US Vies for Jurisdiction to Prosecute Turkish-Owned Bank for Sanctions Evasion at High Court
Congress explicitly gave district courts jurisdiction over the intended U.S. prosecution of a sovereign-owned bank for evading U.S. sanctions, the government argued in a brief vying for jurisdiction for the case at the Supreme Court. The U.S. said that nothing in the common law or the Foreign Sovereign Immunities Act prevents Turkish state-owned bank Halkbank "from facing criminal consequences for violating U.S. law." Allowing the "novel claim of immunity" to thwart the criminal prosecution of the bank "would be unprecedented" and is unsupported by the FSIA, since its "text, structure, and history demonstrate that it does not apply to criminal cases," the brief said.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
In October 2019, Halkbank was charged with fraud, money laundering and conspiracy to violate the International Emergency Economic Powers Act after allegedly working with Iran to evade U.S. sanctions (see 1910160015). The case was brought to the U.S. District Court for the Southern District of New York, where a federal judge allowed the prosecution to proceed, finding that the FSIA did not in fact extend to criminal cases and that if it did, there were commercial activity exemptions in the act allowing for prosecution of this case.
The case was appealed to the U.S. Court of Appeals for the 2nd Circuit, which largely held the district court judge's line, finding that Halkbank was not immune from these criminal charges (see 2110260042). For starters, a panel at the court rejected Halkbank's argument that the FSIA was the sole basis for jurisdiction in this instance. Instead, federal district courts have "original jurisdiction" of all offenses committed against the laws of the U.S under 18 U.S.C. Section 3231.
Halkbank took the matter to the Supreme Court, which decided to hear the case. Responding to Halkbank's claims that Section 3231 could be viewed as a "common-law immunity argument," the U.S. told the highest court that this claim is "unsound" since the immunity typically afforded states is "not extended to the commercial activities of foreign-government-owned corporations ... let alone when the Executive Branch has determined that it should not." Common law further recommends deference to Executive Branch decisions, the government claimed.
"Petitioner offers no meaningful support for a contrary approach that would altogether foreclose the United States from prosecuting a foreign-governmentowned corporation, no matter how egregious its criminal acts," the brief said. "Petitioner’s international-law authorities all address prosecutions of foreign states qua states, not foreign-government-owned corporations. And to the extent that policy consequences are relevant, they decisively support allowing this prosecution to proceed. Doing otherwise would jeopardize our national security by permitting corporations that are merely 50.1% owned by a foreign government to engage in rampant criminal conduct affecting U.S. citizens, while facing no criminal consequences."
The government said the FSIA does not create an exemption for criminal cases, though even if it did, the prosecution is still valid under the commercial activity exception. "The conduct described in the indictment falls within the FSIA’s commercial-activity exception, 28 U.S.C. 1605(a)(2)," the U.S. said. "The gravamen of the prosecution includes petitioner’s participation in 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. That conduct is commercial in nature and has substantial contact with and direct effects in the United States."