Supreme Court Decides Republic of Hungary v. Simon

On February 21, 2025, the U.S. Supreme Court decided Republic of Hungary v. Simon, holding that the commercial nexus requirement of the expropriation exception to the Federal Sovereign Immunities Act of 1976 (FISA) — which is an exception to presumptive immunity for foreign states from suit in the United States — is not satisfied by alleging comingling of funds alone.

Respondents — Jewish survivors of the Hungarian Holocaust and their heirs — sued the Republic of Hungary and its national railway, MÁV, in federal court in the United States seeking damages for property allegedly seized from Jewish Hungarians during World War II, liquidated by Hungary and MÁV, and then commingled with general government revenues and accounts and used for various governmental and commercial operations, including commercial activities in the United States. The federal district court determined that the suit could proceed on the basis that the plaintiffs-respondents satisfied FISA’s expropriation exception, which permits claims against foreign states to be brought in the United States when “rights in property taken in violation of international law are in issue” and either the property itself or any property “exchanged for” the expropriated property has a commercial nexus to the United States. 28 U. S. C. §1605(a)(3). The district court reasoned §1605(a)(3)’s commercial nexus requirement was satisfied by the “commingling theory.” The Court of Appeals for the D.C. Circuit affirmed, reasoning that requiring plaintiffs to trace the particular funds from the sale of their specific expropriated property to the United States would make the exception a “nullity” in cases involving liquidated property.

The Supreme Court reversed, holding that alleging commingling alone cannot satisfy the commercial nexus requirement of the expropriation exception. The Court explained that §1605(a)(3)’s plain text treats tangible and fungible property alike: for both kinds of property, plaintiffs must plead some facts that enable the reasonable tracing of the property to the United States. Thus, when property is expropriated and exchanged for cash that is then commingled with other funds, plaintiffs must still plausibly allege that the specific proceeds from their property have the required commercial connection to the United States. The Court emphasized that this is “especially true when commingled funds have been used for various activities worldwide or when the commingled funds are within a foreign sovereign’s treasury.”

The Court noted that its interpretation aligns with the history of interpreting FISA to avoid both friction in international relations and reciprocal suits against the United States in foreign forums. It also emphasized that there is no categorical bar on commingling claims from satisfying the commercial nexus of the expropriation exception and gave several nonexclusive examples illustrating how plaintiffs could potentially do so, including alleging that a foreign sovereign spent all funds from a commingled account in the United States shortly after the commingling occurred.

Additionally, the Supreme Court noted its agreement that “the moral imperative has been and continues to be to provide some measure of justice to the victims of the Holocaust, and to do so in their remaining lifetimes.”

Justice Sotomayor delivered the unanimous opinion of the Court.