US Supreme Court ruled on 27 February 2019 that international organisations, like the World Bank can be sued in US courts where they are acting in their private market capacity. The IFC is headquatered in Washington DC, along with the rest of the World Bank as the US Government is the largest shareholder of the Bank.
In this case, the IFC had financed a power plant in Gujurat India. The plaintiffs ( members of the local fishing community ) alleged that they had their livelihoods, air quality and drinking water devastated by the project. They alleged that the IFC and the project developers were aware of these issues before the project started but chose to go ahead with it. Whilst the IFC tried to defend their immunity to litigation, the court noted that the IFC charter did not grant immunity from legal proceedings.
Importantly the plaintiffs had tried to raise their concerns using the internal grievance mechanism of the IFC. When the leadership of the IFC ignored the grievance proceedings conclusions the plaintiffs decided to sue.
As the court has decided that the IFC can be sued, litigation will ensue in the lower courts. Further commentary can be found here.
The case has serious implications for international institutions. Clearly the leadership had not considered the risk to the organisation in overlooking the internal grievance mechanism’s recommendations.
The case also highlights the under developed area of remedy which forms part of the UNGPs framework.
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