C. Defining the Limits of Immunity for Unlawful Expropriation
- The global financial crisis (as well as continuing political changes in Africa, Latin America, and the former-Soviet Union) likely will result in an increase in claims of expropriation and other unlawful "takings," whether through outright nationalization, post facto statutory changes, tariff restrictions, or otherwise. As discussed in the Guide, the FSIA does not provide immunity for certain claims of unlawful expropriation, provided that there is requisite "commercial" nexus to the US. 28 USC § 1605(a)(3). The "expropriation" exception will see increased attention and development by US courts as claims of unlawful "takings" wind their way through litigation.
- In 2008, some of the finer points of the "expropriation" exception were discussed in a case not about the current crisis, but reaching back to the first quarter of the last century, Agudas Chasidei Chabad of the US v. Russian Federation, 528 F.3d 934 (D.C. Cir. 2008).
- In Agudas Chasidei, plaintiffs filed suit in the US against the Russian Federation and Russian government agencies to regain possession of a religious Library and Archive that allegedly had been unlawfully taken - or "retaken" - through various means by the Bolshevik government in 1917, the Soviet government in later years, and the Russian Federation still later.
- The district court dismissed the claims as to the Library - finding FSIA immunity - but not as to the Archive. On appeal, the DC Circuit clarified that:
(a) The "commercial nexus" requirement of the expropriation exception requires the plaintiff to carry an early burden of producing sufficient evidence of such a nexus. Id. at 940-41. If that burden is carried, the burden of persuasion is on the sovereign defendant to prove by a preponderance of the evidence that there is no requisite nexus. Id.
(b) As to the requirement of a "claim" in which "rights in property taken in violation of international law" are "in issue," it is enough for the plaintiff to make a claim that is not "wholly insubstantial and frivolous." Id. at 940-42. Whether the plaintiff succeeds on the merits of the claim is not a question of FSIA immunity. Id.
(c) A plaintiff can place such property "in issue" without making any claim of its own to rights in the property. Id. at 941, n.3.
(d) An unlawful "taking" may occur where court and government orders to return property are frustrated or nullified by practical or juridical circumstances - e.g. administrators refusing to obey orders, mobs threatening violence when retrieval is attempted, "secret" orders overturning or enjoining prior court orders, etc. Id. at 943-46.
(e) The expropriation exception provides two separate avenues to satisfy the "commercial" nexus requirement, only one of which actually requires the presence of the property (or its exchanged property) in the US. It is enough, for example, if the property at issue is owner or operated by an agency or instrumentality of the foreign sovereign and that agency or instrumentality happens to be "engaged in" commercial activity in the US - a relatively low threshold that does not, for example, require "substantial" contact. Id. at 946-48. In Agudas Chasidei, this standard was met by the commercial contracts that the various Russian agencies had for publication and broadcasts in the US, even though the contracts had no nexus to the property at issue itself. Id.
(f) There is no requirement under the FSIA that the plaintiff "exhaust" local remedies before suing in the US. Id. at 948-49. The Court also questioned the suggestion by Justice Breyer in 2004 that US Constitutional principles should be extended to international law such that, to prove a "taking" in violation of international law, the plaintiff may need to show the absence of remedies available in the sovereign state. Rep. of Austria v. Altmann, 541 US 677, 714 (2004) (Breyer, J., concurring).
(g) Even if there were an exhaustion requirement, it was plain that there was no effective remedy available to the plaintiff in Russia. Russia?s suggestion that the plaintiff could recover possession under Russian law by paying for the Archive and Library was found to be no "remedy" at all for the alleged unlawful taking. Id.