Jam v. International Finance Corp

Issues 

Does the International Organizations Immunities Act, which gives international organizations the “same immunity” granted to foreign governments, confer the immunity that foreign sovereigns enjoyed when the Act was passed in 1945? Or does the immunity evolve as the immunity given to foreign sovereigns evolves?

Oral argument: 
October 31, 2018

The Supreme Court will determine whether the International Organizations Immunities Act (“IOIA”) confers immunity on the commercial activities of international organizations now that foreign governments are no longer afforded that immunity under the Foreign Sovereign Immunities Act (“FSIA”). The D.C. Circuit Court of Appeals held, and the International Finance Corporation (“IFC”) now argues, that the IOIA entitles international organizations to virtually absolute immunity and does not incorporate subsequent developments in foreign immunity law that have restricted immunity for commercial acts. However, a group of fishermen and farmers who were harmed by an IFC funded power plant in India counter that the IOIA is meant to track the development of sovereign immunity law, as codified in the FSIA, which does not currently extend to commercial acts. The Court’s decision in this case will have implications for jurisdiction over international organizations, international and domestic litigation, and international commercial activity.

Questions as Framed for the Court by the Parties 

Whether the International Organizations Immunities Act—which affords international organizations the “same immunity” from suit that foreign governments have, 22 U.S.C. § 288a(b)—confers the same immunity on such organizations as foreign governments have under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-11.

Facts 

The International Finance Corporation (“IFC”) is an international organization (“IO”) purposed with promoting private enterprise in its 184 member countries, mainly by investing in private projects where insufficient capital is available. Jam v. Int’l Fin. Corp., 172 F. Supp. 3d 104, 106 (D.D.C. 2016). When investing in these projects, the IFC’s internal policies require an assessment of environmental and social risks and the mitigation of potential risks. Id. Recently, the IFC decided to invest in the development of the Tata Mundra Power Plant in India. Id. Pursuant to their internal policies, the IFC put in place environmental and social covenants requiring the power plant to mitigate its negative impact on the area and retained the right to remove financing should the power plant fail in its commitments. Id.

Fisherman and farmers who work near the plant, including Budha Ismail Jam, allege that the operation of the power plant devastated their way of life by polluting the air and groundwater, altering the local marine ecosystem, and displacing local fishermen and farmers. Id. at 107. They argue that the IFC should have enforced the loan agreement and stopped funding the power plant and that by failing to do so these social and environmental harms have resulted. Id. The people of the community blame the IFC for the resulting harm because they would have been avoided the IFC had followed its own policies. Id.

Jam first filed a complaint with the IFC’s internal accountability mechanism for environmental and social concerns, the Compliance Advisor Ombudsman (“CAO”). Id. After an investigation, the CAO concluded that the IFC had violated its internal policies when it failed to adequately assess environmental and social dangers the community would be exposed to, which was compounded by its failure to address compliance issues during the project. Id. The CAO, however, lacks an enforcement mechanism to compel the IFC to make reparations. Id.

Jam then sued the IFC in the D.C. District Court, claiming that the IFC was negligent in failing to enforce the loan agreement, making it responsible for damaging the health of the community, trespassing on the community’s land, and breaching its contract. Id. at 108. In response, the IFC argued that the federal district court did not have jurisdiction to hear the claim under the International Organizations Immunities Act (“IOIA”), which granted international organizations the same sovereign immunity accorded to foreign nations. Id. Jam argued that the Foreign Sovereign Immunities Act (“FSIA”) had restricted foreign sovereign immunity by allowing individuals to sue sovereigns for their commercial activities and that the IO’s immunity is similarly limited. Id. at 112. The district court rejected Jam’s argument and followed Atkinson v. Inter-American Development Bank, in which the D.C. Circuit held that the IOIA granted “virtually absolute immunity” as it was understood in 1945 and did not evolve as foreign sovereign immunity evolved. Id. The court also held that, under these facts and the prevailing case law, the IFC could not have contractually waived its immunity. Id. at 109–11.

Jam appealed to the D.C. Circuit Court of Appeals. Jam v. Int’l Fin. Corp., 860 F.3d 703 (D.C. Cir. 2017). The Court of Appeals dismissed the case, holding that it did not have jurisdiction to hear the case under the 1945 understanding of the IOIA. Id. The Court of Appeals refused to overturn Atkinson because it would have required an en banc decision. Id. at 706. Furthermore, though Jam argued that in Republic of Austria v. Altman the Supreme Court, in dicta, had undermined the idea that foreign sovereign immunity was absolute, the Court of Appeals recognized that they had since reaffirmed their holding in Atkinson. Id.

The United States Supreme Court granted Jam’s petition for writ of certiorari on May 21, 2018.

Analysis 

THE “SAME IMMUNITY” PROVISION OF THE IOIA

Jam argues that under the text of Section 288a of the IOIA, international organizations receive the “same immunity . . . as is enjoyed by foreign governments.” Brief for Petitioners, Budha Ismail Jam, et al. at 17. And according to Jam, the FSIA, which later codified the law of foreign sovereign immunity in 1976, does not provide immunity to foreign governments for their commercial dealings. Id. at 9, 17. Jam then argues that courts “must enforce plain and unambiguous statutory language according to its terms.” Id. at 17. Therefore, according to Jam, the only plausible interpretation of the IOIA is that the statute does not extend immunity for commercial actions to international organizations. Id. Jam claims that this conclusion is supported by a canon of statutory construction under which statutes that refer to a general area of law should be construed to incorporate subsequent developments in the law. Id. As such, Jam contends that it does not matter that the commercial activities exception did not exist when the IOIA was passed; the IOIA should now be read to incorporate the exception as per the evolved doctrine enshrined in the FSIA. Id. at 19–20.

Jam argues that the term “same” in the “same immunity” provision of the IOIA buttresses the notion that the IOIA was intended to continually track the law of foreign sovereign immunity. Id. at 21. Jam contends that it is a recognized practice to interpret statutes that treat one thing “the same as” another as if Congress intended to maintain that similarity in the future. Id. at 21–22. Additionally, Jam argues that the IOIA is written in the present tense, while the Supreme Court has often looked to the form of verb tense used in a statute to discern the statute’s intended temporal reach. Id. at 23. According to Jam, the Dictionary Act confirms that with respect to Acts of Congress, “words used in the present tense include the future as well as the present.” Id. at 24. Jam contends that Congress could have, among other things, phrased the statute in the past-tense if it did not want to incorporate future changes in sovereign immunity law. Id. at 24–26. That Congress exercised none of these options demonstrates their intent that the IOIA incorporate current sovereign immunity law, argues Jam. Id. at 26.

The IFC counters that the IOIA was enacted to bring the United States’ foreign sovereign immunity law into line with that of the U.N. and the international community, and so the “same immunity” language was understood by the Supreme Court and the State Department to refer to a common law standard which entailed virtually absolute immunity, including immunity for commercial acts. Brief for Respondent, International Finance Corporation at 18–19, 25. The IFC asserts that, as the Supreme Court has consistently held, a statute that codifies common law standards is construed to adopt the relevant common law as it existed at the time the statute was enacted. Id. at 25–26. Therefore, argues the IFC, the IOIA should be construed as affording international organizations the same level of virtually absolute immunity. Id. at 25. The IFC also claims that Jam’s invocation of the reference canon is misplaced because the canon is only applicable when a statute specifically refers to another act and not a general area of law. Id. at 30.

The IFC further argues that the use of the word “same” does not indicate whether the quality of “sameness” should be evaluated with respect to the time the IOIA was enacted or to the time the IOIA is applied. Id. at 28. The IFC contends that the present-tense verbs used in the IOIA also fail to indicate that the statute is meant to incorporate current sovereign immunity law. Id. at 28–29. Again, the IFC claims that this use of the present tense could refer to either the time of enactment or the time of application, and that the Supreme Court has repeatedly held that the context of the language in a statute may demonstrate that the use of present-tense verbs refers to a time prior to the time of the statute’s application. Id. at 29.

INTERPRETING THE STRUCTURE AND PURPOSE OF THE IOIA

Jam argues that comparing the structure of certain parts of the IOIA, namely Section 288a, to other parts of the act also supports the interpretation that the IOIA was intended to track current law. Brief for Petitioners at 26–27. Jam asserts that while Section 288a references foreign sovereign immunity law in the “same immunity” provision, other provisions of the statute fail to refer to other bodies of law, and instead clearly establish absolute immunity. Id. at 26. According to Jam, this discrepancy demonstrates that Section 288a was not intended to establish absolute immunity for international organizations. Id. at 27. Jam argues that when Congress expresses certain language in one part of a statute but excludes it from another part of that same statute, it is presumed that Congress acted “intentionally and purposely in the disparate inclusion or exclusion.” Id. Jam further contends that while Section 288a makes no distinction between foreign sovereigns and international organizations, other sections of the statute specifically distinguish the two groups, reflecting Congress’ intent that foreign governments and international organizations are “equivalent” with respect to immunity under the IOIA but not for other purposes. Id. at 28–29.

Moreover, Jam asserts that Congress’ core purpose for passing the IOIA was to provide “privileges and immunities of a governmental nature” to international organizations. Id. at 32. Jam concludes that Congress’ underlying objective in doing so was to prevent states from dodging legal accountability by using international organizations as intermediaries. Id. Therefore, Jam argues, it would contravene Congress’ purpose in enacting the IOIA to read international organizations as having been granted different immunities than those currently conferred upon sovereign governments. Id. at 32–33.

The IFC responds by asserting that Section 288a contains a clause stating that international organizations “may expressly waive their immunity for the purposes of any proceedings or by the terms of any contract,” a power which is already established as part of the body of sovereign immunity law. Brief for Respondent at 31. According to the IFC, if Section 288a was intended to incorporate the current body of sovereign immunity law it would be superfluous to include this waiver power because it would apply automatically under the commercial activities exception. Id. Furthermore, the IFC indicates that Section 288a(c) contains a prohibition on all compelled discovery, which is at odds with the notion that Congress had conceived of international organizations eventually becoming subject to a wide range of commercial lawsuits. Id. at 33.

The IFC further contends that Congress specifically enacted the IOIA to enable the US to fulfill commitments related to its membership in international organizations and to “facilitate the functioning of international organizations in this country,” which Congress recognized are bases that are distinct from the bases justifying immunity for sovereign governments. Id. at 21–23, 34. The IFC argues that because the immunity afforded to international organizations under many of the treaties that the US was a party to was virtually absolute, Congress’ purpose in this regard could only be effectuated with a domestic rule of virtually absolute immunity for international organizations. Id. at 35.

APPLYING 1945 SOVEREIGN IMMUNITY LAW AND THE RESTRICTIVE THEORY

Jam asserts that even if the Court of Appeals was correct in determining that the IOIA affords international organizations the same immunity afforded to foreign governments in 1945, that it still has jurisdiction over the IFC. Brief for Petitioners at 37. Jam contends that by the time the IOIA was enacted, the law governing sovereign immunity was a rule of deference to the Executive Branch. Id. at 38–39. Jam argues that since the issuance of the State Department’s Tate Letter in 1952, the policy of the Executive Branch regarding sovereign immunity has been a “restrictive theory” which excludes immunity for private acts such as commercial activities. Id. at 40. Jam claims that applying the rule of deference that existed in 1945 would dictate that international organizations do not receive immunity for commercial acts under the IOIA. Id.

According to Jam, the Court of Appeals was incorrect in its view that applying this rule of deference would mandate that courts defer specifically to the State Department’s view of sovereign immunity as of 1945. Id. at 41. Jam argues that requiring courts to determine what the State Department would have decided about a modern claim of immunity made by an international organization would be unworkable and thus could not have been intended by Congress. Id. at 42–43. More importantly, Jam asserts that the Supreme Court has held that when applying this rule of deference, courts are required to defer to the most recent declaration made by any political branch, which in this case is Congress’ declaration with the FSIA. Id. at 42.

The IFC contends that the Tate Letter fails to mention international organizations at all, while the reasons it gives for narrowing the scope of immunity, comity and reciprocity, are relevant to sovereign governments but not international organizations. Brief for Respondent at 24. Furthermore, the IFC argues that there is no evidence that the Executive Branch intended to narrow the scope of immunity for international organizations by shifting to the restrictive theory. Id. The IFC claims that since the issuing of the Tate Letter, the Executive Branch has acted in ways that confirm the view that the IOIA has continued to provide virtually absolute immunity since 1945, such as the Executive Branch’s treatment of the U.N. and its treatment of several international organizations through the U.N. Id. at 44–46.

The IFC acknowledges that Congress passed the FSIA to codify the restrictive theory, but asserts that the FSIA does not change the IOIA’s grant of virtually absolute immunity, as per 1945’s common law standards. Id. at 39–40. The IFC indicates that the terms of the FSIA state that the act only applies to “foreign states,” while international organizations are only referred to a single time in the text of the FSIA. Id. at 41. The IFC argues that the House Report confirms that the FSIA did not alter the immunity enshrined in the IOIA because it says that the reference to international organizations made in the FSIA “is not intended to restrict any immunity accorded to such international organizations under any other law or international agreement.” Id. at 42.

Discussion 

EXPANDING JURISDICTION OVER INTERNATIONAL ORGANIZATIONS

Bipartisan Members of Congress, in favor of Jam, argue that preserving immunity for the commercial activities of international organizations will make it too easy for foreign states to avoid legal accountability for their commercial activities if they merely act through international organizations. Brief of Amici Curiae Bipartisan Members of Congress, in Support of Petitioner at 16–17. Furthermore, Professors of International Organization and International Law claim that allowing international organizations to escape liability will create an unfairly asymmetrical system in which the international organizations are immune while the parties they contract with are not similarly protected. Brief of Amici Curiae Professors of International Organization and International Law, in Support of Petitioner at 29. The Center for International Environmental Law (“CIEL”) contends that if the Court of Appeals is affirmed, international organizations will have little incentive to ensure they provide effective internal accountability mechanisms because there will be no available impartial forum where complainants can get relief, whereas withdrawing immunity would open up the courts to grievances. Brief of Amici Curiae Center for International Environmental Law (“CIEL”) et al., in Support of Petitioner at 21, 30. Moreover, CIEL asserts that refusing to grant immunity could inspire international organizations to strengthen their internal accountability mechanisms as a way to avoid courtroom litigation and could lead to more effective avenues for citizens to pursue remedies. Id. at 29.

IFC Member Countries and the Multilateral Investment Guarantee Agency (“MIGA”), in favor of the IFC, argue that granting jurisdiction over international organizations will frustrate the members of the IFC, and other international organizations hosted in the United States, who did not agree to be hosted in a country where they were open to suit. Brief of Amici Curiae Member Countries and the Multilateral Investment Guarantee Agency (“MIGA”), in Support of Respondent at 12. Furthermore, MIGA argues that the member countries that contribute funds to these international organizations will not want to continue contributing if their money will be spent on lawsuits rather than development opportunities. Id. at 18. The International Bank for Reconstruction and Development agrees, and argues that if there is no immunity, international organizations will need to account for significantly greater transaction costs for legal defense and will need to consider potential litigation costs when making investment decisions. Brief of Amicus Curiae International Bank for Reconstruction and Development, in Support of Respondents at 23. International Law Experts are also concerned that international organizations will not be able to fulfill the purposes for which member states created them because opening international organizations to domestic lawsuits will allow individual members to exert too much influence over the group, compromising the international organization’s independence and ability to make impartial decisions. Brief of Amici Curiae International Law Experts, in Support of Respondents at 8. The Former Secretaries of State and Secretaries of the Treasury also argue that reversing this decision would restrict the performance of international organizations, because they will be focused on addressing litigation rather than performing their missions. Brief of Amici Curiae Former Secretaries of State and Secretaries of the Treasury, in Support of Respondents at 7.

OPENING THE FLOODGATE FOR LITIGATION

Professors of International Organization and International Law, in support of Jam, argue that revoking immunity for commercial activities will not subject U.S. courts to massive amounts of new litigation because existing procedural rules in the U.S. will prevent lawsuits without a genuine connection to the forum. Brief of Professors of International Organization and International Law at 31. The United States asserts that the courts will not experience a flood of litigation because the FSIA limits jurisdiction over commercial activities to those that take place in the United States or substantially affect the United States. Brief of Amicus Curiae United States, in Support of Petitioner at 33. CIEL argues that it is unaware of any empirical support for the assertion that reversing this case would open up a floodgate of litigation. Brief of CIEL at 25. Furthermore, CIEL argues that even under a more restrictive reading of the IOIA’s immunity grant, law suits would be quite rare. Id.

The International Bank for Reconstruction and Development (“IBRD”), in support of the IFC, argues that if international organizations do not receive immunity for their commercial activities,  there will be a flood of litigation which the restrictive provisions of the IOIA will not contain because they will only inspire plaintiffs’ counsel to create new, enterprising arguments as to why the actions fall within the FSIA’s jurisdictional allowances. Brief of International Bank for Reconstruction and Development at 15. The IBRD also argues that revoking immunity will create more litigation by incentivizing plaintiffs to sue the international organization in the United States when they are unable to sue the foreign company that harmed them. Id. at 16. Furthermore, the IBRD argues that other potential jurisdictional limitations are insufficient protections because international organizations will still have to spend money raising these protections and defending themselves against litigation in the U.S. Id. at 18.

Edited by 

Additional Resources 

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