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The World Bank Group's defeat at the US Supreme Court will save its mission

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Members of the affected community in Gujarat, India. The coal-fired power plant is in the background. (Credit: EarthRights International)
Jessy
Thursday, 14 March, 2019

In this guest blog Kirk Herbertson, Advocacy Strategist at EarthRights International - one of the Spark of Hope organisations honoured by The Elders - explains the significance of a ruling from the US Supreme Court earlier this year. 

 

In February, the US Supreme Court issued a landmark ruling, deciding that international organisations like the World Bank Group can be sued in the United States for their commercial activities. Being accountable to the law, rather than above the law, will help the bank to better fulfil its mandate to lift people out of poverty. 

The case arises out of a lawsuit brought by farmers and fisherfolk in Gujarat, India who have faced severe pollution and health problems as a result of a coal-fired power plant financed by the International Finance Corporation (IFC), the private sector lending arm of the World Bank Group. The power plant has contaminated local communities’ drinking water, destroyed crops, decimated fishing grounds, and created dangerous levels of air pollution. 

The communities tried to raise their concerns directly to the IFC. The bank’s own internal grievance mechanism, the Compliance Advisor Ombudsman (CAO), investigated and supported their claims. Yet the IFC’s management chose to ignore their findings.

Left with no other choice, the communities filed a lawsuit in the United States, where the IFC is headquartered and does much of its business. EarthRights International is representing the communities in this lawsuit.

The IFC responded to the suit by claiming it was immune to any lawsuit filed in the United States because it is an international organisation. The Supreme Court disagreed, ruling that the immunities of international organisations, just like those of foreign governments, do not extend to commercial activities.

On the steps of the U.S. Supreme Court on Oct. 31, 2018 after the hearing. (Credit: EarthRights International)

The communities still have a long way to go before they obtain justice; they must demonstrate that the IFC engaged in “commercial activities” in the United States, and must prove that the IFC is legally responsible for what happened. But last week’s decision is an important step in the right direction.

The Supreme Court’s decision is a victory not only for these communities; the IFC’s staff should be celebrating, as well. As the organisation itself proclaims, “IFC believes that transparency and accountability are fundamental to fulfilling our development mandate and strengthening public trust in IFC and our clients.” And central to the IFC’s development mission, it says, is its “intent to ‘do no harm’ to people or the environment."

At times, however, the IFC’s management has strayed away from this mission, championing the commercial interests of the companies that it finances without due regard for the local communities whose daily lives are transformed by the IFC’s investments. 

These poor choices reflect a profound institutional failure. Faced with a disastrous project, the IFC’s management has preferred to deny and deflect, rather than to improve the situation on the ground. The IFC pursues projects that harm the very people who are supposed to benefit from its work.

As my colleague Marco Simons has explained, “Immunity from all legal accountability does not further the development goals of international organisations. It simply leads them to be careless, which is what happened here. Just like every other institution, from governments to corporations, the possibility of accountability will encourage these organisations to protect people and the environment.” 

In other words, the possibility of being sued will encourage these organisations to remain true to their mission of helping rather than harming the poor.

Fortunately for the World Bank Group, an opportunity exists to make reforms in the coming months. The CAO—and its counterpart at the World Bank, the Inspection Panel—are under review this year. The World Bank Group should ensure that the IFC’s management responds more effectively to CAO’s reports and that the World Bank Inspection Panel monitors cases it has investigated. These steps would help the World Bank Group put out fires before they spread. And, in turn, put the World Bank Group back on the pathway to being a champion of real “development.” 

Views expressed are those of the author and do not necessarily represent those of The Elders or The Elders Foundation.

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