A bank controlled by the Turkish government is not immune from criminal prosecution in American courts for allegedly helping Iran defy U.S. economic sanctions, the Supreme Court ruled 7–2 on April 19.
Turkiye Halk Bankasi A.S., also known as Halkbank, is 75 percent owned by the Turkish Wealth Fund, which in turn is owned by the Republic of Turkey.
Istanbul-based Halkbank is accused of participating in a criminal conspiracy involving money laundering, bank fraud, and assisting terrorism-sponsoring Iran in evading U.S. economic sanctions.
The bank is accused of laundering about $20 billion in proceeds from the sale of Iranian oil and natural gas. Prosecutors said the bank used money servicing outfits and front companies in the United Arab Emirates, Iran, and Turkey in defiance of the sanctions regime.
The case has made U.S. relations with Turkey, a NATO ally, difficult at times.
Turkish President Recep Tayyip Erdogan previously said the U.S. government’s decision to prosecute the bank was “ugly” and “unlawful.”
The United States prosecuted the bank in a federal district court in New York for conspiring to evade the sanctions against Iran.
The bank argued the indictment, which was issued in 2019, should be thrown out because federal law does not allow for the prosecutions of instrumentalities of foreign states such as Halkbank.
It argued in the alternative that the Foreign Sovereign Immunities Act (FSIA) of 1976 confers instrumentalities of foreign states with absolute immunity from criminal prosecution in U.S. courts.
“We disagree with Halkbank on both points,” Justice Brett Kavanaugh wrote for the court majority.
The Supreme Court held that the federal district court has jurisdiction under federal law and that the FSIA does not provide immunity from criminal prosecution.
“On Halkbank’s view, a purely commercial business that is directly and majority-owned by a foreign state could engage in criminal conduct affecting U.S. citizens and threatening U.S. national security while facing no criminal accountability at all in U.S. courts,” Kavanaugh wrote.
“Nothing in the FSIA supports that result,” he added.
The bank’s FSIA-related arguments “are infused with the notion that U.S. criminal proceedings against instrumentalities of foreign states would negatively affect U.S. national security and foreign policy.”
“But it is not our role to rewrite the FSIA based on purported policy concerns that Congress and the president have not seen fit to recognize,” Kavanaugh added.
The Supreme Court also directed the U.S. Court of Appeals for the 2nd Circuit to reconsider the bank’s request to dismiss the prosecution based on a theory of common law-based immunity.
Justice Neil Gorsuch dissented in part and concurred in part with the majority opinion. Gorsuch’s opinion was joined by Justice Samuel Alito.
The majority is wrong to hold that FSIA’s rules “apply only in civil cases,” Gorsuch wrote.
“To decide whether a foreign sovereign is susceptible to criminal prosecution, the Court says, federal judges must consult the common law. Respectfully, I disagree. The same statute we routinely use to analyze sovereign immunity in civil cases applies equally in criminal ones,” the justice wrote.
The case is Turkiye Halk Bankasi A.S. v. United States (court file 21-1450).