No absolute immunity for World Bank affiliate: US Supreme Court

In a historic decision involving Indian coal plant, US top court says World Bank affiliate can be prosecuted for environmental damages

By DTE Staff
Published: Thursday 28 February 2019
Tata Mundra power project. Photo: Angeline Sangeetha

In a major win for Indian fishermen from Mundra in Kuchchh district of Gujarat, the US Supreme Court passed a historic decision making international organisations like the World Bank and its affiliates liable for legal action.

The case dates back to 2015 when fisherman Budha Ismail Jam, along with EarthRights International and others, filed a suit against the International Finance Corporation (IFC) — World Bank’s private lending arm — alleging negligence while financing the coal-fired Tata Mundra Power Plant and environmental damages caused due to it.

The project received a $450 million loan from IFC in 2008, but in July 2011, the bank received complaints from the local community, claiming deterioration of water quality and fish populations, blocked access to fishing and drying sites, forced displacement of fishers, community health impacts due to air pollution and destruction of natural habitats, particularly mangroves, because the project.

The Coalition Advisor Ombudsman (CAO) of World Bank also wrote a report stating that “a number of issues raised by the complainants merited further enquiry.” The District Court in Washington D.C., where the case was first filed, dismissed the case in 2016 after the IFC claimed absolute immunity.

In its ruling, the Supreme Court notes: “Petitioners sued the IFC for damages and injunctive relief in Federal District Court, but the IFC claimed absolute immunity from suit. Petitioners argued that the IFC was entitled under the IOIA only to the limited or ‘restrictive’ immunity that foreign governments currently enjoy. We agree…”

Organisations like the World Bank, International Monetary Fund, United Nations etc are granted “same immunity from suit . . . as is enjoyed by foreign governments” according to the International Organizations Immunities Act (IOIA), 1945.

In the ruling, the Court observed that “foreign governments are entitled to immunity only with respect to their sovereign acts, not with respect to commercial acts.” Citing the 1976 Foreign Sovereign Immunities Act, it said that the IFC enjoyed “only the same immunity as foreign governments and not absolute immunity”.

The judgment assumes historic significance as it opens the door for other such lending organisations to be taken to court over negligence and funding without proper clearances.

Down To Earth reported on the environmental damages caused by the 4,150 MW Mundra ultra mega power project, noting that “emissions from the plant are affecting one and all.”

It quotes Bharath Patel of the local fisherworkers' organisation, Machimar Adhikar Sangharsh Samiti (MASS) saying that during a public hearing “when a resident of Navinal asked how far the stack emissions of the power plant would travel and where it would get deposited, the company had no answers.”

“Air pollution is taking a heavy toll on the people. Dust from the power plant gets deposited on the fields. Agricultural production has drastically gone down in the nearby villages. Besides this, asthma and other respiratory diseases are increasing in the area,” added Patel.

Further, IFC had claimed that India forms its largest country of operation with a total of 248 projects. However, Centre for Science and Environment (CSE), a New Delhi-based non-profit, found serious lapses in the environmental review process of IFC’s projects, contrary to the claims made during investment.

Here’s a table listing projects that demonstrate lapses in IFC’s environmental review process.

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