US Supreme Court holds that international organisations can be sued in landmark decision

Jam et al v International Finance Corp (586 U.S. ____ 2019)

Summary

In a landmark decision in which a group of Indian farmers and fishing communities sued the International Finance Corporation (IFC) in relation to pollution from a coal-fired power plant financed by them, the Supreme Court of the United States (Supreme Court) held that international organisations that have a sufficient nexus to the United States, such as the Food and Agriculture Organisation and World Bank, no longer enjoy full immunity from suit.

Law

Under the International Organizations Immunities Act 1945 22 U.S.C. (IOIA), "International organizations… enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments" (see section 288a(b)).

The status of absolute immunity of sovereign states was modified in 1974 by the Foreign Sovereign Immunities Act 1974 28 U.S.C. (FSIA).  The FSIA grants foreign sovereign states immunity from suit subject to several statutory exceptions, including as is relevant in this case, an exception to suit for commercial activities: “A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case… upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States” (see subsection 1605(a)(2)).

Facts

The International Finance Corporation (IFC), headquartered in Washington DC, is charged with furthering economic development by financing private-sector development projects that cannot otherwise attract capital on reasonable terms. 

IFC, the respondent in this matter, is an international organisation which is subject to the IOIA.  In 2008, the IFC loaned USD $450m to Coastal Gujarat Power Limited to finance the construction of a coal fired power plant in Gujarat.  The terms of the agreement required Coastal Gujarat to comply with an environmental plan to protect areas around the plant from environmental damage.  The petitioners in this matter, WHO are local farmers, fisherman, and a small village, sued the IFC, alleging that pollution from the plant harmed the surrounding land, air and water. 

The IFC contended that the IOIA grants international organisations the same immunity from suit that foreign governments enjoyed in 1945.  The IFC contended that the IOIA's reference to immunity enjoyed by foreign governments is not a general reference to an external body of law, but rather, a specific reference to a common law concept that had a fixed meaning when the IOIA was enacted in 1945.  The petitioners in this case argued that the IOIA grants international organisations the same immunity from suit that foreign governments enjoy today (and is therefore subject to the exceptions in the FSIA).

Decision

Contemporaneous link between foreign state and foreign organisation immunity

The majority of the Supreme Court agreed that the language of the IOIA naturally lends itself to the petitioners' reading.  Failing to use static language and failing to specify fixed levels of immunities, the Supreme Court ruled that the intention of the IOIA is to continually place on equal footing the levels of immunity that benefit international organisations and foreign governments.  That provision is therefore understood to guarantee continuous equality of immunity from suit, whether or not it is to the disbenefit of another, between international organisations and foreign governments.

The 'equal footing' reading of the IOIA is confirmed by canons of statutory construction.  If a statute refers to a general subject, the statute adopts the law on that subject as it exists whenever a question under the statute arises. The Supreme Court ruled that:

"[t]he IOIA's reference to the immunity enjoyed by foreign governments is a general rather than specific reference."  The majority in the Supreme Court commented that the phrase "immunity enjoyed by foreign governments" is a concept that can only "be given scope and content only by reference to the rules governing foreign sovereign immunity", and "is a general reference to an external body of (potentially evolving) law.”

Atkinson v. Inter-American development bank: Weighing the canon's probative force and structural inferences derived from the Statute 

The IFC contends that the structural inference that the court can derive from the larger context of the IOIA outweighs any reference canon, which is consistent with the decision in Atkinson v. Inter-American Development Bank 156 F. 3d 1335 ("Atkinson").  The court in Atkinson, focussing on the provision of the IOIA that gives the President the authority to withhold, withdraw, condition or limit the otherwise applicable immunities of an international organisation, understood this provision to "delegate to the President the responsibilities for updating the immunities… in the face of changing circumstances". The court in Atkinson took the view that this delegation undermined the IOIA. 

The majority in Jam disagreed with the reasoning in Atkinson, and commented that the reference canon interpretation only authorised the President to take action in single instances of updating immunities, rather than updating them on a "wholesale" basis. 

Therefore, the majority in Jam dismissed the argument from the IFC that the structural inference that the court can derive from the larger context of the IOIA outweighs the contemporaneous link between international organisation and foreign state immunity.

Commentary - implications for human rights

Jam is a landmark decision, as it raises the possibility that communities harmed by projects financed by international financial institutions may be able to hold them legally accountable. This may be particularly important in relation to projects financed in countries where it is difficult for communities to sue the company directly responsible for the harms they have suffered. The decision may also incentivise better oversight of projects by lending organisations like the IFC or encourage them to undertake more careful due diligence before financing projects which may have high human rights or environmental risks.