Jam v. IFC – some questions and answers after the Supreme Court’s ruling

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We’ve received a number of questions in the days since the landmark Supreme Court ruling in Jam v. International Finance Corporation, which ended absolute immunity for many international organizations. I’ll try to answer a couple of them.

What is the effect of the Supreme Court’s ruling?

The Court’s ruling affects the interpretation of the International Organizations Immunities Act (IOIA), the main law that provides some degree of immunity in U.S. court for international organizations. The Court ruled that immunity under the IOIA is subject to the exceptions that also apply to foreign governments under the Foreign Sovereign Immunities Act (FSIA). In other words – if an FSIA exception applies, the international organization can be sued.

It’s not quite that simple, however, for a couple of reasons. First, many international organizations have a separate source of immunity in addition to the IOIA, and the Jam decision doesn’t affect them. Second, the exact meaning of the FSIA exceptions is not entirely clear.

The two main exceptions are the “commercial activity” exception and the “tort in the United States” exception. The commercial activity exception allows lawsuits that are “based upon a commercial activity carried on in the United States.” We think this applies to the IFC’s loan in the Jam case, because the IFC’s decisionmaking and lending happens from Washington D.C.; in fact, the IFC didn’t argue against our position until we reached the Supreme Court. But it may try to argue that this exception doesn’t apply.

The tort in the United States exception allows lawsuits “for personal injury or death, or damage to or loss of property, occurring in the United States and caused by [a] tortious act or omission” of an international organization or its employees. This does not apply to our case, but it’s an important exception for other purposes. It’s the exception that guarantees that employees of foreign embassies can’t just get away with reckless traffic collisions in the United States, and now it will have the same effect on international organizations.

But the real focus for accountability of international organizations is on commercial activity. So that begs the question – which international organizations are most likely to be affected by that exception? More to the point – are there other international financial institutions that, like the IFC, might now face greater accountability for their financing decisions?

Which international organizations will be affected most by the Supreme Court’s ruling?

The international organizations most likely to be affected are those that are based in the United States, engage in commercial activity here, and do not have a separate source of immunity.

IFIs in the U.S.

By our count, there are eighty-five international organizations designated under the IOIA. But only seven of them are particularly likely to be affected:

  • International Bank for Reconstruction and Development
  • International Development Association
  • International Finance Corporation
  • Multilateral Investment Guarantee Agency
  • Inter-American Development Bank
  • Inter-American Investment Corporation
  • North American Development Bank

These are the International Finance Institutions (IFIs) that are headquartered in Washington, D.C., that do not otherwise have immunity from another source. The first four on the list are part of the World Bank Group. The Inter-American Investment Corporation is a sister organization for the Inter-American Development Bank; like the IFC, it funds projects by private corporations. The North American Development Bank was created as part of NAFTA; it funds projects in the United States and Mexico.

Each of these institutions could, like the IFC, face liability for financing done from the United States. The NADB, additionally, could face liability for projects carried out in the United States.

Other U.S.-headquartered IOs

The next category of international organizations likely to be affected are other organizations headquartered in the United States. There aren’t actually all that many of these, and they don’t engage in that much commercial activity. But if they have a dispute over rental of office space, for example, they will probably be subject to a lawsuit:

  • Commission for Labor Cooperation (also a NAFTA entity)
  • Great Lakes Fishery Commission
  • Inter-American Defense Board
  • Inter-American Tropical Tuna Commission
  • International Boundary & Water Commission (jointly headquartered in Mexico)
  • International Cotton Advisory Committee
  • International Food Policy Research Institute
  • International Joint Commission – United States and Canada
  • International Pacific Halibut Commission
  • Pan American Health Organization
  • United States-Mexico Border Health Commission

Has anyone else noticed how many international organizations focus on fish? Additional common topics are health, agriculture, and labor. Some of these organizations also have their own immunity statutes, but they typically provide for immunity necessary to fulfill their functions. These organizations may be somewhat affected by Jam, because in their ordinary commercial dealings in the United States they may be subject to suit, if that does not interfere with their functions.

There are four other U.S.-headquartered IOs that probably won’t be affected by Jam:

  • International Centre for the Settlement of Investment Disputes
  • International Monetary Fund
  • Organization of American States
  • United Nations

These institutions all have near-absolute immunity enshrined in statutes and/or ratified treaties. So they do not rely primarily on the IOIA for their immunity.

Other international organizations

Most international organizations fall into the “other” category: they are not headquartered in the U.S. and presumably do not engage in substantial commercial activities here. However, they may still engage in some commercial activities here, so the Jam decision may help keep them accountable. Four of these are IFIs headquartered outside the U.S.:

  • African Development Bank
  • African Development Fund
  • Asian Development Bank
  • European Bank for Reconstruction and Development

These IFIs may be subject to suit for activities such as raising money on U.S. capital markets, but since their lending decisions largely happen outside the U.S., they’re not likely to be subject to lawsuits based on their lending. (They also do not, of course, finance projects in the United States.)

There are a bunch of other IOs in the “other” category. These organizations might be subject to suit if they engage in commercial activity in the U.S., such as hiring a U.S. contractor. But most of their work is not commercial in nature, and they’re not headquartered here:

  • Caribbean Organization
  • Commission for Environmental Cooperation
  • Council of Europe in Respect of the Group of States Against Corruption (GRECO)
  • Customs Cooperation Council
  • European Central Bank
  • European Space Agency
  • Food and Agriculture Organization
  • Global Fund to Fight AIDS, Tuberculosis and Malaria
  • Hong Kong Economic and Trade Offices
  • Inter-American Institute of Agricultural Sciences
  • Inter-American Statistical Institute
  • Intergovernmental Maritime Consultative Organization
  • International Atomic Energy Agency
  • International Civil Aviation Organization
  • International Civilian Office in Kosovo
  • International Coffee Organization
  • International Committee of the Red Cross
  • International Cotton Institute
  • International Criminal Police Organization (INTERPOL)
  • International Development Law Institute
  • International Fertilizer Development Center
  • International Food Policy Research Institute
  • International Fund for Agricultural Development
  • International Hydrographic Bureau
  • International Labor Organization
  • International Renewable Energy Agency
  • International Telecommunication Union
  • International Union for Conservation of Nature and Natural Resources
  • International Wheat Advisory Committee (International Wheat Council)
  • Interparliamentary Union
  • Israel-United States Binational Industrial Research and Development Foundation
  • ITER International Fusion Energy Organization
  • Multinational Force and Observers
  • North Pacific Anadromous Fish Commission
  • North Pacific Marine Science Organization
  • Office of the High Representative in Bosnia and Herzegovina
  • Organization for European Economic Cooperation (now known as the Organization for Economic Cooperation and Development)
  • Organization for the Prohibition of Chemical Weapons
  • Organization of Eastern Caribbean States
  • Pacific Salmon Commission
  • Provisional Intergovernmental Committee for the Movement of Migrants from Europe (now known as the Intergovernmental Committee for European Migration)
  • South Pacific Commission
  • United Nations Educational, Scientific, and Cultural Organization
  • United Nations Industrial Development Organization
  • Universal Postal Union
  • World Health Organization
  • World Intellectual Property Organization
  • World Meteorological Organization.
  • World Organisation for Animal Health
  • World Tourism Organization
  • World Trade Organization

Again, many of these have some sort of “functional” immunity in their own agreements, typically recognized by U.S. statutes and/or ratified treaties.

Defunct IOs

What about the rest? Well, even though they were originally given immunity under the IOIA, these eight international organizations don’t really exist anymore:

  • Border Environment Cooperation Commission
  • Commission for the Study of Alternatives to the Panama Canal
  • International Maritime Satellite Organization
  • International Secretariat for Volunteer Service
  • International Telecommunications Satellite Organization (INTELSAT)
  • Korean Peninsula Energy Development Organization
  • Preparatory Commission of the International Atomic Energy Agency
  • United International Bureau for the Protection of Intellectual Property (BIRPI)

So we can probably safely ignore them.

Can the IFC just move its headquarters or amend its Articles of Agreement to avoid this ruling?

Another question we’ve gotten is whether the IFC can easily avoid the Jam decision by simply moving its headquarters outside the U.S., or just amending its charter (its Articles of Agreement) to give it absolute immunity.

In a word: no.

The same issue would present an obstacle to both potential moves: the U.S. stake in the IFC and the World Bank.

IFC Headquarters

The IFC’s Articles of Agreement state, indirectly, that its headquarters must be in Washington, D.C.

Article IV, Section 8 states that the IFC’s “principal office” must “be in the same locality as the principal office of the Bank,” meaning the World Bank.

The Bank’s Articles, in turn, state that “The principal office of the Bank shall be located in the territory of the member holding the greatest number of shares.” That is the United States, which holds 16.88% of the Bank’s shares – far more than Japan, which holds the next highest percentage at 7.26%.

So, absent an amendment to the Articles of Agreement, the IFC’s headquarters will stay in Washington, D.C.

(Of course, it’s also just not that easy to move the headquarters of a major international institution.)

Amending the Articles of Agreement

But what about amendments? Can the IFC amend the articles to move its headquarters, or simply to state that it has absolute immunity?

Not without agreement from the United States. The Articles of Agreement require a “vote of three-fifths of the Governors exercising eighty-five percent of the total voting power” for amendments. And the United States holds even more voting power in the IFC –       22.19% of the total. That is more than enough to block any amendment, even if every other member country voted in favor of it.

Would the United States block such an amendment? Given that the U.S. Government supported the Supreme Court’s restrictive immunity ruling in Jam, there’s no particular reason to believe that they would want to re-introduce absolute immunity in this way.

So there’s no quick fix for the IFC to avoid greater accountability. And of course the IFC should not be trying to avoid greater accountability; it should be trying to ensure that its projects don’t harm the people they’re supposed to help.

Indeed, these questions highlight the difference between IFC’s management – the people who run the IFC on a day-to-day basis, and make most of the detailed decisions – and the IFC’s members, the governments that chartered the institution and still, today, need to approve any major decisions or changes to the institution. Management typically wants to avoid liability. But the members – like the United States, the single biggest shareholder in the IFC – don’t necessarily agree. Any major moves to avoid liability would need to have support from the members, not just management.

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