Embassy Law Web Log   
Washington, DC, USA      

Expropriation Exception to the FSIA

On December 7, 2016, the United States District Court for the District of Columbia found in favor of the defendants in Schubarth v. Federal Republic of Germany & BVVG, citing a lack of subject-matter jurisdiction under the Foreign Sovereign Immunities Act. In its memorandum opinion, the Court stated that the plaintiff had not pled facts establishing the requirements of the expropriation exception to the FSIA Immunity and set forth its analysis to the expropriation exception, 28 U.S.C. § 1605(a)(3).

In 1991, the plaintiff applied to a German state agency for restitution of inherited property that had been expropriated by the East German government in 1945. Although the plaintiff had received an award for the estate from the agency, she considered it to be only a fraction of the estate's worth. She then claimed entitlement under the German-American 1956 Treaty of Friendship, Commerce and Navigation to the full, fair market value of the property as of the date of expropriation. However, without reference to the Treaty, the award of € 35,279 was finalized by the state agency in November 2014.

Following the finalization of the award, the plaintiff sued the Federal Republic of Germany and BVVG Bodenverwertungs- und -verwaltungs GmbH, its state-owned entity responsible for expropriated properties located in East Germany. The plaintiff asserted that Germany and BVVG had failed their obligations under the FCN Treaty by refusing her the full compensation of her estate.

In order to proceed with the suit, the plaintiff needed to prove jurisdictional grounds via the FSIA's expropriation exception, 28 U.S.C. § 1605(a)(3), which applies to a case

in which rights in property taken in violation of international law are in issue and [either][1] that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or [2] 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 commercial activity in the United States. Id. at 3-4

To prove that BVVG was engaged in U.S. commercial activity, which is defined by the FSIA as either a regular course of commercial conduct or a particular commercial transaction or act, the plaintiff alleged that the existence of BVVG's predecessor's office in New York in the early 1990s and BVVG's online marketing efforts were indicators thereof. However, these allegations did not meet the substantial contact requirement of clause [1] of 28 U.S.C. § 1605(a)(3), as they did not plausibly show any direct commercial activity linked to the United States; the offices that existed two decades prior to the filing of the initial complaint did not reveal any present-day commercial engagement, and the online marketing efforts in the English language appealed to the international community generally, not specifically to the United States. Thus, the Court concluded that the FSIA's expropriation exception to immunity is unavailable and that it does not have subject matter jurisdiction over the plaintiff's claims. The Court thereby dismissed the case. -- Kathryn Campbell, Legal Assistant, Berliner Corcoran & Rowe LLP, Washington, DC.