Last week, the Supreme Court issued a unanimous decision in Republic of Hungary v. Simon, a case concerning the scope of immunity under the Foreign Sovereign Immunities Act’s (FSIA) expropriation exception.¹ On February 21, 2025, the Court held that the Simon plaintiffs – survivors of the Hungarian Holocaust and their heirs – cannot satisfy the FSIA’s expropriation exception to foreign sovereign immunity based solely on a theory that the Hungarian government liquidated property it confiscated from the plaintiffs during the Holocaust, commingled proceeds from those sales with general government funds and then used funds from those government accounts for commercial activity in the United States. Instead, the plaintiffs must show that the specific funds the Hungarian government received in exchange for the expropriated property were used in connection with Hungary’s commercial activity in the United States. The decision indicates that the Supreme Court is inclined to read the FSIA’s expropriation exception narrowly, based at least in part on foreign relations and international comity concerns. 

As a general matter, foreign states are immune from jurisdiction in U.S. courts. The FSIA sets out a limited number of exceptions to such immunity in civil actions. Simon concerns the FSIA’s expropriation exception, which provides for jurisdiction over foreign state defendants where the foreign state has engaged in a taking of rights in property in violation of international law. The exception also requires that the expropriated property – or property exchanged for that property – be present in the United States in connection with the foreign state’s commercial activity in the United States, or that the property be owned or operated by the foreign state’s agency or instrumentality and that agency or instrumentality be engaged in a commercial activity in the United States.² This is often referred to as the expropriation exception’s “commercial nexus” requirement.

Justice Sonia Sotomayor, writing for a unanimous court, rejected the Simon plaintiffs’ argument that they had satisfied the commercial nexus requirement based on allegations that Hungary had commingled money from the sale of the expropriated property with general government funds and then later used those general government funds to issue bonds and purchase military equipment in the United States. Instead, the Court held that the plaintiffs must produce some evidence tracing the actual funds received in exchange for the expropriated property to commercial activity in the United States, stating, “Commingling allegations are … not enough on their own because they do not allow for plausible tracing of specific funds.”³

The Court reached this decision despite concerns at oral argument that rejecting the plaintiffs’ commingling theory could make it easier for foreign states to expropriate the property of U.S. nationals with impunity. As Justice Elena Kagan raised at oral argument, such a limitation could “provide a roadmap to any country that wants to expropriate property…. In other words, just sell the property, put it into your national treasury, insulate yourself from all claims for all time[.]”⁴ The Court’s opinion did recognize that “because money is fungible, it will likely be difficult to trace cash from the sale of expropriated property after it is commingled.”⁵ But the Court concluded that the “tracing” requirement did not entirely foreclose jurisdiction under the expropriation exception where the expropriated property is exchanged for money. The Court noted that the commercial nexus requirement might still be satisfied in cases, for instance, where the plaintiff “identif[ies] an account within the United States that holds the proceeds from the sale of the seized property” or where the “foreign sovereign, soon after commingling funds from the sale of expropriated property, spent all the funds from the commingled account in the United States as part of its commercial activity here.”⁶

Still, the Court’s decision likely makes it more difficult for plaintiffs to maintain expropriation claims against foreign sovereigns in U.S. courts. It may be particularly difficult in cases like Simon, where there is a significant time gap between when the alleged expropriation occurred (in that case, the 1940s) and the timing of the alleged commercial activity (in that case, the 2000s). Indeed, the Court recognized that such a lengthy time lapse could make it more difficult to trace proceeds exchanged for the expropriated property to U.S.-based commercial activity.⁷

The decision leaves open the possibility that the plaintiffs’ claims could proceed under the second prong of the commercial nexus requirement, which allows for jurisdiction where the expropriated property or property exchanged for it is “owned or operated” by the state’s agency or instrumentality and the agency or instrumentality engages in commercial activity in the United States. This prong does not require that the expropriated property be present in the United States. The Simon plaintiffs alleged that Hungary’s national railway, MÁV, also liquidated their property and deposited those funds into commingled accounts that it owns today, and that MÁV engages in commercial activity in the United States. While the Court did not address this theory at length, it did indicate that the plaintiffs would need to show that MÁV currently possesses those specific funds, which could prove difficult given that “MÁV has used those commingled funds in the intervening decades for countless transactions.”⁸

The Supreme Court’s decision appears to be driven at least in part by a concern that adopting the plaintiffs’ commingling theory would undermine the expropriation exception’s conformity with international law⁹ – an argument raised by the U.S. Solicitor General in an amicus brief filed in support of Hungary.¹⁰ Adopting in large part the Solicitor General’s views, the Court expressed concerns that the expropriation exception already “goes beyond even the restrictive view” of foreign sovereign immunity “[b]y permitting the exercise of jurisdiction over certain public [as opposed to private] acts” and noting that “it appears that no other country has adopted a comparable limitation on foreign sovereign immunity.”¹¹ The Court further noted that adopting the commingling theory could “subject[] the United States abroad to more claims than we permit in this country”¹² and “undermine the United States’ foreign relations and reciprocal self-interest.”¹³ 

In sum, the Supreme Court’s decision raises the bar that the Simon plaintiffs must meet to establish jurisdiction over the Hungarian defendants and potentially makes it easier for foreign governments to avoid expropriation claims in U.S. courts in the future. It also potentially signals that the Court will read the FSIA’s expropriation exception narrowly in cases moving forward, based at least in part on concerns regarding international comity and the exception’s conformity with international law.

WilmerHale regularly counsels clients on issues concerning foreign sovereign immunity, including the FSIA expropriation exception. For more information on this or other issues relating to the FSIA or litigation involving foreign sovereigns more generally, please contact one of the authors.