World Bank, IFC Immune from Federal Lawsuits U.S. District Court Rules

When a coal-fired plant in India destroyed the health, livelihoods, and property of farmers and fishermen in the region, they turned to international interest groups for help. Those interest groups, in turn, devised the strategy of taking the matter to court.

Of course, the plant itself had no real assets, but the institutions that provided their financing might. Therefore, they decided to take the International Finance Corporation (IFC), a private lending arm of the World Bank Group, to court in the US District Court in Washington D.C.

When a coal-fired plant in India destroyed the health, livelihoods, and property of farmers and fishermen in the region, they turned to international interest groups for help. Those interest groups, in turn, devised the strategy of taking the matter to court.

Of course, the plant itself had no real assets, but the institutions that provided their financing might. Therefore, they decided to take the International Finance Corporation (IFC), a private lending arm of the World Bank Group, to court in the US District Court in Washington D.C.

Unfortunately, the plan, devised by EarthRights International (ERI) (the organization that the Indian Fishermen and Farmers turned to for help), has fallen flat. Last week, a federal district court judge in Washington, D.C. ruled that the IFC and — by extension — the World Bank, were immune from liability in the United States and could not be sued.

After being sued, the IFC moved to dismiss the case, arguing that it is not subject to the legal authority of the United States, regardless of how harmful, offensive, or illegal its actions might be. The District Court agreed, concluding that the World Bank and IFC enjoyed absolute immunity in the United States, citing a number of previous decisions from the D.C. Circuit Court of Appeals.

ERI, acting as the plaintiff in the case, attempted to argue that a recent Supreme Court case had overturned the D.C. Circuit’s decisions, but the District Court disagreed. The matter appears destined for the D.C. Circuit Court of Appeals.

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

Despite being aware of “significant” and potentially “irreversible” problems that the power plant in question might cause for the local community, the IFC opted to fund it anyway. The IFC provided a $450 million loan and, as the primary financier, had significant influence over the project. Nevertheless, according to ERI, the IFC failed to take any reasonable action to prevent harm to the community or the environment.

Construction of the offending facility caused local communities to suffer displacement from their homes and the plant caused saltwater intrusion into local groundwater, damaging the environment. Moreover, coal ash put out by the plant also caused respiratory problems and further environmental damage.

Despite being made aware of the problems, the IFC allegedly ignored these conditions and allowed the project to proceed without interference.

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