High Court of the United States Declines to Embrace Commingling Approach in Holocaust Asset Recovery Dispute
The Supreme Court of the United States has issued a unanimous decision in the case of Republic of Hungary v. Simon (2025), further defining the Foreign Sovereign Immunities Act's (FSIA) exception to sovereign immunity for expropriation claims.
The FSIA, enacted in 1976, grants foreign states sovereign immunity but contains an expropriation exception permitting suits "in connection with the taking of property in violation of international law" if the property is used for commercial activity in the United States. This exception is codified in 28 U.S.C. § 1605(a)(3).
In Republic of Hungary v. Simon, the Court emphasised the importance of independent assessment of jurisdictional facts required under FSIA exceptions. The Court rejected the argument that § 1605(a)(3) will become a "nullity" if a commingling theory alone cannot satisfy the commercial nexus requirement.
The Court's decision underscores the importance of not expanding the circumstances in which foreign sovereigns can be brought into US courts for their public acts of expropriation. The Court determined that a commingling theory, where a foreign state sells plaintiffs' property, commingles the proceeds with other government funds, and later uses funds from that account for commercial purposes in the United States, cannot satisfy § 1605(a)(3)'s commercial nexus requirement.
The Court's interpretation of § 1605(a)(3)'s commercial nexus requirement is narrow and sets a more demanding threshold for plaintiffs. The Court did not decide who bears the burden of persuasion "to prove (or disprove) the expropriated property has a commercial nexus with the United States."
The Court's decision may influence future FSIA cases involving the expropriation exception. The Court left open several issues for future FSIA cases, including whether tracing principles from non-FSIA contexts could inform the § 1605(a)(3) commercial nexus inquiry.
The case originated in 2010 when plaintiffs brought expropriation claims under § 1605(a)(3) against the Republic of Hungary and its national railway seeking damages for property seized during WWII.
The Supreme Court's decision in Republic of Hungary v. Simon tightens judicial scrutiny on FSIA immunity exceptions—including expropriation claims—and reinforces that courts cannot rely solely on foreign or arbitral findings but need to ensure the commercial nexus and other jurisdictional elements are independently satisfied before waiving immunity. This has the effect of making it more difficult for plaintiffs to enforce claims against foreign states under FSIA by requiring a robust link to commercial activity and clear jurisdictional grounds demonstrated directly to U.S. courts.
- The Supreme Court of the United States, in the case of Republic of Hungary v. Simon (2025), established a stricter interpretation for the Foreign Sovereign Immunities Act's (FSIA) expropriation exception.
- Under the FSIA, foreign states are granted sovereign immunity, but the expropriation exception allows for suits in cases of property seizure violating international law if the property is used for commercial activities within the U.S.
- Republic of Hungary v. Simon emphasized the importance of a rigorous assessment of jurisdictional facts for FSIA exceptions and rejected a claim that the commercial nexus requirement would render § 1605(a)(3) ineffective.
- The Court clarified that a commingling theory, where a foreign state sells property, combines proceeds with other government funds, and uses a portion for U.S. commercial purposes, does not meet the commercial nexus requirement of § 1605(a)(3).
- The Court's decision in Republic of Hungary v. Simon sets a higher standard for plaintiffs seeking damages for expropriation under FSIA, but did not decide who bears the burden of proving the commercial nexus between the seized property and the U.S.
6.Future FSIA cases involving expropriation exceptions may be influenced by the Supreme Court's decision, leaving open questions about the potential use of tracing principles from non-FSIA contexts to inform the commercial nexus inquiry.
- The origins of the Republic of Hungary v. Simon case can be traced back to 2010 when plaintiffs brought expropriation claims against the Republic of Hungary and its national railway under § 1605(a)(3), seeking compensation for property seized during WWII.
- The Supreme Court's decision in Republic of Hungary v. Simon reinforces that courts will not waive immunity based solely on foreign or arbitration findings, but instead require independent satisfaction of the commercial nexus and other jurisdictional elements to enforce claims against foreign states under the FSIA.
