Upholding World Bank's Immunity in Case Against Gujarat Fishermen Will Have Long-Term Ramifications

Such a decision by US Supreme Court would allow, even encourage the International Finance Corporation – World Bank's lending arm – to continue to act irresponsibly without worrying about consequences.

The power plant has damage marine environment and productive fishing grounds. Credit: Reuters

The stacks of the 4150 MW coal-powered plant run by the Coastal Gujarat Power Ltd (CGPL) tower above the makeshift shacks of the Wagher fishing community that resides on the flat coastal stretches of Mundra in the Kutch district of Gujarat. The plant – one of the largest coal plants dependent on imported coal – has recently been in the news for its poor economic viability and is up for sale for Re 1. In April, the Supreme Court disallowed the CGPL to claim a compensatory tariff to accommodate the rise in Indonesian coal prices. But another story related to this project is unfolding in the US and has far greater ramifications for investor accountability in such projects.

Even before the CGPL, popularly referred to as the Tata Mundra Power Plant, was made operational, there was good reason to believe that it would pose a significant threat to the surrounding neighbourhood and the environment. The company initiated construction of a different cooling technology than what was environmentally approved in 2007. The adoption of the once-through cooling system instead of closed cycle cooling through towers meant that the power plant could use up to 100 times more sea water and permanently damage marine environment and productive fishing grounds where the Bombay duck fish is caught.

The International Finance Corporation (IFC), the private lending arm of the World Bank Group, provided $450 million for the plant. Over the years, studies and fact finding initiatives have pointed to several project violations such as coal ash dumping and release of contaminated warm water that has impacted fish catching and agriculture in the area. The communities living in the vicinity of the project thus blamed the IFC for damage to their lives, livelihoods and property, as without the loan, the project would not have had been established and the subsequent damage to the environment would never have happened.

The road to the Supreme Court

The affected fishing communities first approached the Compliance Advisor Ombudsman (CAO), a forum of the IFC, for addressing claims of its stakeholders in June 2011. The case was formally registered in February 2012 and the compliance appraisal was completed by July 2012. The CAO was of the opinion that a number of issues that had been raised by the complainants merited further enquiry. Since then, the project has been monitored by the CAO, but that has not provided any effective remedies.

Secondly, as the CAO was not a legal enforcement mechanism, the fishing communities decided to seek justice through a class action lawsuit in the US district court for the District of Columbia. The case was fought by Earth Rights International, a non-governmental organisation that engages in pro bono environmental litigation in the US.

Tata Mundra power plant. Credit: Wikimedia Commons

The case was filed in April 2015 by local fishermen and farmers, the trade union Machimar Adhikar Sangharsh Sangathan and the panchayat. The district court, in Buddha Ismail Jam and Others vs IFC, reasoned that the IFC had absolute immunity from suits and proceedings unless the same had been expressly waived. The court opined that the immunity had not been waived in this case, and thus ruled in favour of the IFC.

The plaintiffs challenged the decision of the district court and filed an appeal at the US court of appeals for the District of Columbia. The majority upheld the decision of the district court, but Pillard J. was of the opinion that the cases on the basis of which the decision was based should be re-evaluated by a full bench. However, the full bench, on September 26, refused to do the same, leaving the fishing communities with no other alternative but to approach the US Supreme Court.

Is the ‘absolute immunity’ rule justified?

When the UN, the first international organisation with a legal personality, was established in 1945, a need of creating privileges and immunities for international organisations arose for the first time. Pursuant to that, the US Congress enacted the International Organisation Immunities Act, 1945 (IOIA). The IOIA prescribed the same level of immunities from suits and other judicial processes as was enjoyed by foreign governments, which, during that time period, meant absolute immunity. Since then, the absolute nature of immunity has been made more and more restrictive by the drawing of a difference between sovereign and commercial Acts. In 1976, the US Congress enacted the Foreign Sovereign Immunity Act (FSIA) which adapted the restrictive approach and excluded commercial activities altogether from the broad scope of sovereign immunities. Therefore, the question before the US Supreme Court is likely to be whether the standard which existed in 1945 should be applied to the present case, or should the subsequent changes in the law also be taken into consideration.

Interestingly, there are two conflicting decisions of the circuit courts on this point which will have to be reconciled by the US Supreme Court. The US court of appeals for the District of Columbia, in Atkinson vs Inter-American Development Bank, was of the opinion that the international organisations enjoyed absolute immunity, just as the sovereigns did in 1945. Contrastingly, the US court of appeals for the third circuit in OSS Nokalva Inc vs European Space Agency was of the opinion that the international organisations fall under commercial activities as per the FSIA. The law is meant to be dynamic and evolve with time, and this would require the US Supreme Court to apply the same standard of immunity to international organisations as is present in the FSIA, i.e., restrictive immunity.

US Supreme Court. Credit: Reuters

The IFC has argued so far that since its activities are purely commercial in nature, the restricted immunity rule as per the FSIA will open up a floodgate of litigation against it and have a chilling effect on its lending abilities. As rightly pointed out by one of the amicus curiae for the plaintiffs, such an argument clearly indicates that the shield of immunity granted to the international organisations for effective functioning is now being used as a sword to waive off claims of the people whose lives it has affected. Commercial activities, especially of the kind engaged in by the IFC, has immense human rights implications, and if the people cannot bring forth claims against it, there will never be any accountability on their part. Instead of taking a negative stand on immunity, the IFC should instead ensure that it operates in a responsible manner so that the floodgates of litigation remain closed.

Possible implications of the court’s decisions

With the fisherfolk geared up to go to the US Supreme Court, it seems that a clear legal standing with respect to the jurisdictional immunity of international organisations will finally be reached. If the court decides to uphold the IFC’s immunity, it will be a blow to the long-standing struggles of the fishing communities of Gujarat and many other parts of the world where the IFC has invested in detrimental projects. It would allow or even encourage the IFC to continue acting in a negligent and irresponsible manner without having to worry about consequences.

Such a decision would be a violation of customary international law since the affected people have a right of access to effective remedies under the International Covenant on Civil and Political Rights. A decision in favour of the IFC would allow the continuation of an outdated and dangerous legal concept of absolute immunity in these times of global environmental risks and social inequality.

If the court decides in favour of the project affected people, it would reaffirm the faith that the IFC and similar organisations are not above the law. The IFC will have to mandatorily comply with its own social and environmental policies. The damage to the lives, livelihoods and properties of the affected people may be restored to some extent. Most importantly, it will provide access to justice to non-state actors affected by the decisions of international organisations.

Debayan Gupta, Krithika Dinesh, Manju Menon and Kanchi Kohli are with the Centre for Policy Research-Namati Environmental Justice Program.