Investor liability for investee actions?
<p>The recent <a href="https://www.npr.org/sections/goatsandsoda/2019/03/07/699437482/supreme-court-rules-that-world-bank-can-be-sued" rel="nofollow noreferrer">Supreme Court ruling in Jam v. International Finance Corporation</a> kind of surprised me, as a layperson, since I had not imagined that banks were liable for their investees' actions <em>domestically</em>, 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? </p>

<blockquote>
  <p>Is the logic here strictly to dissuade investment in "bad actors" or
  is there a deeper reasoning?</p>
</blockquote>

<p>Neither. In <a href="https://www.leagle.com/decision/insco20190227i90" rel="nofollow noreferrer"><em>Jam v. IFC</em></a>, 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</p>

<p>(1) as it was <em>formerly</em> enacted for the benefit of foreign governments, versus </p>

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

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

<p>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 <em>only against the borrower</em> (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.</p>

<p>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 <em>even more corrupt</em> than the US judiciary.</p>

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