Internal accountability creates “institutional discomfort”

23 January 2006

In its recently published annual report for 2004-2005, the Compliance Advisor Ombudsman(CAO) received 14 complaints. Experience with high-profile and often contentious projects in Guatemala, Democratic Republic of Congo, Brazil, India, Kazakhstan and Georgia, as well as the IFC safeguard policy review reveal that despite the CAO‘s best efforts to seek “rapid resolution of complaints and ensure public accountability of IFC and MIGA”, it is powerless to stop them from acting with impunity. These institutions have ridden roughshod over the CAO‘s efforts by ignoring recommendations, contradicting findings and submitting inadequate or dismissive responses. On the other hand, questions regarding the CAO‘s role have also been raised by affected communities and civil society groups, many of whom have been dissatisfied with the way in which it has dealt with their complaints. It has been criticised for failing to take claims seriously enough; for coming down in favour of the IFC and/or the company; and for not going far enough in its recommendations. Members of the CAO‘s reference group ask whether “dispute resolution really holds IFC and MIGA accountable, or instead reinforces both institutions’ abilities to more successfully undertake projects”.

In July 2005 the CAO conducted an independent audit of MIGA’s due diligence process for Anvil Mining’s Dikulushi copper-silver mine in the Democratic Republic of Congo (see Update 47). Anvil is facing serious allegations regarding the company’s role in a brutal massacre in October 2004 carried out by the Congolese armed forces, and questions regarding the propriety of its relationships with senior Congolese politicians. The CAO‘s final audit report was submitted for clearance to Bank president Paul Wolfowitz in October 2005 but at the time of publication had still not been made public. In December, UK NGO Rights and Accountability in Development wrote to Wolfowitz urging him to authorise the report immediately. “It is the victims of the Kilwa massacre and their families who have a right to know the outcome of the internal audit without further delay”.

In an audit report in May 2005, the CAO looked at the impacts of the IFC-financed Amaggi soy expansion project in the Brazilian Amazon (see Update 44, 46), on deforestation in the region. It summarised that the IFC’s environmental and social categorisation procedures are “loosely defined and rely heavily on professional discretion” and do not allow adequate consultation for affected parties. An unsatisfactory response from the IFC produced six months later expressed “surprise” at the CAO‘s findings in relation to the IFC’s failure to ensure full compliance of the company with the IFC’s environmental and social requirements. The response was dismissed outright by many Brazilian and international NGOs. At a public meeting in Sao Paulo in December 2005, Wolfowitz committed to pursue the issue on return to Washington. A follow-up letter from the Forest Working Group of the Brazilian Forum of NGOs and Social Movements, asked if and how the recommendations of the CAO would be implemented by the IFC. A response from Jean-Paul Pinard, director of the agribusiness department at the IFC, on Wolfowitz’s behalf merely reiterated points made in the IFC’s response to the audit and referred NGOs back to the CAO. In its annual report the CAO said the experience of the Amaggi audit reveals “a considerable institutional discomfort [on the part of the IFC] with the exacting nature of the compliance role”.

powerless to stop them from acting with impunity

A CAO investigation of the Glamis goldmine in Guatemala identified significant deficiencies in the IFC’s due diligence in relation to human rights and security forces (See Updates 45, 47) and its failure to consider the Guatemalan government’s lending capacity to regulate the mining sector in light of its fragile peace accords and the legacy of its bloody civil war. The IFC’s response from the director of its oil gas mining & chemicals department, Rashad Kaldany on 14 October brushed aside many of the findings, and claimed that most of the recommendations specific to the Project were already being implemented.

However local NGOs strongly questioned the independence of the CAO‘s assessment on Glamis. Madre Selva acknowledged that the assessment contains “useful statements pointing out project inadequacies and reasonable recommendations”, but found that “these are smothered by legalistic and bureaucratic language”. Other groups also objected to the report’s reference to a “facutally unfounded campaign” carried out by local groups.

In relation to the CAO‘s response to a complaint on the IFC-financed Allain Duhangan hydroelectric dam in India, local NGOs assert that the CAO was biased in favour of the IFC and the company. Himanshu Thakkar, coordinator of the South Asia Network on Dams, Rivers & People added “the CAO office dealt with the issue with a pro-IFC and pro-developer bias”, and failed to “address the core issues in the recommendations even though these were discussed in the report”.

Safeguards and disclosure

In September 2005 the CAO outlined its concerns on the IFC’s proposed revisions to its environmental and social safeguard policies. These largely related to transparency of decision-making and insufficient detail on how IFC will be held accountable at key decision-points including in relation to: clients’ environmental and social impact assessments; the adequacy of public consultation and disclosure; and the basis for project categorisation. In October it also criticised the IFC’s draft policy on disclosure of information including in relation to: consultation requirements; broad community support; transparency and accountability; and a call for clarity in relation to the independence of the CAO from Disclosure Policy Officer.