The private sector arm of the World Bank has long come under fire for funding projects that run afoul of human rights. But, because it enjoys full legal immunity in the United States, it has not been possible for anyone to hold the International Finance Corporation (IFC) accountable in US courts.
That may change. This week, the US Supreme Court will decide whether to hear a case brought forward by a fishing community in India seeking damages for harm allegedly caused by IFC-funded coal power plant in Gujarat, India. If the court decided to take on the case, it could, for the first time, allow people to seek legal recourse for human rights abuses and environmental harm related to IFC investments.
Lower courts have ruled that the IFC enjoys absolute immunity from lawsuits under the International Organizations Immunities Act, the US law granting them that status.
In 2016, the IFC had more than US$18 billion investment commitments worldwide, making it the largest development bank investing solely in the private sector. The institution has a mandate to end extreme poverty and “promote share prosperity in every country.”
In this case, the petitioners to the Supreme Court tried to resolve their claims through the IFC’s accountability mechanism, the Compliance Advisor Ombudsman (CAO), but the IFC’s actions have been insufficient to act on the problems identified by that office.
This is not an isolated case. In another case from India, tea workers alleged labor rights abuses, in violation of international law and the IFC’s own rules, on IFC-funded tea plantations. Tea workers also appealed to the CAO, which found numerous shortcomings in IFC’s assessment of risks associated with child labor, fair compensation, and freedom of association. They also found IFC wasn’t providing a way out of poverty for workers, contrary to its goal of alleviating poverty. Local civil society say that little has changed for tea workers in the nine years since IFC invested in the tea plantations.
IFC’s lawyers also seem worried about how many communities may come forward to accuse the IFC of abuses in court, if its immunity is lifted. They argued in court that waiving immunity would open “a floodgate of lawsuits by allegedly aggrieved complainants from all over the world.”
If that’s the case, then IFC should focus on making sure its projects don’t undermine human rights and truly promote development, so it won’t have to worry so much about keeping itself out of court. If the court doesn’t strip the IFC of its immunity, then Congress should create legal liability for IFC’s actions, offering communities a better chance at justice and remedy for abuses.