Jam v. International Finance Corporation, to be heard by the U.S. Supreme Court on Wednesday, brings together some strange bedfellows. It makes one wonder how the Trump administration ended up on the side of some professors seeking to get the U. S. courts involved in international environmental regulation. The case involves Indian fishermen’s complaints of environmental harm from a coal-fired power plant in Gujarat, India, which was built in part with a $450 million loan from the International Finance Corporation, part of the World Bank Group.
The fishermen-petitioners initially lodged a complaint with the IFC’s Compliance Advisory Ombudsman, which offers a platform for communities around IFC-financed projects to voice their complaints. The fishermen refused dispute resolution, and the ombudsman offered compliance advice as to how the IFC might better comply with its own, voluntary standards. The fishermen instead turned to the U.S. courts and filed suit against the IFC—but not the developer/builder/operator or its parent, since the Supreme Court recently held that foreign corporations cannot be sued under the Alien Torts Statute. They sought damages and injunctive relief “directing the IFC to . . . exercise all . . . leverage practicable” to induce the developer/builder/operator and its parent to alter the plant design and “ensure” that operations are conducted in a manner satisfactory to them.
The IFC, established in 1956 by the World Bank Group with major funding by the United States, encourages development through the private sector. One-hundred and eighty-four countries are members. Its Articles of Agreement provide immunity from regulation and other actions by its member governments that would interfere with its functions. Furthermore, as an international organization of which the United States is a member pursuant to a treaty or act of Congress, it has been designated an international organization under the U. S. International Organizations Act, and “enjoy[s] the same immunity from . . . judicial process as is enjoyed by foreign governments”—except when it waives such immunity. Under the Act, the President of the United States may, “in the light of the functions performed by [an] . . . international organization,” limit or withdraw completely that immunity for an international organization.
In 1945, when the IOIA was enacted, the United States and international law generally recognized a near-absolute standard of immunity for foreign governments. Over time, this near-absolute standard gave way to the “restrictive theory,” excepting commercial activities. The United States codified the restrictive theory in the Foreign Sovereign Immunities Act of 1976. Thus, the question before the Supreme Court is: Does the IOIA embody the near-absolute standard existing in 1945 or an evolving standard based on the law applicable to foreign sovereigns (i.e., the FSIA).
In 1996, the U.S. Court of Appeals for the D.C. Circuit held in Atkinson v. Inter-American Development Bank that the Foreign Sovereign Immunities Act did not modify the International Organizations Act. An earlier case in the same court had held that a provision in the World Bank’s Articles of Agreement agreeing to suits in the District of Columbia constituted a waiver of immunity from judicial process, but only in connection with agreements that benefitted the Bank, such as a loan. That case involved an employment discrimination claim, for which the court held there had been no waiver. In Atkinson, the court confirmed that view, further holding that while the wording of the IOIA was not clear as to which standard (near-absolute or evolving) applied, the IOIA provided a mechanism for the president to adjust whatever the standard for a specific international organization. That reasoning has been followed not only in the District of Columbia, but in other federal and state courts, except for one case in the Third Circuit Court of Appeals.
The D.C. Circuit Court of Appeals confirmed this view in Jam v. IFC, with Judge Laurence Silberman writing for the court. Judge Cornelia Pillard, a 2013 Obama appointee, concurred in the result because Atkinson is controlling in the D. C. Circuit, but she said that Atkinson was wrong. Both Judge Pillard and the fishermen rely heavily on a dictum in a 1980 opinion by then State Department Legal Adviser Roberts Owen that “By virtue of the FSIA, and unless otherwise specified in their constitutive agreements, international organizations are now subject to the jurisdiction of our courts in respect of their commercial activities, while retaining immunity for their acts of a public character” (emphasis added). Both Judge Pillard and the fishermen-petitioners substituted ellipses for the two inconvenient qualifications in the Owen dictum.
The Supreme Court granted certiorari on the narrow question of whether the FSIA modified the IOIA. The Trump administration submitted an amicus brief advocating reversal of the decision below (the brief was signed by the solicitor general, a career deputy solicitor general, and the State Department Legal Adviser, but not, interestingly, the Treasury Department General Counsel). A group of law school professors, including former Legal Adviser and Yale Law School Dean Harold Koh, filed a brief taking the same position.
I organized an amicus brief opposing that position, recruiting three other former Legal Advisers and a former White House Counsel. Other amicus briefs on our side were submitted by a very impressive bipartisan group of eight former Secretaries of State and Treasury, which pointed out the difficult foreign relations issues involved in modifying an international organization’s immunities, and a group of law school professors, including a former career member of the Office of the Legal Adviser.
The Strange Bedfellows. Clearly, the motivation behind the Koh group is getting U.S. courts involved in international human rights issues—which include environmental issues. However, it was not clear what the Trump administration’s motivation was. While claiming to take a consistently held position (also citing the Owen dictum), which our brief disputed, it curiously rejected the clearly delegated presidential power in the International Organizations Act to carefully tailor international organization immunities where appropriate. It instead favored the courts doing this with the very blunt FSIA blade, regardless of its effect on the operations of the IFC, whose function is engagement in commercial activities. Support for the courts’ involvement in international environmental matters is inconsistent with every aspect of the Trump administration.
In our brief, we pointed out that while the U. S. Government had on several occasions paid lip service to the Owen dictum, in each case it had come out on the side of immunity for the particular activity involved (usually an internal personnel matter), as did Owen in his letter, and that its most recent position on the issue included an endorsement of Atkinson. We further pointed out the U. S. position did not even follow the Owen dictum, because the result sought ignored the two important qualifications in the Owen dictum.
The narrowness of the question before the Court unfortunately did not offer an opportunity to explore the myriad issues lurking in this litigation. A reversal of the opinion below will begin years of litigation over whether the U. S. nexus required by the FSIA’s commercial activities and tort exceptions exists and whether the relief sought is regulation by a member in violation of the IFC’s Articles. Finally, the fishermen’s case does not appear to meet the high pleading standard the Supreme Court recently held applicable in FSIA claims.
But the most interesting question the Justices should ask is why the president did not just do what the Court is being asked to do. It will be interesting to see what the answer is—though the honest answer is that it would be too hard!
