Run by the government of Turkey, Halkbank is accused of criminal money laundering charges in the U.S. that it says run afoul of the Foreign Sovereign Immunities Act.
MANHATTAN (CN) — The Second Circuit appeared unlikely Monday to rule that Turkey’s state-run Halkbank is immune from claims over the same crimes that brought indictments against its executives.
“Since the bank is synonymous with government of Turkey, in your view, I assume the officers of the bank would be, in effect, state officials; Are they state officials?,” U.S. Circuit Judge Jose Cabranes asked an attorney for the bank this afternoon as the Manhattan-based court held remote oral arguments.
“Several of these managers or executives of the bank been indicted,” the Clinton-appointed judge noted. “Has anybody asserted a claim of diplomatic immunity or any sort of immunity that’s ascribable to the government?”
Since October 2019, the bank also known as Turkiye Halk Bankasi has faced a six-count indictment in New York’s Southern District that accuses it of having violated U.S. sanctions against Iran by helping to funnel $20 billion in Iranian oil money into the global market.
“High-ranking government officials in Iran and Turkey participated in and protected this scheme,” the indictment alleges.
Halkbank moved last summer to dismiss the indictment under the Foreign Sovereign Immunities Act, but U.S. District Judge Richard Berman refused in October. “The court concludes that Halkbank is not immune from prosecution,” Judge Berman wrote in his 16-page opinion.
With a stay in place pending its appeal, Halkbank attorney Simon Latcovich said the Turkish state-run bank is immune from prosecution under the “plain text” of the FSIA statute and under common law.
“Historically, courtrooms are not the forums or battle fields where sovereigns settle disputes,” said Latcovich, of the from Washington-based Williams & Connolly firm. “Instead we see diplomatic action, economic sanctions or, god forbid, the use of force.
“We don’t see domestic criminal action,” Latcovich added. “In fact, we’ve never seen one, which would suggest that the executive branch has managed quite well with its existing toolkit, including the prosecution of individuals involved.”
The U.S. government meanwhile told the three-judge panel that history proves otherwise.
“For decades, the Supreme Court and this court have held explicitly that the FSIA is the comprehensive set of legal provisions governing civil actions,” Assistant U.S. Attorney Sidhardha Kamaraju said at the 45-minute hearing. “The court has never extended it to criminal actions.”
Kamaraju balked at Halkbank’s “trying to equate the instrumentality of a foreign state with a foreign state itself.”
Cabranes was joined on the panel by U.S. Circuit Judges Amalya Kearse and Joseph Bianco, appointed by Carter and Trump, respectively. They reserved a decision on the appeal.
Halkbank’s indictment follows the U.S. prosecution of Reza Zarrab, an Iranian-Turkish gold trader who turned state’s witness after pleading guilty to what prosecutors describe as a record-breaking money laundering scheme.
In testimony that shook U.S.-Turkish relations, Zarrab said Turkish President Recep Tayyip Erdoğan ordered the illicit trade.
Zarrab also accused former senior Turkish officials, including former Economy Minister Zafer Çağlayan, of accepting enormous bribes to look the other way.
The case additionally implicates former President Donald Trump, who reportedly tried to scuttle the case against Halkbank as a favor for Erdoğan. Zarrab’s shell company Royal Holdings also listed its address in Trump Towers Istanbul, a building branded — though not owned — by the former president of the United States.
Zarrab’s testimony helped convict Halkbank manager Mehmet Hakan Atilla, a figure widely expected to testify again next year when the bank itself stands trial.
Halkbank initially refused to appear in a New York court and accept U.S. jurisdiction, complying only after it was threatened with heavy fines for contempt of court.
The bank has pleaded not guilty.
“The district court’s decision to assume criminal jurisdiction over a foreign state ignores the text and structure of the FSIA; ignores the history of foreign sovereign immunity; cannot be squared with international law; and departs from the practice of other Nations,” Halkbank wrote in an appeal brief.
The case was expected to go to trial last month, but has been delayed indefinitely due to the Covid-19 pandemic and a stay pending Halkbank’s appeal.