U.S. top court mulls pollution dispute over power plant in India

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Wednesday appeared unlikely to revive a lawsuit by villagers in India seeking to hold a Washington-based international financial institution responsible for environmental damage they blame on a power plant it financed.

The justices heard an hour of arguments in an appeal by the villagers of a lower court ruling that the International Finance Corp, part of the World Bank Group, was immune from such lawsuits under U.S. law. Several justices expressed skepticism towards the villagers' legal argument, signalling the court was likely to back the IFC. A ruling is due by the end of June.

The IFC provided $450 million in loans in 2008 to help construct the coal-fired Tata Mundra Power Plant in Gujarat, India. IFC loans include provisions requiring that certain environmental standards are met. Lead plaintiff Budha Ismail Jam and other fisherman and farmers living near the plant sued in federal court in Washington in 2015, saying the IFC failed to meet its obligations.

The legal question is whether there are limits to immunity for entities like the IFC under the 1945 International Organizations Immunity Act, as there are for foreign countries under a 1976 law called the Foreign Sovereign Immunities Act.

The IFC expressed concern that a ruling against the organisation could invite similar lawsuits targeting it and other international development banks.

Justice Stephen Breyer appeared to sympathise, asking Justice Department lawyer Jonathan Ellis: "What is the assurance that the government can give us that this isn't going to lead to a lot of lawsuits?"

Fellow liberal Justice Elena Kagan said the IFC's interpretation of the scope of immunity appears to "make a lot more sense."

The villagers said the plant's construction and operations did no comply with the environmental plan set out for the project. The local environment has been devastated, according to the plaintiffs, with marine life killed by water discharges from the plant's cooling system and coal dust contaminating the air.

Lower courts ruled that the lawsuit was barred because the IFC is immune from such litigation under the 1945 law.

President Donald Trump's administration backed the plaintiffs, saying international organizations should not be given anything more than the limited immunity foreign countries are accorded.

One of the nine justices did not participate in the case. Justice Brett Kavanaugh, who Trump appointed, was involved in the case in his prior role as a federal appeals court judge.

(Reporting by Lawrence Hurley; Editing by Will Dunham)