The Second Circuit recently held that 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 but concluded that even if FSIA did provide immunity from criminal prosecutions, that immunity would not extend to a foreign sovereign’s or its instrumentality’s commercial activities.

The United States accused Halkbank—a bank majority-owned by the Turkish government—of helping Iran evade U.S. economic sanctions by laundering billions of dollars’ worth of Iranian oil and natural gas proceeds held in Halkbank, and permitting Iran to use those proceeds to purchase gold and convert it to cash for Iran’s benefit. The bank also allegedly attempted to cover up those transactions by lying to U.S. Treasury Department officials that the transactions related to the purchase of food and medicine by the bank’s Iranian customers and thus fell within the so-called “humanitarian exception” to U.S. sanctions.

Halkbank moved to dismiss the indictment arguing that FSIA—which facially applies only to civil cases—renders Halkbank immune from criminal prosecution because it is majority-owned by the Turkish government. The district court disagreed and denied the motion.  Halkbank immediately appealed arguing that the district court’s denial of immunity qualified for interlocutory review under the collateral-order doctrine. A panel of the Second Circuit agreed, holding that it had jurisdiction over the appeal because, just as in the civil context, a threshold foreign sovereign-immunity determination in criminal cases is immediately reviewable under the collateral-order doctrine.

The panel, however, sidestepped the key issue:  whether FSIA, which plainly confers immunity on foreign sovereigns from civil actions, also confers immunity in the criminal context. Rather, the panel concluded that even if foreign sovereigns and their instrumentalities were immune from criminal prosecution under FSIA, FSIA’s many exceptions would still apply and, in this case, preclude Halkbank from qualifying for immunity. The panel explained that Halkbank’s charged offense conduct would fall within FSIA’s exception to sovereign immunity for commercial activity. According to the panel, Halkbank’s participation in money laundering and other fraudulent schemes designed to evade U.S. sanctions constitute “an activity that could be, and in fact regularly is, performed by private-sector businesses,” and thus those acts are commercial, not sovereign, in nature.

The panel also rejected Halkbank’s argument that even if FSIA did not confer foreign-sovereign immunity in criminal cases, Halkbank was nevertheless immune from criminal prosecution under the common law. The panel explained that if FSIA did in fact confer sovereign immunity in criminal cases, then it displaced any pre-existing common-law immunity. And if FSIA did not apply in the criminal context or did not supersede the common law, foreign-sovereign immunity at common law also had an exception for a foreign state’s commercial activity, similar to FSIA’s commercial activity exception. The panel thus affirmed the district court’s order denying Halkbank’s motion to dismiss the indictment.

Photo of Lucas Kowalczyk Lucas Kowalczyk

Lucas Kowalczyk is an associate in the Litigation Department and a member of the firm’s nationally recognized Appellate Practice Group, which has been named to the National Law Journal’s Appellate Hot List. Lucas has authored dozens of briefs in federal and state appellate…

Lucas Kowalczyk is an associate in the Litigation Department and a member of the firm’s nationally recognized Appellate Practice Group, which has been named to the National Law Journal’s Appellate Hot List. Lucas has authored dozens of briefs in federal and state appellate and trial courts, and at the certiorari and merits stages in the Supreme Court of the United States, and has argued cases in state and federal appellate courts. He litigates cases in a wide range of subject areas, including antitrust, bankruptcy, healthcare, labor, employment, and constitutional law. He also co-authored chapters of the treatise Principles of Appellate Litigation: A Guide to Modern Practice, published in 2021 by PLI and revised annually.

Among his notable appellate representations, Lucas helped obtain a critical victory at the U.S. Supreme Court for the Financial Oversight and Management Board for Puerto Rico in an appeal concerning the Board’s sovereign immunity. Lucas also prevailed at the First Circuit for the Board in four related appeals seeking to overturn the $18-billion plan of adjustment for the Sales Tax Financing Corporation, a critical component of Puerto Rico’s historic fiscal recovery.

Lucas is also a member of the firm’s White Collar Defense and Investigations Group, focusing on government and internal investigations, and criminal and regulatory matters. Among other representations, Lucas helped secure a full release of nearly $20 million worth of interest in assets seized from the firm’s client by the U.S. Department of Justice.

Finally, Lucas is a member of the firm’s Commercial Litigation Practice, and has successfully represented clients in high-stakes contractual disputes involving financial services, life sciences, consumer goods, telecommunications, and other industries in trial courts and arbitrations in a number of jurisdictions.

Lucas also maintains a diverse pro bono practice and has represented indigent clients in immigration, family, and appellate courts, and in death-penalty proceedings. Among his notable representations, Lucas prevailed in a Second Circuit appeal addressing the showing the government must make to justify the continued detention of a noncitizen in removal proceedings. In 2019, Lucas received the Legal Aid Society’s Pro Bono Publico Award and Proskauer’s Golden Gavel Award for obtaining a critical victory for his client—an indigent grandmother acting as guardian for her two learning-disabled grandchildren—in an appeal, argued by Lucas, to the New York State Appellate Division, First Department. The court held that an amendment to New York’s Subsidized Kinship Guardian Program applied retroactively and required an award of benefits to the client’s grandchildren.

Lucas is a graduate of the National Trial Advocacy College.

Photo of Seetha Ramachandran Seetha Ramachandran

Seetha Ramachandran is a partner in the Litigation Department, and a member of the White Collar and Asset Management Litigation practices. An experienced trial and appellate lawyer, Seetha has conducted 10 criminal jury trials, argued 10 appeals before the U.S. Court of Appeals…

Seetha Ramachandran is a partner in the Litigation Department, and a member of the White Collar and Asset Management Litigation practices. An experienced trial and appellate lawyer, Seetha has conducted 10 criminal jury trials, argued 10 appeals before the U.S. Court of Appeals for the Second Circuit, and handled ancillary civil proceedings in forfeiture cases.

Seetha is a leading expert in anti-money laundering (AML), Bank Secrecy Act, economic sanctions and asset forfeiture matters. Her practice focuses on white collar and regulatory enforcement defense, internal investigations, and compliance counseling. She represents banks, broker dealers, hedge funds, private equity funds, online payment companies, and individual executives and officers in high stakes and sensitive matters. Seetha has deep experience representing institutions and individuals in financial penalty phase of criminal and regulatory matters, and is often retained to litigate forfeiture and restitution claims on behalf of victims and third parties in criminal cases, as well as handling these issues for individual defendants.

Seetha served as a federal prosecutor for nearly 10 years, including as Deputy Chief in the Asset Forfeiture and Money Laundering Section (AFMLS), Criminal Division, U.S. Department of Justice. She was the first head of DOJ’s Money Laundering & Bank Integrity Unit, where she supervised DOJ’s first major AML prosecutions, and oversaw all of the Criminal Division’s AML cases. In that role, Seetha coordinated closely with state and federal banking regulators, including FinCEN, the OCC and the New York State Department of Financial Services, giving her deep experience with how these agencies work together, especially in matters involving civil and criminal liability. Her work developing and charging criminal cases under the Bank Secrecy Act (BSA) formed the model for AML enforcement that regulators and prosecutors follow today.

Seetha also served as an Assistant U.S. Attorney for the Southern District of New York for nearly six years, in the Complex Frauds, Major Crimes and Asset Forfeiture units where she investigated and prosecuted white-collar cases involving a wide range of financial crimes, including bank fraud, mail and wire fraud, tax fraud, money laundering, stolen art and cultural property, and civil and criminal forfeiture cases.

Seetha is a frequent speaker and prolific author on topics including enforcement trends in the financial services industry, OFAC sanctions, effective AML programs and asset forfeiture.