign sovereign defendant as open to such claims.
The Court also noted that the heirs’ expansive interpretation of international law would open the door to federal court jurisdiction over claims involving activities that occurred entirely within the territory of other nations. If the heirs’ interpretation were accepted, the Court held, any property taken in conjunction with a human rights violation could be brought to U.S. court, whether or not any U.S. connection to the violation existed. Interpretations of statutes that lead to such wide-ranging extraterritorial jurisdiction should be avoided, the Court opined, since it could cause friction with other nations and even trigger retaliation. Instead, Chief Justice Roberts emphasized that “United States Law…does not rule the world,” a phrase he first used in his opinion for the Court in Kiobel v. Royal Dutch Petroleum, a 2013 decision restricting Alien Tort Statute (ATS), 28 U.S.C. §1350, litigation with insufficient contacts with the United States.
Roberts’s self-citation here is telling because it reflects one of the less noticed jurisprudential shifts the Court has taken under his leadership. For decades, the lower courts allowed plaintiffs to use the federal Alien Tort Statute to sue for violations of international law, usually international human rights law, suffered by foreign nationals in foreign countries. Critics of the Alien Tort Statute litigation argued that plaintiffs were invoking unsettled and evolving conceptions of international human rights law to bring cases with little connection to the United States into U.S. courts. But in a 2004 decision by Justice Souter in Sosa v. Alvarez-Machain, a divided Court allowed such cases to continue.
Since the 2013 Kiobel decision, however, the Roberts Court has slowly cut back on the ability of foreign plaintiffs to bring such cases. It first limited ATS cases to those that “touch and concern” the United States in Kiobel. This resulted in a number of such cases being dismissed. In the Jesner v. Arab Bank decision, the Court further limited ATS cases that were brought against foreign corporate defendants, whether or not those foreign corporate defendants were in the United States. This term it is considering in Nestlé USA v. Doe I whether ATS claims against U.S. corporate defendants should also be restricted for similar reasons of uncertainty about contemporary international law norms.
Germany v. Philipp can thus be understood as falling within a broader trend of Roberts Court decisions limiting the reach of U.S. law and jurisdiction to stay within the territory of the United States while also avoiding controversial and unsettled interpretations of international law. With a unanimous Court now backing this approach in the context of foreign sovereign immunity, it seems likely that this trend will continue.
Reprinted with permission from the March 17 issue date of the “New York Law Journal” © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or email@example.com.