The U.S. Supreme Court on Wednesday supported Turkish state-owned lender Halkbank's bid to avoid criminal charges in the United States for allegedly assisting Iran in evading sanctions.
The justices in a 7-2 decision threw out a lower court's ruling that had allowed the prosecution to proceed. The court's majority, while rejecting a key defense mounted by Halkbank, ordered the Manhattan-based 2nd U.S. Circuit Court of Appeals to reconsider the bank's effort to dismiss the case.
The case tested Halkbank's contention that it is shielded from prosecution because, by virtue of being owned by the Turkish government, it should have the same legal protections as Türkiye. Sovereign immunity generally protects countries from facing legal action in another country's courts.
The Supreme Court rejected the bank's view that it is protected under a 1976 U.S. law called the Foreign Sovereign Immunities Act (FSIA) that limits the jurisdiction of American courts over lawsuits against foreign countries. But the court's majority found that the 2nd Circuit did not fully consider whether the bank has immunity under "common law" principles.
President Joe Biden's administration has said the law does not apply to criminal prosecutions and, even if it did, Halkbank's actions fell under the law's exception to sovereign immunity for misconduct involving commercial activities.
The U.S. government has argued that the case does not involve the prosecution of a sovereign government and that it has been pursuing criminal matters against foreign government-owned companies - if not foreign states themselves - for at least 70 years.
A Justice Department lawyer told the court in January that ruling for Halkbank could allow any foreign state-owned enterprise to "become a clearinghouse for any federal crime, including interfering in our elections, stealing our nuclear secrets, or something like here, evading our sanctions and funneling billions of dollars to an embargoed nation."
Federal prosecutors in New York in 2019 brought charges against Halkbank, accusing it of participating in a scheme to launder about $20 billion of Iranian oil and natural gas proceeds in violation of U.S. sanctions against Iran.
Halkbank has been at the center of a major dispute between Ankara and Washington.
The Turkish bank denied any wrongdoing.
President Recep Tayyip Erdoğan has called the U.S. government's decision to charge the bank an "ugly, unlawful" step and has pushed for the case to be dropped.
Halkbank appealed to the U.S. Supreme Court, calling the prosecution "unprecedented" and saying that the 2nd Circuit's ruling "green lights future indictments of any sovereign state."
The U.S. Justice Department countered that the Foreign Sovereign Immunities Act addresses only civil cases, not criminal prosecutions, and even if it did, the case fell within the law's exceptions for cases involving commercial activities.
Alleged misconduct includes helping Iran secretly transfer $20 billion of restricted funds, including $1 billion laundered through the U.S. financial system, and converting oil revenue into gold and then cash to benefit Iranian interests.
Halkbank had appealed a ruling by U.S. District Judge Richard Berman, allowing it to be prosecuted.
Berman has overseen several related cases, including the conviction of former Halkbank executive Mehmet Hakan Atilla and a guilty plea by Iranian Turkish gold trader Reza Zarrab.
Atilla was convicted in January 2018 and returned to Türkiye in July 2019 after leaving prison.
In an Oct. 22 decision, the 2nd Circuit said Halkbank could be prosecuted because its alleged misconduct involved commercial activity that was not covered by sovereign immunity.
The Supreme Court denies most appeals. In its last term, it received 5,307 filings and heard arguments in 72 cases.
