The US Supreme Court has ruled that international organisations that are based in the US are not protected from being subjected to legal action in the American courts system.
The case involved the International Finance Corp (IFC) which is part of the World Bank and is based in Washington. The IFC provides loans to fund various projects in developing countries. This case specifically focused on an action brought by the residents of a small village in India against the IFC, after it funded the construction of a coal-powered plant in their region. It was claimed that pollution caused from coal dust, ash, and water from the plant’s cooling system had destroyed or contaminated much of the surrounding air, land, and water.
The IFC argued, with the backing of decisions by the US Court of Appeals for the D.C. Circuit Court, that under the International Organizations Immunities Act (IOIA) of 1945, international organisations are completely immune from legal liability in the US. This legislation essentially facilitated agreements whereby certain important multi-lateral organisations, such as the United Nations and the International Monetary Fund, were granted broad immunity from lawsuits in the jurisdiction, the same immunity that is enjoyed by foreign governments.
In 1952, the Foreign Sovereign Immunities Act (FSIA) was introduced, which gives foreign sovereign governments immunity from legal action subject to several statutory exceptions including an exception for actions based on commercial activity. The IFC argued that the implementation of the FSAI contradicted the IOIA, claiming that such restrictive immunity defeats the purpose of granting such immunity in the first place.
The Supreme Court stated that these laws, and the agreements arising from them, provided merely limited protection to certain international institutions, the same level of immunity afforded to foreign governments. Such protection did not extend to the commercial activity of these institutions, such as that undertaken by the IFC, with the loaning of funds for development projects in poorer countries constituting such activity.
Chief Justice Roberts asserted that this immunity referred to such legislation no longer meant “virtually absolute immunity” and further stated that ‘‘it is true that under the rules applicable in 1945, the extent of immunity from suit was virtually absolute, while under the rules applicable today, it is more limited.’’
In a 7-1 majority ruling, the Supreme Court concluded that the IOIA grants international organisations the “same immunity” from legal action “as is enjoyed by foreign governments” at any given time. This meant that the FSIA governs the immunity of international organisations and therefore IFC is not absolutely immune from lawsuits.
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