Gujarat Communities Take the World Bank to the U.S. Supreme Court for Financing Disastrous Tata Mundra Power Plant
Location: Washington, D.C.
October 29, 2018, Washington, D.C. – This week, the highest court in the United States – the Supreme Court – will hear a landmark lawsuit challenging the immunity of powerful institutions like the International Finance Corporation (IFC), the private lending arm of the World Bank Group. International organizations like the IFC have long claimed they are entitled to “absolute” immunity from suit in U.S. courts – no matter how illegal their actions are or how much harm they cause.
This case challenges that claim. Jam v. IFC has been brought by Gujarati fishing communities and farmers with legal representation from EarthRights International (ERI) and the Stanford Law School Supreme Court Litigation Clinic. The Supreme Court’s decision to hear their case means it will consider international organization immunity for the first time, and decide whether organizations like the IFC can be held accountable in U.S. courts for their harmful conduct or whether, as the IFC claims, they enjoy unique status above the law.
Last year, a lower court in the United States ruled that the IFC had “absolute immunity” and could not be sued for its role in the controversial Tata Mundra coal-fired power plant that has caused significant harm to local communities and the environment they depend on. The court acknowledged, however, the “dismal” situation the project has created for the plaintiffs and their community, including the destruction of their livelihoods, property, and the serious threats to their health, and noted the IFC did not deny those harms. The communities sought review of that decision by the U.S. Supreme Court.
The Plaintiffs are pleased the Supreme Court decided to hear their case and optimistic that it will reject the IFC’s claim to sweeping immunity far greater than any other entity or person enjoys. The case is Budha Ismail Jam v. International Finance Corp., No. 17-1011. The hearing will take place on October 31 in Washington, D.C.
“We are happy that our voices will finally be heard. We hope this will help us seek justice for our losses.” – Budha Ismail Jam, Plaintiff
“When at a time we thought that all doors for justice seemed closed, with this judgment our faith in the judicial system is restored.” – Gajendrasinh Jadeja, head of a local village that is a plaintiff in the case.
“International organizations like the IFC are not above the law and must be held accountable when their projects harm communities. The notion of ‘absolute immunity’ is inconsistent with Supreme Court precedent, and it is contrary to the IFC’s own mission as an anti-poverty institution. We are glad the Supreme Court has agreed to hear this case and hope it will correct this error.” – Richard Herz, Senior Litigation Attorney at EarthRights International (ERI)
“We’re grateful the Court has taken an interest in the case and we look forward to presenting argument going forward.” – Jeff Fisher, head of the Stanford Supreme Court Litigation Clinic
“This is a new chapter for the accountability of financial institutions like IFC, and has reinvigorated our fight for justice. For too long, these institutions have used their might and power to curb the voices seeking accountability and justice. We are hopeful the court’s decision to change this case will change that.” – Bharat Patel, the head of MASS, an organization of local fishing communities that is a Plaintiff in the case
From the start, the IFC recognized that the Tata Mundra plant was a high-risk project that could have “significant” and “irreversible” adverse impacts on local communities and their environment. Despite knowing the risks, the IFC provided a critical $450 million loan, enabling the project’s construction and giving the IFC immense influence over project design and operation. Yet the IFC failed to take reasonable steps to prevent the harms it predicted and failed to ensure that the project abided by the environmental and social conditions of IFC involvement.
As predicted, the plant has caused significant harm to the communities living in its shadow. Construction of the plant destroyed vital sources of water used for drinking and irrigation. Coal ash has contaminated crops and fish laid out to dry, air pollutants are at levels dangerous to human health, and there has already been a rise in respiratory problems. The enormous quantity of thermal pollution – hot water released from the plant – has destroyed the local marine environment and the fish populations that fishermen like Mr. Jam rely on to support their families. Although a 2015 law required all plants to install cooling towers to minimize thermal pollution by the end of 2017, the Tata plant has failed to do so.
The IFC’s own internal compliance mechanism, the Compliance Advisor Ombudsman (CAO), issued a scathing report in 2013 confirming that the IFC had failed to ensure the Tata Mundra project complied with the environmental and social conditions of the IFC’s loan at virtually every stage of the project and calling for the IFC to take remedial action. The IFC responded to the CAO by rejecting most of its findings and ignoring others. In a follow-up report in early 2017, the CAO observed that the IFC remained out of compliance and had failed to take any meaningful steps to remedy the situation.
The harms suffered by the plaintiffs are all the more regrettable because the project made no economic sense from the beginning. Last year, in fact, Tata Power began trying to unload a majority of its shares in the project for 1 rupee because of the losses it has suffered and will suffer going forward.
Against this background, several individuals harmed by the plant, as well as MASS and a local village, filed suit against the IFC in U.S. federal court in 2015. The suit was filed in Washington, D.C., where the IFC is headquartered. The federal district court ruled that the IFC had immunity from suit and dismissed the case in 2016; the D.C. Circuit affirmed the decision in 2017.
The central legal question the Supreme Court will consider is how to interpret the International Organizations Immunities Act (IOIA), a U.S. law that gives international organizations “the same immunity” from suit “as is enjoyed by foreign governments.” The D.C. Circuit’s interpretation of the law gives international organizations substantially broader immunity than that of foreign governments. The Plaintiffs have argued – and the Court of Appeals for the Third Circuit has held – that the IOIA should be read to give international organizations only the same restrictive immunity of foreign governments, which are not entitled to immunity from suits arising out of their commercial activities. Since a foreign government would not be immune from this suit, the IFC, which is made up of foreign states, should not be immune either.