U.S. Supreme Court justices touched upon the issue of sovereign immunity as they evaluated Turkish public lender Halkbank's appeal to avoid criminal charges in the U.S. for allegedly helping Iran evade U.S. sanctions.
The nine justices heard arguments in Halkbank's appeal of a lower court's ruling in favor of the U.S. government that allowed the prosecution of the bank to proceed.
The case tests Halkbank's contention that it is shielded from prosecution because, as an entity majority owned by the Turkish government, it should enjoy the same legal protections as Türkiye. Sovereign immunity generally protects countries from facing legal action in another country's courts.
The justices raised numerous concerns about curbing the U.S. government's executive branch's authority to make decisions involving national security, as well as the potential consequences of criminally prosecuting one of a foreign government's entities.
Conservative Justice Brett Kavanaugh said it would be "pretty bizarre" and "huge" for the court to tell a U.S. president that "this court is going to prohibit your exercise of national security authority."
Halkbank, charged in New York in 2019, has pleaded not guilty to bank fraud, money laundering and conspiracy charges over its alleged use of money services and front companies in Iran, Türkiye and the United Arab Emirates to evade U.S. sanctions.
Conservative Justice Neil Gorsuch raised concerns that allowing the federal prosecution to proceed might open the door to U.S. states targeting foreign nations as well.
States, Gorsuch said, could be "free to try to bring lawsuits against Mexico for this or that, or perhaps China because of COVID, or who knows what a creative state prosecutor might come up with?"
Liberal Justice Sonia Sotomayor cautioned against giving federal or state prosecutors "the right to insult another nation by giving them this unbridled power to initiate suits."
Some justices appeared open to sending the case back to the lower courts to further explore the extent to which U.S. law reflects international law in broadly disfavoring criminal prosecutions against foreign countries, and if Halkbank should enjoy the same legal status as Türkiye for purposes of immunity.
"Who should be deciding under these circumstances in this case whether we have a foreign corporation versus their argument that this really is the state?" liberal Justice Ketanji Brown Jackson asked Eric Feigin, a lawyer for the U.S. Justice Department.
The bank said its view is backed up by a 1976 U.S. law called the Foreign Sovereign Immunities Act (FSIA) that limits the jurisdiction of American courts over lawsuits against foreign countries. President Joe Biden's administration contends that the law does not apply to criminal prosecutions and, even if it did, the bank's actions fall under the law's exception to sovereign immunity for misconduct involving commercial activities.
Halkbank's case has complicated U.S.-Turkish relations, with Turkish President Tayyip Erdoğan calling the American charges against the bank an "unlawful, ugly" step.
Halkbank's attorney Lisa Blatt, emphasizing the dispute's unusual nature, urged the justices to dismiss the case.
"The world has been around for, like, 7,000 years and no country has ever tried another country, it's just never happened," Blatt said, though she did not explain that date.
"I'm not going to claim that we've been doing this for 7,000 years," Feigin said, adding that such prosecutions have occurred since the 1980s. "That's because of the rise of government-owned corporations concealing some very serious crimes."
Halkbank's alleged misconduct includes helping Iran secretly transfer $20 billion of restricted funds, including $1 billion laundered through the U.S. financial system, and converting oil revenue into gold and then cash to benefit Iranian interests.
Halkbank had appealed a ruling by U.S. District Judge Richard Berman, allowing it to be prosecuted.
Berman has overseen several related cases, including the conviction of former Halkbank executive Mehmet Hakan Atilla and a guilty plea by Iranian Turkish gold trader Reza Zarrab.
Atilla was convicted in January 2018 and returned to Turkey in July 2019 after leaving prison.
In an Oct. 22 decision, the 2nd Circuit said Halkbank could be prosecuted because its alleged misconduct involved commercial activity that was not covered by sovereign immunity.
It also said it would suffer irreparable harm if forced to defend against “a case from which it is immune.”
The Supreme Court denies most appeals. In its last term, it received 5,307 filings and heard arguments in 72 cases.
