Supreme Court Limits Immunity of International Organizations
On February 27, 2019, the Supreme Court held in Jam v. International Finance Corp. that international organizations, such as the International Monetary Fund and the World Bank, can be sued in the United States for claims arising out of their commercial activities because they do not enjoy absolute immunity from suit in the United States. In reaching that decision, the Supreme Court overruled past D.C. Circuit precedent and held that Section 288a(b) of the International Organizations Immunities Act of 1945 (IOIA)—which states that international organizations (IGOs) have the “same immunity from suit … as is enjoyed by foreign governments”—confers on IGOs the same (limited) immunity enjoyed by foreign sovereigns under the Foreign Sovereign Immunities Act (FSIA).
- The immunity enjoyed by IGOs under the IOIA will now closely track the immunity enjoyed by foreign states under the FSIA.
- As a result, IGOs may now find themselves defending against claims arising from commercial activity that has a sufficient nexus with the United States.
- The Supreme Court specifically noted that loans made by international financing organizations, such as the World Bank or the Inter-American Development Bank, may not “qualify as ‘commercial’ under the FSIA.”
- Finally, the Supreme Court’s holding in Jam does not affect immunities granted by an IGO’s charter. This means that organizations that have highly protective immunity provisions in their charters, such as the United Nations and the International Monetary Fund, may remain largely immune from suit in the United States.
The International Finance Corporation (IFC) is a branch of the World Bank, headquartered in Washington, D.C. In 2008, the IFC loaned $450 million to Coastal Gujarat Power Limited (Gujarat Power) to finance the construction of a coal fired power plant in Gujarat, India. Gujarat Power failed to comply with certain environmental and social obligations, and an internal IFC audit determined that the IFC failed to supervise the project adequately. In 2015, a group of farmers and fishermen living near the Gujarat plant sued the IFC in the District Court for the District of Columbia, asserting claims of negligence, nuisance, trespass, and breach of contract.
IFC sought dismissal, arguing that under long-standing D.C. Circuit precedent, the IOIA afforded the IFC complete immunity from suit. The Plaintiffs countered that the IOIA’s extension to IGOs of the “same immunity from suit … as is enjoyed by foreign governments” conferred on IGOs the immunity enjoyed by foreign governments today (ie limited immunity), not the immunity foreign governments enjoyed in 1945 when the IOIA was passed. The Supreme Court agreed with the Plaintiffs.
The Supreme Court’s Decision
In a 7-1 decision, with only Justice Breyer dissenting (Justice Kavanaugh did not take part in the consideration of the case), the Supreme Court held that the IFC was entitled under the IOIA only to the “restrictive” immunity that foreign governments currently enjoy under the FSIA.
At issue was the correct interpretation of Section 288a(b) of the IOIA, which states that IGOs will receive the “same immunity from suit … as is enjoyed by foreign governments.” When the IOIA was adopted in 1945, foreign states enjoyed near absolute immunity from suit under State Department policy. That changed in 1952, when the State Department announced that it would adopt a “restrictive” theory of sovereign immunity, under which foreign governments are entitled to immunity only with respect to sovereign, not commercial, acts. That theory was subsequently codified with the enactment of the FSIA in 1976.
The Supreme Court held that the language of 288a(b) “seems to continuously link the immunity of international organizations to that of foreign governments” to “ensure ongoing parity between” IGOs and foreign governments. In reaching that decision, the Supreme Court rejected the IFC’s policy-based argument that the elimination of absolute immunity would expose IGOs to excessive liability in US courts. The Supreme Court observed that (i) IGOs could protect themselves by providing for absolute immunity in their charters, as the United Nations and the International Monetary Fund have done, and (ii) “the lending activity of at least some development banks” may not qualify as “commercial activity,” thus immunizing that activity from suit even under a restrictive theory of immunity.
The decision in Jam may open the door to more suits against international organizations, but is unlikely to drastically increase the success of such cases.
International organizations that are not protected by charter immunity provisions should expect to see an increase in the number of claims brought by foreign plaintiffs. Plaintiffs will presumably attempt to exploit the “commercial activity” exception in the FSIA. However, these claims will face significant hurdles. In Jam, the Supreme Court reaffirmed the narrowness of the commercial activity exception, as noted above. Still, the interpretation of that exception is evolving, and it will be interesting to see how the law develops, particularly in the context of development banks that make loans to governments as well as to private companies.