Today, the U.S. Court of Appeals for the District of Columbia Circuit heard arguments in Budha Ismail Jam v. International Finance Corporation, a case against the International Finance Corporation (IFC), the World Bank Group’s private lending arm, for its role in funding a controversial power plant that has harmed fishing communities in India. The question before the Court was whether the IFC is entitled to “absolute immunity” from suit in the United States.
“The IFC argues it is above the law in all circumstances, regardless of how much harm it causes,” said Richard Herz, senior litigation attorney at EarthRights International (ERI) who argued the case for the plaintiffs today. “But its sweeping claims of immunity are inconsistent with Supreme Court precedent and contrary to the goals of the IFC’s mission.”
Fishing communities and farmers represented by ERI filed suit against the IFC in April 2015 over the destruction of their livelihoods and property and threats to their health caused by the IFC-funded Tata Mundra coal-fired power plant in Gujarat, India. In March 2016, a district court judge dismissed the case, concluding it was required to find the IFC “absolutely immune” from suit, based on previous decisions of the D.C. Circuit. In their appeal, the Plaintiffs argue that those decisions have been overturned by Supreme Court cases addressing immunity.
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, implementation and operation. Yet it failed to take reasonable steps to prevent harm to the communities and to ensure that the project abided by the required environmental and social conditions for IFC involvement, according to the complaint.
Construction of the plant resulted in displacement of local communities and destroyed vital sources of water used for drinking and irrigation. Coal ash contaminates crops and fish laid out to dry and has led to an increase in respiratory problems. The plant has also destroyed the local marine environment and the fish populations that fishermen like Budha Ismail Jam, a plaintiff in the case, rely on to support their families. "After nearly 10 years of IFC approving finances for the project, promising jobs, development and ending poverty, the power plant has taken what little we had and left us with less than before,” Mr. Jam said.
The IFC’s own compliance mechanism, the Compliance Advisor Ombudsman (CAO), issued a scathing report confirming that the IFC had failed to ensure the Tata Mundra project complied with the environmental and social conditions of the IFC’s loan. Rather than take remedial action, the IFC responded by rejecting most of its findings, and ignoring others.
At the hearing, attorneys for the IFC sought to downplay the importance of the environmental and social commitments it makes to communities and told the Court that its willingness to make loans would be deterred if it could actually be held accountable for failing to follow through on those commitments.
The IFC is required to obtain broad community support for projects like the Tata Mundra Plant before it can provide financing. But Dr. Bharat Patel of Machimar Adhikar Sangharsh Sangatha (Association for the Struggle for Fisherworkers’ Rights), which is a plaintiff in the case, says their experience shows the IFC’s word alone provides insufficient guarantees. “Even when the CAO finds the IFC did not abide by its commitments to communities, the IFC just ignores their suffering,” he said. “Communities cannot trust the IFC to live up to its commitments if it ignores the CAO's findings and if communities are not able to access the courts. The people are left high and dry.”
“The IFC thinks it is entitled to act with impunity, contrary to its own mission, and accountable to no one,” said Herz. “Our clients disagree, and the law is on their side.”
The Court is not expected to rule for months, but the plaintiffs are optimistic. “This is a fight for our lives and livelihood,” said Gajendrasinh Jadeja, the head of Navinal Panchayat, a local village involved in the case. “We will continue our struggle for justice and we believe we will prevail.”
EarthRights International (ERI) is a nongovernmental, nonprofit organization that combines the power of law and the power of people in defense of human rights and the environment, which we define as "earth rights." We specialize in fact-finding, legal actions against perpetrators of earth rights abuses, training grassroots and community leaders, and advocacy campaigns, and have offices in Southeast Asia, the United States and Peru. More information on ERI is available at https://www.earthrights.org.