Supreme Court considers state-owned Turkish bank’s criminal immunity

The Supreme Court heard arguments on Tuesday over whether a bank largely owned by Turkey’s government must face criminal charges that allege the bank evaded U.S. sanctions against Iran.

Halkbank, which denies the allegations, appealed a lower court’s decision permitting the prosecution to move forward, which has caused tensions in U.S.-Turkish relations after Turkish President Recep Tayyip Erdoğan reportedly asked then-President Trump to quash the investigation.

A number of justices grappled with the foreign policy impacts of permitting criminal prosecutions against foreign sovereigns in either federal or state courts, while also raising concerns about limiting the executive branch’s authority.

Representing the bank, attorney Lisa Blatt argued that the bank has immunity because it is owned by a foreign sovereign. She told the justices that Congress never authorized courts to pursue criminal prosecutions against foreign sovereigns, and the 1976 Foreign Sovereign Immunities Act (FSIA) also shields Halbank from prosecution.

Justice Brett Kavanaugh, noting that the case has been prosecuted by both the Trump and Biden administrations, said it would be “pretty bizarre” for the court to prohibit the president from their “exercise of national security authority” and instead impose the justices’ own expertise.

“Talk about big steps, that’s huge,” Kavanaugh said.

But a number of justices also questioned the implications of Deputy Solicitor General Eric Feigin’s argument that the FSIA does not apply to criminal cases, and that even if it did, an exception for commercial activities allows the Halkbank case to move forward.

Federal prosecutors indicted the bank in 2019 on charges including money laundering and bank fraud, alleging it aided Iran by unlawfully freeing up the country’s oil revenues and laundering $1 billion through the U.S. financial system.

Justice Sonia Sotomayor inquired about the approval process in which U.S. attorneys decide to prosecute a case, suggesting that those decisions could set up a “danger on its own.”

“I don’t know how I would want to leave to the vagrancies of individual prosecutors, whether it’s federal or state, the right to insult another nation by giving them this unbridled power to initiate suits,” Sotomayor said.

Feigin argued that although no formal written approval process exists for approving those types of decisions, prosecutors did not take the decision to prosecute the Halkbank case lightly, and government attorneys would generally need to “run this kind of thing up the chain.”

Justice Amy Coney Barrett similarly cautioned that “part of the questions that you’ve been getting about states is that, however carefully the United States might consider it before initiating such a prosecution, it may or may not be possible to control what states and municipalities do.”         

Multiple justices also raised potentially sending the case back to the 2nd Circuit Court of Appeals because it did not consider the bank’s argument that the common law prohibits the prosecution.

“If the 2nd Circuit didn’t consider this question, if it was an FSIA analysis, and if you concede that there is some general or international common law immunity for sovereigns that the court didn’t consider below, isn’t a remand appropriate?” said Justice Neil Gorsuch.