Laws giving foreign organizations immunity from lawsuits date back to at least 1945 with the “International Organization Immunities Act.” This Act granted international organizations the same immunity from being sued as enjoyed by foreign governments. However, since then, the scope of foreign government immunity has been curtailed raising the question of whether foreign organizations should be similarly treated. That issue recently went to the U.S. Supreme Court who clarified when international companies and nonprofits can be sued.

Under the 1945 Act, foreign governments and organizations had a nearly absolute immunity from suit. However, in 1976, Congress eliminated absolute immunity for foreign governments and instead established a presumption of immunity subject to a variety of exceptions. These included commercial activity with a connection to the U.S.; claims related to U.S. property taken in violation of international law; claims related to U.S. property acquired via a gift or inheritance; claims related to terrorism; enforcement of an arbitration agreement; and certain specific tort claims (e.g., malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit or interference with contract rights).

Whether this reduced immunity should also apply to foreign organizations was raised in Jam v. International Finance Corporation. The case involved an international organization headquartered in the U.S. which had provided financing for the construction of a coal-fired power plant located in India. Plaintiffs who lived and worked near the power plant sued in U.S. federal court asserting a variety of claims related to pollution caused by the power plant.

The Defendant claimed that it was immune from suit because at the time the International Organization Immunities Act was passed, foreign governments and organizations had absolute immunity. The company argued the scope of their immunity was fixed at that level and that the subsequent change in the standards in 1976 was inapplicable to them.

The Supreme Court, reversing a decision of the District of Columbia Circuit ruled that this was not the case. The Court stated that based on the language of the statute, the degree of immunity available to foreign organizations should evolve and change in lockstep with the immunity available to foreign governments. Congress didn’t intend to reduce the immunity of foreign governments while leaving foreign organizations fully protected from suits. Therefore, any changes to immunity of foreign governments also apply to foreign organizations. Accordingly, the Court reinstated the suit and sent it back to the trial court to determine whether it was within the scope of the commercial activity exception contained in the 1976 act (which would allow the plaintiffs to maintain a lawsuit against it).

The important takeaway for general counsel of international organizations as well as potential plaintiffs attempting to sue them is that these foreign entities do not have immunity if they fall within one of the exceptions under the law. Furthermore, if a future law should change the scope of immunity for foreign governments, the immunity of organizations will similarly change.
If you are considering a suit against a foreign entity or defending one, contact us for a consultation.