Episode description

In this case, the court considered these three issues:

1. Does historical commingling of assets suffice to establish that proceeds of seized property have a commercial nexus with the United States under the expropriation exception to the Foreign Sovereign Immunities Act?

2. Must a plaintiff make out a valid claim that an exception to the FSIA applies at the pleading stage, rather than merely raising a plausible inference?

3. Does a sovereign defendant bear the burden of producing evidence to affirmatively disprove that the proceeds of property taken in violation of international law have a commercial nexus with the United States under the expropriation exception to the FSIA?

The case was decided on February 21, 2025.

The Supreme Court held that an allegation that a foreign sovereign liquidated expropriated property, commingled the proceeds with other funds, and then used some of those commingled funds for commercial activities in the United States cannot alone satisfy the commercial nexus requirement of the expropriation exception in the Foreign Sovereign Immunities Act of 1976 (FSIA). Justice Sonia Sotomayor authored the unanimous opinion of the Court.

The expropriation exception requires plaintiffs to establish a clear trace between expropriated property (or the proceeds from its sale) and property present in the United States in connection with commercial activity. While money is fungible, merely stating that proceeds from the liquidation of an expropriated asset were once mixed with other funds is insufficient. To satisfy the FSIA’s requirements, plaintiffs must show that specific funds or assets linked to the seized property are currently in the United States or were used for identifiable commercial transactions there.

This interpretation aligns with the FSIA’s structure and purpose, which generally adopts the restrictive theory of sovereign immunity, shielding foreign states from suits arising from public (rather than commercial) acts. Congress designed the expropriation exception to conform closely to international law, avoiding excessive interference in foreign relations. The requirement to trace specific property reflects this cautious approach. Accepting the commingling theory alone would excessively broaden the FSIA’s expropriation exception, potentially undermining sovereign immunity principles and inviting retaliatory measures from foreign nations.

The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.