The Supreme Court of the United States will hear oral arguments this week in a criminal case that largely occurred outside the United States itself. At issue in Türkiye Halk Bankasi v. United States is whether a foreign company can be held criminally accountable under U.S. law if it is owned by a foreign government. How the justices answer that thorny question could have significant implications for American foreign relations.
Halkbank, the common English-language name for Türkiye Halk Bankasi, is a major Turkish bank and lender. Its majority shareholder is the Turkish Wealth Fund, the sovereign-wealth fund owned and governed by the Republic of Turkey. (The U.S. government now uses the name Türkiye at the Turkish government’s recent request.) Halkbank is among the most prominent financial institutions in the Middle East, which has occasionally brought it into some of that region’s diplomatic conflicts.
In 2019, federal prosecutors in the Southern District of New York announced that they would bring fraud and money-laundering charges against Halkbank for its alleged role in helping Iran circumvent U.S. economic sanctions. The U.S. and other world powers have imposed harsh restrictions on commercial and financial transactions, in part to bring Tehran to the negotiating table over its nuclear program. According to federal prosecutors, Halkbank and its associates helped the Iranian government launder $20 billion in oil and gas revenue through deceptive transfers of food and gold bullion.
Those transactions eventually flowed through U.S. financial institutions; the bank also allegedly lied to the Treasury Department about the nature of its dealings with Iran. Halkbank has denied any wrongdoing. More importantly for this case, it has also claimed that the U.S. can’t prosecute it at all for the alleged scheme. Halkbank unsuccessfully claimed in the lower courts that, as an extension of the Turkish government, it has sovereign immunity and can’t face criminal charges in the U.S.
Sovereign immunity is, indeed, a kind of get-out-of-jail-free card for foreign governments. In its broadest theoretical sense, it means that any level or form of government—whether it be state, local, tribal, territorial, federal, or foreign—can’t be sued in court or be prosecuted for crimes. Just as medieval kings once proclaimed that they could do no legal wrong, so do their modern successors.
In most circumstances, the practical reality is more limited. Lawmakers in democratic countries have often carved out exceptions to sovereign immunity so their citizens can seek damages or redress for wrongs committed against them. Congress has also created mechanisms to sue individual officials if they violate your constitutional rights by—among many other things—searching your house without a warrant, denying your right to vote based on race, or refusing to grant a marriage license to you and your partner.
The federal government and the states derive their sovereign immunity from the Constitution. Foreign governments are also protected in U.S. courts by the aptly named Foreign Sovereign Immunities Act, or FSIA. Even before Congress passed that law in 1976, however, the courts recognized a common-law form of sovereign immunity that was rooted in the “law of nations,” the Constitution’s archaic term for international law. The Founding Fathers embraced the concept of sovereign immunity for foreign countries to help burnish the early republic’s credibility on the international stage.
In its brief for the court, Halkbank argued that sovereign immunity applied because the Republic of Turkey is its majority shareholder through its sovereign wealth fund. The bank also insisted that the Justice Department’s prosecution of the bank was without precedent in the annals of American history. “Until the decision below, no court had authorized the criminal trial of a foreign sovereign or its instrumentalities,” it claimed. “Nor did any administration attempt to prosecute foreign sovereigns for the first two centuries of the republic.”
The examples given by Halkbank to underscore this point are strange, to say the least. “President Madison did not indict Great Britain for arson for torching the White House in 1814,” the bank told the court. “President Roosevelt responded to Pearl Harbor by unleashing the full might of the American military against Japan, not a phalanx of prosecutors. Presidents Nixon and Ford did not turn to antitrust law to address the 1973 OPEC embargo; they chose diplomacy and sanctions. And President Clinton confronted Sudan’s role in bombing the U.S. Embassy in Kenya through retaliatory strikes and sanctions, not by conscripting U.S. Attorneys.”
It’s true that Madison did not bring criminal charges against British soldiers for burning down Washington. Nixon and Ford also did not use antitrust law against OPEC, which is not generally a criminal matter. But the U.S. did charge members of the Japanese government with war crimes after the country surrendered in 1945, with some charges brought against top military and civilian officials specifically for attacking Pearl Harbor without a formal declaration of war. Federal prosecutors also successfully brought cases against the individuals who bombed the embassy in Nairobi, even though they couldn’t really bring criminal charges against Sudan for harboring them. It is also somewhat awkward to see a major bank defend itself with comparisons to terrorist groups and one of the Axis powers.
On more stable ground, Halkbank also argued that the FSIA foreclosed the possibility that the Justice Department could prosecute the bank for skirting Iranian sanctions. It reasoned that since Congress went out of its way to describe the circumstances in which civil suits could overcome sovereign immunity in the FSIA, the legislature had implicitly ruled out criminal cases by not providing them with a similar framework. “Any other reading of the FSIA would reproduce in the criminal context the state of the world in the civil context Congress rejected by enacting the FSIA: courts and the executive [branch] muddling along without congressional guidance,” it argued.
The federal government pushed back against this reading on two levels. First, the Justice Department told the court that the FSIA doesn’t apply to criminal prosecutions at all because it doesn’t mention them. “The FSIA contains a grant of jurisdiction solely over civil cases, and then sets forth numerous procedural provisions that relate only to civil cases, without any similar provisions for criminal cases,” the government explained in its brief for the justices. “Indeed, the FSIA’s text does not provide direction for criminal cases at all, and its history suggests an exclusive congressional focus on civil actions.”
In other words, in the Justice Department’s view, congressional silence is implicit permission instead of an implicit restriction. Even if the court somehow thinks that the FSIA applies to criminal cases, however, the government still argued that the prosecution is valid under that law’s exception for commercial activities. It noted that the crux of the case against Halkbank involved “fraudulent financial transactions to evade U.S. sanctions, concealment of those transactions through misrepresentations to U.S. government officials, and laundering of restricted funds through the U.S. financial system,” which the government said amounted to “substantial contact” with “direct effects” within the U.S.
Halkbank rejected that interpretation outright. The bank argued that its activities were too far removed from U.S. soil, even with funds passing through U.S. financial institutions, to fall under the scope of the exemption. More importantly, however, Halkbank insisted that the activities in question were sovereign in nature, not commercial, because they were done at the behest of the Turkish government—a point that Halkbank said prosecutors had acknowledged when indicting the bank by describing the Turkish government’s orchestration of the scheme.
The Supreme Court is generally reluctant to hear cases involving foreign affairs. Previous generations of justices have concluded that such matters are better handled by Congress and the president, both of which have specific constitutional powers for diplomacy and war. The Roberts court has often adopted a narrow reading of laws that hold U.S. companies accountable in U.S. courts for wrongs that they and their subsidiaries commit overseas. In a 2019 case, for example, the justices reasoned that it would be impermissible to second-guess Congress by allowing child-slavery victims to sue Nestle under an eighteenth-century statute for acts that one of its business partners allegedly carried out in Côte d’Ivoire.
Allowing the Justice Department’s prosecution to go forward, warned Halkbank, could “[open] a Pandora’s box” in the realm of international diplomacy. Federal prosecutors, for their part, spoke of even direr consequences if sovereign immunity applies. “Under [Halkbank]’s theory, a corporation that is 50.1 percent owned by a foreign government could engage in rampant criminal misconduct affecting U.S. citizens—from stealing trade secrets, to hacking computer systems, to advancing a foreign adversary’s nuclear program, to providing material support to terrorists—while facing no criminal accountability at all,” the Justice Department told the court. A ruling is expected by the end of June.