The Conundrum of International Organisations Immunities: Jam et al v International Finance Corporation  (Part 1 of 2)

[Rishi Gulati is a Barrister at the Victorian Bar, Australia; Dickson Poon Scholar of Law at King’s College London; and Academic Expert, Bretton Woods Law, London]

Following the conclusion of the much discussed Haiti Cholera Class Action in US courts, the immunities of international organisations (IOs) have again been tested in the courts of that country in claims filed against the International Finance Corporation (‘IFC’), a financial institution within the World Bank Group. This is the first of a two part post. In Part I, I canvass some general matters around the IFC’s immunities, and provide the context to the litigation. In Part II of this post, I will discuss the jurisprudence arising out of this litigation so far.

The IFC’s immunities under the IOIA

The provisions of the US International Organisations Immunities Act 1945 (‘IOIA’) provide the applicable immunities regime for the IFC. Pursuant to 22 USC § 288a(b) of the IOIA, ‘[i]nternational organizations, their property, and their assets, wherever located and by whomsoever held, shall enjoy the same immunity from suit and every form of judicial process as enjoyed by foreign governments, except to the extent that such organizations may expressly waive their immunity for the purpose of any proceeding or by the terms of any contract’.

With international financial institutions such as the IFC essentially operating in the commercial marketplace, their founding instruments expressly allow for waivers for immunities from suits brought by private litigants in certain types of claims. In the case of the IFC, Article VI, Section 1 of the IFC’s Articles of Agreement grants immunities in classical functional terms. However, Article VI, Section 3 contains an express waiver, stating:

Actions may be brought against the Corporation only in a court of competent jurisdiction in the territories of a member in which the Corporation has an office, has appointed an agent for the purpose of accepting service of process, or has issued or guaranteed securities. No actions shall, however, be brought by members or persons acting for or deriving claims from members…

On its face, the express waiver to the IFC’s immunity is broad. According to the plain meaning of the words, the functional immunities of the IFC or similarly situated organisations will have little work to do. Indeed, courts have referred to such treaty language as ‘somewhat clumsy and inartfully drafted’ (Mendaro v World Bank, 717 F2d 610 (DC Cir 1983) (‘Mendaro’). Such criticism is well justified. This is because the language used in the express waiver contained in Article VI, Section 3 seemingly provides for a blanket waiver of immunity in respect of all suits save for the ones expressly prohibited. Should the words used be given effect to in accordance with their plain meaning, the IFC, and similarly situated organisations, would lose  their immunities even in respect of claims arising out of their functional activity. Thus defeating the very grant of functional immunities in the first place. To deal with this anomaly, courts have employed creative but unsatisfactory ways of addressing the challenge presented. The recent case of Jam et al v International Finance Corporation (.pdf), considered below, is just one example where the limits of the express waiver of immunities has been tested. The 24 March 2016 decision of the US District Court for the District of Columbia is here (.pdf) (‘First Instance decision’); and the decision of the US Court of Appeals for the District of Columbia Circuit delivered recently on 23 June 2017 is here. Note again, I discuss both these decisions in Part II of this post.

Jam et al v International Finance Corporation – a background

The IFC loaned USD 450 million to Coastal Gujarat Power Limited (‘CGPL’), a subsidiary of Tata Power. The loan was towards the construction of the coal-fired Tata Mundra Power Plant in India (the ‘Plant’). Critically, though, the IFC remains responsible for the monitoring and supervision of CGPL. This is to ensure CGPL’s compliance with internal IFC policies, including those set out in its ‘Performance Standards on Environmental and Social Sustainability’ (‘IFC Standards’). Those Standards established a mechanism for ‘the assessment, avoidance, minimization, and mitigation of environmental and social risks’ (First Instance decision, p. 3). The detailed facts are set out in the First Instance decision here (.pdf).

In summary, the complainants, a group of Indian nationals, who live, fish and farm within proximity of the Plant allege that the main legacy of the Plant has been ’environmental and social harm—to the marine ecosystem, to the quality of the air, to plaintiffs’ health, and to their way of life’ (First Instance decision, p. 1). Seeking justice within the IFC’s institutional structures, a group of Indian persons filed a complaint with the IFC’s Compliance Advisor Ombudsman (‘CAO’), the IFC’s ‘independent recourse and accountability mechanism’. Tellingly, with respect to the complaint of the affected individuals in the Plant, as was pointed out at First Instance, the CAO concluded that: ‘IFC had failed adequately to consider the environmental and social risks to which plaintiffs would be exposed as a result of the Plant’s development’; and that in ‘the CAO’s estimation, IFC then compounded that error by failing to perform an environmental and social impact assessment “commensurate with project risk,” and by failing to “address [subsequent] compliance issues during [project] supervision.”’

Ultimately, it is apparent that the CAO was not satisfied with the steps taken by the IFC to address the plaintiffs’ grievances. Nevertheless, as the CAO does not have enforcement powers, its views were not binding on the IFC, and the grievance remained unaddressed (First Instance decision, p. 4).

The plaintiffs finally resorted to the national courts, contending that the IFC was liable for the injuries caused by failing to comply with its own policies and standards, and failing to enforce the terms of its loan agreement with the CGPL. The plaintiffs sought equitable relief or, alternatively, compensatory and punitive damages before the US District Court for the District of Columbia (First Instance decision, p. 1). More specifically, the plaintiffs contended that ‘the irresponsible and negligent conduct of the International Finance Corporation in appraising, financing, advising, supervising and monitoring its significant loan to enable the development of the Tata Mundra Project in Gujarat, India’ caused them injury. The plaintiffs pursued claims in ‘negligence, negligent supervision, public nuisance, private nuisance, trespass, and breach of contract.’ (First Instance decision, p. 5).

More to follow in Part II of this entry.