Context: US Supreme Court has ruled in favour of a group of fishermen and a Gujarat village panchayat in a suit against the US-headquartered International Finance Corporation (IFC). The case, which now goes back to a US district court, relates to alleged pollution caused by a Gujarat-based power plant partly funded by IFC.

What’s the issue?

Indian fishermen and villagers had recently taken the International Finance Corporation (IFC) before US Courts alleging severe ecological destruction due to working of a coal-based power plant in Gujarat which was financed by IFC.

The Supreme Court of the United States in Budha Ismail Jam, et al. v. International Finance Corporation has now held that the international organisations are not immune from suits and hence the suit against the IFC can proceed.

Why international institutions should not be immune?

International organisations have been provided with privileges and immunities under International Law similar to the immunities provided to foreign states. The grant of immunities to international organisations generally rests on functional grounds and it is without any doubt a requirement for them to effectively and independently carry out their functions. But absolute immunity may bring with it some undesirable consequences leading to violations of International Law. Complete lack of accountability can also lead to many undesirable consequences.

About the International Finance Corporation (IFC):

• The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private sector development in developing countries.
• It is a member of the World Bank Group and is headquartered in Washington, D.C., United States.
• It was established in 1956 as the private sector arm of the World Bank Group to advance economic development by investing in strictly for-profit and commercial projects that purport to reduce poverty and promote development.
• The IFC is owned and governed by its member countries, but has its own executive leadership and staff that conduct its normal business operations.
• It is a corporation whose shareholders are member governments that provide paid-in capital and which have the right to vote on its matters.

Functions:

• It offers an array of debt and equity financing services and helps companies face their risk exposures, while refraining from participating in a management capacity.
• The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible.
• It advises governments on building infrastructure and partnerships to further support private sector development.