U.S. Court Rejects Expropriation Claim against Chinese Officials

In an opinion issued yesterday, a U.S. district court judge rejected a claim by three people of Chinese origin living in the United States that their assets had been expropriated by the Chinese government, and also rejected claims of crimes such as torture and false imprisonment.

The plaintiffs and the defendants

As set out in the the opinion of Judge Jia Cobb of the U.S. District Court for the District of Columbia, there are three plaintiffs in this case, each of whom is of Chinese origin and currently lives in the District of Columbia. Plaintiff Heping Li is a permanent resident of the United States, but not a citizen; plaintiff Yanlan Huang moved to the United States in 1999 and became a U.S. citizen in 2020; and plaintiff Xiaogang Shi is a U.S. citizen, although the record does not indicate when he became one. Both Li and Shi were previously married to Huang.

The defendants are four Chinese government officials in their official capacities, an unspecified number of John Does, and the Industrial Commercial Bank of China (ICBC). The John Does are Chinese officials "who orchestrated, participated in, or benefitted from the expropriation of Plaintiffs’ property."

The claims

The plaintiffs claimed that the Chinese government "illegally expropriated tens of millions of dollars’ worth of property that they owned in China," with the ICBC "serving as a conspirator-intermediary." In this regard, the complaint alleges the following.

On August 16, 2002, plaintiff Li "was arrested in Shanghai on the grounds that he and his former wife, Plaintiff Huang, had embezzled a large sum of money and used it to purchase dozens of apartments in Shanghai." Li was kept in “secret detention” by the People’s Procuratorate of Guilin City for 145 days, during which time "the authorities attempted (and failed) to coerce him into signing a false confession," and he was “brutally tortured" by his captors. Also in August 2002, the Chinese government seized various properties from plaintiff Huang, who had relocated to the United States in 1999. Amongst the seized property was "a corporation of which Huang was the majority owner, several pieces of valuable real estate owned by that corporation, and Huang’s personal savings."

In February 2003, the government auctioned off, "without Li’s consent and for a fraction of their value," nineteen of Li’s "best located apartments," cumulatively worth around 26 million U.S. dollars. That transaction was facilitated by ICBC, with the cooperation of the Chinese courts.

In December 2004, Li was sentenced to life imprisonment. He appealed that conviction, and it was reversed for insufficient evidence. Li petitioned the Intermediate Court of Guilin City "for state compensation for his detention and torture and for the confiscation of his property." The court agreed to compensate Li for his wrongful imprisonment, but not for the torture or for the loss of his apartments. In 2017, after "considerable litigation," those proceedings were terminated.

A second round of seizures took place in December 2016, when the People’s Procuratorate of Guilin City "seized twenty-one Shanghai apartments owned by Plaintiff Shi."

The plaintiffs sought "damages, a declaratory judgment stating that defendants violated international law, and either an injunction barring the sale of any unsold properties or the disgorgement of profits from the sale." They made the following claims against various defendants: (i) illegal expropriation of private property; (ii) torture; (iii) cruel, inhuman, or degrading punishment; (iv) arbitrary arrest; (v) forced labor; (vi) battery and assault; (vii) false imprisonment; (viii) distortion and blackmailing; (ix) pain and suffering; (x) intentional infliction of emotional distress; (xi) conversion and unjust enrichment; and (xii) civil conspiracy.

The court's decision and reasoning

The judge concluded that the individual defendants in this case – both the named government officials and the John Does – are "immune from suit under the Foreign Sovereign Immunities Act (FSIA)." Therefore, the claims against those defendants are therefore dismissed for lack of subject matter jurisdiction. In addition, although the ICBC has not shown that it enjoys FSIA’s presumptive immunity, the judge concluded that plaintiffs have failed to state a claim against the ICBC upon which relief can be granted, and therefore granted its Motion to Dismiss. The judge's reasoning on these issue was as follows.

First, on the FSIA, the judge said that the FSIA affords the “sole basis for obtaining jurisdiction over a foreign state” in U.S. courts. Under the FSIA, foreign governments "are presumptively immunized from lawsuits brought against them in the United States," though that immunity is "subject to certain enumerated exceptions" set forth in the statute. FSIA immunity extends to both a foreign sovereign in its own name, and to its political subdivisions, agencies, and instrumentalities. A court is obligated to determine whether immunity is available under the FSIA, even where the foreign state does not enter an appearance in the case. Once the Court determines that a defendant enjoys presumptive immunity under the FSIA, the plaintiff bears the "initial burden" of "making out a legally sufficient case" that a FSIA exception applies.

Here, the judge's analysis came in two parts. First, the judge determined, based on the allegations in the complaint, that the individual defendants "are extensions of the Chinese state, and therefore enjoy presumptive immunity under the FSIA." Second, the judge concluded that plaintiffs "have not carried their burden to plead facts that would establish that any FSIA exception applies to their claims against the individual Defendants." Therefore, those claims "are dismissed sua sponte for lack of subject matter jurisdiction."

With regard to the four named government officials, the complaint makes it clear that "the Chinese state is the real party in interest," as "[e]ach of those Defendants is sued in their official capacity." Thus, the judge concluded that the plaintiffs’ lawsuit "is not really targeted at any of the named individuals, but at the state itself." The judge reached the same conclusion with regard to the John Does.

As to any FSIA exceptions, the judge concluded that no FSIA exception applies to plaintiffs’ claims against individual defendants, and those claims are therefore dismissed for lack of subject matter jurisdiction. In this regard, she considered whether "any FSIA exceptions apply to abrogate presumptive immunity." The plaintiffs had pointed to three such exceptions: the “expropriation exception,” the “terrorism exception,” and the FSIA’s carve-out for “international agreements to which the United States is a party.” The judge considered each in turn.

With regard to the expropriation exception, she said that if plaintiffs were Chinese nationals when their property was seized, "then the seizures did not violate international law, and the expropriation exception cannot apply." Here, plaintiffs "have not shown that they were nationals of any other country at the time of the seizures." Thus, "because neither Li nor Huang have shown they were anything other than Chinese nationals at the time of the expropriation, they cannot invoke the expropriation exception"; and for Shi, the complaint is silent on when he became a U.S. citizen.

As to the terrorism exception, because the State Department has not designated China a state sponsor of terrorism, and because Li has never been a national of the United States,  the terrorism exception cannot apply.

Finally, the plaintiffs argue that the Court has jurisdiction over their claims pursuant to five separate international treaties and agreements: (1) the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; (2) the International Covenant on Civil and Political Rights; (3) the Universal Declaration of Human Rights; (4) the Charter of the United Nations; and (5) the International Labour Organization’s Convention No. 29 Concerning Forced or Compulsory Labor. However, the judge said, "[b]ecause none of the cited agreements creates an independent cause of action, the Court determines that they do not abrogate FSIA immunity."

Accordingly, the judge concluded that the individual defendants in this case "are immune from suit under the FSIA, and therefore dismisses, sua sponte, all claims against those Defendants for lack of subject matter jurisdiction."

In addition, the judge concluded that the plaintiffs failed to state a claim against the ICBC. While the ICBC does not qualify for presumptive immunity under the FSIA, the judge found that the plaintiffs’ claims against the ICBC "must be dismissed under the act of state doctrine." This doctrine "directs United States courts to refrain from deciding a case when the outcome turns upon the legality or illegality . . . of official action by a foreign sovereign performed within its own territory." The judge stated: "If the Court assumes, as it must, that the seizure of Li’s properties, his detention, and the remedies granted him by the Chinese courts were valid, ... none of Plaintiffs’ claims survive." Furthermore, "[e]ven if the ICBC’s auction of the Li’s seized property was as deficient as Plaintiffs claim, the ICBC’s failure to get a fair price for the properties harmed the Chinese government, not Plaintiffs." As for the seizure of Huang’s property and Shi’s apartments, the judged noted that the complaint "contains no non-conclusory allegations that the ICBC was involved in the seizure or resale of those properties." Because the act of state doctrine "requires the Court to assume the validity of all official actions taken by the Chinese government within its own territory, and because the Complaint fails to state a claim against the ICBC if the Chinese government’s actions were valid, the Court grants the ICBC’s Motion to Dismiss all claims against it."

The court's conclusion

Because the Court finds that defendants Keqiang Li, Shengkun Guo, Xinshe Lu, Yaojun Meng, and the John Does are immune from suit under the Foreign Sovereign Immunities Act (FSIA), plaintiffs’ claims against those Defendants are dismissed sua sponte for lack of subject matter jurisdiction. As for defendant ICBC, the court grants its motion to dismiss under Rule 12(b)(6) for failure to state a claim.

The dismissal order is here.