IFI governance


Calls for Bank to uphold human rights

1 April 2008

As the UN human rights council holds its seventh session in Geneva in March, a variety of reports calling for greater human rights accountability of the World Bank have been published, including by the independent expert on economic reform policies and foreign debt, the special rapporteur on the right to food, the UN-High Level Task Force on the right to development, and Margot Salomon from the London School of Economics.

The January report of the UN High-Level Task Force on the right to development concluded that “though the principles of the Paris Declaration on Aid Effectiveness are consistent with human rights”, it “does not adequately address the asymmetries in power”. According to the report, ownership rests with the OECD-DAC and the World Bank, while developing countries have a limited voice. The report also found a “lack of mutual accountability” and that the process “can work against the right to development and erode national democratic processes”.

Margot Salomon concurred with these findings in her paper International economic governance and human rights accountability. She highlights ways in which World Bank and IMF policy-based lending has violated human rights in recipient countries. Though IFIs have begun to consider the place of human rights in their rhetoric (see Update 53, 51), most crucially human rights accountability is missing from their practice. Salomon outlines the difference between the Bank potentially providing support to member countries to uphold and protect their human rights responsibilities, and the lack of accountability for the negative impact that its economic policy prescriptions have had on human rights. She states that executive directors of the Bank must be held to account, who in acting on behalf of their countries are bound to comply with their national and international human rights obligations in the policies they pursue.

it does not adequately address the asymmetries in power

The March report of the UN Independent Expert on human rights, economic reform policies and foreign debt, Bernards Mudho (see Update 55) outlines general guidelines for states and financial institutions to ensure that “compliance with the commitments arising from foreign debt does not undermine the capacity of states to fulfil their human rights obligations”. His core recommendations include that:

  • states define “country-specific minimum standards in the area of economic, social and cultural rights”, which “must be coherent with the provisions of international human rights law”;
  • the World Bank and IMF should harmonise their institutional procedures to be consistent with international human rights law, to which they are bound;
  • human rights obligations should be harmonised across multilateral organisations to avoid conflicting and contradictory policy advice; and
  • new analytical tools such as human rights impact assessments, formulation of minimum standards and core content, human rights-based budgeting and accountability measures for IFIs should be developed.

Mudho criticises the World Bank and IMF debt sustainability model which fails to assess a country’s ability to meet its human rights obligations while servicing its foreign debt. Capacity to pay “should not be assessed by primary financial parameters alone” and the regulatory framework of international public finance must be improved to “take into account the international human rights regime and innovative analytical tools on debt sustainability”.

He also recommends that the mandate of the independent expert be reformulated to address the impact of “public finance management on the achievement of fundamental human rights.”

Jean Ziegler, the UN Special Rapporteur on the right to food refers to “schizophrenia in the UN system and in states’ policies” as one of the key obstacles to the promotion and protection of the right to adequate food. He condemns the World Bank and IMF for their refusal to recognise the existence of the right to food and finds that their insistence on the privatisation of institutions and public utilities, the liberalisation of agricultural trade, and market-assisted models of land-reform “create catastrophic consequences”. They are also in contradiction with the UN General Assembly resolution of December 2007 in which the Bank and Fund are asked to avoid actions that could have a negative impact on its realisation.

During two missions to Niger, Ziegler found that the privatisation of government support services, including the logistics and food distribution system and national veterinary office has exacerbated food insecurity amongst small-scale farmers and pastoralists. This has meant that Niger’s millions of nomads and peasants can no longer afford the prices of vaccinations and medicines charged by commercial traders for their cattle, sheep and camels.

Ziegler is highly critical of the World Bank’s market-based agrarian reform, which he says undermines the “concept of a right to land and redistribution”, fails to challenge historically produced inequities and pushes the view that “access to land is only possible through purchase at market prices”. He refers to the ineffectiveness of a World Bank supported land fund in Guatemala, for failing to consider the historical reality of land expropriation from indigenous people exacerbated by a 36-year civil war.

IFC: atoning for past violations?

An IFC-funded research project on stabilisation clauses and human rights by Andrea Shemberg, legal advisor to the office of the UN Special Representative on business and human rights (see Update 57) finds that investment contracts often discriminate against the ability of developing countries to uphold their human rights and environmental commitments. Stabilisation clauses are clauses in private contracts between investors and host states that address changes in law in the host state during the life of an investment project. This research will contribute to the final report of the special representative to the UN human rights council

On-going concerns over this issue arose in 2003 in relation to the IFC-funded Baku-Tblisi-Ceyhan pipeline (see Update 47,37 ). Civil society groups claimed that the clauses limited the host states’ ability to implement international human rights obligations. The research covers a broad range of industries, including power, water, health care services and extractive industries. One category of stabilisation clause is a “freezing clause” which ‘freezes’ the law of the host state with respect to the investment project for the life of the project. It analyses a broad sample of contracts and models from all regions, including rich countries. The IFC’s involvement “reflects its ongoing interest in advising private sector clients” on sustainable investment. Findings include:

  • freezing clauses (which ‘freeze’ the law of the host state with respect to the investment project for the life of the project) were found in contracts from Sub-Saharan Africa, Eastern, Southern Europe and Central Asia and the Middle East and North Africa;
  • no contracts from Organisation of Economic Cooperation and Development (OECD) countries include freezing clauses;
  • 83 per cent of freezing clauses are in the extractive sector; and
  • limited freezing clauses explicitly include labour law changes.

The study recommends:

  • that appropriately high standards be benchmarked at the outset of a project;
  • good practice from a human rights perspective in stabilisation clauses be identified;
  • the analysis of how host state capacity and the skills of negotiators impact the design of stabilisation clauses; and
  • the transparency of contracts be improved.

Multi-stakeholder consultations are planned imminently.