The International Finance Corporation has funded projects in India that have caused large scale violation of environmental and social laws.

In a recent move, India has extended the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), which confers legal immunity akin to the kind enjoyed by foreign missions and diplomats, to the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group.

The United Nations (Privileges and Immunities) Act, 1947 (46 of 1947) gives effect to the Convention on the Privileges and Immunities of the United Nations in India. Some of the few organisations the Act provides protection to are the International Civil Aviation Organisation, World Health Organisation, International Labour Organisation, Food and Agriculture Organisation of the United Nations, United Nations Educational, Scientific and Cultural Organisation, Universal Postal Union, International Telecommunication Union and World Meteorological Organisation.

This list of organisations is not exhaustive and has been extended to more organisations over the years through government notification.

The Act provides jurisdictional personality to the institution that it is granted to. It also provides immunity to the officials of the organisation in case of any disputes of a private nature and disputes involving any official of the organisation. This will provide immunity to the organisation and its officials against legal action in India.

The problem of an abuse of the immunities by the United Nations or specialised agencies is addressed not by municipal legal action, but through consultation, arbitration or in the case of failure of such process, by the International Court of Justice.

Past projects funded by World Bank Group 

The Sardar Sarovar Project was conceived as the first in a series of some 30 projects that were designed to develop the Narmada basin in the 1980s and was supported by the World Bank’s government lending arm – the International Bank for Reconstruction and Development (IBRD).

The bank’s support for the scheme took the form of a 10-year Dam and Power Project and a companion three-year Water Delivery and Drainage Project. Both projects were processed in parallel and were approved in 1985, two years before India’s Ministry of Environment, Forest and Climate Change cleared the project.

In 1991, massive protests against the project led to an unprecedented independent review by the World Bank. The Morse Commission, appointed in June 1991 at the recommendation of the World Bank, conducted its first independent review of a World Bank project. This independent review stated that the “performance under these projects has fallen short of what is called for under bank policies and guidelines and the policies of the government of India”.

It further strongly criticised the bank and the borrower for paying inadequate attention to resettlement and rehabilitation, and to environmental protection. In order to save face, the World Bank put conditions for improving the state of rehabilitation. A day before the deadline, having failed to meet the conditions, the Indian government pulled out of its loan agreement with the World Bank. The World Bank’s participation in these projects was cancelled in 1995.

 Since then, the World Bank has funded a number of problematic projects in India. The IFC has in the recent past been involved with some of the most environmentally and socially damaging projects.

The Tata Mundra Ultra Mega Power Project (UMPP) sponsored by Coastal Gujarat Power Limited in the coastal region of the state has been under the scanner for displacing fish workers and impacting their source of livelihood.

In June 2011, a complaint, representing the various potentially affected fishing communities, was filed with the Compliance Advisor Ombudsman (CAO), the grievance redressal body of the IFC. The complaint raised issues related to the project’s social and environmental impact on fishing communities, specifically: deterioration of water quality and fish populations blocked access to fishing and drying sites, forced displacement of fishermen, community health impacts due to air emissions and destruction of natural habitats, particularly mangroves.

The complainants also believe that the impact to their fishing communities was not adequately identified and mitigated, and the cumulative impact of the project was not adequately assessed.

 The CAO audit report validated the concerns raised by the community and an inadequate action plan was formulated, which was rejected by the community and is being monitored right now.

The Tata Mundra UMPP is not the first instance where the IFC has funded projects in India that have caused large scale violation of environmental and social laws, even by IFC’s standards. In Orissa, the GMR power project, which is funded by the IFC through a financial intermediary – Infrastructure Development Finance Company – has been responsible for a grave environmental and social disaster. A complaint regarding this was filed with the CAO, raising concerns about the disclosure of project information, environmental and social risks and human rights violations.

In Tata’s tea plantations in Assam and West Bengal, where the IFC investment comprises an equity investment of $7.8 million, there have been serious issues regarding labour law violations. A complaint was filed with the CAO by concerned NGO’s on behalf of tea workers raising concerns about the labour and working conditions at three different plantations.

In their complaint, they specifically cited long working hours, unpaid compensation, poor hygiene and health conditions, and a lack of freedom to associate among plantation workers. Furthermore, the complainants have questioned the worker share-buying programme, contending that workers have been pressured into buying shares, often without proper information about the risks of such an investment. In all the above cases the CAO has gone ahead and given an audit report reinforcing the contentions of the complainants.

A complaint on IFC’s technical assistance to Vizhinjam port in Kerala is pending with the CAO.

Sabotaging the interests of its people

Immunity is oddly being granted to the IFC at a time when the people in India have, for the first time, taken a major step towards holding large financial institutions accountable.

The local fishing and farming community members from the villages affected by the Tata Mundra UMPP, filed a class action lawsuit in a US court holding the IFC responsible for causing the loss of their livelihoods, destroying their land and water and for creating a threat to their health by funding the coal-fired power plant in Gujarat.

Though the appeal was dismissed in the lower court, for the people it was a chance at seeking justice. A new appeal has been recently filed in a higher court in the US. This is the first time that a case is filed against a member of the World Bank Group anywhere in the world.

Immunity to the IFC in India has snatched away a medium to seek justice from the people who are affected by IFC funding within the Indian jurisdiction. Also, the move to extend the United Nations (Privileges and Immunities) Act to an institution like IFC, which funds only private sector projects, seems not without a motive. By making this move, the government of India has opened a new door to lowering the environmental and social safeguard implementations, by taking away the rights of the affected people for holding IFC answerable for its investments.

Also, this underhanded way of bringing financial institutions under the Act is of serious concern. For any citizen, the judicial system of a nation is the most reverent space for seeking justice. By making this move, the government of India has gone ahead and compromised with the constitutional rights of its citizens to seek justice in their land and has made it easier for international financial institutions like the IFC to get an easy pass for the devastation that their projects have caused.

How can any institution be above the law of the land?


Originally published in

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