Yesterday, the Supreme Court issued its decision in Turkiye Halk Bankasi A.S., aka Halkbank v. United States.[1] This groundbreaking case represents the first known attempt by the United States (or likely any state in modern history) to indict and criminally-prosecute the agency or instrumentality of a foreign state. The Supreme Court held that the Foreign Sovereign Immunities Act (“FSIA”) does not apply to, or provide immunity from, criminal prosecutions of foreign states and their agencies and instrumentalities. Noting Samantar’s[2] conclusion that immunity not addressed by the FSIA is controlled by the common law, the Court remanded to the Second Circuit to consider how that body of law addresses state immunity from criminal prosecutions. Certainly, in the short term, this case will generate much interest around criminal prosecutions of foreign states—potentially by domestic state courts, and perhaps certain organizations with immunities running parallel with those granted under the FSIA,[3] topics we will analyze further in the coming weeks.

The case involves the United States’ prosecution of Halkbank, a Turkish bank that is indirectly owned by the Republic of Turkey. The United States indicted Halbank, alleging that it engaged in “a multi-year conspiracy to evade economic sanctions imposed by the United States on Iran.”[4] The United States further alleged that Halkbank lied to the U.S. Treasury Department in order to cover up its conduct.

Halkbank moved to dismiss the indictment, arguing that it was immune from prosecution as an agency or instrumentality of the Republic of Turkey, a foreign sovereign under the FSIA.  A New York federal district court denied Halbank’s motion, based in part on its view that the FSIA does not grant immunity from criminal proceedings. The Second Circuit assumed for purposes of Halkbank’s appeal that the FSIA does, in fact, apply in criminal proceedings, but held that Halbank’s alleged misconduct fell into the FSIA’s “commercial activity” exception to jurisdictional immunity.  Halbank then sought Supreme Court review.[5]

Writing for the 7-2 majority, Justice Brett Kavanaugh first rejected Halkbank’s argument that the district court lacked subject matter jurisdiction under 28 U.S.C. § 3231, which according to its plain language provides federal district courts with jurisdiction over all criminal proceedings involving violations of federal law. Halkbank referred to the lack of any known prosecutions of foreign states and with that backdrop argued that Section 3231 does not specifically refer to suits against foreign states and their agencies or instrumentalities, and when it was passed, prosecution of foreign states was never contemplated.  Thus, those foreign entities are not included in Section 3231’s scope. Looking to the words Congress chose, the majority quickly rejected that argument, holding that Section 3231 applies to “all” federal criminal proceedings, regardless of who the defendant is. 

Further, the majority rejected Halkbank’s argument regarding the statutory predecessor of Section 3231, the Judiciary Act of 1789, read with the oft-cited 1812 Supreme Court decision, Schooner Exchange v. McFaddon,[6] holding that “Schooner Exchange did not address statutory subject matter jurisdiction,” but applied “a rule of substantive lawgoverning the exercise of the jurisdiction of the courts” that did not act as “an exception to a general statutory grant of subject matter jurisdiction.”[7]

The Court then turned to Halkbank’s FSIA arguments. The majority noted that the Supreme Court has frequently held that the FSIA applies in civil actions as part of the “carefully calibrated scheme,” covering only civil actions, and had never applied the FSIA to a criminal case. Examining the statutory text and reading it in context, the majority noted that the FSIA specifically refers to the federal courts’ subject matter jurisdiction over “any nonjury civil action against a foreign state.”[8] The FSIA’s sole venue provision similarly refers to venue in a “civil action.” The FSIA’s service provisions deal with service of a “summons and complaint,” as well as answers and responsive pleadings and default judgments—all of which apply only in civil cases—while other provisions address civil litigation features like counterclaims and punitive damages.[9] The majority further observed that the FSIA referred to “litigants,” rather than prosecutors, and to immunity “from suit,” rather than criminal investigations and proceedings. By contrast, the majority noted, the FSIA does not contain any references to criminal proceedings.

The majority further noted that the FSIA appears in Title 28 of the United States Code, which deals largely with civil procedure, and not in Title 18, which deals with crimes and criminal procedure. The majority found additional support for its conclusion in a prior case in which the Court held that the FSIA does not apply to suits against individual officials, reinforcing the conclusion that the FSIA does not extend to certain “discrete context[s],” such as criminal proceedings.[10]

Halkbank pointed to a provision of the FSIA, Section 1604, which states that “[s]ubject to existing international agreements,” a “foreign state shall be immune from the jurisdiction of the courts of the United States and of the States” unless an exception to immunity applies.[11]  The majority held that this provision could not be read in isolation, but rather in the context of the entire statutory framework. Reading Section 1604 together with 28 U.S.C. § 1330, which provides district courts with jurisdiction over “any nonjury civil action against a foreign state,” the majority held that “the natural inference is that § 1604 operates exclusively in civil cases.”[12] 

Halkbank acknowledged that the FSIA’s jurisdictional immunities only apply in civil cases.  That only reinforced the majority’s conclusion that the FSIA did not apply to criminal proceedings, since it would be odd for most FSIA provisions to apply only in civil cases, but one, Section 1604, to apply in both civil and criminal cases.  According to the majority, “[t]he better and more natural reading” is that all of the FSIA provisions “operate in tandem within a single universe of civil matters.”[13] 

The majority noted Halkbank’s concern that if the FSIA does not apply, state prosecutors might bring criminal proceedings against foreign sovereigns and their agencies or instrumentalities. But the majority stated that it “must interpret the FSIA as written,” while noting that “it is not evident that the premise of Halkbank’s consequentialist argument is correct.”[14] In that regard, the Court noted (without suggesting outcomes) the lack of history of domestic-state attempts to prosecute foreign states in state courts, the possibility of a suggestion of immunity filed in such actions by the Executive Branch, possible application of foreign-affairs preemption, and ultimately potential Supreme Court review of immunity from such prosecutions.

Even though it held the FSIA did not apply, the majority found that the Second Circuit did not fully address the application of common law immunity and remanded for further proceedings on that issue.[15]

Justices Neil Gorsuch and Samuel Alito concurred in part and dissented in part. They agreed with the majority that Section 3231 provided the district court with subject matter jurisdiction but took the position that the FSIA applies to criminal proceedings. The dissenting justices argued that Section 1604 of the FSIA “sets forth the FSIA’s general immunity rule” and refers broadly to “the jurisdiction of the Courts of the United States and the States” over foreign states and their agencies or instrumentalities unless an exception to jurisdictional immunity applies.[16] 

The dissenting justices further argued that the fact that certain FSIA provisions refer to civil actions reinforces their conclusion because if Congress had intended to limit Section 1604 to civil actions, it would have added express language about civil actions similar to that in the other provisions.[17] They also noted that not all of the exceptions to jurisdictional immunity are limited to civil cases, noting that the commercial activity exception refers to “any case . . . in which the action is based upon a commercial activity . . . .”[18]  The dissenting justices then concluded that context cannot illuminate the meaning of Section 1604 because that provision is not ambiguous. Finally, they disagreed with the majority’s decision to remand for an analysis of common law immunity, arguing that such an analysis would present the lower court and the litigants “with an unenviable task” involving “[m]any thorny questions,” in contrast to the “simple rules” and “straightforward conclusion” provided by the FSIA.[19]

Justices Gorsuch and Alito nevertheless concurred in the result because they agreed with the Second Circuit that the “commercial activity” exception to jurisdictional immunity applied to Halkbank’s alleged activities.

Conclusion

Although it will take some time before the full ramifications of this decision are known, the Court’s decision in Halkbank has the potential to impact criminal prosecutions of foreign states, and foreign policy in a variety of ways. Among other things, the ruling may affect how courts apply canons of statutory construction to the FSIA, or how federal and state courts address the availability of common law sovereign immunity.  We will analyze those potential impacts and others in the coming weeks.

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[1] Case No. 21-1450, Decision available at https://www.supremecourt.gov/opinions/22pdf/21-1450_5468.pdf. 

[2] Samantar v. Yousuf, 560 U. S. 305 (2010).

[3] Aspects of this immunity will be addressed by the organizations charter, the international agreement on which the organization was formed, or perhaps immunity addressed in headquarters agreements.  Again, more analysis on this topic will follow.

[4] Decisionat 1.

[5] Id. at 1-2. 

[6] 7 Cranch 116 (1812).

[7] Decision at 3-5.

[8] Id. at 7. 

[9] Id. at 7-8. 

[10] Id. at 9.

[11] 28 U.S.C. § 1604.

[12] Decision at 10-11.

[13] Id. at 11. 

[14] Id. at 13-14.

[15] Id. at 14-15.

[16] Dissent at 2-3.

[17] Id. at 4.

[18] Id.

[19] Id. at 5-7.