PEOPLE OF DEVELOPING COUNTRIES CAN SUE THE WORLD BANK AND THE IMF IN US COURTS

This is a quick exposé on whether or not one can sue the Bretton Woods Institutions (BWI), the World Bank, and or the IMF for any corruption in a giving country when their client countries or members are not holding those in government accountable when public money borrowed from the BWI is stolen with the active participation or indirect involvement of local government. Historically, the International Monetary Fund (IMF) and the World Bank were created in July 1944 at an international conference in the United States (in Bretton Woods, New Hampshire) that established a framework for economic cooperation aimed at creating a more stable and prosperous global economy. While this goal remains central to both institutions, their work constantly evolves in response to economic developments and challenges. The IMF promotes global macroeconomic and financial stability and provides policy advice and capacity development support to help countries build and maintain strong economies. On the other hand,??the World Bank Group works with developing countries to reduce poverty and increase shared prosperity, while the International Monetary Fund serves to stabilize the international monetary system and acts as a monitor of the world’s currencies[1].

Recent lawsuits against the World Bank and the IMF: In 2019, the U.S. Supreme Court issued a 7-1 decision in?Jam v. International Finance Corporation, ruling for the first time that international financial institutions, including various branches of the bank and other U.S.-based organizations like the Inter-American Development Bank, can be subject to lawsuits in cases where their investments in foreign?development projects are alleged to have caused harm to local communities. This decision overturned a decades-old presumption dating to the founding of the World Bank in 1945 — that the IFC, a Washington, D.C.-based branch of the World Bank Group that finances private-sector projects in developing countries, and other bank-affiliated organizations are fully immune from such suits[2]?[3].

My opinion at the time of this decision was to applaud the SCOTUS’ decision and there was no potential long-term damage to the World Bank and the IMF in contrast to others. Further, in 2021, the World Bank faced a data-rigging scandal that forced it to discontinue its "Doing Business" investment climate rankings. The scandal was difficult to repair and has raised questions over whether the institutions' influential research is subject to shareholder influence. Regardless of whether IMF chief Kristalina Georgieva was to blame for changes to World Bank data in 2017 that supposedly benefited China, the scandal has dented the research reputations of both institutions, former staff, government officials, and outside experts say[4].

The following, are possible reasons for suing the World Bank and the IMF: alleged harm caused to local communities by their investments in foreign development projects[5]?[6].

?However, it is important to note that the IMF and the World Bank share a common goal of raising living standards in their member countries, and their approaches to achieving this shared goal are complementary[7].?

What is the process of suing,??the process of suing the World Bank and the IMF: Suing the World Bank and the IMF in Federal Court would involve filing a lawsuit against them and going through the legal process. It is important to consult with legal experts to understand the specific requirements and procedures involved in such a lawsuit:

-Alleged harm caused to local communities by their investments in foreign development projects[8];

-Disagreements over policy advice and capacity development support provided by the IMF;

-Corruption and lack of good governance in member countries, which undermines public trust in government and threatens economic development[9]? .

-Disputes over loans and balance of payments difficulties[10].

-Other legal issues related to the operations of the institutions[11].

Furthermore, there have been other legal issues related to the operations of the institutions, such as disagreements over policy advice and capacity development support provided by the IMF, disputes over loans and balance of payments difficulties, and corruption and lack of good governance in member countries, which undermines public trust in government and threatens economic development[12]. ?

Farmers, fishermen and others who say the coal-fired Tata Mundra Power Plant in Gujarat, India has ruined the environment and their livelihoods cannot sue the U.S.-based international organization that financed its construction in 2008, a federal appeals court held Tuesday in a case that the U.S. Supreme Court revived in 2019.

?However, in 2021, the U.S. Court of Appeals for the District of Columbia Circuit affirmed last year’s ruling for International Finance Corp on remand. The appeals court found that IFC, represented by White & Case and Sidley Austin, has immunity from suit because the plaintiffs’ claims “are not based upon activity carried on in the United States.”[13]

“Even crediting the allegation that the Plant would not have been built without IFC’s funding, the operation of the Plant is what actually injured appellants, and the manner of its construction and operation is the crux of their complaint,” Circuit Judge Judith Rogers wrote. “The gravamen of appellants’ lawsuit is, therefore, conduct that occurred in India, not in the United States.” Conversely, Richard Herz of EarthRights International, who argued the appeal for fisherman Budha Ismail Jam and his neighbors,??said the D.C. Circuit should have focused solely on the IFC’s decision to disburse funds without enforcing the loan agreement’s environmental provisions. Instead, the court focused on the actions of Coastal Gujarat Power Limited, which constructed and operates Tata Mundra. Based in Washington, D.C., the IFC is the private-lending arm of the World Bank Group. In this case,??it provided $450 million in loans to help construct Tata Mundra. Jam filed suit in federal court in Washington in 2015, saying the IFC’s failure to enforce the lending agreement’s environmental provisions has had a devastating effect on marine life and air quality. The lower federal district court dismissed the suit in 2016 and the D.C. Circuit affirmed in 2017, relying on the “virtually absolute” immunity that IFC was presumed to have under the International Organizations Immunities Act (IOIA)[14].

In analyzing this?Jam v. International Finance Corporation,??First, the majority confirmed that the “Privileges and Immunities accorded by the IOIA are only default rules,” and suggested that “[i]f the work of a given international organization would be impaired by restrictive immunity, the organization’s charter can always specify a different level of immunity.”[15]??The majority noted that “[t]he charters of many international organizations do just that,” and observed that “the IFC’s own charter does not state that the IFC is absolutely immune from suit.”[16]

Second, the majority suggested that the lending activities of IOs like the IFC may not fall within the commercial activity exception.[17]?The majority also indicated that even if the activity at issue is deemed to be commercial under the Foreign Sovereign Immunity Act (FSIA), there may not be a sufficient nexus or link between the activity and the U.S., or the case may not be based upon that activity but rather non-commercial conduct[18].??Justice Breyer was less optimistic, pointing out in a dissent that the constituent documents of many IOs do not have the force of law in the U.S., and thus these organizations “continue to rely upon [the IOIA] to secure immunity,” rather than their charters or articles of agreement[19].?Justice Breyer also explained that the definition of “commercial activity” under the FSIA is broad, and this will “at the very least create uncertainty for organizations involved in finance,” given that the core functions of these organizations “are at least arguably ‘commercial’ in nature.”[20]

In?Rodriguez v. Pan American Health Organization, a more recent decision applying?Jam, a different judge in the D.C. district held that PAHO, a specialized international health agency for the Americas, was not immune from suit under the IOIA given the FSIA’s commercial activity exception[21].

The?Rodriguez?plaintiffs were Cuban doctors who allege that they were coerced by the Cuban government into participating in a medical mission in Brazil and that the Cuban government withheld most of their wages while they were abroad.?According to the complaint, PAHO facilitated this misconduct, including by arranging payment for the work performed by the plaintiffs, most of which PAHO remitted to Cuba and some of which it kept.?

The district court concluded that the gravamen of one of the plaintiffs’ claims—that PAHO knowingly profited from forced labor—was based on the allegation that PAHO “mov[ed] […] money, for a fee, between Cuba and Brazil,” and that this qualified as a commercial activity under the FSIA “and thus the IOIA.”[22]??The district court held there was a sufficient nexus between PAHO’s commercial activity and the U.S., given that the Director-General approved the agreements committing PAHO to its role as a financial intermediary at PAHO’s headquarters in Washington, D.C., and the money passed through PAHO’s bank account there.[23]?PAHO also argued that it was otherwise entitled to immunity under the U.N. Charter and the WHO Constitution, both of which contain so-called “functional” immunity provisions.[24]???But an IO’s charter or other constituent documents, like its articles of agreement, may only have binding legal effect in the U.S. if they are part of or referenced in a treaty of which the U.S. is a member,?and?the relevant treaty provisions are either self-executing or have been enacted into law by Congress. However, the district court focused on the text and drafting history of the immunity provisions contained in the U.N. Charter and the WHO Constitution, and concluded that they are not self-executing, and thus do not have domestic legal effect in the U.S.[25]?and as a result, it held that neither immunity provision renders PAHO immune from suit.[26]?In 2022, the federal Appeals Court of?DC in??Rodriguez v. Pan American Health Organization, 29 F. 4th 706 - Court of Appeals, Dist. of Columbia Circuit 2022,?affirmed the district court's judgment denying PAHO's motion to dismiss the 18 U.S.C. § 1589(b) claim and remand for further proceedings consistent with this opinion.

In conclusion, the US Supreme Court in?Jam?settled a fundamental question regarding the scope of immunity for IOs—answering in the negative whether they are entitled to absolute immunity under the IOIA.?Further, the US Supreme Court clarified that lower federal courts “can always specify a different level of immunity” than the statute, but which may not be binding in U.S. courts.?Conversely and finally, you (people of developing countries) can sue the Bretton Woods Institutions before a US court on the basis of some of the aforementioned grounds.??

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DISCLAIMER:?Nothing in these presentations should be interpreted as legal advice. These presentations are intended to help a person to understand the area of law to help ask the right questions with the attorney of their choice. Your time to act may be very limited and this could substantially reduce your rights and options. YOU CANNOT rely on anything contained herein. This information is not intended to substitute for professional legal advice and does not create an attorney-client relationship. You should accept legal advice only from a licensed legal professional with whom you have an attorney-client relationship. You should contact a lawyer in your area immediately, to assist you in any of these matters.???

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[1]?See https://www.imf.org/en/About/Factsheets/Sheets/2022/IMF-World-Bank-New

[2]?See?https://www.npr.org/sections/goatsandsoda/2019/03/07/699437482/supreme-court-rules-that-world-bank-can-be-sued

[3]?See https://www.ciel.org/news/supreme-court-rules-world-bank-group-immunity-jam-v-ifc/

[4]?See https://www.reuters.com/business/world-bank-imf-face-long-term-damage-after-data-rigging-scandal-2021-10-04/

[5]?See https://www.reuters.com/business/world-bank-imf-face-long-term-damage-after-data-rigging-scandal-2021-10-04/

[6]?See https://www.ciel.org/news/supreme-court-rules-world-bank-group-immunity-jam-v-ifc/

[7]?See https://www.imf.org/en/About/Factsheets/Sheets/2022/IMF-World-Bank-New

[8]?See https://www.npr.org/sections/goatsandsoda/2019/03/07/699437482/supreme-court-rules-that-world-bank-can-be-sued

[9]?See https://www.imf.org/en/About/Factsheets/Sheets/2023/The-IMF-and-Good-Governance

[10]?See https://www.worldbank.org/en/about/history/the-world-bank-group-and-the-imf

[11]?See https://www.supremecourt.gov/opinions/18pdf/17-1011_mkhn.pdf

[12]?See Id.

[13]?See?Jam v. International Finance Corp., No. 20-7092 (D.C. Cir. 2021)

[14]?See?Jam v. International Finance Corp., No. 20-7092 (D.C. Cir. 2021)

[15]?See?Id.?at 771.

[16]?See Id.

[17]?See?Id.?at 772 (“[I]t is not clear that the lending activity of all development banks qualifies as a commercial activity within the meaning of the FSIA.”).

[18]?See?Id.

[19]?See?Id.?at 778 (Breyer, J., dissenting).

[20]?Id.?(Breyer, J., dissenting).

[21]?Rodriguez, 2020 WL 6561448, at *9.?The?Rodriguez?decision was issued by Judge Boasberg.?The?Jam?decisions were issued by Judge Bates.

[22]??Id.?at *7.

[23]?Id.?The?Rodriguez?plaintiffs asserted two other claims against PAHO; the district court concluded that these claims did not trigger the commercial activity exception.

[24]?IO immunity is based on operational necessity and thus is often described as “functional” immunity.?This is epitomized by Article 105 of the U.N. Charter, which states that “[t]he Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfillment of its purposes.”?The WHO Constitution contains similar language.

[25]?Rodriguez, 2020 WL 6561448, at **16-18.

[26]?Id.?at *18.