### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 12

- 3269
E LFRIEDE K ORBER and C HRISTOPHER M ARK , Plaintiffs

- Appellants ,

v.

B UNDESREPUBLIK D EUTSCHLAND , et al

. , Defendants

- Appellees

.

____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 08 C 6254

— Edmond E. Chang
, Judge

.

____________________
A RGUED J ANUARY 6, 2014

— D ECIDED J ANUARY 9, 2014

____________________

Before E ASTERBROOK , W ILLIAMS , and T INDER , Circuit Judges

. E ASTERBROOK , Circuit Judge

. After Germany surrendered in May 1945, holders of bonds issued by public and private entities in that nation demanded repayment. Germany had suspended payment on many fo reign

- held bonds during the 1930s, but some pre

- war bonds were not due until the 1950s or 1960s. A multinational agreement among 21 creditor n ations and the Federal Republic of Germany

— w hich at theNo. 12

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time meant the Lä nder that had be e n occupied by the United States, United Kingdom, and France

— specified that Germ any would pay valid debts outstanding on May 8, 1945 . This pact , called the London Debt Agreement
, gives priority to creditors who accept diminished payoffs. The Soviet Union and the German Democratic Republic (the Lä nder constitu ting E ast Germany) did not participate. Contemporaneously with negotiation of the London Debt Agreement , West Germany enacted a Validation Law requi ring holders of foreign debt instruments to submit them to panels that would determine whether the claims were gen uine. Some bonds had been bought back in the markets but stolen toward the end of the war; West Germany sought to ensure that these retired debt instruments were not paid a second time and that no counter feit instruments would be paid. In April 1953 the Un ited Sta tes and West Germany agreed by treaty that foreign debts contracted before the end of World War II would be paid only if found by a validation panel to be legitimate. 4 U.S.T. 885 (1953 ). The parties agree that this treaty applies to Germany as rec onstituted by the merger of East and West Germany in 1990. Holders had five years to submit their documents for validation by a panel in New York City

. Any later claim for validation go es to an E xamining Agency in Ger many. The claimant must show a good reason for the delay and establish the instruments’ provenance. D ecisions adverse to claimants are subject to judi cial review in German courts

. Article II of the Treaty adds that no instrument within the scope of the Treaty and Validation Law may be enforc ed unless it has first been val idat ed by a panel in New York or Germany

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Plaintiffs filed this suit in 2008 under the international diversity jurisdiction, 28 U.S.C. §1332(a)(2), seeking to reco ver on bearer bonds that Germany had issued or guaran teed befo re World War II began . One holder has never submitted the bonds to a validation panel. T he other submitted them to a panel in Germany, which found them ineligible , and did not seek judicial review of that decision.
In re sponse to defendants’ re quest for th e suit’s dismi ssal, both plaintiffs contend that the Treaty is invalid because it takes their property without just compensation . The di strict court held that the Treaty is binding and that the suit, which seeks to collect on un

- validated instruments, must be dismissed. The court added that the suit is barred by the statute of limitations, which the judge deemed to be a ten

year period drawn from Illinois law. (Illinois is the state in which the district court sits.) The court’s opinion s cover some other is sues, such as whe ther payment of the bonds is

a commer cial activity for the purpose of the Foreign Sove reign Immunities Act, 28 U.S.C. §§ 1602

– 11, and whether pa rticular defendants were served with process, but those que stions have dropped out. A ppellees’ brief does not contend that the defendants are immune under the FSIA or that se rvice on any defendant was improper. Despite the passage of time since the 1953 Treaty spec ified how bonds could be enforced, recent years have seen an uptick in claims seeking to recover in federal courts. Some holders have argued that their claims did not accrue until 2010 , when Germany made t he final payments on bonds processed under the Agreement . These su its have been un iformly unsuccessful. See Fulwood v. Germany , 734 F.3d 72 (1st Cir. 2013); World Holdings, LLC v. Germany , 701 F.3d 641 (11thNo. 12

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Cir. 2012); Mortimer Off Shore Services
, Ltd. v. Germany , 615 F.3d 97 (2d Cir. 2010). The first, second, and eleve nth circuits have held that bondholders lose either because of the Tre aty’s language or because the claims are time

- barred . Our plaintiffs have raised constitutional arguments in an effort to circumvent the obstacles created by the Treaty and the other cir cuits’ decisions. The attempt to get around this sixty

- year

old treaty is unavailing.
The Constitution’s fifth amendment does not forbid the taking of private property. Instead it requires just compens ation for taken property. The Tucker Act, 28 U.S.C. §14 91(a)(1), authorizes the Court of Federal Claims to award whatever compensation the Constitution requires . It follows that the 1953 Treaty cannot be unconstitutional as a prohi bited taking. A person who thinks that the 1953 Treaty takes private property sh ould use the Tucker Act remedy. See, e.g., Preseault v. ICC , 494 U.S. 1, 12

– 16 (1990); Ruckelshaus v. Monsanto Co ., 467 U.S. 986, 1017

– 19 (1984); Regional Rail R eorganization Act Cases , 419 U.S. 102, 126

– 36 (1974)

. It is tempting to end the opinion here, b ut in Dames & Moore v. Regan , 453 U.S. 654 (1981), the Supreme Court, while observing that claimants could resort to the Tucker Act, id . at 688

– 90, also stated that there is no constitutional obstacle to an international property settlement. The agre ement contested in Dames & Moore , among the United States, Iran, and Algeria, resolved the dispute that began when di plomats and their families were taken hostage at the United States Embassy in Tehran . The agreement established the Iran

– United States Claims Tri bunal in The Hague. A ll claims (in cluding contract claims that predated Iran’s 1979 revol ution ) must be submitted to the Tribunal , whose disposi tions5 No. 12

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are final. Litigation of claims outside the Tribunal is forbi dden . The Court observed that settlements of private claims are a traditiona l, and valid, part of peace making, see 453 U.S. at 679

– 80, and add ed that the United States’ power to strike such bargains with other nations may be exercised by exec utive agreement as well as by treaty.
Iran’s refus al to pay claims made by foreign nationals was not a taking by the United States ; this nation does not guarantee other nations’ sovereign debt. Likewise Germ any’s refusal to pay claims based on bonds it issued or gua ranteed before the end of World War II cannot be thought a taking by the United States of America. That the United States and Germany agreed in 1953 to a process that will lead to payment of some but not all claims is an ordinary part of peace making and not an affront to the Constituti on. Diplomacy requi res compromise. Many governments are reluctant to pay debts incurred by predecessors that have been overthrown in revolution (e.g., Iran) or lost a war (e.g., the Nazi regime in Germany). Indeed, the United States itself did not ensure payment of debts inc urred within its own borders by the states that attempted to secede in 1861. The history summarized in Dames & Moore shows that diploma tic dispositions of private financial claims against other so vereigns, designed to facilitate the establishment of peacef ul relations among nations, have occurred throughout Amer ican history. We cannot see any basis for a constitutional di stinction between the diplomatic resolution of private claims against Iran and those against Germany.
Plaintiffs maintain that Germany has not carried out all its obligations under the 1953 Treaty. That contention should be made to the Department of State rather than to a districtNo. 12

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judge. The 1953 Treaty is not self

- executing; the United States and West Germany made promises to each other, no t directly to private citizens. Decisions such as Medellín v. Te xas , 552 U.S. 491 (2008), show that private parties can be the intended beneficiaries of treaties without having a right to enforce them in court. Plaintiffs do not point to any language in th e 1953 Treaty conferring enforcement rights on private parties; to the contrary, the Treaty forbids private suits based

on non

- validated claims. It is far from clear to us that Ge rmany has fallen short of its commitments; Examining Age ncies still exist in Germany, and judicial review of adverse d ecisions is available. But because this treaty is not self

executing, diplomatic rather than judicial channels are the appropriate ones for consideration of plaintiffs’ grievances. According to plaintiffs, a judicia l order requiring Germ any to improve its validation process may issue under the A lien Tort Statute, 28 U.S.C. §1350, even if not directly under the 1953 Treaty. That contention did not survive Kiobel v. Royal Dutch Petroleum Co ., 133 S. Ct. 1659 (2013), wh ich holds that §1350 cannot be used to contest the acts of foreign n ations taken within their own borders . How Germany admi nisters the validation process is for diplomats or German courts to consider. Because plaintiffs lack validated claims, their suits m ust be dismissed. Lest silence invite suits on claims validated in coming years , we add that we agree with World Holdings , 701 F.3d at 653

– 54, and the district court that the statute of lim itations independently bars a judicial role in collection

. Hol ders could have submitted their bonds for validation decades ago , whether or not they accepted the speed

- for

- amount tradeoff under the London Debt Agreement ; those who d e-7 No. 12

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layed have only them selves to blame . Plaintiffs tell us that international law lacks a sta tute of limitations for the e nforcement of sovereign debt

— which is true but irrelevant. These bonds were issued under German law, and perhaps under U.S. law or other nations’ law too (they were designed for sale to non

- German investors, and some of the ins tr uments covered by the 1953 Treaty were traded on U.S. e xchanges). The applicable periods of limitations are those pro vided by Germany, by jurisdictions in which the bonds were sold, and by agreement of the parties reflected in t he instruments themselves. Litigation in the 2010s is far too late under any of those sources of law.
A FFIRMED