Guest Blogger, Henry Lowenstein: Valuable Lessons in "Woman in Gold"

Today's post is generously shared by Henry Lowenstein, Professor at Coastal Carolina University.

This week premieres a new movie in theaters nationwide, Woman In Gold.  You may have seen the ads on TV, the true story of Maria Altman, a Jewish Austrian survivor of WWII's Holocaust and her decades-long efforts to retrieve fine art paintings looted from her family by the Nazis. Post War the Austrian government improperly laid claim to them.  Altman pursued the matter to the U.S. Supreme Court which ruled in her favor in 2004.  Austria then agreed to arbitration and returned the paintings (today on display in New York).

For students interested in international business Ms. Altman's story and the U.S. Supreme Court ruling on when a U.S. citizen (or business) can get relief from property stolen overseas prior to 1976 by bad acts of governments is instructive.  In Republic of Austria v. Altman 541 U.S. 677 (2004), the Supreme Court ruled the U.S. Foreign Sovereign Immunity Act of 1976 (28 U.S.C. sec. 1330 et. al) can be applied retroactively to conduct or wrongdoing that occurred prior to enactment of the law; that being a clear intent of Congress.   This cleared the way for Altman to sue Austria in U.S. courts to retrieve paintings rightfully belonging to her and her family stolen by the Nazi's in 1938, then allegedly owned by Austria's national museum.

Implications For Business:    There are markets now opening to China, Cuba Vietnam, Venezuela (previously Russia and former Soviet states) and other nations in which private/personal business property and assets were illegally seized by governments or revolutionaries.  

There is now a strong precedent.  The Supreme Court in its opinion stated that governments enjoy sovereign immunity (i.e. protection from private lawsuits) for public acts.   That is acts of normal functions of the state (jure imperil).  However, they are not exempt from suits for private bad acts under color of state law (jure gestionis).  What could this precedent mean today to business?

Let's take for example, Cuba.   In 1958 Conrad Hilton and the Hilton Hotels built in Havana, Cuba, the premier hotel, Habana Hilton; 572 rooms, 4 restaurants at a cost of $24 million (approximately $197 million in 2015 dollars).  In October 1960, revolutionaries led by Fidel Castro overthrew the elected Batista government of Cuba and seized the hotel (actually making it for a time Castro's headquarters).   The hotel was then renamed Hotel Tryp Habana Libre and continues to be run by and for the benefit of the Cuban government.  Hilton Hotels was never indemnified by the "new" Cuban government for the illegal taking of its property and had to long ago write off the loss on its books.
 

The Habana Hilton:

(source: http://clickamericana.com/eras/1950s/now-open-cubas-habana-hilton-1958)

Now over half a century later, the Obama Administration is slowly opening relations with Cuba.  Fidel Castro is still alive but the Castros still run the country.  It is conceivable at some point that full tourism will resume to Havana (prior to 1959 a top tourism destination) and world hotels will try to come in.  What happens if the former Havana Hilton is sold?  Like Altman's Klimt paintings, Hilton might have a claim for the original value of the hotel stolen from it, or perhaps even a claim to have the hotel returned to them.   Many American corporations such as the sugar and mining industries might have like claims. 

In our global world of business today, many "businesses" in which you will do commerce are "state owned."  In some cases they will be covered by treaties as is the case in the European Union.  However, in many others, particularly emerging nations, "Jurisdiction" of disputes will be a constant battle and business risk as commerce expands with these entities.

Something to keep in mind as you watch the movie and move on in your business career.

An historical aside about the case;  Altman found it impossible to sue in Austrian courts because the rules of civil procedure there assess a "filing fee" as a percentage of the value of the property in dispute.  In her case, it would have originally cost over $1.3 million filing fee to file the case (the painting in dispute was worth $135 million)!!  The Austrian government agreed to lower the fee to around $300,000 but was still far above an individual’s means to pay.  That's when she (then a U.S. citizen) turned to the U.S. Courts!   Such a system in the US certainly would have a chilling effect and substantially reduce lawsuit volume, but also deny far too many due process.    

Woman in Gold Trailer:

Understanding The Misunderstanding

The violence and rhetorical tumult in the Middle East following the posting on YouTube of the video entitled "The Innocence of Muslims" affords a number of teaching opportunities. One that comes quickly to mind is the lack of universality in law and in basic legal philosophy. Teaching rudimentary U.S. constitutional principles to undergraduate students reminds one that even intelligent college students may not easily attain a full grasp on the concepts of free speech.  However, even if just through popular culture and everyday exposure, students do seem to understand that American Free Speech concepts protect expression even when the expression is hurtful to others.  As long as the speech is not certain to incite imminent violence at the time and place where it is made, even disgusting and distasteful speech is protected. 

However, this is not a universal concept. NPR broadcast an interview with Harvard International Law professor Noah Feldman in which he explains that government officials and educated persons, even in countries that embrace Free Speech principles harbor the misconception that the US Government may censor harmful or hateful expression. As a result, when the US took no action to remove or censor the offending video, the implication was that the US government was complicit or in support of the views expressed therein. The audio report is available here and provides an excellent source for assignment or class discussion in a Legal Environment class.  Here are some selected quotes from Professor Feldman:

"I had conversations with highly educated Tunisians — people high in the government — who were genuinely astonished to discover that, under U.S. law, we couldn't ban speech like that precisely because any incitement that might occur is distant in time, distant in place and not at all certain to occur. ...

"And it's actually a problem when people elsewhere actually think, including reasonable people, that the United States government must be complicit in something like the anti-Muslim film because we haven't prohibited it."

"In the U.S., we value the liberty of the speaker much more highly than either the dignity of the person who feels insulted or the state's interest in trying to avoid violent protest. ...

Professor Feldman also notes that American legal communities have discussed, whether the technological advances that have made global reach of communication more easily attainable should affect the American concept of time, space and imminence for incitement purposes.

This interview is a worthwhile resource on a current and complex topic in the law.

Justice Breyer ponders whether the internet changes the size of the "crowded theatre":

Singing the C.I.S.G.

University of Pittsburgh Law School Professor Harry Flechtner has composed and recorded a song extolling the virtues of the United Nations Convention on Contracts for the International Sale of Goods (C.I.S.G.). If this is your area, be prepared to be simultaneously entertained and educated.  I don't know a lot about the CISG, but I am a big believer in the use of music as a pedagogical device. Thank you, Professor Flechtner, for sharing this great educational resource by posting it on the web.  A tip of the hat to ALSB member George Siedel for bringing it to my attention.

Click on the link below to access the site with an audio file of the C.I.S.G. Song:
(image source: http://commissions.uianet.org/en/business-law-department/root-48/presentation/)