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Focus on Regulation

Budha Ismail Jam, et al, Petitioners v. International Finance Corporation

Introduction

On 27 February 2019, the Supreme Court of the United States (SCOTUS) held that International Organisations do not have absolute immunity under the International Organizations Immunities Act of 1945 (IOIA). This blog discusses the opinion of the Supreme Court.

International Organisations

International Organisations have their own legal personality and status under international law and their rights and duties are determined by treaties. The World Bank Group’s private lending arm – the respondent in this matter – the International Finance Corporation (IFC) is one such International Organisation.

IOIA was enacted as a consequence of many International Organisations being headquartered in the U.S. It gives International Organisations a set of privileges and immunities. The purpose of International Organisation immunity is to allow such organisations to pursue the collective goals of member countries without undue interference from the courts of a member country. The question before the Supreme Court was whether the immunity enjoyed by the IFC in terms of IOIA is absolute.

Budha Ismail Jam, et al, Petitioners v International Finance Corp (JAM v IFC)

In 2008, the IFC lent $450 million to Coastal Gujarat, a power company based in India. The loan was to finance the construction of a coal-fired power plant. In 2015, a group of farmers and fishermen (the Petitioners) who lived near the power plant sued the IFC in a United States District Court. They claimed that pollution from the plant had destroyed or contaminated much of the surrounding air, land, and water. Relying on an IFC audit report (which concluded that not only did Coastal Gujarat not comply with the environmental and social action plan in constructing and operating the plant, but also that the IFC had failed to inadequately supervise the project) the Petitioners instituted various actions against the IFC. These included claims of negligence, nuisance, and breach of contract. The IFC argued that because of certain provisions of the IOIA it was immune from being the subject of a legal action and argued that U.S Courts had no jurisdiction. The District Court agreed with the IFC and so the matter proceeded on appeal.

The question before the Supreme Court was whether IOIA grants International Organisations the absolute immunity that foreign governments enjoyed when IOIA was enacted, or whether International Organisations enjoy limited immunity that foreign governments enjoy today. The Supreme Court favoured the later interpretation. The provision in question read as follows- “[international organisations] shall enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments.”

In reaching its conclusion, the Supreme Court had regard to the fact that IOIA defines immunities by reference to comparable privileges and immunities enjoyed by foreign governments. Therefore, using the “reference” canon method of interpretation – that when a statute refers to a general subject, the statute adopts the law on that subject as it exists whenever a question under the statute arises – the Supreme Court held that the reference to the immunity enjoyed by foreign governments in IOIA is a general rather than specific reference. Thus, the IOIA should be understood to link the law of International Organisation immunity to the law of Foreign Sovereign Immunity, as defined by the Foreign Sovereign Immunities Act (FSIA).

The IFC also argued that if the Supreme Court were to interpret IOIA’s immunity provision to grant anything less than absolute immunity that would lead to a plethora of claims against the IFC. In a quick overview of the meaning of ‘commercial activity’ in the FSIA, the Supreme Court considered that it is not clear that the lending activity of all International Organisations qualifies as commercial activity within the meaning of the FSIA. The Supreme Court held further that there is no good reason to think that restrictive immunity would expose International Organisations to excessive liability. Notably, the Supreme Court was quick to thwart any interpretation which could lead to claims based on tortious activity. “Thus, if the ‘gravamen’ of a lawsuit is tortious activity abroad, the suit is not ‘based upon’ commercial activity within the meaning of the FSIA’s commercial activity exception.”

The dissenting opinion was authored by Justice Breyer. He adopted a purpose based method of interpretation and held that having regard to IOIA’s history, context, purposes and consequences Congress intended for absolute immunity.

Conclusion

The Supreme Court’s opinion was welcomed by human rights groups as being a landmark ruling which “is a major step towards holding [the] World bank accountable for the negative impacts their investments are causing“.

However, this is only one of many ‘hurdles’ for the Petitioners and going forward they still need to prove not only that the IFC engaged in a commercial activity but also that a nexus between the commercial activity and the alleged harm exists. These claims will take years to finalise. Nevertheless, it is yet more evidence of the expanding web of accountability for alleged human rights impacts.

Julianne Hughes-Jennett, Head of Hogan Lovells Business and Human Rights Group, together with Bryce Wray – March 2019