Customs
Import
Illegal
Trafficking of Cultural Property
Taking
Seizure (Here in Switzerland)
Is the U.S. District Court Vested with Jurisdiction?
State’s Police Powers
Expropriation
Exception
Does the Expropriation Exception
Incorporate an Exhaustion Requirement?
Foreign
Sovereign Immunities Act
Comity
Appeals from
the United States District Court for the Southern District of New York Nos.
18-cv-8248, 18-cv-11167.
In 2017, Swiss
law enforcement officers seized more than a thousand pieces of ancient art
owned by the plaintiffs as part of an ongoing investigation into illegal
trafficking of cultural property in Switzerland. The plaintiffs sued the
defendant Swiss government entities and instrumentalities in the Southern District
of New York, alleging that the seizure was arbitrary and made without probable
cause. The district court (Abrams, J.) dismissed the cases, holding that
it lacked jurisdiction over the defendants under the Foreign Sovereign
Immunities Act. The plaintiffs now appeal, arguing that jurisdiction is proper
under the statute’s “expropriation exception,” which applies in cases involving
property taken by a foreign state in violation of international law. See 28
U.S.C. § 1605(a)(3). We disagree and AFFIRM the district court.
A routine law enforcement seizure does not ordinarily
constitute a taking at all, let alone a taking in violation of international law,
because it falls within a state’s traditional police powers. And while there
are a handful of narrow exceptions to that general rule, such as when the seizure
(i) is not rationally related to a public purpose, (ii) is a pretextual attempt
to nationalize property without compensation, or (iii) has continued for an
unreasonable amount of time, none of those exceptions applies here.
Accordingly, the seizure was not a taking in violation of international law,
and the Foreign Sovereign Immunities Act therefore does not vest the district
court with jurisdiction.
Foreign
governments and their instrumentalities are ordinarily immune from suit in
American courts under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602, et
seq. (the “FSIA”). There are, however, several statutory exceptions to that
general rule. One of those exceptions is the “expropriation exception,” which
may be invoked in certain cases involving property taken by a
foreign
government or its instrumentality in violation of international law. See id.
§ 1605(a)(3). The question before us is whether that exception applies to
property that was seized as part of an ongoing law enforcement investigation.
We hold that such seizures ordinarily do not constitute a taking at all, much
less a taking in violation of international law. And while there are a handful
of narrow circumstances in which a seizure can fall within the scope
of the expropriation exception, none applies to this case. Accordingly, we
AFFIRM the judgment of the district court (Abrams, J.).
In December
2016, a border patrol officer for the Federal Customs Administration of the
Swiss Confederation (the “Swiss Customs Administration”) stopped a Land Rover
registered to Phoenix that was entering the country across the French border. During a routine
inspection of the SUV, the officer identified what appeared to be an illegally
imported antique oil lamp along with receipts for a storage warehouse in
Geneva. The driver and passenger were questioned and eventually released around
2:00 AM the following morning.
(…) The Swiss Customs Administration developed a “strong
suspicion” that the warehouse was being used to store numerous pieces of
illegally imported art and antiquities. Thereafter, on February 10, 2017, the
Swiss Customs Administration issued a “denunciation,” asserting that X.
and others were involved in the “sudden and suspicious movement . . . of a
number of articles of cultural property.” Id. at 39. This denunciation
was similar to one that had been prepared the prior month by the Swiss Federal
Office of Culture (together with the Swiss Customs Administration, the “Swiss
Agencies”). That earlier
denunciation had identified “seven objects of suspicious provenance.
On February
24, 2017, based on those two denunciations, the Public Prosecutor’s Office of
the Republic and Canton of Geneva issued a search and seizure order, naming as
defendants (…). As a result, it authorized the seizure of relevant objects
and documents found in various storage locations.
Pursuant
to that authorization, Swiss authorities seized nearly 12,000 antiquities.
Rather than physically remove the objects, however, authorities simply
“segregated them in place.” The seizure order informed the named defendants
that they could appeal the order to “the criminal board of appeals of the Court
of justice” in Geneva. Days later, the Swiss Customs Administration issued a
separate search warrant as part of a “criminal customs inquiry” into potential
violations of Swiss law, including evasion of Swiss import taxes. Id. at
56. Pursuant to that warrant, additional artifacts were seized. Similar
to the Geneva prosecutor, the Swiss Customs Administration permitted the seized
items to remain with Y. and X.,
and simply “prohibited the couple from disposing of them.” And, like the Geneva
search warrant, the Swiss Customs Administration’s warrant made clear that the
seizure could be challenged through domestic legal proceedings.
(…) In 1952, in what has been dubbed the “Tate Letter,” the
State Department changed course and enunciated “a new, ‘restrictive’ theory of
sovereign immunity.” Garb, 440 F.3d at 585.
Under that theory, sovereign immunity continued to be recognized where “public
acts” were concerned but was no longer extended in “cases arising out of a
foreign state’s strictly commercial acts.” Verlinden, 461 U.S. at 487; see
also Garb, 440 F.3d at 585.
(…) There are exceptions for waiver, commercial activity,
expropriations, succession, personal injury in the United States, arbitration,
maritime liens, state-sponsored terrorism, and counterclaims. See 28
U.S.C. §§ 1605, 1605A, 1607. Together, these exceptions form the “sole basis
for obtaining jurisdiction over a foreign state in our courts.” Argentine
Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989).
It is
undisputed that the defendants in this case – a political subdivision of the
Swiss Confederation and two Swiss federal agencies – are all foreign sovereigns
under the FSIA. See 28 U.S.C. § 1603(a) (defining “foreign state” to
include “a political subdivision of a foreign state or an agency or
instrumentality of a foreign state”). So, to hale them into court, the Art Owners
must demonstrate that this case falls within one of the FSIA’s exceptions. The
Art Owners identify only one exception as applicable: the expropriation
exception. As its name suggests, the expropriation exception supplies federal
courts with jurisdiction over certain cases concerning property taken by a
foreign government: A foreign state shall not be immune from the jurisdiction
of courts of the United States or of the States in any case . . . in which
rights in property taken in violation of international law are in issue and
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 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 a commercial
activity in the United States. 28 U.S.C. § 1605(a)(3).
Notably, “no
other country has adopted a comparable limitation on sovereign immunity.” Philipp,
141 S. Ct. at 713. The reason for our nonconformity is that “the United States
has long sought to protect the property of its citizens abroad as part of a
defense of America’s free enterprise system.” Id.
A plaintiff
seeking to invoke this exception must show four things:
“(1) that
rights in property are in issue; (2) that the property was ‘taken’; (3) that
the taking was in violation of international law; and (4) that one of the
provision’s two nexus requirements is satisfied.” Rukoro, 976 F.3d at
224 (quoting Zappia, 215 F.3d at 251); see also Restatement
(Fourth) of Foreign Rels. L. of U.S. § 455 cmt. a (Am. L. Inst. 2018). Our decision today concerns
the second and third elements of the exception, which requires unpacking the
meaning of the phrase “taken in violation of international law.” The
expropriation exception is concerned only with illegal takings. And the legal
standards by which takings are judged are not found in the domestic laws of the
United States or even the laws of the “expropriating” nation, but rather in
customary international law. See Permanent Mission of India, 551 U.S. at
200. To determine which takings offend these
international standards, we have historically turned, in part, to House Report
94-1487 on the FSIA legislation. See Chettri, 834 F.3d at 58; Zappia,
215 F.3d at 251. The House Report identifies three categories of illegal
takings: (i) “nationalizations or expropriations of property without payment of
. . . prompt, adequate, and effective compensation”; (ii) takings that are
“discriminatory”; and (iii) takings that are “arbitrary.” See 12 H.R. Rep. No.
94-1487, at 19–20 (1976), as reprinted in 1976 U.S.C.C.A.N. 6604, 6618, see
also Chettri,
834 F.3d at 58. In this appeal, the plaintiffs focus their arguments on the
third category, claiming that the seizure of their artwork was arbitrary. Today,
we hold that an “arbitrary taking” is a taking that bears no rational
relationship to a public purpose. We settle on this definition for two reasons.
First, the lack of a public purpose has been identified by both courts and the
Restatement as a paradigmatic example of a taking that violates international
law. See, e.g., Comparelli v. República
Bolivariana de Venezuela, 891 F.3d 1311, 1326 (11th Cir. 2018); Cassirer
v. Kingdom of Spain, 616 F.3d 1019, 1027 (9th Cir. 2010) (en banc); Chettri
v. Nepal Bangladesh Bank, Ltd., No. 10-cv-8470 (PGG), 2014 WL 4354668, at
*16 (S.D.N.Y. Sept. 2, 2014), aff’d, 834 F.3d 50 (2d Cir. 2016); Smith
Rocke Ltd. v. República Bolivariana de
Venezuela, No. 12-cv-7316 (LGS), 2014 WL 288705, at *7 (S.D.N.Y. Jan. 27,
2014); Restatement (Third) § 712(1)(a) & cmt. e; Restatement (Second) §
185(a). Second, this definition dovetails with the restrictive approach to
sovereign immunity announced in the Tate Letter and largely codified in the
FSIA, see Philipp, 141 S. Ct. at 713; Garb, 440 F.3d at 585–86,
which “recognizes immunity in cases based on a foreign state’s public acts, but
not in cases based on commercial or private acts,” H.R. No. 94-1487, at 8, as
reprinted in 1976 U.S.C.C.A.N. at 6607.
(13 The
plaintiffs do not argue that Switzerland or Geneva has nationalized or
expropriated their artwork or that the seizures were the result of
discrimination.)
(…) We conclude that a foreign state’s action is an arbitrary
“taking in violation of international law” if the foreign state exceeds its
traditional police powers to deprive an alien of substantially all the benefit
of her property in a way that is not rationally related to a public purpose.
B. The
Swiss Investigatory Seizure
Seizure made as part of an ongoing law enforcement
investigation can constitute a taking in violation of international law. The
answer is “yes,” but only in rare circumstances. Such circumstances are not
present here.
1. When
Does a Temporary Law Enforcement Seizure Constitute a Taking?
Temporary law
enforcement seizures ordinarily do not constitute a taking at all, much less a
taking in violation of international law. See Chettri, 834 F.3d at 58 (rejecting “the
proposition that” a foreign state’s decision to “freeze . . . financial assets
in connection with . . . a routine law enforcement action . . . constitutes a
taking within the meaning of the FSIA”); see also Off. Stanford Invs. Comm.
v. Bank of Antigua, No. 13-cv-762 (DCG), 2018 WL 3956470, at *4 (N.D. Tex.
Aug. 17, 2018); Hilsenrath v. Swiss Confederation, No. C 07-02782 (WHA),
2007 WL 3119833, at *4 (N.D. Cal. Oct. 23, 2007), aff’d, 402 F. App’x
314 (9th Cir. 2010); Greenpeace, Inc. (U.S.A.) v. State of France, 946
F. Supp. 773, 782–84 (C.D. Cal. 1996); Restatement (Third) § 712 cmt. g;
Restatement (Second) §§ 192 n.2, 197. This is because such seizures usually
fall within the scope of a state’s traditional police powers. See Restatement
(Third) § 712 cmt. g; cf. Warden, Md. Penitentiary v. Hayden, 387 U.S.
294, 302 (1967) (discussing police powers in the domestic context).
But, of
course, a foreign state cannot absolve itself of liability for an
otherwise illegal taking simply by branding the action as a law
enforcement seizure.
Accordingly,
there are a handful of circumstances in which this general rule does not apply.
Three of those circumstances are relevant here.
First, a law
enforcement seizure may constitute an illegal taking if the seizure is not
rationally related to a public purpose. See West, 807 F.2d at 831
(recognizing that “valid expropriations must always serve a public
purpose” (emphasis added)); Chettri, 2014 WL 4354668, at *16 (similar); see
also Restatement (Third) § 712(1)(a). In other words, if a law enforcement
seizure is “arbitrary,” as we explained that term above, then it both falls
outside the scope of the state’s traditional police powers because it serves no
valid governmental objective and violates international law.
Determining
whether a particular seizure constitutes an arbitrary taking for purposes of
the FSIA is not the same as asking whether the seizure is unlawful under the
“seizing” nation’s applicable criminal laws. See Chettri, 834 F.3d at 58
(holding that “conclusory criticisms of the manner in which the foreign state
has conducted its investigation are insufficient to prove a violation of
international law”). Rather, it requires first asking whether the law
enforcement investigation itself is rationally related to a public purpose. If so, then as long as
the seizure bears a rational connection to that investigation, the seizure is
not arbitrary. See Chettri, 834 F.3d at 58; West, 807 F.2d at
831; Greenpeace, 946 F. Supp. at 783.
Second, even
if a seizure bears some facial connection to a public purpose, it may
nonetheless constitute an illegal taking if that public purpose is shown to be
a “sham” – that is, if the seizure is merely a ploy by the foreign state either
to nationalize the plaintiff’s property without compensation or to discriminate
against
her because she is an alien. Siderman de Blake v. Republic of Argentina,
965 F.2d 699, 704 (9th Cir. 1992); see Restatement (Third) § 712 cmt. g.
While pretextual seizures will likely be few and far between, such seizures
will often be recognizable from an examination of the investigation’s course,
or because the foreign officials have acted in such a way or made statements
that strongly suggest that there is an ulterior motive at work. See, e.g.,
Comparelli, 891 F.3d at 1317, 1327– 28 (remanding for district judge to
consider whether expropriation exception was satisfied where government seized
plaintiffs’ chemical company on grounds it illegally stored three million
unreported pounds of hydrochloric acid, but physical audit revealed only
excesses “within the normal tolerance margins associated with the weighing
of bulk purchases”); see also Siderman, 965 F.2d at 704 (finding
expropriation exception satisfied under pre-Helmerich & Payne standard
where government first “imprisoned and killed the accountant to whom Sidermans
had granted management powers” and then held ex parte receivership
proceeding on grounds company “lacked a representative”).
Third, a
temporary law enforcement seizure that is not initially a taking can
nonetheless ripen into an arbitrary one if it continues for an unreasonably
long and indefinite period. See Sardino v. Fed.
Rsrv. Bank of N.Y.,
361 F.2d 106, 111 (2d Cir. 1966) (acknowledging that it is “hard to say there
is no deprivation when a man is prevented both from obtaining his property and
from realizing any benefit from it for a period of indefinite duration which
may outrun his life”); see also Restatement (Third) § 712 cmt. g, n.6
(explaining that a temporary seizure “might become a taking if it is long
extended”); Restatement (Second) § 192 n.2. Of course, there is no catchall
answer to the question of how long is too long; each investigation is unique
and must be considered in context. But there are a few factors that courts
might consider in addition to the duration of the seizure to help guide this
assessment, including: (i) whether the investigation has been prosecuted
diligently since the seizure occurred; (ii) the complexity and scope of the
investigation; (iii) whether formal criminal charges have been filed that bear
some connection to the seized property; and (iv) whether the plaintiff
has cooperated with the investigation or taken any other steps, judicial or
otherwise, to move the investigative process along.
See,
e.g., Chettri,
2014 WL 4354668, at *18; Greenpeace, 946 F. Supp. at 783.
(16 It
goes without saying that this does not apply to seizures that become permanent
because of a bona fide criminal conviction. See Restatement (Third) §
712 cmt. g (indicating that a “forfeiture for crime” does not constitute a
taking even though it results in the permanent “loss of property”).)
(17 This last factor is not intended to impose an
exhaustion requirement on plaintiffs. Rather, it is an acknowledgment that, all
else being equal, a seizure’s duration will look very different depending on
whether the plaintiff has taken advantage of the tools at her disposal to help
speed up the investigation. Simply put, a plaintiff who refuses to utilize
those lawful tools should reasonably expect that the investigation will take
longer as a result.)
The Art Owners
identify a fourth circumstance in which they argue a law enforcement seizure would
come within the boundaries of the expropriation exception: if the seizure is
made without probable cause in contravention of either the “seizing” nation’s
law (here, Switzerland) or the Fourth Amendment. But, in making this argument,
the Art Owners identify no precedent suggesting that international law has
adopted those probable cause standards, let alone that an investigatory seizure
in violation of those standards would automatically constitute an illegal
taking. And while that alone is fatal to the Art Owners’ position, it is also
noteworthy that the Fourth Amendment itself has only limited extraterritorial
application. See United States v. Getto, 729 F.3d 221, 227–28 (2d Cir.
2013) (holding that the Fourth Amendment generally does not require “suppressing
evidence collected by foreign law enforcement authorities abroad”); see also
United States v. Hasbajrami, 945 F.3d 641, 662–63 (2d Cir. 2019); United
States v. Odeh (In re Terrorist Bombings of U.S. Embassies in E. Africa),
552 F.3d 157, 167–71 (2d Cir. 2008). We therefore reject the Art Owners’
invitation to conclude that a foreign law enforcement seizure that fails to
meet the probable cause standards found in Swiss or United States law ipso
facto constitutes a taking in violation of international law.
Before
applying these principles to the law enforcement seizure at issue here, we
pause for a note of caution. Specifically, courts must be deferential when
assessing a foreign sovereign’s police activities. One of the FSIA’s purposes
is to avoid stoking international tensions, see Philipp, 141 S. Ct. at
714; Zappia, 215 F.3d at 251, and meddling in a foreign nation’s ongoing
criminal investigations will often be invasive of its sovereignty. As a result,
we expect that law enforcement seizures will be declared to be illegal in only
rare and egregious circumstances. See Chettri, 834 F.3d at 58; Restatement
(Second) § 185 cmt. b (noting that “there appear to be few, if any, cases in
which a taking has been held unlawful under international law on the sole and
specific ground that it was not for a public purpose”).
2. The
Swiss Law Enforcement Seizure Is Not a Taking
The
investigation in this case bears a rational relationship to a public purpose.
Swiss law enforcement officers observed Phoenix employees and Z.’s
sister-in-law engaging in what appeared to be criminal violations of customs
laws and the unlawful importation of art. Curtailing criminal activity is in
the public interest, and stopping the illegal importation of cultural property
is important to Switzerland’s efforts to comply with its obligations under the
UNESCO Convention.
The Art
Owners’ property also has a rational connection to this investigation, as it
was stored in warehouses owned and operated by individuals whom Swiss
authorities suspected of illegally importing and possessing cultural property.
This remains true regardless of whether the seized art was actually owned by
one of the named defendants in the Swiss investigation or was owned by a third
party (like the Art Owners). See Off. Stanford Invs. Comm., 2018 WL
3956470, at *1, *4 (finding that a seizure of assets involved in a Ponzi scheme
was not a taking even though those assets were scheduled to be distributed to
the fraud’s victims); cf. Bennis, 516 U.S. at 453 (explaining that, in
the context of domestic law, the inquiry focuses on the character of the
government action, not the culpability or innocence of the property owner). In
either case, the property bore some rational connection to the investigation.
Accordingly, the seizure of the Art Owners’ property was rationally connected
to a public purpose and, as a result, was not arbitrary.
While that
conclusion could have been overcome had the Art Owners identified facts
strongly suggesting that the investigation and seizure were merely a pretext to
allow Switzerland to nationalize their property without compensation or to
discriminate against them because of their foreign citizenship, the district
court did not clearly err in finding that they had not done so.
Thus, there is
no suggestion that the Swiss Agencies or Geneva are claiming a legal interest
in the seized property or are manufacturing after-the-fact explanations for an
illegal expropriation.
Because the
seizure was not a taking in violation of international law when it occurred,
the only way it might come within the expropriation exception is if it had
become a taking over time. We conclude that it has not.
As of now, the
seizure has been ongoing for a little more than four years (and, importantly,
the Art Owners sued after only one and a half years). This duration is not out
of step with what one would expect in an investigation involving thousands of
pieces of art and antiquities, nor is it significantly longer than the duration
of seizures that courts have previously found not to constitute a taking. See,
e.g., Chettri, 834 F.3d at 54, 58 (two and a half years before
criminal charges were filed); Acadia Tech., 458 F.3d at 1329 (four years
before forfeiture complaint was filed in domestic investigation). In fact, the
Art Owners’ counsel conceded below that the seizure “isn’t indefinite yet.”
Aboutaam App’x at 613.
And while
criminal charges have not yet been filed, the investigation has progressed
since the initial seizure.
Also relevant
here is the fact that the Art Owners have thus far refused to cooperate with
the investigation and have not otherwise taken advantage of domestic Swiss
remedies that could potentially speed things along. Having chosen not to avail
themselves of those opportunities, the Art Owners should reasonably have
expected that the investigation would take longer.
Before moving
on, we offer a few additional words about the Art Owners’ decision to sue in
the United States before seeking recourse in Swiss court. See Aboutaam,
2019 WL 4640083, at *5. Whether the expropriation exception incorporates an
exhaustion requirement is the source of some dispute among our sister circuits.
Compare Federal Republic of Germany v. Philipp, 894 F.3d 406, 414–16
(D.C. Cir.
2018) (rejecting an exhaustion requirement), vacated on other grounds,
141 S. Ct. 703 (2021), with Fischer v. Magyar Allamvasutak Zrt., 777
F.3d 847, 854, 856–59 (7th Cir. 2015) (declaring exhaustion to be required
under international law), and Abelesz v. Magyar Nemzeti Bank, 692 F.3d
661, 678–85 (7th Cir. 2012) (same); see also Republic of Austria v. Altmann,
541 U.S. 677, 714 (2004) (Breyer, J., concurring) (explaining that “a
plaintiff who chooses to litigate in this country in disregard of the postdeprivation
remedies available in the ‘expropriating’ state may have trouble showing a
‘taking in violation of international law’” (brackets omitted)); Cassirer,
616 F.3d at 1034–37 (concluding that the FSIA does not mandate exhaustion,
but leaving open whether courts may consider exhaustion as a prudential factor
before accepting jurisdiction over a case against a foreign sovereign). Because
we can resolve this case on other grounds, we do not analyze this issue. That
said, the Art Owners’ suggestion that exhaustion would have been futile here
simply because the Swiss government is on the other side of the “v.” borders on
the frivolous. Absent a strong showing to the contrary, we have no reason to
question the Swiss judiciary’s ability to fairly and impartially review the
lawfulness of its government’s actions.
For the foregoing reasons, we AFFIRM the judgment of
the district court.
(U.S. Court of Appeals for the Second Circuit, June 8,
2021, Beierwaltes v. Office fédéral de la culture et Administration fédérale
des douanes de la Confédération Suisse, Docket No. 19-3457, 19-3481)
