Havlish v. Taliban: Second Circuit Denies Rehearing En Banc

As of Spring 2026, Afghan central bank assets blocked by the U.S. government remain unavailable to satisfy terrorism-related judgments. In March, a divided Second Circuit denied rehearing en banc to victims of terrorist attacks who hold judgments against the Taliban and who seek to enforce those judgments against $3.5 billion in “blocked” assets held in New York. TLB has for years covered this case, Havlish v. Taliban, which has been consolidated with a similar case, Aliganga v. Taliban, in which other purported victims of terrorism by the Taliban seek pre-judgement attachment of the assets to satisfy any future judgment that they may secure.

The March decision to deny rehearing en banc was joined by eight active Second Circuit judges, including Judge José A. Cabranes, who wrote, and Judge Guido Calabresi, who joined, the panel opinion back in August 2025. They wrote briefly in March say that they “stand by” their panel opinion and that en banc review was “rightly” denied.

But five active judges voted in favor of rehearing en banc, illustrating the complexity and uncertainty around the issues involved. Judge Richard J. Sullivan, who was the third judge on the August 2025 panel, wrote one of the two opinions dissenting from the denial of rehearing en banc. He partially dissented from the panel opinion, so it is unsurprising that he voted to rehear the case. Judge Steven J. Menashi wrote the second opinion dissenting from the denial of rehearing en banc; his opinion sets out a flawed approach to central bank immunity, as discussed below.

Conflicting Approaches to “Agencies and Instrumentalities”

As described in our coverage of the panel opinion, the disagreement in these cases centers on whether the central bank of Afghanistan, Da Afghanistan Bank (“DAB”), is an “agency or instrumentality” of Afghanistan and/or the Taliban itself.  If DAB is an agency or instrumentality of Afghanistan, it is presumptively entitled to immunity under the Foreign Sovereign Immunities Act (FSIA). Plaintiffs argue that the bank lacks this status because Afghanistan fails to qualify as a foreign state at all. Here the parties and the judges see varying roles for the U.S. president’s power to recognize foreign states and foreign governments, with strong disagreement between the dissenting opinions of Judges Menashi and Sullivan. Plaintiffs also argue that the DAB does not fulfill the statutory requirements to be an “agency or instrumentality” under the FSIA, even if Afghanistan is a foreign state.

Alternatively, even if the DAB is an agency or instrumentality of Afghanistan under the FSIA and is thus presumptively entitled to immunity, the Terrorism Risk Insurance Act (“TRIA”) allegedly abrogates that immunity because DAB is an agency or instrumentality of the Taliban, which is a terrorist organization. Here, the differences focus on the point in time at which to make the determination, with the panel opinion and the defendants arguing that the analysis hinges on the facts when the asset were blocked (here, the moment the U.S.-supported government in Afghanistan fell), with the dissent and the plaintiffs arguing that later developments (here, the Taliban’s later assertion of control over the DAB) can change the analysis.

Agency and Instrumentality Status under the FSIA

I will not repeat my analysis of Judge Sullivan’s disagreement with the panel opinion from August 2025, except to note neither was fully correct and that I disagreed with Judge’s Sullivans final conclusion that Afghanistan is not a “foreign state” under the FSIA.  In this post, I focus instead on one aspect of the disagreement between Judges Menashi and Sullivan:  the role of recognition in the “foreign state” analysis. I will also address an issue about which they appear to agree: how to determine agency and instrumentality status under the FSIA.

Recognition and “Foreign States” under the FSIA

Judges Menashi and Sullivan both correctly note that the President has the exclusive constitutional power to recognize foreign states and countries as a matter of diplomatic practice. Congress could not direct the president to recognize (or not recognize) Afghanistan as a state. Both also correctly note that Congress generally has the power to make immunity rules that apply to litigation in domestic courts in the United States – notwithstanding the President’s power to decide which countries to recognize or not.  They disagree, however, in two respects.

First, if Congress passed a statute conferring foreign state immunity on an entity that the United States has not recognized as a state – let’s say Palestine – Judge Menashi would view the statute as implicitly contradicting the President’s decision not to recognize Palestine. Judge Sullivan would, I think, view such a statute as fully within the power of Congress, no matter what any particular President decided about recognizing Palestine as a country. Judge Menashi points to Zivotofsky v. Kerry (2015), in which the Court held not only that the President had the sole power to recognize Israeli sovereignty over disputed territory in Jerusalem, but also that a statute dictating that the President to record territorial sovereignty in a specific way in U.S. passports (directing that U.S. citizens born in Jerusalem should have “Israel” listed as their place of birth) interfered with the recognition power and was thus unconstitutional.  Similarly, Judge Menashi suggests, denying that Afghanistan is a “foreign state” for the purposes of the FSIA might implicitly conflict with the President’s decision that Afghanistan is a foreign state for diplomatic purposes.

Judge Menashi points to a weakness in the Court’s analysis in Zivotofsky of what constitutes “conflict,” although “weakness” is my language, not his.  The question of what constituted a “conflict” was the basis for the dissenting opinion by Chief Justice Roberts in that case, who reasoned that there was not a conflict between the passport statue and recognition. He and the other dissenting justices would almost certainly reach the same conclusion here, but I think that the rest of the Court would as well.  The statute in Zivotofsky dictated the contents of a passport, which is at its core a diplomatic correspondence, so there was arguably a tension between the President’s diplomatic decisions on the one hand, and inconsistent language in the passport on the other. There is no comparable tension when it comes to immunity, which is solely concerned with judicial power – not with diplomacy.  In the end, Judge Menashi is incorrect in his suggestion that the statute might be unconstitutional if courts do not follow the President’s recognize decisions to determine what constitutes a “foreign state.”

Second, the heart of the problem in this case is that Congress did not define “foreign state,” leaving unclear what role executive branch recognition decisions should play in the statutory analysis by the courts.  Judge Menashi reasons that because the FSIA provides no definition of the term, the statute was not intended or designed to displace presidential decision-making about what is and is not a foreign state, a conclusion that is supported neither by text nor by history.  Judge Sullivan would, on the other hand, have the courts conclude that Afghanistan is a “failed state” despite the variety of international organizations and other actors – as well as the United States – which all continue to view it as a state. Better than either approach is that of the Restatement (Fourth) of the Foreign Relations Law of United States, Section 452, reporters’ note 1 which provides that “[t]o determine whether a particular territorial, political, or regional body is a foreign state under the FSIA, courts consider whether it has been formally recognized by the United States, as well as the criteria of statehood from international law.”  An analysis applying these factors leads to the clear conclusion that Afghanistan is a “foreign state” for the purposes of the FSIA.

Central Bank Independence and Immunity

Plaintiffs argue that DAB is not an “organ” of Afghanistan (and thus not an “agency or instrumentality” under this prong of the FSIA) because the Taliban exercises too much control over its operations.  Judge Manashi accepted this reasoning, noting that the Taliban “installed its own officers,” that the Taliban appointed “loyalists,” and that it set workplace conditions including preventing women from working there.  Thus, the Afghan central bank ceased to be an organ of the Afghan government.

In general, courts reason that an entity is an “organ” of a foreign state if it was created by the foreign state for a national purpose, and if the foreign state directs the operations, hires the employees, and so on.  The point, in other words, is to look for indicia of state control: sensibly enough, entities that are far removed from the state itself are not entitled to state immunity. That analysis has always been a complicated one when it comes to central banks, which – in a healthy system – often operate by design as independently of the state as possible.  Distance from government power is often a good thing and should not render a central bank ineligible for immunity. In international practice, the focus is therefore not so much on the degree of control and supervision that the state exercises over the central bank but instead whether the bank serve a “sovereign function” – such as setting monetary policy.  Even this inquiry will come under increasing pressure as the role of central banks change in the new “state capitalism,” but for now, it should be the focus. In other words, DAB should not be denied immunity based solely on findings that suggest inadequate control over it by the state of Afghanistan.

That the Taliban is the entity allegedly exercising decision-making authority over DAB adds another wrinkle, because the Taliban is also the political party in power in Afghanistan, so Taliban control seems in certain respects like state control anyway, even if the Taliban is a distinct legal entity from Afghanistan. But in any event, DAB operates both domestically and internationally as a central bank and should be treated as such for immunity purposes. Judge Manashi’s reasoning would put courts on a dangerous path of making granular decisions about workplace conditions in, and political party control over, foreign central banks – a path that introduces uncertainty (and thus inefficiency) and opens the door to the kinds of political decision making that the statute was meant to foreclose.

Conclusion

These cases are complicated.  In my view, all the opinions issued throughout this litigation have been flawed in one way or another.  But the bottom line is that the District Court and the Court of Appeals reached the right result – the blocked assets should not be available for attachment – an outcome that the Second Circuit sitting en banc court has now voted to leave undisturbed. The Supreme Court should deny the inevitable cert petition and bring this case to a close.