The 9th Circuit Court of Appeals in San Francisco upheld a lower court ruling that said the Vatican bank was immune from such a lawsuit under the 1976 Foreign Sovereign Immunities Act, which generally protects foreign countries from being sued in U.S. courts.
Holocaust survivors from Croatia, Ukraine and Yugoslavia had filed suit against the Vatican bank in 1999, alleging that it stored and laundered the looted assets of thousands of Jews, Serbs and Gypsies who were killed or captured by the Nazi-backed Ustasha regime that controlled Croatia.
They sought an accounting from the Vatican, as well as restitution and damages.
The court didn't rule on the allegations. In its decision, the court said the Vatican bank, formally known as the Institute for the Works of Religion, or IOR, was a sovereign entity entitled to the protections of the foreign sovereign immunities act, and that therefore U.S. courts had no jurisdiction.
The pope himself has been granted such protections in U.S. courts hearing clerical sex abuse cases.
Jeffrey Lena, who represented the Vatican Bank in the case, said he was gratified with the ruling since the court decided not only that the IOR was a sovereign entity but that as such it was immune from U.S. jurisdiction.
"In defending the lawsuit, the IOR did not challenge the allegations of the plaintiffs that they had suffered terrible losses at the hands of the Ustasha," he told The Associated Press. "Rather the challenge was simply to the jurisdiction of U.S. courts over the IOR."
Jonathan Levy, who represents the survivors, said he thought he had sufficiently shown that the Vatican bank engaged in commercial activities in the United States, which can serve as an exemption to the protections granted by the immunities act.
"The reason we're disappointed is the court found that dealing in gold teeth from concentration camps was not a commercial act," he said.
In its ruling, the court said that the Vatican banks' U.S. commercial activities were "too tangentially related to their legal claims to be considered the basis for the suit."
Levy said he didn't plan to appeal the judgment. The victims are also suing the Franciscans, the Roman Catholic order, on identical charges, and that portion of the lawsuit is going ahead, he said.
The survivors filed suit against the Vatican Bank a year after Swiss Banks agreed to pay some $1.25 billion to Nazi victims and their families who accused the banks of stealing, concealing or sending to the Nazis hundreds of millions of dollars worth of Jewish holdings.
Many of the survivors named as plaintiffs in the suit live in the United States.
The Vatican bank was famously implicated in a scandal over the collapse of Italy's Banco Ambrosiano in the 1980s. Roberto Calvi, the head of the Banco Ambrosiano, was found hanging from Blackfriars Bridge in London in 1982. The circumstances remain mysterious.
More recently, Italian news reports said last month that Italian financial police were scrutinizing tens of millions of euros worth of Vatican bank transactions to see if they violated money laundering regulations.