Jurisdictional Law Hailed as Impetus to End Russian Art Loan Embargo that is Actually Unaffected by that Law

Art Law Report 6 January 2017
By Nicholas O'Donnell

With reports that Russia is considering abandoning the nearly five year old embargo on loans of cultural artifacts into the United States, the cited connection between that willingness and the recent passage of the Foreign Cultural Exchange Jurisdictional Clarification Act (FCEJCA) bears closer scrutiny that it has received to date.  If the unnecessary embargo were to come to an end it would be welcome news, but Russia’s claim that the new law is the reason is hard to square with the history of the issue.  It cannot be stated emphatically enough that the new law makes Russian art loans no more or less safe from seizure than they were before, because the law governing seizure of cultural objects (the Immunity from Seizure Act, or IFSA) has not changed.  Russia’s penchant for framing the question as something for which it needed protection is thus frustrating because it is simply incorrect.  The Russian loan embargo has been political theater from the time in began in 2012 in retaliation after Russian defendants lost a key litigation in Washington, DC, and the new law was passed in response to events that had nothing to do with Russia. 

As we have explained before, the FCEJCA was an amendment to a jurisdictional statute (Foreign Sovereign Immunities Act , or FSIA), that is, a law about whether U.S. courts can hear a certain kind of claim (i.e., against foreign sovereign defendants).  Under the “expropriation exception” of the FSIA, 28 U.S.C. § 1605(a)(3), a sovereign defendant like Russia or Hungary may be sued in U.S. federal court if the claims concern rights in property taken in violation of international law, and the sovereign defendant is engaged in commercial activity in America (not necessarily related to the property at issue).  The FSIA does not create the property claim itself, but it does endorse U.S. courts as a forum to hear them.  The FSIA is the basis for many restitution claims, particularly for Nazi-looted art (for which the FCEJCA also has a specific exception), including the Welfenschatz and Flechtheim cases brought by clients of ours. 

Many sovereign defendants dispute whether they are engaged in commercial activity here, and in one—and only one—case, the sole commercial activity alleged was the loan of paintings immune from seizure under IFSA.  The District Court ruled that such a loan (which had been made by an Amsterdam museum) could satisfy the commercial activity prong of the expropriation exception.  In that case, however (Malewicz v. City of Amsterdam), the consequence was only over whether the lawsuit could proceed (it did), not over whether the paintings themselves could be seized (they could not).  The FCEJCA overrules that result by statute, such that if there is no commercial activity other than a loan of an IFSA-immune object, now the defendant cannot be sued in the United States. 

How does IFSA work, then?  IFSA allows the State Department to immunize any cultural object loaned into the United States from seizure while it is here.  Once granted immunity, an object cannot be seized for any reason, and it must be returned whence it came.  Critically, the FCEJCA does not amend, alter or affect IFSA in any way.  Much of the outcry about the FCEJCA has centered on the argument that it blesses the loan of looted or stolen art.  It does not, however.  If one believes (as many of good faith do) that stolen art should not be loaned into the U.S. without consequence, then it is IFSA that must be amended, not the FSIA. 

None of this has anything to do with Russia.  The FCEJCA was proposed three times before it passed, and it was a direct response to the Malewicz case, not Russia.  In fact, the connection comes from an FSIA-based case that Russia lost nearly a decade ago and which it continues to defy. 

In 2005, the (Orthodox Jewish) Chabad movement in Brooklyn sued the Russian Federation, the Russian Ministry of Culture and Mass Communication, the Russian State Library and the Russian State Military Archive, seeking the return of the so-called Rebbe’s (the movement’s charismatic leader) collection of books and other objects of interest to the Chabad-Lubavitch movement and teachings (the “Library”).  The defendants moved to dismiss Chabad’s complaint, arguing that the expropriation exception did not apply.  The District Court denied the motion to dismissed and the Court of Appeals for the D.C. Circuit affirmed the order in 2010.  In short, the courts concluded that the claims did relate to rights in property taken in violation of international law, and that the Russian defendants were sufficiently commercially active. 

In response, Russia announced that it would defy the judgment and refuse to participate in the proceedings any further.  The Russian defendants have been in contempt of the U.S. District Court in Washington for four years, and have been accruing a fine of $50,000 per day ever since for flouting the Court’s order (last liquidated in an unpaid amount of $43,700,00 as of September 2015).

The current loan embargo was in explicit retaliation for the judgment of the U.S. court, not because of the Malewicz case or any other Russian loan.  In short, it is unconnected to any principled concern about seizure because any object from Russia that has IFSA imimunity cannot be seized.  The FCEJCA does not change this.  If the Chabad case were filed today, the FCEJCA would not change the result, because the Chabad case does not concern property that was ever loaned into the United States.

Yet in response to the statute’s passage, Russian officials have been suddenly vocal that the law will bring an end to the embargo.  That may well be, but the unilateral refusal to loan cultural objects has never had anything to do with the law.
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