By Corporate Crime Reporter

A federal district court in Washington, D.C., ruled last week that the International Finance Corporation (IFC), the private lending arm of the World Bank Group, has absolute immunity and thus cannot be sued in the United States.

Fishing communities and farmers represented by EarthRights International (ERI) filed suit against the IFC last year over the destruction of their livelihoods and property and threats to their health caused by the IFC-funded Tata Mundra coal-fired power plant in Gujarat, India.

The IFC moved to dismiss the case, arguing that it is not subject to the authority of U.S. courts, no matter how harmful or illegal its actions may have been.

The district court concluded that it was required to find that the IFC is entitled to absolute immunity based on previous decisions from the D.C. Circuit Court of Appeals.

The plaintiffs had argued that recent Supreme Court cases addressing immunity overturned the D.C. Circuit’s decisions.

The district court did not consider that argument, but instead held that it should be heard and decided by the D.C. Circuit on appeal.

“The IFC’s sweeping claims of immunity are deeply problematic both from a policy perspective, and in light of recent Supreme Court caselaw. We feel confident that the appellate court will agree,” said Rick Herz, ERI’s litigation coordinator.

From the start, the IFC recognized that the Tata Mundra project was a high-risk project that could have “significant” and potentially “irreversible” adverse impacts on local communities and their environment.

Despite knowing the risks, the IFC provided a critical $450 million loan, enabling the project’s construction and giving the IFC immense influence over project design, implementation and operation.

Yet it failed to take reasonable steps to prevent harm to the communities and to ensure that the project abided by the required environmental and social conditions for IFC involvement, according to the complaint.

The IFC’s mission is to promote economic development and reduce extreme poverty without doing harm to people or the environment.

The plaintiffs told the court that the Tata Mundra project is a “mission failure.”

Construction of the plant resulted in displacement of local communities and contributed to saltwater intrusion into the groundwater, destroying vital sources of water used for drinking and irrigation.

Coal ash contaminates crops and fish laid out to dry and has led to an increase in respiratory problems. The plant has also destroyed the local marine environment and the fish populations that fishermen like Budha Ismail Jam, a plaintiff in the case, rely on to support their families.

“The IFC says its projects will reduce poverty, but this project has only made things worse for us,” he said. “Since the time the project is operational the fish catch has declined drastically. Now we get very little, we find it difficult to make our ends meet.”

The Compliance Advisor Ombudsman (CAO), the IFC’s own compliance mechanism, issued a scathing report confirming that the IFC had failed to ensure the project complied with the environmental and social conditions of the IFC’s loan.

Rather than take remedial action, the IFC responded by rejecting most of its findings, and ignoring others.

As the district court noted in its decision, “the CAO is not a court” and it “cannot compel the IFC to right its wrongs, or to provide remedies to individuals who have been harmed by IFC-financed projects.”

The IFC is required to ensure there is broad community support for projects like the Tata Mundra Plant before it can provide financing.

“What community would agree to support a project like this now? Even when the CAO confirms the community’s concerns, the IFC just ignores their suffering,” said Bharat Patel, of the Machimar Adhikar Sangharsh Sangatha (Association for the Struggle for Fisherworkers’ Rights), which is a plaintiff in the case.  “Communities cannot trust the IFC to live up to its commitments if it is not taking actions on the CAO findings and if they are not allowed to access the courts.”

“The IFC thinks it is entitled to act with impunity, contrary to its own mission, and accountable to no one,” said Mr. Herz. “Our clients disagree, and the law is on their side.”

The plaintiffs intend to appeal the court’s decision.

“We are not discouraged,” said Gajendrasinh Jadeja, the head of Navinal Panchayat, a local village that is also a plaintiff. “This is a fight for our lives and livelihood. We will continue our struggle for justice and we believe we will prevail.”

To Learn More:

                District Court Rules World Bank Can’t be Sued (Corporate Crime Reporter)

IFC Claims “Absolute Immunity” to Avoid Justice. But Will it Hold Up in Court? (by Michelle Harrison, EarthRights International; Bretton Woods Project)

Budha Ismail Jam, et al. v. International Finance Corporation (U.S. District Court for the District of Columbia) (pdf)

Gujarati Villagers Sue World Bank Arm in US Court (by Karan Singh, AllGov India)

Big Oil Wins another One as Judge Bates Rules against SEC Rule Mandating Disclosure of Payments to Governments (by Matt Bewig, AllGov)