Our Statement for Remedial Action Policy and Responsible Exit

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Our Statement for Remedial Action Policy and Responsible Exit

Our Statement for Remedial Action Policy and Responsible Exit

We, the civil society organizations signing this statement,  assert that the newly released proposal on remedial action and responsible exit principles by the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) fall short of expectations and fail to provide a comprehensive plan for delivering remedy to affected communities. If IFC and MIGA cannot guarantee remedy for project-related harm, they should not be funding development projects in the first place.

 

IFC and MIGA’s proposed Approach to Remedial Action and Responsible Exit Principles were supposed to explain how the institutions would address the well-known human rights and environmental harms caused by some of their investments. Instead, IFC and MIGA’s response to the well-documented remedy gap is to publish a short paper and a PowerPoint presentation that herald its existing prevention and mitigation practices and does not admit that the institutions have a human rights obligation to remedy harms to which they have contributed. Thankfully, the documents are only proposals subject to public consultations, and we call upon IFC and MIGA to make significant changes.

 

IFC and MIGA have known for years that some of their investments cause environmental and social harm and that under international human rights standards, those who contribute to harm should contribute to providing remedy. An independent expert review, led by a former IFC president and requested by the World Bank’s board, confirmed this standard and recommended that the institutions contribute to and promote access to remedy for project-related harms. The review deemed IFC and MIGA’s current accountability system inadequate and remedial actions practically nonexistent. We are surprised, therefore, that the Approach to Remedial Action and Responsible Exit Principles commit to very few new actions.

 

The proposed Approaches include some necessary elements, including a commitment from IFC and MIGA to facilitate and support clients’ remedial actions, explore and pilot arbitration, and exercise leverage over clients, including through contractual provisions and the use of various financing instruments. IFC and MIGA largely failed to respond to the board’s assignment, however, as they left out the following necessary components:

 

  1. Types of remedy: Despite “Remedial Action” in its title, the proposed Approach does not provide a plan for delivering any type of remedy. Further, the draft policy does not include any examples of remedy that IFC and MIGA have provided in the past or how IFC and MIGA will contribute to and promote specific types of remedy available in the future. Remedy can take many forms, including compensation, apology, rehabilitation, satisfaction, and commemoration, among others. The Approach must detail how IFC and MIGA are prepared to provide each type of remedy when the circumstances arise.
  2. Financial contribution by IFC and MIGA: Even though it is evident that remedy often costs money, “the Approach does not contemplate a systemic process for the financing of direct contribution to remedial action” (page v). This is a major gap. IFC and MIGA refer vaguely to directly financing remedy in “exceptional circumstances,” but don’t define them. IFC and MIGA don’t even commit to directly remedying the cases in which its accountability mechanism, the Compliance Advisor Ombudsman (CAO), found that projects did not comply with the IFC’s own Sustainability Policy and, as a result, contributed to harm.In line with the recommendations of the external review and per international standards, IFC and MIGA are obligated to financially contribute to remedy when their actions or inactions contribute to harm or when a client cannot provide financial contributions.
  3. Access to remedy after the end of a project: While the proposed Approach to Remedial Action references its draft Responsible Exit Principles, it does not describe specific actions IFC and MIGA will take to provide access to remedy after a project is complete. Further, IFC and MIGA do not commit to not exiting a project subject to an ongoing CAO process without the consent of community complainants.This directly contradicts established norms and must be amended accordingly. Furthermore, the proposed Principles reiterate the IFC’s right to exit an investment in case of persistent delays by the client in meeting the social and environmental requirements. This type of divestment is a simple “washing the hands” strategy especially since divestment decisions are often made discreetly. A threat by the IFC to make public such a decision, and the reason behind it, would be a proper use of the IFC’s leverage.
  4. Addressing the past: Even though IFC and MIGA’s failure to remedy harm in the past is the impetus for this proposed Approach, the institutions appear to only commit to implementing their remedial obligations going forward, with the document stating that IFC and MIGA would implement this approach to “new” projects. This fails the communities who are currently experiencing harm and need remedy.

 

The Approach to Remedial Action is risk-averse from an institutional perspective but expects a risk tolerance from rightsholders. Communities adversely affected by development projects have a right to remedy that is co-designed by them. Prioritizing the bottom line over the people these development institutions serve is unacceptable and a missed opportunity.

In addition to the proposed Approach to Remedial Action, IFC also released its draft IFC Responsible Exit Principles, which fail to adequately recognize the importance of including impacted communities as full stakeholders in the process. Further, delivering responsible exit depends on IFC and MIGA’s ability to provide holistic and inclusive remedy in line with communities’ expectations.

IFC and MIGA should be leaders among development institutions, setting the path for others to follow. They still can be if they provide sufficient opportunities for civil society and project-affected communities to provide feedback on the draft policy, and reform their proposal accordingly.

 

Endorsed by:

Accountability Counsel

Bank Information Center

Center for International Environmental Law (CIEL)

Arab Watch Coalition (AWC)

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