Taylor Wessing successfully counsels Hungarian state in Herzog lawsuit

The building of the U.S. Supreme Court (photo by Steven Frame/Shutterstock.com)

Zoltán Novák, head of Taylor Wessing Budapest’s dispute resolution practice, was cited in a press release sent to the Budapest Business Journal as saying that the decision has far-reaching implications, essentially precluding the most important U.S. courts from proceeding against foreign states in the majority of cases for the restitution of specific assets.

The eight-year-long Herzog lawsuit, which seems to be reaching its conclusion by the decision published this Monday, was initiated against the Hungarian state and four state-owned institutions by U.S. and Italian descendants of Jewish art collector Baron Mór Lipót Herzog (1869-1934), for the restitution of 44 artworks currently forming part of Hungarian public collections. The collection includes artworks by masters such as El Greco, Francisco de Zurbarán, Théodule Ribot, Jean-Baptiste-Camille Corot, and Gustave Courbet.

The claim was brought before the United States District Court for the District of Columbia for the restitution of the artworks in 2010. The defendants were counseled, in addition to U.S. attorneys Thaddeus Stauber and Sarah Andre, by the dispute resolution team of Taylor Wessing Budapest, who assisted in establishing the historical and factual background and advised on the Hungarian and international legal aspects of the case.

The lawsuit raised the central question of whether under U.S. law the jurisdiction of U.S. courts can be established over Hungary in connection to property located abroad. In Hungary’s view, due to their close connection to the country’s 20th century history, the Herzog heirs’ claims should be decided by the courts of Hungary, as had already been the case for several of the artworks.

After a prolonged legal battle, in 2017, the U.S. Court of Appeals for the District of Columbia Circuit accepted the defendants’ reasoning, stating that a much stronger connection must be shown between the object of the lawsuit and the United States than could be found in the present case. In the court’s opinion, a foreign state can only be tried before U.S. courts in restitution cases if the asset to be restituted is located in the United States.

This decision prompted the plaintiffs to turn to the Supreme Court of the United States, the land’s highest judicial body. In the end, the Supreme Court followed the U.S. Solicitor General’s recommendation and rejected the petition, thereby upholding the lower court’s decision confirming the immunity of the Hungarian state. Although the lawsuit may continue against the museums holding the artworks, the legal viability of such an action is now rather doubtful, the press release notes.

The outcome is not only decisive in relation to the fate of the Herzog estate, but is also a crucial development from the aspect of the sovereignty of Hungary, as well as other states sued before U.S. courts with restitution claims.

"The decision severely restricts U.S. jurisdiction in restitution claims brought against foreign sovereigns," emphasized Novák. "Although it stops short of generally preventing the adjudication of such cases in the U.S., the most important U.S. courts will be precluded from exercising jurisdiction in restitution lawsuits against foreign states. In the future, most of these claims will have to be litigated before the courts of the country accused of the wrongdoing," he noted.