Budha Ismail Jam et al. v. International Finance Corporation

Nature of the Case

In 2015, Budha Ismail Jam and other farmers and fishing communities surrounding the polluting Tata Mundra Ultra Mega coal-fired power plant in Gujarat, India, sued the World Bank Group’s International Finance Corporation (IFC) for its role financing the plant’s construction by private firm Costal Gujarat Power Limited. The plaintiffs sought damages and injunctive relief for negligence, nuisance, trespass, and breach of contract, alleging that pollution from the coal plant’s construction and operation had harmed farmland, air, water, and marine life. An IFC internal audit found that the company had not complied with an environmental and social plan required by the loan to protect areas surrounding the plant. The audit also found the IFC had not adequately supervised the project.

The issue before the United States (US) Supreme Court was whether the IFC had absolute immunity from suit. The Court interpreted US law as granting designated international organizations the more restricted immunity that is currently enjoyed by foreign governments, not the nearly absolute immunity granted initially in 1945. Since 1952, foreign governments have typically been able to be sued in the US for certain commercial activities, even as they have continued generally to hold absolute immunity in other areas.

Enforcement of the Decision and Outcomes

The case was remanded to the District Court to settle the questions of the commercial nature of the IFC’s loan, and of whether the activities are related enough to the US for the IFC to be held liable.

Significance of the Case

This case opens the possibility that international financial institutions may be held liable for harms caused by projects they finance, since the decision lowers the standard of immunity for international financial institutions under domestic law. Whether an organization’s activities in any individual case are commercial and have a sufficient tie to the US to enable potential liability will likely be subject to fact-specific litigation that may be hard to predict. Therefore, this lower standard of immunity may incentive better oversight by international lending institutions or dissuade them from financing projects with high human rights, environmental, or social risks.

This decision may also have some immediate impact in other related cases. The same organization that represents plaintiffs in Jam, the legal environmental nonprofit EarthRights International, has since resumed litigation in a case against a palm oil plantation in Honduras, which had also received a loan from the IFC. The private security forces of the plantation allegedly attacked and killed community members, events which, similarly to the audit activities in Jam, were documented in internal IFC reports. Now, the IFC may be more inclined to settle because of its more limited immunity, especially if the lower court proceeding in Jam results in damages for the plaintiffs.

For their contributions, special thanks to ESCR-Net member: the Program on Human Rights and the Global Economy (PHRGE) at Northeastern University.

Groups Involved in the Case

• EarthRights International