The Supreme Court today ruled that, just like foreign countries, international organizations such as the World Bank can be sued in U.S. courts when they are acting as private players in the market. But although the decision was a welcome one for human-rights groups, the justices made clear that the courthouse doors may not necessarily be wide open to lawsuits against international organizations.

The defendant in the case that the justices decided today was the International Finance Corporation, which makes loans to private businesses to finance projects in developing countries. In 2008, the IFC loaned $450 million to help finance a coal-fired power plant on the western coast of India. The plant was built to meet the growing demand for power in India, but residents who live near the plant say that it was an environmental disaster: Pollution from the plant killed fish, ruined the wells that residents used for drinking water and irrigation, and contaminated nearby farmland.

Some of the residents sued the IFC in a federal court in Washington, D.C., where the organization has its headquarters. They claimed, among other things, that the IFC had violated provisions of the loan agreement that were included to protect the community surrounding the plant.

The question before the Supreme Court was whether the residents could bring their case at all or whether, as the IFC argued, the organization is immune from being sued in U.S. courts. The IFC pointed to a federal law, the International Organizations Immunities Act, that gives international organizations “the same immunity from suit” as “as is enjoyed by foreign governments.” Because foreign governments could virtually never be sued in U.S. courts when the act was passed in 1945, the IFC argued, the organization has complete immunity.

Backed by the federal government, the residents countered that under the IOIA, the IFC is only entitled to the same, more limited immunity that foreign governments currently have. In particular, under a federal law passed in 1976, the Foreign Sovereign Immunities Act, foreign governments can now be sued in U.S. courts for their commercial activities – such as making loans.

Today the Supreme Court agreed with the residents, reversing a decision for the IFC by the U.S. Court of Appeals for the District of Columbia Circuit. In an opinion by Chief Justice John Roberts, the court acknowledged that, when Congress passed the IOIA in 1945, foreign governments had “virtually absolute” immunity from lawsuits in U.S. courts. However, the most natural way to read the IOIA, the court explained, is as making immunity for international organizations “continuously equivalent” with immunity for foreign governments.

The court rejected the IFC’s argument that the IOIA should “not be read to tether international organization immunity to changing foreign sovereign immunity” because the two kinds of immunity serve different purposes: Immunity for foreign governments has its roots in mutual respect and reciprocity among  countries, while immunity for international organizations is intended to allow them to operate without interference from the courts of member countries. “But that,” the court reasoned, “gets the inquiry backward”: “Whatever the ultimate purpose of international organization immunity may be,” “the immediate purpose of the immunity provision is expressed in language that Congress typically uses to make one thing continuously equivalent to another.”

Reading the IOIA to “tether” immunity for international organizations to foreign sovereign immunity is also consistent with a method of interpreting statutes known as the “reference” canon, the court continued. Under the reference canon, the court explained, if a statute “refers to a general subject, the statute adopts the law on that subject as it exists whenever a question under the statute arises.” In this case, the court observed, the IOIA refers to the immunity “enjoyed by foreign governments,” which “is an instruction to look up the applicable rules of foreign sovereign immunity, wherever those rules may be found.”

The court dismissed the IFC’s concerns about a “flood” of lawsuits in U.S. courts by foreign plaintiffs as “inflated.” First of all, the court noted, if an international organization truly needs near-complete immunity, its charter can say so – just as the charter of the United Nations does, for example. Moreover, the court added, it is not clear that all the loans that international organizations make would necessarily qualify as “commercial activities” for purposes of the FSIA.

And even if an international organization does engage in commercial activities, the court posited, other requirements of the FSIA will likely foreclose many lawsuits against international organizations. Among other things, when the heart of the lawsuit is an allegedly wrongful act that took place overseas, the lawsuit will not be “based upon” commercial activity, as the FSIA requires. Indeed, the court pointed out, the federal government has suggested that even the residents in this case may not be able to satisfy that requirement. So although their lawsuit can go forward for now, their ability to win on the merits is uncertain.

Justice Stephen Breyer filed a dissenting opinion in which he emphasized that, after World War II, “many in this Nation saw international cooperation through international organization as one way both to diminish the risk of conflict and to promote economic development and commercial prosperity.” In response, Breyer wrote, Congress enacted the IOIA. “Given the differences between international organizations and nation states, along with the Act’s purposes and the risk of untoward consequences, I would leave the” IOIA “where we found it—as providing for immunity in both commercial and noncommercial suits.”

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Posted in Jam v. Int'l Finance Corp., Featured, Merits Cases

Recommended Citation: Amy Howe, Opinion analysis: Justices hold that international organizations do not have near-complete immunity, SCOTUSblog (Feb. 27, 2019, 8:42 PM), https://www.scotusblog.com/2019/02/opinion-analysis-justices-hold-that-international-organizations-do-not-have-near-complete-immunity/