FSIA Does Not Protect Rogue State-Owned Actors - Justices


The U.S. Supreme Court has rejected Turkey's state-owned Halkbank's claim that it is protected under the 1976 Foreign Sovereign Immunities Act (FSIA), which limits the jurisdiction of American courts over lawsuits against foreign countries. The court ruled that the FSIA does not provide foreign states and their instrumentalities with immunity from criminal proceedings, according to conservative Justice Brett Kavanaugh.

Halkbank has been trying to avoid criminal charges in the United States for allegedly helping Iran evade American economic sanctions. The majority of the Supreme Court found that the 2nd Circuit did not fully consider whether the bank has immunity under "common law" principles.

In a dissenting opinion, Justice Neil Gorsuch argued that the FSIA does apply but that the bank's prosecution would still be allowed to proceed under the law's exceptions for commercial activity in or affecting the United States. He criticized the majority's decision for complicating the law unnecessarily and stated that lower courts lack guidance on resolving immunity disputes using common law.

President Joe Biden's administration maintained that the FSIA does not apply to criminal prosecutions and that Halkbank's actions fell under the law's exception to sovereign immunity for misconduct involving commercial activities. The U.S. government has been pursuing criminal matters against foreign government-owned companies for at least 70 years.

U.S. prosecutors accused Halkbank of converting oil revenue into gold and cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds. They also alleged that Halkbank helped Iran secretly transfer $20 billion of restricted funds, with at least $1 billion laundered through the U.S. financial system.

The 2nd Circuit in 2021 ruled against Halkbank, concluding that even if the FSIA law shielded the bank, the conduct for which it was charged fell under the commercial-activity exception.