It has been quite some time since there was occasion to update the dispute between the Chabad Lubavitch movement and Russia over Chabad’s efforts to obtain the return of the library of the movement’s late rabbit Menachem Schneerson and his predecessors (each known in his respective era as the “Rebbe”).  There is now a major development.  The court has granted the Chabad plaintiffs’ request to turn the daily sanctions that began to accrue in 2013 into an interim judgment, that is, to tally the $50,000 daily fines to date.  The U.S. District Court in Washington, DC has done so, and entered a judgment against the Russian Federation, the Russian State Military Archive, the Russian State Library, and the Russian Ministry of Culture and Mass Communication, for a total of $43.7 million.  Notably, the judgment will increase automatically by $4.5 million every 90 days if not satisfied; the plaintiffs will not have to return to the court and ask for an amended judgment.  Plaintiffs have already begun efforts to identify assets from which that judgment could be collected.

This case remains important in the realm of art law and restitution because it continues to probe the most frequent, and in many ways most understandable, question that observers often ask when a restitution case is filed pursuant to the Foreign Sovereign Immunities Act (FSIA): what if the defendant refuses to cooperate?  The interim judgment (which grew from $14.75 million between the time it was first requested) shows that in the most important forum in the country for FSIA cases, that foreign sovereign defendant should not do so lightly and should expect serious repercussions.  This is even more notable because the United States has consistently opposed the sanctions relief sought by the plaintiffs, but the court has been unimpressed.

The case is also important because it was the impetus for an ongoing embargo by Russian museums of cultural loans into the United States.  Perhaps this decision will coerce some movement that could bring that to an end.

The Case

In 2005, Chabad sued the defendants in Washington, DC seeking the return of the collection of books and other objects of interest to the Chabad-Lubavitch movement and teachings (the Library).  By the early twentieth century, the Library included thousands of religious books, manuscripts and other documents.  One portion of the Library was seized in 1917 by the emerging Bolshevik government from a warehouse in which the Fifth Rebbe had placed it for safekeeping in the face of the advancing German army during the First World War as the Tsarist regime collapsed.  The Russian State Library (where those objects ended up after the dust settled) rejected the Fifth, and then the Sixth Rebbe’s pleas for their return in the 1920s.  Over the next twenty years, the Sixth Rebbe moved from Russian/Soviet territory to Latvia to Poland, from which he fled upon the invasion by Germany in 1939.  The remaining portions of the Library still in his possession were left behind, collected by the German army, and ultimately captured by the Soviet Union at the end of the war.  That portion is currently held by the Russian State Military Archive.  The Sixth Rebbe survived the war and settled in the United States, where he and his followers have been attempting to retrieve the Library ever since.  They, and the then-Seventh Rebbe (who died in 1994 without an official successor) achieved initial success in 1991-92 as the Soviet Union collapsed, but political forces in the nascent Russian Federation apparently thwarted their early judicial victories.

The defendants argued that they were entitled to sovereign immunity, that is, the right for nations and states or their “instrumentalities” to be free from judicial suit without their consent, regardless of their underlying conduct.  The plaintiffs countered that the Foreign Sovereign Immunities Act, 28 U.S.C. § 1603 (the FSIA), abrogates that immunity.  Specifically, the FSIA mandates that a foreign state is not immune from suit in any case “in which rights in property taken in violation of international law are in issue” when the property is claimed by a foreign instrumentality that is also engaged in commercial activity within the United States.

The Court of Appeals for the D.C. Circuit affirmed (in 2010) that the Russian defendants are not immune from suit because the Library was taken in violation of international law (particularly with respect to the initial victory in Russian court in 1991 that was overruled by executive action).

Rather than defend the case back in the trial court, however, the Russian defendants filed a “Statement with Respect to Further Participation,” informing the Court that they simply would not participate further in proceedings in a court that they claimed had no jurisdiction over them.  The District Court promptly entered a default judgment against them, ordering the immediate return of the Library to the plaintiffs on July 30, 2010.  Having simply terminated their participation, however, the Russian defendants neither did so, nor even responded to the judgment.  For the remainder of that year, the plaintiffs provided the District Court with various updates, mostly relating to their efforts to serve the default judgment on the Russian defendants in compliance with applicable international procedure.  The Russian defendants did sent a letter directly to the Court in January, 2011 (in Russian), reiterating that they did not consider themselves bound by the judgment.

In January 2013, the court (over the objections of the United States) fined the Russian Federation, the Russian Ministry of Culture and Mass Communications, the Russian State Library, and the Russian State Military Archive $50,000 per day for their failure to comply with the original judgment.

Sanctions and Execution under the FSIA

A year later, the plaintiffs asked the court to sum up the fines to date and turn it into a judgment.  This was a significant request, because the sanctions had little teeth as far as enforcement was concerned.  They were an obligation by the court, but there was no chance that the defendants, having defied the court’s authority before, were going to respond to it.

The interim judgment request, and now the interim judgment, stand on a very different footing.  The FSIA is very strict in what it allows a plaintiff to pursue as far as assets.  Generally speaking, if a plaintiff wins a $100 judgment under the FSIA, it can only try to seize assets owned by the foreign sovereign defendant (not a related agency), that are in the United States and which are used for commercial activity.  So an embassy’s entertainment budget, for example, is likely safe.  But this interim judgment allows the plaintiffs to try, and their recent actions show they intend to take a broad view of what is Russia’s commercial property.  The judge was not persuaded that the case presents any reason to refrain from interfering, noting that he could perceive no effect on diplomatic relations, and he was obviously incensed at Russia’s defiant litigation tactics.  Lastly, the court was dismissive of the United States’ assertion that sanctions would undermine efforts to resolve the case, observing that those efforts had led essentially nowhere (and, implicitly, that they could hardly get worse).

We learned this from a related case in which Sberbank, a state-owned bank, is seeking to quash a subpoena for a deposition.  That deposition is clearly intended to explore Sberbank’s assets in the United States, which could now be vulnerable to the judgment.

None of this prevents Russia from striking a deal or complying with the judgment to make this all end.  Its claim that it was creating its own Jewish museum to house the library is a non-starter for the Chabad plaintiffs.  Maybe this will encourage the Russian authorities to reconsider their approach.