Expropriation Exception

Expropriation Exception in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): Section 1605(a)(3) of the FSIA provides an exception for immunity in cases of alleged expropriation:

in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.

Developments

In May 2011, the United States submitted a brief as amicus curiae in the Supreme Court of the United States at the invitation of the court which addressed the meaning of the expropriation exception in the FSIA. Kingdom of Spain v. Estate of Claude Cassirer, No. 10-786. As discussed in this world Encylopedia of Law 8, the case was brought by the estate of the descendant of a former owner of a painting that was confiscated by Nazi Germany and later came to be owned by an agency of the Spanish government. The United States brief is available at (internet link) justice.gov/osg/briefs/2010/2pet/6invit/2010-0786.pet.ami.inv.pdf. Excerpts below address the applicability of the expropriation exception (with citations to the record and most footnotes omitted). see in the content of this world legal encyclopedia 8 for discussion of the section in the brief addressing whether there is an exhaustion requirement prior to seeking relief for expropriation under the FSIA in U.S. courts. The Supreme Court denied certiorari, allowing the case to proceed at the district court level.

Details

1. The court of appeals correctly concluded that the exception to foreign sovereign immunity in Section 1605(a)(3) applies in this case and permits the exercise of subject-matter jurisdiction over the Foundation. The statute contains two jurisdictional prerequisites, and respondent's complaint satisfies both of them. First, Section 1605(a)(3) requires that a plaintiff's suit be one “in which rights in property taken in violation of international law are in issue.” In his complaint, respondent alleges—and petitioners do not challenge before this Court—that the Foundation owns a Pissarro painting taken from respondent's grandmother by the Nazi government in violation of international law. Respondent's “rights in property taken in violation of international law” are therefore very much “in issue” in this case.

Second, Section 1605(a)(3) requires either that the property be “present in the United States in connection with a commercial activity carried on in the United States by the foreign state” or that the property be “owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.” Here, respondent does not allege that the Pissarro painting is “present in the United States” in connection with any commercial activity carried on by Spain. But respondent does allege—and petitioners again do not challenge before this Court—that the Foundation is an instrumentality of Spain engaged in commercial activity in the United States. Respondent's complaint therefore satisfies Section 1605(a)(3)'s express requirements with respect to the Foundation.

More about the Issue

2. a. Petitioners argue that the expropriation exception is ambiguous because “[it] does not expressly say” whether the property at issue must have been taken “by the [defendant] foreign state” or “by any foreign state,” and they contend that this supposed ambiguity should be resolved by requiring that the defendant foreign state have been the wrongdoer. But the absence of any reference to the responsible foreign state indicates that Congress was interested in the fact of the unlawful expropriation, not the identity of the expropriator. Congress drafted the exception to govern all cases “in which rights in property taken in violation of international law are in issue” (if the requisite nexus to commercial activity is also present), without regard to whether the defendant foreign state took the property or subsequently came into possession of it. As the court of appeals explained, “[t]he text is written in the passive voice, which 'focuses on an event that occurs without respect to a specific actor.'” (quoting Dean v. United States, 129 S. Ct. 1849, 1853 (2009)). “Thus, the text already connotes 'any foreign state,'” and the court interpreted the statute in accord with its most natural meaning.

The FSIA's emphasis on the fact of a taking carries over to its provision governing attachment of a foreign state's property in the United States, 28 U.S.C. 1610 (2006 & Supp. III 2009). Section 1610(a)(3) parallels Section 1605(a)(3): it provides that certain property is not immune from attachment to execute “a judgment establishing rights in property which has been taken in violation of international law.” But elsewhere in the FSIA's attachment provision, Congress concentrated on the identity of the expropriator. Section 1610(f)(1) permits the attachment of certain property owned by a foreign state found liable for terrorism, and refers to property “expropriated or seized by the foreign state.” 28 U.S.C. 1610(f)(1)(B) (emphasis added). That is because the parallel jurisdictional exception permits suits for monetary damages “against a foreign state” for terrorist acts committed by agents “of such foreign state.” 28 U.S.C. 1605A(a)(1) (Supp. III 2009).Where Congress has chosen to make an exception to foreign sovereign immunity turn not simply on the fact of expropriation but the identity of the expropriating state, it has said so in the FSIA. Congress has not so provided in Section 1605(a)(3).

b. Petitioners also assert that the expropriation exception was “intended to apply to foreign states that have committed a jurisdictionally-significant act.” That assertion begs the question of what act by a foreign state should be considered jurisdictionally significant. The text of the FSIA supplies the answer: If the case is one “in which rights in property taken in violation of international law are in issue,” then the conduct that gives rise to jurisdiction is commercial activity in the United States by the foreign state or instrumentality: either (i) the expropriated property is “present in the United States in connection with a commercial activity carried on in the United States by the foreign state” or (ii) the property is “owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.” 28 U.S.C. 1605(a)(3). Section 1605(a)(3)'s reliance on commercial activity in the United States by the foreign state or instrumentality as the jurisdictionally significant act is consistent with the general practice under the restrictive theory of immunity of abrogating such immunity based on commercial activities conducted by a foreign state in the forum state. See, e.g., Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 487, 488-489 (1983).

The Fsia's Expropriation Exception Does Not Require Respondent to Exhaust Remedies in Spain or Germany in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): The court of appeals correctly held that Section 1605(a)(3) does not mandate that a plaintiff exhaust foreign remedies before bringing suit against a foreign state or instrumentality. Section 1605(a)(3) itself says nothing about exhaustion. That is in contrast to the former Section 1605(a)(7), which required that a plaintiff suing a foreign state for state-sponsored terrorism “af-ford[] the foreign state a reasonable opportunity to arbitrate the claim in accordance with accepted international rules of arbitration.” 28 U.S.C. 1605(a)(7)(B)(i) (2006). Congress knows how to require plaintiffs to seek other remedies before bringing suit under Section 1605(a), and it has not done so in Section 1605(a)(3).

Developments

In addition, the FSIA's expropriation exception was enacted following this Court's decision in Sabbatino, which declined to adjudicate claims to property expropriated by the Cuban government._

Details

2. Petitioners invoke international law, but there is no requirement in international law that a plaintiff must exhaust local remedies for a viable expropriation claim to arise. To be sure, if a taking of property by a foreign state is for a public purpose and is not discriminatory, then the taking violates international law only if it is not accompanied by prompt, adequate, and effective compensation. 2 Restatement § 712(1)(c) & cmt. c at 196, 198. Accordingly, for those types of takings, a plaintiff may need to have pursued and been denied compensation in the foreign state for there to be a ripe taking claim at all. Cf. Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 194-195 (1985). But where, as here, the taking violated international law because it was not for a public purpose or was discriminatory, the taking claim does not depend upon a showing that the plaintiff has sought and been denied just compensation. In any event, these considerations go to whether a taking in violation of international law has occurred, and here petitioners concede that such a taking occurred. Accordingly, to the extent that these considerations bear at all on this case, they can be taken into account on remand in determining whether exhaustion should be required as a prudential matter. The FSIA's expropriation exception provides for subject-matter jurisdiction over certain such suits—i.e., it prevents a foreign entity from invoking sovereign immunity when a plaintiff alleges a taking in violation of international law and demonstrates that the foreign en-tity carries on the requisite commercial activity in the United States. In Sabbatino itself, the Court noted that Cuba had “formally provided” a system of compensation for expropriated property, although “the possibility of payment under it may well be deemed illusory.” 376 U.S. at 402; see id. at 402 n.4. It is unlikely that Congress intended to require the victims of expropriation abroad to exhaust foreign remedies, whether real or illusory, and yet said nothing about it in Section 1605(a)(3).

Expropriation Exception in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): 3. Petitioners ground their arguments in a number of policies and authorities outside the FSIA. None counsels in favor of a different interpretation of Section 1605(a)(3).

a. Petitioners argue that the decision below conflicts with the State Department's espousal policy. Espousal is the process by which the “government of the United States, usually through diplomatic channels, makes [a private citizen's claim] the subject of a formal claim for reparation to be paid to the United States by the government of the state responsible for the injury.” Abrahim-Youri v. United States, 139 F.3d 1462, 1463 n.2 (Fed. Cir. 1997) (citation omitted). As petitioners note, the State Department will consider espousing a claim of expropriation against a foreign government only if certain conditions are satisfied, including that (i) the claimed violation of international law is attributable to that foreign government, and (ii) the claimant has exhausted local remedies in the relevant country or demonstrated that exhaustion would be futile.

The State Department's espousal policy does not, and is not intended to, have any logical bearing on the proper interpretation of Section 1605(a)(3). The espousal policy governs when the United States will adopt the claim of one of its citizens for the purposes of state-to-state resolution; it does not govern whether the rights of U.S. citizens under international law have been violated in the first instance, let alone whether those citizens can satisfy the FSIA's expropriation exception and invoke the jurisdiction of federal courts. Indeed, one purpose of the FSIA was to enable private parties to obtain—and, in some instances, to execute upon—judgments against foreign states or instrumentalities without the need for State Department espousal. Cf. 28 U.S.C. 1602; H.R. Rep. No. 1487, 94th Cong., 2d Sess., 8, 13, 27-29 (1976) (1976 House Report). There is no basis, then, for the State Department's diplomatic policy governing resolution of claims with foreign nations to limit the FSIA's exceptions to sovereign immunity for suits by private parties.

More about Expropriation Exception

b. Petitioners contend that international law permits jurisdiction over a foreign state or instrumentality only for conduct that itself violates international law. Petitioners cite no authority for that proposition, and in any event the FSIA subjects foreign states to suit in a variety of circumstances that do not involve any violation of international law. See, e.g., 28 U.S.C. 1605(a)(2) (exception to foreign sovereign immunity for suits based on a foreign state's commercial activity in the United States); 28 U.S.C. 1605(a)(4) (same; suits in which certain rights in property in the United States are at issue); 28 U.S.C. 1605(a)(5) (same; suits based on certain types of tortious conduct); see also Convention on Jurisdictional Immunities of States and Their Property Art. 10, U.N. Doc. A/59/508 (2004) (exception to foreign sovereign immunity for claims arising out of certain commercial transactions); id. Art. 11 (same; claims relating to certain employment contracts); id. Art. 13 (same; claims arising out of ownership, possession, or use of certain property in the forum state).

c. Petitioners point to the Restatement (Third) of Foreign Relations Law of the United States (1987) (Restatement). Section 455 of the Restatement addresses the immunity of foreign states from jurisdiction, and it appears to contemplate that immunity is withdrawn only for an expropriating state. See 1 Restatement § 455(3)(a) and (b) at 411; id. § 455 cmt. c at 412 (stating that jurisdiction is appropriate in part if “the property was taken by the foreign state in violation of international law”). But the Restatement was drafted in 1987, eleven years after the FSIA was enacted. And although the Restatement says that it “reflect[s] Section 1605(a)(3)” of the FSIA, ibid., it adds a requirement— that the property at issue was “taken by the foreign state”—that is not present in Section 1605(a)(3), without indicating whether that choice of wording was meaningful, imprecise, or inadvertent. Even assuming that the drafters of the Restatement intended to address, sub silentio, jurisdiction over a nonexpropriating state, petitioners cite no authority for the proposition that the text of the Restatement (and its commentary) should control over the quite different and broad text of the FSIA itself.

Developments

d. Finally, petitioners rely on the Hickenlooper Amendment, 22 U.S.C. 2370(e)(2). That provision was enacted following this Court's decision in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), which held that the act of state doctrine barred litigation of the ownership of property that had been expropriated by the Cuban government. Id. at 436-437. The Hicken-looper Amendment overturns that result. It provides that United States courts shall not “decline on the ground of the federal act of state doctrine to make a determination on the merits” in a case “in which a claim of title or other rights to property is asserted by any party including a foreign state (or a party claiming through such state) based upon (or traced through) a confiscation or other taking * * * by an act of that state in violation of the principles of international law.” 22 U.S.C. 2370(e)(2). Petitioners contend that the Hickenlooper Amendment abrogates the act of state doctrine only for expropriating states, and the FSIA's waiver of foreign sovereign immunity should be interpreted in parallel fashion.

As an initial matter, it is not established that the Hickenlooper Amendment denies an act of state defense to a foreign state only if that state confiscated the property at issue, and petitioners cite no authority for that proposition. Senator Hickenlooper, when explaining the amendment, specifically noted that it would “discourage purchases of expropriated property since the purchasers would be unable to rely automatically on the act of state doctrine and would have to establish their lack of notice of the violation of international law that took place in the seizure.” 110 Cong. Rec. 19,557 (1964). Nothing in this statement suggests that it did not apply equally to a foreign state that purchased property that had been expropriated by another foreign state.

In any event, Congress “intended that the expropriation exception to foreign sovereign immunity operate independently from the Hickenlooper Amendment's exception to the act of state doctrine.” Nemariam v. Federal Democratic Republic of Ethiopia, 491 F.3d 470, 479 (D.C. Cir. 2007); see 1976 House Report 20 (explaining that the FSIA's expropriation exception “deals solely with issues of immunity” and “in no way affects existing law on the extent to which, if at all, the 'act of state' doctrine may be applicable”). Although the FSIA authorizes United States courts to exercise subject-matter jurisdiction over a foreign state or instrumentality that possesses property that was unlawfully expropriated, the FSIA does not itself affect the substantive liability of those foreign entities. Thus, whether the plaintiff has a valid cause of action or whether the foreign state has a valid defense, including one based on the act of state doctrine, does not affect the jurisdiction of United States courts to adjudicate those questions.

Details

4. Petitioners apparently assumed below that (and the court of appeals therefore did not address whether) if Section 1605(a)(3) permits jurisdiction over the Foundation, it also permits jurisdiction over the Kingdom of Spain. That assumption is erroneous. If an action is one “in which rights in property taken in violation of international law are in issue,” then Section 1605(a)(3) requires either of two types of commercial activity in the United States: (i) the expropriated property must be “present in the United States in connection with a commercial activity carried on in the United States by the foreign state,” or (ii) the property must be “owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.” 28 U.S.C. 1605(a)(3) (emphasis added).

Whether jurisdiction exists over the foreign state depends on which prong of Section 1605(a)(3) the plaintiff invokes. Where a plaintiff alleges that the property at issue “is present in the United States in connection with a commercial activity carried on in the United States by the foreign state,” 28 U.S.C. 1605(a)(3), then there is jurisdiction over the foreign state itself based on its own commercial activities within this country. But where a plaintiff alleges that the property is “owned or operated by an agency or instrumentality of the foreign state * * * engaged agency or instrumentality that has availed itself of American markets, not the foreign state. Ibid.; cf. Garb v. Republic of Poland, 440 F.3d 579, 589 (2d Cir. 2006).

Counsel for respondent has informed this Office that on remand before the district court respondent would not oppose a motion to dismiss the Kingdom of Spain from this case. Because the Foundation would still be subject to jurisdiction before the district court, and because the Foundation and Spain have a shared interest in opposing the relief that respondent seeks, it is conceivable that Spain would choose not to seek to be dismissed as a party. But the fact that Spain may not ultimately be subject to the district court's jurisdiction— and in any event that other foreign states should not be subject to the jurisdiction of United States courts based on the possession of expropriated property by their agencies and instrumentalities—significantly diminishes the potential impact on foreign relations of the decision below.

Expropriation Exception

In relation to the international law practice and Expropriation Exception in this world legal Encyclopedia, please see the following section:

Privileges, Immunities

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Foreign Sovereign Immunities Act

Under this topic, in the Encyclopedia, find out information on Exceptions to immunity. Note: there is detailed information and resources, in relation with these topics during the year 2011, covered by the entry, in this law Encyclopedia, about Expropriation exception

The Fsia's Expropriation Exception Does Not Require Respondent to Exhaust Remedies in Spain or Germany

In relation to the international law practice and The Fsia's Expropriation Exception Does Not Require Respondent to Exhaust Remedies in Spain or Germany in this world legal Encyclopedia, please see the following section:

International Claims, State Responsability

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See Also

• Privileges
• Immunities
• Foreign Sovereign Immunities
• Exceptions To Immunity
• Expropriation Exception

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See Also

• International Claims
• State Responsability

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Notes and References

1. _ Editor's note: see in the content of this world legal encyclopedia 10.A.2.b for the section of the U.S. brief that discusses Sabbatino.