U.S. Supreme Court Rules That the FSIA Does Not Grant Foreign State-Owned Entities Immunity From Prosecution
The Court held that the Foreign Sovereign Immunities Act ("FSIA") does not apply to criminal prosecutions, but left open the possibility that instrumentalities of foreign states may have common law immunity from prosecution.
On April 19, 2023, the U.S. Supreme Court issued its ruling in Turkiye Halk Bankasi v. United States, addressing the scope of foreign sovereign immunity in criminal prosecutions against instrumentalities of a foreign state. The case arose from the Department of Justice's 2019 indictment of Halkbank, a bank majority-owned by the Republic of Turkey, for offenses relating to an alleged conspiracy to evade U.S. economic sanctions on Iran. Halkbank moved to dismiss the indictment on grounds of foreign sovereign immunity under both the FSIA and common law immunity principles.
The district court denied the motion, and the Second Circuit affirmed, assuming without deciding that the FSIA applied, but ruling that the alleged conduct fell within the FSIA's commercial activities exception to immunity. As to common law immunity, the Second Circuit held—with limited analysis—that, to the extent it was not displaced by the FSIA, it both incorporated an equivalent commercial activities exception and was granted at the prerogative of the Executive Branch, which had necessarily determined that no immunity should apply when it brought the charges.
In a 7–2 decision, the Court held that the FSIA does not apply to criminal prosecutions, as well as that U.S. courts have subject-matter jurisdiction over criminal prosecutions of instrumentalities of foreign states for offenses against the laws of the United States. The Court found that the FSIA applied only to civil actions against foreign states and their instrumentalities. The Court did not, however, decide whether the prosecution of Halkbank was barred by foreign sovereign immunity under the common law. Instead, the Court remanded the case to the Second Circuit to reconsider that issue, stating that the Circuit had not "fully consider[ed]" the parties' arguments regarding common law immunity or the extent to which common law immunity operates differently in the criminal context. As a result, the viability of sovereign immunity defenses to the criminal prosecution of foreign-stated owned entities remains uncertain.
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