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

• Author: Nicholas Johnson
• Position: J.D. Candidate, American University Washington College of Law 2021.
• Pages: 16-16

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

case.21

*J.D. Candidate, American University Washington College of Law 2021.

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