A fishing community in India challenges the bankâs private-lending arm in the US Supreme Court.
The US Supreme Court sits more than 12,000 miles from Tragadi Bandar, the patch of Indiaâs west coast where Budha Ismail Jam has spent most of the past two decades fishing for a living. Jamâs seasonal home, a single room with burlap walls and no electricity or running water, is beyond the Courtâs usual reach.
Yet, on October 31, Chief Justice John Roberts will announce Jamâs name as the lead plaintiff in a lawsuit that could determine whether organizations like the World Bank Groupâs International Finance Corporation (IFC) can be held responsible for harming the very people theyâre supposed to be lifting from poverty.
Jam, who is about 60, belongs to the Wagher people, a Muslim-minority group in India that, for two centuries, has relied on the Gulf of Kutch for survival. Every summer, about 1,000 Wagher families migrate from their inland villages to a string of fishing grounds near the town of Mundra in Gujarat state. There, they erect temporary dwellings on the sand. The men harvest the fish, both from boats and on foot. The women dry the catch on long bamboo trellises, preparing it for sale across South Asia.
âWe lived high-class,â Jam told me, reminiscing about the old days, when I visited Tragadi Bandar four years ago. âWe worked from eight in the morning until 11 at nightâŠ. We did not mind if we didnât get restâŠ. When we had fish, our whole day went by quickly.â
Then heavy industry began taking over the coastline. Among the behemoth newcomers was the coal-fired Tata Mundra Ultra Mega Power Project, which began operations in 2012 at the edge of Tragadi Bandar. Seven times the capacity of the average coal-fired plant in the United States, it was designed to help modernize a country where millions live without reliable electricity.
Backing the project was the International Finance Corporation, a self-described âsister organizationâ of the World Bank that provides private-sector loans and other financial services in the developing world. The IFC lent $450 million to a subsidiary of Tata Power for the $4 billion project.
The IFC says its aim is to âend extreme poverty and boost shared prosperity.â But on the Gulf of Kutchâs fishing grounds, the poverty has only worsened. According to Jam and his neighbors, Tata Mundra helped turn a fertile coastline into a sacrifice zone. They say that heated discharges from the plantâs cooling system have decimated fish stocks; that dredging has destroyed the mangroves that act as marine nurseries; that coal dust and fly ash have tainted the drying fish; and that their drinking water has been ruined by saltwater intrusion. âThe joy has gone away,â said Jam, who catches a fraction of what he used to.
Tata Power, which did not respond to requests for an interview, has previously stated that it âtirelessly worksâ to minimize environmental impacts, and that the power plant âhas not impacted any mangroves [or] biodiversity-rich creeks.â
The Waghers fear that, as the fish disappear, their own survival will be increasingly imperiled. âThese people have poisoned the sea,â Jubedaben Manjaliya, a family matriarch, told me when I was working on an earlier article for the International Consortium of Investigative Journalists. The Waghersâ declining income, she said, meant begging fish merchants for loans to cover their expenses, driving the community into debt. âOtherwise,â she said, âwe canât feed our families.â
This wasnât supposed to happen. The IFC says it holds its clients to rigorous environmental and social standards. But even before Tata Mundra opened, local fishworkers were feeling ignored. In 2011, their organization, Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for Fishworkersâ Rights), or MASS, lodged a complaint with the IFCâs independent ombudsman. That complaint, however, didnât bring the relief they needed.
So they sued. In 2015, Jam and MASS became plaintiffsâalong with two other fishworkers, a village government, and a farmer who says his crops have been harmedâin a lawsuit against the IFC. The complaint was prepared by the nonprofit EarthRights International and filed in US District Court for the District of Columbia, where the IFC is headquartered. The complaint noted that the IFCâs mission includes investing money âwith the intent to âdo no harmâ to people and the environment,â and that it is obligated to monitor the projects it finances. âThe Tata Mundra Plant is thus a mission failure.â
The IFC, in its response, didnât dispute the facts; it simply asked the court to throw out the case, saying it enjoyed âabsolute immunityâ from lawsuits.
The court agreed with the IFC and dismissed the case in 2016. The following year, a three-member panel of the US Court of Appeals for the District of Columbia Circuit upheld the lower courtâs decision. The appellate judges acknowledged that the lawsuit âpaints a dismal pictureâ of life on the Mundra coast and that âthe IFC did not take any stepsâ to compel its client to protect local communities. But from a legal perspective, the appellate court ruled, Jam and his neighbors were âswimming upriverâ: The DC Circuit had a âlong-held precedentâ that, under a 1945 law, international organizations canât be sued.
Thatâs the question before the Supreme Court in October: whether an ambiguous World War IIâera statute really intended to give organizations like the IFC and the World Bank a blanket protection from lawsuits.
Human-rights advocates are watching the case carefully. The World Bank Group has been linked for decades to humanitarian and environmental disasters. According to a 2015 report by the International Consortium of Investigative Journalists, over the previous decade World Bankâfunded projects had physically or economically displaced 3.4 million people. Between 2009 and 2013, the consortium noted, World Bank Group lenders invested $50 billion in projects that had been âgraded the highest risk for âirreversible or unprecedentedâ social or environmental impacts.â
A ruling in favor of the Indian fishworkers could help other victims seek justice. In fact, thereâs another set of plaintiffsâHonduran farmers or their widowsâawaiting the Supreme Courtâs decision in Jam v. IFC.
The 1945 law is called the International Organizations Immunities Act. It applies to âpublicâ organizations like the World Bank and the IFC, which are composed of member countries, including the United States. Those groups, it says, âshall enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments.â
That last phrase is the tricky one: âenjoyed by foreign governmentsâ whenâin 1945? Or in 2018? âItâs actually about what the word âisâ is,â says Harold Hongju Koh, a professor of international law at Yale Law School and a former legal adviser to the State Department.
To understand why this matters, it helps to know that before World War II, international organizations were rare. One exception was the League of Nations, to which the United States didnât belong. Then, in 1944, delegates from 44 countries gathered in New Hampshire for the Bretton Woods conference, which created the International Monetary Fund and the International Bank for Reconstruction and Development (now part of the World Bank). The United Nations was launched around the same time. âThe idea among the great powers was, âWeâre going to cooperate on an international levelâeconomically, military, politically,ââ says William Dodge, a law professor at the University of California, Davis.
The United States had no law governing these new organizations, and it needed one quickly. âI could imagine the State Department saying, âWhat do we do?ââ Dodge continues. âWhat they proposed was, âWe need a default ruleââŠand that was going to be âwhatever [foreign] states are entitled to.ââ
At the time, the United States generally (but not always) granted absolute immunity from lawsuits to the governments of foreign states. This policy, however, was evolving to match the rules of other countries, from Egypt to France to Peru. In 1952, the State Department issued a new edict: It would still grant immunity, but not for a foreign governmentâs commercial transactions. That exception was codified in a 1976 law called the Foreign Sovereign Immunities Act.
The IFC claims that Congress meant to give organizations like itself permanent absolute immunityâwithout a commercial exception that might exclude the Tata Mundra loanâbecause that was how the United States treated foreign governments 73 years ago. In other words, the IFCâs immunity should be frozen at 1940s levels.
Many legal scholarsâincluding Koh and Dodge, who signed a brief supporting the plaintiffsâcall this view preposterous. Congress, they say, never intended for international organizations to have more protection than foreign governments. âItâs a huge metaphysical question about whether the law is static or whether it evolves,â says Koh. âObviously, it evolvesâŠ. The term âdue processâ doesnât mean what âdue processâ meant when we were cutting off peopleâs hands.â
The IFC declined interview requests for this story. In court filings, it has argued that lifting absolute immunity âwould potentially open a floodgate of lawsuitsâ from around the world. The fear of litigation, with its âdevastating costs,â would hinder the IFC from doing its job, the organization claimed.
Dodge doesnât buy the argument. âExxonMobil has no immunity from suit,â he says. âAnd the floodgates havenât opened against them. They might prefer to be sued less, but being subject to suit doesnât keep them from running a very profitable business.â
On this issue, two US Circuit Courts have reached opposite conclusions. Twenty years ago, the DC Circuit ruled that Congress intended to freeze immunity at 1945 levels. (One judge in Jam v. IFC, Cornelia Pillard, called that decision âa wrong turn,â but said she was bound by precedent.) Then, in 2010, the Philadelphia-based Third Circuit concluded that the law was meant to evolve. With the circuits split, itâs up to the Supreme Court to break the tie.
The IFC maintains that communities like the Waghers, even without access to US courts, have an âalternative means of recourseâ: the World Bank Groupâs Compliance Advisor/Ombudsman, which deputy counsel Fady Zeidan calls a âflexible, settlement-orientedâ mechanism. The CAO reports directly to the World Bank Groupâs president and can both mediate disputes and investigate complaints. But it has no enforcement powers.
âCAO, at best, can say, âYes, this is violated.â So what?â says Joe Athialy, the executive director of the Centre for Financial Accountability, a New Delhiâbased NGO that works closely with MASS. âIf you donât have the power to say what needs to be done as a course correction, then whatâs the purpose?â
Still, to the Indian fishworkers, the CAO represented the best option in 2011, when they felt shut out of the planning process for the Tata Mundra plant. In an 18-page complaint, they asked the ombudsman to investigate what they called the plantâs âflawed development.â
The CAOâs findings, issued in 2013, were extensive and damning. The fishing families, âwho represent a vulnerable group given their migrant traditions and status as a religious minority, were not adequately considered as theâŠrisks and impacts of the project were considered,â the report said. Tata Powerâs subsidiary failed to consult properly with the fishworkers on Tragadi Bandar and another seasonal settlement. There were âno baseline dataâ collected about the fishing communities. The IFC, which was supposed to monitor its client, âpaid insufficient attentionâ to these shortcomings.
The CAOâs report also called the power plantâs environmental assessment inadequate. It chastised the IFC for failing to ensure that the plant wouldnât discharge overheated wastewater back into the Gulf of Kutch.
âThe CAO report reconfirmed all the concerns that the people raised,â Athialy says. âThis was an opportunity for the [IFC] to show to the world that they mean business when it comes to compliance.â
Rather than admitting fault, the IFC disputed many of the CAOâs findings. âIFC does recognize that there have been some impacts on the fishing community,â it said, but added that Tataâs local subsidiary has âcorrectly addressedâ the problems. Since then, according to a 2017 CAO monitoring report, the IFC has taken some corrective steps, including a socioeconomic study of the fishing grounds and the testing of ash residue for radioactivity and heavy metals. But those steps, the CAO continued, âare not sufficientâ; fixing the fishworkersâ problems would require a ârapid, participatory and expressly remedial approach.â
Athialy says the IFCâs dilatory response âcomes from the arrogance of immunity.â Knowing that it canât be sued, the IFC has no incentive to hurry.
Advocates for vulnerable communities say the Wagher fishworkersâ experience with the CAO is hardly unique. In Peru, for example, repeated oil spills linked to Maple Energy, another IFC client, contaminated the waterways used by indigenous people in two Amazon communities, according to a 2010 CAO complaint. The ombudsman tried to broker a dialogue between residents and Maple Energy. When that broke down, the CAO declined to do a full audit, asserting that it would âyield limited information.â Instead, the CAO closed the case.
These stories illustrating the CAOâs limits come from around the world, advocates and researchers say: from Kazakhstan, for example, where children living near an IFC-financed oil-and-gas field reportedly suffered from seizures and convulsions; and from Central America, where the IFC continued to invest in sugar companies even as Nicaraguan workers were dying of chronic kidney disease.
Immunity was never supposed to protect the IFC from Kazakh schoolchildren, indigenous Peruvians, or Indian fishworkers, but rather from lawsuits by governments, says Daniel Bradlow, a professor of international law at South Africaâs University of Pretoria who has consulted for the World Bank. Over time, Bradlow wrote in a brief for the Jam plaintiffs, the IFCâs claim of immunity âhas evolved from a shield that protects the IFC from interference by its member states into a sword.â
When I reached Jam by phone in early September, he told me that the conditions on Tragadi Bandar had deteriorated since my 2014 visit. âThe catch has gone down drastically,â he said. He still felt optimistic, though, that the fish would return if the US courts ordered pollution reductions at the Tata Mundra plant.
Thatâs one of the demands by the Indian plaintiffs: that the IFC use its leverage to make sure that the power plant operates more cleanly and that the existing damage is remediated. Jam and his neighbors have also asked for a medical monitoring system to detect environmental illnesses and financial compensation for their lost livelihoods.
Even if they prevail at the Supreme Court, however, that decision will only address their right to sue. The lawsuit will then have to be litigated on its merits. But a favorable ruling for Jam on the immunity question could make the IFC more vigilant about protecting impoverished communities affected by its financial decisions. And it could give those communities another recourse.
EarthRights International, which filed the Jam case, is waiting to try a second federal case against the IFC. It involves the Honduran palm-oil producer Dinant, an IFC client that critics have linked to the intimidation, beatings, and killings of farmers in a land dispute. (Dinant has denied responsibility for the violence.) A CAO investigation into the case found that IFC staffers were encouraged not to delve too deeply into land conflicts, âlest you open a âPandoraâs Box.ââ
âThe IFC was literally funding murder,â EarthRights attorney Richard Herz says of the Honduras case. In its response to the lawsuit, the IFC again claimed immunity. The case, filed in 2017, is on hold pending the Supreme Courtâs Jam ruling.
Athialy considers the case so important that heâs thinking of flying from India to listen to the arguments. âIf the financiers are not held accountable, if the affected communities are not ensured of justice, we are bound to see many more Tata Mundras,â he says. âThe fight is not just against one project. Itâs about peopleâs rights over natural resources. Itâs about making the violator pay. Itâs about asking the financiers to invest responsibly.â
The article, first published in The Nation, can be accessed here.