FOR IMMEDIATE RELEASE
January 21, 2021, Washington, D.C. – This week, farmers and fishers from Gujarat, India, filed an appeal with the United States Court of Appeals for the D.C. Circuit in Jam v. International Finance Corporation (IFC), arguing that the IFC – the private lending arm of the World Bank Group – should be held accountable for its role in funding and enabling a disastrous coal power plant in their community. This appeal comes after a ruling last August by U.S. District Judge John D. Bates that the World Bank Group is immune from suit for the damages its lending caused. The plaintiffs are represented by EarthRights International.
“Nearly two years ago, the U.S Supreme Court ruled that the IFC and other international organizations can be sued for their commercial activities in the United States,” said EarthRights Senior Litigation Attorney Richard Herz. “Since the World Bank Group committed negligence at IFC’s headquarters in Washington, D.C., it is not immune in this case. The World Bank Group must be held responsible for its role in enabling this destructive power plant.”
In August, Judge Bates concluded that a lawsuit over the IFC’s lending is not based upon IFC’s activity at all. He held that even if IFC knew when it made the loans that the power plant would harm these communities, in the United States, the institution cannot be sued because its client built the power plant in India. Plaintiffs challenged that decision in their appeal, arguing that the IFC committed its tortious acts inside the United States: IFC disregarded reports about the inevitable harm from the plant from within the U.S., made the reckless decision to approve the loan to the plant in the U.S., failed to enforce crucial environmental and social requirements in the loan agreement in the U.S., approved an inadequate plant design in the U.S., and ignored Plaintiffs’ repeated reports of the harms from the plant in the U.S. Because all of the IFC’s commercial activity took place in the United States, it cannot be immune in the United States. Instead, it should be held accountable here.
The construction and operation of the 4,150MW Tata Mundra coal power plant along the Gujarat coast is harming livelihoods and destroying the natural resources that generations of local families have relied on for fishing, farming, salt-panning, and animal rearing. The plaintiffs tried to raise their concerns through the IFC’s internal grievance mechanism, but when the IFC’s leadership ignored the grievance body’s conclusions, plaintiffs filed suit in the United States in 2015 as a last resort. In addition to its destructive impact on local communities, the power plant has been an economic albatross from the start. It has lost money since the day it started operating, causing its operator to fight with local governments to raise electricity rates from the low prices that had been promised.
From the start, the IFC recognized that the Tata Mundra coal-fired power plant was a high-risk project that could have significant adverse impacts on local communities and their environment. Despite knowing the risks, the IFC provided a critical $450 million loan in 2008, enabling the project’s construction.
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 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 fisherfolk like Mr. Budha 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.
A nine-mile-long coal conveyor belt, which transports coal from the port to the Plant, runs next to local villages. Coal dust from the conveyor and fly ash from the plant frequently contaminate drying fish, damage agricultural production, and cover homes and property. Some air pollutants, including particulate matter, are already present at levels dangerous to human health, in violation of Indian air quality standards and the conditions of IFC funding, and respiratory problems, especially among children and the elderly, are on the rise.
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. IFC’s management 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. In 2017, in fact, Tata Power began trying to unload a majority of its shares in the project for one rupee (a few cents) because of the losses it has suffered and will suffer going forward. At the moment, the plant is operating at only one-fifth capacity in part because India has an oversupply of electricity. In August of 2020, Tata Power announced that it would merge the Tata Mundra subsidiary into itself in order to deal with the plant’s debt problem. That month, U.S. District Judge John D. Bates also ruled that the World Bank Group cannot be sued for damages caused by its lending.
The case is Budha Ismail Jam v. International Finance Corp., No. 17-1011. Visit our website for more background on the case.
Kate Fried, EarthRights International