Courthouse Steps Oral Argument: Jam v. International Finance Corp.

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The issue at hand in Jam v. International Finance Corp. is whether the International Organizations Immunities Act (IOIA), which gives international organizations the “same immunity” as sovereigns have from suits, confers the same type of immunity as those foreign governments have under the Foreign Sovereign Immunities Act (FISA). The lawsuit began when farmers and fishermen in India were affected economically by the development of a coal-plant in India, by the International Finance Corporation (IFC), which is housed in D.C. and seeks to give aid and support to struggling communities in developing countries around the world. When the petitioners failed at the district and appellate court levels, they appealed up to the Supreme Court, who agreed to take the case while Justice Kennedy was still on the Court. Associate Justice Kavanaugh will sit out on the oral arguments and decision, as he was on the D.C. Circuit when this case was originally heard before that court. 

Edwin D. Williamson will address the concerns at stake here, including the involvement of U.S. courts in international human rights issues (including environmental). 

Featuring: 

Edwin D. Williamson, Retired Partner, Sullivan & Cromwell

 

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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's International & National Security Law Practice Group, was recorded on November 7, 2018 during a live teleforum conference call held exclusively for Federalist Society members.       

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is a Courthouse Steps oral argument discussion on Jam v. International Finance Corporation. My name is Wesley Hodges, and I'm the Associate Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today's call.

 

      Today we are very fortunate to have with us Edwin D. Williamson, who is a Retired Partner at Sullivan & Cromwell and a former State Department Legal Adviser. After our speaker gives his remarks today, we will move to an audience Q&A, so please keep in mind what questions you have for the case, for the oral arguments, or for our speaker in particular. Thank you very much for sharing with us today, Edwin. The floor is now yours.

 

Edwin D. Williamson:  Well, thank you very much. Well as explained, Jam v. International Finance Corporation was heard by the Supreme Court last Wednesday. And it brings together some strange bedfellows. It makes one wonder how the Trump administration ended up on the side of some professors seeking to get the U.S. courts involved in international human rights issues, including environmental regulation.

 

      The case involves some Indian fisherman's complaints of environmental harm from a coal fire plant in India, which was built in part by a $450 million loan from the International Finance Corporation, part of the World Bank Group. The fisherman-petitioners initially lodged a complaint with the IFC's Compliance Advisory Ombudsman, which offers a platform for communities around IFC-finance projects to voice their complaints. The fisherman refused dispute resolution, and the ombudsman offered compliance advice as to how the IFC might better comply with its own, voluntary standards.

 

      The fisherman instead turned to the U.S. courts and filed suit against the IFC. But not the developer/builder/operator or its parent, since Supreme Court recently held in Jesner v. Arab Bank, that foreign corporations cannot be sued under the Alien Torts Statute. They sought damages and injunctive relief, quote, "directing the IFC to…exercise all…leverage practicable" to induce the developer/builder/operator and its parent to alter the plant design and ensure that operations are conducted in a manner satisfactory to them.

 

      The IFC, established in 1956 by the World Bank Group with major funding by the United States, encourages development through the private sector. 184 countries are members. Its Articles of Agreement provide immunity from regulation and other actions by its member governments that would interfere with its functions. Furthermore, as an international organization of which the United States is a member pursuant to a treaty or act of Congress, it has been designated an international organization under the U.S. International Organization Immunities Act. And it, quote, "enjoy[s] the same immunity from…judicial process as is enjoyed by foreign governments," close quote. I would note except where it has waived such immunity.

 

      Under the Act, the president of the United States may, quote, "in light of the functions performed by [an] international organization," close quote, limit or withdraw completely an international organization's immunities. The president cannot, by the way, mess with the IFC's immunities under its Articles of Agreement.

 

      In 1945 when the IOIA was enacted, the United States and international law generally recognized a near-absolute standard of immunity for foreign governments. Over time, this near-absolute standard gave way to the restrictive theory, accepting commercial activities, generally known as jure gestionis, as opposed to use jure imperii acts, which only sovereigns perform. The United States codified the restrictive theory in the Foreign Sovereign Immunities Act of 1976. Thus, the question before the Supreme Court was: Does the IOIA embody the near-absolute standard existing in 1945 or an evolving standard based on the law applicable to foreign sovereigns, specifically the Foreign Sovereign immunities Act.

 

      In 1996, the Court of Appeals for the D.C. Circuit held in Atkinson v. Inter-American Development Bank that the Foreign Sovereign Immunities Act did not modify the IOIA. An earlier case in the same court, which I'll refer to as Mendaro, had held that a provision in the World Bank's Articles of Agreement agreed to suits in the District of Columbia constituted a waiver of immunity from judicial process, but only in connection with agreements that benefited the bank, such as a loan. That case involved an employment discrimination claim for which the court held there had been no waiver. In Atkinson, the court confirmed that view, further holding that while the wording of the IOIA was not clear as to which standard, near-absolute or evolving, applied the IOIA provided a mechanism for the president to adjust whatever the standard for a specific international organization. That reasoning has been followed not only in the District of Columbia but in other federal and state courts, except for one case in the Third Circuit Court of Appeals.

 

      The D.C. Court of Appeals confirmed this view in Jam v. IFC, with Judge Silberman, the author of Atkinson, again writing for the court. Judge Pillard, a 2013 Obama appointee, concurred in the result because Atkinson is controlling in the D.C. Circuit, but she said that Atkinson was wrong. Thus, Judge Pillard and the fisherman-petitioners rely heavily on a dictum in 1980 opinion by then-State Department Legal Adviser, Roberts Owen, that, quote, "by virtue of the FSIA, and unless otherwise specified in their constitutive agreements, international organizations are now subject to the jurisdiction of our courts in respect of their commercial activities, while retaining immunity for their acts of a public character." Both Judge Pillard and the fisherman-petitioners substituted ellipses for the two very inconvenient qualifications in the Owen dictum – that is "unless otherwise specified in their constitutive agreements" and "while retaining immunity for their acts of a public character."

 

      The Supreme Court granted certiorari on the narrow question of whether the FSIA modified the IOIA. The Trump administration submitted an amicus brief advocating reversal of the decision below. The brief was signed by the Attorney General, a career deputy -- sorry, was signed by the Solicitor General, a career deputy solicitor general, and the State Department Legal Adviser, but not, interestingly, the Treasury Department General Counsel. A group of law school professors, including former-Legal Adviser and Yale Law School Dean, Harold Koh, filed a brief taking the same position.

 

      I organized an amicus brief opposing that position, recruiting three other former Legal Advisers and a former-White House Counsel, fellow Federalist member, Boyden Gray. Other amicus briefs on our side were submitted by very impressive bipartisan group of eight former Secretaries of State and Treasury, including my old boss, James Baker—who was both—which pointed out the difficult foreign relations issues involved in modifying an international organization's immunities. And a group of law school professors, including a former career member of the Office of the Legal Adviser also filed an amicus brief on our side.

 

      So what is this about strange bedfellows? Clearly, the motivation behind the Koh group is getting U.S. courts involved in international human rights issues, which include environmental issues. For an articulation of this issue, see his piece on Just Security, where he says, "If the Supreme Court rules that the words, quote, 'same immunities,' close quote, are frozen in time as of 1945, then international organizations make who make profits, commit environmental damage, violate human rights, or breach contracts with United States companies would be absolutely immune from suit, even though the many governments that compete -- comprise them are not," close quote. As with the rest of Harold's pronouncements, parts of that statement are true, which we can cover later if we have time.

 

      It was not clear, and still isn't clear to me, what the Trump administration's motivation was in coming on -- coming in on that same side. I think the most charitable explanation is that they were just instinctively following a, quote, "we-go-where-a-plain-reading-of-the-statute-takes-us," close quote, maxim, notwithstanding the fact that the plain words of the IOIA are ambiguous. There is nothing in the FSIA that even hints at its also amending the IOIA, and arguably one mentioned in the FSIA of IOs indicates that Congress understood the difference between the sovereignty of IOs and foreign sovereigns -- sorry, the difference between the immunity of IOs and foreign sovereigns. And the government's interpretation ignores the structure of the IOIA.

 

      Let me just pause for a second to explain the difference between the immunities. Probably the best way to express it is the -- we put it in our brief -- the foreign sovereign immunities rests on comity and reciprocity. IO immunity exists to further each member's own direct interest in effective functioning of the IO. And there's a statement on that in the third restatement, if anybody is interested in more detail.

     

      While the government claimed to take a consistently held position that the FSIA applies to IOs, also citing the Bob Owen dictum that I quoted a little while ago—and our brief disputed the accuracy of this claim—it curiously ignored the structure of the IOIA; that is a grant of immunity subject to the power clearly delegated to the president to carefully tailor an international organization's immunities, where the IOIA has grant, whatever the standard, was inappropriate. It instead favored the court's modification of the IFC's immunities with the very blunt FSIA blade regardless of its effect on the operations of the IFC, whose function is engagement in commercial activities.

 

      As to the Koh group's motivations, I don't think I need to point out that support for the Courts involvement in international environmental matters is inconsistent with everything I know about the Trump administration. And I'll briefly point it out that while the U.S. government had on several occasions paid lip service to the Owen dictum, in each case it had come out on the side of immunity for the particular activity involved, usually an internal-personnel matter, as did Bob Owen in his letter. And that the government's most recent position on the issue, in a footnote in a brief in the Second Circuit involving the IMF, included an endorsement of Atkinson—this was in 2006. We further pointed out that the U.S. position did not even follow the Owen dictum because the result sought ignored the two important qualifications of the Owen dictum.

 

      At the oral argument, the fisherman-petitioner's lawyer, Jeffery Fisher of Stanford Law School, was almost immediately interrupted by Justice Breyer. Justice Breyer first pointed out that the hornbooks that he read about the reference canon, cited by Fisher and the government as a guide in interpreting the key words of the IOIA, contained an important proviso. The later change in the law supposedly adopted by the earlier statute must be consistent with the purpose of the adopting statute. Then Justice Breyer laid out the problem with [the] petitioner's position. If the Court reverses the lower court, taking away the immunity of the IFC, and along comes a case when the IFC should have immunity, there's nothing that can be done. On the other hand, if the Court upholds the ruling below and along comes a case in which the IFC should not have immunity, then the president, under his powers granted by the IOIA, can take it away in that case or even completely. After a lot of thrashing around without really addressing the issue, Fisher was again interrupted by Justice Breyer, who raise this point again. Fisher's only response was that the IFC could lobby Congress to enact legislation, giving it immunity and cited three cases where Fisher claimed that this had been done – the UN and OAS Headquarters treaties and the World Trade Organization Agreement.

 

      As with a number of Fisher's arguments, this was quite misleading, and the IFC's lawyer very convincingly demolished his examples, demonstrating how they either did not support his argument, particularly the UN example, or they were not on point. Justice Sotomayor entertained the legislation solution but even that devolved into a discussion as to whether it would be retroactive, etc.

 

      Justice Gorsuch made a brief intervention with respect to the reference canon, appearing to agree somewhat with Justice Breyer's question along this line. Fisher rebutted by citing an opinion by then-Judge Gorsuch on the Tenth Circuit, holding that of course the adopting statute would not be held to have incorporated stilted or antiquated concepts. Fisher finished with a brief discussion of the differences between the wording of the IO immunity provision and of the officer's and employee's immunity provision, which the U.S. government also spent some time on. This is a very technical area. I'm not going to get into it, mainly because I did not get the impression that the Court saw much of significance here.

 

      Jonathan Ellis, an Assistant Solicitor General, put in a ten-minute argument on behalf of the U.S. government. He picked up on Fisher's text arguments and was beginning to get into some drafting history when Justice Kagan intervened. She suggested that if the IOIA standard was less than absolute, it would have made more sense if Congress had given the president power to limit or increase an IO's immunity; therefore -- which      it obviously does not give the president the power to increase an IO's immunity; therefore, assuming a virtually absolute standard makes no sense. Ellis responded that the IOIA did not bestow a high standard of immunity on international organization offices, and the IOIA does not give the president to increase that immunity.

 

      Justice Breyer then joined in echoing Justice Kagan's line of inquiry, pointing out that if the IOIA does not give any immunity to the IFC because all it does is lend money, then the provision allowing the president to limit immunity has no meaning. Ellis responded that the IFC has some activities that would not come within the commercial activities exception. He then argued that, in fact, in this case it was unlikely that the petitioner's claims met the commercial activities and tort exceptions U.S. nexus requirements, citing the OBB case involving the gravamen requirement.

 

      He then gave a couple of questionable examples where the IFC should be subject to suit, citing contract disputes, clearly held by Mendaro, by the way, to have been waived by IFC in slip-and-fall cases. As to the latter, it seems that the easy answer is that the president could issue an executive order stating that there would be no immunity from suit in such cases.

 

      The biggest disappointment to me in the oral argument was that none of the Justices challenged Ellis on this example. I think Ellis was just wrong, also, in characterizing some IFC and World Bank activities, such as legislative advice and lending to sovereigns as not being commercial activities. Later, Ellis did refer to the waiver interpretation, but it was not clear that he accurately summarized it.

 

      The IFC was represented by former-Solicitor General Donald Verrilli, making his first Supreme Court appearance since stepping down at the end of the -- towards the end of the Obama administration. While no doubt connected to the fact that I agreed with him, I found his arguments to be very persuasive. In addition to his statutory arguments, he kept returning to the characterization of the petitioners, in particular the government's positions as inviting the Court to jump off a cliff. The problem, he argued, is that there is no assurance of a soft landing. He got in a little trouble with Justice Kagan in trying to distinguish between the purposes of the IOIA provision. It, then, was not to provide the same immunities granted to sovereigns, but it was a means to meet U.S. statutory treaty obligations undertaking with respect to IOs, particularly the UN. His analysis of the UN treaty history was especially strong, and in the course of that he cited a valuable contribution by the brief of the professors on our side.

 

      Professor Fisher's final reply contained a couple of statements that I had some problem with. One I'll just talk very briefly about. In trying to refute Verrilli's argument with respect to the UN, essentially what Verrilli said is that in 1945, we undertook to provide the UN with absolute immunity. The UN Headquarters Treaty does provide that. But the Headquarters Treaty was not ratified by the United States until 1970; therefore, if the IOIA did not bestow this immunity, then the U.S. was in violation of its treaty obligation from 1945 to 1970. So Fisher refuted that and said, basically, the UN wasn't doing anything that were commercial activities, so therefore we weren't in breach of any -- which I think was very questionable comment -- and therefore, we weren't in breach of any treaty rights. And if you have any doubt on that, I would urge you to look at the federal government's position then and now.

 

      And he says it's not just a brief filed in this Court. It is the position of four different presidential administrations have taken. He refers to the Carter administration, and there I assume he means the Owen letter, right after the FSIA was passed. The George H. W. Bush administration, which I assume he refers to as the -- is referring to a statement that accompanied the OAS Treaty where, just in a passing reference, the statement was made that while the Department usually advocates a restrictive theory applicable to the international organizations, in this case it was appropriate that the absolute principle apply. It was hardly correctly characterized as a definitive statement on the immunities of international organizations. The Clinton administration, which I assume refers to a couple of briefs that were filed I think right about the time that Atkinson was decided, but it could've been something in the pipeline before Atkinson was decided. But, again, like all the other cases in the government, while it pays lip service to this position, found that there was immunity in the particular case. And then he finally cites the Trump administration, which I assume he means the current case. Quite interestingly, he omits the position taken in the George W. Bush administration, which I referred to earlier in the case with respect to the IMF.

 

      So I think I've gone on a little bit longer than I expected. I hope you'll forgive me for that. So I think I'll wind down here and take some questions. But let me just end with a couple of thoughts. The narrowness of the question before the Court unfortunately did not allow for an opportunity to explore the myriad issues lurking in this litigation. As Ellis, for the government, admitted or either -- actually offered us the cushion for the jump off the cliff, reversal of the opinion below will begin years of litigation over whether the U.S. nexus required by the FSIA's commercial activities and tort exceptions exist, and whether relief sought—and I think this is the most interesting question from an administrative law -- international organization immunities standpoint—but whether the relief sought is really regulation by a member government in violation of the IFC's Articles. Let me [give] a word of disclosure. I have given the World Bank and the IFC an opinion to the fact that their immunities in their Articles of Agreement do shield them from regulation under the Dodd-Frank Act.

 

      Finally, the fisherman's case does not appear to meet the high pleading standard the Supreme Court recently held applicable in FSIA claims in Venezuela v. Helmerich & Payne. Also, given Ellis's argument, the decision will really not make any difference in the outcome of this particular case because immunity will eventually be found.

 

      I wonder if there are grounds for the Court to conclude that certiorari was improvidently granted. I make that last comment also with the disclosure that when I suggested inserting that into our amicus brief, my very able lawyers, Jonathan Franklin and Peter Siegal from Norton Rose Fulbright, told me that there was no way we were going to get that particular argument in this brief. But anyway, I make it for what it's worth.

 

      So I'll end there, and I'd be happy to take any questions.

 

Wesley Hodges:  Thank you so much, Edwin. And I don’t see a question right away. I turn the mic back to you for any comments you'd like to have, maybe perhaps comments on -- more thoughts on where you see this case going?

 

Edwin D. Williamson:  It was interesting the -- I also meant to sort of mention the activity by the various Justices. I'm not a great Supreme Court watcher so I don't know how much weight to give to this, but Justice Breyer was fully engaged, and I think he got it right off the bat, and I think he saw the -- and he was quite skeptical. So I think he will come out on the side of affirming. Justice Kagan was likewise quite involved, and I agree that she -- and I think -- my first reaction was that maybe there was a little bit of a question about her.

 

      Justice Ginsburg had a few questions, but I really couldn't quite tell where they were going.

 

      I was quite disappointed and a little bit concerned about the fact that Justice Gorsuch only had the one question and dealt more with statutory interpretation as opposed to what I consider is sort of the substance of the case. And Justice Alito did not say anything, as of course Justice Thomas didn't either.

 

      Justice Kavanaugh had recused himself or was recused, probably because he participated in the rehearing question or something at the D.C. Court of Appeals level.

 

      Justice Sotomayor had some questions, but, again, I couldn’t quite tell what they were leading to. They didn’t seem to quite go to the -- what I consider to be kind of the heart of the issues here.

     

      So I think on balance, I think I would predict an affirmation one way or the other. I asked somebody much more knowledgeable than I what the significance was of the silence of—relative silence of—Gorsuch and Alito, and he replied that they probably didn't want to have to write the opinion. Someone else suggested perhaps a -- at least a 4-4 decision. It would, of course, result in the lower court decision standing but with no opinion.

 

Wesley Hodges:  Wonderful. Thank you for that commentary, Edwin. It does look like we do have one question from the audience. Let's go ahead and move to our first caller.

 

Mary Maxwell:  Hello, Mr. Williamson. It's Mary Maxwell in New Hampshire. I'm afraid I tuned in late, but I doubt if you covered this. In your biography, it says that you work on such issues as the basis for domestic and international basis for the use of force. And when I just glanced at it, I hope I read it wrong to mean the basis for the use of international force domestically. Are there any examples of that? I'll say it again. The use of international forces domestically. I can't imagine it being constitutional in U.S. but maybe somewhere else?

 

Edwin D. Williamson:  Let's see, I don’t have that formulation right in front of me, but let me see if I can pull it up. But it's on -- basically, I think a domestic and international lawyer -- sorry, domestic and international law bases—that is authorizations -- how do you find the authorization to use force? And it would be use of force [inaudible 30.34]. I'm not talking about domestic police action, but the war power and what is the constitutional basis for the president on -- you know, what's the constitutional basis for our having troops in Syria, or Iraq, or Afghanistan, and what is the international basis for those?

 

Mary Maxwell:  And so you just look for the basis in international law, not that the forces are international?

 

Edwin D. Williamson:  Right. Yeah.

 

Mary Maxwell:  I'm the appellant, or was the appellant until the other day, in Maxwell v. Trump, which is a war powers case, and it has been lost at the First Circuit, so I'm trying to decide whether to go to the Supreme Court about it, but as you know all the war powers cases are lost since 1952. However, there's a soldier who is in the queue ahead of me for having an important war powers case. His name is Nathan Smith, and he was complaining --

 

Edwin D. Williamson:  I'm having a little difficulty understanding you, so I can't -- I would love to follow up…

 

Mary Maxwell:  Very sorry. All right. It was a little bit off topic, but you could look it up sometime. His name is Captain Nathan Smith. And his war powers case is as yet undecided at the D.C. Appellate Court.

 

Edwin D. Williamson:  What's his name again? Mason…?

 

Mary Maxwell:  Captain Nathan Smith, and his complaint is if I this this war, like against ISIS, is unconstitutional, how can I instruct the men under my command to participate? And he filed it under Obama, but then they changed the name of the case to Smith v. Trump and it's been hanging around for a long time.

 

Edwin D. Williamson:  Okay. I'll take a look at it.

 

Mary Maxwell:  Thank you.

 

Wesley Hodges:  Thank you very much, caller. Seeing no more questions from the audience, Edwin, do you have any closing thoughts for the case or anything you want to cover before we end today?

 

Edwin D. Williamson:  I did have a piece on the Weekly Standard website that appeared the day of the arguments. I assume it's still up. It basically has the same details that I discussed. Anyway, so I hope I answered the questions, or I hope I didn't put everybody to sleep.

 

Wesley Hodges:  Thank you so much, Edwin. And, again, I'd invite everyone to check out that piece in the Weekly Standard that Edwin wrote. So, everyone, on behalf of The Federalist Society, I'd to thank our expert for the benefit of his valuable time and expertise today. We welcome all listener feedback by email at info@fedsoc.org. Thank you all for joining. The call is now adjourned.

 

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