United States: Oral Argument In Supreme Court Case Involving U.S. Prosecution Of State-Owned Entity Shows Justices May Remand To Have Lower Court Consider Common Law Immunity

Key Takeaways:

• During oral argument in Turkiye Halk Bankasi A.S. v. United States, the Court raised several questions about whether a state-owned entity, Halkbank, was immune from U.S. criminal prosecution under the common law.
• The Justices noted that the common law immunity issue was not given much attention in the Second Circuit opinion, suggesting that the Court may consider remanding the case to further develop the record on this point.

On January 17, 2023, the Supreme Court heard oral argument in Turkiye Halk Bankasi A.S. v. United States. This case involves the U.S. prosecution of Halkbank, a commercial bank majority-owned by Turkey. The Government alleges that Halkbank helped Iran evade U.S. sanctions and lied to U.S. authorities. Halkbank argues that it is immune from prosecution under both the Foreign Sovereign Immunities Act ("FSIA") and common law. The Second Circuit focused its analysis primarily on the FSIA and determined that Halkbank is not immune. As the Supreme Court assesses Halkbank's immunity defense, it must grapple with several issues that could have a significant impact on how the U.S. approaches its regulation of foreign sovereigns and their instrumentalities going forward.

On January 10, 2023, we summarized the parties' respective arguments in the lower courts and the potential consequences of the Supreme Court's eventual ruling. The Court inquired about many of those arguments and potential consequences during oral argument, but the Justices also focused on an issue that did not get a lot of attention in the Second Circuit opinion (nor in the parties' Supreme Court briefs). That issue is whether Halkbank is immune under the common law rather than the FSIA. Multiple Justices asked about the potential availability of common law immunity and raised the prospect of remanding the case to the Second Circuit for further analysis. The Court underscored that the Second Circuit only dedicated a few paragraphs to common law immunity in its decision, suggesting that the record needs to be developed further before the Court can decide the issue.

The Court is scheduled to issue a decision by June 2023, but, considering the questions the Justices asked during oral argument, it may hold off on deciding the merits for now and send the case back to the appellate court to review further and develop a more complete analysis. When the Court eventually issues a substantive ruling, that ruling could have a significant impact on whether and how the United States prosecutes foreign states and state-owned entities going forward.

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