Courthouse Steps Oral Argument: Turkiye Halk Bankasi A.S. v. United States

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On January 17, 2023, the US Supreme Court will hear oral argument in Turkiye Halk Bankasi A.S. v. United States.

Turkiye Halk Bankasi A.S. (“Halkbank”) was indicted by a grand jury in 2019, and charged with involvement in a scheme to launder billions of dollars worth of proceeds from Iranian oil and natural gas, which was in violation of U.S. sanctions against Iran at the time.

Halkbank, is majority-owned by the government of Turkey and moved to dismiss this indictment, arguing that the court lacked jurisdiction. Halkbank contended that the Foreign Sovereign Immunities Act (FSIA) and the fact that the government of Turkey had a majority of its ownership made it immune to criminal prosecution in U.S. federal court. In relying on FSIA, Halkbank asserted that exceptions in FSIA apply only to civil cases, and that even if such exceptions applied in criminal cases, Halkbank Would still be immune under common law standards.

The U.S. District Court rejected the argument put forward by Halkbank, and the Second Circuit affirmed. This Supreme Court granted certiorari on the question of whether US district courts may exercise subject matter jurisdiction over criminal prosecutions against foreign sovereigns and their instrumentalities under 18 U.S.C. § 3231 and in light of FSIA.

Please join us on January 18 for this program which will break down and analyze the oral argument.

Featuring:

  • Mike Hurst, Partner, Phelps Dunbar LLP

 

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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript

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Chayila Kleist:  Hello. And welcome to The Federalist Society's webinar call. Today, January 18, 2023, we host a post-oral argument “Courthouse Steps" on Turkiye Halk Bankasi A.S. v. United States, which was argued just yesterday before the Court. My name is Chayila Kleist, and I'm Assistant Director of Practice Groups here at The Federalist Society. As always, please note that all expressions of opinion are those of the expert on today's call, as The Federalist Society takes no position on particular legal or public policy issues.

 

      In the interest of time, I'll keep my introduction of our speaker brief. But if you'd like to know more, you can access his full bio at FedSoc.org. We are very fortunate to have with us Mike Hurst, who is a partner at Phelps Dunbar LLP, where he employs his in-depth knowledge of the court system, investigative and prosecutorial agencies, the regulatory arena and public policy realm, to help clients facing government investigations, enforcement actions, regulatory matters, general litigation, and policy issues.

 

      Immediately prior to joining Phelps Dunbar, Mr. Hurst served as the U.S. attorney for the Southern District of Mississippi from 2015 to 2021, after serving as an assistant U.S. attorney in the same district for more than eight years. During his time there, he oversaw some of the biggest cases in Mississippi history and handled some of the most difficult and complex cases in that office dealing with white-collar crime, public corruption, and financial fraud. We're grateful to have him with us here today.

 

Mike Hurst:  Thank you.

 

Chayila Kleist:  One last programming note before the panel: if you have any questions, please submit them via the Q&A feature so that our speaker will have access to them for when we get to that portion of today's webinar. With that, thank you for being with us today. Mr. Hurst, the floor is yours.

 

Mike Hurst:  Thank you so much. And thank you for having me. Good morning, everyone. And I want to first preface this with they asked me to do this last week. I had a number of high school basketball and soccer games last night, so bear with me on the presentation today.  But what I will tell you is it really is a fascinating case, what we're going to discuss today: one involving statutory interpretation, issues of separation of powers, the powers and the interactions of the three branches of government, foreign affairs, criminal law. This case has it all. So, let's jump in, if you will.

 

      First, the question presented to the Court is whether U.S. district courts may exercise subject matter jurisdiction over criminal prosecutions against foreign sovereigns and their instrumentalities under 18 United States Code § 3231 and in light of the Foreign Sovereign Immunities Act, which is codified at 28 U.S.C. § 1330, and, for our purposes today, 1604 and 1605.

 

So let me give you the background on the facts of this case. And I'm going to butcher this name. I apologize. But Turkiye Halk Bankasi—or, as it's translated, People's Bank of Turkey—was set up by Turkish law in 1933 as a state bank. It's majority-owned by the Turkish government. I believe almost 90 percent of the bank is owned by the Turkish government. It has no branches, employees, officers, in the United States. But Turkish law regulates control of the bank. The bank is an affiliate of the Turkish Ministry of Treasury. And the finance minister for Turkey is actually the one that oversees the people's bank of Turkey.

 

      So this case arises from the U.S. sanctions regime targeting Iran between 2012 and 2016. And that regime allowed U.S. allies like Turkey that had long relied upon Iranian oil and gas to continue purchasing those commodities if they complied with certain conditions. Among those, the allies were required to deposit Iran's oil and gas proceeds into a bank under their jurisdiction and limit Iran's use of the deposit proceeds to certain purposes, such as humanitarian relief or bilateral trade.

 

      And, throughout this period, the Turkish government had designated its bank, the People's Bank of Turkey, Halkbank, to serve as the sole repository of Iranian oil and gas proceeds. So, fast-forward. The government here, our federal government alleges that in 2012 a Turkish-Iranian businessman named Reza Zarrab had hatched a scheme to divert these funds at Halkbank to uses not permitted by U.S. sanctions. Specifically, Zarrab had approached Turkey's minister of economy, which was also Halkbank's governor, who, in turn, directed that the scheme should be conducted through Halkbank.

 

And the United States government claims that senior Turkish government officials, at various times, directed the bank to continue and accelerate the scheme. And, at Zarrab's direction, Halkbank employees helped him transfer funds within the bank from Iranian accounts to accounts belonging to Zarrab or his front companies, which he, then, transferred out of the bank to exchange houses and front companies in Turkey, which he then took those funds and purchased gold, and transported that gold to Dubai. Once in Dubai, that gold was converted into cash or currency and remitted to Iran, or used to conduct international financial transfers on behalf of Iranian persons or entities.

 

At the bottom, the scheme's purpose, according to the U.S. government, was to create a pool of Iranian oil funds in Turkey and the U.A.E. that could be used for Iran's benefit. And it was alleged that Zarrab ultimately passed about five percent of these funds through the United States accounts en route to other countries. Now, former Halkbank employees and executives were accused of conspiring to conceal these schemes from the U.S. Treasury Department, in fact, making misrepresentations to Treasury officials.

 

In 2017, Zarrab pled guilty and agreed to cooperate with the federal government in this prosecution. And, in turn, the federal government indicted three former Halkbank executives: one who stood trial and was actually convicted. And the other two have not been caught. So, fast-forward to almost today. In October of 2019, federal prosecutors in the Southern District of New York obtained a six-count indictment against Halkbank, charging various things such as conspiracy, conspiracy to violate these U.S. sanctions against Iran, money-laundering, bank fraud, and many others.

 

So, in response, the bank filed a motion to dismiss in district court. But the district court denied that motion, saying that sovereign immunity only applies in civil cases, and, thus, foreign sovereigns stand like private persons in criminal cases, with no immunity under the Foreign Sovereign Immunities Act, or even under common law. And, in the alternative, the district court held that the FSIA—the Foreign Services Immunities Act, this commercial activities exception to the immunity—would overcome any immunity that the bank may have in this case.

 

Now, the bank appealed that immediately, the motion to dismiss, to the Second Circuit, which affirmed the district court's holding. On the merits, the court first held that subject matter jurisdiction, under 18 U.S.C. § 3231, which, as many of you know, is the general grant of jurisdiction that came down from the Judiciary Act of 1789, because the phrase, the words, the actual language in Section 3231 says that it grants jurisdiction "for all offenses against the laws of the United States" -- pretty broad, "against all offenses against the laws of the United States."

 

But the same circuit also acknowledged that some of its previous holdings, specifically, interpreting the text and structure of the Foreign Sovereign Immunities Act, demonstrated that Congress actually intended the FSIA to be the sole basis of obtaining jurisdiction over foreign states in courts. But, in that context, there is an exception, or a limit to that immunity. FSI grants immunity to foreign entities. But there are exceptions to that immunity. And one exception is if the foreign entity is involved in commercial activities. And there is, under, I think it's 28 U.S.C. § 1605, there are three prongs that have to be met in order to do that.

 

The first two prongs, which require U.S. acts -- the Second Circuit, in this case, treated the basis of the indictment of the communications between the bank and United States Department of Treasury officials, the misrepresentation to Treasury officials, as qualifying for that commercial activity in the United States, satisfying the first two prongs under Section 1605.

 

The Court also held that the bank's actions overseas, in Turkey and overseas, actually had a direct effect in the United States, because they led to those funds clearing through the U.S. financial system, which satisfied the third prong under 1605, which was an exception to the immunity granted under 1604.

 

And then, finally, the Second Circuit said, "Even if you don't buy any of this stuff they said previously, the Court believes that the foreign entity here, Halkbank, lacks criminal immunity under the common law." It really didn't get into that in much detail. But it did make note of that at the very end of this decision. Obviously, the bank went to the Supreme Court. The Court ran its certiorari last October.

 

And here's what the bank argued, and, I think, pretty persuasively, to the Supreme Court. First, out of the gate, in its reply brief, the first sentence of the bank says, "No federal court has ever presided over the criminal trial of a foreign sovereign." Let me say that again. "No federal court has ever presided over the criminal trial of a foreign sovereign." That's a pretty powerful argument.

 

The bank went on to argue, first off, under Section 3231, that that general grant of federal criminal jurisdiction actually does not confer jurisdiction over foreign sovereigns and their instrumentalities, specifically because the Supreme Court, in a prior case, a very prior case in 1812 known as Schooner Exchange, where Chief Justice Marshall, in that case, said, "In order to confer jurisdiction," -- and that case actually involved, as I mentioned earlier, the Judiciary Act of 1789, which is where 3231 came from, and it had similar jurisdiction provisions. And, in this case, Schooner Exchange specifically related to admiralty.

 

Chief Justice Marshall, in that case, said the descriptive of the ordinary jurisdiction of the judicial tribunals did not confer jurisdiction, in that case, over a French warship, so, in that case, a foreign instrumentality. And Chief Justice Marshall said that, in those instances, where you want to confer, or Congress wants to confer jurisdiction over foreign sovereigns—because of international law, it's the birth of a new country, all of those factors—Chief Justice Marshall said Congress needed to speak, "in a manner not to be misunderstood."

 

So, according to Halkbank, the general grant of criminal jurisdiction in 3231 should not apply here, because Congress has not specifically spoken in a manner in which it would not be understood, and wanted to apply criminal jurisdiction to a foreign sovereign, or, in this case, its instrumentality. So that's the bank's first strong argument.

 

Now, the bank also said if there's any doubt remaining, then Congress removed that doubt under the Foreign Sovereign Immunities Act, which provides broad immunity to foreign states, and, in this case, majority-owned instrumentalities, like the bank, "from the jurisdiction of the courts of the United States," except as provided in pre-existing international agreements, or in specific subsections therein.

 

And that's under 28 U.S.C. § 1604. And, specifically, the exception -- so you have a broad grant of immunity to foreign sovereigns and their instrumentalities, under 1604. But 1604 says there are exceptions to this immunity. And, specifically, one of those exceptions is international agreements. But another exception is if that entity is providing commercial activities. And, in this case, Halkbank argued that that exception did not apply here.

 

First, the case, according to the bank, is not based upon conduct in the United States, despite what the government alleged. Because the government's allegations against the bank are all activities that occurred in Turkey. Remember, there are three things, there are three qualifications, under that commercial activities exception to immunity. 

 

The first two really involve acts in the United States. And the bank says, "There were no acts. All the acts that the bank did occurred in Turkey." So it knocks you out of the first two exceptions to immunity. So the third exception is, did it have a direct effect in the United States? And the bank says, "No." The federal government here claimed that the direct effects were the fact that the money passed through the U.S. banking or financial system. But Halkbank says that's too remote to the alleged conduct. So that's the argument of the bank. 

 

The government, obviously, has a different perspective here. And the federal government here says that it's in the national interest that the executive branch of our three-branch federal government has the discretion to prosecute foreign sovereigns. Specifically, in this instance, a foreign sovereign or instrumentality to the bank of a foreign sovereign that assisted Iran in evading U.S. sanctions.

 

According to the United States, this lies at the heart of the executive branch's Article II authority under federal criminal law and under foreign policy, so two very prominent Article II authorities for the executive branch. First, the federal government of the United States relies upon, as I mentioned in the bank's argument, the general jurisdictional statute conferring criminal jurisdiction under 18 U.S.C. § 3231. I'm not going to repeat the language. The language is pretty broad. It's pretty all-encompassing.

 

Again, it gets back to statutory interpretation. And we'll talk a little bit about that from the oral arguments yesterday. But it's a pretty compelling argument that the United States is making here when the Congress has spoken and they have used terminology such as "all, all criminal prosecution, all jurisdictions, all offenses against the United States." I mean, those are pretty broad statements that it's hard to rebut by the bank, that the U.S. government is arguing here.

 

The second argument the U.S. government makes here is that common law immunity should apply. And while the United States put forward a number of examples of where the U.S. government has proceeded against foreign entities, I think the bank has a leg up here, because most of the cases cited by the United States really related to either the waiving of immunity in those instances or really related to just the issuance of criminal subpoenas.

 

And so, it was not -- as the bank stated at the very opening of its reply brief, there's never been an instance where the United States has criminally prosecuted, in trial, another foreign sovereign. So it's going to be hard for the United States, I think, to overcome that argument, because the facts are the facts. Now, the United States also says that the Foreign Sovereign Immunities Act did not immunize the petitioner here. Because, based upon the FSIA's text, its structure, and the history, it does not apply to criminal cases.

 

As the United States quotes, 28 U.S.C. § 1330 specifically says that it grants jurisdiction over foreign sovereigns only in non-jury civil cases. Again, that's pretty plain, pretty straightforward. That's clearly the language that FSIA only applies to civil cases. Now, what the bank argues in response is, while the Congress has authorized non-jury civil cases against foreign sovereigns, the Section 1604 immunity provision does not have qualifying language relating to civil trials only. And so that's what the bank really hangs its hat on, is that immunity granted under 1604, the bank tries to argue, encompasses both criminal and civil.

 

And, as I'll talk about a little bit, the justices were having a real hard time with the bank's argument that we start with FSIA granting jurisdiction for civil lawsuits against foreign entities, foreign sovereigns. But the bank then comes in and says that the immunity provision of that jurisdiction should apply to all criminal and civil. And I don't really think the Court was buying that argument.

 

So let's jump into that argument. The arguments yesterday were fascinating. Both sides, I thought, did a real good job. I thought the justices asked some really, really pointed questions. Attorney Lisa Blatt argued for Halkbank. And she told the justices, straight out of the gate, that allowing criminal prosecutions of foreign countries, as the United States is arguing here, would be unprecedented. And, frankly, it would risk retaliation by other countries against the United States and their instrumentalities.

 

And she gave some examples, like the Import-Export Bank, the Voice of America, a number of entities that the United States government controls, owns, and has a lot of actions throughout the world. But I want to pose this: Miss Blatt stated, and I quote, "The executive applauds this result, arguing that it alone makes the common law a criminal immunity. But the executive does not make the law, and an immunity waivable by your prosecutor is no immunity at all." I thought that was a pretty good argument on Ms. Blatt's part.

 

If a prosecutor says you have immunity, or you don't have immunity, does anyone really have immunity? So, the FSIA, which generally bars lawsuits against foreign governments in U.S. courts, Ms. Blatt said it doesn't apply just to civil lawsuits, despite what I mentioned earlier, that the Section 1330 specifically says, "non-jury civil lawsuits." Ms. Blatt argues that it prohibits criminal cases against all foreign countries. A ruling that the FSIA only confers immunity in civil lawsuits would mean that Congress created special rules just for civil lawsuits, but, in Ms. Blatt's words, "Threw sovereigns to the wolves," for criminal cases.

 

And she said, frankly, "That would be cataclysmic." It would mean, "Fifty states, all counties in any city in this country that has prosecution authority would all of a sudden have jurisdiction to prosecute any country. And because Congress has expressly waived immunity, and canceled it out on that statute, the executive branch can't do anything about it." That's pretty compelling. And the justices picked up on that compelling argument multiple times, throughout.

 

But, right out of the gate, as soon as Ms. Blatt finished her argument, Justice Thomas began questioning by saying what was the difference between subject matter jurisdiction and immunity? Specifically asking, "If immunity were waived here in this situation, would there still be subject matter jurisdiction?" And Ms. Blatt answered that there was no jurisdiction under the general criminal jurisdiction statute 1331, because, as I mentioned, the Schooner Exchange case earlier. But the Section 1604, the immunity provision under the FSIA, would cancel out any remaining jurisdiction.

 

And, to be frank, I don't really think any of the justices were buying the subject matter jurisdiction. They kept inquiring with Ms. Blatt about common law immunity, and how do we get past it. They weren't really buying her argument that FSIA only relates to civil lawsuits, but immunity relates to both civil and criminal. They weren't really buying that.

 

Really, what they were buying, and what I think the justices were most concerned about with Ms. Blatt's argument, was opening Pandora's box here, allowing state, city, county, local, whatever, however many thousands of prosecutors there are throughout the United States, free range on prosecuting foreign entities, whether that be China or India or Iran or Pakistan, or whomever. It opens the floodgates. And, really, without any recourse that the United States can stop it.

 

A number of justices focused on -- let me talk about this real quick. Justice Alito pressed the United States government's deputy solicitor general to explain that question: how could the federal government thwart or stop a criminal prosecution by an elected state prosecutor? And I really don't think that the deputy solicitor general's response was that good, because he stated that the United States could file a letter—file a letter—in state court, suggesting that the proceedings should be dismissed. And, frankly, I don't think Justice Alito was buying that argument either, because Justice Alito responded that, well, the local court could just ignore the federal government's letter—it's just a letter—and could require that the federal government take the case all the way to the Supreme Court.

 

But Gorsuch really piggybacked on Justice Alito's question and tried to pinpoint the deputy solicitor general down, asking him, specifically, what provision of the Constitution allowed the Supreme Court of the United States, through the supremacy clause, to tell states that they were violating customary international law, that they would bring such a lawsuit? And, frankly, I don't think the deputy solicitor general really had a good argument, or a really good answer. And, frankly, I don't think he really answered Justice Gorsuch's question there.

 

Now, another thing I think Justice Gorsuch brought up, which is a very valid point, which is, the United States hung its hat on Section 3231, and the plain language which says, "all offenses against the United States." That should give jurisdiction over all criminal cases, all offenses against the United States. But Justice Gorsuch turned that argument a little bit on the United States and pressed the government about the plain language of 1604.

 

And 1604 says, in part, "A foreign state shall be immune from the jurisdiction of the courts of the United States and of the states." Clear and simple, "foreign states shall be immune from the jurisdiction of the courts." So, according to Gorsuch, he said, on this plain language, "We normally start with the statute itself. And if the statute is clear, we stop there. And, here, the statute's language doesn’t parse out criminal versus civil. It says courts shall have no jurisdiction to entertain something like that. Pretty broad language that would normally encompass both civil and criminal in a normal case."

 

Again, the government really didn't have a good argument in response to this, other than—and it may be a good argument—other than that, one, a court has to look at the language of 1604 in the entire context of the Foreign Sovereign Immunities Act, the entire context of the FSIA. That means the way that Section 1330 limited jurisdiction to non-jury civil cases. And you can't read 1604 in a vacuum. Again, it might be a good argument, but Justice Gorsuch pressed him on the plain language of the argument.

 

Now, Justice Kavanaugh, as you would expect, kept coming back to whether the Court should just let the executive branch decide on prosecuting foreign sovereign instrumentalities. And, frankly, Kavanaugh said, if the Congress didn't like it, they could just come back and put restrictions on the government. But that was in the bank's argument, that Kavanaugh stated that.

 

Kavanaugh also stated in the United States' argument whether the Court should look at all these questions and try to fit it into a statutory scheme that already exists in Congress, and, basically, decide whether the United States has the authority. And if the United States does not have the authority, the government, the executive branch, should go to Congress to get more authority.

 

And so Kavanaugh was kind of playing both sides of, well, first off, should we let the executive branch do its thing, its Article II authority over criminal prosecutions over foreign affairs? Or has Congress even granted the courts jurisdiction to hear such cases? And, if it has not, and the executive branch wants to prosecute such cases, shouldn't the executive branch have to go to Congress and get Congress to grant subject matter jurisdiction to the courts, in order for the executive branch to prosecute foreign sovereigns criminally in our courts?

 

Justice Sotomayor raised, I think, really, a tangential issue. I don't really think it went to the merits, but her question was, "What's the possibility of we have a rogue prosecutor, a federal prosecutor, that could bring indictments against foreign governments?" Again, the deputy solicitor general tried to reassure her that there are processes in place, that that wouldn't happen. The Department of Justice, the attorney general, and, ultimately, the president, could order a United States attorney's office to dismiss such cases.

 

Justice Barrett asked about the need to prosecute foreign countries when criminal charges could be brought up against individuals. And the deputy solicitor general, I think, rightly, stated that the executive branch could and did bring criminal prosecutions against individuals. But, many times, such individuals were out of the reach of the federal government, and, specifically, in this case, too, had been indicted and not been extradited or brought to justice. And, in that case, there are instances where it makes sense to go after the publicly-owned business, in order for the United States government to have a deterrent effect, to prevent other foreign sovereign instrumentalities from doing the same thing.

 

I failed to mention this at the very beginning, because at the very beginning of the oral arguments, Justice Kavanaugh raised this, and you would expect this of a justice whose prior career involved in the White House counsel's office. But Kavanaugh really hit the bank hard, saying it would be "pretty bizarre for this Court to tell the president of the United States that it was placing limits on the executive branch's ability to exercise its national security powers." Kavanaugh described that as "big steps." That would be huge. Then, again, Kavanaugh said if Congress disagrees with what the United States government is doing here in this case, Congress can come back and pass new laws and restrict the federal government's prosecution of foreign countries.

 

One thing that kept recurring over and over and over again in the oral arguments was the prospect of possibly sending the case back to the Second Circuit, remanding it back to the Second Circuit to determine whether there might be principles under international law that granted immunity to the bank, and, whether, if the FSIA did not shield the bank from criminal prosecution, should the Second Circuit look at common law or international law. And, specifically, there were a few times where some justices asked, should they send it back to the Second Circuit to determine whether the bank was, in fact, a true instrumentality of the government of Turkey?

 

I think both sides, the bank and the United States, really didn't see that as necessary. The bank specifically said that the federal government has really conceded that point. And I think they are correct. But, at the end of the day, again, this case is fascinating, with different issues of statutory interpretation, the history, the context that this Supreme Court is really looking at and relying upon. And I thought I would have a better sense of where the Court might be coming down, after hearing the oral arguments. But I've got to tell you, I'm up in the air. I really don't know.

 

I thought the bank did a really good job of focusing on the fact that our country has been around over 200 years, and, really, up until 1989, did the United States government really start pursuing, or trying to prosecute, or go after with criminal subpoenas various foreign sovereigns or their instrumentalities. So, for almost 200 years, it was assumed that foreign governments were immune from criminal prosecution in United States courts.

 

And, again, I think that's a very compelling argument, which the bank would say that's why Congress did not include any reference to criminal prosecutions when it passed the Foreign Sovereign Immunities Act in 1976. Because everyone thought, well, foreign governments are immune from criminal prosecution in U.S. courts.

 

And to Justice Barrett's question about had there been any state prosecutions of foreign sovereigns or their instrumentalities -- and Ms. Blatt, for the bank, said, other than a few here or there, there really haven't. Because, again, the assumption was that foreign sovereigns were not criminally liable in U.S. courts for almost the entirety of the history of our country. So, again, a fascinating case, maybe a lot more questions than when we went in with the oral argument. But really good questions by the justices and a really good job on both sides. Happy to answer any questions. I hope I didn't muddle it up too much for you guys. And thanks for the time.

 

Chayila Kleist:  Absolutely. Thank you, Mr. Hurst. Really appreciate that summary of the facts of the case, as well as how we got to this point, and then of oral argument. We actually do have some audience questions, so I'll hop right in while issuing the brief reminder that if you have questions, feel free to submit them via the Q&A feature that's at the bottom of your Zoom window.

 

      Our first question comes from Jeffrey Wood, who asks "Assuming the federal government can thread the needle on the statutory questions, and the bank is forced to rely on the common law as its national law arguments, does the bank have an alternative enforcement mechanism for internationally-agreed sanctions? Would enforcement only be through international tribunals, such as the ICJ, or an international law marshaling of shame type thing?

 

Mike Hurst:  Yeah. That's a great question. And I really don't know, to be honest with you. As a former AUSA and a former U.S. attorney, I'm more focused on the domestic side. I did do a little foreign international affairs work. But I don't know what's the prospect of some type of international tribunal or a thing like that. So, I'm sorry Jeffrey. I really can't answer that question.

 

Chayila Kleist:  Well, fair enough. A secondary question, which you touched on slightly, so it may be a moot point: did the nation-state of Turkey intervene or file an amicus? I know you talked about how the government has essentially given up the point that this is a foreign sovereign, or an actor on behalf of a foreign sovereign. So that's not really an issue. But did Turkey, itself, get involved?

 

Mike Hurst:  Yeah, Turkey actually filed an amicus brief. And, again, I hate to say, since I've only been looking at this case for the last six days, I didn't get a chance to read their brief to see exactly how they were positioning themselves. But, again, the briefs filed by the bank set forth pretty clearly the facts of the relationship between the bank and Turkey, including the fact that the government of Turkey owned 87 percent of the shares of the stock of the People's Bank of Turkey.

 

      Now, in the oral arguments, the deputy solicitor general tried to make an issue with that. But he was shut down pretty quickly, especially by Justice Gorsuch, saying that, no, I'm sorry, United States. You really didn't contest or really fight that in the lower court. And I know Justice Jackson, in particular, thought about remanding it to the Second Circuit to delve into that more. But I don't really know how much support she's going to have for that.

 

Chayila Kleist:  Got it. Thank you. Another question from our audience comes from David Chu, who asks, "Did anyone raise the acts of state doctrine that grants sovereign immunity to the government's acts within its own borders, which, it seems to me, is what's at case here."

 

Mike Hurst:  No, there was no allegation in any of the briefs, or reply briefs, about the acts of state doctrine. There were some analogies made to the Alien Torts Act, Alien Tort Claims Act—I may have that wrong—the admiralties section. There were a number of jurisdictional sections passed in the Judiciary Act of 1789, related to the general grant of criminal jurisdiction.

 

And, again, I thought the bank did a good job of parsing out the various Supreme Court cases that had come before this case, about those provisions, and, specifically, the Schooner Exchange, where Chief Justice Marshall said if Congress wants to do this, they've got to be almost explicit in granting criminal jurisdiction over foreign sovereigns. But, again, I thought that was compelling. I didn't get the sense, from oral arguments, that the Supreme Court justices thought it was very compelling.

 

Chayila Kleist:  Understood. We had a couple of questions that I'll combine here. And it's concerning what other remedies may be. So, based on whether or not Turkey helped Bankasi—which, lest I butcher it further, I'll call "Halkbank"—or the government, whichever one wins, what the remedy would be if the fed has jurisdiction. What are the options there? Is this case going to be any different than the trials that have already gone on? And then, alternately, if there is a ruling that there isn't jurisdiction, the executive still has other options. What might those be?

 

Mike Hurst:  Yeah, first, if they rule for the United States, the case goes back to the Southern District of New York, and they try the bank, just like any other criminal trial. At the end, if they convict the bank on these charges – what I've experienced in my prior life of prosecuting corporations or other types of entities – you can't put a bank in jail. So really the only options you have are fines, penalties, and stuff like that.

 

      Now, if the Supreme Court sides with the bank in this case, then the federal government, the executive branch, is left with all the options that, frankly, the bank references in their brief, which is, you still have your sanctions regime. You still have all the options under the Department of State. And, it's extreme, but the bank did reference that when there are issues with foreign governments, the United States government has options other than criminal prosecutions, including military action. So there are a lot of other things that the United States government can do, other than bringing a foreign sovereign into the courts of the United States and trying them or prosecuting them criminally.

 

Chayila Kleist:  Got it. Following up on this idea of what happens if the Court rules in favor of Halkbank, what, if you know, might be the effect of such a ruling on the scope of the FSIA? And would there be courts that still retain jurisdiction, either in criminal cases like this, or in civil cases? What are the effects of ruling in favor of Halkbank?

 

Mike Hurst:  Yeah, I don't know how far-reaching it will be, just because the United States government has not really used its criminal prosecutorial authority to go after foreign sovereigns or their instrumentalities to a great degree. The United States does cite a number of cases where they have attempted it. Those cases, as I've mentioned, mainly involved the waiver of immunity, mainly involved the issuing of criminal subpoenas. The United States says that if the bank wins this case before the Supreme Court, that will put at jeopardy its ability to gather information through criminal subpoenas of foreign sovereigns or their instrumentalities, or to pursue them.

 

The United States makes an analogy that if the Supreme Court goes with the bank and sides with the bank in this case, then that means a foreign sovereign that tries to interfere with our elections, or a foreign sovereign that tries to, like this case, get past our sanctions of what we would deem a terrorist country, or try to do any type of sabotage that affects the United States, the United States would be at a loss to criminally go after those foreign sovereigns. So it's a sky-is-falling type argument from the government, but I think some of those are legitimate.

 

Chayila Kleist:  Got it. Well, thank you. And now, the opposite question. What are the effects of the Court ruling in favor of the government, saying there is jurisdiction here? Are there institutions that formerly would have been considered immune, that now could be subject to federal courts, either in civil or criminal cases?

 

Mike Hurst:  Well, I think the bank's arguments and the justices' concerns, as noted by their questions, are legitimate, which is, we're not talking about just opening up the federal courts for criminal prosecution by a U.S. attorney's office. We're talking about potentially opening up courts to criminal prosecution of foreign countries by state, county, local prosecutors.

 

And the way the bank put it to the Supreme Court is, "If you decide there is jurisdiction to criminally prosecute foreign sovereigns, you have basically judicially declared war on foreign countries throughout the world." And that's hyperbolic, but that's a pretty bold statement. But it's also a pretty scary thing to think about, as well.

 

Chayila Kleist:  That was, the effects of either decision may be far-reaching. Either there is a significant limitation of capacity to go after foreign actors, or it's almost a declaring of open season. Or at least those are the arguments that are being put forward?

 

Mike Hurst:  Those are the arguments. But, again, I think Justice Kavanaugh is correct, in the sense that if there really is this circuit split, as the bank argues, the Sixth Circuit has decided one way, I think the Tenth, Second, and, I believe, the Seventh—I may have that wrong—if there is a circuit split, then all Congress has to do is do what it did in 1976: come in and give some clarity, pass a statute that clarifies exactly what can be done on the criminal side, with regard to foreign sovereigns and their instrumentalities.

 

Chayila Kleist:  Got it. A couple questions on the nature of the FSIA coming out of this. What would it mean for the future of the application of the FSIA, if the Court grants, regardless of which side they say wins, the argument that it only applies to civil cases?

 

Mike Hurst:  Yeah, back to my last answer, I think if that's the case, I think you'll probably see whatever administration you have -- because, remember, this prosecution began in the Trump administration, and it's still being argued to go forward in the Biden administration. So I think anyone who is president wants a strong executive branch. And I think what you'll see is that executive branch going to Congress and trying to get an expansion of the FSIA to specifically and clearly allow the executive branch to exercise what it would argue is its already existing Article II authority under the Constitution to criminally prosecute those who have violated United States law.

 

Chayila Kleist:  Okay. Are there other laws—and this may not be something that's in your wheelhouse, but I'll ask it anyway—are there other laws governing a district court jurisdiction, or a jurisdiction in general, that would be affected by the how far the court rules the FSIA reaches, given that we're dealing with a particular definition of a sovereign entity or a state actor?

 

Mike Hurst:  I don’t think so. But I'm not certain. Don’t hold me to that. All I know is what I read in the briefs and what I heard in the arguments.

 

Chayila Kleist:  Fair enough. Well, I'll pose a last question. And, barring none from our audience, perhaps we'll wrap early, give everybody back some time. You touched on what arguments seem to have been convincing to the Court. And you've also mentioned that you don't know how the Court will rule. That said, do you have a read—even a general, unsolidified one, and I won't hold you to it—as to what the key or determinative points in this issue will be for the justices? What might be those key sticking points where you can get a coalition of people to agree that this is the issue, regardless of how they'll decide?

 

Mike Hurst:  Yeah, I really think -- and this is kind of unusual, I think. I may be naïve, but I really think that the effects that a ruling allowing this to go forward, allowing the executive, the United States, to go forward with criminal prosecution, saying that all offenses against the United States means all offenses and it's open season on foreign sovereign governments and their instrumentalities, I think that's going to keep a number of justices awake last night or tonight or the next couple of days. Because the implications, again, for that, I think, it's just, it's so far-reaching.

 

And in this political environment, where you have elected district attorneys, you have elected attorneys general, you have a number of people who are running for office or want to make a statement, I could definitely see some of these trying to haul in a specific country that might not be as well-liked by the citizens' electors, being hauled in for criminal prosecution. And, again, to the deputy solicitor general, he didn't really have a good answer as to what the federal government could do to stop that. I don't think filing a letter saying, "the United States disagrees with this," is going to do much to a state attorney general or a state D.A. who's running for reelection and wants to galvanize its supporters to get behind it by bringing a criminal prosecution of a foreign country that its citizens electing them may not like.

 

So I think there could be far-reaching complications with this. And I think that, more so than maybe statutory interpretation or traditional ways of looking at the authority of the executive branch under the Constitution, I think that question of actually what are the consequences of a decision like that, I think that's going to really drive what some of these justices do. I don't really think I answered your question though.

 

Chayila Kleist:  No, no. I think that did. It says, "Hey, here's what might be a key point of discussion that may draw some lines down the Court." And that seems definitely to be one of them, based on oral argument and the way you presented it.

 

      We'll wrap it there. On behalf of The Federalist Society, thank you, Mr. Hurst, for the benefit of your valuable time and expertise today. And thank you to our audience for joining and participating. We welcome listener feedback by email at info@fed-soc.org. And, as always, keep an eye on our website and your emails for announcements about other upcoming virtual events. With that, thank you all for joining us today. We are adjourned.