Supreme Court Confirms that the FSIA Does Not Apply to Criminal Cases

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U.S. courts have long held that the Foreign Sovereign Immunities Act (FSIA) provides the sole basis for a U.S. court to obtain jurisdiction over foreign states and their instrumentalities in civil cases. On April 19, 2023, in Turkiye Halk Bankasi A.S., aka Halkbank v. United States (“Halkbank v. U.S.”), the Supreme Court held for the first time that a separate statute – 18 U.S.C. § 3231 – provides the basis for jurisdiction over foreign states and their instrumentalities in criminal cases and that the FSIA does not apply to criminal cases. The FSIA therefore does not grant immunity from criminal prosecution to foreign states and their instrumentalities.

The Court, however, did not decide whether foreign states might still be entitled to common-law immunity from criminal prosecution. It remanded that issue to the U.S. Court of Appeals for the Second Circuit (New York).

Lower Court Proceedings

In 2019, the U.S. government indicted Halkbank for an alleged “multi-year conspiracy to evade economic sanctions imposed by the United States on Iran.” Halkbank is “a bank whose shares are majority-owned by the Turkish Wealth Fund, which in turn is part of and owned by the Republic of Turkey.” According to the indictment, Halkbank, with the assistance of high-ranking Turkish government officials, laundered billions of dollars of Iranian oil and gas proceeds through the global financial system, including the U.S. financial system, in violation of U.S. sanctions and numerous federal statutes.

Halkbank moved to dismiss the indictment on the ground that it was entitled to sovereign immunity from criminal prosecution under the FSIA. The U.S. District Court for the Southern District of New York denied Halkbank’s motion and the Second Circuit affirmed. Halkbank then appealed to the Supreme Court.

Supreme Court Decision

On April 19, 2023, in a majority decision joined by seven justices, the Supreme Court held that U.S. courts have subject matter jurisdiction over criminal prosecutions of foreign states and their instrumentalities under 18 U.S.C. § 3231, and that the FSIA does not apply to criminal cases, it only applies to civil cases. The FSIA therefore does not grant foreign states and their instrumentalities immunity from criminal prosecution.

The Court’s analysis was primarily based on the text of 18 U.S.C. § 3231 and the FSIA. The Court found that 18 U.S.C. § 3231 contains “sweeping language” which “opens federal district courts to the full range of federal prosecutions for violations of federal criminal law” including the prosecution of foreign states and their instrumentalities.

With regard to the FSIA, the Court started with 28 U.S.C. § 1330 which “grants district courts original jurisdiction over any nonjury civil action against a foreign state[.]” The Court concluded that the “FSIA [] sets forth a carefully calibrated scheme that relates only to civil cases.” The Court observed, for example, that the venue provision of the FSIA refers only to venue in a “civil action” and that the act provides for the removal to federal court of a “civil action” brought in state court. Conversely, the Court highlighted that the FSIA does not once mention criminal proceedings.

The Court also raised and considered a number of policy arguments that Halkbank made including Halkbank’s argument that “if the FSIA does not apply to criminal proceedings, then state prosecutors would also be free to commence criminal proceedings against foreign states and their instrumentalities.” The Court dismissed that argument, falling back on the text of the FSIA which “simply does not grant immunity to foreign states and their instrumentalities in criminal matters.” The Court also questioned the legitimacy of Halkbank’s concern, indicating that a state prosecution of a foreign state or instrumentality was unprecedented and that there were likely political and judicial remedies available if that were to happen.

Justices Gorsuch and Alito concurred in part and dissented in part. They agreed that federal courts have subject matter jurisdiction over federal criminal prosecutions, but would have held that the FSIA applies equally in such cases and in civil cases. They believed that the FSIA was meant to be “a comprehensive framework for resolving any claim of sovereign immunity” and, like the Second Circuit, they would have found that the commercial activity exception to sovereign immunity applied. On the other hand, the dissenters worried that punting on the common-law immunity claims would only generate more questions than answers.

Conclusion

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The Supreme Court’s decision in Halkbank v. U.S. clarified that the FSIA does not apply to criminal cases. But the Court left open the question of whether a foreign state can assert sovereign immunity from criminal prosecution under common law.