dChan - Q Origins Project Archive

That is the clear message from the U.S. Supreme Court, which last week issued a 7-1 decision in Jam v. International Finance Corporation, ruling for the first time that international financial institutions, including various branches of the bank and other U.S.-based organizations like the Inter-American Development Bank, can be subject to lawsuits in cases where their investments in foreign development projects are alleged to have caused harm to local communities.

The decision overturns a decades-old presumption dating to the founding of the World Bank in 1945 — that the IFC, a Washington, D.C.-based branch of the World Bank Group that finances private-sector projects in developing countries, and other bank-affiliated organizations are fully immune from such suits.

The Jam suit, which was filed in 2015, is far from over. With the fundamental immunity issue resolved, it will return to a federal circuit court in Washington, D.C., this spring for further battles over the facts of the case, and it may not be decided for years. In the meantime, at least one other major suit against the IFC is now gaining steam in response to last week's decision, and more could follow as international financial organizations grapple with this new standard of accountability for the unintended consequences of their investments.

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"This decision certainly opens the door for more lawsuits," says Mark Wu, an international trade law scholar at Harvard Law School who was not involved in the suit. "It may cause [international financial institutions] to be more cautious in the operations of the projects themselves."

Wu added that the new legal liability might make the World Bank think twice about whether to fund projects that could come with high environmental or social risks.

The decision could make it possible for millions of people around the world to seek compensation for environmental and human rights abuses associated with internationally financed development projects.

The World Bank and its affiliates are vital sources of funding for international development projects, and many of their projects are completed without complaint. But some are highly controversial. An ongoing series by the International Consortium of Investigative Journalists has found that more than 3 million people, across every continent, have been physically or economically displaced by World Bank-funded projects over the past decade.

Who's suing?

The Jam lawsuit, the first of its kind against a World Bank institution, was brought in 2015 by a group of farmers and fishermen living in Gujarat, a coastal state in western India (several of whom share the surname "Jam"). They alleged that the nearby Tata Mundra coal-fired power plant, which came online in 2012, had contaminated local water sources and led to a decline in fish populations, severely disrupting their livelihoods.

The plant was built with a $450 million loan from the IFC. The IFC, the fishermen allege, did not follow through on a commitment it made as a part of the loan to ensure that the project adhere to stringent environmental safeguards and is therefore responsible for the damage. The group is being represented by EarthRights International, a D.C.-based legal nonprofit that is the driving force behind the suit.

The case was brought in U.S. court because the IFC is based in the United States and because the injury in question is linked to an allegedly irresponsible decision, made in the U.S., to finance the power plant despite the risks.

The IFC, for its part, argued that it was protected from lawsuits by a 1945 law granting U.S.-based international organizations "the same immunity from suit and every form of judicial process as is enjoyed by foreign governments," and that changing that standard would unleash a flood of baseless litigation. The case reached the Supreme Court in part because lower courts had disagreed on their interpretation of the immunity issue.

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