Open Access Research Article
CHANGING DYNAMICS OF IMMUNITY TO INTERNATIONAL ORGANIZATIONS: COMMENT ON JAM ET AL V. IFC
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Article Details
CHANGING DYNAMICS OF IMMUNITY TO INTERNATIONAL
ORGANIZATIONS: COMMENT ON JAM ET AL V. IFC
Authored by - Ritika Kanwar
Abstract
With the landmark judgement in recent years, the Supreme Court of United
States (“US SC”) has strengthened the foundations of human rights and
environmental standards in the international community. With a majority of 7:1,
the US SC held that immunity to international organizations under the
International Organizations Immunity Act, 1945 (“1945 Act”) is not
absolute in nature, instead is pari passu with that granted to foreign
governments from lawsuits under the Foreign Sovereign Immunities Act, 1976
(“1976 Act”).
The said judgment holds ample significance in terms of international law
by lowering down the standards of absolute immunity to international
organization and making it equivalent to the immunities to foreign sovereigns.
The said judgment is an epitome of the fact that actions of international
organizations can be scrutinized by courts at domestic level. However, the
extension of scope of said restrictive immunity is a major dilemma in the light
of commercial disputes and direct linkage or nexus to US territory.
The author, herein, envisages to identify such additional loopholes and
criticisms along with analysing the matured scenario prior and post the said
ruling. Apart from criticisms and impact, the article focuses on statutory
history and procedural background of the 1945 and 1976 Acts along with
examining the position of functional necessity rationale post judgement.
Moreover, it discusses a prospective journey from principle of equivalence to
principle of translation with respect to international organizations.
Keywords: Absolute Immunity, Foreign Sovereign
Immunities Act, Functional Necessity Rationale, International human rights,
International Organizations Immunity Act.
Introduction
International Finance Corporation (“IFC”), as an investment institution
of the World Bank, lends large quantum of monetary aid to development projects
of private counterparts in several developing countries around the world.
Herein, a group of farmers and fishermen of Gujarat State brought into
limelight the serious and adverse repercussions on human rights and
environmental standards owing to prospective construction of Gujarat coal
plant. The IFC has invested a significant amount of $540 million in the said
project which had a detrimental effect on the local surroundings.
The US SC, in the said case, ensures victory of human rights by rejecting
absolute immunity to international organizations in law suits at domestic level
and make the, consequently, accountable for any kind of violations with respect
to human rights and environmental standards in domestic sphere. The studies
undertaken by IFC were indicative of some major protocol violations such as
dumping of coal ash and releasing contaminated water which in turn severely
impacted marine ecosystem and agriculture, the dominant source of livelihood,
in that area.
Thus, the communities approached the court alleging the lending and
subsequent ignorance of the conduct by IFC as the causal event for
establishment of the project and harm to the environment. The first stop in the
road to the Supreme Court was Compliance Advisor Ombudsman (“CAO”) at IFC in
June 2011. Being deficient of further enquiry and ineffective remedies by CAO
which is not a legal enforcement mechanism, the communities seek adequate
redressal by filing a class action suit in US district court at Columbia in
April 2015.
The plaintiffs, i.e., local fishermen and farmers, panchayat and the
trade union Machimar Adhikar Sangarsh Sanghatan, were represented by Earth
Rights International, an NGO engaged in pro-bono environmental litigation in
the US. After non-satisfactory settlement from District Court and Court of
Appeals, the plaintiffs approached the US SC. On February 20, 2020, with an
opinion 7:1, the US SC in Jam v. International Finance Corporation (“JAM-IFC
judgement”) concluded that the international organizations are equally immune
to the lawsuits at domestic level as the foreign sovereigns.
It has been interpreted by the court that there is a constant link
between both such immunities, i.e., to foreign governments and international
organization established by FSIA and IOIA. The decision paves way for similar
cases to be decided on merits in US courts. Moreover, it exposes activities of
international organizations falling under exceptions to FSIA including that of
‘commercial activities.’
Factual Matrix and
Issues Involved
While granting specific immunities and privileges to international
organizations, the Congress passed International Organizations Immunity Act in
1945. The 1945 Act exempts such organizations from property taxes and
absolutely immune them from searches and lawsuits. Section 2 of 1945 Act
extends the scope of said immunity to their property and assets, irrespective
of their possession, from every form of judicial process except when the same
has been expressly waived off in lieu of any binding contract. It affords
international institutions the same immunity as enjoyed by foreign sovereigns.
However, it allows the president to withdraw such exemptions and immunities
from international organizations. Through commercial activities exception, such
absolute immunities to foreign governments were significantly restricted.
IFC (Respondent) is an international organization, member of World Bank
based in Washington DC (DC), which provides funding to private-sector projects
in developing countries. The IFC financed for construction and operation of one
such projects, namely, Tata Mundra Plant in Gujarat, India. In lieu of the same
vested supervisory authority, it may rescind the agreement and revoke the
financial aid in case company shows patchy adherence to environmental action
plan damaging the surrounding communities.
Plaintiff, being the third-party beneficiary, i.e., farmers and fishermen
living nearby, approached the federal district court in DC seeking damages and
injunctive relief based on tort cause of action. They claimed against IFC’s
negligent compliance with own internal audit pointing towards detrimental
effects on surroundings and enforce environmental action plan resulting in
degraded air quality, contaminated groundwater, loss of livelihood, property
damage, threats to human health and consequent displacement of local masses.
IFC avowed regarding absolute immunity from lawsuits under 1945 Act.
Thus, the case revolves around the issue whether immunity from lawsuits
enjoyed by international organizations under 1945 Act is equivalent to that
provided to foreign governments when 1945 Act was enacted or as described in
accordance with 1976 Act? The district court, while dismissing the claim of
plaintiffs, found that international organizations are entitled to absolute
immunity from lawsuit under 1945 Act and the IFC had not waived the same.
Moreover, the action did not fulfil the condition precedent of commercial
activities exception, i.e., it was not ‘based on’ conduct, ‘carried on’ or
‘performed in’ the US. The US Court of Appeals for DC Circuit affirmed the
district court relying on its 1998 precedent titled Atkinson v. Inter-American
Development Bank (“1998 Case”) along with Convention on Privileges and
Immunities of United Nations.
It is pertinent to note that the 1998 Case is in contrast with other such
precedent by the US Court of Appeals for third circuit in 2010, namely, OSS
Nokalva Inc v. European Space Agency (“2010 Case”) well-known for its
collateral order doctrine. In 1998 Case, court took the opinion in the favour
of absolute immunity to international organizations on the similar level as
enjoyed by foreign sovereigns under 1945 Act. Nevertheless, in 2010 Case, the
court opined international organisations to be included in commercial
activities exception under 1976 Act. With the evolving dynamics in this aspect,
the US SC ruled in favour of restrictive immunity to such organizations.
Majority Opinion and
Dissent
The majority opinion authored by Justice John G. Roberts J.R. held that
1945 Act assign international organizations with same immunity from lawsuits as
provided to foreign sovereigns under 1976 Act and not what was described under
1945 Act at the time of its enactment. In a 7:1 judgement, IFC enjoys
restricted immunity, i.e., to the extent as enjoyed by foreign governments,
thereby uplifting such immunity from commercial activities carried on by
international organisations.
The 1945 Act is non- static in nature and parallel with the lines of 1976
Act. The Court found that this interpretation is bolstered by the “reference
canon” of statutory interpretation, which provides that when a statute refers
to a general subject, it adopts the law on that subject at the time a question
arises, as opposed to when a statute refers to a statute by title, in which
case it adopts the law as it existed at the time the statute was enacted.
However, Justice Stephen Breyer emphasised on statutory history, context, aim and
consequences of 1945 Act rather than on canons of statutory interpretation.
US SC, discarding the contention that restrictive immunity under 1945 Act
would result in flooding of litigation claims against international
organizations, stated that 1945 Act merely comprises of default rules that can
be departed through introduction of specific level of immunity under charter of
an international organisation. Further, it wasn’t specified whether activities
of developmental banks would qualify as commercial activities, thus continued
to be immune. Moreover, for courts to exercise jurisdiction the activity along
with related requirements under 1976 Act must have sufficient nexus to the US.
On the other hand, the district courts’ decision was founded on the proposition
that gravamen is indicated through the ‘last act’ which causes injury in the
causal chain, i.e., not the act of funding the project by IFC but the
prospective ignorant conduct of the IFC. Moreover, the court excluded the ‘but
for’ test of causation while determining the core of the complaint. This is
indicative of objective approach of the court regarding determination of
essential or gravamen of the suit. Apart from ‘last act’ theory, the court took
‘point of contact’ approach wherein it found the point of contact with
plaintiff as the basis of particular conduct of suit. As the whole conduct didn’t took place in US,
the same would not come within the ambit of commercial activities exception.
Comparative Analysis:
Prior and Post Ruling
The impact of JAM-IFC judgement is confined to the interpretation of US
state practice or opinion juris with respect to certain restrictions on
international organizations under customary international law. Prior to said
ruling, such organizations presumably enjoyed absolute immunity from lawsuits
against property damage, human rights violations and deteriorating
environmental standards. Post ruling, if analysed closely, the situation is
pretty much similar in the light of the fact that IFC’s charter did not provide
absolute immunity. The JAM-IFC judgement reflects that absolute immunity could
only be denied to international organizations for commercial activities within
the US territory under customary international law unless there is any
provision under the treaty or charter to the contrary.
Apart from negligible effect on customary international law, it does not
significantly affect treaty-based immunities to such organizations. The
judgement mandate of restrictive immunity can be nullified by international
organizations through introduction or modification of its rules under charter,
specifying either its activities to be of non-commercial in nature or having
absolute immunity from lawsuits. Furthermore, whether the commercial
activities, i.e., activities by which private party engages in trade or
commerce, are inclusive of international development banks’ activities is still
a grey area. Merely contracts like procurement contracts undertaken by
international organizations can be captured by commercial activities provided
it does not have sufficient nexus to the core function of organization in case
the same has modified its immunity provision.
Moreover, the immunity of international organizations is founded on
functional basis and not the governmental actions that are commercial in
nature. Thus, applying the restrictive standard akin to state would go contrary
to challenges posed by such immunity. On one hand, if functions of
international organizations would be covered within the ambit of commercial
activities exception, they would get prone to divided verdicts of courts of
several member states vitiating their purpose of independent functioning. On
the other hand, if not, access to justice concerning affected individual would
go unaddressed. The absolute immunity would result in lack of reasonable
alternative redressal means of dispute settlement against such organizations.
This approach would be advantageous for capturing harm caused by non-
commercial activities of international organizations.
Therefore, the functional necessity rationale proves to be relevant in
the US post-ruling. The distinction between commercial and non-commercial would
be based on functions or activities of international organization. Even though
they qualify as non-commercial activity under 1976 Act, functions of such
organizations would indicate domestic courts as preferable ones for exercising
jurisdiction. However, the normative relationship between access to justice and
immunity of international organizations is still unaddressed and the judgement
haven’t proved to be a significant step towards holding international
organizations legally accountable before domestic courts. A key takeaway for
international organizations could be improvisation of internal settlement
mechanisms for employment disputes and thirty party redressals for not
encouraging domestic courts to deprive them from their immunity in the light of
right to fair trial.
Conclusion
The JAM-IFC judgement proves to be a landmark one in the aspects of
covering lending activities of international organizations as commercial in
nature and lowering down the standards of their absolute immunity. However,
specific litigation being commercial activity and having sufficient nexus with
the US to be potentially liable is objective in nature and a question of fact.
Moreover, the restrictive state immunity standard would dissuade international
lending institutions from funding projects with grave human rights and
environmental risks. This judgment would change the win- lose scenario to a
healthy amicable settlement. Moreover, the same deeply impacts related cases
like one against palm oil plantations in Honduras and would open avenues for
third party redressal.
Additionally, the contrary decision upholding the absolute immunity would
have resulted in authoritative persuasion to negligent and unaccountable
conduct of the international organizations that would further have posed
serious environmental and social risks. The same would have been in violation
of customary international law as right to access effective remedies with the
affected individuals, non- state actors, is guaranteed by the International
Covenant on Civil and Political Rights (“ICCPR”). Lastly, it would reaffirm the
mandatory compliance of international organizations towards not only the
customary international law but also its own framework and polices on
environment and human rights.
References
I.
Yohei Okada, Immunities of Organizations under
International Law: Reflections in light of Jam v International Finance
Corporation- The immunity of international organizations before and after Jam v
IFC: Is the functional necessity rationale still relevant?, Questions of
International Law, July 05, 2020.
II.
Jam v. International Finance Corp, Oyez, February 20,
2021.
III.
Sachintha Dias, Jam v IFC before the D.C. District
Court: Forget the Floodgates, there won’t even be a Trickle, April 1, 2020.
IV.
Diane Desierto, SCOTUS Decision in Jam et al v.
International Finance Corporation (IFC) Denies Absolute Immunity to IFC…With
Caveats, February 28, 2019.
V.
Julian Arato, Equivalence and Translation: Further
thoughts on IO Immunities in Jam v. IFC, March 11, 2019.
VI.
Jam et al v International Finance Corporation, No
17-1011, 139 S. Ct. 759 (2019), OXIO 474, 27th February 2019.
VII.
Nancy Perkins & Sally Pei, Jam v. International
Finance Corp., Vol 23 Issue 3, American Society of International Law, May 01,
2019.
Article Information
CHANGING DYNAMICS OF IMMUNITY TO INTERNATIONAL ORGANIZATIONS: COMMENT ON JAM ET AL V. IFC
Authors: Ritika Kanwar
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/12/01
- Volume 2
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
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