Jam v. International Finance Corp.

On February 27, 2019, the Supreme Court issued an opinion in Jam v. International Finance Corp.,[1] a case of critical importance for international organizations. The question presented in Jam was whether U.S. law affords international organizations absolute immunity from suit in the United States, or whether international organizations instead are entitled to only the more limited or "restrictive" immunity that applies to foreign sovereigns under the Foreign Sovereign Immunities Act.

The Supreme Court decided that international organizations enjoy only the same immunity to which foreign sovereigns are currently entitled.[2] In so ruling, the Court reversed decades of precedent and practice affording international organizations absolute immunity from suit. The decision, while resting on a relatively narrow issue of statutory interpretation, fundamentally changes the landscape for international organizations. Such organizations now face substantially increased exposure to litigation and potential liability, with few parameters indicating the limits of that exposure.

Background

The International Organizations Immunities Act (IOIA), enacted in 1945, provides in relevant part that international organizations enjoy "the same immunity from suit . . . as is enjoyed by foreign governments."[3] At the time, foreign governments were accorded virtually absolute immunity from legal process in U.S. courts. 

In 1952, however, the United States—in keeping with developments in state practice in other countries—adopted what is known as the "restrictive" theory of sovereign immunity, under which a foreign sovereign's immunity from legal process depends on whether the suit pertains to sovereign acts or to acts of a private or commercial character. Immunity is generally available for sovereign acts, but not for a foreign government's private or commercial acts. Congress eventually codified the restrictive theory of immunity in the Foreign Sovereign Immunities Act of 1976 (FSIA).

The question presented in Jam was whether, in according international organizations "the same immunity from suit . . . as is enjoyed by foreign governments," the IOIA confers on international organizations the absolute immunity that foreign sovereigns enjoyed in 1945, when the statute was enacted, or whether Congress' intent was that the "same immunity" as foreign sovereigns enjoy was intended to mean whatever immunity applies to foreign sovereigns at the time it is assessed, however it might evolve. Since 1998, the prevailing opinion on this question was that of the U.S. Court of Appeals for the District of Columbia Circuit in Atkinson v. Inter-American Development Bank.[4] There, the Court held that the IOIA fixed international organizations' immunity as of 1945; that is, notwithstanding subsequent departures from absolute immunity for foreign governments, international organizations continued to enjoy under the IOIA the absolute immunity that had existed in 1945.[5]

The Decision in Jam v. IFC 

In Jam, the Supreme Court overturned the longstanding absolute-immunity rule set forth in Atkinson. Instead, the Court held that, as a matter of statutory interpretation, the IOIA entitles international organizations only to the limited immunity that foreign sovereigns currently enjoy under the FSIA. The dispute in Jam arose out of the construction of a coal-fired power plant in Gujarat, India, that was financed by the International Finance Corporation (IFC), an international organization with 184 member states that is charged with promoting economic development in less developed areas and supplementing the activities of the World Bank. A group of local farmers, fishermen, and a small village in India brought suit against the IFC in federal court in Washington, D.C., claiming that the power plant had polluted the surrounding areas. 

The district court dismissed the suit, holding—based on the D.C. Circuit's opinion in Atkinson, which was binding on it—that the IFC was entitled to absolute immunity from suit.[6] On appeal, a three-judge panel of the D.C. Circuit unanimously affirmed in light of the previous decision in Atkinson.[7] One member of the panel wrote separately to express her view that Atkinson was wrongly decided and should be revisited.[8]

The Supreme Court in a 7-1 decision agreed that Atkinson was wrongly decided and reversed the D.C. Circuit's judgment in Jam. The majority, in an opinion written by Chief Justice John Roberts, reasoned that the term "same immunity" is most naturally read to "ensure ongoing parity between" the immunity of international organizations and that of foreign governments. Had Congress wished to provide international organizations with a fixed scope of immunity, the majority reasoned, it would have done so expressly.[9]

The Court noted that the IFC, in arguing to the contrary, had pointed out that immunity serves a different purpose for international organizations than it does for foreign sovereigns. According to the IFC, while foreign sovereign immunity promotes international comity and reciprocity, international organization immunity enables organizations to pursue the collective goals of member states without undue interference from the domestic courts of any one member state. But the Court found it unnecessary to engage with this argument. Under conventional methods of statutory interpretation, there was no need to venture beyond the legislative purpose expressed by the ordinary meaning of the statutory text.[10]

The majority also stated that the IFC's policy concerns that anything less than absolute immunity would have adverse consequences for international organizations were "inflated."[11] The IFC had argued that more limited immunity would expose international organizations' decisions to second-guessing by domestic courts, would impede international organizations' ability to fulfill their missions by exposing them to liability for damages, and would open the floodgates to burdensome litigation in U.S. courts by foreign plaintiffs. But the majority expressed skepticism that restrictive immunity would automatically expose international organizations to excessive liability. 

First, the majority explained that the IOIA only sets the default rules for immunity, and that international organizations may specify different—and therefore broader—parameters of immunity in their charters. Second, the Court highlighted the Government's suggestion at oral argument that the lending activity of at least some development banks may not qualify as "commercial" activity sufficient to subject an international organization to suit under the FSIA. Third, the majority pointed to other requirements in the FSIA that must be met before an international organization may be subject to suit in the United States, including that the commercial activity must have a sufficient nexus to the United States.[12]

Justice Breyer dissented, opining that the ordinary meaning of the IOIA's immunity provision was not as clear as the majority had suggested, and that the purposes and history of the IOIA—including to encourage international organizations to establish their headquarters and pursue their missions in the United States—favored interpreting the IOIA to confer absolute immunity.[13] Justice Breyer also disagreed with the majority's view that the consequences of the Court's ruling would be limited. Justice Breyer observed that organizations may at the very least face significant uncertainty as to whether their core functions are "commercial" in nature so as to expose them to litigation and liability in U.S. court.[14]

In addition, Justice Breyer opined that the Court's decision disrupts the balance between the immunity from suit that is necessary for international organizations to carry out their activities free from the burdens of litigation, on the one hand, and the need for accountability, on the other. International organizations, while previously enjoying absolute immunity under the IOIA, had struck this balance by waiving their immunity from certain types of suit, as well as by agreeing to alternative forms of dispute resolution to address controversies. And, as Justice Breyer noted, the Executive Branch retains the authority under the IOIA to withdraw or limit immunity in cases where immunity from suit is not warranted.[15]

The case now returns to the district court for further proceedings on whether the IFC enjoys immunity under the more restrictive FSIA-based standard.

Observations and Conclusions

The Supreme Court's decision marks a sea change in the law of international organization immunity. The majority highlighted organizations' charters and the limits of the FSIA's "commercial activities" exception to immunity under the FSIA as potential bulwarks against excessive litigation against international organizations in U.S. courts. But the effectiveness of these possible shields remains to be seen. 

Individual international organizations may face significant political or practical difficulties in amending their charters to specify heightened levels of immunity from suit. And because many treaties are not self-executing as a matter of U.S. law—i.e., they are not automatically enforceable in U.S. court absent implementing legislation—it is unclear that even the amendment of an international organization's charter would on its own be sufficient to ensure immunity in suits arising from commercial activities. 

Moreover, whether a particular organization's activities in the United States are "commercial activities" that are sufficiently connected to the dispute to afford a basis for jurisdiction will likely be the subject of fact-intensive and unpredictable litigation. 

Jam has not necessarily thrown the courthouse doors open to lawsuits against international organizations. But at a minimum, the Supreme Court's decision marks the beginning of a period of uncertainty as international organizations adapt to this new immunity regime, and it will be some time before Jam's full effects will be apparent.

About the Authors: Nancy Perkins and Sally Pei are attorneys at Arnold & Porter Kaye Scholer LLP, which litigated the Atkinson case on behalf of the Inter–American Development Bank. Any opinions expressed in this article are the authors' individually and not the firm's or its clients.