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IFC case is a challenge to immunity rules

A U.S. Supreme Court case could weaken immunity rules for international organizations in the nation that offers them the most financial support.

WASHINGTON (AN) — A U.S. Supreme Court case could weaken immunity rules for international organizations in the nation that offers them the most financial support.

Justices are deciding if World Bank Group's financial lending arm, International Finance Corporation, or IFC, has the same immunity as nations, in a case heard on October 31. The opinion, to be issued by next summer, could alter the amount of protection — and independence from courts — that staff are given at organizations operating by U.S. laws.

Villagers who live near a power plant in Gujarat, India that was built with the IFC's help want to hold it accountable for the discharges of hot water and coal ash that damaged their local fishing and farming livelihoods. The hot water polluted their drinking and irrigation water, and coal ash contaminated their crops and the fish they laid out to dry.

“We hope this will help us seek justice for our losses," said the lead plaintiff, Budha Ismail Jam, who along with other villagers sued the IFC in federal court in Washington three years ago. They complained of respiratory problems from coal dust and said the plant did not follow a new law that requires building cooling towers to minimize thermal pollution.

The IFC, which has 184 member nations and is based in Washington, provides financing for projects in developing nations. In 2008, it signed US$450 million in loans for building the coal-fired Tata Mundra power plant in Gujarat at a cost estimated over US$4.4 billion.

Fish drying on racks at a beach in Gujarat, India (AN/Nevil Zaveria)

The commercial angle

A district court's ruling two years ago said IFC was protected by the 1945 U.S. International Organizations Immunity Act, passed when the United Nations was founded at the end of World War II. The law says international organizations have the "same immunity" against lawsuits as foreign governments. Appeals judges upheld that ruling.

But a second law central to the case is the 1976 U.S. Foreign Sovereign Immunities Act, which changed the immunity given to foreign governments by codifying when it was not applicable.

The IFC claimed immunity under the 1945 law, which gives it the same standing as foreign governments. But villagers argued the immunity that foreign governments receive is now defined by the 1976 law, which does not extend to commercial activities.

That is the central legal issue.

IFC's purpose, according to its articles of agreement, is "to further economic development by encouraging the growth of productive private enterprise in member countries, particularly in the less developed areas," as a supplement to the International Bank for Reconstruction and Development, one of five organizations in the World Bank Group.

The IFC, which supervises projects but lacks enforcement authority, acknowledged that its lending caused harm at Gujarat. A World Bank-sponsored study found the power plant was "associated with increased poverty across neighboring communities, as well as a host of negative impacts on children, including increasing rates of sexual violence."

Representing the villagers, Jeffrey Fisher, head of Stanford Law School's Supreme Court Litigation Clinic, said international organizations enjoy more immunities than any person, government or entity. But he and EarthRights International, which both support the Indian villagers, argued U.S. laws did not provide anyone with absolute immunities.

Jonathan Ellis, a U.S. Justice Department lawyer, also argued for the villagers. He said the U.S. Congress "wanted to provide international organizations at most the immunity from suit and other privileges of immunities that foreign governments received and not more so," according to a Supreme Court transcript.

The IFC, he said, was asking for "more immunity than foreign governments receive."

Donald Verrilli, a former U.S. Solicitor General who represented the IFC, told the court that the 1945 law requires "a standard of virtual absolute immunity that is fixed and not evolving" for international organizations.

He said the law fulfilled international "treaty obligations," and the IFC, unlike commercial enterprises, often loans money for projects in developing nations where there is no private capital available.

U.S. Supreme Court (AN/John Heilprin)

A balance of interests

Few experts dispute the need for international organizations to operate with some degree of immunity. Where things get tricky is putting the rules into practice.

If, as the villagers contended, the IFC was not above the law in this instance, that would be consistent with the United States' tendency to offer less immunity to the international organizations it supports. That appears to be the result of rising public awareness and emphasis put on issues of accountability and compliance with anti-corruption measures.

Switzerland, with a long tradition of hosting international organizations, determines immunity based on an organization's statutes, protocols on privileges and immunities and its headquarters agreement with the Swiss government, the foreign ministry said. Staff are told to bring complaints to internal grievance bodies and administrative tribunals.

Some of the fundamental human rights treaties — such as the Universal Declaration of Human Rights, International Covenant on Civil and Political Rights and European Convention of Human Rights — also guarantee the right to a fair trial.

The United States is the largest overall financial backer of international organizations, providing 22%, or US$14.1 billion a year, to a sampling of 53 organizations given US$63 billion a year from 2014 to 2016, according to a Brookings Institution survey this year.

Britain was second, at 12%, or US$7.6 billion, followed by Japan, at 9%, or US$5.4 billion, and Germany, at 7%, or US$4.4 billion, the survey found. Combined, the four countries gave 50% of total contributions; the top 32 nations gave 95%.

"In the international society, questions of accountability are taken more seriously than they were a few decades ago," wrote Leiden University's Niels Blokker and Nico Schrivjer in a 2015 book, "Immunity of International Organizations."

"It is considered to be less acceptable today," they wrote, "if individuals suffer from the activities of international organizations and do not have adequate remedies or cannot bring claims against these organizations with some chance of success."