United States Supreme Court Hold Foreign Government Taking From Own Citizens Does Not Fall Within Exception To Foreign Sovereign Immunities Act

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The Supreme Court of the United States recently held in Federal Republic of Germany v. Philipp that Germany was immune from suit brought by heirs of Jewish art dealers on the grounds that the heirs' claims did not fall within an exception to the Foreign Sovereign Immunities Act ("FSIA").

The heirs are U.S. and U.K. citizens descended from the Jewish owners of three art firms who purchased medieval relics and devotional objects known as the Welfenschatz from a German duke during the Weimar Republic. Half the Welfenschatz were sold to museums and individuals in the Europe and the U.S. The other half, the heirs allege, were coercively taken by Prussia, for one third of their value. Since the Second World War, the Welfenschatz have been maintained by the Prussian Cultural Heritage Foundation and displayed in a museum in Berlin. The heirs sought the Welfenschatz from the Foundation, claiming the relics had been unlawfully taken. The Foundation conducted its own investigation and concluded the objects had been purchased at a fair market price. The heirs then brought their claim to the German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, which conducted a hearing into the matter, including documentary and testimonial evidence. The Commission also concluded the relics had been bought at a fair price without duress.

The heirs then brought suit in the District Court of Washington D.C. seeking $250 million in compensation for the Welfenschatz. Germany moved the dismiss the case on the grounds it was immune from suit because the heirs claims did not fall into the FSIA exception for "property taken in violation of international law." 28 U.S.C. §1605(a)(3). The Jewish art dealers were German citizens at the time of the sale and a sovereign's taking of its own citizens property is not unlawful under the international law of expropriation, Germany argued. The heirs argued that the FSIA exception did apply because Germany's allegedly coercive purchase of the Welfenschatz was an act of genocide, which violates international law. The District Court sided with the heirs, finding that the sale of the Welfenschatz fell into the FSIA exception for a violation of the law of genocide. The D.C. Circuit Court affirmed.

The Supreme Court disagreed with the lower courts, and reversed. The Supreme Court held that the sale of the Welfenschatz was governed by the international law of property and expropriation, not genocide, as it was a property interest at stake. Under the international law of property, the "domestic takings rule" establishes that what a sovereign country does to the property of its own citizens within its borders is not the subject of international law. Only a sovereign's taking of a foreign citizen's property is governed by the international law of expropriation, as the taking constitutes an injury to the foreigner's state, thus implicating international law. As the Jewish art dealers were German citizens at the time of the Welfenschatz's sale, the sale was a domestic property issue, not subject to international law. Therefore, the U.S. Supreme Court held, the exception to the FSIA did not apply and Germany is immune from suit.

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