On 27 February 2019, in the case Jam v. International Finance Corporation, the US Supreme Court ruled that international organisations are entitled to the same level of jurisdictional immunity granted to foreign governments.
Legal background information
In 1945, at a time when foreign governments were entitled to absolute immunity, the US Congress adopted the International Organisations Immunities Act. It provides inter alia that international organisations shall enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments (22 US Code § 288a(b)). However, in 1976, the US Congress passed the Foreign Sovereign Immunities Act, whereby foreign governments are no longer immune from actions based upon a commercial activity in which they engage (28 US Code § 1605(a)(2)).
Jam v. International Finance Corporation
The International Finance Corporation is an international organisation within the World Bank Group, whose Headquarters are located in Washington DC, and whose purpose is to encourage economic development, by notably making loans to private companies with the view of financing projects[1].
In 2008, the International Finance Corporation loaned a sum of USD 450 million to help financing a coal-fired power plant in Gujarat (India). Villagers, farmers and fishermen living and working nearby the location filed a suit against the International Finance Corporation before the US Courts on the account that pollution from the plant had contaminated and destroyed the surrounding environment.
The legal issue presented before the US Supreme Court pertained to whether international organisations enjoyed the same immunity granted to foreign governments at the time the International Organisations Immunities Act was adopted in 1945, or whether their immunity had evolved as the immunity granted to foreign governments under the Foreign Sovereign Immunities Act of 1976. While the International Finance Corporation submitted that international organisations still enjoyed an absolute immunity as granted under the 1945 Act, the Petitioners argued that the “same immunity” as foreign governments had evolved with the 1976 Act.
In its Opinion dated 27 February 2019 (7-1), the US Supreme Court held that the International Organisations Immunities Act of 1945 had continuously linked the immunity of international organisations to that of foreign governments and that, accordingly, it afforded international organisations the same immunity from suit that foreign governments enjoy today under the Foreign Sovereign Immunities Act of 1976.
It follows that the US Supreme Court acknowledges that international organisations can be sued before US domestic Courts for their commercial activities. Now, the remaining question that will have to be addressed pertains to whether the International Finance Corporation’s financing activities can be construed as a commercial activity as defined under the 1976 Act (28 US Code § 1603(d) and § 1605(a)(2)).
[1] Article 1 of the IFC Articles of Agreement.
10 March 2019 | Rafaela Choairy