Reed Smith Client Alerts

Key takeaways

  • The Foreign Sovereign Immunities Act’s expropriation exception remains strictly construed, preserving sovereign immunity for non-commercial acts.
  • Merely claiming “commingled” funds is not enough – plaintiffs must trace expropriated property or proceeds to U.S. transactions.
  • The Court’s ruling imposes a higher evidentiary burden, demanding a clear and fact-based commercial nexus to the United States.
  • The ruling may limit the ability of plaintiffs to bring claims related to World War II-era property seizures against foreign states in U.S. courts.

In Republic of Hungary et al. v. Rosalie Simon et al.1, the U.S. Supreme Court unanimously affirmed that the Foreign Sovereign Immunities Act (FSIA) requires a tangible connection between expropriated property – or its proceeds – and commercial activity in the United States. In an opinion authored by Justice Sonia Sotomayor, the Court stressed that generalized allegations of “commingling” foreign treasury funds with expropriated assets do not suffice to pierce sovereign immunity.

I. Background of the case

The plaintiffs, Jewish survivors of the Hungarian Holocaust and their heirs, filed suit against Hungary and its national railway, MÁV, for the seizure of their property in World War II. Their complaint alleged that, after liquidating the confiscated goods, Hungary placed the proceeds in treasury accounts and later used that money for commercial activities in the United States (such as issuing bonds or procuring equipment). The plaintiffs argued that such a historical commingling of funds sufficed to meet the expropriation exception of the FSIA, which allows lawsuits against a foreign state if the seized property (or property exchanged for it) is tied to commercial activity in the United States.

a. Overview of the FSIA and the expropriation exception

Enacted in 1976, the FSIA codifies the principles of restrictive sovereign immunity, under which foreign states are broadly immune from U.S. court jurisdiction unless a specific statutory exception applies. One of these exceptions – the “expropriation exception,” 28 U.S.C. §1605(a)(3) – authorizes suits alleging that: