RUSSIAN LAWS AND CULTURAL PROPERTY: EXPLORING LEGAL PROBLEMS ARISING FROM APPOPRIATIONS, SALES, AND RESTITUTION CLAIMS IN THE 20 TH CENTURY

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1 RUSSIAN LAWS AND CULTURAL PROPERTY: EXPLORING LEGAL PROBLEMS ARISING FROM APPOPRIATIONS, SALES, AND RESTITUTION CLAIMS IN THE 20 TH CENTURY AGUDAS CHASIDEI CHABAD OF UNITED STATES V. RUSSIAN FEDERATION Howard N. Spiegler, Esq. Herrick, Feinstein LLP I. Factual Allegations A. At issue is Chabad s ownership of thousands of religious books, manuscripts and documents (the Collection ) assembled by Rebbes over the course of Chabad s history. traditions. 1. The Collection comprises the textual basis for Chabad s core teachings and 2. Critical religious and historical importance to Chabad. B. Russia s Bolshevik government seized one portion of the Collection (known as the Library ) during October Revolution of 1917 from private warehouse in Moscow. 1. Fifth Rebbe had sent it there for safekeeping as he fled from German forces invading Russia. 2. By 1925, Soviet government rejected pleas by Fifth and Sixth Rebbes for return of the Library. 3. Government stored Library at Lenin Library, later became the Russian State Library ( RSL ). 4. Sixth Rebbe arrested for counter revolutionary activities (establishing Jewish schools), was beaten by Soviets and sentenced to death by firing squad, but sentence was commuted to exile. C. Other part of the Collection: religious manuscripts and books known as the Archive 1. Sixth Rebbe brought the Archive with him to Latvia. 2. In 1933, he moved to Poland, bringing Archive with him. to flee again. 3. On September 1, 1939, Nazi German forces invaded Poland, forcing the Rebbe

2 4. Nazis seized the Archive and transferred it to a Gestapo-controlled castle at Wolfelsdorf, near Glatz (now Klodzko) in Lower Silesia, Poland. 5. In September 1945, Soviet military forces commandeered the Archive, characterizing them as trophy documents and brought them to Moscow. 6. Archive is now held by the Russian State Military Archive ( RSMA ). D. Attempts at recovery of the Collection for 70 years 1. With assistance of U.S. Government, Sixth Rebbe escaped to New York. 2. Chabad was incorporated in New York in Chabad was briefly successful at recovering the Library in , resulting from several Soviet and then Russian judicial, executive and legislative pronouncements, but ultimately all of Chabad s efforts were thwarted, which it alleges comprised a further expropriation by Russia. II. Lawsuit A. In 2004, Chabad sued the Russian Federation, its Ministry of Culture and Mass Communication, the RSL and the RSMA (all generally referred to as Russia ) in the U.S. District Court for the Central District of California. In 2005, the case was transferred to the U.S. District Court for the District of Columbia. B. Russia moved to dismiss the claims on the grounds of sovereign immunity, inconvenient forum and the act of state doctrine. In 2006, District Court dismissed all claims concerning the Library, finding that as a sovereign state, Russia was immune from suit with respect to it, but it denied Russia s motion to dismiss the Archive claims. C. Both sides appealed to the Court of Appeals for the District of Columbia Circuit. III. Decision of the Court of Appeals: June 13, 2008 A. Sovereign Immunity: Exceptions for expropriation in violation of international law where agencies conducted commercial activity in the U.S. 1. Exception to sovereign immunity under the Foreign Sovereign Immunities Act (FSIA): expropriation of property in violation of international law. 2. Russia argued that the Library was the personal property of the Fifth and Sixth Rebbes and when it was first taken, they were Soviet citizens. Therefore, no international law was violated since the Soviet Union was seizing its own citizen s property. 2

3 3. District Court had agreed with Russia s argument in dismissing Chabad s claims for the Library. 4. Court of Appeals reversed the District Court and held, at least at this stage of the case, Chabad had sufficiently alleged that the Library was owned by the world-wide Chabad organization, and therefore its first seizure was in violation of international law. 5. Court of Appeals separately determined that the impediments to recovery of the Library in , after certain administrative and judicial decisions appeared to determine that Russia should return it to Chabad, also constituted a taking by Russia, at least at this stage of the proceeding. Specifically, the Deputy Chief State Arbiter and the Supreme Soviet made official determinations preventing the recovery of the Library by Chabad. 6. The FSIA also requires that the RSMA and RSL have engaged in commercial activity with the United States in order for it to be subject to jurisdiction in U.S. courts. The Court of Appeals determined that this was easily established by the fact that both entered into contracts with American corporations for the reproduction and worldwide sale of materials, including the papers of Leon Trotsky. B. Exhaustion of remedies in Russia 1. Russia argued that Chabad cannot claim an expropriation in violation of international law without showing that it first attempted to obtain recovery using Russian legal and administrative systems. 2. Russia s claim was that Chabad never made any efforts to pursue recovery of the Archive in Russia. 3. The FSIA does not expressly require exhaustion of remedies and the District Court rejected Russia s argument on this basis. 4. The Court of Appeals indicated that this is likely correct but is concerned by comment by Judge Breyer of the U.S. Supreme Court in another case that might suggest that exhaustion of local remedies should be required even in FSIA cases. 5. It nevertheless decided against Russia on this point because it concluded that the remedy provided by Russian law would be inadequate. 6. Russia argued that its Federal Law on Cultural Valuables Displaced to the U.S.S.R. as a Result of World War II and Located on the Territory of the Russian Federation provides an adequate method for Chabad to attempt to recover the Archive. But the Court found that this law would require that Chabad compensate Russia for the value of the Archive in return for recovering it. The Court concluded that obviously Russia s mere willingness to sell the plaintiff s property back to it could not remedy the alleged wrong. C. Russia s defense of inconvenient forum 3

4 1. The Court of Appeals agreed that the District Court had correctly reviewed the necessary factors to determine if the case would be more conveniently heard in Russia rather than the United States and that it was correct in concluding that it was appropriate for the case to be heard in the United States. 2. One particular factor is worth noting. Russia argued that the Court would likely be unable to provide Chabad with the relief it seeks -- recovery of the Library and the Archive -- because any judgment by the Court would not be recognized and enforced in Russia. The District Court had characterized this argument as an affront to the Court. 3. The Court of Appeals focused instead on the fact that Chabad could ask the Court to seize Russian government property in the U.S. in aid of enforcing any judgment against Russia it might obtain and that this would provide leverage over Russia, enhancing the likelihood that Russia or its courts would respect the judgment of a U.S. court. D. Russia s defense of act of state: the Archive 1. The act of state doctrine generally provides that a U.S. court should refrain from hearing a case when the validity of an official taking by a foreign state of property located within its own territory would have to be determined by the court, because such a determination could interfere with the foreign affairs function of the Executive Branch of the U.S. government. 2. With respect to the Archive, the District Court had ruled that the act of state doctrine did not apply and the Court of Appeals agreed. 3. The key issue was whether the seizure of the Archive by the Soviet Union occurred within its own territory. Russia claimed that this was so in that it seized the Archive in Soviet-occupied Germany. The Court, however, found that documentary evidence demonstrated that the Soviets had seized the Archive in Poland. E. Russia s defense of act of state: the Library 1. The District Court had stated that even if Russia was not immune from suit with respect to the Library, as it had held (which was reversed by the Court of Appeals, as noted above), it would still not be liable for seizure of the Library because of the act of state doctrine. Apparently, the District Court considered the decision of the Deputy Chief State Arbiter and the decree of the Supreme Soviet in not to return the Library to Chabad as acts of state. 2. The Court of Appeals disagreed, however, based on a U.S. statute called the Second Hickenlooper Amendment that bars application of the act of state doctrine to seizures occurring after January 1, 1959 (resulting from the seizures of American property by Cuba). 3. As for the first seizure of the Library in , the District Court had ruled that since this comprised a taking by Russia of property within its territory, it is subject to the act of state doctrine and Chabad s Library claims should be dismissed on that basis. 4

5 4. The Court of Appeals examined each of Chabad s arguments against the District Court s holding. 5. First, Chabad argued that the current Russian regime is radically different from the Soviet government that seized the Library as a result of the Bolshevik revolution and therefore the act of state doctrine should not apply. The Court of Appeals, however, refrained from a judgment about the character of the current Russian government in this regard, for fear of interfering with the very foreign policy concerns that the act of state doctrine was meant to avoid. 6. Second, Chabad argued that the act of state doctrine does not apply when accepted norms of international behavior are so clearly violated by the State s actions that there would be no reason for the Court to fear interference with American foreign policy concerns. In this case, Chabad contended that the Library s seizure was part of a campaign to suppress the practice of Judaism, which, like racial discrimination, is condemned by a consensus of the international community. 7. The Court of Appeals, while finding this argument intuitively appealing, was concerned that this kind of analysis would involve courts in ranking violations of international law and dispensing with the act of state doctrine for the vilest. It added: While it would be heartening to believe that there is a nearly universal consensus against religious prejudice in general or anti-semitism in particular, a glance around the world exposes glaring examples to the contrary in areas containing a large fraction of the human population. 8..The Court also recognized that it might be difficult for Chabad to show that the Library s seizure was an example of religious discrimination as opposed to just another instance of the seizure of all private property by the new Soviet Government after the revolution. 9. As a result of all of its misgivings on this point, the Court simply reversed the District Court s holding that dismissed the claims concerning the Library and deferred ultimate resolution of the act of state issues pertaining thereto. F. Conclusion of the Court of Appeals 1. The Court therefore affirmed the District Court s judgment finding jurisdiction over the Chabad s claims concerning the Archive and reversed its finding that Russia was immune from suit over the claims concerning the Library. The Court also affirmed the District Court s rejection of Russia s inconvenient forum defense, affirmed its rejection of Russia s act of state defense concerning the Archive claims and vacated the District Court s application of the act of state doctrine to the Library claims. 2. The result of the Court decision is to permit the case to continue through the long process of producing documents and witnesses for pre-trial testimony and ultimately, a trial. It is not a final decision on the merits by any means. 5

6 G. Post-decision events 1. Russia announced that it was no longer participating in the lawsuit. On October 27, 2009, the District Court ordered that, as a result, a default judgment should be entered against Russia, granting Chabad all of the relief it requested in the lawsuit. 2. This ends the lawsuit. But now the questions raised by the District Court and the Court of Appeals concerning whether any final judgment by the District Court could be enforced against Russia will come sharply into focus. 6