IFC claims legal immunity in suit, warns of ‘chilling effect’

The World Bank Group is asking a US judge to toss a lawsuit filed against it by a fishing clan in India, citing a 1945 law.

Mundra, Gujarat, India

The World Bank Group contends it has “absolute immunity” from being sued in the United States by people who claim they’ve  been harmed by dams, power plants and other development projects it bankrolls, according to a motion filed in U.S. federal court.

The bank is asking a U.S. judge to toss  a lawsuit filed against it by members of a fishing community in India, citing a 1945 law that grants international institutions such as the World Bank and the International Monetary Fund the same legal immunities as foreign governments.

In April, representatives of traditional fishing clans in Gujarat, India filed a lawsuit in April in U.S. District Court in Washington, D.C., accusing  the World Bank’s private-sector lending arm, the International Finance Corporation, of “irresponsible and negligent conduct” in handling its $450 million financing package for a coal-fired power plant along an ecologically fragile stretch of India’s coastline.  The suit says the plant has encroached on the fishing clans’ traditional lands and damaged their livelihoods with pollution.

The IFC’s motion for dismissal reflects the bank’s longstanding policy, but it offered detailed arguments for its immunity that are significant in light of the bank’s recent record.

In April, a report by the International Consortium of Investigative Journalists, the Huffington Post and other media partners found that the World Bank had regularly failed to apply its “safeguards” for protecting local populations from being harmed by big development projects. Since 2004, an estimated 3.4 million people have been physically or economically displaced by projects financed by the World Bank, losing their homes, some or all of their land, or seeing their livelihoods diminished.

During this period, the bank has also stepped up its lending in risky projects. From 2009 to 2013, World Bank Group lenders poured $50 billion into projects graded the highest risk for “irreversible or unprecedented” social or environmental impacts, more than twice as much as the previous five-year span. The IFC has committed to ramping up its investments in fragile and conflict-affected regions by 50 percent between 2012 to 2016.

In its filing in federal court, the IFC maintains that its ability to lend in the poorest regions depends on the assurance that it can’t be sued.

“Such liability would have a considerable chilling effect on IFC’s capacity and willingness to lend money to business entities in developing countries, which frequently struggle to conduct industrial activity in accordance with sound environmental practices,” the IFC says in its motion.

The IFC did not respond to ICIJ’s inquiries about the case, but in an interview last year, IFC risk management official Mark Constantine forcefully defended the IFC’s growing investments in troubled areas.

“This is not for the faint of heart,” Constantine said. “If not us, who?”

EarthRights International, an environmental group that filed the lawsuit on behalf of the fishing clans, argues in a news release that the IFC should not enjoy blanket immunity from legal accountability.

“The IFC’s defense boils down to this: we are above the law,” Richard Herz, the group’s litigation coordinator and counsel for the plaintiffs, says in the news release. “It argues that it is entitled to act with impunity, contrary to its own mission and accountable to no one, even though the risks were so obvious from the start, and the IFC’s failure to act so devastating for precisely the people the IFC is supposed to help and protect.”

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