Supreme Court rules that World Bank Group can be sued in US Courts in historic decision

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IFC
WASHINGTON, DC — In a historic decision, today the United States Supreme Court decided 7-1 to overturn the International Finance Corporation (IFC)’s claim to absolute immunity from lawsuits. Under the Jam v. IFC decision, international organizations like the IFC and the World Bank can now be sued in US courts, including in relation to their commercial activities.
Previously, international organizations like the World Bank Group and its private lending arm, the IFC, had enjoyed absolute immunity, meaning that they could not be sued in US courts under any circumstances. Foreign governments have only limited immunity in the US, so today’s decision aligns international organizations’ immunity with that of foreign governments.
“For far too long, the World Bank Group has considered itself exempt from any form of litigation,” says Carla García Zendejas, Senior Attorney at the Center for International Environmental Law (CIEL), which submitted an amicus brief to the Supreme Court opposing absolute immunity. “Today’s decision is a win for communities everywhere who face tremendous obstacles seeking accountability for development projects that harm their environment, livelihoods, and rights.”
In Jam v. IFC, Indian fishing communities and farmers, represented by EarthRights International, sued the IFC in an effort to hold the institution accountable for harms resulting from the Tata Mundra Ultra Mega coal-fired power plant in Gujarat, India, which received an IFC loan in 2008. Affected communities originally sought redress through the IFC’s independent accountability mechanism, the Compliance Advisor/Ombudsman (CAO), alleging that the IFC caused the loss of their livelihoods and property and threats to their health. While the CAO found a number of counts of non-compliance, the IFC largely dismissed their findings.
To pursue adequate remedy, the communities filed suit in federal court in Washington, DC. The IFC has long claimed absolute immunity as an international organization, and lower courts have upheld the interpretation that the statutes grant the IFC greater immunity than foreign governments. With the Supreme Court’s decision, the case will now return to lower courts for litigation, in which plaintiffs will still need to show that their injury is based on commercial activity within the United States.
“While the Supreme Court ruled against the IFC, development finance institutions should view this as a win. Achieving their mission of alleviating extreme poverty and improving people’s lives doesn’t just mean investing in projects; it also means having strong and effective ways for communities to obtain remedy when things go wrong,” says García Zendejas.
“History has repeatedly shown that development finance institutions’ own internal accountability mechanisms are essential, but not enough. Today’s decision in Jam v. IFC gives communities a vital new legal avenue to hold them accountable,” says García Zendejas. “Just as importantly, it provides an incentive for these institutions to work harder to prevent harms in the first place. We hope that this decision serves as a wake-up call for the IFC and other development finance institutions to take a hard look at ensuring that their projects truly benefit communities and properly assess any risks — before those projects are even approved.”
Contact:
Amanda Kistler, Communications Director: akistler@ciel.org, 202.742.5832
Notes to Editors:
Link to EarthRights International press release: https://earthrights.org/media/historic-supreme-court-win-world-bank-group-is-not-above-the-law/

Bloomberg | 27 February 2019

US Supreme Court Rules Against World Bank Arm on Immunity

By Greg Stohr

– International Finance Corp. sought to end power plant suit
– Immunity doesn’t protect commercial activities, court says

The U.S. Supreme Court opened some American-based international organizations to lawsuits, ruling that a World Bank affiliate must defend against allegations it is responsible for environmental damage caused by a power plant in India.

Voting 7-1 on Wednesday, the court said sovereign immunity doesn’t protect those international organizations in the U.S. when they are involved in commercial activities.

The suit accuses the International Finance Corp., the World Bank’s private-sector lending arm, of inadequately supervising the plant’s construction after providing a $450 million loan. Those suing the IFC include local farmers and fishermen.

The decision could mean new legal liability for the IFC and other multilateral development banks. The ruling doesn’t affect the International Monetary Fund or the United Nations itself, both of which have complete immunity from suit under the terms of their charters.

A 1945 federal law says international organizations are entitled to the “same immunity” as foreign countries. The central question for the court was how that provision was affected by a 1976 law that said foreign governments don’t get immunity when they are involved in commercial dealings. The 1976 measure didn’t mention international organizations.

Writing for the court, Chief Justice John Roberts said the 1976 law also changed the immunity possessed by international organizations.

The 1945 law “should therefore be understood to link the law of international organization immunity to the law of foreign sovereign immunity, so that the one develops in tandem with the other,” Roberts wrote. He said the standard set by the 1976 law “hardly means unlimited exposure to suit for international organizations.”

Justice Stephen Breyer dissented, and Justice Brett Kavanaugh did not participate in the case.

The case is Jam v. International Finance Corp., 17-1011.

Original source: CIEL