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International: International Finance Corporation Faces Renewed Lawsuits Regarding Financing for Coal-fired Power Plant in India

(Feb. 27, 2020) Following last year’s landmark win in their case before the U.S. Supreme Court, the plaintiffs in Jam v. International Finance Corporation (IFC) are still searching for remedy—and legal clarity—in their lawsuit regarding environmental damages caused by the construction and functioning of the Tata Mundra Plant in India. The search for remedy has now taken almost a decade, as it was in 2011 that representatives of those negatively affected by the project lodged their first complaint about its environmental impacts with the IFC’s independent accountability mechanism, the Compliance Advisor Ombudsman (CAO). The recent roadblock to remedy occurred in early February 2020, when the U.S. District Court for the District of Columbia dismissed the case, ruling that the IFC is immune given the facts of the case—namely that the case is not “based upon a commercial activity carried on in the United States.” The claimants have vowed to appeal the District Court’s ruling.

Background on the Jam v. IFC Supreme Court Case

Jam v. IFC, a 2015 class action decided by the Supreme Court in 2019, was brought by struggling fishing communities and local farmers in India, who argued that their way of life had been destroyed by the Tata Mundra Plant, which the IFC co-financed. The U.S. Supreme Court, in a 7-1 decision (Justice Breyer dissenting), found that the IFC, as an international organization, does not enjoy “absolute immunity.” Instead, the Supreme Court ruled that the IFC enjoys the same type of immunity that foreign governments have under the Foreign Sovereign Immunities Act (FSIA), and sent the merits of the case back to the lower courts for consideration. The FSIA gives foreign governments “presumptive immunity,” but includes several exceptions to that immunity, including when the allegedly tortious conduct is not based on commercial activity that took place in the United States.

Background on the IFC

The IFC is a member of the World Bank Group. Unlike the World Bank, which lends money or provides grants to developing country governments, the IFC’s mandate is to invest in private entities. In fiscal year 2019, the IFC invested $19.1 billion and made long-term investments in 269 projects. Some have argued that the impact of international financial institutions (IFIs), including the IFC, is increasingly important, and IFIs have been subject to heightened scrutiny and efforts to impose liability for projects that negatively affect local communities.