United States v. Turkiye Halk Bankasi A.S.

16 F.4th 336

UNITED STATES of America, Appellee,

v.TURKIYE HALK BANKASI A.S., aka Halkbank, Defendant-Appellant,Reza Zarrab, aka Riza Sarraf, Camelia Jamshidy, aka Kamelia Jamshidy, Hossein Najafzadeh, Mohammad Zarrab, aka Can Sarraf, aka Kartalmsd, Mehmet Hakan Atilla, Mehmet Zafer Caglayan, Abi, Suleyman Aslan, Levent Balkan, Abdullah Happani, Defendants.

No. 20-3499-cr

August Term 2020

United States Court of Appeals, Second Circuit.

Argued: April 12, 2021

Decided: October 22, 2021

Sidhardha Kamaraju (Michael D. Lockard, David W. Denton, Jr., Jonathan E. Rebold, Thomas McKay, on the brief), Assistant United States Attorneys, for Damian Williams, United States Attorney for the Southern District of New York, New York, NY, for Appellee.

Simon A. Latcovich (Robert M. Cary, Eden Schiffmann, James W. Kirkpatrick, on the brief), Williams & Connolly, LLP, Washington, D.C., for Defendant- Appellant.

Before: Kearse, Cabranes, and Bianco, Circuit Judges.

José A. Cabranes, Circuit Judge:

This case presents two questions. First, whether a denial of a motion to dismiss a criminal indictment based on the Foreign Sovereign Immunities Act ("FSIA") is immediately appealable under the collateral order doctrine. Second, whether FSIA confers immunity on foreign sovereigns from criminal prosecutions. We answer the first question in the affirmative. As to the second, we hold that even if we were to assume that FSIA confers immunity in the criminal context, the offense conduct with which Defendant-Appellant Turkiye Halk Bankasi A.S. ("Halkbank") is charged would fall under the commercial activity exception to FSIA. Accordingly, we DENY the Government's motion to dismiss this appeal, and we AFFIRM the Decision and Order of the United States District Court for the Southern District of New York (Richard M. Berman, Judge ).

I. BACKGROUND

Halkbank is a commercial bank that is majority-owned by the Government of Turkey.

In 2019 a grand jury returned a Superseding Indictment (the "Indictment") charging Halkbank with participating in a multi-year scheme to launder billions of dollars’ worth of Iranian oil and natural gas proceeds in violation of U.S. sanctions against the Government of Iran and Iranian entities and persons. The oil and natural gas proceeds were held in Halkbank accounts on behalf of the Central Bank of Iran ("CBI"), the National Iranian Oil Company ("NIOC"), and the National Iranian Gas Company ("NIGC").¹

The Indictment alleged that Halkbank knowingly facilitated certain types of illegal transactions, including: (1) "allowing the proceeds of sales of Iranian oil and gas deposited at Halkbank to be used to buy gold for the benefit of the Government of Iran"; (2) "allowing the proceeds of sales of Iranian oil and gas deposited at Halkbank to be used to buy gold that was not exported to Iran";² and (3) "facilitating transactions fraudulently designed to appear to be purchases of food and medicine by Iranian customers, in order to appear to fall within the so-called ‘humanitarian exception’^{[3 ]} to certain sanctions against the Government of Iran, when in fact no purchases of food or medicine actually occurred."⁴

Through the charged scheme, Halkbank allegedly transferred approximately $20 billion of otherwise restricted Iranian funds in order to create a "pool of Iranian oil funds ... held in the names of front companies, which concealed the funds’ Iranian nexus."⁵ These funds were then used to make international payments on behalf of the Government of Iran and Iranian banks, including at least $1 billion in dollar-denominated transfers that passed through the U.S. financial system in violation of U.S. law.

Further, Halkbank executives, acting within the scope of their employment and for the benefit of Halkbank, are alleged to have concealed the true nature of the transactions Halkbank made on behalf of the Government of Iran from officials at the U.S. Department of the Treasury (the "Treasury").⁶ To conceal these transactions, Halkbank officers allegedly conspired with Reza Zarrab, an Iranian-Turkish businessman, and other Turkish and Iranian government officials, some of whom are alleged to have received millions of dollars from the proceeds of the scheme in exchange.⁷

Halkbank was charged in the six-count Indictment with: conspiring to defraud the United States by obstructing the lawful functions of the Treasury, in violation of 18 U.S.C. § 371 (Count One); conspiring to violate or cause violations of licenses, orders, regulations, and prohibitions issued under the International Emergency Economic Powers Act ("IEEPA"), codified at 50 U.S.C. §§ 1701 - 06 (Count Two); bank fraud, in violation of 18 U.S.C. § 1344 (Count Three); conspiring to commit bank fraud, in violation of 18 U.S.C. § 1349 (Count Four); money laundering, in violation of 18 U.S.C. § 1956(a)(2)(A) (Count Five); and conspiring to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count Six).

On August 10, 2020, Halkbank moved to dismiss the Indictment, arguing that FSIA renders it immune from criminal prosecution because it is majority-owned by the Turkish Government.⁸ Halkbank further argued that FSIA's exceptions to immunity are applicable only in civil cases—not in criminal cases—and that, in any event, even if FSIA's exceptions did apply in the criminal context, the conduct with which Halkbank is charged does not fall within the ambit of FSIA's so-called "commercial activity" exception. Finally, even if FSIA did not bar its prosecution, Halkbank argued that it was nevertheless entitled to immunity from prosecution under the common law.

Following briefing and oral argument, the District Court denied Halkbank's motion in a Decision and Order dated October 1, 2020. The District Court principally concluded that Halkbank was not immune from prosecution because FSIA confers immunity on foreign sovereigns only in civil proceedings. The District Court went on to conclude that, even assuming arguendo that FSIA did confer immunity to foreign sovereigns in criminal proceedings, Halkbank's conduct would fall within FSIA's commercial activity exception. The District Court also rejected Halkbank's contention that it was entitled to immunity from prosecution under the common law, noting that Halkbank failed to cite any support for its claim on this basis. Halkbank timely appealed.

On appeal, Halkbank moved to stay the District Court proceedings pending resolution of this appeal, which the Government opposed. The Government then moved to dismiss Halkbank's appeal, taking the position that the District Court's denial of Halkbank's motion to dismiss the Indictment on the basis of foreign sovereign immunity is not subject to interlocutory review by our Court.

A motions panel of our Court granted Halkbank's motion for a stay and referred the decision on the Government's motion to dismiss to the merits panel.

II. DISCUSSION

A. Appellate Jurisdiction

As a threshold matter, we must consider whether we have jurisdiction over this appeal, which is taken from the District Court's denial of Halkbank's motion to dismiss the Indictment on the basis of foreign sovereign immunity.

The Government challenges our jurisdiction, asserting that the District Court's sovereign immunity determination is neither a final judgment nor an order that qualifies for interlocutory appeal. We do not agree.

While Congress has limited our jurisdiction to "final decisions of the district courts,"⁹ we have recognized a narrow exception to the final judgment rule that permits interlocutory appeals from certain "collateral orders." It is well established that, to qualify for interlocutory appeal under the collateral order doctrine, a decision must: (1) "conclusively determine the disputed question"; (2) "resolve an important issue completely separate from the merits of the action"; and (3) "be effectively unreviewable on appeal from a final judgment."¹⁰

We have "consistently held that [a] threshold [foreign] sovereign-immunity determination is immediately reviewable under the collateral-order doctrine."¹¹ But, as the Government points out, our holding on this point concerned a sovereign immunity determination in the civil, not criminal, context. Because the Supreme Court has made clear that the collateral order doctrine is to be applied in criminal cases with the "utmost strictness,"¹² the Government argues that a threshold sovereign immunity determination in a criminal case cannot qualify for the collateral order exception to the final judgment rule.

It is true that the Supreme Court has "emphasized that one of the principal reasons for ... strict adherence to the doctrine of finality in criminal cases is that the Sixth Amendment guarantees a speedy trial."¹³ Still, that the Supreme Court has not yet held that a sovereign immunity determination in a criminal case falls within the collateral order doctrine does not necessarily foreclose that outcome.¹⁴

Indeed, where, as here, a sovereign immunity determination in the criminal context plainly satisfies the criteria set forth by the Supreme Court in Coopers & Lybrand , applied with the "utmost strictness," it qualifies for interlocutory review. First, the District Court's sovereign immunity determination conclusively determined the issue against Halkbank.¹⁵ Second, Halkbank's professed entitlement to immunity is an issue distinct from the merits of the charges at issue.¹⁶ Third, an "appeal from [a] final judgment cannot repair the damage caused to a sovereign that is improperly required to litigate a case."¹⁷ Put another way, "the denial of immunity is effectively unreviewable after final judgment because defendants must litigate the case to reach judgment and, thus, lose the very immunity from suit to which they claim to be entitled."¹⁸

In sum, we hold that a threshold sovereign immunity determination is immediately appealable pursuant to the collateral order doctrine—even in a criminal case. Accordingly, we have jurisdiction to review the District Court's...