Second Circuit Rules Foreign State-Owned Bank Does Not Have Sovereign Immunity From Criminal Prosecution

The U.S. Court of Appeals for the Second Circuit recently held in U.S. v. Halkbank that a Turkish state-owned bank did not have sovereign immunity from criminal charges that it engaged in a conspiracy to launder $20 billion of Iranian oil and gas proceeds in violation of U.S. sanctions.

While the district court had joined other Circuit courts in ruling that the Foreign Sovereign Immunities Act (“FSIA”) does not confer on foreign sovereigns immunity from criminal prosecutions, the Second Circuit declined to decide that unsettled issue, except insofar as it held that the FSIA is not the only source of criminal jurisdiction over a foreign sovereign. Instead, the Second Circuit assumed arguendo that the FSIA confers immunity in the criminal context and held that the conduct at issue would fall under the FSIA’s commercial activity exception to immunity.

The Second Circuit did, however, hold that common-law sovereign immunity defenses are categorically precluded by the FSIA and in any event inapplicable where the U.S. government chooses to bring criminal charges. And in reaching these rulings, the Second Circuit also confirmed that a foreign sovereign has a right to interlocutory appeal from a decision rejecting sovereign immunity in criminal proceedings.

Please click here to read the full alert memorandum.