U.S. Supreme Court
The Supreme Court's Halkbank Decision Explained
On April 19, the Supreme Court delivered a decision in Türkiye Halk Bankasi S.A. v. United States (Halkbank) that may make it easier to prosecute foreign sovereign entities, while leaving some thorny questions of immunities unresolved. As I wrote in January, the case stemmed from the Southern District of New York’s indictment of Halkbank, which is majority-owned by the government of Turkey, on charges of sanctions evasion. On an interlocutory appeal of a motion to dismiss, Halkbank argued that it was exempt from criminal prosecution due to its status as a foreign sovereign instrumentality. The bank relied on two sections of the U.S. Code, as well as the doctrine of foreign sovereign immunities as general common law, to argue that it could not be prosecuted. In its 7-2 opinion, the Court delivered a large win for the government’s position, definitively ruling that the Foreign Sovereign Immunities Act (FSIA) grants immunity only in civil cases. The Halkbank saga, however, is far from over, as the Court then remanded contentious issues of foreign sovereign immunities under common law to the circuit court.
Background and Procedural Posture
The case stems from allegations that Halkbank and its executives orchestrated a “multi-year scheme” to “violate and to evade and avoid” U.S. sanctions against Iran. The U.S. attorney for the Southern District of New York indicted Halkbank on six criminal charges in October 2019, alleging that Halkbank knowingly facilitated illegal transactions that allowed proceeds from Iranian oil and natural gas sales to be laundered into gold and transferred back to Iranian entities. The indictment further asserted that Halkbank facilitated transactions “fraudulently designed to appear to be purchases of food and medicine by Iranian customers, in order to appear to fall within [sanctions exemptions].”
Halkbank filed a motion to dismiss on the grounds that its status as a foreign sovereign-owned entity precluded prosecution under the FSIA and general common law. The U.S. District Court for the Southern District of New York denied Halkbank’s motion to dismiss: Judge Richard Berman read the FSIA to apply exclusively to civil cases and stated, on the issue of common law immunities, that courts would defer to the stance of the executive branch.
Halkbank then filed an interlocutory appeal of that opinion to the U.S. Court of Appeals for the Second Circuit, which affirmed the district court’s decision. The Second Circuit first found general jurisdiction over foreign sovereigns under 18 U.S.C. § 3231. On the FSIA, the Second Circuit declined to reach the issue of its application to criminal cases: It found that, in any case, Halkbank’s prosecution would be allowed under the FSIA’s “commercial activities” exemption.
Halkbank petitioned for certiorari in May 2022, which the Supreme Court granted in October, over the opposition of the Justice Department. The Court granted certiorari over whether U.S. district courts may exercise subject matter jurisdiction over criminal prosecutions against foreign sovereigns and their instrumentalities under 18 U.S.C. § 3231, in light of the FSIA and under common law. Oral arguments were heard in January 2023. Halkbank argued that § 3231, the general grant of criminal jurisdiction to federal courts, cannot be read to apply to foreign sovereigns. On the FSIA, Halkbank argued that the act extends its general grant of sovereign immunity in both civil and criminal cases, but that its subset of exceptions (including a commercial activities exemption) apply only in civil cases. As a last resort, Halkbank also argued that it is protected by sovereign immunity under common law. The government, conversely, argued that 18 U.S.C. § 3231 extends criminal jurisdiction over foreign sovereigns and that the structure and context of the FSIA support an inference that it covers only the civil immunities of foreign sovereigns. On common law criminal immunities, the government argued that the courts should defer to executive guidance on whether to allow prosecutions and that there are marked differences between a sovereign and a sovereign-owned entity.
The Supreme Court Decision
In the Court’s opinion, published on April 19, Justice Brett Kavanaugh wrote for the majority, joined by Chief Justice John Roberts and Justices Clarence Thomas, Sonia Sotomayor, Elena Kagan, Amy Coney Barrett, and Ketanji Brown Jackson. The Court affirmed in part the Second Circuit’s decision and vacated and remanded in part for further arguments. Justice Neil Gorsuch filed a separate opinion concurring and dissenting in part and was joined by Justice Samuel Alito. Kavanaugh’s majority opinion sided with the government on the scope of 18 U.S.C. § 3231 and the scope of the FSIA but left the issues of foreign sovereign immunity for the lower courts to decide on remand.
Scope of 18 U.S.C. § 3231
The Court first ruled that 18 U.S.C. § 3231 grants background jurisdiction over foreign sovereigns in criminal cases. This statute forms the basis of the criminal jurisdiction of the federal courts; Halkbank had argued that, because the statute does not explicitly mention extension to foreign sovereigns, it must be read to preclude such prosecutions. The Court disagreed: Kavanaugh wrote that the “sweeping language” of § 3231 “plainly encompasses” Halkbank’s prosecution. Kavanaugh discounted Halkbank’s arguments relying on other statutes that “expressly refer to actions against foreign states and their instrumentalities.” He called such an interpretation an “atextual limitation” of § 3231’s “broad jurisdictional grant.”
Scope of the FSIA
In a precedential move, the majority ruled that the FSIA applies only in civil cases and cannot grant immunity to Halkbank against criminal prosecution. The Court first looks to the text of the FSIA, finding from its focus on civil matters and “silen[ce]” on criminal suits that the statute applies only to civil cases. The first provision of the FSIA “indicates that the statute exclusively addresses civil suits.” And the system of exemptions and procedural rules given in §§ 1605–1607 of the act present a “carefully calibrated scheme [of venue, removal, and exemptions] that relates only to civil cases.” The existence of such a scheme for only civil exceptions supports an inference that the whole act was intended to apply exclusively to civil cases.
Kavanaugh looks to other choices of words in the text (such as holding foreign states “liable” and protecting the rights of U.S. “litigants”) as pointing toward an exclusively civil scope. The majority also relies on the context and purpose of the statute, such as its positioning within a U.S. code chapter on civil cases and the Court’s 2010 decision in Samantar v. Yousuf, which declined to extend the FSIA to suits against foreign officials.
Halkbank had argued that several provisions of the FSIA supported an inference that the act applied to criminal prosecutions. Section 1604, on which Halkbank relied, sets out that “foreign states shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in [the following sections].” Halkbank argued that, because the following §§ 1605–1607 specify that their exemptions apply only to certain civil cases, 1604 should be read as a general immunity from jurisdiction over both civil and criminal cases. Curtis Bradley and Jack Goldsmith agreed in Lawfare with Halkbank’s interpretation of § 1604, arguing that the section’s “plain meaning” suggests it covers criminal as well as civil cases. Kavanaugh, however, disagreed, writing that § 1604 must be read “in tandem” with § 1330(a), which “confers district-court jurisdiction” over a universe of civil cases against foreign states. “Section 1604 then confers immunity on foreign states unless an enumerated statutory exception applies,” Kavanagh wrote.
Kavanaugh also dispatched with three additional arguments of Halkbank on the scope of the FSIA. First, Halkbank had pointed to one sentence from Amerada Hess stating that the FSIA was the “sole basis for obtaining jurisdiction over a foreign state in federal court,” which the majority did not analogize to criminal cases. Second, Halkbank raised that the courts and executives would lack “congressional guidance” if the FSIA were deemed not to apply to criminal cases. And last, Halkbank argued that opening up criminal jurisdiction to foreign states could lead to state prosecutors acting against foreign states with poor foreign policy consequences. However, on these last two points, the majority opinion declined to have these arguments change their interpretation of the statute’s scope. (On the issue of state prosecutions and the government’s response at oral arguments, see Bradley and Goldsmith’s Lawfare piece from January.)
Justice Gorsuch’s Dissent
Justice Gorsuch, joined by Justice Alito, wrote a separate opinion concurring in part and dissenting in part. Gorsuch agreed with the majority’s holding that § 3231 covers foreign sovereigns but would have decided that the FSIA extends immunity in both criminal and civil cases. Gorsuch, as opposed to the majority, read § 1604 of the FSIA (that “a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in §§ 1605 to 1607 of this chapter”) as the operative provision setting out the FSIA’s scope. As § 1604 does not cabin out criminal prosecution, Gorsuch argues, the statute should be properly read to apply to criminal cases as well.
Gorsuch argues that the majority’s bases for limiting the scope of the FSIA do not “pack the punch” necessary to displace the “plain statutory text” of the act. The majority’s reliance on § 1330, Gorsuch argues, shows precisely the opposite of Kavanaugh’s intended conclusion: that had Congress wished to limit the FSIA to civil cases in § 1604, it knew how to do so and would have followed the same blueprint of the text of § 1330. Gorsuch also disagrees with the majority’s inference that, because the FSIA’s scheme of exemptions and procedure apply to civil cases, the whole act should apply only civilly: Congress may have intended just that result.
Gorsuch, however, would have determined that the act’s criminal activities exemption applies in this case to Halkbank’s activities, at least as alleged so far in the pleadings. As such, he would allow the government’s case against Halkbank to proceed and remand to the district court for continued pleading.
The Court’s Choice of Textualism in Analysis of the FSIA
The Court’s treatment of the FSIA shows a more moderate approach to textualism in practice. The government appears to be on sound footing that the enacting Congress did not intend for the FSIA to extend to criminal cases, as Chimène Keitner (a Lawfare contributing editor) and Mark Feldman (who led the drafting of parts of the FSIA during his time as State Department deputy legal adviser) explain in their amicus briefing. They write:
[T]he FSIA was drafted purely with civil litigation in mind. It did not modify or otherwise affect the criminal jurisdiction of the state or federal courts. … The attorneys in the Justice Department and the State Department who drafted the statute, and the Congress that passed it, were addressing problems arising from private civil litigation against foreign states and their instrumentalities, not criminal law enforcement.
However, a strong argument from the drafters of the statute does not change the text of the FSIA itself, which (as Gorsuch, Halkbank, and academics have argued) does not make explicit that distinction. As Gorsuch and others wrote, nothing in the provisions of the statute required or noted that it applied exclusively to civil cases. To make that conclusion, Kavanaugh’s majority looked beyond the text of the act itself to its placement within the code and inferences from its language and structure.
This interpretation was not a foregone conclusion: Taking the statute at the most literal bounds of textualism could have led to an overall illogical result (an act that draws out a detailed framework of exemptions in civil cases but completely bars a whole universe of criminal cases). But the justices could have—as the dissent did—simply decide that Congress works in mysterious ways and that must have been the result the FSIA’s drafters had intended. Instead, though, the majority’s resulting analysis accumulated inferences by piecemeal, building up to a result most consistent with Congress’s original intent (as shown through decidedly nontextualist sources). Their conclusion shows a divide in the flavor of statutory interpretation (or, perhaps more accurately, flavor of textualism) favored by the justices, with Gorsuch’s uber literal reading losing out to a more measured form of purposivism-lite.
Common Law Immunity and Remaining Issues
While the Court delivers sure answers about the FSIA, however, it leaves hanging those who were hoping for guidance in the most contentious legal issue raised by the case: the scope of the doctrine of state immunities and the state of general common law within federal law. Halkbank’s remaining legal argument, which it will now raise again before the Second Circuit, is that it is immune from federal prosecution as a matter of general common law. The Court’s punt on this issue leaves the Second Circuit to decide, without much guidance from Court precedent, a series of cascading common law questions. Do foreign sovereign immunities apply here as general common law? Is there still any general common law? If yes, whence does it come, and what defines it? Is it similar to (or identical to) the rules of customary international law governing state immunities?
Bradley and Goldsmith surveyed the wide range of options on common law immunities that the Court might have adopted after deciding that the FSIA did not apply. Bradley and Goldsmith ultimately endorse the government’s position in its briefing before the Court, that the courts should “recognize executive authority to make determinations about sovereign immunity issues that are not covered by the FSIA.” However, this question of executive deference on common law immunities is far from settled. Ingrid (Wuerth) Brunk wrote in Lawfare last week reiterating the argument that she also raised in her and William Dodge’s amicus brief: that courts are not bound to follow the immunity decisions of the executive but can make their own determinations based on common law. Also implicated are questions of separation of powers and foreign affairs exceptionalism that risk, in Gorsuch’s words, “relegating courts to the status of potted plants.”
The government may also argue that, even if the Second Circuit is left to make its own immunity determination, it should treat Halkbank (as a foreign-owned entity that resembles a private enterprise) differently from a foreign sovereign qua sovereign. This argument was echoed by Keitner and Feldman in their amicus brief.
The Second Circuit could make a broad ruling on any of these issues, setting the stage for a (possible) second appeal and a Halkbank II before the Court in future terms, which may set the record straight once and for all. Perhaps more likely, the circuit court may cabin its ruling in a way such that it does not reach the largest issue—by relying on executive deference or on distinctions between sovereigns and state-owned entities. Either way, the Court’s reticence in this decision to reach a conclusion on the immunities issue leaves the lower court with, as Gorsuch writes, the “unenviable task” of resolving the “many thorny questions” implicated by the parties’ arguments.