On June 8, 2021, the United States Court of Appeals for the Second Circuit ruled in Beierwaltes v. Federal Office of Culture of the Swiss Confederation that the temporary seizure in Geneva of antiquities belonging to Colorado-based art collectors conducted by Swiss authorities, as part of a Swiss police investigation, does not fall within the scope of the “expropriation exception” of the U.S. Foreign Sovereign Immunities Act (the “FSIA”), which under certain conditions permits private parties to sue foreign governments in U.S. courts.[1] The Second Circuit’s decision follows closely on the heels of the U.S. Supreme Court’s February 3, 2021 decision in Federal Republic of Germany v. Philipp, declining to apply the expropriation exception in a case involving an alleged taking of art that occurred in Germany as the Nazis rose to power, and further limits the application of the expropriation exception, particularly in cases involving takings in connection with foreign police activities.[2]
Background
Plaintiffs-Appellants Lynda and William Beierwaltes are Colorado-based art collectors who in the 1990s accumulated one of the world’s leading private collections of art and antiquities.[3] In 2006, after falling into financial troubles, the Beierwalteses granted a leading dealer in antiquities, the Geneva-based gallery Phoenix Ancient Art S.A. (“Phoenix”), the exclusive right to sell their collection.[4]
Plaintiff-Appellant Hicham Aboutaam co-founded Phoenix with his brother Ali Aboutaam, and also amassed his own large personal collection of art and antiquities.
In December 2016, during a routine inspection of a car registered to Phoenix as it entered Switzerland from France, Swiss border patrol officers identified an apparently illegally-imported antique object with a receipt for a storage warehouse in Geneva. Surveillance footage of the Geneva warehouse revealed suspicious “movements of merchandise” at around the same time.[5] The Swiss Customs Administration suspected the Phoenix co-founders of storing illegally-imported art and antiquities at the warehouse.[6]
On February 24, 2017, the Public Prosecutor’s Office of the Republic and Canton of Geneva issued a search and seizure order directed to the warehouse, and ended up seizing nearly 12,000 antiquities.[7] Of the 12,000 objects, approximately 18 belonged to the Beierwalteses and 1,200 belonged to Hicham Aboutaam. The Swiss Customs Administration subsequently issued a search warrant for Ali Aboutaam’s home in Geneva, and seized 111 additional artifacts, at least one of which belonged to the Beierwalteses.[8]
In May 2018, the Beierwalteses and Hicham Aboutaam (the “Claimants”) sent letters to the Geneva prosecutor demanding the immediate release of their property, but the prosecutor’s office refused.[9]
On August 8, 2018, the Beierwalteses filed a civil complaint in the U.S. District Court for the District of Colorado against the Federal Office of Culture of the Swiss Confederation, the Federal Customs Administration of the Swiss Confederation, and the Republic and Canton of Geneva, seeking a declaratory judgment as to their title to the seized artifacts, along with claims for conversion, unjust enrichment and civil theft.[10] Hicham filed a similar complaint against the same defendants in the U.S. District Court for the Southern District of New York, and the Bierewalteses’ case was subsequently transferred to New York as related.[11]
On September 24, 2019, the District Court dismissed both cases, finding that the two Swiss government agencies and Geneva were immune from suit under the FSIA. The court recognized the expropriation exception for “takings” of property in violation of international law, but determined that exception was inapplicable based on its finding that the Claimants’ property had been lawfully seized during a valid investigation.[12]
Claimants appealed to the U.S. Court of Appeals for the Second Circuit, which affirmed the District Court’s dismissal of both claims.[13]
The Second Circuit’s Opinion
The Second Circuit rejected Claimants’ argument that the expropriation exception applies to the seizure of their works in Geneva. Although Claimants argued that the seizure constituted an illegal taking under the expropriation exception because it was “arbitrary,” a three-judge panel of the Court of Appeals disagreed. It held that an arbitrary taking is one that “bears no rational relationship to a public purpose,” and that the seizure in this case was not arbitrary for three reasons:[14] (1) the seizure took place as part of an ongoing investigation that was rationally related to a public purpose, “as [the art] was stored in warehouses owned and operated by individuals whom Swiss authorities suspected of illegally importing and possessing cultural property;” (2) Claimants did not establish that the public purpose was a pretext by the foreign state to seize the property without compensation; and (3) the taking was not unreasonably long because the investigators continued to collect and review evidence.[15]
The Second Circuit also found it relevant that Claimants “refused to cooperate with the investigation and [did] not otherwise taken advantage of domestic Swiss remedies that could potentially speed things along.”[16]
Writing for the panel, U.S. Circuit Judge Richard J. Sullivan emphasized that U.S. courts “must be deferential when assessing a foreign sovereign’s police activities.”[17] “One of the FSIA’s purposes is to avoid stoking international tensions . . . and meddling in a foreign nation’s ongoing criminal investigations will often be invasive of its sovereignty.”[18] Therefore, “law enforcement seizures will be declared to be illegal in only rare and egregious circumstances.”[19]
Going Forward
In light of the Second Circuit’s decision and the Supreme Court’s February 2021 decision in Federal Republic of Germany v. Philipp, courts will likely continue to apply the expropriation exception narrowly, which could deter would-be plaintiffs from filing suit in U.S. courts against foreign governments, even where an apparent “taking” of art or antiquities is involved.
[1] Beierwaltes v. L’Office fédérale de la culture de la Confederation Suisse, 999 F.3d 808 (2d Cir. 2021).
[2] Federal Republic of Germany v. Philipp, 141 S. Ct. 703 (2021).
[3] Beierwaltes, supra note 1.
[4] Id. at 813.
[5] Id. at 814.
[6] Id.
[7] Id.
[8] Id.
[9] Id. at 815.
[10] Id. at 816.
[11] Id.
[12] Aboutaam v. L’Office Federale de la Culture de la Confederation Suisse, No. 1:18-cv-08248 (S.D.N.Y. Sep. 24, 2019).
[13] Beierwaltes, supra note 1 at 813.
[14] Id. at 821.
[15] Id. at 823–25.
[16] Id. at 827
[17] Id. at 824.
[18] Id. at 825.
[19] Id.