On April 19, the U.S. Supreme Court released its decision on a case, Turkiye Halk Bankasi A.S. (a.k.a. Halkbank) v. United States, that changed the immunity given to foreign nations. This decision gives the U.S. the power to go after entities that are controlled by foreign nations when they use U.S. financial institutions.
The case gives the State Department and the Department of Justice (DoJ) more power to apply pressure to foreign nations. It also provides domestic organizations with a way to force the DoJ to act against foreign nations.
The Background of Halkbank v. United States
Halkbank is a financial institution and is owned by the Republic of Turkey. The Department of Justice brought charges against the bank and two of its officials for conspiring to evade U.S. economic sanctions against Iran through money laundering.
Justice Kavanaugh described the case in greater detail: “Halkbank, with the assistance of high-ranking Turkish government officials, laundered billions of dollars of Iranian oil and gas proceeds through the global financial system, including the U. S. financial system, in violation of U. S. sanctions and numerous federal statutes.
“The indictment further claimed that Halkbank made false statements to the U. S. Treasury Department in an effort to conceal the scheme. Two individual defendants, including a former Halkbank executive, have already been convicted in federal court for their roles in the alleged conspiracy. According to the U. S. Government, several other indicted defendants, including Halkbank’s former general manager and its former head of foreign operations, remain at large.”
Halkbank, however, argued that it is immune from criminal prosecution since the bank is owned by the Turkish government. As a government-owned bank, Halkbank also said it was immune from prosecution according to the Foreign Sovereign Immunities Act (FSIA) of 1976. According to this legislation, the FSIA “limits the role of the Executive branch in suits against foreign governments and governmental entities by precluding the Department of State from making decisions on state immunity.”
This act was always understood by the Supreme Court as applying to civil matters. But in this case, Halkbank wanted to use this act to create immunity in a criminal case.
FSIA Does Not Cover Criminal Prosecution
In their decision on Halkbank, the Supreme Court decided the Foreign Sovereign Immunities Act does not cover criminal prosecution. The Supreme Court pointed to the many references to civil action in FSIA’s language and its complete silence on criminal cases.
Writing for the court, Justice Brett Kavanaugh said that “In stark contrast to those many provisions concerning civil actions, the FSIA is silent as to criminal matters. The Act says not a word about criminal proceedings against foreign states or their instrumentalities. If Halkbank were correct that the FSIA immunizes foreign states and their instrumentalities from criminal prosecution, the subject undoubtedly would have surfaced somewhere in the Act’s text.”
However, the issue of a foreign nation’s immunity is not over. While the Supreme Court found that Halkbank does not have immunity based on the FSIA, there is still case law that has recognized immunity as a common-law matter.
The Supreme Court has sent the Halkbank case back to a lower court. According to Courthouse News Service, that lower court will “have to decide whether to make the immunity decision based on customary international law and other sources, or defer to the executive branch’s judgment on whether to grant immunity to a foreign sovereign.”
Implications of the Halkbank Case for Foreign Nations
When it comes to foreign relations, the Supreme Court has always held that it serves as the jurisdiction of the executive branch of the U.S. government. The intervention of the court in issues of foreign affairs can bring about complications, however, so judicial restraint is warranted.
However, this principle has limits, such as the prosecution of war crimes by the DoJ when there is a connection to the U.S. In the case of mass atrocities, such as prosecuting Russia for war crimes in Ukraine, Congress and the Biden administration were willing to act. But in general, the Supreme Court is careful to intervene in foreign affairs only when it becomes necessary.
The fact that criminal action can be taken against foreign institutions means the State Department and the Department of Justice have more leverage against foreign nations. Even if a commercial business like Halkbank does not have an office in the U.S., the need to interact with the U.S. financial system (e.g. money transfers and other financial transactions can give the DoJ jurisdiction over its activities.
But sometimes the State Department does not want to have that option, and international politics sometimes necessitates looking the other way. But if there is jurisdiction, then it may be necessary for the U.S. government to prosecute.
It will be interesting to see a lower court’s position on whether or not Halkbank has true immunity. This case will have far-reaching implications for not just the U.S. government, but the governments of other foreign nations.