United States: Museum Loans - Part Two

Last post discussed the legal issues surrounding museum loan agreements. This post continues the discussion of museum loans with a look at loans coming into the U.S. from abroad. When exhibition descriptions use the phrase “supported by an indemnity from the Federal Council on the Arts and the Humanities,” or similar language, the organizers have taken advantage of the laws that provide immunity from seizure and indemnification in the context of international loans.

The United States has a strong national interest in facilitating international cultural exchanges of artwork, so immunizing foreign art loans from seizure in the U.S. contributes to the expansion of our nation’s education and cultural awareness. Cultural exchange would be hampered absent the protections provided by the Immunity from Seizure Act (“IFSA”) and the Foreign Sovereign Immunities Act (“FSIA”). These laws, although often confused for one another, bolster loans from foreign lenders. Many people get the acronyms IFSA and FSIA confused, likewise they confuse the meaning of indemnity and immunity, and understandably so. It is important to keep the meanings clear: indemnity is a security or protection against a loss, whereas immunity is an exemption from prosecution. Both laws provide foreign nations with a broad cloak of protection from either being sued in U.S. courts or from losing control over a loaned object.

IFSA was enacted in 1965, giving the President of the United States authority to grant a work of art, or other object of cultural significance, immunity from seizure by U.S. courts whenever it is determined that temporary exhibition or display of that object is within the national interest of the United States. If immunity is granted, then no state, federal or territorial court may issue “any judicial process” or enforce any order or judgment against the object. A grant of immunity protects a foreign lender from prejudgment attachments for jurisdiction or for security on a potential judgment, prejudgment injunctions, and post-judgment attachments. (It should be noted, though, that neither IFSA nor FSIA provides immunity from executive actions since an Executive Order is not considered a “judicial action.” Therefore, such an Order could freeze the assets of a foreign sovereign and prohibit a museum from returning artworks on loan.)

The other statute, FSIA, also protects a foreign lender against seizure. Enacted in 1976, FSIA gives federal district courts original in personam jurisdiction against “foreign states,” defined as a foreign state, a political subdivision of a foreign state, or an agency or instrumentality of a foreign state. If a defendant qualifies as a “foreign state,” it shall be immune to suit in any U.S. court, unless a statutory exception applies. Some instances where jurisdictional immunity would not apply include if a foreign state has waived its immunity, or if the loan is based upon a commercial activity carried on in the U.S., or if rights in property located in the U.S. are acquired by succession or gift, or where rights in property are taken in violation of international laws. This last exception, known as the “expropriation exception” was recently expanded in 2005 by a federal court decision, creating a gap between the two immunity laws.

Recent court decisions regarding the relationship between IFSA and FSIA have undercut protections of IFSA, slowing the exportation of artwork to the U.S. for temporary exhibition or display. One influential decision, Malewicz v. City of Amsterdam, was brought by heirs of the Russian artist, Kazimir Malevich, against the City of Amsterdam, in the U.S. federal court to recover paintings on exhibition at the Menil Collection in Houston in 2005. The paintings had been left by the artist for safekeeping with a friend in Germany during World War II. Years after the artist’s death, the paintings were purportedly sold, fraudulently, to the Stedelijk Museum, owned and operated by the City of Amsterdam. The heirs cited the expropriation exception in FSIA, which permits a foreign state to be sued if it took property in violation of international law, and if that property is present in the United States in connection with a commercial activity carried out by the foreign state. The court held the temporary exhibition of the artwork in the United States satisfied the definition of “commercial activity” as used in the FSIA exception.

The Malewicz decision gives U.S. courts jurisdiction over foreign governments when artwork is temporarily imported into the U.S. for exhibition. This could place immunized foreign works at risk of seizure and gives a basis for suing the foreign government lender for damages. This new development has caused some foreign governments to decline to lend cultural objects to U.S. museums for fear of litigation in U.S. courts, and has had a negative impact on U.S. museums.

Congress sought to correct the disconnect between FSIA and IFSA in 2012 when it proposed the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act (“Immunity Clarification Act”). Although the Immunity Clarification Act was not enacted, the narrow legislation sought to amend FSIA by including language that made any activity of a foreign nation associated with loaned art that has immunity from seizure, not to constitute “commercial activity,” and thus not to waive the nation’s immunity from suit. Further, the bill included a special carve-out for all claims filed by families whose artwork was taken by Nazis in World War II. Opponents of the bill protested that it goes too far in blocking efforts to recover looted treasures wrongfully taken from proper owners. Proponents urge this will unfreeze artistic exchanges, and that it is consistent with American policy to seek restitution for victims of the Nazi government and its allies. Proponents of the law seldom defended or clarified the proposed legislation though, and the overall news coverage suggests that supporters, such as the Association of Art Museum Directors, were not given the chance to clarify the actual purpose of the law. Though U.S. museums wish to promote Americans’ exposure to objects of cultural significance, the Immunity Clarification Act was mired in controversy earlier this year, and failed to pass.

The issue is off the table for now, with no known future plans, but we will be watching the 113th Congress for any news.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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