For Immediate Release

U.S. Government Opposes “Absolute” Immunity for World Bank Group in Brief to SCOTUS

Washington, D.C., August 1, 2018 – Late yesterday, the U.S. Government urged the U.S. Supreme Court to reverse a lower court decision holding that the international organizations like the World Bank Group are entitled to “absolute immunity” from lawsuits in U.S. Courts – an immunity far greater than any other person or entity receives under U.S. law. Instead, the Government’s brief argues, as it has previously, that such organizations should only be entitled to the same “restrictive” immunity that foreign governments have, and like foreign governments, should be subject to suit for injuries arising out of their commercial activities.

The brief supports the Plaintiffs in Jam v. International Finance Corporation (IFC), who with EarthRights International (ERI) filed suit against the IFC, the World Bank’s private lending arm, for its role in funding a destructive power plant project in Gujarat, India that has devastated their community and the local environment. The IFC has not denied that the harms have occurred, instead, it has simply argued that it is immune and cannot be held liable, no matter how illegal its conduct, and no matter how much harm it causes. The Plaintiffs filed a petition for certiorari and earlier this year the Supreme Court agreed to hear the case, marking the first time it will consider international organization immunity. The Court is expected to hear oral arguments later this year.

The question before the Supreme Court is how to interpret the relevant statute – the International Organizations Immunities Act (IOIA) – which says international organizations have “the same immunity” from suit “as enjoyed by foreign governments.” The Court of Appeals for the D.C. Circuit ruled last year based on its prior precedent that this should be interpreted to mean the IFC had “absolute” immunity – even though that is far greater than the restrictive immunity that foreign governments enjoy today. One of the judges wrote separately, however, to strongly criticize those cases as wrongly decided.

“We are pleased the Government has weighed in against absolute immunity,” said Rick Herz of EarthRights International, one of the attorneys who represent the Plaintiffs in the case. “We are optimistic the Court will use this opportunity to clarify that the law must be read to mean what it says: international organizations are entitled only to the same immunity as foreign governments.”

The Plaintiffs, filed their opening brief last week explaining why the D.C. Circuit’s holding is wrong and the IFC is not immune from suits for commercial activity. The US Government’s brief filed this week adds substantial weight to that argument, emphasizing the clear congressional intent to subject international organizations like the IFC to the same immunity rules as foreign governments, and the consistent position of the executive branch, which has for decades recognized only restrictive immunity for international organizations.

A number of other amicus curiae (“friend of the court”) briefs were also filed this week, including briefs by a bipartisan group of a Members of Congress, International Law Scholars, and environmental, human rights, and development-focused advocacy organizations that have experience working with the IFC, all arguing that the D.C. Circuit’s absolute immunity holding is wrong and should be reversed. The congressional brief explains “[t]here is no reason that international organizations should be immune to suit in cases where the states that created them are not,” as that would permit states “to evade legal accountability merely by acting through international organizations.”

The brief from advocacy organizations refutes the IFC’s suggestion that restrictive immunity would “open the floodgates,” and argues that allowing suit in cases like this one, where even the IFC’s own ombudsman has condemned the IFC’s conduct, would increase the accountability of these institutions and help restore the IFC’s credibility as a poverty-fighting institution, which has already been damaged by the public perception that it “consider[s] itself to be above the law.”

In addition to EarthRights International, the Plaintiffs are also represented before the Supreme Court by the Stanford Law School Supreme Court Clinic and O’Melveny and Meyers.

Background

From the start, the IFC recognised that the Tata Mundra plant was a high-risk project that could have “significant” and “irreversible” adverse impacts on local communities and their environment. Despite knowing the risks, the IFC provided a critical $450 million loan, enabling the project’s construction and giving the IFC immense influence over project design and operation. Yet the IFC failed to take reasonable steps to prevent harm to the communities and to ensure that the project abided by the environmental and social conditions necessary for IFC involvement.

Construction of the plant destroyed vital sources of water used for drinking and irrigation. Coal ash contaminates crops and fish laid out to dry and has led to an increase in respiratory problems. The thermal pollution from the plant has also destroyed the local marine environment and the fish populations that fishermen like Mr Jam rely on to support their families. Although a 2015 law required all plants to install cooling towers by the end of 2017, which would minimize thermal pollution, the Tata plant has failed to do so.

The IFC’s own compliance mechanism, the Compliance Advisor Ombudsman (CAO), issued a scathing report in 2013 confirming that the IFC had failed to ensure the Tata Mundra project complied with the environmental and social conditions of the IFC’s loan. Rather than take remedial action, the IFC responded to the CAO by rejecting most of its findings and ignoring others. In a follow-up report in early 2017, the CAO observed that the IFC remained out of compliance and had failed to take any meaningful steps to remedy the situation.

The harms suffered by the plaintiffs are all the more regrettable because the project made no economic sense from the beginning. In fact, Tata Power, which owns the plant, has begun trying to unload a majority of its shares in the project for Rupees 1 because of the losses it has suffered and will continue to suffer.