US Supreme Court Clarifies Availability Of US Forum For Victims Of Foreign State Expropriation

• Published date: 05 March 2025
• Law Firm: Jenner & Block
• Author: Mr Jason Hipp, Ben Alter and Elizabeth Dassow

On February 21, 2025, the Supreme Court issued its decision in Republic of Hungary v. Simon, holding that allegations of commingling of funds alone cannot satisfy the US commercial nexus requirement of the expropriation exception to foreign sovereign immunity. See Republic of Hungary v. Simon, No. 23-867, slip op. (February 21, 2025) (Slip Op.). The decision clarifies the circumstances when victims of a foreign state's expropriation of property can seek redress in US courts. While the decision increases the difficulties associated with such claims in circumstances where a foreign state liquidates wrongfully confiscated assets for cash, it also articulates a variety of circumstances where such suits remain viable.

Background

Under the Foreign Sovereign Immunities Act (FSIA), foreign states are immune from suit in US courts except where one of several enumerated exceptions applies. At issue in Simon is the FSIA's expropriation exception, 28 U.S.C. § 1605(a)(3), which permits plaintiffs to sue foreign states in certain cases involving the taking of property in violation of international law. The statute provides:

A foreign state shall not be immune from the jurisdiction of courts of theUnited Statesor of the States in any case ... in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in theUnited Statesin connection with acommercial activitycarried on in theUnited Statesby the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in acommercial activityin theUnited States[.]

Id. § 1605(a)(3).

As the statutory text makes clear, the provision includes a requirement of a commercial nexus to the United States, whereby the expropriated property ("or any property exchanged" for it) must be either (1) "present in the United States in connection with a commercial activity carried on in the United States by the foreign state"; or (2) "owned or operated by an agency or instrumentality of the foreign state," so long as that agency or instrumentality is engaged in some US commercial activity (including activity unrelated to the expropriated property).

The question presented in Simon was whether a foreign state's US property can be said to have been "exchanged for" the plaintiff's wrongfully confiscated assets if the foreign state sold the confiscated assets, placed the proceeds in an account with other funds, and then used that account to fund its US activities. The plaintiffs are fourteen Jewish survivors of the Hungarian Holocaust and their heirs. They alleged that...