The First Circuit Court of Appeals has affirmed a win for the Museum of Fine Arts Boston and Harvard University concerning possession of a number of Iranian antiquities.  The ruling left open, however, some interesting questions about the Foreign Sovereign Immunities Act (FSIA).  In particular, the First Circuit did not have to rule on whether antiquities in a museum are “property” of a source country that could be used to satisfy an unrelated judgment, or whether a museum displaying an object from a foreign country makes the object “used in commercial activity” such that it is no longer immune from seizure under the FSIA.

The case in the First Circuit, Rubin et al. v. Islamic Republic of Iran, et al., is not actually a restitution case, it is a terrorism case.  The Rubin plaintiffs are U.S. citizens injured in a 1997 terrorist attack in Jerusalem orchestrated by Hamas.  The plaintiffs filed suit in the District Court for the District of Columbia, alleging that Iran had provided material support to Hamas in carrying out the attack.  Iran put up no defense, and the plaintiffs were awarded a default judgment in 2003.

As the Chabad case covered extensively here has shown however, a default judgment is only the start of the process to collecting money.  The plaintiffs filed an action to attach almost 2,000 antiquities in the possession of the MFA and Harvard, arguing that the antiquities were the property of Iran, and thus available to satisfy the judgment.  Put another way, the plaintiffs argued that given the judgment debt Iran had to them, the plaintiffs were entitled to attach the antiquities to sell or otherwise dispose of to satisfy the judgment.  This is the same process any judgment creditor would follow, the assets in question just happened to be a large number of cultural artifacts.

The museums defended on two principle grounds: first, that the objects do not belong to Iran and are therefore not properly attachable to satisfy a judgment; and second, that the FSIA exempts property of a foreign sovereign from execution.  In response, the plaintiffs disputed the museums’ standing to assert sovereign immunity and/or could not satisfy its elements, and even if the museums had that standing, that Terrorism Risk Insurance Act of 2002 (TRIA), Pub. L. No. 107-297, § 201 (a), 116 Stat. 2322, 2337 (2002) (codified as 28 U.S.C. § 1610) allowed the plaintiffs to attach the antiquities as “blocked assets” under the TRIA.

On appeal to the First Circuit, the two critical issues were (1) the FSIA immunity from seizure, and (2) the TRIA’s applicability.  FSIA immunity from seizure is quite different from the cultural loan immunity from seizure provided by 22 U.S.C. § 2259 (the Immunity from Seizure Act) discussed here previously; the Immunity from Seizure Act protects prospectively those objects loaned into the United States after they are given immunity from seizure by the State Department.  It does not affect the immunity from seizure of objects owned by foreign states already in the country (cultural or otherwise), that is governed by the FSIA.  FSIA immunity from seizure is also distinct from FSIA immunity from suit, which removes jurisdiction over the claims against the foreign country in the first instance.  That is also not at issue in the Rubin case.

The FSIA, for its part, makes “the property in the United States of a foreign state” immune from seizure or execution unless the property is “used for commercial activity within the United States.”  The plaintiffs argued that the FSIA does not require Iran to use the objects for commercial activity, only that someone must.  This reading is credible in view of other aspects of the FSIA; for example, in considering whether an object was taken in violation of international law, the Ninth Circuit has held that the object need not have been taken by the defendant, only that it be held by a foreign sovereign at the time of suit (and thus Spain could be sued over objects allegedly taken by Nazi Germany).

Nonetheless, the District Court ruled against the plaintiffs on that point, and the plaintiffs did not challenge it on appeal.  Instead, the plaintiffs relied on a different part of the FSIA, the National Defense Authorization Act of 2008 (NDAA).  That statute postdates the underlying judgment, however, and the First Circuit held that the plaintiff’s failure to explain why the later amendment applied to the earlier judgment forbid them from making the argument.  So, to what extent that statute, § 1610(a)(7) of the FSIA might apply—which allows execution by a judgment creditor “against any property interest” whatsoever of a foreign state—remains an open question.

The dispositive question, therefore, was the TRIA’s effect.  That statute permits attachment of property otherwise immune from execution that are “the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party).”  TRIA, § 201(a).  A “blocked asset” is “any asset seized or frozen by the United States” under laws passed as sanctions for terrorist acts; the simplest example in this context would be bank accounts owned by Iran seized in response to the 1979 hostage crisis.  To proceed along these lines, the plaintiff must obtain a license from the Office of Foreign Asset Control (OFAC).

In contrast, antiquities in the MFA and at Harvard for decades cannot be considered blocked assets, in no small part because Iran has not laid claim to them recently (or, as far as the First Circuit could tell, ever).  And OFAC entered the case on appeal to argue that these were not blocked assets, to which the First Circuit accorded substantial deference.

The First Circuit therefore upheld the lower result based on the TRIA.  Left unresolved in this case, and as precedent for the future, however, was to what extent a judgment creditor could argue for seizure of antiquities as “property” of the source country, or to what extent the museums’ (and not the source country accused of terrorism) display of the objects constitutes “commercial use” sufficient to strip the objects of immunity from seizure.  It is not difficult to imagine other cases either from Iran itself, or from other source countries, raising these very same questions.  For now, at least, we will have to wait for a circuit-court level answer.