A D.C. Circuit judge on Monday said U.S. Supreme Court precedent obliges him not to hold a private-sector lending arm of the World Bank responsible for environmental damage caused by a coal-fired power plant, which a proposed class of fishermen and others in Gujarat, India, alleged it has negligently funded. U.S. Circuit Judge David S. Tatel asserted this view as a three-judge panel examined the Indian nationals’ bid to undo a lower court order from August that found the Washington, D.C.-based International Finance Corp. was immune from being sued. The plaintiffs allege that they’ve continued to experience devastating environmental damage from the Tata Mundra Power Plant, including the killing of marine life, because the construction and operation of the project did not comply with the environmental standards initially set out. The complaint dating back to April 2015 also alleged that the IFC, which helped finance the project with $450 million in loans, provided the funding that allowed it to go forward. It also claimed that the organization neglected its obligation to supervise the project and failed to comply with its own policies to protect the environment. The IFC is composed of 184 member countries, including the U.S., and was designed to encourage private enterprise in developing countries.
“It approved all of the design of this plant that harms the plaintiffs,” Richard Herz of Earth Rights International, an attorney for the Indian nationals, told the panel. “And it did so knowing the design it approved, and the plant going forward, would pollute the air, destroy the fisheries and … cause a series of other harms to plaintiffs’ communities.” But Judge Tatel, the most vocal jurist on the panel, repeatedly suggested that the IFC has immunity. Because the alleged injuries did not occur in the U.S., they do not fall under the Foreign Sovereign Immunities Act’s commercial activity exception, the judge said. Ignoring where the injuries actually occurred, Judge Tatel emphasized, would also conflict with the Supreme Court’s 2015 ruling in OBB Personenverkehr AG v. Sachs.
In that case, the high court said a California resident couldn’t sue Austria’s national railway, which has sovereign immunity under the FSIA, for personal injuries that ultimately necessitated the amputation of both her legs above the knee. Since her lawsuit was based on her injury rather than the ticket she purchased in the U.S., the case didn’t fall under the FSIA’s commercial activity exception, the court unanimously ruled. Judge Tatel said Monday that the appellate court must apply this same reasoning in the current dispute. “There’s nothing wrongful about IFC’s decision-making,” the judge said. “It just seems that this case is totally controlled by Sachs.” Still, Herz maintained that the organization cannot escape liability because its allegedly tortious conduct occurred in the U.S.
Senior Circuit Judge A. Raymond Randolph, who seemed skeptical of the plaintiffs’ argument, stated at one point that they cannot allege that the IFC is solely responsible and has final approval authority over the design of the coal power plant. The judge expressed this view after Herz acknowledged that the plaintiffs don’t have access to the loan agreements for the other lenders involved in the multibillion-dollar Indian project. But the attorney insisted that the IFC provided key funding and signed off on the project’s design, and that none of the other lenders would have provided funds without the organization’s involvement. Judge Tatel, unpersuaded by Herz’s argument, said he could not find any “material difference” between Sachs and the current case.
In Sachs, the California resident claimed, among other things, that the railway must face strict liability for its failure to warn her about the design defects in the train and platform when she bought her train ticket through a Massachusetts-based online travel agent. In their D.C. Circuit petition, the proposed class said the IFC failed to adequately supervise the power plant project, Judge Tatel explained. Sidley Austin LLP partner Jeffrey Green, an attorney for the IFC, reiterated Judge Tatel’s reasoning and said the current case is controlled by Sachs because, as the current complaint also itself alleged, the construction and operation of the coal power plant is the source of plaintiffs’ injuries. U.S. Circuit Judge Judith Rogers asked the attorney whether there’s any avenue “to get at the defendant’s action” even if the evidence shows the IFC offered the loan despite knowing that the project’s design would be environmentally disastrous. Green replied in part that because the IFC is not a “private actor,” it is immune from foreign liability claims. He added that the project’s design was significantly modified by Coastal Gujarat after the IFC reviewed the proposal and handed over the loan.
Monday marked the second time the appellate court heard the case. The Supreme Court revived the dispute in February 2019, concluding that international organizations do not enjoy broader immunity than foreign governments. In a 7-1 decision, the high court reversed and remanded a D.C. Circuit order, which upheld the district court’s initial dismissal and held that international organizations have virtually absolute immunity to U.S. lawsuits under the International Organizations Immunities Act. The justices said the IFC, like foreign governments, has immunity equivalent to what is offered to foreign sovereigns under the FSIA. Justice Brett Kavanaugh took no part in that decision, having considered the case while he was on the D.C. Circuit.
The plaintiffs are represented by Richard Herz, Jonathan Kaufman, Marco Simons and Michelle Harrison of Earth Rights International. IFC is represented by Jeffrey Green and Joshua W. Moore of Sidley Austin LLP, and Dana Foster and Maxwell J. Kalmann of White & Case LLP. The case is Jam et al. v. International Finance Corp., case number 20-7092, in the U.S. Court of Appeals for the D.C. Circuit. –Additional reporting by Jimmy Hoover. Editing by Rich Mills.