Tata Mundra case: US Supreme Court to hear whether World Bank group is immune from law suits

Counterview Desk
On October 31, the US Supreme Court will hear arguments in Budha Ismail Jam vs International Finance Corporation (IFC), a case that will consider whether international organizations, like the World Bank Group, are immune from lawsuits in US courts. 

Those who are supporting Budha Ismail's plea are Marcos Simons, Earth Rights International's (ERI's) America regional programme director; Jeffrey Fisher, co-director of the Stanford Law School Supreme Court Litigation Clinic and a leading authority on Supreme Court practice and nationally recognized expert on criminal procedure; Bharat Patel, general secretary of the Macchimar Adhikar Sangharsh Sangathan (MASS), Gujarat; and Joe Athialy, executive director of the Center for Financial Accountability (CFA), Delhi.

An ERI note ahead of the hearing:

From the start, the IFC -- the private sector lending arm of the World Bank Group -- recognized that the Tata Mundra coal-fired power 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.
As predicted, construction of the plant destroyed vital sources of water used for drinking and irrigation. Coal ash has contaminated crops and fish laid out to dry and has led to an increase in respiratory problems. Thermal pollution – hot water released 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, to minimize thermal pollution, the Tata plant has failed to do so.
The IFC’s own internal complaints 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. Last year, in fact, Tata Power began trying to unload a majority of its shares in the project for 1 rupee (the equivalent of a few cents) because of the losses it has suffered and will suffer going forward.
Against this background, several individuals harmed by the plant, as well as MASS and a local village, filed suit against the IFC in U.S. federal court in 2015. The suit was filed in Washington, D.C., where the IFC is headquartered. The federal district court ruled that the IFC had immunity from suit and dismissed the case in 2016; the D.C. Circuit affirmed the decision in 2017.
The central legal question the Supreme Court will consider is how to interpret the International Organizations Immunities Act (IOIA), a U.S. law that gives international organizations “the same immunity” from suit “as is enjoyed by foreign governments.” The D.C. Circuit’s interpretation of the law gives international organizations substantially broader immunity than that of foreign governments. 

The Plaintiffs have argued – and the Court of Appeals for the Third Circuit has held -– that the IOIA should be read to give international organizations only the same restrictive immunity of foreign governments, which are not entitled to immunity from suits arising out of their commercial activities. Since a foreign government would not be immune from this suit, the IFC, which is made up of foreign states, should not be immune either.