IFI governance


Above the law? Battle over World Bank immunity in Bangladesh

21 September 2004

Civil society groups, opposition parties and the media are calling for the repeal of a bill which would amend the scope of the Bank’s immunities under Bangladeshi law. The call echoes the long-term efforts of campaigners worldwide to increase the accountability of the international financial institutions to the citizens they are supposed to serve.

In July, a draft bill to amend the International Financial Organisations Order 1972 was approved. Critics said that passage of the bill by parliament would mean that “the Bank cannot be taken to court, it cannot be held liable for its actions by the people and the government”. Owing to the pressure, the bill’s scheduled passage 16 September was stayed.

When a country joins the Bank, it signs the Articles of Agreement and agrees to recognise in its own laws the various provisions of the Agreement. Next, the country and the Bank draw up an ‘Establishment Agreement’ to cover various issues both sides feel need to be made more explicit. This includes the issue of immunities for Bank staff. It is this latter agreement that was never settled in Bangladesh.

against the spirit of the constitution

The need to clarify the scope of Bank immunity was highlighted by legal proceedings brought against the Bank by a former employee for unfair dismissal. In 2002, the Bank’s internal administrative tribunal found that the treatment of external affairs officer Ms. Ismet Zherin Khan “fell short of appropriate standards of procedural justice which caused her harm for which she is entitled to be compensated”. After being granted compensation but not reinstatement, Ms. Khan took her case to the Bangladeshi courts. The courts found in her favour and rejected the Bank’s plea for immunity.

A group of Bangladeshi NGOs, calling themselves the Alliance against World Bank immunity, believes that the amendment would be at odds with the Bangladeshi constitution by preventing a citizen “from the right to access to court and right to protection of law”. The group asserts that the proposed legislation grants immunities beyond those enjoyed by the UN or the Asian Development Bank (ADB) in Bangladesh, or those enjoyed by the Bank in other countries.

The World Bank’s legal department insists that the proposed amendment is “intended only to provide clarity on World Bank immunities”. The Bank’s immunities, say the representatives, are identical with the immunities accorded to the ADB or the UN in Bangladesh, and “identical with the immunities provided to the Bank in its 184 member countries”.

The Alliance held a series of debates and rallies in Dhaka in September and has circulated a sign-on statement calling for greater scrutiny of the Bank’s work. This would include legislation to provide parliament with binding oversight powers and ensure disclosure of information related to IFI projects in a timely manner; and mechanisms to facilitate civil society participation in the design of IFIs’ country work, and ensure that affected persons receive remedy.

The controversy has brought into relief the lack of democracy and accountability in the IFIs. The Bank argues that “it is not possible for an institution to be subject to the laws of 184 different countries at the same time”. The practice of immunity, it says, is necessary for the UN and its specialised agencies – “of which the World Bank is one” – to carry out its duties. Bangladeshi oversight of the Bank, say representatives of the legal department, is via its representatives on the boards of the Bank.

While the Bank enjoys the immunities granted to UN specialised agencies, it is not – unlike those agencies – accountable to the UN system. Nor does it want its lending activities to be held up for scrutiny against a growing body of international legal covenants. The Bank says that its only accountability is to its shareholder governments. What is not mentioned is that five countries hold 40 per cent of the votes and that the US holds a veto over any key decisions. Bangladesh, with a population of 133 million, has a voting share of just 0.3 per cent. The entire region of South Asia with nearly one quarter of the world’s population is represented by two board members (out of 24).

Some commentators believe that the whole question of immunity for international financial institutions should be revisited. Noreena Hertz in her recent book on the debt crisis, calls for the immunity of the IMF and World Bank to be waived: “Where professional negligence or lack of due diligence in lending can be proven, a claimant, whether a village, an individual or a nation, must be able to hold the institutions liable in the same way that a bank can be held liable by law.”