Last week, the Supreme Court ruled that international organizations (e.g. the World Bank) can be sued by U.S. courts when they act as private players in the market. This decision took place in the context of Jam v. International Finance Corp. The International Finance Corporation (IFC) makes loans to private businesses to finance projects in developing countries.
The IFC loaned $450M to help finance the CPGL Mundra Project, a coal-fired power plant on the western coast of India. The power plant ended up creating pollution that killed fish, contaminated wells, expelled coal ash into the air, and ruined nearby farmlands. Several residents sued the IFC in federal court, since the IFC had violated strict environmental safeguards outlined in its loan agreement.
The Supreme Court considered the legal issue of whether residents had a right to bring their lawsuit, or whether IFC had immunity under the International Organizations Immunities Act (which gives international organizations “the same immunity from suit” as “as is enjoyed by foreign governments”). The residents countered that under the Foreign Sovereign Immunities Act, foreign governments can now be sued in U.S. courts for their commercial activities (such as making loans).
The Supreme Court ruled 7-1 for the residents, tethering and establishing a continuous link between international organizations’ immunity and foreign sovereign immunity. Chief Justice Roberts held that not all loans from international organizations qualify as ‘commercial activities‘ under the FSIA. The present lawsuit is concerned with an allegedly wrongful act that took place overseas, and is thus not based upon commercial activity.
Civil society groups have heralded the ruling as a victory for communities impacted by international institutions. Legal experts state that the ruling is unlikely to trigger a multitude of lawsuits, since plaintiffs face significant financial hurdles in bringing a suit. The final outcome of Jam v IFC, i.e. whether the IFC is ultimately compelled to pay damages to the Gujarat fishermen, will be a major factor in whether more lawsuits follow. One other case against the IFC—initiated by farmers from a palm oil plantation in Honduras—is expected to reach U.S. courts as a result of this ruling.
This post was written by a CCLA-PBSC Rights Watch student. Views expressed do not necessarily reflect the views of the CCLA or PBSC.