By Jonathan Stempel
NEW YORK (Reuters) -A U.S. appeals court docket on Tuesday stated the federal authorities might prosecute Turkey’s Halkbank on prices it helped Iran evade American sanctions, rejecting the state-owned lender’s argument that it deserved immunity.
In a 3-0 determination, the 2nd U.S. Circuit Court docket of Appeals discovered no foundation beneath centuries-old widespread regulation ideas for overseas state-owned corporations to be completely immune from U.S. prosecution associated to business, nongovernmental actions.
Circuit Choose Joseph Bianco stated the Manhattan-based appeals court docket ought to defer to the chief department’s dedication that the U.S. Division of Justice might prosecute Halkbank.
“Although certain prior cases extended immunity to state-owned corporations based on their governmental conduct, the common law places no independent bar on the prosecution of such corporations for their commercial activity,” he wrote.
He additionally wrote {that a} determination to prosecute overseas state-owned corporations reminiscent of Halkbank, relatively than impose tariffs or deny navy help to their state sponsors, “is not one for the judiciary to second guess.”
In response, Halkbank stated in a press release to the Istanbul inventory trade: “Our Bank will use all its legal rights to appeal with regard to the October 22, 2024 decision of the Second Circuit, particularly with the U.S. Supreme Court.”
A spokesman for U.S. Legal professional Damian Williams in Manhattan declined to touch upon the court docket’s determination.
The appeals court docket panel was contemplating the case for the second time, following a associated April 2023 determination by the U.S. Supreme Court docket.
U.S. prosecutors charged Halkbank in 2019 over its alleged use of cash servicers and entrance corporations in Iran, Turkey and the United Arab Emirates to evade sanctions.
Prosecutors stated Halkbank helped Iran secretly switch $20 billion of restricted funds, transformed oil income into gold and money to learn Iranian pursuits, and documented pretend meals shipments to justify transfers of oil proceeds.
Halkbank pleaded not responsible to financial institution fraud, cash laundering and conspiracy. The case turned a thorn in U.S.-Turkey relations, with Turkish President Tayyip Erdogan calling the U.S. prices an “unlawful, ugly” step.
‘UNPRECEDENTED’
In 2021, the appeals court docket had concluded Halkbank could possibly be prosecuted beneath the federal International Sovereign Immunities Act of 1976 as a result of its alleged misconduct concerned business exercise not coated by that regulation.
The Supreme Court docket later agreed that Congress’ want to defend overseas nations and their instrumentalities from civil legal responsibility didn’t cowl prison instances.
However in a 7-2 determination, the excessive court docket stated the 2nd Circuit ought to extra absolutely overview whether or not widespread regulation immunity shielded Halkbank.
The financial institution’s arguments included that the case involved “diplomatic activity” as a result of it included a cost primarily based on Halkbank’s alleged misrepresentations to U.S. Treasury officers about its sanctions compliance.
Throughout oral arguments on Feb. 28, Justice Division lawyer Michael Lockard stated that was no cause to excuse Halkbank.
“For a foreign commercial bank, one that is majority owned by the state of Turkey, to launder billions and billions of dollars (to benefit Iran), to deceive banks, to lie to U.S. Treasury officials, that conduct is unprecedented,” he stated.
The appeals court docket returned the case to U.S. District Choose Richard Berman in Manhattan. He dominated on completely different grounds in 2020 that Halkbank didn’t deserve immunity.
The case is U.S. v. Halkbank, 2nd U.S. Circuit Court docket of Appeals, No. 20-03499.
