In 2015, farmers and fishworkers from rural India sued the World Bank Group in Washington, D.C., over impacts from a disastrous coal-fired power plant project that they said destroyed their livelihoods and damaged their health. Last week, their lawsuit made it to the U.S. Supreme Court. While the World Bank Group is fighting the lawsuit tooth and nail, losing just might save its mission.
The World Bank Group includes five institutions, such as the World Bank itself and the International Finance Corporation (IFC), which makes profitable loans to private corporations. It is the IFC that led the project in India.
Technically, the question before the Supreme Court is about the finer points of a 1945 U.S. law on immunity of international organizations, and whether it prevents institutions such as the IFC from being sued for their commercial activities.
But the IFC has focused far more on the potential policy implications of the case than the text of the law. It paints a dire picture; its counsel warned the court that allowing lawsuits would be “jumping off a cliff,” and would “result in a lot of disruption to the good work that these organizations do.”
We believe that is false. Accountability should help these institutions.
The World Bank Group’s mission is twofold: “To end extreme poverty and promote shared prosperity in a sustainable way.”
Yet in India, the IFC enabled a project that they knew would do just the opposite – it would push more families into poverty, and any benefits would be highly unequal.
In exchange for the promise of more reliable electricity for other communities, the IFC funded a project that dredged channels through fragile marine ecosystems, destroyed mangroves that incubate sea life, continually discharges a river of hot water into the sea, contaminates groundwater with seawater, covers crops with dust and ash, and causes respiratory problems for local villagers.
All of these impacts could have been prevented. Some of them were identified by the IFC before the plant was built.
The plant has been cited multiple times by local pollution control authorities, and violates many industry standards.
And it is not even providing the promised benefits.
Due to a glut of electricity and higher-than-expected operating costs, the plant is functioning only at one-fifth of its capacity, and still losing money. So the local devastation has essentially been for nothing.
The community brought their concerns to the IFC’s internal processes, which found multiple problems with the IFC’s approach. But the IFC failed to take the necessary action in response, which is why the lawsuit was filed.
What would have been different if the IFC knew that it might face legal action over the project?
The IFC likely would have been much more responsive to community concerns, preventing the worst problems and fixing others when they were identified. It would have made sure that the power plant did not leave the most vulnerable local people worse off than they were before, casualties of development.
And this is, of course, just what the World Bank Group’s mission calls for.
The IFC’s management may be opposed to this lawsuit; nobody likes being sued. But anyone who supports its mission of ending poverty and sharing sustainable prosperity should hope that it loses this case.
Immunity from consequences can lead to reckless behavior, and that is exactly what happened here.
The article, first published on the Thomson Reuters Foundation, can be accessed here.