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Justices look for off-ramp in sanctions case against Turkish bank

The government’s fight to prosecute sanctions violations left the high court to consider how sovereign immunity applies to criminal probes. 

WASHINGTON (CN) — After tangling in an international legal battle between the U.S. government and a Turkish bank over sanctions violations, some of the high court’s justices appeared to want to take a step back on Tuesday. 

“Isn’t a remand appropriate,” Justice Neil Gorsuch asked. Justices Sonia Sotomayor, Ketanji Brown Jackson and Brett Kavanaugh each voiced similar sentiments. 

Kavanaugh said it would be bizarre for the court to tell the president of the United States how to handle national security. Addressing the complex political implications of the justices ruling on the issue, he said the court might be out of its depth. 

“What expertise do we have,” the Trump appointee asked. 

Sotomayor admitted she was stuck on the drama of this case, which involves the largest-known conspiracy to evade U.S. sanctions against Iran. While the Biden Justice Department is now heading the case, the prosecution began under former President Donald Trump. Turkish President Recep Tayyip Erdogan's ties to Trump complicated the case. After the publication of a report that accused Ambassador John Bolton of warning Barr of Trump’s compromised position, then-Attorney General William Bar was asked to recuse from the case. 

The state-run Halkbank, also known as Turkiye Halk Bankasi, is accused of participating in a scheme to launder $20 billion in Iranian oil and gas money. Authorities here say it conspired with an Iranian-Turkish businessman, Reza Zarrab, to let Iran access the proceeds of the country's oil and gas sales, in a breach of U.S. sanctions. Among multiple plots to accomplish sanction evasion, the bank allegedly provided Iran with access to funds through illicit shipments of gold. Another plot involved fake food shipments. 

At least $1 billion of the funds in these schemes went through the U.S. financial system, and authorities say Halkbank lied to the Treasury Department to conceal these transactions. 

When a U.S. grand jury returned an indictment against Halkbank in 2019, Halkbank claimed it was immune from criminal prosecution because of its ties to the Turkish government. 

A federal judge in New York denied Halkbank’s motion, arguing that nothing in the Foreign Sovereign Immunities Act protected it from criminal prosecutions. The Second Circuit affirmed, sending Halkbank to the Supreme Court where it asks if FISA applies in the criminal context or only in civil cases. The bank claims that the criminal trial of a foreign sovereign is unheard of and the government should settle its differences through other means. 

“Since the Founding, the United States has resolved its differences with other sovereigns through war and diplomacy, not by prosecuting offending governments in federal court and duking it out over pretrial discovery and alleged Brady violations,” Lisa Blatt, an attorney with Williams & Connolly representing Halkbank, wrote in their brief

Some of the justices appeared swayed by Blatt’s suggestion that a ruling against Halkbank could allow any state to prosecute a sovereign nation without intervention by the federal government. Justice Samuel Alito said he was worried by this prospect, while Gorsuch questioned what authority the court would have to block states from this crusade should they take it up. 

Eric Feign, deputy solicitor general at the Justice Department, said the justices might be getting ahead of themselves since a state has never attempted to sue a foreign sovereign. If a state did attempt this, Feign said the government could take a number of actions to thwart the suit. 

The government argues there is a national interest in prosecuting Halkbank for evading U.S. sanctions against Iran. The case should be allowed to proceed, the government claims, because the prosecution is at the heart of executive authority over federal criminal law and foreign policy. 

“Congress expressly gave district courts jurisdiction over the prosecution, and nothing in the common law or the FSIA immunizes petitioner from facing criminal consequences for violating U.S. law,” U.S. Solicitor General Elizabeth Prelogar wrote in the government’s brief

Justice Amy Coney Barrett noted that this authority was an important tool in the executive tool kit. 

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Categories / Appeals, Financial, Government, International

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