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.
