D.C. Circuit Addresses FSIA in German Art Case

In the years before World War II, the Nazi government in Germany allegedly stole an art collection belonging to a Jewish industrialist. His descendants who live in the United States sued Germany in Toren v. Federal Republic of Germany.  They argue that Germany is not immune from suit under an exception to the Foreign Sovereign Immunities Act (FSIA), which permits suits “in which rights in property taken in violation of international law are at issue.”  The immunity issue turns on whether the alleged expropriation of property was in violation of international law.

These facts may sound familiar.  The Supreme Court held in a similar case, Federal Republic of Germany v. Philipp (2021), that even if the alleged taking of property constituted genocide and violated international law for that reason, the exception was not satisfied.  Instead, the relevant international law under the FSIA’s expropriation exception is that which specifically governs property, and it is not violated when a state expropriates the property of its own citizens – also called a “domestic taking.”  In other words, a claim by a German citizen that Germany expropriated its property does not violate international norms governing property. Instead, those norms generally protect people from the actions of foreign governments.

The Supreme Court’s decision in Philipp left open several questions about whether (and when) German Jews lost their German citizenship and what significance such a loss would have for the exception to the FSIA.  On remand in Philipp, for example, the plaintiffs tried to show that the Jewish owners of the art had ceased to be German nationals before the allegedly coerced transaction. The court reasoned that the plaintiffs had forfeited their argument; that the factual allegations failed to show that the owners had lost their German nationality; and that even if they had ceased to be German nationals and become stateless, the plaintiffs had failed to show that expropriation from a stateless person violated international law.  The decision was affirmed on appeal.

Similarly, in Toren, plaintiffs argued that the Jewish industrialist was rendered stateless before his property was seized, so that the domestic takings rule does not apply. The district court in Toren had held that the case was foreclosed by the Supreme Court’s opinion in Philipp because the plaintiffs argued that a genocidal course of conduct made them stateless. The Court of Appeals disagreed, noting that nothing in Philipp suggests that conduct constituting genocide is not relevant to determining a person’s citizenship or nationality for the purposes of applying the law of expropriation, citing its recent decision in Simon v. Republic of Hungary (2023).

The plaintiff still lost, however.  He failed to demonstrate that a state’s taking of property that belongs to a de facto stateless person violated international law, so Germany was immune from suit and the case dismissed. The Simon opinion had reached the same conclusion, based largely on the Restatement (Second) of Foreign Relations Law, which notes “the lack of any remedy under customary international law for a stateless alien” whose property is taken.  Toren had apparently cited additional authority, beyond that considered in the Simon case, including the United Nations Convention Relating to the Status of Stateless Persons (1954), but the court was not convinced.

A path does remain open for similarly situated plaintiffs. The opinion notes that “[a]t oral argument, Toren suggested for the first time that a state’s taking of a stateless person’s property can violate international law, and thus fall within the FSIA’s expropriation exception, even if relief is unavailable under the Second Restatement.”  The Simon and Toren courts refused to consider this argument because it had not been raised earlier, but it may be a promising one. Many kinds of conduct violate international law even if there is no remedy for aggrieved individuals.  So even if the Restatement (Second) view, reflected in the language quoted above, remains correct, a lack of remedy is not what the FSIA exception requires – it merely requires a violation of international law.