The recent Supreme Court ruling in Jam v. International Finance Corporation kind of surprised me, as a layperson, since I had not imagined that banks were liable for their investees' actions domestically, much less internationally. Under what circumstances can an investing institution be held civilly liable for actions caused by an investee? Is the logic here strictly to dissuade investment in "bad actors" or is there a deeper reasoning?

1 Answer 1


Is the logic here strictly to dissuade investment in "bad actors" or is there a deeper reasoning?

Neither. In Jam v. IFC, the SCOTUS made no rulings as to whether the investor/lender (here the IFC) is liable for acts by its investee(s)/borrower(s). The whole controversy was only whether an international organization enjoys the same level of immunity

(1) as it was formerly enacted for the benefit of foreign governments, versus

(2) immunity to the extent available to foreign governments at the time the legal dispute [with the international organization] arises.

The SCOTUS's inclination is the latter interpretation (see in the Jam opinion the court's discussion of the reference canon).

Now that the proceedings have been remanded, the IFC might litigate on the basis that (1) it is not liable for the borrower's harm to the environment, and/or (2) the plaintiffs' recourse is to proceed only against the borrower (i.e., Coastal Gujarat Power Limited) and in the appropriate jurisdiction. The IFC's reason for not advancing these arguments beforehand might be that doing so could be interpreted as a waiver of the immunity the IFC pleaded.

In my opinion, the plaintiffs' motivation for suing the IFC (rather than the Gujarat power company) is twofold. First, the plaintiffs reasonably expect that recovery from a big, international lender such as the IFC is likelier to succeed than from one of its borrowers in a third-world country. And second, the plaintiffs might be aware that suing the Gujarat power company could only take place in India, which implies having to deal with a judiciary that is likely even more corrupt than the US judiciary.

  • This is insightful. However, my question was primarily about why immunity even matters either way, since they are an investing institution. I.e. how could an investor be liable for investee actions under US law in general?
    – Him
    Mar 7, 2019 at 22:27
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    @Scott Immunity matters because it would bar lawsuits against an entity, and therewith the risk that judgment may be entered against it. I highly doubt that US law would a priori make an investor liable for investee's acts. For a ruling of investor's liability to ensue, the issue would require (1) proof of additional elements, such as investor's awareness that he was funding/abetting investee's illegal activity (fraud, terrorism, racketeering, etc), or (2) specific clauses that establish investor's liability (as in joint and several liability) or which attribute to him a role of guarantor. Mar 7, 2019 at 23:26
  • The language of your comment led me to all sorts of info on the subject. e.g. here and here
    – Him
    Mar 8, 2019 at 0:28

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