“The IFC’s stated goals are to end poverty and boost shared prosperity and to carry out its development activities “with the intent to ‘do no harm’ to people and the environment.” To fulfill its institutional goals, the IFC has developed a Sustainability Framework, which dictates the conditions of IFC involvement in projects and the obligations of both the borrower and the IFC to ensure the project promotes positive development objectives while protecting local communities and the environment.
The communities turned to court as a last resort, marking the first time project-affected communities have taken legal action to hold an international financial institution like the IFC accountable for funding and enabling a harmful project.”
Earthrights: An Indian fishing community takes on the World Bank
We’re Going to the Supreme Court!
Summary
Fishing communities and farmers are taking on the International Finance Corporation (IFC), the arm of the World Bank Group that finances projects by private corporations, for its role in funding and enabling the destructive Tata Mundra Ultra Mega coal-fired power plant project in Gujarat, India. In 2015, they sued the IFC in federal court in Washington, D.C., to challenge the IFC’s claim that it has “absolute” immunity from suit. Representing these communities, EarthRights International seeks to prove the IFC is not – as it believes – above the law.
The construction and operation of the 4,150MW power plant along the Gujarat coast has destroyed the natural resources relied upon by generations of local families for fishing, farming, salt-panning and animal rearing. The IFC’s own accountability mechanism has sharply criticized IFC for its role in the project, finding failures at every stage. The communities turned to court as a last resort, marking the first time project-affected communities have taken legal action to hold an international financial institution like the IFC accountable for funding and enabling a harmful project. IFC has not denied causing harm – instead, it has responded by arguing it has complete immunity from suit and simply cannot be held accountable, regardless of how much harm it causes. We think that’s wrong. We share our clients’ belief that no institution should be above the law and we believe the law is on their side.
Plaintiffs
Plaintiffs Budha Ismail Jam, Sidik Kasam Jam and Kashubhai Abhrambhai Manjalia are fishermen who reside at the fishing harbors (known as “bunders”) that are closest to the plant. Tragadi bunder is located directly next to the outfall channel, where enormous quantities of hot water used to cool the plant are discharged each day. Kotadi bunder is located next to the intake channel and close to the coal conveyor belt that transports coal from the port to the Plant. Their livelihoods and their way of life are increasingly threatened by the depletion of fish stocks and other vital marine resources their community has depended on for generations.
Plaintiff Ranubha Jadeja is a farmer from Navinal village whose wells have been ruined by the increasing salinity of the groundwater and farmland damaged by the ash and dust from the plant.
Additionally, ERI also represents the fishermen’s organization, Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for Fisherworkers’ Rights) (MASS) and the Navinal Panchayat (village), a local government entity.
The named plaintiffs filed suit on their own behalf, and on behalf of other members of their community who are similarly situated in a potential class action.
Defendants
The IFC is the private lending arm of the World Bank Group and plays a major role in funding private-sector development projects in developing countries. Because it only invests in projects that could not otherwise attract sufficient private capital, the IFC has immense influence over how the projects are designed, constructed and operated.
The IFC’s stated goals are to end poverty and boost shared prosperity and to carry out its development activities “with the intent to ‘do no harm’ to people and the environment.” To fulfill its institutional goals, the IFC has developed a Sustainability Framework, which dictates the conditions of IFC involvement in projects and the obligations of both the borrower and the IFC to ensure the project promotes positive development objectives while protecting local communities and the environment. For high risk projects like this one, IFC has additional requirements it must meet before committing to financing, such as ensuring there is “broad community support” for a project. These safeguards – along with a number of other environmental and social safeguards – were incorporated as binding conditions in the IFC’s loan agreement for the Tata Mundra project.
From the outset, the IFC recognized the Tata Mundra project was a “high risk” project that would cause significant harm to surrounding communities, particularly if the project was not well-managed and the risks were inadequately mitigated. Despite this, the IFC provided a critical $450 million loan without taking steps to ensure sufficient safeguards were put in place to prevent the very harms it predicted.
Legal Issues
The Jam case presents two important questions concerning the scope of international organizations’ immunity from suit. The first is the immunity from suit provided by U.S. law. The International Organizations Immunities Act (IOIA) provides that organizations like the IFC have only the “same immunity from suit. . . as is enjoyed” by foreign states. Several D.C. Circuit cases have held, however, that this means that organizations are entitled to absolute immunity, because immunity was absolute when the IOIA was enacted in 1945. Foreign governments now are entitled only to “restrictive” immunity under the Foreign Sovereign Immunities Act (FSIA), which contains a number of specific exceptions to immunity, including cases arising out of a foreign governments “commercial activities.” But the same immunity rules have not been applied to international organizations, and ERI is seeking to change that rule.
The other issue is the scope of the IFC’s waiver of immunity from suit. IFC’s charter document – its Articles of Agreement – contains a provision broadly waiving immunity from suit and reserving immunity only from suits brought by member nations. But the D.C. Circuit has interpreted this to mean that immunity should only be waived where – in the court’s opinion – waiver would result in a “corresponding benefit” to the organization, such that the lawsuit “would further the organization’s goals.” ERI has argued that this lawsuit would further the IFC’s goals because the IFC needs communities’ trust, but also that the waiver should be interpreted broadly, in line with an earlier D.C. Circuit case that interpreted the IFC’s waiver literally.
In a separate opinion issued with the D.C. Circuit’s decision, Judge Nina Pillard wrote that both lines of cases were “wrongly decided” and suggested the full court rehear the case. Plaintiffs have filed a petition seeking rehearing on both issues.
Additionally, this case presents the question of when an international financial institution may be held liable for harms from a project that it finances.