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IFI governance

Background

World Bank support for extractives: complicity in human rights violations

12 September 2005

Bank-supported projects in the Democratic Republic of Congo (DRC), Guatemala and Chad poignantly illustrate how natural resource exploitation can contribute to a deteriorating cycle of human rights abuses, civil conflict and corruption. As the social and environmental consequences of World Bank activities come under increased scrutiny, the tactics it emplys to avoid addressing universal human rights in its policies are becoming untenable. This despite the growing pool of institutional, academic and civil society analysis on the question of development finance and human rights, and recent demands to comprehensively integrate the issue into the Bank management response to the Extractive Industries Review (EIR) and on-going IFC safeguard policy review .

Congo mine questions due diligence

A recent letter from a coalition of Congolese and international NGOs to President Wolfowitz states that Anvil Mining’s Dikulushi copper-silver mine has become a symbol of the Bank’s failure to “uphold its commitments to protect the rights of people affected by extractive industry projects”. The Dikulushi project is the first mine in the Democratic Republic of Congo (DRC) to enjoy World Bank backing, and has been touted as a means of post-conflict recovery and to catalyse further private sector mineral investments. However, the peace agreement in the country remains unstable, fighting continues in many areas, and rebels still finance themselves from the plunder of natural resources. Since 2000, a UN security panel of experts has produced a number of reports exposing a “vicious cycle of resource-driven conflict” in the country.

In September 2004 the board of the Multilateral Investment Guarantee Agency (MIGA) approved plans for a political risk guarantee for the stage II expansion of the mine. MIGA completed negotiations with Anvil in May 2005 and issued a guarantee for $13.3 million. MIGA assured its board that there were no serious security risks and the project would provide benefits to the community.

Since June 2004 civil society has raised concerns about MIGA’s failure to fully assess the human rights and security dimensions of the project. The most recent letter says that MIGA did not take appropriate steps to ensure that Anvil Mining was complying with the voluntary principles on the use of security forces, and the UN Norms for transnational corporations. Anvil is now facing serious allegations regarding the company’s role in a brutal massacre that took place in Kilwa in October 2004, approximately 50 kilometres south of the mine, and questions regarding the propriety of its relationships with senior Congolese politicians.

At Wolfowitz’s request, the Compliance Advisor Ombudsman (CAO) is now conducting a compliance audit of MIGA’s due diligence on the project. “A genuine commitment to human rights should be a precondition of World Bank financial backing” said Mr Meeran, a Melbourne lawyer who is representing several human rights groups that have raised concerns about Anvil’s role.

On 13 October the World Bank’s board is due to consider the next ‘economic recovery credit’ for the DRC, which would include more funding for both the mining and forestry sectors.

Guatemala: no policy on human rights and security forces

A recent report by the CAO has identified significant deficiencies in the IFC’s due diligence in the case of Guatemala’s Marlin mine in relation to human rights and security forces. Controversy surrounding the project, operated by a subsidiary of Glamis gold ltd, pre-dates the approval of $45 million in support for the project by the IFC in June 2004 (see Updates 44,45). Since then, a protestor was killed following clashes between security forces and demonstrators in January; a villager was shot dead by an off-duty employee of Glamis’ local security company in March; and both opponents and proponents of the mine have received death threats. In May the Guatemalan human rights ombudsman argued that the license for the Glamis mine should be revoked because of the government’s violation of International Labour Organisation Convention 169 on indigenous and tribal Peoples. The CAO investigation was carried out in response to a complaint by Guatemalan NGO Madre Selva, regarding the project’s environmental and social impacts and claims that it was not developed with adequate local consultation.

This is the first major mining project approved by the Bank following its response to the EIR in September 2004. Local and international civil society allege that the IFC has failed to comply with the Bank’s commitments. This is reflected in the CAO report particularly in relation to security forces and human rights, and the evaluation of the project’s risks and benefits. The CAO attributes much of the tension and violence to the IFC’s “significant oversight” to develop a clear policy to address human rights and the use of security forces in light of Guatemala’s fragile peace accords and the brutal legacy of its civil war. It goes on to recommend that the IFC require project proponents adopt the US/UK voluntary principles on the use of security forces.

Chad-Cameroon: human rights ‘contracted out’

A ground-breaking report by Amnesty International (AI) warns that the Chad-Cameroon oil pipeline “risks freezing human rights protection for decades to come for the thousands of people who live in its path”. It argues that the IBRD and IFC- who have both lent money to the project- must share responsibility for the danger the project’s agreements pose to human rights. AI further points out that the Bank’s pre-lending assessment did not take into account the potential human rights impact of the legal agreements. It calls on the Bank and other stakeholders involved to revise the project agreements to include an explicit guarantee that nothing in the agreements can be used to undermine either the human rights obligations of the states or the responsibilities of the companies.

The report focuses on the framework of legal agreements, known as ‘host government agreements’ (HGAs) signed between the ExxonMobil-led consortium (which also includes Chevron Texaco and Petronas) and the governments of Chad and Cameroon. These agreements – designed to reduce financial and political risks posed to foreign investors by sudden changes in national law – may require the countries to pay large penalties if they interrupt the operation of the pipeline, even if making an intervention to enforce national laws and protect rights. The agreements could serve as a strong disincentive to the governments of Chad and Cameroon to implement their human rights obligations, given the potential penalty faced for taking any measures that would be seen to “destabilise the financial equilibrium” of the project.

The Chad-Cameroon pipeline is trumpeted by the Bank as a test case that will bring about economic development and poverty alleviation in both countries. Over 1,000 kilometres long, the pipeline transports oil from the Doba oil fields in southern Chad to the Cameroonian Atlantic port of Kribi and is one of the largest private-sector investment projects in Africa. The legal agreements were shrouded in secrecy until passed by law, with companies and governments claiming “commercial confidentiality”. The investment agreements are enforceable only through international arbitration, under the International Chamber of Commerce in the case of Chad, and the International Centre for the Settlement of Investment Disputes (ICSID) (see Update 46) in the case of Cameroon.

Chad and Cameroon are in the bottom quartile of UNDP’s Human Development Index. Both countries have a poor human rights track record, in addition to ineffective judicial systems and under-resourced police forces, which are ill-equipped to uphold the human rights of the population from the adverse effects of large-scale projects for economic development.

Safeguarding whose interest?

The IFC’s current safeguard policy revision has been heavily criticised for failing to explicitly integrate international human rights, environment and labour standards, and for allowing significant discretion to its private sector “clients” (see Update 46). AI points to the shortcomings of the Bank’s environmental and social safeguards to ensure that the legal framework governing these projects respect human rights. It refers to the relevance of the UN Norms on the Responsibilities of Transnational Corporations, which whilst not legally binding, are the most comprehensive attempt at filling the gaps in framing the private sector’s human rights responsibilities. It suggests that the HGAs, and by implication Bank safeguard policies, could be framed in a way that is consistent with these norms.