The International Finance Corporation (IFC) makes loans to private businesses to finance projects in developing countries. In 2008, it lent $450 million to finance a coal-fired power plant in India. Local residents complained of harm suffered as a result of pollution from the plant and sued the IFC before a federal court in Washington, D.C., where it is headquartered, claiming, inter alia, that the the IFC had violated provisions of the loan agreement that were included to protect the local community. The International Organizations Immunities Act 1945 gives international organizations “the same immunity from suit” as “as is enjoyed by foreign governments.”
At the time foreign governments enjoyed virtually absolute immunity and the IFC claimed immunity from suit. Since then s1605(2)(a) of the Foreign Sovereign Immunities Act 1976, s1605(2)(a) U.S.C., has lifted the immunity of foreign governments in respect of suits based on their commercial activities, but the Act made no reference to the immunity of international organisations. In Jam et al v International Finance Corporation 586 U.S _ (2019) the US Supreme Court held on 27 Feb, Justice Breyer dissenting, that the immunity of international organisations is co-equivalent with that of foreign governments and the IFC is not absolutely immune from suit. The case was remanded for further hearing consistent with this opinion.
However under s.1605(2)(a) there are three alternative conditions for the lifting of immunity: (i) the action arises out of commercial activity in the US, or (ii) the action arises out of an act in the US in connection with commercial activity elsewhere, or (iii) the action arises out of an act outside the US in connection with commercial activity elsewhere and the act causes a direct effect in the US. In many cases against international organisations based in the US these criteria will not be satisfied and this may prove to be the case with the further hearings in the instant case.