04 Apr Case of the Month: Garb v. Poland
The issue of the restoring real property that was taken during the Holocaust is one of the great unfinished parts of the Holocaust restitution movement. In our recent book Holocaust Restitution, Ambassaador Stuart Eizenstat has a chapter entitled The Unfinished Business of the Unfinished Business of World War II. He argues that “Completion of the property restitution process remains an imperative…. There was no one overarching agreement covering property restitution…. If returning communal property is difficult, getting back confiscated private property taken by the Nazis during World War II and/or nationalized by the Eastern European communist countries after the war is often even more difficult. Nowhere is this more evident than in Poland….” (pp. 304-05).
The Second Circuit’s decision in Garb strongly suggests that United States courts will not be a venue for resolution of Holocaust real property claims. The Court ruled that the FSIA applied to preclude the real property claims against Poland. As for the commercial exception (1605(a)(2)), it argued that “a State’s exercise of its power to expropriate property within its borders is a decidedly sovereign act.” Nor was the takings exception (1605(a)(3)) available because the property is not located in the United States and the Polish Ministry of Treasury is not an “agency or instrumentality of the foreign state” within the meaning of that exception. Here is the concluding paragraph:
For the reasons stated above, we hold that: (1) Altmann requires us to apply the FSIA, and its exceptions, to claims based on conduct that predates the 1976 enactment of the FSIA, (2) plaintiffs have not satisfied the “commercial activity” exception of the FSIA, 28 U.S.C. § 1605(a)(2), because (a) a state’s confiscation of property within its borders is not a “commercial” act, (b) the subsequent commercial treatment of expropriated property is not sufficiently “in connection with” the prior expropriation to satisfy the “commercial activity” exception, and (c) we decline to credit plaintiffs’ recharacterization of what are in essence “takings” claims as “commercial activity” claims, and (3) plaintiffs have not satisfied the “takings” exception of the FSIA, 28 U.S.C. § 1605(a)(3), because (a) plaintiffs seek to recover property that is not “present in the United States,” (b) under such circumstances, plaintiffs must show that the property “is owned or operated by an agency or instrumentality of the foreign state” within the meaning of the FSIA, (c) plaintiffs allege that the property is “owned by” the Ministry of the Treasury of Poland, Appellants’ Br. at 15, and (d) the Ministry of the Treasury of Poland is not an “agency or instrumentality” of the Republic of Poland under the FSIA because its “core function” is governmental rather than commercial.
Judge Straub dissented, and authored a detailed opinion challenging the conclusion that the Ministry of Treasury is not an agency or instrumentality within the meaning of 1605(a)(3). “the majority’s reading is in tension with the text of the FSIA, conflicts with the House Report’s clear, specific definition of ‘agency or instrumentality,’ and places undue weight on the House Report’s vague definition of ‘political subdivision.'”
Note the significance of the Garb holding regarding the takings exception. Under the commercial activity exception the purpose of the government act is irrelevant. What matters under that exception is “whether the the particular actions that the foreign state performs … are the type of actions by which a private party engages in ‘trade and traffic or commerce.” See Argentina v. Weltover. By contrast, under the takings exception, at least for real property located abroad, purpose is paramount. If the entity is performing a “core function”–in this case holding and administering property of the Polish state–it is viewed as the foreign state itself, and not an agency or instrumentality. Never mind that the act of owning and operating property is a garden-variety act that could be performed by a private or public entity. In other words, under the Second Circuit’s reading of the takings exception, immunity obtains for a foreign state entity that owns or operates expropriated property located abroad (notwithstanding that entity’s engagement in commercial activity), provided the purpose of the entity’s conduct is deemed critical enough to enjoy the status of a core state function.
Under the commercial activity exception, it is what you are doing, not why you are doing it. Under the takings exception, it is not what you are doing, but why you are doing it. The message to foreign states: if you take people’s property, give it over to government entities that perform “core” state functions.
Thanks Roger: from the outside looking in as it were, this seems a particularly pellucid and succinct explanation. The Los Angeles Times today has a not unrelated article (not directly on point however) in its Calendar section. I quote from the first few paragraphs (and perhaps you can discuss this too): By Christopher Knight Times Staff Writer April 4, 2006 As a celebrated Modern painting goes on temporary view at the Los Angeles County Museum of Art today, the masterpiece becomes the latest work looted by the Nazis during World War II to have been returned to its rightful owner. Ninety-year-old Cheviot Hills resident Maria Altmann successfully sued the Austrian government for return of the treasure, seized from her uncle’s home after he fled Vienna in 1938. News of the restitution sent shock waves through the international art world after an arbitration court issued its January ruling. The famed 1907 “Portrait of Adele Bloch-Bauer” by Gustav Klimt — an image of Altmann’s aunt, which will be shown at the museum with four other Klimt paintings also returned to the family in the landmark settlement — ranks as a supreme icon of early 20th century art. The three-month loan to LACMA… Read more »
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