I bring you an excerpt from Professor Vivian Curran’s forthcoming paper, Harmonizing Multinational Parent Company Liability for Foreign Subsidiary Human Rights Violations, 17 Chicago J. Int’l L. (2017). The excerpt has to do primarily with the evolving exception to FSIA immunity in cases of expropriation in connection with genocide. I’ve covered aspects of some of the cases discussed (de Csepel, Davoyan). Thanks very much to Professor Curran for giving Letters Blogatory readers a sneak peek!

The New Restatement (Fourth) of United States Foreign Relations

In May, 2016, the American Law Institute membership voted to approve parts of its ongoing project of a new Restatement (Fourth) of the United States Principles of Foreign Relations with respect to the immunity of foreign states from jurisdiction.¹See Draft No. 2, Submitted for Consideration to and Approved by the Members of the American Law Institute at the Ninety-Third Annual Meeting on May 16, 17 and 18, 2016. As of the writing of this essay, the text voted by the ALI membership in May, 2016 theoretically is subject to some possible continued editorial change by the Reporters, but the author, part of the Members’ Consultative Group of the Restatement (Fourth) project, has been told by one of the Reporters that no further changes will be made (email exchange between author and Reporter Prof. David Stewart, August 22, 2016), nor did comments at the May 2016 ALI meeting suggest membership criticism of the language quoted below. (Author’s notes from May, 2016 general membership meeting) The new text reflects two notable changes from the Restatement (Third): (1) a stance against a FSIA exhaustion of local remedies requirement in consideration of international law norms; and (2) recent evolutions in court decisions that have widened exceptions to foreign state immunity for expropriations by foreign countries as part of genocide.²See Restatement (Fourth), Draft No. 2, Submitted for Consideration to and Approved by the Members of the American Law Institute at the Ninety-Third Annual Meeting on May 16, 17 and 18, 2016. This last development reflects an introduction into case law, now reflected in the new Restatement, of a new jurisdictional category for human rights violations.

Under International Law, the Exhaustion of Local Remedies Arises in Cases Under the Jurisdiction of International Tribunals Rather Than National Courts

The exhaustion of local remedies requirement originated in the system of diplomatic protection, and was based on the idea that when an individual was harmed, his or her state was offended and would take protective legal action.³See Emmerich de Vattel, Le droit des gens, para. 71 (1758). International law has an exhaustion requirement only with respect to cases before an international tribunal, so that the tribunal not appear to be usurping the place of a national court: “A claim will not be admissible on an international plane unless the individual alien or corporation concerned has exhausted the legal remedies available to him in the state which is alleged to be the author of injury.”⁴Ian Brownlie, Principles of International Law (7th ed., 2008). Although the Restatement (Third) did not explicitly limit the exhaustion requirement to cases before international tribunals, its commentary indicated that this was the nature of exhaustion, as it characterized the rule as “‘generally [having] been observed in cases in which a State has adopted the cause of its national whose rights are claimed to have been disregarded in another State in violation of international law;’ ” and that exhaustion is required in such situations “‘[b]efore resort may be had to an international court ….’”⁵Restatement (Third) United States Foreign Relations (Restatement (Third)) § 713, Reporters Note 5, quoting the Interhandel (Switzerland v. United States of America), I.C.J. Rep. [1959] ICJ 6, 26-27 (emphasis supplied).

The exhaustion requirement also serves an important additional goal: namely, to secure the adherence of member states to the international court system by ensuring the ongoing subsidiarity of the international court to the national courts.⁶See A.A. Cançado Trindade, The Rule of Exhaustion of Local Remedies 9-10 (1983); Paula Rivka Schochet, A New Role for an Old Rule: Local Remedies and Expanding Human Rights Jurisdiction Under the Torture Victim Protection Act, 19 Colum. Hum. Rts. L. Rev. 223, 227, 235 (1987). There has been a divergence of interpretations of this international law requirement among courts in the United States which interpreted the FSIA, but the new Restatement takes a clearer stand than the last on the exhaustion rule: “the rule … applies by its terms to “international,” not domestic, proceedings. Accordingly, the interpretation of the statute that does not require exhaustion appears to be the proper one.”⁷Restatement (Third) § 455, Reporter’s Note 9. This Restatement language refers to the interpretation of the FSIA, a specific statute, and would not restrict a domestic law that Congress had enacted from requiring the exhaustion of local remedies.

The New FSIA Category for Expropriations in Furtherance of Genocide

The Foreign Sovereign Immunities Act (FSIA)⁸28 U.S.C. §§1602 et seq. immunizes foreign states from being sued in the United States, but contains an exception for “any case … in which property taken in violation of international law are in issue.”⁹28 U.S.C. § 1605(a)(3). This international law violation does not apply, however, where a state has committed the alleged expropriation against its own nationals, a rule known as the “domestic takings exception.”¹⁰United States v. Belmont, 301 U.S. 324 (1937). Interestingly, in the recent cases in which a new human rights category for genocide was created, the courts might have reached the same ultimate decision to allow the suits to proceed under pre-existing case law, by holding that the plaintiffs had not been deemed citizens or full-fledged citizens by their own governments at the time of the wrongful taking and that, therefore, the domestic takings exception was inapplicable.¹¹See, e.g., De Csepel v. Republic of Hungary, 808 F. Supp.2d. 113, 130 (D.D.C., 2011); aff’d in part, rev’d in part on other grounds, 714 F.3d 591 (D.C. Cir. 2013); Cassirer v. Kingdom of Spain, 461 F.Supp. 2d 1157 (C.D. Cal. 2006); aff’d in part, rev’d in part on other grounds, 580 F.3d 1048 (9th Cir. 2009); reh. en banc, 616 F.3d 1019 (9th Cir. 2010); cert. den., 564 U.S. 1037 (2011).

Pre-Existing Domestic Takings Case Law

In De Csepel v. Republic of Hungary, for instance, the court had rejected defendant Hungary’s argument that expropriations of Jewish property in the 1940s constituted a domestic taking and therefore did not rise to FSIA Section 1605(a)(3)’s international law violation requirement.¹²Id. The court had reasoned that, since the Hungarian government no longer treated Jews as citizens at the time of the expropriation, the taking could not be deemed “domestic” in nature, and therefore the domestic takings exception was inapplicable.¹³Id. Similarly, in Cassirer v. Kingdom of Spain,¹⁴461 F.Supp. 2d 1157 (C.D. Cal. 2006); aff’d in part, rev’d in part on other grounds, 580 F.3d 1048 (9th Cir. 2009); reh. en banc, 616 F.3d 1019 (9th Cir. 2010); cert. den., 564 U.S.1037 (2011). the United States District Court for the Central District of California had reasoned that a German-Jewish victim’s heir could sue under the Section 1605(a)(3) of the FSIA over a valuable painting that had been extorted from his grandmother as the price of her exit visa from Nazi Germany, because the Nazi government did not consider Jews to be citizens of Germany at the time.¹⁵Id., 461 F. Supp. 2d at 1165-1166. In a 1951 case cited by later FSIA domestic taking courts, Nagano v. McGrath, the Seventh Circuit had defined citizenship as follows: “[O]ur concept of a citizen is one who has the right to exercise all the political and civil privileges extended by his government …”¹⁶187 F.2d 759, 768 (7th Cir. 1951).

In more recent cases, however, instead of applying the domestic takings rule in the manner of established case law, the courts have created a novel exception to the FSIA that is nowhere to be found in the statute’s language and that is based on the context of genocide, and perhaps other grave violations of human rights.¹⁷Simon et al. v. Republic of Hungary, 812 F.3d 127 (D.C. Cir. 2016); Fisher; Abelesz. According to the new Restatement,

[b]y eliminating the “domestic takings” rule and permitting claims to go forward on the basis of allegations that the takings occurred in the context of egregious violations of international law, this line of decisions appears to expand the scope of § 1605(a)(3) significantly, potentially opening courts in the U.S. to a wide range of property-related claims arising out of foreign internal (as well as international) conflicts characterized by widespread human rights violations.¹⁸Chapter 5, Immunity of States from Jurisdiction § 455, Reporter’s Note 4.

The New FSIA Cases That Created the Human Rights Exception

Like De Csepel, discussed above, Abelesz v. Magyar Nemzeti Bank¹⁹692 F3d 661 (7th Cir. 2012). was a FSIA case concerning property takings by Hungarian national banks and the national railway from members of its Jewish population during the 1940s. The defendants raised the domestic takings rule in a motion to dismiss.²⁰Id. Here, however, the Seventh Circuit did not reason that the domestic takings exception was inapplicable due to the state’s not regarding the victims as full-fledged Hungarian citizens at the time of the taking; rather, the Abelesz court found that “the relationship between genocide and expropriation in the Hungarian Holocaust takes these cases outside the domestic takings rule and its foundations.”²¹692 F.3d at 675 (emphasis added). It explained the underpinning of its conclusion as follows:

Expropriating property from the targets of genocide has the ghoulishly efficient result of both paying for the costs associated with a systematic attempt to murder an entire people and leaving destitute any who manage to survive. The expropriations alleged by plaintiffs in these cases—the freezing of bank accounts, the straw-man control of corporations, the looting of safe deposit boxes and suitcases brought by Jews to the train stations, and even charging third-class train fares to victims being sent to death camps—should be viewed, at least on the pleadings, as an integral part of the genocidal plan to depopulate Hungary of its Jews. The expropriations thus effectuated genocide in two ways. They funded the transport and murder of Hungarian Jews, and they impoverished those who survived, depriving them of the financial means to reconstitute their lives and former communities.

All U.S. courts to consider the issue recognize genocide as a violation of customary international law.²²Id. (emphasis added); aff’d, Fischer v. Magyar Allamvasutak Zrt., 777 F.3d 847, 858 (7th Cir. 2015) (same case essentially reheard by Seventh Circuit).

The following year, a California district court went a step further, inasmuch as it ruled that FSIA jurisdiction was proper even though, after examining the laws of citizenship in the Ottoman Empire at the time of the Armenian genocide, it determined that, unlike the situation of Jews in Nazi Germany, Armenians had been considered full-fledged citizens by their government.²³Davoyan v. Republic of Turkey, 116 F. Supp. 3d 1084, 1101-1102 (C.D. Cal. 2013). Nevertheless, it held that the FSIA did not protect the Republic of Turkey from suit in the United States under both the reasoning of Abelesz noted above,²⁴Id. and the ATS standards the United States Supreme Court had set forth in Sosa:²⁵Sosa v. Alvarez-Machain, 542 U.S. 692 (2004). namely, that customary international law violations must be “specific, universal, and obligatory.”²⁶Davoyan, 116 F. Supp. 3d at 1102.

Finally, in Simon v. Republic of Hungary,²⁷812 F.3d 127 (D.C. Cir. 2016). a case also involving war-time expropriations in Hungary of its Jewish population, the D.C. Circuit seemed to take yet an additional step beyond both Abelesz and Davoyan, by equating Hungary’s expropriation of its Jewish population with genocide: “In our view, the alleged takings did more than effectuate genocide or serve as a means of carrying out genocide. Rather, we see the expropriations as themselves genocide. It follows necessarily that the takings were ‘in violation of international law.’”²⁸Id. at 142-143 (emphasis in original; citations omitted). Thus, the FSIA expropriations exception for takings in violation of international law has become a form of universal jurisdiction for the gravest of human rights violations under the FSIA. In the words of the Restatement (Fourth), this new case law may open “courts in the U.S. to a wide range of property-related claims arising out of foreign internal conflicts characterized by human rights violations.”²⁹Restatement (Fourth), supra.

• 1
  See Draft No. 2, Submitted for Consideration to and Approved by the Members of the American Law Institute at the Ninety-Third Annual Meeting on May 16, 17 and 18, 2016. As of the writing of this essay, the text voted by the ALI membership in May, 2016 theoretically is subject to some possible continued editorial change by the Reporters, but the author, part of the Members’ Consultative Group of the Restatement (Fourth) project, has been told by one of the Reporters that no further changes will be made (email exchange between author and Reporter Prof. David Stewart, August 22, 2016), nor did comments at the May 2016 ALI meeting suggest membership criticism of the language quoted below. (Author’s notes from May, 2016 general membership meeting)
• 2
  See Restatement (Fourth), Draft No. 2, Submitted for Consideration to and Approved by the Members of the American Law Institute at the Ninety-Third Annual Meeting on May 16, 17 and 18, 2016.
• 3
  See Emmerich de Vattel, Le droit des gens, para. 71 (1758).
• 4
  Ian Brownlie, Principles of International Law (7th ed., 2008).
• 5
  Restatement (Third) United States Foreign Relations (Restatement (Third)) § 713, Reporters Note 5, quoting the Interhandel (Switzerland v. United States of America), I.C.J. Rep. [1959] ICJ 6, 26-27 (emphasis supplied).
• 6
  See A.A. Cançado Trindade, The Rule of Exhaustion of Local Remedies 9-10 (1983); Paula Rivka Schochet, A New Role for an Old Rule: Local Remedies and Expanding Human Rights Jurisdiction Under the Torture Victim Protection Act, 19 Colum. Hum. Rts. L. Rev. 223, 227, 235 (1987).
• 7
  Restatement (Third) § 455, Reporter’s Note 9.
• 8
  28 U.S.C. §§1602 et seq.
• 9
  28 U.S.C. § 1605(a)(3).
• 10
  United States v. Belmont, 301 U.S. 324 (1937).
• 11
  See, e.g., De Csepel v. Republic of Hungary, 808 F. Supp.2d. 113, 130 (D.D.C., 2011); aff’d in part, rev’d in part on other grounds, 714 F.3d 591 (D.C. Cir. 2013); Cassirer v. Kingdom of Spain, 461 F.Supp. 2d 1157 (C.D. Cal. 2006); aff’d in part, rev’d in part on other grounds, 580 F.3d 1048 (9th Cir. 2009); reh. en banc, 616 F.3d 1019 (9th Cir. 2010); cert. den., 564 U.S. 1037 (2011).
• 12
  Id.
• 13
  Id.
• 14
  461 F.Supp. 2d 1157 (C.D. Cal. 2006); aff’d in part, rev’d in part on other grounds, 580 F.3d 1048 (9th Cir. 2009); reh. en banc, 616 F.3d 1019 (9th Cir. 2010); cert. den., 564 U.S.1037 (2011).
• 15
  Id., 461 F. Supp. 2d at 1165-1166.
• 16
  187 F.2d 759, 768 (7th Cir. 1951).
• 17
  Simon et al. v. Republic of Hungary, 812 F.3d 127 (D.C. Cir. 2016); Fisher; Abelesz.
• 18
  Chapter 5, Immunity of States from Jurisdiction § 455, Reporter’s Note 4.
• 19
  692 F3d 661 (7th Cir. 2012).
• 20
  Id.
• 21
  692 F.3d at 675 (emphasis added).
• 22
  Id. (emphasis added); aff’d, Fischer v. Magyar Allamvasutak Zrt., 777 F.3d 847, 858 (7th Cir. 2015) (same case essentially reheard by Seventh Circuit).
• 23
  Davoyan v. Republic of Turkey, 116 F. Supp. 3d 1084, 1101-1102 (C.D. Cal. 2013).
• 24
  Id.
• 25
  Sosa v. Alvarez-Machain, 542 U.S. 692 (2004).
• 26
  Davoyan, 116 F. Supp. 3d at 1102.
• 27
  812 F.3d 127 (D.C. Cir. 2016).
• 28
  Id. at 142-143 (emphasis in original; citations omitted).
• 29
  Restatement (Fourth), supra.