US Court Rules That World Bank Group Cannot Be Sued For Harming Communities

A U.S. Federal Court has held that the International Finance Corporation (IFC) is entitled to “absolute immunity” from lawsuits brought by communities harmed by IFC projects.

The case, filed by communities affected by the Tata Mundra project in Gujarat, against the IFC, the World Bank Group’s private lending arm, seeks a remedy for the IFC’s funding in Tata Groups’ 4000 MW Mundra Ultra Mega Power Project (UMPP) that has devastated the local fishing communities. While the majority of the three-judge panel of the Court of Appeals for the District of Columbia Circuit concluded that previous decisions about international organisations like IFC required the court to find immunity, in this case, one judge of the bench upheld that IFC should be made accountable for its actions.

However, the majority opinion recognised the “dismal” situation of the plaintiffs and noted that the IFC did not deny that the plant had caused substantial damage. The bench ruled that the IFC could not be sued based on the Circuit’s previous decisions.

Judge Nina Pillard, who wrote a dissenting opinion, while agreeing that the court was bound by the earlier cases, criticised those decisions as “wrongly decided.” She also wrote that the D.C. Circuit had taken “a wrong turn” when it “grant[ed] international organisations a static, absolute immunity” and in limiting the IFC’s clear waiver of immunity. She suggested the full D.C. Circuit, which has the authority to change the law of the Circuit, should revisit those cases. On appeal, the IFC argued that it is not bound by the mission in its charter: to help the poor and avoid harming its project’s neighbours.

During the hearing, Earth Rights International’s senior litigation attorney Richard Herz, who argued the case for the affected community, questioned the sweeping immunity to IFC despite being inconsistent with the Supreme Court precedent and contrary to the IFC’s stated mission of avoiding harming its project’s neighbours.
#Gajendrasinh Jadeja, the head of Navinal Panchayat, a local village involved in the case, said, “the decision tells the world that doors of justice are not open to the poor and marginalised when it comes to powerful institutions like IFC.”

The court’s judgment supports the arrogance of lenders like IFC, who disregard the law, their own safeguard policies, and even the findings of their accountability mechanisms,” said Dr Bharat Patel of Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for Fisherworkers’ Rights), which is also a plaintiff in the case. He further added that such decisions of the court send a wrong message to institutions like IFC to continue lending money to bad projects, causing irreversible damage to the people and environment without the fear of being held accountable.

The fishing communities and farmers had filed the suit against the IFC in April 2015 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. The locals allege that the construction of the plant destroyed vital sources of water used for drinking and irrigation. Moreover, the coal ash emitted from the power plant contaminates crops and fish laid out to dry and has led to an increase in respiratory problems. It is also alleged that the plant has also destroyed the local marine environment and jeopardised livelihood of thousands of fish workers.

It is noteworthy that from the start, the IFC recognised that the Tata Mundra plant was a high-risk project that could have “significant” and “irreversible” adverse impacts on local communities and their environment. Despite knowing the risks, the IFC provided a critical $450 million (Rs 1800 crore) loan in 2008, enabling the project’s construction and giving the IFC immense influence over project design and operation. Moreover, the IFC failed to take reasonable steps to prevent harm to the communities and to ensure that the project abides by the required environmental and social conditions for IFC involvement.

Moreover, the IFC’s compliance mechanism, the Compliance Advisor Ombudsman(CAO), issued a scathing audit report in 2013 confirming that the IFC had failed to ensure that the Tata Mundra project complied with the environmental and social conditions of the IFC’s loan. Rather than taking any remedial action, the IFC responded to the CAO by rejecting most of its findings and ignoring others.

Earth Rights International in its statement said that the harms suffered by the community are all the more regrettable because the project made no economic sense from the beginning. The emphasised that Tata Power, which owns the plant, is trying to sell 51 per cent equity of the ailing asset for a nominal fee of ₹1.

The plaintiffs plan to challenge the decision by following Judge Pillard’s suggestion and requesting the court rehear the case “en banc” – in front of all the D.C. Circuit judges.

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