The Executive Does Not Control Common Law Immunity

A previously reported on TLB, the Supreme Court granted certiorari in Türkiye Halk Bankasi, A.S. v. United States, to decide whether a bank owned by Turkey is entitled to foreign state immunity from federal criminal prosecution.  Halkbank was indicted for evading sanctions against Iran. Both lower courts denied immunity to Halkbank, reasoning in part that even if the Foreign Sovereign Immunity Act (FSIA) applies to criminal prosecutions – an important and unresolved question – an exception to immunity applies in this case.

The lower courts also reasoned that if the FSIA does not apply, the executive branch makes immunity determinations that bind the courts. We disagree.  In an amicus brief filed in support of neither party, we explain that in both civil and criminal matters the executive branch lacks the constitutional power to resolve pending cases by directing the courts to confer or deny immunity.

The Supreme Court held in Samantar v. Yousuf (2010) that the “common law” of foreign sovereign immunity governs in cases against foreign entities when the FSIA does not apply.  In subsequent cases, the U.S. government has argued, as it does in Halkbank, that it controls common law immunity.  This means that the executive can make case-by-case decisions about which defendants are entitled to immunity and which are not, and even that that courts must follow the executive’s views on immunity when it does not make a case-specific recommendation.  The government’s position runs afoul of separation of powers, lacks foundation in history and precedent, is not supported by the President’s claim settlement or the recognition powers, and has striking functional weaknesses.

Separation of Powers

As the Supreme Court held in Verlinden v. Central Bank of Nigeria (1983), the Foreign Commerce Clause gives Congress the power to decide “whether and under what circumstances foreign nations should be amenable to suit in the United States.” Pursuant to that authority, Congress adopted the FSIA.  But the statute does not govern every immunity issue involving foreign government defendants, including the immunity foreign government officials, as the Court held in Samantar.  When the statute does not apply, federal common law governs.  Federal courts are constitutionally empowered to develop and apply federal common law in the narrow set of cases involving foreign state and foreign official immunity that are not covered by the FSIA.

The executive branch, by contrast, lacks the power to make law, including the power to pick winners and losers in pending cases.  The Supreme Court observed in Youngstown Sheet & Tube Co. v. Sawyer (1952) that the President’s constitutional power to faithfully execute the law “refutes the idea that he is to be a lawmaker.”  The Court emphasized the President’s lack of power to make law in foreign relations cases when it held in Medellin v. Texas (2008) that the President could not give domestic legal effect to a non-self-executing treaty obligation by directing the outcome of specific cases. The Court described the President’s foreign policy interests as “plainly compelling” but reasoned that those considerations “do not allow us to set aside first principles.”  Those first principles provide that “under our constitutional system of checks and balances, ‘[t]he magistrate in whom the whole executive power resides cannot of himself make a law.’” (quoting The Federalist No. 47).  And quoting Marbury v. Madison (1803), the Court recently reiterated that it is the independent judiciary that has the ‘province and duty . . . to say what the law is’ in particular cases and controversies.”

To be sure, federal courts (unlike state courts) do not make and apply general common law.  But federal courts do make federal common law in some narrow but well-settled contexts in which Congress has not acted, including for issues such preclusion and forum non conveniens which – like foreign sovereign immunity – are procedural. Federal courts also apply federal common law to other discrete issues involving the actions of foreign governments.  For example, the act of state doctrine precludes courts in the United States “from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory.”  Federal common law also governs the substantive liability of a foreign state for the actions of its instrumentalities (and vice versa), an issue not specifically addressed in the FSIA.  Federal judicial power to develop and apply common law immunity principles fits comfortably within this body of precedent.  Indeed, the Supreme Court has unanimously rejected the executive’s argument that it should control the application and development of the act of state doctrine.  In Halkbank, it should do the same for immunity.

History & Precedent

Federal courts have resolved issues of foreign state and official immunity since the early days of the Republic.  They at times deferred to the executive branch on questions of fact (such as who owned a vessel) or politics.  But it was the federal judicial branch that controlled immunity law and its application in particular cases, as documented by G. Edward White in The Transformation of the Constitutional Regime of Foreign Relations.

The executive generally cites a pair of World War II admiralty cases in support of its power to make binding immunity determinations.  But the language in those cases was dicta and neither applies here. Republic of Mexico v. Hoffman (1945) was an in rem action against a vessel owned by the Mexican government but in the possession of private company. The Court found the executive’s failure to suggest immunity “controlling” as an indication of a “national policy not to extend immunity” to vessels owned but not possessed by foreign states. But the Court also held that the distinction between ownership and possession was supported by the “overwhelming weight of authority.” That authority alone provided adequate basis for the Court’s decision.

In Ex Parte Peru (1943), the executive suggested immunity because it had apparently already resolved the case through its claim-settlement power. The Court reasoned that, when the Secretary of State elects “to settle claims against the vessel by diplomatic negotiations between the two countries rather than by continued litigation,” the Court must accept that settlement and “the plaintiff is entitled to the relief obtained through negotiations.” Those considerations do not apply in Halkbank or in the other modern cases in which the executive seeks to control immunity.

Recognition & Claim Settlement

The executive branch’s power to resolve other issues related to foreign policy does not support its power to resolve immunity issues.  For example, the executive’s “narrow and strictly limited authority to settle international claims disputes” is a practice that dates back over 200 years, and one that Congress implicitly approved in the International Claims Settlement Act of 1949. The judiciary’s deference to executive immunity determinations, by contrast, began only in the late 1930s and ended in 1976 when Congress adopted the FSIA at the executive’s request.

The President also has the sole “power to recognize other nations.”  But, as the Court has noted, determining recognition is different than determining the legal consequences that may (or may) not flow from recognition.  Immunity is not the same as recognition, and immunity may apply whether or not the President has recognized the entity in question.  The recognition power does not include the power to make immunity determinations.

Functional Problems

The Supreme Court has repeatedly noted that the FSIA was enacted to solve the problems created by executive control of immunity determinations. That control led to foreign governments pressuring the executive to decide in their favor – even if the law was against them. The executive sometimes made inconsistent immunity determinations not aligned with its overall policy; courts were unsure how to resolve cases when the executive did not act; and the practice generally led to unfair, inconsistent, and unpredictable outcomes. In short, “the old executive-driven, factor-intensive, loosely common-law-based immunity regime” created “bedlam.”

Conclusion

The Halkbank case involves multiple issues that include the scope of the FSIA and questions of international law.  The Court may never reach the question of executive control over immunity.  The merits briefs below devoted little space to the question, but both the district court and the Court of Appeals nevertheless concluded that the executive has the startling and ahistorical power to dictate immunity law to the federal courts. The Supreme Court should not follow their lead.  If it reaches the issue of executive power over immunity, the Court should give the issue full and careful analysis, with careful attention to the structure of the Constitution, historical practice, and well-known and well-documented functional problems with executive control over common law immunity.