Recently, in Federal Republic of Germany v. Philipp, No. 19-351 (Feb. 3, 2021), the U.S. Supreme Court cited the Second, Third, and Fourth Restatements of The Foreign Relations Law of the United States.

In that case, American heirs of Jewish art dealers who were based in Germany during the rise of the Nazi government brought an action against the Federal Republic of Germany and the German government foundation that maintained a valuable collection of medieval relics and devotional objects in a Berlin museum, alleging that, during the Nazi regime, the art dealers were coerced into selling the collection to Prussia for approximately one-third of its value.

The U.S. District Court for the District of Columbia denied the defendants’ motion to dismiss, in which they argued that they were immune from suit under the Foreign Sovereign Immunities Act (FSIA), and that an exception to the FSIA for “property taken in violation of international law” did not apply because, under the domestic takings rule, a sovereign’s taking of its own nationals’ property is not unlawful under the international law of expropriation. The U.S. Court of Appeals for the District of Columbia Circuit rejected the defendants’ argument and affirmed, holding that the “exception for property taken in violation of international law was satisfied because ‘genocide perpetrated by a state even against its own nationals is a violation of international law.’”

Vacating and remanding, the U.S. Supreme Court held that “the phrase ‘rights in property taken in violation of international law’ as used in the FSIA’s expropriation exception refers to violations of the international law of expropriation and thereby incorporates the domestic takings rule.”

Chief Justice John G. Roberts, writing for a unanimous Court, cited Restatement of the Law Third, The Foreign Relations Law of the United States § 712 in explaining that the domestic takings rule “assumes that what a country does to property belonging to its own citizens within its own borders is not the subject of international law” and is based on the historical concept that international law concerned relations among sovereign states, not among states and individuals. Chief Justice Roberts provided the background context of how “courts arrived at a ‘consensus’ that the expropriation exception’s ‘reference to ‘violation of international law’ does not cover expropriations of property belonging to a country’s own nationals.’” He noted that the “domestic takings rule endured even as international law increasingly came to be seen as constraining how states interacted not just with other states but also with individuals, including their own citizens.” As a “growing body of human rights law that made ‘how a state treats individual human beings . . . a matter of international concern,’” (quoting the Restatement of the Law Third, The Foreign Relations Law of the United States, Introductory Note to Part VII), “[t]hese human rights documents were silent, however, on the subject of property rights.” Citing Restatement of the Law Second, Foreign Relations Law of the United States § 185, the Court pointed out that the FSIA’s expropriation exception contained nearly identical language to that of the Second Hickenlooper Amendment to the Foreign Assistance Act of 1964, which was interpreted as not altering the domestic takings rule or any other rule of international law.

The Court rejected the plaintiffs’ argument that the expropriation exception applied to their claims because the forced sale constituted an act of genocide and the expropriation exception applied to rights in property taken in violation of any international law. The Court explained that the expropriation exception should be read as referencing the international law of expropriation, rather than of human rights. The Court noted that at the time of the FSIA’s enactment, the international law of expropriation retained the domestic takings rule (citing Restatement of the Law Second, Foreign Relations Law of the United States §§ 185 and 192), and declined to read the exception, which emphasized property-related rights, as referencing genocide, rather than the international law governing property rights. Citing Restatement of the Law Fourth, The Foreign Relations Law of the United States: Selected Topics in Treaties, Jurisdiction, and Sovereign Immunity § 455, Reporters’ Note 15, the Court pointed out that, in permitting the exercise of jurisdiction over some public acts of expropriation, which was unique to the United States, the expropriation exception went beyond the restrictive theory of sovereign immunity that the FSIA sought to codify, but that this was understandable given the United States’ desire “to protect the property of its citizens abroad as part of a defense of America’s free enterprise system.” The Court clarified that, despite this “nonconformity” of the FSIA to the restrictive theory, the Court “take[s] seriously the Act’s general effort to preserve a dichotomy between private and public acts.”

Read the full opinion here.

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Megan Dingley

The American Law Institute

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