Halkbank V. United States: Initial Read On The Supreme Court's Decision On Foreign State Immunity From Criminal Prosecution

• Jurisdiction: United States,Federal
• Law Firm: Seyfarth Shaw LLP
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Arbitration & Dispute Resolution, Sovereign Immunity: Public Sector Government, Crime
• Author: Mr James R. Newland, Jr.,, Owen Wolfe and Kiran Seldon
• Published date: 04 May 2023

Yesterday, the Supreme Court issued its decision in Turkiye Halk Bankasi A.S., aka Halkbank v. United States.¹ This groundbreaking case represents the first known attempt by the United States (or likely any state in modern history) to indict and criminally-prosecute the agency or instrumentality of a foreign state. The Supreme Court held that the Foreign Sovereign Immunities Act ("FSIA") does not apply to, or provide immunity from, criminal prosecutions of foreign states and their agencies and instrumentalities. Noting Samantar's² conclusion that immunity not addressed by the FSIA is controlled by the common law, the Court remanded to the Second Circuit to consider how that body of law addresses state immunity from criminal prosecutions. Certainly, in the short term, this case will generate much interest around criminal prosecutions of foreign states'potentially by domestic state courts, and perhaps certain organizations with immunities running parallel with those granted under the FSIA,³ topics we will analyze further in the coming weeks.

The case involves the United States' prosecution of Halkbank, a Turkish bank that is indirectly owned by the Republic of Turkey. The United States indicted Halbank, alleging that it engaged in "a multi-year conspiracy to evade economic sanctions imposed by the United States on Iran."⁴ The United States further alleged that Halkbank lied to the U.S. Treasury Department in order to cover up its conduct.

Halkbank moved to dismiss the indictment, arguing that it was immune from prosecution as an agency or instrumentality of the Republic of Turkey, a foreign sovereign under the FSIA. A New York federal district court denied Halbank's motion, based in part on its view that the FSIA does not grant immunity from criminal proceedings. The Second Circuit assumed for purposes of Halkbank's appeal that the FSIA does, in fact, apply in criminal proceedings, but held that Halbank's alleged misconduct fell into the FSIA's "commercial activity" exception to jurisdictional immunity. Halbank then sought Supreme Court review.⁵

Writing for the 7-2 majority, Justice Brett Kavanaugh first rejected Halkbank's argument that the district court lacked subject matter jurisdiction under 28 U.S.C. ' 3231, which according to its plain language provides federal district courts with jurisdiction over all criminal proceedings involving violations of federal law. Halkbank referred to the lack of any known prosecutions of foreign states and with that...