Creditors Of Foreign Sovereigns

During World War II, and arguably also before and after, millions of pieces of art and antiquities were taken from their rightful owners. The Nazi party would systematically strip the European Jews of their properties, their treasures, and even all of their citizenship rights.1] Now it is their time to recover what was wrongfully taken from them.

The Foreign Sovereign Immunities Act, 28 U.S.C. § 1602, et seq. (the “FSIA”) can be used as a tool to assist these former owners who live in the U.S., or have enough contact with it, to sue those who took their properties from them in the U.S. courts. The FSIA contains a restrictive view of sovereign immunity, since it states as a general rule that a U.S. Court has no jurisdiction upon a foreign sovereign. But like in every rule, there are exceptions. One of those exceptions is the expropriation or takings exception to the FSIA that states “a foreign state shall not be immune from the jurisdiction of courts of 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”  Id. at § 1605(a)(3).

U.S. federal district and appellate courts have dealt with several cases where plaintiffs have sued foreign governments under that exception. One of these cases, which has been very active this last month and will continue to be, is Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 729 F. Supp. 2d 141 (D.D.C. 2010). In this case, a religious corporation sued the Russian Federation and its instrumentalities for taking expropriating sacred texts and documents in violation of international law. The defendants moved to dismiss the case for lack of subject matter jurisdiction and other defenses and, after four years of litigation, all of the defendants withdrew as they thought that submitting themselves to the U.S. Courts went against their rights as a sovereign. Meanwhile, the plaintiffs continued their battle, which resulted in the court ultimately entering a default judgment against all defendants. The default judgment ordered the defendants to surrender all religious books, manuscripts, documents and other things taken from the plaintiffs. Unfortunately, Russia has, as of now, not returned anything.

After the long battle fought to obtain a judgment, the plaintiffs now face another hurdle: enforcing their judgment against a foreign sovereign. To that end, the plaintiffs have requested the court to impose civil sanctions against the defendants for not complying with the judgment.  This is one of the first times where such a petition against a foreign sovereign has been filed.  Accordingly, on May 23, 2012, the Judge requested an opinion from the U.S. Department of Justice as to whether he should issue sanctions against Russia. To date, the U.S. Department of Justice has not yet provided any such report. 

What can the plaintiffs really do in this case? The first possibility they should consider is to pursue enforcement in the sovereign’s home territory. Although it seems unrealistic that a Russian court will grant such a relief due to its current position in this matter, if this choice is not available, the plaintiffs can consider other options. For example, it would be useful to conduct a global asset search. After that, the plaintiffs can initiate enforcement proceedings in the countries where such assets are located by domesticating the judgment. However, even with this type of proactive action, it is important to note that very few plaintiffs have been successful in recovering what they once owned.

[1] For example, during World War II, Hungary issued anti-Semitic laws establishing that Hungarian Jews could not “. . . acquire citizenship . . . vote or be elected to public office . . . be employed as civil servants, state employees, or schoolteachers . . .  enter into enforceable contracts . . . participate in various industries and professions . . . participate in paramilitary youth training or serve in the armed forces . . .  own property . . . or acquire title to land or other immovable property.  Moreover, all Hungarian Jews over the age of six were . . . ultimately subject to complete forfeiture of all assets, forced labor inside and outside Hungary, and ultimately genocide.”  De Csepel v. Republic of Hungary, 808 F. Supp. 2d 113, 129 (D.D.C. 2011).

 

Published In: Civil Procedure Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Diaz Jr. - Diaz Reus International Law Firm | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »