Case of the Day: Agudas Chasidei Chabad v. Russian Federation


The Case of the Day is Agudas Chasidei Chabad of the United States v. Russian Federation (D.D.C. 2011). Chabad, a Hasidic Jewish organization, was “the incorporated entity and successor to a worldwide organization of Jewish religious communities having origins in Eastern Europe and Russia.” During the first half of the twentieth century, the Hasidic movement in Europe lost two important sets of records. First, its library was taken by the Soviet Department of Scientific Libraries after the Russian Revolution. Second, its archive was left in Poland in 1939 when leaders of the movement fled to America, and the Soviet Army eventually seized the archive from the defeated Germans. In the 1990s, the courts of the Soviet Union determined that the library and the archives “were not the national property of the Soviet Union” and ordered them returned to Chabad. But before the items were returned, the Soviet Union collapsed, and the Russian Federation “nullified” the decisions.

In 2004, Chabad sued Russia, the Russian State Library, and the Russian State Military Archive under the FSIA. Russia and the agencies  moved to dismiss for lack of jurisdiction and on forum non conveniens grounds. The court granted the motion in part, dismissing all claims concerning the library (a decision later reversed by the D.C. Circuit) but refusing to dismiss the claims relating to the archive. Nevertheless, Russia withdrew from participation in the litigation, stating:

The Russian Federation views any continued defense before this Court and, indeed, any participation in this litigation as fundamentally incompatible with its rights as a sovereign nation.

Russia also sent a diplomatic note protesting the continued litigation. The court then entered a default judgment against Russia, the RSL, and the RSMA, finding that Chabad had made out a prima facie case. The judgment required the defendants to return the library and the archive.

The judgment was served on all of the defendants first by Fedex (which was refused), and then on Russia through the diplomatic channel. The Russian Ministry of Justice “returned” the documents “without judicial review”:

The documents are being returned due to nonexistence of an international treaty between the United States and Russia which would regulate legal provisions pertaining to civil, family and trade matters.

Chabad then sought a writ of execution and sanctions for failure to comply with the judgment. Meanwhile, Russia announced that it was suspending exchanges of art and cultural artifacts with US museums and universities until the Chabad case was resolved, and Russia sought “legal assurances” that art and artifacts would be immune from attachment or execution. As the case of the day for June 10, Rubin v. Islamic Republic of Iran, shows, Russia’s concern (which the United States joined in its briefs) is not unreasonable on its face. In Rubin, a plaintiff in a FSIA case succeeded in the District Court, though not on appeal, in attaching art owned by Iran on exhibit in the United States in aid of its judgment.

Judge Lamberth first focused on Section 1610(c) of the FSIA, which requires that the defendant be given notice and an adequate opportunity to respond before the plaintiff may begin to enforce a judgment. The notice must be served using the methods prescribed for service of the complaint in Section 1608.With regard to Russia itself, the governing provision is § 1608(a), which governs service on foreign states. With regard to the RSL and the RSMA, the governing provision is § 1608(b), which governs service on agencies and instrumentalities of foreign states.

Chabad argued that because the defendants had provided mailing addresses before they withdrew from the litigation, the parties had a “special arrangement” for service by mail, and that the first attempt at service, by Fedex, was therefore effective under § 1608(a)(1) and (b)(1). But the court rejected this assertion on account of the defendants’ withdrawal from the litigation, which occurred months before the defendants’ former lawyer provided the addresses, as he was required to do under the court’s local rules. Because Russia had unilaterally suspended cooperation with the United States under the Hague Service Convention (a fact noted in the discussion of the case of the day from March 4, Baldiga v. Joint Stock Co.), the court found that service by international convention, as permitted by § 1608(a)(2) and (b)(2), was unavailable.

Judge Lamberth held that the attempt at service on Russia via Fedex was insufficient, because the package was dispatched by the plaintiff rather than by the clerk, as § 1608(a)(3) requires. However, the court held that the service through the diplomatic channel was proper under § 1608(a)(4), and that Russia had thus been served.

Service on RSL and the RSMA, which Chabad attempted only by Fedex, was not within the strict letter of the statute, because the package was dispatched by the plaintiff rather than the clerk. However, the judge noted that while even technical defects invalidate service of process on a foreign state, the statute governing service on agencies or instrumentalities “may be satisfied by technically faulty service that gives adequate notice,” citing Transaero v. La Fuerza Aerea Boliviana, 30 F.3d 148, 154 (D.C. Cir. 1994). The improper method of transmitting the papers was a mere technicality, and it was clear from the defendants’ actions (according to the judge) that they understood the import of the documents.

The court dismissed the US government’s concerns about the effect of the proposed order. The proposed order would establish only that a reasonable time since entry of judgment had elapsed, that the defendants had received proper notice of the entry of judgment, and that the plaintiffs are entitled to proceed to enforce the judgment. But as the Rubin case shows, Russia would still be able to argue that its property in the US is immune from attachment or execution. So the order Chabad sought “creates no risk to Russian art or artifacts on loan to American institutions that otherwise would not exist.” The court also included in the order a provision specifically exempting from attachment or execution any property within the scope of the federal Mutual Educational and Cultural Exchange Program, which divests courts of jurisdiction to issue or enforce any process that would have the effect of depriving the museums or institutions exhibiting the works of custody or control of the objects.


6 responses to “Case of the Day: Agudas Chasidei Chabad v. Russian Federation”

  1. […] to serve process on the Russian defendants in Russia. (As we have noted before, in the post on the Chabad case and the post on Baldiga v. Joint Stock Co., Russia has unilaterally suspended judicial assistance […]

  2. […] service via the Convention, or was the futility so clear that Semtek was right not even to try? The Chabad case we considered on July 29, 2011, suggests that Semtek was on solid […]

  3. Moishe

    US judge Royce Lamberth must be insane on many different levels. How can he make a judgement against a sovereign nation. Especially when the case is about articles that belong to that sovereign nation.
    freaking insanity, this is why we look bad on international stage.

    1. Moishe, thanks for the comment. This decision is only about the technicalities of service of documents in the lawsuit against Russia, not whether it’s okay to sue Russia or whether a judgment against Russia could be enforced. If you want to read about a decision that’s closer to your concerns, check out my post on later developments in the Chabad case.

  4. The Voice of Russian bonds

    French holders of Russian government bonds remind investors that the Russian Federation is still in default today (April 2010) on their estimate of some US$ 90 billion owed to them since the Bolshevik, then the Soviet, and now the Russian Federation governments have all unilaterally repudiated Tsarist debt and refused any form of contact or dialogue with their legitimate bona fide creditors.

    They also remind investors that in its Sep. 15th 2006 report entitled “Governance matters: a decade of measuring the quality of governance”, the WORLD BANK has rated Russia’s governance comparable to that of Swaziland, Zambia and Kazakhstan. Russia came 151st out of 208 countries in terms of (…) accountability, quality of regulatory bodies, and rule of law, (…). In particular, rule of law (i.e. the courts and the quality of contract enforcement) was judged as effective in Russia as it is in Ecuador, Indonesia, and Bangladesh. Nicaragua, East Timor, and China’s ability to control corruption was judged similar to Russia’s.

    On February 26th 2007 the St. Petersburg Times, quoting a report from Vedomosti, wrote that “Surgutneftegaz managers covertly hold 72 % of the secretive oil firm” and that Deutsche UFG analysts had had to “raise its estimate number of outstanding shares from less than 26 billion to (…) 43 billion” which “implies a 40% dilution in the value of the stock”.

    In Paris on April 3rd 2007 to launch the merged NYSE-EURONEXT entity Mr. John Thain, the New York Stock Exchange CEO, warned that he was “very concerned about the quality of corporate governance, the transparency of company financials and the protection of minority shareholders. A number of Russian companies raise serious questions around these issues.”

    Despite these findings, and the main rating agencies’ knowledge that Russia is in default on US$ 90 billion of Tsarist debt, Russia is rated “INVESTMENT GRADE” whereas it should clearly be in “SELECTIVE DEFAULT”.

    French bondholders intend to pursue their claim until full settlement at present value, by any legal means and in any jurisdiction they deem appropriate.

    EVERY POTENTIAL INVESTOR IN RUSSIA MUST BE MADE AWARE OF THESE RISKS.

    FRENCH CREDITORS OF THE RUSSIAN FEDERATION STRONGLY ADVISE AGAINST ANY FORM OF INVESTMENT IN A COUNTRY WHOSE SOLVENT GOVERNMENT HAS IN THEIR VIEW SYTEMATICALLY REFUSED TO FULFIL ITS NATIONAL AND INTERNATIONAL CONTRACTUAL OBLIGATIONS, REFUSES ALL CONTACT AND DIALOGUE WITH ITS LEGITIMATE BONA FIDE CREDITORS, AND REFUSES TO DISCLOSE LIABILITIES WORTH US$ 90 BILLION.

  5. […] service via the Convention, or was the futility so clear that Semtek was right not even to try? The Chabad case we considered on July 29, 2011, suggests that Semtek was on solid […]

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