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District Court Forces IDB/IIC to Waive Immunity

Bea Edwards, June 23, 2009

On June 19th, the U.S. Court of Appeals for the District of Columbia ruled that the Inter-American Investment Corporation (IIC), the private sector lending arm of the Inter-American Development Bank (IDB), could not claim immunity from a lawsuit for unjust enrichment by an independent consultant. The lawsuit will now proceed. The case, Vila vs. the IIC, is the second case this year to force international organizations to waive their immunities and submit to lawsuits brought against them in the United States (the other is Osseiran vs. the International Finance Corporation).

Jorge Vila, the consultant, argued that he had an understanding with the IIC to assist in arranging financing for specific projects in 2003. Vila had been retained on numerous previous occasions by the IIC for similar purposes. Because of the urgency of the tasks at hand, the IIC asked Vila to proceed with the work, although the contract for his services was not yet prepared and signed. He was told the paperwork would “catch up.” Over the course of six months, he performed the work, but the contract was never produced by the IIC. Once the work was finished, the IIC informed Vila that he would not be paid because he had no contract.

When Vila attempted to sue the IIC for unjust enrichment – benefiting from his services without compensating him for them – the institution claimed that it was immune from such suits because it is covered by the International Organizations Immunities Act. This law, which exempts international organizations such as the United Nations, the World Bank and the IDB “from every form of judicial process,” was extended to cover the IIC by Ronald Reagan in 1986.

Lawsuits filed by plaintiffs attempting to sue international organizations have confirmed the Act, but court decisions have held that international organizations waive their immunities “when the waiver would arguably enable the organization to pursue more effectively its goals” (Mendaro vs. the World Bank).

In Jorge Vila’s case, the Court of Appeals decided that if the IIC could refuse to pay contractors or consultants, despite a specific verbal agreement, the institution would be unable to contract capable experts. Allowing the suit would therefore serve to communicate to potential contractors that their agreements with the IIC could be enforced by law. Thus capable experts would be willing to work for the IIC and enable the institution to pursue more effectively its goals.

Justice Judith Rogers, writing for the court, recognized that the work Vila performed was well-documented and valuable. The decision leaves no doubt that the IIC solicited Vila’s services, benefited from them, and then refused to pay for them. The refusal to pay was finalized by the General Director of the IIC, Jorge Rogozinski.

The International Organizations Immunities Act has come under increasing scrutiny and criticism in recent years, as arbitrary actions potentially harmful to the staff of these organizations and the public, together with a lack of access to “a day in court,” have been exposed. All of the international organizations, including the World Bank, the UN, the IDB and the IIC, frequently exhort their member states to respect the public’s request for transparency, good governance and an independent judiciary, but often do not respect and implement these principles internally.