Jam v. IFC: One Step Forward, Two Steps Back?

Author:Nicholas Johnson
Position:J.D. Candidate, American University Washington College of Law 2021.
16 Sustainable Development Law & Policy
Jam v. ifc:
one Step foRwaRD, two StepS back?
Nicholas Johnson*
Jurisdictional questions often arise in cross-border develop-
ment lawsuits. Claims against international organizations
and foreign sovereigns, however, are especially challenged
by broad immunity regimes.1 A recent case before the Supreme
Court, Jam v. International Finance Corp.,2 reignited this debate
in the October 2018 term, and the February 2019 decision estab-
lished a new standard for proceedings against international
organizations.3 The Supreme Court decided that instead of ref-
erencing a historical and absolute immunity from suit for sover-
eigns based in common law, the immunities extended under the
International Organization Immunities Act of 1945 (IOIA) will
now mirror the more restricted statutory immunities enumerated
in the Foreign Sovereign Immunities Act of 1976 (FSIA).4 The
decision, however, took the litigation one step forward and two
steps back. Although the suit is no longer barred by immunity,
the ultimate outcome of the case, and future cases like it, remains
far from clear because the Court did little to clarify the mixed
case law surrounding sovereign commercial act exceptions.5
The primary question before the Court was whether the
IOIA—which grants international organizations the “same
immunities from suit . . . as is enjoyed by foreign govern-
ments”—should be based on the common law denition of for-
eign sovereign immunity as understood in 1945 or whether the
immunities are linked to statutory foreign sovereign immunities
and remain at parity with the modern FSIA.6 Notably, the FSIA
was enacted after the Department of State initiated a policy shift
from recognizing absolute sovereign immunity at the time of
the IOIA to a form of restricted immunity in 1952.7 Under the
new theory, foreign sovereigns were presumed to have immu-
nity from suits related to their sovereign acts but not for their
commercial acts.8 This theory was then codied into law with
the FSIA and the judicial branch was tasked with interpreting
when a foreign sovereign could be sued based on the enumer-
ated exceptions.9
In the present case, the petitioners were a group of farm-
ers and sherman who lived in a region in India that was
environmentally degraded by an energy project nanced by
the International Finance Corporation (IFC) and implemented
by a local contractor under IFC loan agreements.10 The IFC
had required that the company follow a s pecic environmental
and social action plan to protect the surrounding area in its loan
agreement; the IFC also maintained the right to revoke funding
if the company did not comply.11 An IFC internal audit report
following the project found that the local contractor had not
complied with the protections plan and also criticized the IFC
for inadequately supervising the project.12 This internal audit
report became an impetus for the petitioners to sue the IFC in
the Federal District Court for the District of Columbia which
followed the United States Court of Appeals for the District of
Columbia’s precedent by upholding the IOIA absolute immunity
standard and dismissing the suit.13
Now that the Supreme Court remanded and decided that the
IOIA will incorporate the FSIA restricted immunity, the excep-
tions to immunity will have to be reinterpreted and re-litigated in
the new context of international organizations.14 For the relevant
commercial activity exception discussed in the present case, “a
foreign government may be subject to suit in connection with
its commercial activity that has sufcient nexus with the United
States.”15 Courts have established further case law on this issue,
but the record is unclear and the cases referenced in the opinion
are lled with unsettled questions about the commercial activity
and sufcient nexus elements.16
In its opinion, the Supreme Court twice referenced the U.S.
Government’s oral argument and amicus brief in support of the
petitioner to suggest that future cases would not succeed at trial
even if the Court linked the IOIA to the FSIA; however, this
seems far from certain.17 On the issue of commercial activity,
the Court concluded that “[a]s the Government suggested . . . the
lending activity of at least some development banks . . . may not
qualify as ‘commercial’ under the FSIA.”18 On the issue of nexus
to the United States, the Court concluded “the Government stated
that it has ‘serious doubts’ whether petitioners’ suit . . . would
satisfy the ‘based upon’ requirement.”19 Following this analysis,
the Court concluded that “restrictive immunity hardly means
unlimited exposure to suit for international organizations.” 20
The language used in the opinion notably avoids committing to
one conclusion on whether the commercial-activity or sufcient-
nexus tests will ultimately allow the IFC to maintain immunity
in the present case.
Serious doubts and generalizations aside, the legal questions
left unanswered in the Court’s past opinions on commercial act
exceptions to the FSIA now carry over into cases against orga-
nizations subject to the IOIA. As Jam v. International Finance
Corp. is remanded for further proceedings, it will again raise
serious questions about sovereign and international organization
immunity that will have broad consequences beyond the present
*J.D. Candidate, American University Washington College of Law 2021.
continued on page 30