Industry News

International Art and Cultural Heritage Law

Aug. 24, 2021


 
*This piece was originally published in the 2021 ABA International Law Committee's Year in Review. The entire publication can be found here.
 
I. Barnet v. Ministry of Culture & Sports of the Hellenic Republic

In June 2020, the United States Court of Appeals for the Second Circuit ruled that the commercial activity exception to the Foreign Sovereign Immunities Act (FSIA)1did not apply to Sotheby’s suit against Greece because Greece’s act of sending a letter contesting ownership of a bronze figurine was not taken in connection with a commercial activity. The following provides an overview of Barnet v. Ministry of Culture & Sports of the Hellenic Republic,[2]as well as a summary of the court’s analysis and a brief note on the decision’s significance.

A.       FACTUAL BACKGROUND

The case centers around a small, bronze horse sculpture of Greek origin crafted during the Geometric Period (the Figurine). The Figurine had been in the private collection of the Barnet Family since 1973, when the family purchased it from antiquities dealer Robin Symes. In 2017, trustees of the 2012 Saretta Barnet Revocable Trust consigned the figurine to Sotheby’s to be sold in an auction scheduled for May 14, 2018.[3]The Ministry of Culture and Sports of the Hellenic Republic (the Ministry, or Greece) saw the catalog for the May 2018 auction and was suspicious of the lot for the Figurine because of its Greek origin and questionable provenance.[4]The Ministry researched the provenance of the Figurine and sent a formal letter to Sotheby’s on May 11, 2018, contesting the sale and the purported ownership of the Figurine. The letter asserted Greece’s ownership interest in the Figurine, requested that it be withdrawn from the auction, and cited various legal tools that the Ministry reserved to use to assert its rights in the Figurine. [5]As a result of the letter, Sotheby’s withdrew the Figurine from the auction.[6]While the Ministry continued to investigate the provenance ofthe piece, Sotheby’s and the Barnet Family (collectively Plaintiffs) jointly filed a claim against the Ministry in the United States District Court for the Southern District of New York, seeking a declaratory judgment that the Barnet Trust was the rightful owner of the Figurine.[7]As a threshold matter,the district court had to determine whether it had jurisdiction over Greece or whether the foreign sovereign was immune pursuant to the FSIA.[8]

B.        LEGALFRAMEWORK AND PROCEDURALPOSTURE

Sovereign immunity is a long-standing doctrine under which domestic courts will, in certain circumstances, decline to exercise jurisdiction over a foreign state unless the state consents to jurisdiction. [9]Until the mid- twentieth century, the United States adhered to a theory of absolute immunity, affording a foreign sovereign immunity no matter the private orpublic nature of the state action.[10]But the advent of a rapidly expanding global market, in which sovereigns were increasingly participating, altered this practice. Seeking to hold foreign states accountable for incidents arising from their “purely commercial operations,” courts began to impose limits on absolute immunity and routinely exercised jurisdiction over sovereigns where commercial activities were implicated.[11]This imposition of limits onimmunity became known as the restrictive approach to sovereign immunity.[12]To encourage consistency in jurisdictional determinations ofthe U.S. judiciary under the restrictive approach, Congress enacted the FSIA, which provides the sole basis for obtaining jurisdiction over a foreignsovereign in the United States.[13]The Act seeks to protect the rights of both foreign states and litigants in United States courts.[14] Thus, the FSIA sets outa presumption of immunity for foreign states and prescribes explicit exceptions or scenarios in which a foreign sovereign may be subject to thejurisdiction of U.S. courts.[15]

Once a defendant demonstrates that it is a foreign sovereign for purposesof the FSIA, a plaintiff has the burden of presenting evidence that an exception applies and that immunity should not be granted.[16]In Barnet, the Ministry moved to dismiss the action on the grounds that the court lacked jurisdiction over the foreign sovereign under the FSIA.[17]Plaintiffs countered that jurisdiction was proper under the third clause of the FSIA’s “commercial activity” exception, known as the “direct-effect” clause. The direct-effect clause provides:

A foreign government shall not be immune from the jurisdiction of courts of the United States . . . in any case in which the action is based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.[18]

Plaintiffs argued that the district court had jurisdiction over Greece, asserting that the act of Greece sending a letter interrupting the sale was commercial activity that caused a direct effect in the United States.[19]The district court agreed with Plaintiffs, denying Greece’s motion to dismiss and holding that the direct-effect clause was satisfied.[20]Greece appealed on thesole issue of whether Greece sending the letter was an act “taken in connection with a commercial activity.”[21]

C.         THE COURT’SANALYSIS

On appeal, the Second Circuit began its analysis by identifying the threeelements that must be met to satisfy the direct-effect clause. For the clause to be satisfied, the suit must be: “(1) based upon an act outside the territory of the United States; (2) that was taken in connection with a commercial activity of [Greece] outside the United States; and (3) that caused a direct effect in the United States.”[22] The Second Circuit explained that the first element instructs the court to find the “core” action taken by Greece that is outside the United States and from which relief is sought.[23]Concurring with the district court, the SecondCircuit identified the core predicate act as Greece sending a letter to Sotheby’s, asserting ownership of the Figurine.[24]

The crux of the Second Circuit’s analysis went to the second element, which requires the court to determine whether the core predicate act performed by the foreign sovereign was taken in connection with a commercial activity of the foreign sovereign outside the United States.[25]Pursuant to precedent that defines commercial activity as an activity thatcould be performed by a private party,[26]the district court had analyzed whether sending a letter asserting ownership comprised an act that could be undertaken by a private party. According to the Second Circuit, the district court erred in this part of the analysis by treating Greece’s act of sending the letter as both the predicate “act” and the related “commercial activity” that is required by the direct-effect clause.[27] The Second Circuit clarified that the core predicate act (i.e., Greece sending the letter asserting ownership of theFigurine) could not be the commercial activity required by the second element because “a single act cannot be undertaken in connection with itself.”[28]Rather, the Second Circuit found it “apparent” that Greece sent the letter “in connection with” Greek legislation nationalizing historical artifacts and pursuant to enforcing those patrimony laws.[29]

According to the court, the question then was whether the adoption andenforcement of patrimony laws is a commercial activity as opposed to a sovereign act.[30] The Second Circuit explained the patrimony laws at issue and emphasized that such laws declare those artifacts owned by the state tobe “extra commercium,” or outside the purview of commerce.[31]The Second Circuit relied on its own precedent to hold that nationalizing property is adistinctly sovereign act, explaining that in claiming ownership of the Figurine, Greece was acting in a sovereign capacity to administer and enforce its patrimony laws.[32]

Because the FSIA instructs that the commerciality of an activity should bedetermined by reference to the “nature” of the activity rather than by reference to its “purpose,” the Second Circuit, without analysis, determinedthat the nature of Greece’s activity was the enactment and enforcement of laws declaring the figurine state property.[33] The Second Circuit explainedthat such activity is not the type a private party would engage in when partaking in trade, traffic, or commerce, nor is it activity that resembles private commercial transactions.[34]The Second Circuit then rejected Plaintiffs’ argument that Greece was not acting in a sovereign capacity because it had not actually physically seized the Figurine, emphasizing that the FSIA does not require that a foreign state “invade the [U.S.]” and “seize disputed property” so as to maintain its immunity from suit.[35]

Finding support from Second and Ninth Circuit precedent, the court took the position that even arguably commercial activities performed by a foreign sovereign maintain their sovereign nature when the activity is undertaken in a strictly sovereign capacity or under a sovereign framework.[36] While Greece was, to some extent, participating in the market by contesting the sale and purported ownership of the Figurine, the Second Circuit declined to find that Greece was doing so “in any traditional sense” and it was not “‘otherwise [competing] in the marketplace like a private’ antiquities dealer.”[37]The Second Circuit then acknowledged that a private party couldsend a letter contesting a sale and that merely claiming ownership is not uniquely sovereign, but the court prioritized the fact that claiming ownership through nationalization and enforcement of patrimony laws isparticular to a sovereign. [38]

Thus, the Second Circuit concluded that “Greece’s act of sending the letter was not in connection with a commercial activity outside of the UnitedStates.” Without addressing the third element of the direct-effects clause, the Second Circuit reversed the holding of the district court and remandedwith instructions to dismiss the action for lack of subject matter jurisdiction. [39]

D.         SIGNIFICANCE/IMPLICATIONS

The Barnet decision is significant for several reasons. First, the decision sets precedential safeguards for foreign sovereigns as they communicate with art market players pursuant to national obligations to protect the nation’s cultural heritage.[40] Until Barnet, an auction house had never before brought suit against a foreign sovereign for communications regarding contested artifacts.[41] The decision gives shape to how the third clause of the FSIA’s “commercial activity” exception, the “direct-effect” clause, might apply in such contexts.[42] Furthermore, the decision upholds the uniquely sovereign nature of vesting and then defending title to antiquities in the State, without need for the State to first reduce the antiquity to physical possession.[43]

 

Endnotes

2. ForeignSovereignImmunitiesAct(FSIA)of1976,28U.S.C.§§1602–1611(1976).

3. Barnet v. Ministry of Culture & Sports of the Hellenic Republic, 961 F.3d 193 (2d Cir.2020).

4.Id.at195.

5. Id. (The Ministry was on high alert due to the reputation of Mr. Symes as someone with ahistoryofengagingintransactionsofdubiouslegality,aswellasthegapsinprovenance.).

6. Id.

7.Id.at196.

8. Id.

9. Barnet,961F.3dat196.

10.SeeH.R.REP.NO.94-1487,at8(1976).

11. Theconceptthatevolvedintothetheoryofabsoluteimmunitywasoriginallyarticulatedin U.S. case law by Chief Justice Marshall in Schooner Exchange v. M’Faddon, 11 U.S. (7Cranch) 116, 125 (1812) (“[T]he law of nations . . . requires the consent of a sovereign, eitherexpressorimplied,beforehecanbesubjectedtoaforeignjurisdiction.”).

12. See, e.g., Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 706 (1976)(referencing the judicial practice of imposing a commercial activity exception to the broad grantofimmunityusuallyaffordedaforeignsovereigninU.S.courts.).

13. SeegenerallyLetterfromJackB.Tate,ActingLegalAdviser,Dep’tofState,toAtt’yGen.(May 19, 1952), reprinted in Alfred Dunhill, 425 U.S. at app. 2, 711–15 (for background ontrendofrestrictivetheoryofimmunity).

14ArgentineRepublicv.AmeradaHessShippingCorp.,488U.S.428,439(1989).

15. H.R.REP.NO.94-1487,at7–8(1976)(statingobjectivesforenactmentoftheFSIA)

16. See, e.g., 28 U.S.C. § 1604.

17. MobilCerroNegro,Ltd.v.BolivarianRepublicofVenezuela,863F.3d96,113(2dCir.2017).

18. Barnet,961F.3dat196.(UndertheFSIA,politicalsubdivisionsandagenciesorinstrumentalitiesoftheforeignsovereign,likethatoftheMinistry,aretreatedastheforeignsovereign.);seealso28U.S.C.§1603(a)–(b).

19.§1605(a)(2).

20. Barnetv.MinistryofCultureandSportsoftheHellenicRepublic,391F.Supp.3d291,293(S.D.N.Y2019).

21. Id.

22. Barnet,961F.3dat196.

23. Id.

24. Id.

25.Id.at197.

26. Id.

27. Id.

28. Barnet,961F.3dat196.

29. Id.

30. Id.

31.Id.at198.

32. Id.

33. Barnet, 961 F.3d at 200 (citing Garb v. Republic of Poland, 440 F.3d 579, 586 (2d Cir.2006) (“Expropriation is a decidedly sovereign—rather than commercial—activity.”) andrelyingonNelson,507U.S.at361).

34.§1603(d);Barnet,961F.3dat201.

35. Barnet,961F.3dat199.

36. Id.

37. Anglo-Iberia Underwriting Management v. P.T. Jamsostek, 600 F.3d 171 (2d Cir. 2010)(where the court found the activities of an Indonesia-owned health insurer were sovereign innature because the services were available as default insurer option under Indonesia’s nationalsocial security program); Hilao v. Estate of Marcos, 94 F.3d 539 (9th Cir. 1996) (where thecourt held that the Philippines were exercising a distinctly sovereign police power when it froze,seized, and sold various assets around the world to repatriate money that had allegedly beenstolenbythecountry’sformerpresident).

38. Barnet,961F.3dat199(citingAnglo-Iberia,600F.3dat177).

39. Id.

40. Id.

41. See Global Marine Exploration, Inc. v. Republic of France, No. 420-cv-181-AW-MJF,2020 U.S. Dist. LEXIS 215362, *11–12 (N.D. Fla. Nov. 16, 2020) (suggesting the protectionsafforded to sovereigns may even extend beyond mere communications: the Barnet decision wasrecently cited by the United States District Court for the Northern District of Florida forsupport in holding that a sovereign entering into contracts relating to shipwreck recoveries isnotnecessarilycommercialwhenundertakenbyasovereignwithasovereignagenda).

42. Kate Brown, Sotheby’s Just Lost Its Lawsuit Against Greece Over an 8th-Century BC HorseStatue,ARTNETNEWS(June10,2020),https://news.artnet.com/art-world/barnet-case-sothebys-1883349.

43. See Global Marine, 2020 U.S. Dist. LEXIS 215362, at *11–12. Since Sotheby’s filed its casein the United States Southern District of New York, a small gallery out of Florida hasundertaken similar efforts in the same district against Italy in a case concerning a bust ofAlexandertheGreat.SeeSafaniGallery,Inc.v.ItalianRepublic,No.1:2019-cv-10507.

43. SeeBarnet,961F.3dat193.