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.
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