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US Supreme Court on Welfenschatz and Sovereign Immunity

1970
1945
Dispute Resolution Germany 4 February 2021
By Ted Folkman

Yesterday, the US Supreme Court issued its decision in Federal Republic of Germany v. Philipp (S. Ct. 2021) and today, we have Ted Folkman of Letters Blogatory reviewing it: 

This is the case of the Welfenschatz, the Guelph treasure said to have been stolen by the Nazis from its Jewish owners. The claim was that Hermann Göring, one of Hitler’s most powerful ministers, had coerced the Jewish owners of the treasure to sell it for a fraction of its value to the Prussian government in the early 1930s. 

The heirs of the rightful owners and the government had agreed to arbitrate the claim before the German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, Especially Jewish Property. The Commission found that the sale by the Jewish owners had not been coerced. The heirs, dissatisfied with the decision, sued in Washington. The jurisdictional question was whether the case came within the expropriation exception to the Foreign Sovereign Immunities Act, which provides that a foreign state is not immune from jurisdiction in cases “in which rights in property taken in violation of international law are in issue.” Both the District Court and the DC Circuit had agreed with the heirs that Germany was not immune, and the Supreme Court granted Germany’s petition for review.

Key Arguments

Germany’s argument, which everyone accepted, was that a state does not violate international law by expropriating the property of its own nationals. The heirs argued that the FSIA’s reference to violations of international law was not just a reference to the international law of expropriation, but to international law more generally, and that the theft of Jewish property was part of the genocide of European Jewry. Genocide, of course, is a violation of international law.

Decision

The Court, in a unanimous decision by Chief Justice Roberts, rejected the heirs’ main argument. To me, the most interesting bit of the decision is the Court’s observation that the rule the heirs proposed would itself cause the United States to violate international law, since international law protects a state’s sovereign immunity. Quoting the ICJ’s decision in Jurisdictional Immunities of the State (Germany v. Italy), 2012 I. C. J. 99, 139 (Judgt. of Feb. 3), the Court noted: “a State is not deprived of immunity by reason of the fact that it is accused of serious violations of international human rights law.” The United States, as the Court noted, has already gone farther than most or all other states by adopting the expropriation exception: “No other country has adopted a comparable limitation on sovereign immunity.” In this sense, it would be a mistake to generalize from yesterday’s decision to FSIA cases generally, as other FSIA exceptions to immunity are more universally accepted as part of customary international law.

Because the Court held that the FSIA’s expropriation exception applies only violations of the international law of expropriations, it did not need to decide whether the forced sale of the treasure was an act of genocide. Nor did the Court decide whether comity provided an independent basis for the US courts to refuse to exercise jurisdiction. Its decision did, though, leave open another question on remand. The heirs had argued that in light of Nazi Germany’s race laws, the Jewish owners were not, in fact, German citizens at the time of the taking. The Court directed the lower courts to consider this question, although there is apparently issue about whether the heirs had adequately preserved the issue for appeal.

This is the kind of case that makes people hate lawyers, because the result is that there is no remedy for an apparent grievous wrong. (I say “apparent” because the heirs would have had to prove, contrary to the findings in the arbitration, that the sale of the property was coerced). Georges v. United Nations, the Haiti cholera case, was similar; it turned on the immunity of the United Nations from service of process. Why should a technicality bar a remedy, especially in a case arising on highly sympathetic allegations? But foreign sovereign immunity, while of course highly technical, is not a mere technicality: it is an expression of important values of comity, and of course the United States is also right to consider its own legal exposure in the courts of other countries when it decides how far it is willing to let litigants go to hold foreign sovereigns liable in its own courts. As the Chief Justice wrote:

“We have recognized that United States law governs domestically but does not rule the world. We interpret the FSIA as we do other statutes affecting international relations: to avoid, where possible, producing friction in our relations with [other] nations and leading some to reciprocate by granting their courts permission to embroil the United States in expensive and difficult litigation.

As a Nation, we would be surprised—and might even initiate reciprocal action—if a court in Germany adjudicated claims by Americans that they were entitled to hundreds of millions of dollars because of human rights violations committed by the United States Government years ago. There is no reason to anticipate that Germany’s reaction would be any different were American courts to exercise the jurisdiction claimed in this case.”

Conclusion

If I may conclude with a non-legal point, I do not like the way Chief Justice Roberts began his opinion. He traced the history of the treasure through the centuries in Brunswick Cathedral, then a Hanoverian chapel, and then safekeeping in Switzerland before its purchase, during the Weimar period, by a Jewish consortium, which sold off part of the collection before the Nazis acquired it; after the war, the United States seized the treasure and eventually returned it to the German government, which put it on display in a German museum. I am sure it was not intended, but to me the recitation of the long history in cathedrals and chapters, followed by a sale to, well, a bunch of Weimar Jews interested in profiting from the collection, followed later by the return of the treasure to a museum, plays to antisemitic stereotypes. Maybe I am being overly sensitive, but that is the impression I had after reading the beginning of the decision. As I say, I am sure it was unintentional, but I feel there was a better way to approach the story.

Note

The matter was not only followed closely in Germany, but also on Hungary, as two similar cases against the Republic of Hungary were pending in the US courts, namely Simon v. Hungary, claiming compensation for property losses suffered by plaintiffs and their predecessors in the course of their deportation during World War II, and de Csepel v. Hungary, claiming restitution of art seized from the heirs of a Jewish art collector in 1944, both of which were premised on the notion that these takings formed a constitutive part of the genocide conducted against Hungarian Jews.

The Simon case was also decided yesterday, along the same lines as the Philipp case. Indeed, the decision consists only of one sentence: “The judgment of the United States Court of Appeals for the D. C. Circuit is vacated, and the case is remanded for further proceedings consistent with the decision in Federal Republic of Germany v. Philipp.” The de Csepel case is still pending. My Budapest partner Zoltan Novak had reveiwed the cases following oral argument in December 2020.



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