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Clifford Chance

Clifford Chance

Business & Human Rights Insights

Lower Courts Grapple with International Organization Immunities after US Supreme Court's Decision in Jam

Since the Supreme Court's 2019 decision in Jam v. IFC, judges' views have begun to diverge on international organizations' immunities. The Courts of Appeals will need to clarify the rules.

Background

Since the Supreme Court's 2019 decision in Jam v. International Finance Corporation, 139 S. Ct. 759, international organizations ("IOs") have had to adjust to a more restrictive view of their immunity from suit in the United States. IOs had enjoyed virtually absolute immunity until Jam, in which plaintiffs from India alleged that a power plant in India financed by the International Finance Corporation ("IFC") caused them environmental harm. The Supreme Court held that the International Organizations Immunities Act ("IOIA"), 22 USC § 288a(b), provides the same level of immunity enjoyed by foreign sovereigns under the Foreign Sovereign Immunities Act ("FSIA"), 28 USC § 1602, which is restrictive rather than absolute. Please see our briefing here.

Post-Jam Immunity Determinations

The Supreme Court's decision in Jam sent shockwaves through the IO community, but until recently, the predicted doomsday scenarios had not materialized. The lower courts have largely continued to find immunity notwithstanding the FSIA's "commercial activity" exception, which removes immunity in suits "based upon" a foreign state's (or now IO's) "commercial activity ... in the United States" or that "causes a direct effect in the United States" - the exception that most plaintiffs seek to invoke.

In Jam itself, on remand from the Supreme Court, the US District Court for DC determined that IFC was immune because the "gravamen" of the plaintiffs' claims was an alleged failure to prevent harm in India, not the US-origin loan. 442 F. Supp. 3d 162. The court later "clarified" its view in response to plaintiffs' attempt to amend their complaint. 481 F. Supp. 3d 1. The court explained that the gravamen of the claims was the loan recipient's construction and operation of the power plant, and that the company "clearly had a much larger and more direct role ... in the alleged harms to plaintiffs, than did IFC ..." The plaintiffs have appealed.

In another case, a different judge on the same court held that the World Bank was immune from suit over its alleged role in the Chinese government's harmful relocation policy in connection with a dam construction project. Zhan v. World Bank, No. 1:19-CV-01973, 2019 WL 6173529 (Nov. 20, 2019). The court held that the complaint was not based upon World Bank activity with direct effects in the United States, nor was the gravamen of the complaint a commercial activity. Instead, the claims were based on "the Chinese government's tortious actions in China against Chinese citizens." In October 2020, the US Court of Appeals for the DC Circuit affirmed the ruling without analysis.

A Contrary View

A new ruling from yet another judge on the same court has gone the other way. In November 2020, Judge Boasberg held in Rodriguez v. Pan American Health Organization that the organization could be sued under the Trafficking Victims Protection Act ("TVPA"), which allows victims to sue those that knowingly benefit from a venture engaged in forced labor. 18 USC §§ 1589(b), 1595. Cuban doctors sued the Pan American Health Organization ("PAHO") for its involvement with Mais Medicos, a program through which they were recruited to provide medical services in Brazil. 2020 WL 6561448.

The doctors' complaint described PAHO as a financial intermediary. The doctors claimed that Cuba forced them to participate in the program and subjected them to harmful treatment in Brazil, and that PAHO used its bank account in Washington, DC to transfer payments from Brazil to Cuba, taking over $75 million in fees for "support costs" throughout the program.

In a seeming break from Jam and Zhan, the court held that PAHO's activities fell within the FSIA's commercial-activity exception, stating that PAHO "acted quite like a bank." In the court's view, the gravamen of the TVPA claim was that PAHO benefitted financially from forced labor, and that benefit occurred in the United States.

Alternative Immunity under the UN Charter and WHO Constitution

PAHO claimed independent grounds for immunity: the UN Charter and the World Health Organization ("WHO") Constitution. The court rejected those grounds because these were not self-executing treaties, meaning Congress would need to pass a law to give them direct effect.

Courts have held that various provisions of the UN Charter are non-self-executing, including the provision at issue in Rodriguez. No court had previously addressed whether the WHO Constitution is self-executing, in part because of the protections of the IOIA prior to Jam. That question is also under consideration in the Southern District of New York in Kling v. World Health Organization, No. 7:20-cv-03124, 2021 WL 242385.

Implications

The Rodriguez court's conclusions produce questions for many IOs, especially multilateral development banks ("MDBs"), and may be flawed. They certainly are inconsistent in effect from the decisions in Jam and Zhan.

PAHO has sought immediate appeal of the ruling, which will go to the DC Circuit - a court with significant influence in these cases because many IOs are headquartered in DC. Because an activity's purpose is irrelevant to the commercial activity analysis, the DC Circuit's characterization of the nature of the IO's activity will be critical. PAHO characterized its role in Mais Medicos as providing "technical and administrative support" to a Member State's public-health program. Private actors would not provide this support - nor could they, because the Brazilian law establishing Mais Medicos allowed for external support only from IOs. Furthermore, but for political concerns, the program would have operated through an intergovernmental agreement between Brazil and Cuba. Much like the activity in Jam and Zhan - multilateral institutional lending of last resort - the activity in which PAHO engaged - facilitating payments between Brazil and Cuba for public health services - was not the type of activity in which a private party typically engages.

If the DC Circuit agrees with the lower court, however, the effect could be especially pronounced for MDBs and IOs like PAHO that pursue their missions through support and financing activities. In the meantime, private litigants affected by projects supported by these organizations may be encouraged to assert claims. Organizations that previously have been secure in their immunity should take stock of their litigation preparedness.