A recent unanimous decision by the United States Supreme Court has dismissed the commingled funds theory invoked by Hungarian Holocaust survivors in their compensation suit against the Hungarian government and its national railway. The plaintiffs argued that Hungary had appropriated their property during World War II, mixing the proceeds from the sales of those assets with other government funds to conduct business in and with the United States. However, Justice Sonia Sotomayor, writing for the court, clarified that such allegations are insufficient on their own for the case to proceed, as per the Foreign Sovereign Immunities Act (FSIA), a principle underscoring the protection of foreign governments from being sued in U.S. courts. You can read more details on SCOTUSblog.
The lawsuit, originally filed in 2010, relied on an exception within the FSIA known as the “expropriation exception”, which is applicable if the confiscated property is located in the U.S. or utilized in a commercial activity by a foreign government entity within the country. The U.S. Court of Appeals for the District of Columbia Circuit had allowed the lawsuit to proceed, reasoning that Hungary’s commingling of funds from the sale of properties with general government funds used for U.S. commercial activities fell under this scope. However, the Supreme Court overturned this decision, with Sotomayor explaining that mere allegations of depositing confiscated property proceeds into government accounts, which were later used for commercial activities, do not substantiate a presence in the U.S. demanded by the FSIA.
Sotomayor further noted that accepting such a rationale requires adhering to an “attenuated fiction”. Claiming that decades-old commingling renders the properties or funds present now contradicts the FSIA’s specifications. She cautioned against a broad interpretation of the expropriation exception, warning that it could lead to increased lawsuits against foreign governments and potential retaliatory legal actions against the U.S. in foreign courts.
The court dismissed concerns from the survivors that the fungibility of money could allow foreign governments to evade FSIA provisions by liquidating and depositing confiscated assets into general treasury funds. Sotomayor highlighted the ruling as a limitation on relying purely on a commingling theory, emphasizing it does not preclude other potential grounds meeting the commercial nexus requirement.
She also conceded the imperative for dispensing justice to Holocaust survivors within their lifetimes remains valid, acknowledging the moral drive for accountability albeit through suitable judicial venues beyond U.S. courts.