Halkbank Ruling: Rejecting Immunity Claim and Its Implications for State-Owned Entities in Violation of US Sanctions.
In 2020, the Turkish state-owned Halkbank was convicted on charges of violating US sanctions on Iran. Halkbank was accused of facilitating a multi-billion-dollar scheme to evade US sanctions by allowing Iranian entities to access the US financial system. The bank was fined $8.9 billion and several of its executives were indicted on criminal charges. In March 2021, a US appeals court vacated the conviction of Halkbank on the grounds that the bank was not properly notified of the charges against it.
With the decision of the Supreme Court on April 2023, the case was sent back to the lower court for further proceedings. The Supreme Court addressed the issue of Halkbank's claim for immunity from prosecution based on its status as a state-owned bank. The court rejected Halkbank's argument that it is entitled to immunity under the Foreign Sovereign Immunities Act (“FSIA”), which governs lawsuits against foreign countries in U.S. courts. However, the majority opinion stated that the 2nd Circuit failed to fully consider whether the bank could claim immunity under common law principles.
It is worth noting that the Biden administration has contended that the FSIA does not apply to criminal prosecutions and, even if it did, Halkbank's alleged misconduct falls within the commercial activity exception to sovereign immunity. In a previous ruling, the 2nd Circuit had already concluded that even if the FSIA could provide immunity to Halkbank, the conduct for which it was charged fell under the commercial-activity exception.
The Supreme Court's decision, while it rejected Halkbank's primary arguments based on federal laws, remanded the case to an appeals court for further consideration of potential defenses related to common-law principles. This approach drew criticism from two dissenting justices who believed a definitive ruling should have been issued.
If the Halkbank ruling stands, it could potentially create an immunity argument from other foreign state-owned entities accused of violating US sanctions claiming that they are immune from prosecution under FSIA.
Overall, the Halkbank ruling and its potential implications highlight the complex legal issues involved in prosecuting state-owned entities accused of violating US sanctions. It remains to be seen how the case will ultimately be resolved and how it may impact future cases involving similar allegations.