Halkbank Files New Cert Petition

 

“United States Supreme Court Building at Dusk”

by Joe Ravi is licensed under CC BY-SA 3.0

Halkbank, a Turkish state-owned bank accused of violating U.S. sanctions on Iran, filed a petition for certiorarilast week seeking a second chance to convince the Supreme Court that it is immune from criminal prosecution in the United States.

In its first trip to the Court, back in 2023, Halkbank argued that it was entitled to immunity under the Foreign Sovereign Immunities Act (FSIA). The Court, however, held that the FSIA does not apply to criminal proceedings and remanded to the Second Circuit to reconsider Halkbank’s separate claim of immunity under federal common law. On remand, the Second Circuit deferred to the executive branch’s determination that Halkbank is not immune from prosecution, although the court also independently found that Halkbank lacked common law immunity and reserved the question of whether similar deference would be appropriate if the executive sought to deny immunity that federal common law grants.

Halkbank’s new cert petition seeks the Supreme Court’s review of two questions:

1. Whether courts are bound to defer conclusively to the Executive’s common-law foreign sovereign immunity determinations in criminal cases.
2. Whether prosecutors may, consistent with the common law of foreign sovereign immunity, criminally prosecute foreign sovereign instrumentalities, including for conduct occurring within their sovereign’s territory.

In my opinion, the Supreme Court should grant review. On the first question, the answer should be no. Courts in the United States are not bound to defer conclusively to the executive’s common law immunity determinations, although they should give great weight to the executive’s views on the content of common law immunity. On the second question, however, the answer should be yes. Common law immunity does not extend to state-owned corporations except with respect to their performance of sovereign functions. [Disclosure: Ingrid Brunk and I filed an amicus brief with the Second Circuit arguing that executive determinations of immunity are not binding.]

Deference to the Executive Branch

Halkbank argues that the Second Circuit’s deference to the executive branch conflicts with the Fourth Circuit’s decision in Yousuf v. Samantar (2012). Yousuf involved the common law immunity of foreign officials rather common law immunity from criminal prosecution. But the deference question is the same in both contexts. Indeed, the Second Circuit in Halkbank considered itself bound to defer by circuit precedent in Matar v. Dichter (2009), a foreign official immunity case.

Yousuf’s approach to deference is inconsistent with the Second Circuit’s decisions in Matar and Halkbank. In Yousuf, the Fourth Circuit found that executive branch determinations of head-of-state immunity were entitled to absolute deference as a function of the executive’s constitutional authority to recognize foreign states. But the court of appeals distinguished the immunity of lower-level officials for acts taken in their official capacities—known as conduct-based immunity—finding “no equivalent constitutional basis suggesting that the views of the Executive Branch control.” Because conduct-based immunity “turn[s] upon principles of customary international law and foreign policy,” the Fourth Circuit said, it would give “substantial weight” to the executive’s views. But the executive’s determinations of conduct-based immunity were “not controlling.”

Even looking only at criminal cases, there is arguably a split between Halkbank and the Ninth Circuit’s recent decision in United States v. Pangang Group Co. (2025). As previously discussed at TLB, the Ninth Circuit in Pangang independently determined that state-owned companies were not entitled to common law immunity from prosecution before saying that deference to the executive “reinforces our conclusion.” In Halkbank, by contrast, the Second Circuit began with deference and reviewed the substance of common law immunity only to make sure that the executive was not denying an immunity that the common law would grant. I expect the Department of Justice would argue that there is no conflict because both cases discussed deference. But two approaches seem quite different.

The petition argues that absolute deference to the executive branch violates fundamental separation of powers principles. “The courts, not the Executive, say what the law is,” Halkbank maintains. I strongly agree. In both Samantar and Halkbank, the Supreme Court said that sovereign immunity not covered by the FSIA is governed by “common law.” Common law is, by definition, judge made law. And, as the Supreme Court has emphasized, “our Constitution does not contemplate vesting [lawmaking] power in the Executive alone.”

“Conclusive deference [to the executive] also usurps powers delegated to Congress,” according to Halkbank. This argument depends on the proposition that the customary international law of sovereign immunity is part of U.S. law and can be displaced only by Congress. The executive branch largely ignored customary international law in its briefing to the Second Circuit, even though that law supports the government’s position (more on this below). There are various theories on how to ground the common law of sovereign immunity in U.S. law, about which I hope to write more soon. Treating customary international law as federal common law is one of those theories, but not the only one.

Deference to the executive also conflicts with “basic fairness,” Halkbank argues, because the executive is necessarily a party to federal criminal proceedings and “it violates fundamental principles of equal justice for a court to defer conclusively to one litigant over another on any contested issue.” Indeed, as Halkbank notes elsewhere in its brief, “[d]eferring to the Executive on sovereign immunity in criminal cases would mean there is no sovereign immunity in criminal cases.”

Finally, Halkbank raises “the specter of state or local prosecutors following the example set by the U.S. Attorney’s Office and indicting other sovereign entities.” Citing Missouri’s civil suit against China over COVID, Halkbank suggests that state criminal prosecutions might be next. Halkbank is right to note that executive suggestions of immunity might not be sufficient to address state prosecutions. In Medellín v. Texas (2008), the Supreme Court rejected an argument that the executive could, by itself, control the criminal processes of state courts.

In sum, I think Halkbank has the better of the argument on the first question presented. There is a circuit split on deference to the executive branch, and there are good reasons to think that the Second Circuit’s position on deference is wrong.

This is not to say that the executive branch’s views are irrelevant. The federal common law of sovereign immunity is and should be based on international law, and the State Department has expertise on international law that U.S. courts lack. The government’s views on the content of international law—and by extension, federal common law—should be given “substantial weight,” as the Fourth Circuit held in Yousuf. But there is a real difference between deference and control.

Common Law Immunity for State-Owned Companies

Halkbank also asks the Supreme Court to review the Second Circuit’s independent holding that it is not entitled to immunity under federal common law. “No one disputes Halkbank is a sovereign instrumentality,” the petition says. “And at common law … instrumentalities have always received the same immunities owed their sovereigns.” Because foreign states themselves are absolutely immune from prosecution, Halkbank argues, so is Halkbank as an instrumentality of a foreign state.

The critical question here is what constitutes an “instrumentality” of a foreign state for purposes of common law immunity. During Halkbank’s first trip to the Supreme Court, the Department of Justice conceded that the bank was an instrumentality for purposes of the FSIA because it is owned by the Turkish state. But the FSIA’s definition of “instrumentality” does not apply here because the FSIA does not apply. The petition itself maintains (in language Halkbank may come to regret) that the FSIA has not “altered the immunities owed sovereigns or their instrumentalities in criminal cases.”

The Ninth Circuit recently addressed this question in the Pangang case mentioned above. There, the court looked to § 66(g) of the Restatement (Second) of Foreign Relations Law (1965) for the immunity of state-owned corporations. Section 66(g) says “[t]he immunity of a foreign state … extends to … a corporation created under its laws and exercising functions comparable to those of an agency of the state.”

As I have previously noted, this is consistent with international law today. The U.N. Convention on Jurisdictional Immunities of States and Their Property (not in force) accurately states the common law rule in this instance: instrumentalities of a state are considered part of the state for purposes of immunity “to the extent that they are entitled to perform and are actually performing acts in the exercise of sovereign authority of the State.” It is also consistent with foreign practice. In the Malta Maritime Authority case, on which Halkbank relies, the French Court of Cassation held that a state corporation was immune from criminal prosecution because it was exercising the sovereign authority of a foreign state.

Halkbank argues that “it serves many government functions, including managing government development and social welfare programs, providing natural disaster relief, and collecting taxes.”  But Halkbank is not being prosecuted for doing any of those things. It is being prosecuted for performing ordinary banking functions such as holding deposits and transferring funds. When a state-owned corporation performs such functions, it is not acting as an instrumentality of a foreign state and therefore is not immune from criminal prosecution.

Affirming the Second Circuit on this ground would not, as Halkbank claims, “expose[] U.S. agencies and instrumentalities (including the U.S. Navy, the Central Intelligence Agency, the U.S. Export Import Bank, the Development Finance Corporation, and countless others) to possible criminal prosecution abroad.” The U.S. Navy and the CIA are part of the United States itself, and therefore absolutely immune from criminal prosecution under customary international law. The Export Import Bank and the Development Finance Corporation are corporate entities, like Halkbank. They are immune from criminal prosecution to the extent they perform sovereign functions but only to that extent. Nothing the U.S. Supreme Court decides in Halkbank will, by itself, change customary international law, and therefore nothing the Supreme Court decides will change the exposure of U.S. instrumentalities to foreign prosecution.

Extraterritoriality

At the very end of its petition, Halkbank tacks on one additional argument—that it must at least be “entitled to immunity for conduct that occurred in Türkiye” (emphasis in original). “[A] co-equal sovereign is simply without power,” Halkbank says, “to dictate what another co-equal sovereign may do within its own sovereign territory.”

This is mixing apples and oranges—or, more rather, mixing jurisdiction to prescribe with jurisdiction to adjudicate. Jurisdiction to prescribe is the authority to make law, whereas jurisdiction to adjudicate is the authority to apply law. Whether U.S. law reaches Halkbank’s conduct in Türkiye is a question of jurisdiction to prescribe. Whether Halkbank is immune from prosecution in U.S. courts is a question of jurisdiction to adjudicate.

Both international law and U.S. domestic law recognize certain immunities from jurisdiction to adjudicate and jurisdiction to enforce (for more on the latter, see my recent post on enforcing Missouri’s COVID judgment against China). But neither recognizes immunities of foreign states from jurisdiction to prescribe. There are customary international law rules on jurisdiction to prescribe. Indeed, I have written that the United States’ prosecution of Halkbank violates those rules and should be dismissed on extraterritoriality grounds. This, however, is not an immunity argument. It is an argument on the merits, which Halkbank will be free to raise if and when the prosecution proceeds.

Conclusion

There is a good chance the Supreme Court will grant review. The Justices are familiar with the case from Halkbank’s first appeal. And the lower courts’ decisions in Halkbank and Pangang, coupled with briefing that focuses specifically on the common law immunity questions, will put the Court in a good position to decide issues that it ducked the first time around.