Advancing the right to an effective remedy for corporate and development finance related harms

Advancing the Right to Remedy

Until recently, development finance institutions (DFIs), such as the World Bank and regional development banks, have faced few consequences when they have violated their own policies and procedures in the planning and implementation of their financed projects.

As a result, individuals and communities who endured the negative effects of DFI projects had nowhere to turn. However, since 1993, when the World Bank Board established its Inspection Panel, there has been a proliferation of transnational accountability mechanisms at DFIs. These mechanisms have helped to enforce the safeguard policies of the DFIs, which promise to “do no harm” to people or the environment through the development projects that they finance throughout the world. Despite these innovations over the past twenty years, the right to redress – a core element of the right to effective remedy for human rights violations under international law – remains elusive for many affected communities.

Even when investigations carried out by the accountability mechanisms conclude that harm has been caused as a result of non-compliance with operational policies, there is no process in place to ensure redress. Without such a process and adequate financing, those whose rights have been violated must rely on the goodwill of DFI management and board members to take appropriate remedial action, as well as the cooperation of client governments and/or companies, which is not always forthcoming. Inclusive Development International is working alongside coalition partners to close this accountability gap and advance the right to effective remedy for people who are harmed as a result of development malfeasance.

Our Actions

Strengthening environmental and social accountability

Joint Submission on the External Review of IFC/MIGA E&S Accountability

Inclusive Development International submitted Joint Comments on Realizing the Right to Effective Remedy within the IFC/MIGA Accountability Framework to the World Bank Group’s Board of Directors in September 2020. The comments, which we prepared along with Accountability Counsel, Bank Information Centre, Center for International Environmental Law and the Arab Watch Coalition, were submitted in response to a public consultation on strengthening environmental and social accountability at the two private sector arms of the World Bank – the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).

The submission follows an external review of IFC and MIGA’s Environmental and Social Accountability, including the role and effectiveness of  the Compliance Advisor Ombudsman (CAO), which was commissioned by the Bank’s Committee on Development Effectiveness in 2019.  The Review was led by an independent group of six experts in private sector development, multilateral institutions, and environmental and social sustainability.  The Review Team’s Final Report was publicly disclosed by the bank in August 2020, along with an invitation for public comments on its recommendations.

The Review team concluded that “most CAO non-compliance findings do not lead to effective remedy,” which it attributed primarily to the IFC’s failure to address project-level compliance findings and fulfill its remedial responsibilities when harms occur.  This reflects the experience of many affected communities seeking redress for adverse impacts associated with IFC/MIGA-supported projects through the CAO complaints process, including those that Inclusive Development International have supported.

Our joint submission emphasizes the critical need for remedy to be centered on the needs of communities affected by projects and be tailored and flexible enough to respond to those needs and to project circumstances.  It urges the IFC/MIGA Board to endorse recommendations by the External Review Team aimed at ensuring effective remedial actions by IFC/MIGA, and asks the Board to instruct IFC/MIGA to propose an implementation plan for public review and input. The joint submission recommends concrete reforms and identifies multiple funding options to support delivery of effective remedy when harm occurs due to projects supported by IFC/MIGA.

Joint Call for Greater Transparency and Consultation in the IFC/MIGA Accountability Review

Inclusive Development International and 74 global partners submitted a joint statement to the World Bank Group’s Board of Directors, expressing concerns about the lack of transparency and external stakeholder engagement in the accountability framework review of the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA). This process includes a review of IFC/MIGA’s independent accountability mechanism (IAM), the Compliance Advisor/Ombudsman (CAO). Recognizing the importance of a strong accountability framework and IAM to address community concerns and facilitate institutional learning, we and partners are calling for a review process that is robust, transparent, and inclusive of stakeholder voices.

Joint civil society submission to the Equator Principles Association: Towards an accountability mechanism for the Equator Principles

The Equator Principles is a social and environmental risk management framework for project finance; 97 financial institutions, including banks and credit agencies are signatories. Inclusive Development International joined 78 other civil society organisations in a joint statement to the Equator Principles Association (EPA) and signatory banks expressing disappointment that the Equator Principles review process has not adequately addressed the need to strengthen accountability of project financiers or ensure access to remedy for project-affected people. There is currently no requirement that institutions that have adopted the Principles establish accountability offices, or that the EPA create a centralized  office to address grievances and harms related to project financing.

Our submission calls on the Equator Principles Association (EPA) to initiate a process to develop an accountability mechanism, including a centralized and independent accountability office, to which project-affected people and other legitimate stakeholders could raise instances of alleged non-compliance with the Equator Principles by signatory banks. Establishing such an accountability mechanism would bring the EPA closer to meeting the requirements of the UN Guiding Principles on Business and Human Rights, and increase the credibility, accountability and effectiveness of the Equator Principles as a tool for risk management.

Submissions to Asian Infrastructure Investment Bank on its proposed Complaints Handling Mechanism

In 2017, Inclusive Development International helped to coordinate the preparation of a joint submission to the Asian Infrastructure Investment Bank (AIIB) on its proposed Complaints Handling Mechanism by ten civil society organizations and networks with expertise in using independent accountability mechanisms of development finance institutions.  The submission – a first of its kind – assembled the best practice from independent accountability mechanisms around the world on range of issues relating to mandates, functions and processes.  It also recommendation innovations that would make AIIB’s complaints mechanism the best in class and ensure AIIB investments further just, inclusive and sustainable development with effective accountability and remediation processes when unintended problems arise.

In 2015, Inclusive Development International joined with 10 partners in the International Accountability Working Group (IAWG) to assess the effectiveness of the accountability systems of 11 different DFIs. This first of its kind comparative research was published in the report, Glass Half Full? The State of Accountability in Development Finance, which documents the hurdles communities must overcome to secure substantive remedies from the financial institutions. The report benchmarks each institution against criteria for effectiveness and human rights compatibility and it concludes with a set of recommendations to improve the system. However, the report underscores that meaningful remedy for complainants and prevention of future harms will require more than best practices.  A new accountability system must be established as a matter of urgency, with complaint mechanisms empowered to make binding decisions on banks and their borrowers, and an end to immunity for development banks in national courts.

EVALUATION OF THE INSPECTION PANEL’S EARLY SOLUTIONS PILOT IN LAGOS, NIGERIA

In early 2014, the World Bank Inspection Panel added a new tool to its operating procedures known as the “Early Solutions approach.” Through this process, the Panel plays a passive problem-solving role, giving the World Bank and project affected people additional time to resolve grievances before the Panel decides whether or not to register the Request for Inspection. The Early Solutions approach was first piloted in a case in Lagos, Nigeria in which some 9,000 people were forcibly evicted from the Badia East urban poor settlement. In 2015, Inclusive Development International and the Center for Research on Multinational Corporations (SOMO) undertook an independent evaluation of the Lagos pilot to assess the fairness of the process used and the extent to which the outcomes were in the best interests of affected people and consistent with World Bank safeguard policies. The report, which was published in April 2016, makes recommendations for improving institutional accountability whilst ensuring the provision of effective remedies to people harmed by World Bank-financed projects.