District of Columbia Circuit affirms dismissal of lawsuit by Indian nationals who claim to be beneficiaries of social and environmental terms of contract of International Finance Corporation (IFC) with large Indian company

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Date: April-June 2017
From: International Law Update(Vol. 23, Issue 2)
Publisher: American Bar Association
Document Type: Article
Length: 1,952 words
Lexile Measure: 1420L

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Appellants, a group of Indian nationals, challenge a district court decision dismissing their complaint against the International Finance Corporation (IFC) on grounds that the IFC is immune from their suit. Appellants are fishermen, farmers, a local government entity, and a trade union of fish workers. The IFC, headquartered in Washington, is an international organization which provides loans in the developing world to projects that cannot command private capital. The IFC loaned $450 million to Coastal Gujarat Power Limited, a subsidiary of Tata Power, an Indian company, for construction and operation of the Tata Mundra Plant. The loan agreement, in accordance with IFC's policy to prevent social and environmental damage, included an Environmental and Social Action Plan designed to protect the surrounding communities. According to the IFC's own internal audit conducted by its ombudsman, the plant's construction and operation did not comply with the Plan. Yet the IFC did not take any steps to force the loan recipients into compliance with the Plan. The appellants' claims are almost entirely based on tort: negligence, negligent nuisance, and trespass. They do, however, raise a related claim as alleged third party contract beneficiaries of the social and environmental terms of the contract.

The IFC relies on the International Organizations Immunities Act (IOIA), which provides that international organizations "shall enjoy the same immunity from suit ... as is enjoyed by foreign governments, except to the extent that such organizations may expressly waive their immunity for the purpose of any proceedings or by the terms of any contract." 22 U.S.C. [section] 288a(b). The IFC has been designated an international organization entitled to the "privileges, exemptions, and immunities" conferred by the statute. Exec. Order No. 10,680, 21 Fed. Reg. 7,647 (Oct. 5, 1956).

In response to IFC claim of statutory entitlement appellants argue that leading case of Atkinson v. Inter-Am. Dev. Bank, 156 F.3d 1335 (D.C. Cir. 1998), should not be followed. In the case of Atkinson it was held that foreign organizations receive the immunity that foreign governments enjoyed at the time the IOIA was passed and that immunity is not diminished even if the immunity of foreign governments has been subsequently modified, particularly by the widespread acceptance and codification of a "commercial activities exception" to sovereign immunity. Attacking Atkinson, appellants make two related contentions. First, Atkinson was wrong to conclude that when Congress tied the immunity of international organizations to foreign sovereigns, it meant the immunity foreign sovereigns enjoyed in 1945. Appellants argue that even assuming foreign sovereigns enjoyed absolute immunity in 1945, if that immunity diminished, as it has with the codification of the commercial activity exception, Congress intended that international organizations fare no better. However, Atkinsons explicitly rejected such an evolving notion of international organization immunity. Appellate Court expressed that while considering legislation Congress rejected a commercial activities exception. However, the issue with this argument is that it runs counter to Atkinson's holding, which explicitly rejected such an evolving notion of...

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Gale Document Number: GALE|A550996289