This recent post highlighted the Supreme Court’s recent decision (Halkbank) in which it concluded that the Foreign Sovereign Immunities Act does not provide immunity for foreign states and their instrumentalities from criminal prosecution.
Fred Davis, an astute commentator on multi-jurisdictional criminal proceedings, recently penned this note which states in pertinent part.
“The Court’s decision is thus based on an interesting approach to statutory interpretation. As the Court essentially acknowledges, in adopting the FSIA almost a half century ago Congress appears not to have specifically focused on criminal matters at all. This is not surprising: the idea of prosecuting an actual sovereign State would have appeared so farfetched (and would almost certainly be barred by any “common law” concept of immunity) that no provision was necessary for it, but SOEs (now estimated to account for as much as 10% of global economic activity, according to one UN estimate) were far less visible in international commerce, and had not been viewed as potential criminal actors. The Court’s legerdemain of interpreting the stark language of §1604 was thus based less on what Congress actually said – which, as the Court admitted, would appear by itself to suggest total immunity in pretty clear terms– but rather on what Congress must have “meant,” or perhaps what it “would have done.”
While the Court’s outcome is not lacking in common sense as a policy matter, it does leave open at least two issues for future exploration.
First, the Court noted that Halkbank’s backup argument – that, if the FSIA did not apply, it could rely on “common law” immunity – had not been addressed by the lower courts, and thus it remanded to the Second Circuit for this issue to be explored. It is difficult to predict that the Circuit will do anything other than find that Halkbank’s banking activities are not protected by “common law immunity,” but the reasoning for such a conclusion may not be obvious and could be consequential. Among other things, the Department of Justice takes the position that under principles of separation of powers, the Executive Branch has the exclusive power to determine if a sovereign is immune under the specific circumstances of the situation; it will be interesting to see if the courts adopt this position, which would certainly add to the Department of Justice’s already powerful collection of tools with which to negotiate.
And second, the Court’s opinion acknowledges what it calls a “consequentialist” argument made by Halkbank: A core principle of the FSIA was to federalize all aspects of civil litigation involving sovereigns, to the total exclusion of State courts, thereby assuring that issues relating to foreign sovereigns (and thus to foreign relations generally) would be handled solely by federal courts. By ruling that the FSIA does not apply to criminal matters at all, State and local prosecutors are free to indict and prosecute not only SOEs but actual foreign States. The implications of this were actively discussed at oral argument, during which several justices expressed concern about the risks of local (and
possibly “elected”) prosecutors pursuing foreign actors. But in its opinion, the Court essentially pooh-poohs the significance of this, noting quite breezily that States have not in fact prosecuted foreign sovereigns or SOEs, and that if they do, the federal government may submit a “suggestion of immunity” in State courts, that State court decisions might be reviewable by the Supreme Court, or that federal preemption might apply (carefully noting that the Court was not “deciding” any of these issues).
The real issue here is that Congress should focus on SOEs, and come up with principles to apply federal standards of immunity to their prosecution, but hasn’t. The FSIA has two main goals. One is to address the widely perceived problem of “inconsistency” that resulted from applying principles of common law immunity on a “case-by-case” analysis. This decision puts all criminal matters on a pre-FSIA basis – that is, immunity claims by SOEs and actual States to federal or State prosecution will need to be addressed by applying “common law” standards case-by-case. A second goal was to assure that the United States speaks with “one voice” on matters relating to foreign affairs. The basic
structure of the FSIA insures that in civil matters the “one voice” will be that of the federal courts, to the total exclusion of State ones. This opinion makes clear that there is no blanket preclusion of State prosecution of SOEs, or even foreign States; while the Court offered several open-ended suggestions of how potential federal “common law” can be applied to any such prosecutions, in the absence (specifically admitted by the Solicitor General) of removal provisions, exploring these possibilities risks messiness in which State as well as federal “voices” will be heard.
Congress should address this. SOEs are simply an important part of the globalized economy; Halkbank may be the first but will not be the last such entity to face criminal prosecution. As my earlier note concluded, the FSIA offers no coherent framework for addressing this issue. The Court’s somewhat strained interpretation of the statute may be the “least bad” outcome available to it, but leaves open issues that that will continue to bedevil the courts unless Congress acts.”
