A New Forum: The Guelph Treasure Decision and its Impact on Jurisdiction of U.S. Courts over Restitution Claims for Nazi-Looted Art
Throughout the latter half of the 20th century and continuing to the present day, survivors and heirs of victims of the Holocaust have come forward to claim artworks in public and private collections around the world that were seized by the Nazis or were sold under duress by owners in dire need of escaping occupied countries. This arena has been characterized by conflicts over whether U.S. courts have jurisdiction over claims against sovereign nations or whether they are barred from doing so under the Foreign Sovereign Immunities Act (“FSIA”). In April 2017, a U.S. District Court judge ruled in Philipp v. Federal Republic of Germany that a U.S. federal court had jurisdiction over a restitution claim against Germany in a suit seeking the recovery of the Guelph Treasure. However, on appeal, the D.C. Circuit held that, on remand, the district court must grant the motion to dismiss with respect to Germany because it did not meet the Circuit’s interpretation of the FSIA. Nevertheless, the rationales behind both the district court’s and the D.C. Circuit’s Philipp decisions illuminate a marked change in the legal landscape for Nazi-looted art claims. This post will examine these cases and analyze their potential impacts on the future of such litigation efforts in U.S. courts.
The litigation over the Welfenschatz (hereinafter, “Guelph Treasure”) was brought by the legal successors of the estates of a consortium of three art dealer firms in Frankfurt, Germany against the Federal Republic of Germany and Stiftung Preussischer Kulturbesitz (“SPK”), alleging that the defendants were in wrongful possession of the collection of medieval relics because its sale was coerced as part of the Nazi persecution of Jewish art sellers. The plaintiffs asserted ten causes of action in their complaint, five of which were common law property-based actions – declaratory relief, replevin, conversion, unjust enrichment, and bailment.
The traditional procedural posture for Nazi-looted art claims against Germany are for them to be raised before the German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, Especially Jewish Property (“Advisory Commission”). The Advisory Commission was established by Germany in 2003 to address such claims in accordance with the Washington Conference on Holocaust Era Assets’ Principles on Nazi-Confiscated Art, which “encouraged” nations to “develop alternative dispute mechanisms for Nazi-era art claims.” After hearing testimony from five experts presented by the plaintiffs, the Advisory Commission issued a non-binding recommendation that the 1935 sale at issue “was not a compulsory sale due to persecution,” and, as such, did not recommend the return of the Guelph Treasure to plaintiffs. The plaintiffs subsequently filed suit in U.S. court against Germany and the SPK. The defendants sought a motion to dismiss on the multiple grounds, including that (1) they were entitled to sovereign immunity on each claim; and (2) the claims were preempted and non-justiciable because they conflicted with U.S. foreign policy.
In regard to sovereign immunity, the FSIA provides the sole basis for obtaining jurisdiction over a foreign state in United States courts. Nazi-looted art claims against foreign governments are often met with the defense of sovereign immunity and thus raise interpretive questions regarding the FSIA. Under the FSIA, “a foreign state is presumptively immune from the jurisdiction of United States Courts…unless a specified exception applies.” Subject matter jurisdiction in any FSIA action depends on the existence of one of the specified exceptions and, at the threshold, the district court must be satisfied that at least one exception applies.
The plaintiffs’ argument regarding sovereign immunity centered on the expropriation exception of § 1605(a)(3) of the FSIA, which prescribes that a claim must satisfy two requirements: (1) the property in question must have been “taken in violation of international law”; and (2) that property is “present in the U.S. in connection with a commercial activity carried on in the U.S. by the foreign state or that property…is owned or operated by an agency or instrumentality of the foreign state” that is “engaged in a commercial activity in the U.S.”
With regard to the first requirement, the D.C. Circuit has found that takings may fall within exception when “takings of property described in the complaint bear a sufficient connection to genocide that they amount to takings in ‘violation of international law.” Specifically, a plaintiff may assert “garden-variety common-law causes of action” and plead a violation of international laws to give rise to jurisdiction, but the court requires more than a mere non-frivolous argument to satisfy the jurisdictional standard in these contexts. The D.C. Circuit has also found, quoting the Convention on the Prevention and Punishment of the Crime of Genocide, that the definition of genocide includes any act “committed with intent to destroy, in whole or in part, a…religious group” by “deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part.”
The district court held, and the D.C. Circuit affirmed, that the plaintiffs sufficiently pled that they were targeted because they were Jewish sellers in possession of property that was of particular interest to the Nazi regime and that the taking of the Guelph Treasure was in furtherance of the genocide of the Jewish people during the Holocaust. Specifically, the D.C. Circuit focused on the historical background and recent Acts of Congress to support this finding. First, the court observed that the plaintiffs sufficiently described the hostile environment following Hitler’s ascension to power in 1933 and that members of the consortium were particularly vulnerable to persecution because of their ownership of the Guelph Treasure and because of their prominence and success. Second, the D.C. Circuit noted that the Consortium bought the Guelph Treasure not for pleasure or display, but as business inventory, to re-sell for profit. By seizing businesses’ inventory, the court found that the Nazis blocked Jews’ ability to make a living, and thereby, in the words of the Genocide Convention, “inflict[ed]…conditions of life calculated to bring about [a group’s] physical destruction in whole or…in part.” Third, the court turned to recent legislation and concluded that Congress has twice made clear that it considers Nazi art-looting part of the Holocaust.
There has been an interpretive split in the D.C. Circuit regarding the second requirement of the exception. Specifically, whether “or,” as it is used in the statute, indicates that the nexus requirement differs somewhat for claims against the foreign state itself, as compared with claims against an agency or instrumentality, or whether the two clauses present alternative requirements, and, as such, a plaintiff is only required to satisfy one requirement to proceed. On appeal, the D.C. Circuit found that, on remand, the district court must grant the motion to dismiss with respect to Germany, but not the SPK. The D.C. Circuit explained that precedent dictates that “or” – as it is used in the statute – indicates two different nexus requirements. With respect to foreign states, but not their instrumentalities, the nexus requirement is satisfied only when the property is present in the United States. Since the Guelph Treasure was in Berlin, the D.C. Circuit concluded that Germany must be dismissed from the suit. However, with respect to an agency or instrumentality, like the SPK, the D.C. Circuit found that they lose their immunity if they own or operate the property at issue and are engaged in commercial activity in the U.S. It wasthus sufficient that the Guelph Treasure was featured in books produced by SPK that were for sale in the U.S. to satisfy the commercial activity nexus requirement for SPK.
Although the plaintiffs did not succeed on their jurisdictional arguments over Germany, the D.C. Circuit’s holdings with regard to preemption and non-justiciability indicate a change in the legal landscape. Germany argued that plaintiffs in Nazi-looted art claims must first exhaust remedies in German courts before pressing a claim against it elsewhere, and that not requiring exhaustion would “undermine [its] dignity [as] a foreign state.” The D.C. Circuit referred to the Supreme Court’s holding in Republic of Argentina v. NML Capital, Ltd., that “any sort of immunity defense made by a foreign sovereign in an American court must stand on the [FSIA]’s test.” In that case, the Supreme Court rejected Argentina’ claim of immunity from post-judgment discovery as a matter of “international comity,” noting that nothing in the FSIA’s plain text provided for such immunity. Further, the D.C. Circuit refers to the Supreme Court’s decision in Samantar v. Yousuf, which held that after the enactment of the FSIA, the Act – and not the pre-existing common law – indisputably governs whether a foreign state is entitled to sovereign immunity. Since nothing in the text of the FSIA’s expropriation exception requires exhaustion, the D.C. Circuit concluded that the plaintiffs had no obligation to exhaust their remedies in Germany.
Germany further argued that the plaintiffs’ state-law property-based causes of actions conflicted with, and thus were preempted by, U.S. foreign policy. Germany relied on the Washington Principles, as well as the Terezin Declaration, a follow-up agreement also urging alternative dispute resolution. However, the D.C. Circuit found that neither agreement “requires that the alternative mechanisms be exclusive or otherwise takes an explicit position in favor of or against the litigation of claims to Nazi-confiscated art.” Thus, the D.C. Circuit concluded that there was no “direct conflict between the property-based common law claims raised by plaintiffs and U.S. foreign policy.” Although the district court was ordered to dismiss its jurisdictional finding against Germany, the D.C. Circuit’s holding highlights several significant changes in the jurisprudence of Nazi-looted art cases in U.S. courts. First, the case demonstrates how sovereigns can be subject to the jurisdiction of U.S. courts in certain situations. Specifically, if the artwork is in the U.S., it seems logical to infer that the commercial activity nexus requirement of the FSIA can be met. However, it is worth noting that this can cause an alternative risk to emerge, where foreign sovereigns would be less willing to lend works that are suspected of being looted to U.S. art institutions in fear of being subject to the jurisdiction of U.S. courts. Second, the FSIA does not require litigants to exhaust all possible actions in the courts of the sovereign state before initiating a suit in U.S. courts. Third, the D.C. Circuit explicitly found that United States foreign policy does not preempt common law property-based claims for restitution of Nazi-looted art. Together, these holdings lower the barriers to bringing litigation against sovereigns under the FSIA in U.S. courts, and provide new ways for litigants to circumvent a sovereign immunity defense in the future.
Gerald Ollins Shalam is a J.D. candidate, 2020, at NYU School of Law.