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A Case which made World Bank Legally Accountable

On February 27, a year has passed since the Supreme Court of the United States ruled in a 7-1 judgment that World Bank does not enjoy absolute immunity. The judgment shook the foundations of the financial world, which hitherto enjoyed absolute immunity for whatever consequences their lending led to. It’s not business as usual for them anymore.

It empowered the communities around the world, who have always been at the receiving end of lending to big projects – be it big dams, mining, plantations, energy or infrastructure projects. Already two cases – one from Honduras against the private sector arm of the World Bank, the International Finance Corporation (IFC) and another from China against the World Bank – are currently being considered by different courts in the US.

First, a recap of the case, which led to this landmark judgment.

IFC lend $450 million to Tata Mundra (Coastal Gujarat Power Ltd) – a coal-based thermal power project in Kutch, Gujarat in 2007. The fishworkers, who are severely affected by the project construction as well as the effluence from the project, were not even considered as project-affected, let alone any compensation for their loss. Not just the fishworkers, thousands of farmers, salt pan workers and cattle herders were neither considered, nor compensated.

The affected communities, under the aegis of Machimar Adhikar Sangharsh Sangathan, approached the accountability mechanism of IFC, the Compliance Advisor Ombudsman (CAO) in 2011. After two years of investigation into the violations of IFC’s policies, CAO confirmed nearly all concerns raised by the people in their complaint, holding IFC responsible for the violations and oversight.

Instead of taking it as an opportunity for course correction, IFC chose to ignore the findings first, when pressure was mounted on them from far and wide, they engaged different agencies to conduct a series of studies, which should have done before the project was approved. The findings of those studies were never made public.

The Government of India allowed CAO to visit the project site only once post the report. Their requests for permission to visit the project to monitor the progress of compliance of the policies where declined time and again. Sab ka saath, Sab ka vikas slogan is preserved for the privileged. Riding on the immunity claim of IFC and a government that loathes any independent assessments of projects or situations like in Kashmir, the company continues to ignore people’s concerns.

Having given the project in a platter by the government in 2006 under the newly planned Ultra Mega Power Projects, this project every sop, until Indonesia, from where the coal was procured, revised their coal tariffs. It took the financial viability of the project for a tailspin. In January this year, the company wrote to the Power Ministry that they could not run the project beyond the end of February because of losses. Earlier this week, they wrote to the states who have a Power Purchasing Agreement with them – Gujarat, Haryana, Rajasthan, Punjab, and Maharashtra – that they won’t supply power to them unless the tariffs are revised.

While the company is keen to mitigate the loss by all means, the loss of the people and of many generations, caused because of their project, continued to be meted with indifference and arrogance.

In 2015, the fishworkers and farmers approached the US court – the DC Circuit Court, to hold IFC liable for the livelihood loss their lending caused. IFC claimed immunity from court cases. The Circuit Court and thereafter, the Appeals Court upheld IFC’s claim. Finally, the Supreme Court took it up for an oral hearing and ruled that IFC and its parent body, the World Bank, do not enjoy absolute immunity.

The judgment was meted with disbelief by both sides – obviously for different reasons! Having engaged the best legal batteries to lose the case was beyond IFC’s comprehension. That the Davids can take on the Goliaths even today was a revelation to the communities in Mundra, and around the world.

Having settled the immunity issue, the case in US returned to the DC Circuit Court for hearing on the original petition of IFC’s liability. Again, trying to dodge responsibility for the damages they caused, IFC raised issues of jurisdiction and other legal technicalities. A week before the first anniversary of the immunity case, the Circuit Court ruled in favour of IFC, opening up the road for a long legal battle.

Meanwhile, the condition of the people on the ground went from bad to worse. Because of the effluence, the fish catch went down drastically. Fly ash and coal dust falling on the crops and grazing land made agriculture difficult and animals sick. The intake channel and the continuous dredging of it, expanded the land affected by sea ingress, turning large tracts of agricultural land barren.

A part of what IFC has been paying to its lawyers for defending and covering up their violations would have helped restore people’s livelihood. World Bank Group, a leader amongst the multilateral development banks across the globe, has failed in this case to ensure that people are not left to perish while pushing “prosperity for all”.

Joe Athialy is a social activist based in New Delhi


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