Foreign Sovereign Immunities Act
Türkiye Halk Bankasi AS (Halkbank) v. United States
Date: Oct. 6, 2025
Issue: Halkbank, Turkey’s state-owned lender, possessed common-law foreign sovereign immunity from criminal charges accusing it of laundering about $1 billion in sanctioned Iranian oil proceeds
Case Summary: The U.S. Supreme Court declined to review a Second Circuit decision that held that Halkbank was not entitled to common-law foreign sovereign immunity from criminal prosecution.
In 2019, U.S. prosecutors charged Halkbank for allegedly helping Iran evade U.S. sanctions through a vast money-laundering scheme. The charges arose from the arrest of Turkish-Iranian gold trader Reza Zarrab, who pleaded guilty and testified against Halkbank executive Mehmet Hakan Atilla. Prosecutors alleged Halkbank used front companies and money service businesses across several countries to funnel about $20 billion in restricted Iranian oil and gas revenue, with roughly $1 billion passing through the U.S. financial system. Halkbank pleaded not guilty to conspiracy, fraud and money-laundering charges.
Halkbank moved to dismiss the indictment, arguing the Foreign Sovereign Immunities Act (FSIA) shielded it from prosecution as a state-owned entity. The district court and the Second Circuit both rejected the argument, concluding Halkbank’s alleged conduct involved commercial activity outside the scope of sovereign immunity. Even if the FSIA applied to criminal cases, the statute’s commercial-activity exception would cover Halkbank’s conduct, making dismissal unwarranted, according to the Second Circuit. Moreover, the Second Circuit concluded Halkbank, as an instrumentality of a foreign sovereign, was not entitled to common-law immunity from criminal prosecution.
Halkbank petitioned the U.S. Supreme Court for review. On April 19, 2023, the Supreme Court ruled FSIA does not automatically bar such prosecutions and remanded the case to the Second Circuit for consideration of common-law immunity. The Court held that district courts have jurisdiction under 18 U.S.C. § 3231 to prosecute criminal offenses against U.S. law and that the FSIA applies only to civil actions, not criminal proceedings. Therefore, the Court affirmed and remanded.
On remand, a unanimous Second Circuit panel ruled Halkbank was not entitled to common-law foreign sovereign immunity from criminal prosecution. The panel accepted the Department of Justice’s position that foreign commercial entities have no blanket immunity. The panel agreed with the U.S. government that common law distinguishes sovereign states from state-owned corporations and protects only governmental acts. Because Halkbank allegedly used front companies and money service businesses to evade U.S. sanctions and launder about $1 billion in Iranian oil proceeds, the panel determined its conduct was commercial and beyond the reach of sovereign immunity.
On May 5, 2025, Halkbank again petitioned the U.S. Supreme Court to review its common-law immunity claims. Halkbank argued the Second Circuit’s ruling deepened a circuit split over executive deference. Halkbank contended that the Fourth Circuit correctly held in Yousuf v. Samantar that courts’ deference to Executive immunity is narrowly circumscribed when the Executive is exercising its exclusive authority such as in recognizing foreign sovereigns. Halkbank described the Second Circuit’s decision as “unprecedented,” and warned that no nation has ever criminally prosecuted a foreign sovereign instrumentality. However, the Court declined to review the case and offered no additional comment.
Bottom Line: The Court’s refusal to review leaves intact the Second Circuit’s ruling that Halkbank, as a state-owned commercial entity, cannot claim foreign sovereign immunity to avoid U.S. criminal prosecution
Documents:
Second Circuit Opinion
Petition
