2nd Circuit Denies Turkish Bank Foreign Immunity in Sanctions Evasion Case
Turkish state-owned bank Halkbank is not shielded from "common-law foreign sovereign immunity" in the U.S. government's suit against the bank for sanctions evasion, the U.S. Court of Appeals for the 2nd Circuit said earlier this week, ruling that the U.S. may prosecute it on charges that it helped Iran evade U.S. sanctions (United States v. Turkiye Halk Bankasi, 2nd Cir. # 20-3499).
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Judges Amalya Kearse, Jose Cabranes and Joseph Bianco struck down the bank's immunity claim to allow the prosecution to proceed in the case, which had been returned to the appellate court after the Supreme Court said the Foreign Sovereign Immunities Act doesn't apply to criminal cases (see 2304190064). The Supreme Court remanded the case to address Halkbank's claim that common-law immunity principles operate differently in criminal cases than in civil cases and afford the bank immunity.
But the 2nd Circuit sided with the U.S. in finding that deference is owed to the "Executive Branch’s determination as to whether a party should be afforded common-law foreign sovereign immunity." The court said that deference takes hold "regardless of whether the Executive seeks to grant or, as in this case, deny immunity," adding that it applies equally across criminal and civil cases.
"We find no basis in the common law to conclude that a foreign state-owned corporation is absolutely immune from prosecution by a separate sovereign for alleged criminal conduct related to its commercial activities, and not to governmental functions," the court said.
Since the bank is accused of criminal conduct involving its commercial activities, the court deferred to DOJ's finding that Halkbank doesn't have immunity.
The court's analysis was rooted in the 1812 Supreme Court case Schooner Exchange v. McFaddon, which established the principle that immunity on foreign sovereigns "depended on the consent of the Executive." The judges agreed with the U.S. claim that the federal prosecution of Halkbank is a reflection of the Executive's decision that immunity isn't warranted here.
Halkbank claimed that courts can only defer to the executive branch's position to apply immunity -- and not to deny it -- and also that this deference only extends to civil cases. The court rejected both notions, highlighting the Supreme Court's principle that, in foreign immunity cases, "courts should not so act as to embarrass the executive arm in its conduct of foreign affairs." The court added that it found "nothing in the common law that suggests that the deference afforded to the Executive's determination is limited to civil cases."
The bank said its conduct amounted to "political or public acts," extending it immunity under common law, though the court disagreed. Noting the allegations in the indictment, the court said Halkbank allegedly "used money service businesses and front companies" and took part in various illegal transactions to benefit Iran. The transactions were carried out using private banking channels and are "far more of the character of a private commercial act than a public or political act," the decision said.
The allegations that the evasion scheme came from Halkbank's designation as the "repository of Iranian oil proceeds" and benefited Turkey's government by "making its economy appear stronger" don't make the bank's conduct political acts, the court said. A motivation to boost the national economy "is insufficient to confer immunity to otherwise commercial conduct," the opinion said.