In the Gulf of Kutch, a rural coastal area in western India (where my family comes from), a coal plant financed by the International Finance Corp. — part of the World Bank — caused substantial environmental harm, including devastating the ecosystem relied on by a small minority group that depends on fishing to live.
“The livelihoods we knew from our childhood have been destroyed,” Gajendrasinh Jadeja, a former elected head of Navinal, one of the villages neighboring the plant, told me in March. “Ten fishing boats can’t catch what one boat caught in the past. It’s getting worse by the day.”
But when the local government, along with fisher-people and farmers from that part of the Kutch coast, sued in federal district court in D.C. — where the IFC and the World Bank are headquartered — the IFC’s response wasn’t to deny the harm done but to try to escape legal liability. It’s a stance that’s not only unjust but also undermines the stated mission of the IFC, the World Bank and the rest of the international development finance industry: If these organizations resist responsibility in cases where their investments — their work — do harm, they’re effectively perpetuating some of the same problems they putatively exist to remedy.
Multilateral institutions such as the World Bank are different from private banks. They were set up to fight poverty, not maximize profit. Indeed, in the “What We Do” section of the World Bank’s website, it says, “We are not a bank in the ordinary sense but a unique partnership to reduce poverty and support development.” Unlike a for-profit lender that might finance, say, building of an office complex — and expects only that its loan is paid back on time and in full by the borrower — when the World Bank lends money for development projects, it means to enhance the countries and communities hosting those projects.
The IFC’s internal guidelines elaborate on this idea, stating that “Central to IFC’s development mission are its efforts to carry out investment and advisory activities with the intent to ‘do no harm’ to people and the environment,” and that “IFC is committed to ensuring that the costs of economic development do not fall disproportionately on those who are poor or vulnerable, that the environment is not degraded in the process, and that renewable natural resources are managed sustainably.”
That’s not what happened in the Gulf of Kutch. In this case, the IFC lent the multinational Tata Corporation $450 million to build an “ultra mega” coal plant in Gujarat state as part of what the Huffington Post called “a bold scheme to bring its poorest citizens into the 21st century.”
But as the HuffPost reported in 2015, residents of the nearby fishing outpost of Tragadi Bandar “claim in a lawsuit filed April 23 in U.S. federal court in Washington, D.C., that warm water discharged by the Tata plant has driven fish away from the intertidal zone, where the Waghers [members of a Muslim minority group who’ve lived by the coastline for centuries] used to practice pagadiya, a traditional method of setting up nets and harvesting the fish at low tide. The returns from boat fishing, which takes place farther from shore, have also fallen off.”
There’s evidence that the IFC didn’t stick to its own standards throughout the process. Before taking their case to court, the Kutchi communities petitioned the IFC’s compliance adviser/ombudsman for relief. In 2012, the ombudsman found “a number of issues raised by the Complainants merited further enquiry; that IFC’s review of the power plant’s [environmental and social] assessments was not commensurate with project risk as required by its Sustainability Policy.”
Per the ombudsman: “Cumulative nonlethal (but potentially harmful) effects of submarine noise, light, heat, and other aquatic disturbance from the project on the local marine environment were not adequately considered in marine impact assessment process.”
And in a follow-up report last year, the ombudsman concluded that there was “an outstanding need for a rapid, participatory and expressly remedial approach to assessing and addressing project impacts raised by the complainants.”
But the ombudsman’s office has only an advisory role. Eventually, the affected communities sued. IFC, though, maintained that it can’t be held liable, relying on a 1945 law, the International Organizations Immunity Act. And last year, the U.S. Court of Appeals for the District of Columbia Circuit found in favor of the IFC; the Kutchi communities have petitioned the Supreme Court to review that decision.
Fighting attempts to hold it liable in court is IFC’s legal right. But it’s the wrong approach.
The forces that built that coal plant are international. Now that harm has resulted, the sources of remedy should be, too, and it shouldn’t take American courts to recognize this. As the D.C. Circuit Court noted, the IFC, even in its own defense, “does not deny” that “the plant caused damage to the surrounding communities.” The World Bank and IFC, then, should want to hold themselves accountable, because that’s consistent with their mission. If their raison d’etre is assisting developing communities, they shouldn’t hide when a project winds up diminishing a community.
If a multilateral development bank wants to earn public trust in a country where it has funded projects, and wants to avoid litigating the problems of one land in the courts of another, it shouldn’t assert immunity as a legal strategy. It should make its investments more accountable to the people it was set up to help.
To accomplish this, the first step would be making its social and environmental standards enforceable, both as conditions between the bank and the organization it lends to, and as binding commitments to the community affected. If a firm gets a loan and then violates those standards, citizens of an affected community should be able to seek enforcement from local administrative institutions and, if necessary, local courts. If those efforts fail, multilateral banks should provide access, not to an advisory body such as the ombudsman, but to an arbitration panel with the power to order a remedy.
Second, multilateral banks should pioneer a new global norm for the private sector: dedicating a small fraction of total lending to finance independent legal support for affected communities — a mechanism that would strengthen the position of communities absorbing development efforts.
There is already a growing movement committed to providing that support: I help convene a global network dedicated to legal empowerment. It’s made up of more than 1,300 groups, from 130 countries. But most of them are severely under-resourced. For communities to stand a chance alongside huge corporations and major development institutions, they should have access to adequate legal resources of their own.
To avoid conflict of interest, the money would need to be administered by independent bodies — a national human rights commission, say, or public legal aid boards. But the key point is that the international development complex should bear some of the cost of equipping the people affected by development to exercise their rights.
To live up to the directive “do no harm,” IFC, the World Bank and other development institutions must see that a legalistic approach — one that gives them the option of washing their hands when their projects go wrong — does a disservice not only to the various communities in which these projects exist but also to the ultimate mission of the institutions themselves.