Halkbank court appeal in U.S. gains Erdoğan time as elections loom - analyst

Halkbank of Turkey’s legal appeal at the U.S. Supreme Court represents a latest attempt by President Recep Tayyip Erdoğan to scuttle the prosecution of the bank for its alleged role in helping Iran evade sanctions, Aykan Erdemir, senior director of the Turkey Program at the Foundation for Defense of Democracies (FDD), told Ahval on Tuesday.

An appeals court in Manhattan ruled last week that Halkbank, a Turkish state-run lender which operates under the executive oversight of Erdoğan, could appeal to the U.S. Supreme Court on the basis of claims that it enjoys state immunity from prosecution. The appeal at least temporarily blocks the criminal case against it before a New York jury.

“We were expecting this tactic to be utilised, but a crucial question was whether the court of appeals would allow Halkbank to stop the case while the Supreme Court appeal was continuing,” said Erdemir, a former opposition deputy in the Turkish parliament.

Erdoğan is due to fight presidential and parliamentary elections in June 2023. Should the Supreme Court decide to consider Halkbank’s appeal, its possible prosecution at a lower court would be delayed until after the vote, Erdemir said.

In an indictment issued in late 2019, U.S. prosecutors accused Halkbank of evading U.S. sanctions by assisting Iran to secretly transfer $20 billion’s worth of restricted funds, with at least $1 billion allegedly laundered through the U.S. financial system. The bank has argued that it is immune from prosecution under the federal Foreign Sovereign Immunities Act because it is “synonymous” with Turkey, which has immunity under that law. The argument was initially rejected by a panel of judges at a lower court.

The indictment against Halkbank stemmed from earlier court proceedings that rocked U.S.-Turkish relations during 2017 and 2018. Reza Zarrab, a Turkish-Iranian businessman, was arrested in Miami in 2016, then flipped to become state witness and admitted his guilt for spearheading the evasion scheme. He told prosecutors that bribes were paid to a former Turkish minister, who was indicted alongside him, as part of the scheme.

Erdemir said that there were now two possible outcomes in the case. The first, which occurs in most Supreme Court appeals, is that the court will refuse to hear the case, Erdemir said. Each year, almost 7,000 cases make it to the court but only 1 percent are heard.

Legal experts told Erdemir that the Halkbank case raises some important questions about the scope of the foreign sovereign immunities act, so four out of nine Supreme Court judges - the minimum required to accept a case - might request to hear it. Erdemir said that the legal experts saw a 33 percent possibility of the case being heard. Should the court convene, the trial may take one to two years, they said.

Erdemir pointed out that if the Supreme Court refuses to hear the case, legal proceedings will return to be heard by a jury at the lower court in the southern district of New York within a few months.

“It would therefore be a great win for Erdoğan if the Supreme Court chooses to hear the case, for most experts expect that Halkbank loses it,” Erdemir said.

Should the supreme court accept to hear the case, “the jury trial will be postponed until after the 2023 presidential and parliamentary elections in Turkey and Erdoğan will not have to deal with all the embarrassing evidence and testimony resulting from the Halkbank jury trial in New York,” Erdemir said.

After the prosecution against Halkbank began, it refused to acknowledge the charges against it for several months. After eventually being forced to enter a not guilty plea, it sought the removal of presiding Judge Richard Berman of the Southern District of New York for being biased against the Turkish government. Halkbank failed in those efforts.

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