The U.S. Supreme Court recently held protections in the International Organizations Immunities Act of 1945 against civil lawsuits in U.S. courts were not absolute. Instead, immunity granted to international organizations, including Multilateral Development Banks (MDBs), is no greater than that enjoyed by foreign governments under the Foreign Sovereign Immunities Act (FSIA).
What does the ruling mean? According to a recent article posted to the FCPA blog, international organizations, including MDBs, can now be sued in U.S. courts for “commercial activity” with a nexus to the United States.
The case the U.S. Supreme Court ruled on arose from a lawsuit brought in 2015 by plaintiffs who alleged an IFC-financed coal-fired power plant in India caused environmental and social harm. The allegations stated the IFC failed to implement controls and exercise supervisory authority to protect the surrounding communities. The Court remanded the case back to the lower courts to determine whether the IFC’s providing a $450 million loan constitutes commercial activity under the FSIA and whether there is a sufficient U.S. nexus.
MDBs’ efforts and controls to prevent corruption are in many ways like the IFC’s efforts to prevent environmental and social harm. It is therefore very possible a U.S. court might define MDBs’ financing activity as commercial activity. MDBs headquartered in the United States, or those that receive U.S. financial support, might be considered a nexus to the country.
If MDBs are now exposed to this potential liability, how might they react? To learn more, read the FCPA blog article.