Turkish bank urges Supreme Court to halt prosecution over dodging Iran sanctions

Print Friendly, PDF & Email

A bank controlled by Turkey told the Supreme Court Jan. 17 that it should not be criminally prosecuted in U.S. courts for allegedly helping Iran defy U.S. economic sanctions because it enjoys legal immunity as an arm of the Turkish government.

The petitioner in the case of Turkiye Halk Bankasi A.S. v. United States, court file 21-1450, also known as Halkbank, is 75 percent owned by the Turkish Wealth Fund, which in turn is owned by the Republic of Turkey.

Istanbul-based Halkbank is accused of participating in a criminal conspiracy involving money laundering, bank fraud, and assisting terrorism-sponsoring Iran in evading U.S. economic sanctions.

The case has made U.S. relations with Turkey, a NATO ally, difficult at times. Turkish President Recep Tayyip Erdogan said the U.S. government’s decision to prosecute the bank was “ugly” and “unlawful” and has urged that the case be withdrawn.

A trial against Halkbank has been put on hold pending the Supreme Court’s ruling in the appeal.

In 2019, federal prosecutors filed charges against Halkbank saying it helped to launder around $20 billion in proceeds from the sale of Iranian oil and natural gas. Prosecutors said the bank used money servicing outfits and front companies in the United Arab Emirates, Iran, and Turkey in defiance of the sanctions regime.

The bank argues it is immune to U.S. prosecution under the Foreign Sovereign Immunities Act (FSIA). Specifically, the bank says that U.S. district courts lack the power to entertain criminal prosecutions against foreign sovereigns and their instrumentalities under the act.

The act itself restricts the role of the executive branch in lawsuits against foreign governments and their entities by preventing the U.S. Department of State from making determinations regarding state immunity.

But the U.S. Court of Appeals for the 2nd Circuit rejected the bank’s immunity claim, holding that authorities could pursue Halkbank in the courts because the behavior complained of was commercial activity not protected by sovereign immunity.

In its petition (pdf), the bank said the prosecution was “unprecedented” and that the circuit court ruling would erode the principle of sovereign immunity because it “green lights future indictments of any sovereign state.”

The U.S. Department of Justice argues that the FSIA deals only with civil matters, not criminal prosecutions.

During oral arguments, Halkbank attorney Lisa Blatt said the United States “does not dispute that criminal trials against sovereigns were unthinkable in 1789, would violate international law today, are unprecedented anywhere, and would risk retaliation.”

“But all the same is true for sovereign instrumentalities, which by definition are sovereign,” she said.

Section 1604 of the FSIA “independently bars criminal jurisdiction,” providing that “foreign states shall be immune from the jurisdiction of federal and state courts.”

“Reading the word ‘civil’ into that text would mean Congress created special guardrails in civil cases but threw sovereigns to the wolves in criminal cases,” Blatt said.

The executive branch “applauds this result, arguing that it alone makes the common law of criminal immunity. But the executive does not make the law, and an immunity waivable by your prosecutor is no immunity at all.”

The government’s conduct here “contradicts every common law benchmark, history, international practice, reciprocity, and the choice already made by Congress to define foreign states to include instrumentalities,” she said.

U.S. Deputy Solicitor General Eric Feigin said Halkbank was overreaching.

The bank “is asking for an extraordinary and unprecedented rule under which any foreign government-owned corporation could become a clearinghouse for any federal crime, including interfering in our elections, stealing our nuclear secrets, or something like here, evading our sanctions and funneling billions of dollars to an embargoed nation, using our banks, and lying to our regulators,” Feigin said.

“What they’re trying to do is ask courts, which … have modestly … recognized [they] are the least capable branch of doing this, to invent a new immunity rule that overrides the policy judgments of the federal government,” he said.

Justice Brett Kavanaugh pressed Blatt.

“I think it’s pretty bizarre for this court to tell the president of the United States as a matter of his national security exercise that even though the Constitution doesn’t prohibit what you’re doing, even though a statute doesn’t prohibit what you’re doing, this court’s going to prohibit your exercise of national security authority,” Kavanaugh said.

Justice Amy Coney Barrett said, “Maybe one reason we don’t see these prosecutions is because the executive understands foreign countries to have absolute immunity.”

In the founding period, the first Congress “made it a crime to prosecute a … diplomat,” Blatt replied. “And it seems inconceivable that the first Congress thought that a district court had jurisdiction to convict a foreign country.”

The United States, Blatt said, has “over 90 corporations” abroad that foreign governments could retaliate against.

“We have Voice of America, Export-Import Bank, and one person’s freedom fighter is another person’s terrorist. Our … U.S. instrumentalities do stuff abroad and could be seen to aid and abet terrorism,” she said.

Kavanaugh shot back: “That’s why we have a president who’s elected to protect the national security of the United States and consider those issues.”

“What expertise do we have to balance all those considerations?” he said.

At one point, Blatt expressed frustration as the justices disagreed with her interpretation of a previous legal precedent.

“I read the opinion, but there’s nine of you and one of me and you have all the power, so you’re going to read the opinion how you want,” the lawyer said.

Justice Neil Gorsuch suggested it would be dangerous to allow prosecutions to move forward.

“If we hold that 1604 doesn’t apply to criminal cases, then states would 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.”

Addressing Feigin, Justice Sonia Sotomayor cautioned against giving federal and state prosecutors “the right to insult another nation” by prosecuting them.

The justices are expected to rule on the appeal by June.

This article by Matthew Vadum appeared Jan. 17, 2023, in The Epoch Times.