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The Art Newspaper

July 9, 2004

Supreme Court says Austria can be sued in the US

The Justices rule six to three in favour of Maria Altmann. She can now
pursue her Nazi-loot case in American courts

By Martha Lufkin

In a ruling that defied nearly all expectations, the US Supreme Court held
on 7 June that Austria can be sued in American courts over its alleged
wrongful retention of six paintings by Gustav Klimt that were looted from
their Jewish owner by Nazis. The decision is a severe defeat for Austria and
the Austrian National Gallery (ANG), which have fought since 2000 to keep US
courts from hearing the case of the Klimts, formerly the property of the
Viennese Czech sugar magnate, Ferdinand Bloch-Bauer, whose vast art
collection was stolen by Nazis after the annexation of Austria in 1938 (see
also p. 37). The decision is a rare ruling against a foreign nation and
required the further unusual step for the Supreme Court of affirming a
decision of the lower California federal appeals court.

The decision is a major victory for Ferdinandís niece and heir, Maria V.
Altmann, who fled Nazi Austria aged 22 and is now a US citizen and
California resident, and for her lawyer, E. Randol Schoenberg, of a
three-lawyer firm in Los Angeles, who overcame Austria and the ANG, together
represented by a major US law firm, Proskauer Rose LLP. The Supreme Court
will now return the case to the California trial court, where Altmann will
seek an expedited hearing based on her age of 88 years.

Few had believed that Austria could lose. But the complexity with which the
court viewed Austriaís immunity claim was evident at oral arguments in
February, where a number of justices seemed dissatisfied with the
traditional analysis of foreign sovereign cases, and some, aided by Mr
Schoenberg, seemed eager to fashion a new solution.
Ms Altmannís allegations remain to be proven at trial. She says that after
Nazis seized Ferdinandís property, the six Klimts passed to a Nazi lawyer,
Dr Führer. Dr Führer sold three of the Klimts directly to the ANG. These
three, plus two others found after the war (one in Dr Führerís hands and the
second at the Museum of the City of Vienna which bought it from him), were
then unlawfully and without authorisation extorted from the Bloch-Bauer
family by Austria, in exchange for Austriaís grant of export permits which
let the Bloch-Bauers remove other art from the country, Altmann says. (Art
that was required to be donated in exchange for such export permits can now
be reclaimed under a 1998 Austrian restitution law). The sixth Klimt
painting, which passed from Dr Führer by an unknown route, was given to the
ANG in 1988.

After the war, the ANG wrongly claimed that Ferdinand Bloch-Bauerís wife,
Adele, had bequeathed five of the paintings to it in her will, but neither
Adele nor Ferdinand ever donated the Klimts, Ms Altmann says.

When Ms Altmann determined that court proceedings in Austria would be too
expensive, she sued Austria in California in 2000. She cited a taking of
property in violation of international law, one of the four circumstances in
which the 1976 US Foreign Sovereign Immunities Act (FSIA) allows an
otherwise immune foreign nation to be sued in US courts. But Austria claimed
immunity anyway, saying that as a foreign sovereign it had been immune from
suit when the events occurred in 1948, and that the 1976 FSIA could not
retroactively change that. Two lower federal courts in California rejected
Austriaís argument, and the Supreme Court agreed.

In an opinion written by Justice John Paul Stevens, a six to three majority
said that in analysing whether the FSIA could apply to pre-1976 events, it
found no ìclear answerî using the retroactivity rule set out in a 1994
Supreme Court case, ìLandgrafî.
ìLandgrafî considered whether a new section of the Civil Rights Act,
permitting parties to seek compensatory and punitive damages for intentional
employment discrimination, applied to a lawsuit which was already pending
when the statute was enacted.
ìLandgrafî said that a statute cannot be applied to pre-enactment events if
this would impair the rights or increase the liabilities relied on by a
party to a lawsuit. An exception applies if Congress issues a clear
statement of intent to this end at the time of the statuteís enactment.

But the FSIA ìdefiesî a ìLandgrafî analysis, Justice Stevens wrote. Foreign
nations had no ìrightî to immunity from US lawsuit, and the purpose of
sovereign immunity has been political comity, not protecting a foreign
stateís ìrelianceî on expected immunity in US courts.

Unable to use its own precedent in ìLandgrafî, the court said that
ìthroughout historyî courts had resolved sovereign immunity questions by
deferring to ìdecisionsî of the other political branches. In the unique
context of the Altmann case, the court said it was appropriate to defer to
the ìmost recentî political branch decision, which was Congressís enactment
of the FSIA, rather than decline to apply the FSIA merely because the
statute postdated the 1948 events.

Moreover, the FSIAís language and structure gave ìclear evidenceî that
Congress intended it to apply to pre-enactment events. The court concluded
that the FSIAís exceptions allowing certain lawsuits against foreign nations
ìclearly applied to conduct, like [Austriaís] alleged wrongdoingî, that
occurred in 1948.

The court emphasised the narrowness of its ruling, saying that foreign
nations could still raise available defences to lawsuits, such as the ìAct
of Stateî doctrine, which bars US courts from judging a foreign nationís
public actions within its own territory. Finally, the court responded to the
Bush Administration, which had sided with Austria saying that US foreign
policy interests would be jeopardised if foreign states could be sued in US
courts over pre-1976 events. The court said the State Department could still
file a ìstatement of interestî in particular lawsuits to suggest that a
court should decline to hear the case. Such a statement ìmight well be
entitled to deferenceî the court said, adding, however, that it would not
say whether ìsuch deference should be granted.î

The Bush administration has indicated that it will not file a statement of
interest in Ms Altmannís case. Mr Schoenberg says that the Act of State
doctrine does not apply in any case where a treaty applies, and that the
Austrian State Treaty of 1955 requires Austria to return all property
confiscated by the Nazis.