Introduction
On January 17, 2023, the Supreme Court heard oral arguments in a highly anticipated case, Turkiye Halk Bankasi A.S., aka Halkbank v. United States, that may have a profound impact on the Foreign Sovereign Immunities Act (FSIA).
In 1976, the FSIA codified the presumption of immunity for foreign states and their instrumentalities in U.S. courts, with certain narrow exceptions. The Halkbank case arises from alleged sanctions violations and presents the issue of whether U.S. district courts may exercise subject-matter jurisdiction over criminal prosecutions against foreign sovereigns and their instrumentalities under the FSIA. In other words, do entities such as Halkbank, which is majority Turkish state-owned, receive the same immunities for criminal proceedings under the FSIA as a state itself? The Supreme Court’s ruling, expected this summer, may have implications for the doctrine of foreign sovereign immunity, and, specifically, the U.S. prosecutors’ capacity to bring criminal charges against foreign sovereigns.
Background
The Halkbank case began in 2019 when then-U.S. District Attorney of New York, Geoffrey Berman, indicted Halkbank, Turkey’s second largest state-owned bank, on six separate charges ranging from bank fraud to money laundering. These charges stem from what the Department of Justice deemed a “multi-year scheme” in which the Turkish bank laundered billions of dollars of proceeds from Iranian oil and gas sales in violation of U.S. sanctions against Iran. John C. Demers, Assistant Attorney General for National Security, stated that “this was one of the most serious Iran sanctions violations we have seen.”
In August 2020, Southern District of New York Judge Richard Berman dismissed Halbank’s motion to dismiss for FSIA immunity, noting that “nothing in the text of the FSIA suggests that it applies to criminal proceedings” and, even if it did, the money laundering charges would fall under the commercial activity exception to immunity. The commercial activity exception permits jurisdiction for cases that are based on (1) “a commercial activity carried on in the United States by a foreign state”; (2) “an act performed in the United States in connection with a commercial activity of the foreign state elsewhere”; or (3) “an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” Halkbank filed an interlocutory appeal to the Second Circuit, where Judge Jose Cabranes affirmed the district court’s denial of Halkbank’s motion.
Arguments
At oral argument in the Supreme Court, the US government argued: (1) that the FSIA only applies only in civil—not criminal—cases and (2) that even if the FSIA did apply, the commercial activities exception would apply because Halkbank concealed the true nature of its oil and gas payments from the U.S. Treasury. On the other side, Halkbank, represented by Williams & Connolly’s Lisa Blatt, argued that (1) the FSIA grants sovereign immunity in both civil and criminal cases and (2) the FSIA’s exceptions grant jurisdiction only in civil cases.
The justices focused heavily on the FSIA. Justices Gorsuch and Alito expressed concern about the consequences of ruling in the government’s favor and how permitting jurisdiction over foreign sovereigns in criminal suits may enable state prosecutors to indict foreign sovereigns without the possibility of removal to a federal court, potentially interfering with federal control over foreign relations. Justice Sotomayor further inquired how the federal government would maintain oversight on federal prosecutors’ unbridled ability to bring charges against foreign sovereigns. Justice Barrett asked if there are any added benefits of prosecuting a foreign sovereign when charges may be filed against the individuals responsible for the criminal conduct.
Taking a different view, Justice Kavanaugh expressed concern over ruling in Halkbank’s favor, noting that it would be “pretty bizarre” for the Court to prohibit the President’s exercise of national security authority. Throughout the hearing, there were several occasions on which the Justices suggested potentially remanding the case for the Second Circuit to analyze more closely the issue of common law immunities and executive deference.
Conclusion
The Supreme Court’s decision, which is expected this summer, will have a profound impact on the doctrine of sovereign immunity. The government argues that a decision in favor of Halkbank will allow foreign sovereigns to violate US laws and sanctions, and evade justice by funneling their actions through state instrumentalities. Others, however, posit that a holding in favor of the government would allow states to prosecute foreign sovereigns at will, with the federal executive “powerless to stop it,” a scenario that could ultimately damage a unitary foreign policy outlook.
Author Biography: Sarah Burns is a Moderator of the International Law Society’s International Law and Policy Brief (ILPB) and a J.D. candidate at The George Washington University Law School. She has a B.A. in International Relations and Spanish from the University of Miami. Prior to attending law school, Sarah worked for the Global Partnership for Sustainable Development Data at the United Nations Foundation.
Editor: Drew Weisberg, GW Law J.D. Candidate, 2024