A fishing community in India challenges the bank’s private-lending arm in the U.S. Supreme Court.
Originally published in The Nation.
THE U.S.SUPREME COURT SITS ABOUT 8,000 miles from Tragadi Bandar, the patch of India’s west coast where Budha Ismail Jam has spent most of the past two decades fishing for a living. Jam’s seasonal home, a single room with burlap walls and no electricity or running water, is beyond the Court’s usual reach.
Yet, on October 31, Chief Justice John Roberts will announce Jam’s name as the lead plaintiff in a lawsuit that could determine whether organizations like the World Bank Group’s International Finance Corporation (IFC) can be held responsible for harming the very people they’re supposed to be lifting from poverty.
Jam, who is about 60, belongs to the Wagher people, a Muslim-minority group in India that, for two centuries, has relied on the Gulf of Kutch for survival. Every summer, about 1,000 Wagher families migrate from their inland villages to a string of fishing grounds near the town of Mundra in Gujarat state. There, they erect temporary dwellings on the sand. The men harvest the fish, both from boats and on foot. The women dry the catch on long bamboo trellises, preparing it for sale across South Asia.
“We lived high-class,” Jam told me, reminiscing about the old days, when I visited Tragadi Bandar four years ago. “We worked from eight in the morning until 11 at night…. We did not mind if we didn’t get rest…. When we had fish, our whole day went by quickly.”
Then heavy industry began taking over the coastline. Among the behemoth newcomers was the coal-fired Tata Mundra Ultra Mega Power Project, which began operations in 2012 at the edge of Tragadi Bandar. Seven times the capacity of the average coal-fired plant in the United States, it was designed to help modernize a country where millions live without reliable electricity.
Backing the project was the International Finance Corporation, a self-described “sister organization” of the World Bank that provides private-sector loans and other financial services in the developing world. The IFC lent $450 million to a subsidiary of Tata Power for the $4 billion project.
The IFC says its aim is to “end extreme poverty and boost shared prosperity.” But on the Gulf of Kutch’s fishing grounds, the poverty has only worsened. According to Jam and his neighbors, Tata Mundra helped turn a fertile coastline into a sacrifice zone. They say that heated discharges from the plant’s cooling system have decimated fish stocks; that dredging has destroyed the mangroves that act as marine nurseries; that coal dust and fly ash have tainted the drying fish; and that their drinking water has been ruined by saltwater intrusion. “The joy has gone away,” said Jam, who catches a fraction of what he used to.
Tata Power, which did not respond to requests for an interview, has previously stated that it “tirelessly works” to minimize environmental impacts, and that the power plant “has not impacted any mangroves [or] biodiversity-rich creeks.”
The Waghers fear that, as the fish disappear, their own survival will be increasingly imperiled. “These people have poisoned the sea,” Jubedaben Manjaliya, a family matriarch, told me when I was working on an earlier article for the International Consortium of Investigative Journalists. The Waghers’ declining income, she said, meant begging fish merchants for loans to cover their expenses, driving the community into debt. “Otherwise,” she said, “we can’t feed our families.”
This wasn’t supposed to happen. The IFC says it holds its clients to rigorous environmental and social standards. But even before Tata Mundra opened, local fishworkers were feeling ignored. In 2011, their organization, Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for Fishworkers’ Rights), or MASS, lodged a complaint with the IFC’s independent ombudsman. That complaint, however, didn’t bring the relief they needed.
So they sued. In 2015, Jam and MASS became plaintiffs—along with two other fishworkers, a village government, and a farmer who says his crops have been harmed—in a lawsuit against the IFC. The complaint was prepared by the nonprofit EarthRights International and filed in US District Court for the District of Columbia, where the IFC is headquartered. The complaint noted that the IFC’s mission includes investing money “with the intent to ‘do no harm’ to people and the environment,” and that it is obligated to monitor the projects it finances. “The Tata Mundra Plant is thus a mission failure.”
The IFC, in its response, didn’t dispute the facts; it simply asked the court to throw out the case, saying it enjoyed “absolute immunity” from lawsuits.
The court agreed with the IFC and dismissed the case in 2016. The following year, a three-member panel of the US Court of Appeals for the District of Columbia Circuit upheld the lower court’s decision. The appellate judges acknowledged that the lawsuit “paints a dismal picture” of life on the Mundra coast and that “the IFC did not take any steps” to compel its client to protect local communities. But from a legal perspective, the appellate court ruled, Jam and his neighbors were “swimming upriver”: The DC Circuit had a “long-held precedent” that, under a 1945 law, international organizations can’t be sued.
That’s the question before the Supreme Court in October: whether an ambiguous World War II–era statute really intended to give organizations like the IFC and the World Bank a blanket protection from lawsuits.
Human-rights advocates are watching the case carefully. The World Bank Group has been linked for decades to humanitarian and environmental disasters. According to a 2015 report by the International Consortium of Investigative Journalists, over the previous decade World Bank–funded projects had physically or economically displaced 3.4 million people. Between 2009 and 2013, the consortium noted, World Bank Group lenders invested $50 billion in projects that had been “graded the highest risk for ‘irreversible or unprecedented’ social or environmental impacts.”
A ruling in favor of the Indian fishworkers could help other victims seek justice. In fact, there’s another set of plaintiffs—Honduran farmers or their widows—awaiting the Supreme Court’s decision in Jam v. IFC.
THE 1945 LAW IS CALLED THE International Organizations Immunities Act. It applies to “public” organizations like the World Bank and the IFC, which are composed of member countries, including the United States. Those groups, it says, “shall enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments.”
That last phrase is the tricky one: “enjoyed by foreign governments” when—in 1945? Or in 2018? “It’s actually about what the word ‘is’ is,” says Harold Hongju Koh, a professor of international law at Yale Law School and a former legal adviser to the State Department.
To understand why this matters, it helps to know that before World War II, international organizations were rare. One exception was the League of Nations, to which the United States didn’t belong. Then, in 1944, delegates from 44 countries gathered in New Hampshire for the Bretton Woods conference, which created the International Monetary Fund and the International Bank for Reconstruction and Development (now part of the World Bank). The United Nations was launched around the same time. “The idea among the great powers was, ‘We’re going to cooperate on an international level—economically, military, politically,’” says William Dodge, a law professor at the University of California, Davis.
The United States had no law governing these new organizations, and it needed one quickly. “I could imagine the State Department saying, ‘What do we do?’” Dodge continues. “What they proposed was, ‘We need a default rule’…and that was going to be ‘whatever [foreign] states are entitled to.’”
At the time, the United States generally (but not always) granted absolute immunity from lawsuits to the governments of foreign states. This policy, however, was evolving to match the rules of other countries, from Egypt to France to Peru. In 1952, the State Department issued a new edict: It would still grant immunity, but not for a foreign government’s commercial transactions. That exception was codified in a 1976 law called the Foreign Sovereign Immunities Act.
The IFC claims that Congress meant to give organizations like itself permanent absolute immunity—without a commercial exception that might exclude the Tata Mundra loan—because that was how the United States treated foreign governments 73 years ago. In other words, the IFC’s immunity should be frozen at 1940s levels.
Many legal scholars—including Koh and Dodge, who signed a brief supporting the plaintiffs—call this view preposterous. Congress, they say, never intended for international organizations to have more protection than foreign governments. “It’s a huge metaphysical question about whether the law is static or whether it evolves,” says Koh. “Obviously, it evolves…. The term ‘due process’ doesn’t mean what ‘due process’ meant when we were cutting off people’s hands.”
The IFC declined interview requests for this story. In court filings, it has argued that lifting absolute immunity “would potentially open a floodgate of lawsuits” from around the world. The fear of litigation, with its “devastating costs,” would hinder the IFC from doing its job, the organization claimed.
Dodge doesn’t buy the argument. “ExxonMobil has no immunity from suit,” he says. “And the floodgates haven’t opened against them. They might prefer to be sued less, but being subject to suit doesn’t keep them from running a very profitable business.”
On this issue, two US Circuit Courts have reached opposite conclusions. Twenty years ago, the DC Circuit ruled that Congress intended to freeze immunity at 1945 levels. (One judge in Jam v. IFC, Cornelia Pillard, called that decision “a wrong turn,” but said she was bound by precedent.) Then, in 2010, the Philadelphia-based Third Circuit concluded that the law was meant to evolve. With the circuits split, it’s up to the Supreme Court to break the tie.
THE IFC MAINTAINS THAT COMMUNITIES LIKE the Waghers, even without access to US courts, have an “alternative means of recourse”: the World Bank Group’s Compliance Advisor/Ombudsman, which deputy counsel Fady Zeidan calls a “flexible, settlement-oriented” mechanism. The CAO reports directly to the World Bank Group’s president and can both mediate disputes and investigate complaints. But it has no enforcement powers.
“CAO, at best, can say, ‘Yes, this is violated.’ So what?” says Joe Athialy, the executive director of the Centre for Financial Accountability, a New Delhi–based NGO that works closely with MASS. “If you don’t have the power to say what needs to be done as a course correction, then what’s the purpose?”
Still, to the Indian fishworkers, the CAO represented the best option in 2011, when they felt shut out of the planning process for the Tata Mundra plant. In an 18-page complaint, they asked the ombudsman to investigate what they called the plant’s “flawed development.”
The CAO’s findings, issued in 2013, were extensive and damning. The fishing families, “who represent a vulnerable group given their migrant traditions and status as a religious minority, were not adequately considered as the…risks and impacts of the project were considered,” the report said. Tata Power’s subsidiary failed to consult properly with the fishworkers on Tragadi Bandar and another seasonal settlement. There were “no baseline data” collected about the fishing communities. The IFC, which was supposed to monitor its client, “paid insufficient attention” to these shortcomings.
The CAO’s report also called the power plant’s environmental assessment inadequate. It chastised the IFC for failing to ensure that the plant wouldn’t discharge overheated wastewater back into the Gulf of Kutch.
“The CAO report reconfirmed all the concerns that the people raised,” Athialy says. “This was an opportunity for the [IFC] to show to the world that they mean business when it comes to compliance.”
Rather than admitting fault, the IFC disputed many of the CAO’s findings. “IFC does recognize that there have been some impacts on the fishing community,” it said, but added that Tata’s local subsidiary has “correctly addressed” the problems. Since then, according to a 2017 CAO monitoring report, the IFC has taken some corrective steps, including a socioeconomic study of the fishing grounds and the testing of ash residue for radioactivity and heavy metals. But those steps, the CAO continued, “are not sufficient”; fixing the fishworkers’ problems would require a “rapid, participatory and expressly remedial approach.”
Athialy says the IFC’s dilatory response “comes from the arrogance of immunity.” Knowing that it can’t be sued, the IFC has no incentive to hurry.
Advocates for vulnerable communities say the Wagher fishworkers’ experience with the CAO is hardly unique. In Peru, for example, repeated oil spills linked to Maple Energy, another IFC client, contaminated the waterways used by indigenous people in two Amazon communities, according to a 2010 CAO complaint. The ombudsman tried to broker a dialogue between residents and Maple Energy. When that broke down, the CAO declined to do a full audit, asserting that it would “yield limited information.” Instead, the CAO closed the case.
These stories illustrating the CAO’s limits come from around the world, advocates and researchers say: from Kazakhstan, for example, where children living near an IFC-financed oil-and-gas field reportedly suffered from seizures and convulsions; and from Central America, where the IFC continued to invest in sugar companies even as Nicaraguan workers were dying of chronic kidney disease.
Immunity was never supposed to protect the IFC from Kazakh schoolchildren, indigenous Peruvians, or Indian fishworkers, but rather from lawsuits by governments, says Daniel Bradlow, a professor of international law at South Africa’s University of Pretoria who has consulted for the World Bank. Over time, Bradlow wrote in a brief for the Jam plaintiffs, the IFC’s claim of immunity “has evolved from a shield that protects the IFC from interference by its member states into a sword.”
WHEN I REACHED JAM BY PHONE in early September, he told me that the conditions on Tragadi Bandar had deteriorated since my 2014 visit. “The catch has gone down drastically,” he said. He still felt optimistic, though, that the fish would return if the US courts ordered pollution reductions at the Tata Mundra plant.
That’s one of the demands by the Indian plaintiffs: that the IFC use its leverage to make sure that the power plant operates more cleanly and that the existing damage is remediated. Jam and his neighbors have also asked for a medical monitoring system to detect environmental illnesses and financial compensation for their lost livelihoods.
Even if they prevail at the Supreme Court, however, that decision will only address their right to sue. The lawsuit will then have to be litigated on its merits. But a favorable ruling for Jam on the immunity question could make the IFC more vigilant about protecting impoverished communities affected by its financial decisions. And it could give those communities another recourse.
EarthRights International, which filed the Jam case, is waiting to try a second federal case against the IFC. It involves the Honduran palm-oil producer Dinant, an IFC client that critics have linked to the intimidation, beatings, and killings of farmers in a land dispute. (Dinant has denied responsibility for the violence.) A CAO investigation into the case found that IFC staffers were encouraged not to delve too deeply into land conflicts, “lest you open a ‘Pandora’s Box.’”
“The IFC was literally funding murder,” EarthRights attorney Richard Herz says of the Honduras case. In its response to the lawsuit, the IFC again claimed immunity. The case, filed in 2017, is on hold pending the Supreme Court’s Jam ruling.
Athialy considers the case so important that he’s thinking of flying from India to listen to the arguments. “If the financiers are not held accountable, if the affected communities are not ensured of justice, we are bound to see many more Tata Mundras,” he says. “The fight is not just against one project. It’s about people’s rights over natural resources. It’s about making the violator pay. It’s about asking the financiers to invest responsibly.”