Expropiation in the United States

In Exceptions to Foreign Immunity

In Kalamazoo Spice Extraction Co. v. Provincial Military Government of Socialist Ethiopia, 729 F.2d 422 (6th Cir. 1984), the court allowed an expropriation claim to go forward based on alleged violations of a bilateral treaty of friendship, commerce, and navigation. However, in McKesson Corp. v. Islamic Republic of Iran, 539 F.3d 485, 491 (D.C. Cir. 2008), the court held that a plaintiff cannot base a § 1605(a)(3) expropriation claim on a treaty unless the text of the treaty specifically provides for court enforcement or otherwise indicates that the treaty parties intended treaty rights to be enforceable in their domestic courts. The court in McKesson Corp. v. Islamic Republic of Iran, Civ. Action No. 82-0220 (RJL), 2009 WL 4250767, at *3–4 (D.D.C. Nov. 23, 2009), found that the FSIA’s commercial activities exception permits a plaintiff to base an expropriation claim on customary international law.

The U.S. government argued that, to the contrary, the commercial activities exception does not authorize U.S. courts to create a new federal common law cause of action by looking to customary international law. See Brief of the United States as Amicus Curiae, McKesson Corp. v. Islamic Republic of Iran, No. 10-7174, 2011 WL 3209069, at *6–15 (D.C. Cir. July 27, 2011).

The exception of Taken in violation of international law does not reach takings by a foreign government of its own nationals’ property. See, for example, Beg v. Islamic Republic of Pakistan, 353 F.3d 1323 (11th Cir. 2003); Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 711 (9th Cir. 1992); de Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385 (5th Cir. 1985). Claims arising from a sovereign’s alleged failure to privatize state-owned assets do not give rise to a claim under this section, but the selling and reselling of vouchers and options in connection with the privatization program have been found to fall within the commercial activities exception. Daventree Ltd. v. Republic of Azerbaijan, 349 F. Supp. 2d 736, 751 (S.D.N.Y. 2004)

In the Restatement (Third), Foreign Relations Law of the United States, § 713 (1987) cmt. f, under “international law, ordinarily a state is not required to consider a claim by another state for an injury to its national until that person has exhausted domestic remedies, unless such remedies are clearly sham or inadequate, or their application is unreasonably prolonged. There is no need to exhaust local remedies when the claim is for injury for which the respondent state firmly denies responsibility, for example a claim for injury due to the shooting down of a foreign commercial aircraft where the respondent state contends that the act was justified under international law.”

See also id., Reporters’ Note 3: “In general, the availability of a domestic remedy does not relieve the state of responsibility for the injury under international law, although in principle the domestic remedy must be exhausted before international remedies can be pursued.”

Several U.S. courts have suggested, however, that exhaustion might be appropriate as a prudential matter. See, e.g., Cassirer v. Kingdom of Spain, 580 F.3d 1048, 1062–63 (9th Cir. 2009), aff’d in part on reh’g en banc, 616 F.3d 1019, 1034–37 (2010), cert. denied, 131 S. Ct. 3057 (2011); Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 528 F.3d 934 (D.C. Cir. 2008). The U.S. government disagrees that exhaustion is required by § 1605(a)(3). See Brief of the United States as Amicus Curiae, Kingdom of Spain v. Estate of Cassirer, No. 10-786, 2011 WL 2135028, at *16–17 (U.S. Sup. Ct. on petition for writ of certiorari, May 27, 2011).