An appeals court ruled that the state-owned lender, accused of helping Iran evade sanctions, isn’t entitled to sovereign immunity.

Halkbank pleaded not guilty to bank fraud, money laundering and conspiracy. The case became a thorn in U.S.-Turkey relations, with Turkish President Tayyip Erdogan calling the U.S. charges an "unlawful, ugly" step.

A U.S. appeals court on Tuesday said the federal government may prosecute Turkey's Halkbank on charges it helped Iran evade American sanctions, rejecting the state-owned lender's argument that it deserved immunity.