The Supreme Court Removes Two Obstacles To The Criminal Prosecution Of Foreign States In U.S. Courts

• Jurisdiction: United States,Federal
• Law Firm: Arnold & Porter
• Subject Matter: International Law, Litigation, Mediation & Arbitration, Criminal Law, Export Controls & Trade & Investment Sanctions, Sovereign Immunity: Public Sector Government, Trials & Appeals & Compensation, Crime
• Author: Mr John Bellinger, III, James Cooper, Sally Pei, Kevin Toomey, R. Reeves Anderson, Stephen Wirth, Sean A. Mirski, Rebecca A. Caruso and Volodymyr Ponomarov
• Published date: 19 May 2023

On April 19, 2023, the Supreme Court removed two key potential obstacles to the criminal prosecution of foreign states and their agencies and instrumentalities in U.S. courts. In Turkiye Halk Bankasi A.S. v. United States, 598 U.S. __ (2023), the Court first held that federal courts have jurisdiction over criminal cases against foreign sovereigns under 18 U.S.C. ' 3231. It also held that the Foreign Sovereign Immunities Act (FSIA or Act) does not apply to criminal cases. But the Court's decision still leaves foreign sovereigns and their companies with a number of other potential defenses against criminal prosecutions, and we expect to see those defenses litigated in the lower courts in the coming years. Regardless of how successful those defenses prove, the Court's decision will have broad implications, particularly for foreign state-owned banks and other financial institutions.

Statutory Background and the Case's History in the U.S. Courts

Foreign states and certain foreign state agencies and companies are presumptively immune from state and federal court jurisdiction under the FSIA, meaning that American courts generally cannot hear cases brought against them. But it has long been an open question whether the FSIA protects foreign states and their agencies and companies only from civil suit, or whether the statute also grants immunity from criminal prosecutions.

That question recently arose in the context of a U.S. government prosecution of Türkiye's state-owned bank, Türkiye Halk Bankasi A.S., also known as Halkbank. As we previously explained, the U.S. government claims that Halkbank engaged in a multi-year conspiracy to evade U.S. sanctions against Iran by helping launder billions of dollars' worth of Iranian oil and natural gas proceeds and then lying to U.S. Treasury officials about it. In 2019, the U.S. government indicted Halkbank, and Halkbank moved to dismiss the indictment on the grounds that it was immune from criminal prosecution because it is majority-owned by Türkiye and, thus, a "foreign state" within the meaning of the FSIA. Halkbank also argued that, regardless of the FSIA's applicability, it was also immune from prosecution under the common law.

In 2020, the district court rejected Halkbank's immunity arguments three times over, holding that: (1) the FSIA does not apply to criminal cases; (2) even if the FSIA applied, Halkbank was not immune under the exceptions to immunity within the FSIA; and (3) regardless, Halkbank was not entitled to immunity under the common law. In 2021, the Second Circuit affirmed. It held that it had jurisdiction over the case under the general criminal jurisdiction statute, 18 U.S.C. ' 3231,¹ which provides jurisdiction over all criminal offenses. The Second Circuit also held that it did not need to decide whether the FSIA applies to criminal cases because, to the extent the Act does, then its exceptions to immunity must apply as well, and the Second Circuit decided that Halkbank was not immune under one of those exceptions.

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