The International Finance Corporation (IFC) might sound like an ordinary private business, but it’s not. It’s an international organization that’s part of the World Bank. The IFC has all of the standard accoutrements of an international organization. It was created by treaty; it has member countries, 184 of them; and it has grand ambitions to improve the world “by encouraging the growth of productive private enterprise in member countries.”

The IFC, like other international organizations, is also very difficult to sue in U.S. courts because it has comprehensive immunities from suit. But that may change: last week, the Supreme Court granted certiorari in a case, Jam v. IFC, that may pare back those immunities. The implications would be significant—not just for the IFC, but for international organizations across the board.

The statutory question

The plaintiffs in Jam include farmers and fishermen whose lives and livelihoods were harmed by the construction of the coal-fired Tata Mundra Power Plant in Gujarat, India. According to their complaint, salt contaminated the local groundwater during construction, rendering the water useless for irrigation. The plant’s cooling system discharges thermal pollution into the sea, killing off marine life. And the open-air conveyor system that transports coal to feed the plant disperses coal dust and ash into the air along its route.

Although the power plant is the immediate source of the problem, the plaintiffs sued the IFC in federal district court in Washington, D.C, where the IFC is headquartered. The IFC had loaned $450 million for the construction and operation of the plant—roughly 10 percent of its total cost. Consistent with IFC policy, the loan agreement had incorporated an Environmental and Social Action Plan that should have prevented the harms the plaintiffs endured. But the IFC didn’t take any steps to ensure compliance with that plan. Indeed, the IFC’s own ombudsperson criticized the deficient supervision of the project. So the plaintiffs filed a suit against the IFC for negligence and other torts.

The question raised by the case is whether the IFC’s immunities preclude the lawsuit from going forward. In the United States, international organizations’ immunities stem from two sources: treaties and the International Organizations Immunities Act (IOIA), a statute enacted in 1945. Once the president designates particular individual organizations by executive order, they enjoy the immunities set out in the IOIA. The key text on immunity provides:

International organizations . . . shall enjoy the same immunity from suit and every form of judicial process 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.

Thus, the IOIA itself doesn’t directly specify the scope of organizations’ immunities. It instead cross-references the immunities of foreign governments. But that presents a puzzle. Do international organizations get the immunity that foreign states had in 1945 when the IOIA was adopted? Or, instead, do they enjoy the immunity that foreign states receive today, which is more limited and governed by the 1976 Foreign Sovereign Immunities Act (FSIA)?

The D.C. Circuit has taken the former position; the Third Circuit has taken the latter, creating a genuine circuit split. The difference matters: in 1945 foreign states generally had absolute immunity from suit. Under the FSIA, however, foreign states are (as a rough cut) immune for their sovereign or governmental acts, but not immune with respect to their commercial activities.

Set aside for now whether the D.C. Circuit or the Third Circuit has the better claim on the merits. In this post, I’d like to get a handle on what’s at stake in the lawsuit. As a first cut, deciding that the IOIA measures immunity with reference to the FSIA could create real problems for international organizations operating in the United States. But no matter how the case is resolved, it’s unlikely to spur international organizations to make the kinds of changes that are genuinely needed—developing robust alternative mechanisms for resolving claims by individuals who are adversely affected by what international organizations do.

When do international organizations engage in commercial activities?

If the Supreme Court interprets the IOIA to confer absolute immunity, then the suit against the IFC can proceed only if the IFC has waived its immunity. If the Supreme Court goes the other way, then determining whether the IFC (and other international organizations) can be sued becomes quite complicated. The answer turns in part on the question of what counts as a commercial activity of an international organization. In a throwaway line in its opinion in Jam, the D.C. Circuit wrote that if the commercial activities exception applied to the IFC, “the organization would never retain immunity since its operations are solely ‘commercial,’ i.e., the IFC does not undertake any ‘sovereign’ activities.” But it’s not so clear that the IFC’s immunity could be wiped away so quickly.

The Supreme Court has said that to determine whether an act is commercial for purposes of the FSIA, the key question is “whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in ‘trade or traffic or commerce.’” At first blush, the IFC’s work indeed looks commercial—its main activity is lending to private actors, and a slew of banks in the private sector do exactly that.

But a lot depends on the level of generality at which a particular activity is described. Repaying a bank loan sounds like a “garden variety” commercial act, but the Second Circuit has held that repaying a loan from the International Monetary Fund is a sovereign act because of the particular way that the IMF and its loans are structured. Only states can be members of the IMF and borrow from it; the IMF’s lending is “part of a larger regulatory enterprise intended to preserve stability in the international monetary system and foster orderly economic growth.” If repaying an IMF loan isn’t a commercial activity, neither is making such a loan. The analogy to the IFC’s activities is obvious.

Likewise, hiring an employee might initially appear to be an obviously commercial act, but the executive branch has long taken the position that employing international civil servants is not a commercial activity, and a number of court decisions have adopted this reasoning. The bottom line is that there’s a lot of room to debate what’s commercial and what’s sovereign—and a conclusion that international organizations lack immunity for their commercial acts is only an interim step in the analysis.

What about treaties?

Even if the IOIA does not confer immunity for commercial activities, an international organization’s treaty might. But figuring out the effect that a treat might have on immunities is more complicated than it might at first appear. Even apart from interpreting the treaty language about immunity, courts will have to decide whether that language is self-executing; whether the treaty language overrides conflicting statutory provisions pursuant to the last-in-time rule; and whether the treaty should influence the interpretation of the IOIA pursuant to the Charming Betsy rule, which instructs courts to interpret statutes to avoid conflicts with international law.

It’s difficult to generalize about how this analysis would come out because the content of treaty provisions that address the immunities of international organizations vary considerably. The treaty that governs the immunity of the United Nations is quite sweeping: It provides that the United Nations “shall enjoy immunity from every form of legal process except insofar as in any particular case it has expressly waived its immunity.” The Charter of the Organization of American States, like that of a number of other organizations, is somewhat narrower. It says that each organization “shall enjoy in the territory of each Member such legal capacity, privileges, and immunities as are necessary for the exercise of its functions and the accomplishment of its purposes,” but it doesn’t specify exactly how much immunity is “necessary.” Still other charters are silent on immunity, like the one governing World Organization for Animal Health.

The upshot is that some organizations, like the United Nations, can make a treaty-based claim that their immunity remains absolute regardless of how the IOIA is interpreted. Other organizations can’t. An adverse decision from the Supreme Court will be especially consequential for this latter group.

Consider again the World Organization for Animal Health, which is known by its historical French acronym OIE. Its work focuses on preventing animal diseases—and thereby facilitating international trade in animals and animal products. President Barack Obama designated OIE pursuant to the IOIA right at the end of his term. Six months later, the OIE announced that it would establish a liaison office in College Station, Texas. The extension of immunity and the establishment of the office appear closely connected. Indeed, the OIE’s press release regarding the Texas office opens with a reference to the executive order in its very first sentence.

If the Supreme Court interprets the IOIA as conferring limited immunities, what will the OIE do? At a minimum, it will face considerable legal uncertainty. OIE might find itself on the receiving end of a lawsuit by a disgruntled employee, but unsure whether courts will find the commercial-activities exception to apply or not. The OIE might maintain the office in College Station, that risk notwithstanding. It could try to bolster its immunity through a new international agreement or a new statutory provision (good luck with that). Or it could decide that the legal risk is too great and shut down the office.

Alternative mechanisms for resolving disputes

Stepping back, there are two main rationales for providing immunity to international organizations. First, immunity shields the organization from member states that seek to undermine or influence the organization by subjecting it or its officials to lawsuits. This risk is real. The International Court of Justice, for example, affirmed the immunity of a UN Special Rapporteur on judicial independence after that rapporteur was sued for libel by individuals and companies who were incensed by comments the rapporteur made to the press. Second, immunity from employment-related lawsuits helps assure that international organizations can be genuinely international—and can develop employment policies that are suitable for an international workforce.

Although there are good reasons for according immunity to international organizations, that immunity often comes at a heavy price: it can leave individuals who are harmed by an international organization without recourse. The plaintiffs in the case against the IFC are alleging serious harm. Another recent high-profile example involves the United Nations. UN peacekeepers in Haiti unintentionally introduced cholera to the country in the wake of the 2010 earthquake. The cholera epidemic there has killed more than 9,000 individuals and sickened hundreds of thousands. The United Nations denied a claim for compensation and an apology that the victims submitted directly to the organization, and successfully invoked immunity to shut down a lawsuit filed in U.S. courts. In December 2016, then-UN Secretary-General Ban Ki-moon issued a long-delayed apology and announced the establishment of a new $400 million program to benefit Haitian victims. But a year and a half later, the program has not delivered much, largely because UN member states have supplied only $7.5 million, a tiny fraction of what Ban had promised.

The plaintiffs in the case against the IFC do have some recourse. In 1999, IFC established an Office of the Compliance Officer/Ombudsman (CAO) and empowered it to hear complaints by people affected by projects financed by IFC “in a manner that is fair, constructive, and objective.” In 2011, the Association for the Struggle for Fishworkers’ Rights filed a complaint with the CAO about the Tata Mundra plant, arguing that that the IFC had violated its own economic and social policies in connection with that project. CAO proceeded with a formal investigation. After CAO produced reports that substantiated a number of the Association’s claims, CAO produced an Action Plan that contemplated a number of environmental, economic, and health studies, and indicated that “appropriate mitigation measures will be developed” in consultation with certain experts if those studies indicated an “adverse impact.” Since then, CAO has continued to monitor implementation of this action plan and subsequent developments. CAO’s most recent monitoring report, dated February 2017, described progress on completing some of these studies, but emphasized “an outstanding need for a rapid, participatory and expressly remedial approach to assessing and addressing project impacts raised by the complainants.” The case remains open, and CAO is continuing to monitor IFC’s response to its findings.

There are other examples of such alternative mechanisms that allow individuals who have been harmed by international organizations to challenge at least certain kinds of actions by the organizations. The UN Security Council created an Office of the Ombudsperson that allows individuals and entities subject to the ISIL and al-Qaeda sanctions regime to challenge their listings. The Human Rights Advisory Panel was established to hear human rights claims against the UN Administration in Kosovo.

One solution might be to make the immunity of international organizations contingent on the development of such mechanisms. (The European Court of Human Rights did that in Waite and Kennedy v. Germany.) But crafting an effective rule is very difficult. If any alternative mechanism suffices to assure immunity from suit, international organizations might be tempted to develop minimalist procedures that offer nothing meaningful to injured individuals. If, on the other hand, national courts recognized immunity only when they deem the alternative mechanism adequate, there’s a risk of recreating the problems that justify immunity in the first place: Courts might issue decisions that evaluate alternatives based on parochial standards, yielding inconsistent decisions from one jurisdiction to the next, and potentially subjecting organizations to undue influence of individual member states outside of the organization’s formal governance mechanisms.

Suppose the IFC’s immunity from suits like the current one depended on the availability of a good-enough alternative mechanism. Would—and should—the CAO qualify? Reasonable minds could disagree. The plaintiffs presumably aren’t satisfied by the CAO process. At the same time, the oversight process can’t be dismissed as pure window dressing. The CAO seems to be taking the Association’s complaints seriously, and appears willing to publicly criticize the IFC and to maintain pressure over time.

Returning to the statutory question in Jam v. IFC, then, there are two take-away points. First, interpreting the IOIA to confer immunities only for governmental acts would create considerable legal uncertainty for international organizations across the board. Second, neither interpretation of the IOIA that’s on offer would do much to systematically advance the development of serious alternative dispute settlement mechanisms. The presence or absence of such mechanisms is irrelevant if the IOIA confers absolute immunity—and is likewise irrelevant if the IOIA confers immunity only for sovereign or governmental acts. The push to develop—and to improve—such alternative mechanisms will have to come from elsewhere.

Image: Getty