Jams v. IFC on IO Immunities

by Kristen Boon

On Thursday, May 10, the US Supreme Court will decide whether to grant cert in Budha Ismail Jam v.  International Financial Corporation(IFC), a case involving environmental damage arising from a coal fired power plant in India.    Two excellent blogs on the case written by Rishi Gulati in 2017 can be found here.

The case turns on the interpretation of a US Statute entitled The International Organizations Immunities Act which provides that international organizations designated by the President enjoy “the same immunity from suit and every form of judicial process as is enjoyed by foreign governments.” 22 U.S.C. § 288a(b).

The plaintiffs argue that state immunity today clearly exempts commercial activities, and when an IO acts as a commercial lender in the marketplace, it should not be protected by immunities.  Their position is supported by the decision in OSS Nokalva v. ESA, and the concurring opinion of Pillard, J, at the District Court of Columbia Court of Appeals, who wrote:

Reading the IOIA to dynamically link organizations’ immunity to that of their member states makes sense.  The contrary view we adopted in Atkinson appears to allow states, subject to suit under the commercial activity exception of the FSIA, to carry on commercial activities with immunity through international organizations….  Neither the IOIA nor our cases interpreting it explain why nations that collectively breach contracts or otherwise act unlawfully through organizations should enjoy immunity in our courts when the same conduct would not be immunized if directly committed by a nation acting on its own.

The IFC argues that this phrase must be interpreted at the time in was enacted, in 1945, when foreign states enjoyed broad immunity.  Moreover, it argues the IOIA does not incorporate subsequent developments in the law of foreign-state immunity, including those enacted in the Foreign Sovereign Immunities Act (“FSIA”).   The briefs are available here.

There are a number of issues which the Supreme Court could usefully clarify if it takes the case, but I will mention three in particular.

First, it would be extremely helpful for the Court to unpack the analogies drawn between state and IO immunity in the IOIA.   Every other field of immunity (such as state, diplomatic, and charitable) has narrowed, and the presumption today of absolute IO immunity today stands as an outlier.  Any narrowing of IO immunity should be justified on its own grounds, and not simply in relation to the developments as regards to states.   As noted in Rishi Gulati’s post, the problem is the IOIA statute itself, which makes reference to state immunity.  As a result, the Supreme Court has to deal with problematic wording to get to this end.

Second, the concept of waiver has emerged as an extremely important issue in litigation over immunity. Specifically, what constitutes a waiver? Can it be express or implied?  Can it be given in advance?  And what does waiver practice in IOs tell us about the utility of this device?  The issue is particularly important with regards to the World Bank Group because these IOs have “charter-based waivers” built into their constituent instruments, which limit immunity in certain circumsntaces. Plaintiffs in suit against these organizations often argue that charter-based waivers exact a broad waiver of immunity. However, there have been occasions where courts have read down explicit provisions requiring waiver. In Mendaro, applying the ‘correspondent benefit’ test, the court analyzed the World Bank’s intent in including the waiver provision, and concluded it only waived immunity with regard to situations which  further its chartered activities.  A re-examination of Mendaro would be very timely, as it has had the effect of denying plaintiffs access to remedies despite an explicit provision for waiver in the charters of the WB group.

Third, given the increasing interest in and pressure on IOs to grant access to justice to individuals  affected by IO activities, these cases are part of a larger effort by classes of plaintiffs to get their day in court and clarify the relationship between immunity and responsibility for IOs today.  The Haiti Cholera Case, which I have written about here, for example, raises some similar issues (although it did not involve the IOIA).

This is an important case which raises significant legal issues.  It bears some similarities to another case, Honduras v. IFC,  making its way through the US courts.   I very much hope the US Supreme Court takes up the opportunity to weigh in.  If the Supreme Court were to lift or narrow the IFC’s immunities, it would then be necessary to assess the scope of the IFC’s liability (lender liability) and determine which substantive tort law applies, given that the acts took place outside of the US.

http://opiniojuris.org/2018/05/08/jams-v-ifc-on-io-immunity-case/

3 Responses

  1. Regarding your quote from Judge Pillard’s opinion, the commercial activity exception in the Foreign Sovereign Immunities Act only applies to commercial activity carried on in the US, an act performed in the US in connection with commercial activity elsewhere, or commercial activity outside of the US that causes a direct effect in the US. Environmental damage caused by a coal power plant in India doesn’t sound like it has the requisite connection to the US.

  2. Absolutely right regarding the commercial activity exception – but in this case, the IFC’s lending activity occurs in the US, from its headquarters. Until its opp cert, the IFC had not even argued that the commercial activity exception was not satisfied. In the opp cert, the IFC did not dispute that its alleged tortious activity – lending to the project without adequate safeguards while knowing that the project would harm the plaintiffs – occurred from the United States. (Disclosure: I am counsel on the case!)

  3. Is there sufficient causal link that relates to the defendant’s action?

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