The US Supreme Court has ruled that US district courts have jurisdiction over criminal prosecutions of foreign states and state-owned entities and that the Foreign Sovereign Immunities Act of 1976 (FSIA) does not apply to criminal cases. This ruling could lead to an increase in prosecutions of foreign states and state-owned entities in the US. Halkbank, a commercial bank majority-owned by the Republic of Turkey, had been indicted in 2019 by the US government for helping Iran bypass US sanctions programs. The bank had moved to dismiss the charges on several grounds, including sovereign immunity, but the US District Court for the Southern District of New York denied the motion, and the Second Circuit affirmed. The case was then brought to the Supreme Court. The court has remanded the case to the Second Circuit to consider whether common-law sovereign immunity applies. Why is this important?
This ruling is important because foreign state actors doing business in the US or using US financial institutions may now be exposed to increased risk, as they cannot claim immunity under the FSIA if faced with a US criminal prosecution. This means they would need to review their compliance with the full spectrum of US criminal law. Prosecutors may bring a wide range of charges against foreign states and their instrumentalities, including US export controls, trade sanctions, and other laws containing both criminal and civil provisions.
The Supreme Court’s ruling places on the executive branch and Congress the responsibility for balancing national security implications, diplomatic considerations, and enforcement priorities. State prosecutors, including state attorneys general, may be emboldened to take action against foreign states and their instrumentalities that could be inconsistent with the federal executive branch’s foreign policy agenda, leading to foreign relations issues. However, the federal government and judiciary may have tools in place to prevent such prosecutions, and the legislative branch could respond by enacting additional legislation. The case may present the most significant policy justification for the Second Circuit to find some common-law safety valve.