Supreme Court Refuses to Shield Halkbank From Criminal Case (1)

The US Supreme Court refused to shield Turkey’s state-owned Halkbank from criminal charges that it helped Iran evade economic sanctions, rejecting some of the bank’s sovereign immunity arguments.

The ruling sends the case back to a federal appeals court, where Halkbank will have a chance to press an additional line of argument.

The bank wasn’t immediately available for comment. Following the news on the Supreme Court decision its stock price rose as much as 10% to 12.55 liras in Istanbul, the most since Jan. 16.

The justices rejected Halkbank’s core contentions that federal courts can’t consider criminal cases against foreign governments and the companies they own and that the 1976 US Foreign Sovereign Immunities Act shields the bank from prosecution.

Writing for the court, Justice Brett Kavanaugh said the FSIA shield applies only to civil lawsuits, not criminal prosecutions.

“Congress enacted a comprehensive scheme governing claims of immunity in civil actions against foreign states and their instrumentalities,” Kavanaugh wrote. “That scheme does not cover criminal cases.”

But Kavanaugh also said the New York-based 2nd US Circuit Court of Appeals hadn’t fully considered a separate Halkbank argument. The bank contends the prosecution is barred under “common law,” the judge-made set of legal rules that sometimes apply when no statute governs.

“We express no view on those issues,” Kavanaugh wrote.

Two justices, Neil Gorsuch and Samuel Alito, said they would have ruled definitively that the prosecution of Halkbank can go forward.

The charges against Halkbank have been a major source of tension between the US and Turkey. Prosecutors allege that Halkbank helped free up $20 billion of restricted Iranian funds and helped launder at least $1 billion through the US financial system.

The case is Turkiye Halk Bankasi v. United States, 21-1450.

(Updates with stock movement in third paragraph, excerpt from opinion in sixth.)

--With assistance from Ercan Ersoy.

To contact the reporter on this story:
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

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