Resolving the Immunity Issues in Halkbank
January 9, 2023
The question now before the U.S. Supreme Court in Türkiye Halk Bankasi A.Ş., v. United States is whether a foreign state’s wholly-owned private bank is immune from criminal prosecution in U.S. courts. The issue is framed as one of statutory interpretation, since the Second Circuit affirmed District Judge Berman’s ruling that the 1976 Foreign Sovereign Immunities Act (FSIA) does not provide such immunity and, even if it did, the offenses with which Halkbank is charged would fall under the statute’s commercial activity exception.
This (admittedly lengthy) post argues that (i) the question cannot properly be resolved as a matter of statutory interpretation, (ii) the government has not provided the Court with a coherent view of the relevant principles of customary international law on which the decision might alternatively be based (indeed, its prosecutor-centric arguments are flawed, contrary to the FSIA’s purposes, and dangerous), and (iii) the Court should accordingly reverse the decision below and remand the case for further consideration.
Instead, the U.S. position on the criminal liability of foreign states and governments (and their “agencies and instrumentalities”) should be resolved by the political branches, optimally through an amendment to the FSIA that reflects the government’s considered appreciation of the relevant rules of international law as well as the broader interests of the United States. A proposal along those lines is offered below. A merits decision by the Court, especially one that embraces the propositions put forward by the government in this case, would make such a solution far more difficult.
By equating private state-owned entities like Halkbank (as “agencies and instrumentalities”) with the foreign state itself, the FSIA explicitly accords them immunity from “the jurisdiction of the courts of the United States and of the States” except as it provides otherwise. The statute has been broadly described by the Court as “the sole basis for obtaining jurisdiction over a foreign state in [U.S.] courts.” Argentine Republic v. Amerada Hess Shipping Corp. (1989). The presumption is in favor of immunity, reflecting the underlying rules of customary international law. In consequence, “if a defendant is a ‘foreign state’ within the meaning of the Act, then the defendant is immune from jurisdiction unless one of the exceptions in the Act applies.” Samantar v. Yousuf (2010) (emphasis added).
Neither the text of the FSIA nor its extensive legislative history says anything, one way or the other, about criminal jurisdiction over foreign states, governments or their agencies and instrumentalities. Its core provision (28 U.S.C. § 1604) provides, broadly, that both foreign states and their agencies and instrumentalities “shall be immune from the jurisdiction of the courts of the United States and of the States,” unless a statutory exception applies. No such exception exists for criminal proceedings.
At the same time, the exceptions to immunity specified in § 1605 clearly focus on civil proceedings – with the possible exception of the first, which addresses situations in which foreign state has waived its immunity “either explicitly or by implication.” The primary jurisdictional provision implementing the statute, 28 U.S.C. § 1330(a), provides that district courts have jurisdiction only over “nonjury civil action[s]” against foreign states.
It is therefore difficult, if not impossible, to derive from the FSIA’s text itself any definitive decision by the political branches regarding the immunity from criminal prosecution of foreign states, governments, and their “agencies and instrumentalities.” Neither does anything in the legislative history indicate any intent one way or the other. It would have made no sense to embrace sovereign immunity in the civil and commercial dimensions — subject to carefully-crafted exceptions to reflect applicable norms of international law — while considering sub silentio that foreign states, governments and their agencies and instrumentalities had, or did not have, immunity from criminal prosecution or that the same “restrictive” approach applied to those questions.
Had that been the view of the political branches, it would certainly have been reflected in the relevant legislative history. No such statement exists. As a result, the question simply cannot be answered conclusively as a matter of statutory interpretation or congressional intent.
Neither can the FSIA be understood to reflect the considered judgment of the political branches that questions of the immunity from criminal prosecution were to be placed in the hands of the judiciary, subject to the same criteria and exceptions that were adopted for civil and commercial cases. Nothing in the statute reflects a decision by the political branches that foreign states (and/or their agencies and instrumentalities) are not entitled to any immunity from criminal prosecution, nor does the legislative history support such a view.
Equally important, the statute offers no basis for carving out different rules for foreign states and governments, on the one hand, and or their “agencies and instrumentalities” on the other. To the contrary, § 1603(a) expressly treats them the same way. In consequence, a judicial decision that the FSIA does not provide “agencies and instrumentalities” with immunity from prosecution must also apply to foreign states and governments.
Not only does the Second Circuit’s opinion ignore these facts, it is also (at least arguably) internally inconsistent, holding that (a) the statute does not provide immunity from criminal prosecution for agencies and instrumentalities and (b) if it does, the conduct in question would fall within the “commercial activity” exception.
If neither the text of the statute nor accepted rules of statutory interpretation can answer the question, where might the Court look for the dispositive rules? The answer should have been to the government’s considered understanding of the underlying principles of customary international law. Yet the government has failed to provide any such understanding.
From its very creation, the United States has been committed to complying with the rules of international law regarding sovereign immunity. It has done so not simply because the country is bound by those rules but also because it recognizes the political sensitivity (and sometimes gravity) of such decisions and that they inherently implicate significant national interests.
Indeed, before the adoption of the FSIA, immunity decisions in specific cases were made by the executive branch on the basis of its understanding of the relevant rules and principles of customary international law in the broader context of the conduct of the nation’s foreign relations (and the crucial role of reciprocity in that realm). Domestic courts routinely respected and gave effect to the executive’s decisions as they were communicated by the Department of State in formal “suggestions of immunity.”
The U.S. appreciation of those rules evolved over time, from a common law doctrine of “absolute immunity” in both criminal and civil contexts – cf. Justice Marshall’s opinion in The Schooner Exchange v. McFaddon (1812) – to the “restrictive” approach under which immunity was no longer accorded to a set of claims arising in the civil and commercial context. First formally articulated in the so-called “Tate Letter” (1952), that approach reflected the executive’s considered judgment regarding the evolution of customary international law and the nation’s interests and obligations thereunder.
Enactment of the FSIA marked a significant change in that practice, by (i) removing the determination from the executive branch to the courts — in principle insulating decisions in particular cases from the government’s political and transactional concerns, and (ii) codifying the rules to reflect relevant principles of international law as understood by the political branches.
However, the statute did not empower the courts with “law-making” authority to divine those rules on their own in particular cases. To the contrary, it provided concrete guidance reflecting the political branches’ considered appreciation of – and commitment to adhere to – international law. In so doing, the executive and the legislature, acting together, established a regularized process grounded in the nation’s appreciation of its obligations under international law.
In this case, given that neither the FSIA’s text nor its legislative history resolves the question, the logical approach would be to revert to the pre-FSIA practice of relying on the executive’s interpretation of the relevant rules of customary international law. (The United States is party to no relevant treaty.)
It appears that when the FSIA was adopted, questions of sovereign immunity from criminal prosecution did not arise with any significant frequency. In the intervening decades, the U.S. government has increasingly sought to regulate commercial activities through criminalization and to impose criminal penalties on legal entities such as corporations. The United States is not entirely unique in doing so, but not all legal systems embrace that approach. The international community has not ignored these developments or their implications for issues of sovereign immunity, but to date no conclusive view, much less an international consensus, has emerged. Relevant practice appears sparse.
Moreover, relatively few legal systems around the world have codified their rules on foreign sovereign immunity. Most resolve such questions on the basis of their understanding of customary international law, and a substantial number still embrace the “absolute immunity” of foreign sovereigns in their courts, under the par in parem non habet imperium principle.
For its part, the International Law Commission, in its work on the law of state responsibility, rejected the concept of State criminal responsibility and limited itself to civil responsibility for internationally wrongful acts. In adopting the 2005 multilateral Convention on the Jurisdictional Immunities of States and Their Property (that essentially codifies the “restrictive theory” of sovereign immunity), the UN General Assembly, in which all Member States are represented, made clear that the convention’s provisions do not apply to criminal proceedings. One leading authority on sovereign immunity has stated affirmatively that a “foreign state cannot be subjected to [criminal] proceedings by the forum State or its officials punished by way of fine, penalty, or imprisonment ….” At the same time, the International Court of Justice has affirmed that sovereign immunity can shield foreign government from domestic litigation even for serious violations of international human rights law or the international law of armed conflict. See Jurisdictional Immunities of the State (Ger. v. It.) (2012).
The Government’s Position
Against this background, and given the sensitivity of the issues for the conduct of foreign affairs, one might have expected the executive branch to have informed the Court about its considered understanding of contemporary international law and practice. Yet neither its opposition to the petition for certiorari nor its merits brief do so. Indeed, the government mentions customary international law only to underscore its irrelevance.
The government’s position appears to be that neither the FSIA nor international law erect any bar to criminal proceedings against foreign-government-owned commercial entities like Halkbank (or even foreign governments themselves), nor can the courts impose constraints on its freedom to prosecute. Its merits brief states categorically that “[t]he common law does not recognize foreign sovereign immunity where the Executive Branch determines that immunity is unwarranted” (Brief of the United States at 21, emphasis added), citing a series of mostly non–FSIAdecisions and essentially sidestepping the FSIA. The core contention is that in the criminal area “the Executive has the discretion to weigh foreign-policy concerns and it determined here that the prosecution is in the national interest.” Id. at 8.
At the conclusion of that brief, the government states that “[i]t is precisely because petitioner’s alleged acts caused such [direct and deleterious] effects in multiple ways that the United States has made the weighty decision to prosecute a commercial bank whose shares are majority-owned by a foreign government.” Id. at 49. That proposition is, at base, an assertion that any international rules of foreign sovereign immunity that might exist (and any foreign policy concerns more broadly) must yield to the prosecutorial decision, and the courts must stand aside. Indeed, the government asserts, “[n]othing could embarrass the Executive Branch more than a judge-made principle that would vitiate a federal criminal prosecution.” Id. at 23.
It is hard to conceive of a clearer repudiation of the central purpose of the FSIA, in which the executive made an explicit decision to forego its unilateral role in making sovereign immunity decisions by entering into a partnership with the Congress to turn the questions (at least in civil and commercial cases) over to the courts for decision on the basis of codified rules reflecting the political branches’ carefully considered views about the relevant norms of international law. Indeed, the government’s assertion harkens back to a time, long before the statute and even the Tate Letter, when immunity decisions were based simply on administration policy and executive branch self-interest to the exclusion of relevant legal principles.
The government’s position gives little thought or weight to the potential consequences of its position on U.S. foreign relations or activities. Unsurprisingly, the Department of State is listed on neither of the government’s briefs.
The risks of reciprocal treatment by foreign governments are likely significant. At first glance, they might seem slight, since the U.S. government typically does not itself conduct commercial activities through state-owned private entities like Halkbank. Yet it does engage in commercial transactions abroad on a daily basis (in its own right and though separate entities) and, as the Department of Justice knows full well, those activities frequently generate disputes that end up in litigation, where the government often invokes its sovereign immunity. More broadly, foreign parties (including foreign governments) often (and perhaps increasingly) accuse the U.S. government of conducting illegal, even criminal, activities.
A decision that deprives foreign states (and their “agencies and instrumentalities”) of immunity from criminal prosecution in the United States could easily have far-reaching consequences for the operations of the U.S. government around the globe. Accordingly, the issue should not be decided by the courts without clear direction from the political branches reflecting the broader national interests – which do not seem to have been offered in this situation.
Recognizing that (i) criminal prosecutions of foreign states, governments, and their majority-owned entities can be enormously sensitive for the conduct of foreign relations, (ii) the FSIA itself does not provide an answer to the questions about the immunity of foreign states and their “agencies and instrumentalities” from criminal prosecution, and (iii) the executive has failed in this case to provide a clear view of the relevant principles of international law or the broader foreign policy interests of the United States, the Court lacks a clear and principled basis for resolving the question before it. Accordingly, it should reverse the decision below and remand the case for additional briefing on the international law and foreign relations issues. That decision would reflect fidelity to the origins, text, purpose, and indeed the limits of the FSIA.
The substantive question raised by this litigation could be resolved by an amendment to the FSIA clarifying that state-owned private entities lack immunity from criminal prosecution (or perhaps deleting them from the statute altogether). Such an amendment would not contravene international law or practice, since states are not clearly required to give any immunity (civil or criminal) to such separate entities (although many, perhaps even most, do so). It would be faithful to the FSIA’s principles and purposes without requiring the political branches to resolve the question of the criminal liability of states per se. A judicial judgment to that effect, however, could not be supported on “statutory interpretation” grounds, since it would modify the statute substantively by eliminating the “equivalence” between states and their agencies and instrumentalities – an act of judicial “lawmaking” contrary to the core purpose of the FSIA. It is a task for the political branches.