The United States Supreme Court has rejected arguments made by Turkiye Halk Bankasi A.S. ("Halkbank") that, as a majority state-owned bank and thus an agency or instrumentality of the Republic of Türkiye, it enjoys immunity from criminal prosecution in the United States.

Specifically, the Supreme Court addressed two questions. First, does 18 U.S.C. § 3231 ("Section 3231")—which provides district courts with subject-matter jurisdiction over "all offenses against the laws of the United States"—allow the United States to bring criminal prosecutions against foreign sovereign defendants in federal court? If so, does the Foreign Sovereign Immunities Act (FSIA) provide foreign sovereign defendants immunity from such criminal prosecutions?

In an opinion issued on April 19, 2023, the Supreme Court held that (i) the district court has jurisdiction under Section 3231 over the United States' prosecution of Halkbank, and (ii) the FSIA does not provide foreign sovereign defendants immunity from criminal prosecution.1 The Supreme Court, however, remanded the case back to the Second Circuit Court of Appeals to decide whether Halkbank is entitled to common law immunity from prosecution.

I. Background and Lower Court Decisions2

On October 15, 2019, the U.S. Attorney's Office for the Southern District of New York charged Halkbank with a six-count indictment alleging fraud, money laundering, and sanctions offenses "related to the bank's participation in a multibillion-dollar scheme to evade U.S. sanctions on Iran."3 On August 10, 2020, Halkbank moved to dismiss the indictment on sovereign immunity grounds under the FSIA.4 The district court denied Halkbank's motion, finding that "Halkbank [was] not immune from prosecution."5 The district court reasoned that (i) the FSIA did not "appear to grant immunity in criminal proceedings," and (ii) even if it did, Section 1605(a)'s commercial-activity exception would apply and thus bring Halkbank within the scope of the court's jurisdiction; the district court further rejected Halkbank's argument that it was entitled to immunity under common law.6

The Second Circuit affirmed. The court of appeals held, among other things, that the district court had "subject matter jurisdiction over the federal criminal prosecution of Halkbank," under Section 3231 (the general grant of criminal jurisdiction).7 The Second Circuit found that it did not need to address whether Section 1604 of the FSIA, which recognizes that, under existing international agreements, some foreign states will be immune "from the jurisdiction of the courts of the United States and of the States," conferred immunity on foreign sovereigns in the criminal context.8 The Second Circuit so found because (i) the district court "plainly" had subject-matter jurisdiction over the prosecution under Section 3231, and (ii) assuming, arguendo, the FSIA confers sovereign immunity in criminal cases, the commercial-activity exception to the FSIA's grant of immunity would apply.9 The Second Circuit also rejected Halkbank's argument that common law principles of sovereign immunity applied because (i) if the FSIA confers sovereign immunity in criminal cases, the FSIA "displaced any pre-existing common-law practice," (ii) common-law sovereign immunity also had a commercial-activity exception, and (iii) to the extent common-law immunity determinations rested with the Executive Branch, the decision to prosecute "necessarily manifested the Executive Branch's view that no sovereign immunity existed."10 The Supreme Court granted Halkbank's petition for a writ of certiorari in October 2022.

II. The Supreme Court's Ruling

A. Section 3231

The Supreme Court held that, because of Section 3231's "sweeping language . . . federal district courts [are open] to the full range of federal prosecutions for violations of federal criminal law" and declined to limit the scope of Section 3231's "broad jurisdictional grant over 'all offenses.'"11 Halkbank argued that because other civil and bankruptcy statutes expressly referenced actions against foreign states and their instrumentalities, and Section 3231 did not, that meant Section 3231's grant of jurisdiction implicitly excludes foreign sovereign defendants. The Court disagreed.12 The Court reasoned that Halkbank's references to other statutes did "not shrink the textual scope of [Section] 3231, which operates 'without regard to the identity or status of the defendant.'"13

Halkbank made a similar argument concerning Section 3231's predecessor, a provision of the Judiciary Act of 1789, which granted district courts "cognizance of all crimes and offenses that shall be cognizable under the authority of the United States."14 Halkbank argued that other provisions at the time suggest that "Congress would have expressly referenced foreign states and their instrumentalities if Congress had intended the 1789 provision to reach those entities."15 The Court did not agree because the 1789 provision, like Section 3231, "contains no exception for prosecutions of foreign or state instrumentalities."16 The Court also rejected Halkbank's argument that rested on a separate provision of the Judiciary Act of 1789 regarding admiralty and maritime civil actions and the Court's jurisprudence interpreting the provision.17

In sum, the Court affirmed the Second Circuit's holding that the district court has jurisdiction over the United States' prosecution of Halkbank under Section 3231's broad grant of jurisdiction.

B. FSIA

The Court further held that the FSIA "does not provide foreign states and their instrumentalities with immunity from criminal proceedings."18 Indeed, the Court held that the FSIA applies only in civil actions and does not cover criminal cases at all.19 The Court reasoned that (i) the text and provisions of the FSIA "exclusively address[] civil suits against foreign states and their instrumentalities";20 (ii) "the FSIA is silent as to criminal matters";21 (iii) at the time of the FSIA's enactment, the "vast majority of the litigation involving foreign [sovereign defendants] . . . was civil," and thus, it is unlikely that "Congress sought to codify foreign sovereign immunity from criminal proceedings without saying a word about such proceedings";22 and (iv) the fact that the FSIA is within Title 28, which mostly concerns civil procedure, and does not alter Title 18, which addresses criminal procedure, further supports the Court's holding that the FSIA does not apply in criminal proceedings.23

The Court found Halkbank's "mangled" reading of the FSIA unavailing. Halkbank argued that Section 1604 of the FSIA provided Halkbank with immunity from civil and criminal prosecutions, but Section 1605's exceptions to Section 1604's grant of immunity only applied in civil matters.24 The Court reasoned that, if read alone, Section 1604 could potentially be read that way; but the Court could not read Section 1604 in isolation. Reading Section 1604 alongside 28 U.S.C. § 1330(a)—which grants district courts jurisdiction over civil actions against a foreign state—and reading them in sequence, the "natural inference is that [Section] 1604 operates exclusively in civil cases."25 In other words, Section 1330(a) provides the universe of cases against foreign sovereign defendants over which district courts have jurisdiction, i.e., civil cases and civil cases only, and Section 1604 explains how immunity applies within that universe.26 The Court stated that, to adopt Halkbank's reading, would lead to an inconsistent reading of the FSIA where its "scope awkwardly flip-flops from civil [Section 1330(a)] to civil-and-criminal [Section 1604] back to civil [Section 1605] again in sequential provisions."27

The Court rejected Halkbank's remaining arguments. First, relying on the Court's statement in Amerada Hess that the FSIA is the "sole basis for obtaining jurisdiction over a foreign state in federal court," Halkbank argued that the FSIA immunizes foreign sovereign defendants in criminal proceedings.28 The Court did not agree because (i) Amerada Hess is not a criminal case, and (ii) the FSIA did not repeal or modify Section 3231's grant of criminal jurisdiction.29 Second, the Court found Halkbank's argument that courts "will lack 'congressional guidance' as to procedure in criminal cases if . . . the FSIA does not apply in the criminal context" unpersuasive because (i) the Federal Rules of Criminal Procedure would apply, and (ii) juries already resolve similar cases against foreign officials.30 Lastly, Halkbank's arguments concerning potential state prosecutions against foreign sovereign defendants were also unavailing because (i) Halkbank offered no history of state prosecutions against foreign sovereigns, and (ii) if state prosecutions did happen, the Supreme Court could review a state court's decision denying foreign sovereign immunity, the state proceedings could be preempted, or the United States (either the president or Congress, or both) could intervene by either suggesting immunity in the state proceeding or enacting new legislation.31

Because the Second Circuit did not fully consider arguments concerning common-law immunity, the Court expressed no view on the issue, vacated the Second Circuit's judgment, and remanded to the Second Circuit to consider the parties' common-law arguments.32

III. Looking Ahead

The Court's decision provides clarity on whether and how foreign states or their agencies or instrumentalities are "indictable" in federal court. Nevertheless, the question remains whether foreign sovereigns can assert common-law principles of immunity and avoid the broad grant of criminal jurisdiction under Section 3231. The Second Circuit is now tasked with providing an answer to that remaining question.

Footnotes

1. Turkiye Halk Bankasi A.S., a.k.a, Halkbank v. United States, No. 21-1450, 598 U.S. ____, slip op. at 1 (April 19, 2023).

2. For a more in-depth discussion of the background of the case and the lower court decisions, please see our prior client alert, which is available here.

3. Press Release, U.S. Dep't of Justice, Turkish Bank Charged in Manhattan Federal Court for Its Participation in a Multibillion-Dollar Iranian Sanctions Evasion Scheme (Oct. 15, 2019).

4. United States v. Halkbank, No. 15-cr-867, 2020 U.S. Dist. LEXIS 182312, at *1, *10–11 (S.D.N.Y. Oct. 1, 2020).

5. Id. at *11.

6. Id. at *11–16.

7. United States v. Turkiye Halk Bankasi A.S., 16 F.4th 336, 347 (2d Cir. 2021) ("We think that the District Court plainly has subject matter jurisdiction over the federal criminal prosecution of Halkbank pursuant to § 3231.").

8. Id. at 346.

9. Id. at 347–48.

10. Id. at 350–51.

11. Halkbank, 598 U.S. ____, slip op. at 3.

12. Id.

13. Id. at 3–4.

14. Id. at 4.

15. Id.

16. Id.

17. Id. at 4–5.

18. Id. at 5 (emphasis in original).

19. Id. at 7.

20. Id.

21. Id. at 8.

22. Id. at 8–9.

23. Id. at 9.

24. Id. at 10–11.

25. Id.

26. Id. at 11.

27. Id. Because the Court found that the FSIA does not apply in criminal proceedings, the Court did not discuss in-depth the FSIA's commercial-activity exception. However, it is worth noting that Justice Gorsuch, joined by Justice Alito, filed an opinion concurring in part and dissenting in part, stating that he would have found that the FSIA applies in criminal proceedings, but Halkbank's prosecution would have nevertheless proceeded because of the FSIA's commercial-activity exception, i.e., the indictment alleges that Halkbank engaged in activity that triggers the commercial-activity exception to the FSIA's general grant of immunity. Halkbank, 598 U.S. ____, slip op. at 2–3 (Gorsuch, J., concurring in part and dissenting in part).

28. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989).

29. Halkbank, 598 U.S. ____, slip op. at 12–13.

30. Id. at 13.

31. Id. at 14.

32. Id. at 16.

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