Later this month, the U.S. Supreme Court will decide whether to hear a case challenging the International Finance Corporation’s (IFC’s) claim to immunity from being sued. If the Court decides not to hear the case—thereby granting the IFC “absolute immunity” from lawsuits in the United States—it will place international organisations like IFC above the law, creating a new rule of immunity far greater than that of any other entity, government, or person, at the expense of the right to remedy. A decision to hear the case, however, presents a critical opportunity to rectify an accountability gap.

In 2015, EarthRights International filed a lawsuit in a U.S. federal court on behalf of fishing and farming communities in Gujarat, India. The lawsuit asked for compensation from the IFC for its role in financing the destructive Tata Mundra coal-fired power plant project, despite knowing that the project carried grave risks. As the IFC predicted, the project has led to extensive harm – precisely those harms it warned could result if appropriate steps were not taken. Many local communities have lost their access to clean drinking water. Fish catch they depend on for their livelihoods has been severely reduced as a result of the thermal pollution from the plant. Coal ash, coal dust, and other pollutants have contaminated the land and air pollutants are present at levels that are dangerous to people’s health.

The IFC does not deny that these harms occurred, and instead argues that it is immune from being sued in U.S. courts, no matter how much harm it causes. But international organisations do not have absolute immunity. 

Under the relevant U.S. law, international organisations are supposed to have “the same” level of immunity as foreign governments. Foreign governments are not immune from lawsuits arising out of commercial activities, like the loans that the IFC provided for the Tata Mundra project. The same rules are supposed to apply to international organisations, which are made up of foreign governments.

Even international organisations need to deal with external parties during the course of their operations, ranging from buying office supplies to interacting with local communities. Inevitably, disputes arise and need to be resolved in an impartial way. In fact, having immunity can harm an international organisation by making external parties less willing to engage with them, for fear they won’t be able to seek recourse if the organisation goes back on its commitments. 

The IFC’s own Articles of Agreement set aside certain privileges and immunities that its founding members considered necessary for the organisation to function, such as immunity of property from search and confiscation, protection of official communications, and immunity from suits by IFC member states. But the Articles broadly waive immunity from lawsuits brought by anyone else. Since the IFC is headquartered and conducts much of its business on U.S. soil, it is subject to U.S. courts.

EarthRights International petitioned the U.S. Supreme Court to consider this case. During an earlier stage in the lawsuit, a lower court misinterpreted the law, ruling that the IFC has “absolute immunity” from lawsuits, far greater than the immunity enjoyed by foreign governments. If the Supreme Court does not take the case, the lower court’s ruling will stand, and there will be no way for affected communities to hold the IFC accountable for harm arising out of its investments. 

In this case, it is clear that only the threat of judicial enforcement can make the IFC abide by its commitments. The IFC’s behaviour contradicted its own standards, policies, and commitments at almost every turn. Despite identifying substantial risks at the outset, IFC chose to invest without ensuring proper safeguards were in place to mitigate those risks.  Rather than recognise the communities’ right to access remedies, and its own commitment to provide for remedies where violations of its Performance Standards occur, the IFC acted—and continues to act—as a barrier. 

IFC’s management disregarded the findings of its own grievance mechanism, the Compliance Advisor Ombudsman (CAO), which recommended numerous steps to bring the IFC’s investment back into compliance with its own environmental and social standards. The CAO’s most recent monitoring report on the project affirms that the IFC remains out of compliance and has failed to take meaningful action to address its findings.

And in this litigation, the IFC actively sought to close down avenues of recourse for the affected communities. In arguing for broad immunity, IFC argued that there was no role for the courts, because the IFC “already provides Plaintiffs with an alternative means of recourse”—the CAO. But as this case illustrates, even when the CAO agrees with local communities, it lacks any ability to enforce its findings and compel the IFC to act. A grievance mechanism that IFC can ignore at whim is obviously not an adequate alternative to access to courts. 

Perhaps most surprisingly, the IFC has denied that it has any obligation to protect local communities from harms arising out of the projects it funds, even though the IFC’s mission is to benefit the world’s poor, and despite its public commitments to “do no harm” to local communities in carrying out its mission.

IFC’s own policies require extensive engagement with communities in order to obtain their support for proposed projects. The IFC’s involvement in a development project comes with guarantees that the project will abide by environmental and social standards that protect local communities and the environment on which they depend. After this case, communities might question what IFC’s word is really worth without the ability to hold the IFC to its promises. 

Ultimately, this case could damage the IFC’s global brand by eroding trust between affected communities and the institution. “No one should be above the law,” said Gajendrasinh Jadeja, the head of Navinal Panchayat, a local village involved in the case. “Fish catch is down, our routes to fishing grounds are blocked, air is polluted because of the coal dust and fly ash, we have lost access to drinking water. What are we supposed to do?” 

For more information about Jam v. IFC, please visit: https://earthrights.org/case/budha-ismail-jam-et-al-v-ifc/