Indian coal plant's World Bank lender immune from enviro suit

By
4 minute read

A coal-fired power plant in Poland, REUTERS/Kacper Pempel

Register now for FREE unlimited access to Reuters.com

(Reuters) - Farmers, fishermen and others who say the coal-fired Tata Mundra Power Plant in Gujarat, India has ruined the environment and their livelihoods cannot sue the U.S.-based international organization that financed its construction in 2008, a federal appeals court held Tuesday in a case that the U.S. Supreme Court revived in 2019.

The U.S. Court of Appeals for the District of Columbia Circuit affirmed last year’s ruling for International Finance Corp on remand. The appeals court found that IFC, represented by White & Case and Sidley Austin, has immunity from suit because the plaintiffs’ claims “are not based upon activity carried on in the United States.”

“Even crediting the allegation that the Plant would not have been built without IFC’s funding, the operation of the Plant is what actually injured appellants, and the manner of its construction and operation is the crux of their complaint,” Circuit Judge Judith Rogers wrote. “The gravamen of appellants’ lawsuit is therefore conduct that occurred in India, not in the United States.”

Register now for FREE unlimited access to Reuters.com

Richard Herz of EarthRights International, who argued the appeal for fisherman Budha Ismail Jam and his neighbors, said in an email that they intend to seek further review “and to go back to the Supreme Court, if necessary.”

Herz said the D.C. Circuit should have focused solely on the IFC’s decision to disburse funds without enforcing the loan agreement’s environmental provisions. Instead, the court focused on the actions of Coastal Gujarat Power Limited, which constructed and operates Tata Mundra.

The IFC and its attorneys did not immediately respond to requests for comment on Tuesday.

Based in Washington, D.C., the IFC is the private-lending arm of the World Bank Group. It provided $450 million in loans to help construct Tata Mundra.

Jam filed suit in federal court in Washington in 2015, saying the IFC’s failure to enforce the lending agreement’s environmental provisions has had a devastating effect on marine life and air quality.

The lower court dismissed the suit in 2016 and the D.C. Circuit affirmed in 2017, relying on the “virtually absolute” immunity that IFC was presumed to have under the International Organizations Immunities Act (IOIA).

In 2019, however, the Supreme Court ruled that IOIA immunity was not absolute; instead, it was subject to the same exceptions as the Foreign Sovereign Immunities Act (FSIA). The justices remanded for consideration of whether the FSIA’s exception for suits “based upon” a foreign government’s “commercial activity” in the United States applied to Jam’s case.

On remand, the district court ruled that the commercial-activity exception did not apply. Affirming that ruling on Tuesday, Rogers wrote that “all of (Jam’s) claims turn on allegedly wrongful conduct in India, which has led to injuries suffered in India.”

Circuit Judge David Tatel and Senior Circuit Judge A. Raymond Randolph joined Rogers’ opinion.

Randolph also filed a concurrence, in which he noted the similarity of EarthRights’ arguments to those the Supreme Court rejected last Thursday in Nestle USA v. Doe, a suit under the Alien Tort Statute alleging that Nestle’s corporate decisions in the USA contributed to human rights abuses in Ivory Coast.

As the Supreme Court held in Nestle, “ ‘corporate activity — like decisionmaking — cannot alone establish domestic application of the (statute)’,” Randolph wrote.

The case is Budha Ismail Jam et al v. International Finance Corp., U.S. Court of Appeals for the D.C. Circuit, No. 20-7092.

For Jam: Richard Herz, Marco Simons and Michelle Harrison of EarthRights International

For IFC: Jeffrey Green of Sidley Austin, Dana Foster and Maxwell Kalmann of White & Case

Register now for FREE unlimited access to Reuters.com

Our Standards: The Thomson Reuters Trust Principles.