Justices Nix Immunity for Financier of Indian Power Plant

WASHINGTON (CN) – The U.S. Supreme Court revived a lawsuit Wednesday by a group of fisherman in Gujarat, India, who say a coal-fired power plant is threatening their way of life. 

Budha Ismail Jam is the lead plaintiff in the case, which says that opening of the $4.14 billion Tata Mundra Plant in 2013 has degraded local air quality and severely damaged the marine ecosystem. Locals blame hot water from the plant’s cooling system with depressing the fish catch near the shore, and they say the water-intake channel polluted their groundwater with saltwater, making irrigation and drinking impossible.

Jam directed his lawsuit meanwhile not at Tata Power, the Indian parent company behind the plant, but at International Finance Corp., the private-lending arm of the World Bank Group, which provided $450 million to the project.

Although the D.C. Circuit affirmed dismissal of the case in 2017, finding the suit barred by the International Organizations Immunities Act, the U.S. Supreme Court reversed 7-1 on Wednesday.

“The International Organizations Immunities Act grants international organizations the ‘same immunity’ from suit ‘as is enjoyed by foreign governments’ at any given time,” Chief Justice John Roberts wrote for the majority. “Today, that means that the Foreign Sovereign Immunities Act governs the immunity of international organizations. The International Finance Corporation is therefore not absolutely immune from suit.”

The ruling sparked applause from EarthRights International, which represents the villagers alongside attorneys at Stanford Law School’s Supreme Court Clinic.

“For years, the IFC has operated as if it were ‘above the law,’ at times pursuing reckless lending projects that inflicted serious human rights abuses on local communities, and then leaving the communities to fend for themselves,” the group said in a statement.

Justice Brett Kavanaugh took no part in the consideration or decision of the case, presumably because of his 12-year tenure on the D.C. Circuit before his ascension to the Supreme Court last fall.

Writing in dissent Wednesday, Justice Stephen Breyer disagreed with the majority for finding that the IOIA’s “reference to ‘immunity’ moves with the times.”

Though this reading led the majority to conclude that the statute no longer allows international organizations immunity from lawsuits arising from their commercial activities, Breyer said such immunity should exist because it was true for foreign governments when Congress enacted the statute in 1945.

“If Congress wished the act to carry out one of its core purposes — fulfilling the country’s international commitments — Congress would not have wanted the statute to change over time, taking on a meaning that would fail to grant not only full, but even partial, immunity to many of those organizations,” Breyer wrote.

Breyer also echoed the IFC’s argument that today’s reversal will cause far-reaching consequences.

“As a result of the majority’s interpretation, many of the international organizations to which the United States belongs will discover that they are now exposed to civil lawsuits based on their (U.S.-law-defined) commercial activity,” the dissent states. “And because ‘commercial activity’ may well have a broad definition, today’s holding will at the very least create uncertainty for organizations involved in finance, such as the World Bank, the Inter-American Development Bank, and the Multilateral Investment Guarantee Agency.”

Even for organizations like the IFC that believe they do not need broad immunity in commercial areas, “today’s decision will affect them nonetheless,” Breyer wrote.

“That is because courts have long interpreted their waivers in a manner that protects their core objectives,” the dissent continues. “But today’s decision exposes these organizations to potential liability in all cases arising from their commercial activities, without regard to the scope of their waivers.” (Emphasis in original.)

In the majority opinion, Roberts called such concerns “inflated.”

“Notably, the IFC’s own charter does not state that the IFC is absolutely
immune from suit,” Roberts wrote.

Roberts also called it unclear “that the lending activity of all development banks qualifies as commercial activity” under the Foreign Sovereign Immunities Act.

“And even if an international development bank’s lending activity does qualify as commercial, that does not mean the organization is automatically subject to suit,” the opinion continues. “The FSIA includes other requirements that must also be met. For one thing, the commercial activity must have a sufficient nexus to the United States. … At oral argument in this case, the government stated that it has ‘serious doubts’ whether petitioners’ suit, which largely concerns allegedly tortious conduct in India, would satisfy the ‘based upon’ requirement. In short, restrictive immunity hardly means unlimited exposure to suit for international organizations.”

In the Gujurat case, EarthRights International said it brought the suit reluctantly after IFC leadership ignored the conclusions of its own grievance body. 

“Immunity from all legal accountability does not further the development goals of international organizations,” Marco Simons, general counsel at EarthRights International said in a statement. “It simply leads them to be careless, which is what happened here. Just like every other institution, from governments to corporations, the possibility of accountability will encourage these organizations to protect people and the environment.”

Attorneys for the IFC have not returned an email seeking comment. The IFC was represented by Don Verrilli, a former U.S. solicitor general who is now with the firm Munger, Tolles & Olson, and by White & Case attonrey Francis Vasquez Jr.

EarthRights International notes that it has another case pending against the IFC in U.S. District Court for the state of Delaware. 

Juana Doe et al v. IFC involves IFC projects in Honduras that have been linked to murders, torture and other violence by paramilitary groups and death squads.

The statement from EarthRights International also quotes Bharat Patel, the head of MASS, a fishworkers’ rights group that is a plaintiff in the Gujurat case, and Joe Athialy, executive director of the Centre for Financial Accountability, India.

“This is a huge victory for the people of Mundra in particular and other places in general, where World Bank’s faulty investments are wrecking communities and environment,” Patel said. “This is major step towards holding World Bank accountable for the negative impacts their investments are causing.”

Athialy said: “This judgment will strengthen communities’ efforts to hold the bank accountable and is a step in the direction of bringing accountability in financial institutions.”

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