CVSG in Chabad v. Russian Federation: Another Question of Foreign State Immunity

On June 2, 2025, the Supreme Court called for the views of the Solicitor General (“CVSG”) in Chabad v. Russian Federation. In Chabad’s petition for certiorari, the question presented is whether the Foreign Sovereign Immunities Act (FSIA)’s expropriation exception applies to a foreign state if the expropriated property—or property exchanged for it— is located outside of the United States and is owned or operated by an agency or instrumentality of the foreign state that is engaged in commercial activity in the United States. The D.C. Circuit answered no. It held that for a foreign state itself (as opposed to an agency or instrumentality), the expropriation exception to immunity applies only if the expropriated property—or property exchanged for it—is located in the United States.

Background

Chabad’s petition for certiorari comes after a decades-long effort to reclaim religious property nationalized by Soviet authorities in the early 20th century and now held by the Russian government in Russia. Chabad, after years of failed negotiations, brought suit to recover this property in 2004 against the Russian Federation, the Russian State Library, the Russian State Military Archive, and the Russian Ministry of Culture and Mass Communications. In 2008, the D.C. Circuit held that the defendants were not entitled to immunity under the FSIA’s expropriation exception, 28 U.S.C. § 1605(a)(3). On remand, Russia did not participate in the proceedings, leading to a 2010 default judgment and then to daily contempt sanctions when it did not pay the judgment. Seeking to enforce the sanctions award, Chabad began targeting assets of Russian state-owned entities with a U.S. presence, including Tenex-USA. After Chabad’s motion to attach was denied without prejudice, Tenex-USA, who sought a denial with prejudice, appealed. Tenex-USA argued that the district court had erred in asserting jurisdiction over Chabad’s claims against the Russian Federation under the FSIA’s expropriation exception. The D.C. Circuit agreed, reasoning that Russia’s immunity had not been specifically addressed in its 2008 decision, and that although this part of the expropriation exception applied to the Russian agencies and instrumentalities, it did not apply to Russia itself because the property in question is not located in the United States.

Foreign States and the FSIA’s Nexus Requirement in Expropriation Cases

Pursuant to 28 U.S.C. § 1604, foreign sovereigns are presumptively immune from suit in the United States unless one of the FSIA’s exceptions applies. Here, Chabad relies on the “expropriation exception,” which gives courts personal and subject matter jurisdiction over certain claims against foreign states involving unlawful expropriations.

The expropriation exception, 28 U.S.C. § 1605(a)(3), says that “a foreign state shall not be immune from the jurisdiction of courts in the United States … in any case … 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.”

Chabad argues that the second subsection can apply to foreign states; Tenex-USA argues that the second subsection applies only to agencies and instrumentalities and that it cannot lift the immunity of foreign states themselves. The plain language of the expropriation exception appears to support Chabad because it refers to “foreign state” in the language that precedes both subsections (1) and (2). Chabad also relies on the FSIA’s definition of a “foreign state” to include both the “foreign state” itself and any “agency or instrumentality” of the foreign state. This definition means that states and their agencies and instrumentalities are generally (but not always) treated in the same way in the FSIA, suggesting that subsection (2) operates to lift the immunity of the state as well as the immunity of its agencies and instrumentalities.

Tenex-USA relies on a different background principle: government agencies incorporated as juridical entities distinct from their sovereign generally should be treated as such, a presumption adopted by the Supreme Court in the venerable Bancec case. This principle means that the conduct of agencies and instrumentalities under subsection (2) of the expropriation exception should not render the foreign state itself subject to suit in the United States because doing so changes the legal position of the foreign state based only on the conduct of its agency. Or so Tenex-USA argues.

Chabad disagrees, making an interesting distinction between separate legal status for the purpose of substantive liability (the subject of Bancec) and for the purposes of jurisdiction (the issue in this case). In other words, disregarding the separate legal entities in Bancec would have imputed to one juridical entity the wrongful conduct of another.  In Chabad, by contrast, it is uncontested that the wrongful conduct (the expropriation itself) was done by Russia, and the conduct of the agency or instrumentality merely generates the required connection between the property and the United States – that connection is what confers jurisdiction (personal and subject matter) and lifts immunity. Just based on the briefing, I am not sure how compelling this distinction is: the Bancec presumption is applied in various contexts to interpret the FSIA, which generally does not provide substantive rules of decisions in cases that go forward under an exception to immunity.

The D.C. Circuit agreed with Tenex-USA that subsection (2) does not apply to foreign states, citing its earlier decisions in Simon v. Republic of Hungary and de Csepel v. Republic of Hungary.  In the de Csepel panel decision Judge Randolph dissented, however, and then- Judge Kavanaugh and Judge Randolph voted to rehear the case en banc.  The Supreme Court declined to address the issue.  The D.C. Circuit’s opinion in Chabad is also apparently consistent with the U.S. government’s interpretation of the FSIA’s expropriation exception. Tenex-USA maintains that the U.S. has consistently argued—through amicus briefs in de Csepel, Philipp v. Germany, and other cases—that satisfaction of the second nexus test gives the U.S. jurisdiction only over the agency or instrumentality, not the sovereign state itself.

Conclusion

The parties disagree about many ancillary questions, including whether this case is a good vehicle to resolve the issue and whether there is an actual circuit split on the question. The CVSG makes good sense in part because of another point of contention: what exactly the views of the U.S. government have been in past litigation. Finally, it is worth noting that Chabad argues as a policy matter that the D.C. Circuit’s decision makes it too easy for dictators to expropriate property abroad and avoid suit in the United States by keeping the property abroad, while Tenex says that it ought to be more difficult to sue foreign states in the United States then it is to sue agencies and instrumentalities in the United States. Here, too, the views of the United States could be helpful as the Court considers the broader implications of this case and weighs whether to grant cert.

The SG’s office has a steady stream of FSIA CVSGs. In addition to Chabad, the Court is awaiting the Solicitor General’s brief in Exxon v. Corporación Cimex (covered here on TLB) and Wye Oak v. Republic of Iraq (covered here on TLB). Additionally, the Solicitor General recently filed a brief in response to a CVSG in the FSIA-related case of Borochov v. Islamic Republic of Iran (covered here on TLB). On June 30, 2025, the Court denied Borochov’s cert petition, as the Solicitor General had recommended.