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20 Apr 2023

EarthRights International

Submission by EarthRights International to consultation on IFC/MIGA remedial action approach

'Submission of EarthRights International on the Draft IFC /MIGA Approach to Remedial Action'

EarthRights International is a non-governmental organization with offices in the United States, the Amazon region, and Southeast Asia, that holds corporations and governments accountable for human rights violations and environmental harms, through litigation and legal advocacy. As part of this work, EarthRights has represented communities harmed by IFC-financed projects, including in Jam v. International Finance Corporation and Doe v. International Finance Corporation. We submit this comment on IFC/MIGA’s Draft Approach to Remedial Action (“Draft Approach”) based on that experience and our broader expertise on remedy, legal liability, human rights, and sovereign immunity. While our focus is on the Draft Approach, we note that much of this submission is highly relevant to the “Draft IFC Responsible Exit Principles” as well.

I. Introduction

IFC/MIGA’s Draft Approach does not address the accountability crisis that led to this effort in the first place and rejects most of the recommendations that could have resulted in meaningful change. It proposes nothing new, commits to nothing, and will have no impact on access to remedy. That is obviously by design. The strategy behind the Draft Approach is a mistake. If adopted, it would harm IFC/MIGA’s institutional interests, undermine its mandate, and damage its reputation. It should be reconsidered. [...]

VIII. Necessary components of a meaningful approach to remedy

For this effort to have value, IFC/MIGA must:

  1. Expressly acknowledge their remedial responsibilities and commit to ensuring the remedy gap is closed in all IFC/MIGA projects through a combination of borrower funds and IFC/MIGA funds and other support. This includes financial intermediaries.
  2. Remedy past cases of harm. At a minimum, all cases where CAO found non-compliance. This must include a commitment to provide remedy, including compensation, to the Jam communities.
  3. Commit to ensuring there are funding mechanisms in place for all projects in the event of harm. This should include building in contingent liability funding for all projects that can be easily tapped into in the event of harm and a process for ensuring such funds are actually provided that minimizes, or removes, IFC staff/management discretion to decline to access such funds. This should also include a means of ensuring IFC/MIGA funds are made available where IFC/MIGA cause or contribute to harm, and where there is no means of ensuring the borrower will provide compensation. This could be a set aside fund administered by CAO or some other independent means but it should be set up in a way that removes barriers to accessing such funds, including IFC staff and management discretion to refuse or simply fail to ac.
  4. Disclose existing contractual terms and explain existing practice. Commit to full contract transparency going forward.
  5. Write and fully publish a model contract(s) for all future projects with meaningful, innovative contractual terms to enhance IFC leverage to ensure social and environmental compliance. There should be an emphasis on provisions that remove discretion from IFC management and staff and give oversight and enforcement to the people and communities that the provisions are meant to protect, including express third party beneficiary rights for project-affected communities. This should also include limiting existing provisions, such as the ability to waive compliance, that undermine environmental and social performance.
  6. Expressly commit to using all available leverage and describe in detail what this will look like so prospective clients, communities, and the public are fully aware of this commitment and what is expected.
  7. Establish – and make publicly available – detailed policies and procedures that lay out the requirements for documenting use of any staff or management discretion with respect to compliance with environmental and social conditions, including written justification and explanation for any waiver decision and after the fact evaluation of that decision.
  8. Require the evaluation of development outcomes for every IFC/MIGA project and overhaul the way development outcomes, and more generally “success” is evaluated to require assessment of the impact on the local community and the environment. The AIMM 42 evaluation model is inadequate and problematic. The new approach must include an evaluation of initial assumptions and justifications against actual implementation and include a detailed assessment of environmental and social impacts, including negative impacts, to assess the net development outcomes.
  9. Substantially overhaul internal structures and incentives, with particular emphasis on how staff and management performance is evaluated and reshape other incentive structures necessary to shift the institutional culture away from emphasizing money out the door, and instead toward positive development outcomes and the prevention of harm to third parties and the environment.
  10. Strengthen the CAO, including by giving it greater access to information, more independence and authority, more resources, and the power to compel action by IFC/MIGA, including remedies, and especially compensation.
  11. Substantially enhance information disclosure and access to host communities. For every project, provide materials in the local language and distribute locally regarding IFC/MIGA potential involvement before project approval. Include information on the CAO as part of this.
  12. Substantially enhance commitment to enabling and supporting remedy to clients, but also expand this to make resources available to communities to support them in accessing mechanisms for redress and in balancing the asymmetry of power, resources and information.
  13. Commit to ensuring every exit – including early borrower prepayment – will ensure remedial action before the borrower’s obligations are considered complete under the agreement.
  14. Develop an approach to providing for affirmative local development outcomes separate from the question of remedy, to be designed by and for the communities who host IFC projects.

IX. Conclusion

Put simply, IFC/MIGA did not do the task that they were assigned. The Draft Approach is not an approach to remedial action at all, but rather, a concerted effort to dodge any measure of accountability. IFC/MIGA must use this opportunity to course correct before it is too late. [...]