IFC Safeguard Policy Update Coordinator
Environment & Social Development Dept.
International Finance Corporation
2121 Pennsylvania Avenue, NW
Washington, DC 20433
USA

Dear IFC safeguard update team,

The purpose of this letter and attached annex is to provide a general reaction to the IFC safeguard update process and to provide more detailed comments on a number of draft Performance Standards (August 2004) and associated Guidance Notes (January 2005).

The first overriding comment is that the FPP recognises that the draft documents available for comment at this time may well have already undergone modifications. Unfortunately, therefore, our comments relate to now out-of-date documents. In our view, it is essential that the IFC release a second draft of the Performance Standards and Guidance Notes and allow for sufficient time for consultation and comment thereon prior to consideration by CODE.  We note that the IFC previously committed to providing an indicative draft showing changes made in response to comments and that this has not occurred to date.  Without opportunity to comment on a second draft, and in light of other deficiencies previously highlighted, we must regard the process for revising the IFC’s safeguard standards as fundamentally flawed.

Another general comment is that the draft Performance Standards place too much emphasis on cost effectiveness, which qualifies most of the potentially binding and/or actionable standards in the PSs. In particular, the phrases “wherever technically and economically feasible” and “where…feasible and cost-effective” are used repeatedly.  This language could be used to justify any deviation from compliance with strict and necessary environmental or social standards.  Over-emphasis on cost effectiveness and economic efficiency is inconsistent with the concept of sustainable development and may not lead to poverty alleviation in many cases.

A further general response is that it has proved difficult to fully assess the implications of the draft proposals without the revised IFC Corporate Procedures document, which will presumably specify when particular standards must be addressed in the IFC project cycle. The Guidance Notes do not do much to help clarify the vagueness of the draft Performance Standards and in general they raise more questions than they answer. In short, as the proposals stand, they are not clear and require significant changes to improve their clarity and their potential effectiveness as a safeguard framework for the IFC. Indeed, at present, it is difficult to characterize the draft proposals as ‘standards’ at all as this term requires measurability, certainty and accountability and this is largely absent or inadequate at present.

The draft Guidance Notes also contain numerous potential loopholes by using language like: “where appropriate”, “wherever possible” etc etc. Additionally, much of what is contained in the Guidance Notes should either be added to the Performance Standards or, preferably, the Guidance Notes as a whole should be incorporated by reference into the Performance Standards.

It is noted that despite serious loopholes, the draft guidance notes do contain some mandatory language. Such binding requirements should be contained in the performance standards. In this regard, it is recommended that binding language (will, will be, shall, must, require, requirement, condition etc etc) and preconditions for IFC finance embedded in the draft guidance notes should be moved to the mandatory performance standards. Alternatively, the IFC should make the guidance notes mandatory implementation procedures.

The FPP is disappointed that the IFC’s draft proposals apply a narrow focus on national law and lack any clear new standards and commitments in relation to human rights or international law in general. The proposals make no requirement that clients comply with international norms such as those contained in ratified international environmental treaties (a substantial departure from existing WBG policy) and human rights law.  The IFC has thus disregarded the human rights obligations of the private sector under international norms (see, for example, relevant norms identified by the UN Centre for Trans-national Corporations).[1]  In so doing, the IFC has also disregarded its own obligations, as a subject of international law and as a specialized agency of the United Nations to respect human rights in its policies and operations.

The human rights obligations of host countries are part of the legal environment in which IFC clients will operate, whether or not these obligations are reflected in national law, and therefore cannot be disregarded.  In particular, host countries have an obligation to protect the rights of persons and collectivities subject to their jurisdiction, including against violations by third parties such as corporations.[2]  In three of the regions in which the IFC operates, there are international human rights courts with binding jurisdiction, including the authority to issue interim orders, which may order host countries to take remedial measures to correct violations by corporations.  Thus, the human rights obligations of host countries are highly relevant to assessing project risks and liabilities as well as for setting adequate safeguard standards.

As a minimum, the IFC should ensure the final revised safeguard framework acknowledges IFC’s responsibilities under international law, including its obligation to respect human rights in its policies and operations. The IFC should explicitly state that its activities and investments shall not hinder or undermine state obligations to respect national and international human rights norms. The new safeguard standards must also include a clear statement that the IFC will not finance projects/activities that contravene borrower/host country obligations under international law. It essential that the IFC stipulate that all its project and financial lending must comply with applicable international and national laws as well as all relevant performance standards.

A further disappointing aspect of the IFC’s draft documents is that they contain a whole series of proposals that if adopted would weaken existing safeguards standards. The FPP finds that several draft performance standards contain proposed dilutions to existing IFC rules. For example, PS1 no longer prohibits the financing of projects that contravene the obligations of the country under international environmental agreements it has ratified. PS5 proposes to restrict the requirement for land-for-land compensation for people affected by resettlement to those that have formal legal rights or legally recognised claims to land they occupy. Such a distinction marks a major and regressive departure from OD4.30 and OP/BP4.12, is discriminatory and potentially very problematic for indigenous peoples and is therefore unacceptable (see comments on PS5 and PS7 in Annex.).

The FPP is alarmed that the draft performance standard 6 eliminates the IFC’s stand alone existing safeguard policy on Forests (OD4.36). We put it to the IFC and the World Bank Group that such proposals are at odds with prior commitments made under the previous Forest Policy and Implementation Review and Strategy (FPIRS)  process and the statement made in the World Banks’ new Forest Strategy.[3] A further example of weakening is found in draft PS7. The existing OD4.20 on Indigenous peoples requires that an Indigenous Peoples Development Plan be developed for all investment projects that affect indigenous peoples. Under the proposed PS7, Indigenous Peoples Plans are only required where adverse impacts are anticipated.

Our analysis of the IFC’s plans for updating its safeguards also demonstrates that they fall short of stronger draft standards on indigenous peoples likely to be adopted by the IBRD and IDA under draft OP 4.10. Adoption of the proposals as they stand would thus mean that they would already be out of date at the moment they were adopted, which is clearly not acceptable in any process that claims to be an update of existing standards.

The FPP finds that alongside the weakening of existing standards, there are a few aspects of the draft performance standards that could be useful in the revised safeguard framework, such as the proposed requirement for a social assessment for all IFC proposed loans (PS1). However, these potentially useful elements will not be effective unless the serious derogations, loopholes and defects are addressed by the IFC as set out in the attached annex.

All IFC projects must have a demonstrable poverty alleviation impact and this is not anywhere stated in the Performance Standards. The PSs must contain a poverty alleviation screen and standards, including an options assessment, to determine if the proposed project is consistent with the World Bank Group’s poverty alleviation mandate and thus whether IFC support is justifiable.  Specialized poverty screens must be employed for ‘high risk’ investments, such as extractive industry projects, where the relationship to poverty alleviation is often highly questionable.

We urge the policy team at the IFC to act to remedy the weaknesses and gaps identified above and in the annex to this letter. Unless the current weaknesses are rectified, we fear that the proposed new safeguard framework will be a step backwards for the IFC and the World Bank Group, with serious implications for indigenous peoples and local communities affected by the IFC loan operations.

We look forward to seeing how our recommendations have been dealt with in the second draft of the Performance Standards and guidance notes.

Yours faithfully

T Griffiths          Fergus MacKay

_________________________________________________

The FPP analysis and recommendations below will focus on draft PS7. Some additional brief comments and recommendations are also made in relation to PS1, PS5, PS6, PS8 and PS9. It is stressed that FPP’s shorter comments on the draft performance standards other than PS7 are not exhaustive, and only include some of our key observations and recommendations.

Major problems with the August 2004 draft of PS7 include the following:

-          There is no requirement that the IFC and client respect indigenous peoples’ internationally guaranteed right to give or withhold their free prior and informed consent (FPIC).  Instead, the IFC standards employ the language ‘free, prior and informed consultation’ (FPICon) and ‘broad community support’ (BCS) neither of which have any basis in international law and have been repudiated repeatedly by indigenous peoples

-          The draft PS and Guidance Notes fail to act on the recommendations of the United Nations Permanent Forum on Indigenous Issues, which in 2003, it recommended that: the World Bank Group “Continue  to  address  issues  currently  outstanding,  including  Bank implementation of international customary laws and  standards,  in  particular  human rights  instruments,  full  recognition  of  customary  land  and  resource  rights  of indigenous  peoples,  recognition  of  the  right  of  free,  prior  informed  consent  of indigenous peoples regarding development projects that affect them, and prohibition of the involuntary resettlement of indigenous peoples.”[4]

-          PS7 does not expressly prohibit forced relocation of indigenous peoples[5]

-          In the draft Guidance Notes, the broad community support requirement is in brackets raising the question of whether this will be ultimately required at all, and there is otherwise sufficient ambiguity in the Guidance Notes to permit the conclusion that forced resettlement of indigenous peoples may be permitted if there is no “feasible” alternative

-          The language referring to indigenous peoples “who were previously moved in anticipation of the project” is extremely problematic. This may create an incentive to forcibly relocate indigenous peoples prior to approaching the IFC for financing.  Prior and related impacts of projects can better be addressed by simply requiring that safeguard standards are triggered by an impact on indigenous peoples’ traditional territories even if the indigenous people or community in question does not have a physical presence at present (see draft OP 4.10, ‘collective attachment’ and below).

-          Similarly, the following language in the Guidance Notes also creates the potential for substantial abuse: “Where the client cannot alter the project site to avoid impacts on Indigenous Peoples because the host government has designated the project site in an area where Indigenous Peoples live, the client should involve the relevant government officials in their discussions.”  Involving government officials in discussions is a potentially meaningless response to such situations (compare with Guidance Notes, para. 17, in relation to resettlement for a more appropriate response). Unless the client can demonstrate that it has legitimately obtained indigenous peoples’ free, prior and informed consent, the scenario described by this language should be grounds for exclusion of IFC financing.  Such a scenario also places the client and IFC at risk in relation to violations of the human rights obligations of the host country

-          The existence of “broad community support” is based only on IFC’s judgment and there is no independent verification mechanism or requirement that broad community support be documented and attested to in written agreements between the client and indigenous peoples. Moreover, the current language implies that broad community support is only applicable to projects that are judged to have adverse impacts, and then only to “directly affected” communities

-          Documentation of the outcomes of FPICon is left entirely to the client, without formal independent mechanism for complaints about official decisions on broad community support

-          No requirement that any assessment of “community support” is validated by affected communities and their representative organisations and independent third parties

-          PS7 and the Guidance Notes contain vague and weak provisions on lands and resources that are inconsistent with the commitments made by the WBG in its decision on the Extractive Industries Review and are inadequate as safeguards

-          Clients are only required to “take into account” the customary rights of indigenous peoples and there is no recognition of indigenous ownership rights arises from customary laws (PS7: Customary Use)

-          It is unclear what language “without prejudicing the existing claims of Indigenous Peoples to land or resources” means in practice (PS7GN21)

-          The PS employs discriminatory standards relating to indigenous peoples’ property rights, such as safeguards that only apply ‘where these are vital to the sustainability of their cultures and livelihoods’. Indigenous peoples’ livelihoods are not limited to only those that are ‘customary’ and all natural resources traditionally owned by indigenous peoples’ require protection not just those deemed ‘vital to …’ (by whom is unspecified).   Non-indigenous people’s property rights are not limited to those that are ‘customary’ or ‘vital’ to cultural or livelihood sustainability and it is manifestly discriminatory to apply this standard to indigenous peoples.

-          The definition of customary rights to lands and resources is inadequate at least insofar as it fails to acknowledge indigenous peoples’ customary laws as being a basis for rights to lands and resources, including ownership rights. Draft OP 4.10 employs a better definition (see recommendations below).

-          A potentially dangerous exception to the proposed safeguard is inferred in relation to “Project Utilization of Natural Resources”, which does not explicitly refer to “broad community support.” Moreover, the free, prior and informed consultation requirement is restricted only to compensation for the use of natural resources rather than whether those resources are used in the first place.  Where use rights are not recognized by national law, the client is only required take such use of resources into account for the purposes of compensation and ‘explore’ how benefits may be shared.  This is incompatible with previous Bank policies and international law, which require that indigenous peoples receive an equitable share of benefits in a culturally appropriate manner. Paragraph 22 of the Guidance Notes sharpens concerns about treatment of the use natural resources traditionally owned by indigenous peoples (meaning those pertaining to indigenous peoples’ traditional lands and territories) and is unacceptable as drafted.

-          Indigenous peoples, if they so choose, have the right to participate in all SIA/EIAs.  At present, participation in EIA/SIAs appears to be limited to ‘projects with significant adverse impacts’ (PS1).  See, also, PS 7 and Guidance Notes, which use non-mandatory language (‘foster participation’; ‘should’) in relation to participation rights in SIA/EIAs.

-          There is no clear separation between indigenous peoples, on the one hand, and local communities (rather than only ‘natural resource dependent communities’), on the other, in the PS and Guidance Notes.

Recommendations:

a)      To be consistent with indigenous peoples’ internationally guaranteed human rights, PS7 must establish that the IFC will only support projects that have the free, prior and informed consent of affected indigenous peoples arrived at through their customary decision-making processes and institutions subsequent to meaningful and good faith consultation and their informed participation commencing at the earliest stages of project design, and agreement on benefits.

b)      Should the IFC continue to employ the inappropriate language ‘free, prior and informed consultation resulting in broad community support’, at a minimum, the following must be explicitly and clearly included in the PS:

·       Unambiguously require that ‘free, prior and informed consultation resulting in broad community support’ applies to all IFC-projects affecting indigenous peoples (not just those with adverse impacts) (see draft OP 4.10, para. 1).

·       Free prior and informed consultation should be defined (along the lines of draft OP 4.10) as follows: ‘Free, prior and informed consultation with the affected indigenous peoples and their communities refers to a culturally-appropriate and collective decision-making process subsequent to meaningful, good faith and culturally appropriate consultation and informed participation regarding the preparation and implementation of the project.’

·       Also in accordance with draft OP 4.10 (para. 6(c)), the PS and Guidance Notes must specify that all projects require ‘a process of free, prior and informed consultation with affected indigenous peoples and their communities at each stage of the project, and particularly during project preparation in order to fully identify their views and to ascertain their broad community support for the project.’  ‘Each stage of the project’ includes impact assessment and the development and finalization of Indigenous Peoples Plans and Action Plans.

·       As stated in draft OP 4.10, the PS must unequivocally state that the IFC ‘will provide project financing only where free, prior and informed consultation results in broad community support to the project by the affected indigenous peoples;’ and, ‘the IFC will not proceed further with project processing if it is unable to ascertain that broad community support exists.’

·       The PS must include mechanisms for independent (of the IFC and client) verification and certification that broad community support exists and has been freely obtained.  Additionally, and most importantly, broad community support must be confirmed and the nature of that support detailed in written agreements between the client and indigenous peoples (see draft OP 4.10, para 11(e)) and these agreements shall be incorporated into covenants in the IFC loan agreement.  These covenants also shall provide mechanisms to ensure that indigenous peoples can access and obtain meaningful remedies in cases of breach of the written agreement.

·       The PS must also include a built-in grievance/complaints/mediation mechanism for addressing disputes about the existence of broad community support in the initial and subsequent stages of project discussions.

·       PS7 and the Guidance Notes must ensure that the broad community support requirement is triggered by potential impacts on indigenous peoples’ lands, territories and resources traditionally/customarily owned or otherwise occupied and used by them (rather than just the existence of indigenous peoples in the project area) e.g., “where a project affects indigenous peoples’ lands, territories and resources traditionally owned or otherwise occupied and used, PS7’s requirements will be triggered”.  This therefore also applies to indigenous peoples who are no longer physically present in their traditional territories, but still maintain relationships therewith, because of forced displacement, natural disasters, development projects, or in-migration and settlement by non-indigenous persons (see ‘collective attachment’ in draft OP 4.10). 

c)      PS7 and the Guidance Notes must be consistent with the rights of indigenous peoples in international law to own, control and manage their traditional lands, territories and resources and the obligations of host governments and the private sector in relation to those rights.  These obligations include the requirement that host countries obtain indigenous peoples’ consent prior to authorizing third parties; that they delimit, demarcate and title indigenous peoples’ lands and territories in accordance with indigenous peoples’ customary laws and values; and that they provide affirmative protection against unwanted encroachment on or interference with traditional lands and resources, including applying sanctions against persons that violate these rights.  To achieve this, a number of issues must be addressed in relation to lands, territories and resources, including:

·       An improved definition of customary rights to and use of lands and resources. Draft OP 4.10 uses a better definition that the draft IFC standard and this should also be employed in the PS and Guidance Notes: “patterns of long standing community land and resource usage in accordance with indigenous peoples’ customary laws, values, customs and traditions, including seasonal or cyclical use rather than formal legal title to land and resources issued by the State.”

·       Remove the proposed distinction between two categories of indigenous peoples for the purposes of safeguards i.e. those primarily dependent on natural resources versus those who are not primarily dependent on natural resources. Both categories must be treated equally and accorded adequate and effective safeguards.

·       PS7 and the Guidance Notes must not contain discriminatory limitations such as limiting protection of customary land and resource rights only ‘where these are vital to the sustainability of their cultures and livelihoods’, and avoidance of impacts must not be further limited by the language “where feasible.”

·       The language “without prejudicing the existing claims of Indigenous Peoples to land or resources” must be included in the PS rather than the Guidance Notes, clarified and defined in accordance with applicable international legal standards, and be a mandatory condition of all IFC projects (not just limited to situations where negative impacts are unavoidable).  The appropriate formulation must be ‘without prejudicing or otherwise contravening the rights of indigenous peoples to lands, territories and resources’; the term ‘rights’ being defined in accordance with international legal standards rather than domestic laws.

d)  Require Human Rights Impacts Assessments (HRIA) and cultural impact assessments as part of IFC social assessment analyses. In particular, require that environmental, social and cultural impact studies of potential impacts on indigenous peoples are undertaken in a manner consistent with The Akwe:kon Guidelines for the Conduct of Cultural, Environmental and Social Impact Assessment Regarding Developments Proposed to Take Place on, or Which are Likely to Impact on, Sacred Sites and on Lands and Waters Traditionally Occupied or Used by Indigenous and Local Communities, adopted by the 7th Conference of Parties to the Convention on Biological Diversity in 2004.[6]

e)   PS7 must clearly specify that benefits for indigenous peoples must be ensured in all projects and that the nature of such benefits shall be part of the decision-making process resulting in broad community support and detailed in the written agreement between the client and the affected indigenous people(s).

f)    To avoid confusion and potential weakening of indigenous peoples’ rights, ‘Natural Resource Dependent Communities’ should be addressed in a separate performance standard from that on indigenous peoples or, at a minimum, PS7 should be clearly divided into two separate sections, one on indigenous peoples and one on all local communities (rather than just NRDCs).

g)   When appropriately amended subsequent to participation by indigenous peoples, the Guidance Notes in toto should be incorporated by reference into the PS.

Problems include (but are not limited to):

-          No longer prohibits IFC financing for projects that contravene the obligations of the host country under relevant international environmental agreements

-          Limitation of the requirement for a comprehensive social and environmental impact assessment to ‘projects with significant adverse impacts’ (PS1: Assessment Requirements)

-          No explicit requirement for poverty impact and poverty risk assessments

-          The client is only required to ensure participation of affected communities in the S&EA process in projects with expected to result in “significant adverse impacts” (PS1: Assessment requirements)

-          Defective and restrictive definitions of “adverse” and “significant adverse” impacts

-          No requirement for third-party review of social assessments prepared by the client

-          No requirement to involve independent experts (not attached to the project) for completion of the SEIA for category A projects

-          The time-bound mandatory requirement for disclosure of SEIA and Action Plan prior to Board consideration is too short: 60 days for Category A projects and just 30 days for all other projects. [7] This time period clearly not acceptable in the case of indigenous peoples where customary decision making practices require much longer periods of time.

-          Only makes consideration of “risks and impacts in relation to fundamental human rights” an option in the assessment process (PS1GN:17)

-          Lacks unambiguous benchmark to prohibit IFC financing for projects where clients do not have an acceptable Action Plan (cf. PS1GN47)

-          Does not specify clear criteria for “no-go circumstances in which the IFC will not provide financing as a result of the application of the Performance Standards”

-          The draft PS gives the client almost complete control over the social and environmental assessment activities and outcomes

Recommendations:

A reading of the draft PS confirms that the effectiveness of much of the proposed revised IFC safeguard framework would depend to a large extent on whether the SA and EA are fair and credible and are rigorous in identifying potential impacts, documenting the concerns of indigenous peoples and other affected communities, determining the full area of project influence, and analysing the risks of adverse or negative impacts and viable alternatives, including the no-project option. It is therefore essential that PS1 be significantly strengthened. To this end, the FPP recommends that PS1:

a)      Remove any weakening of existing safeguards and ensure that, as a minimum, the PS is consistent with existing EA standards

b)      Require that SA and EA must review the host country obligations under social and environmental international agreements it has ratified

c)      Include a mandatory requirement that IFC social assessment analyses must also include a Human Rights Impacts Assessments (HRIA)

d)      Require that the social and environmental assessments clearly identify and evaluate the expected poverty impacts

e)      Poverty screens must be employed for ‘high risk’ investments, such as extractive industry projects

f)        For projects that may potentially impact indigenous peoples, require a cultural impact assessment, consistent with international best practice such as the Akwé:Kon Guidelines[8]

g)      Require that the social assessment process address the issue of broad community support

h)      Make informed participation of affected communities in all S&EA process and base line studies a mandatory requirement (i.e., do not restrict this requirement only to cases where adverse impacts are anticipated).

i)        Require that clients hold good faith and culturally appropriate public hearings in the project affected areas during the scoping phase

j)        Require third party social audit of social assessment analysis

k)      Make the draft SEIA documents available to communities prior to negotiation of any client-IFC Action Plan

l)        Require that the draft Action Plan be made publicly available in accessible form to affected communities and that the final Action Plan be mutually agreed before its adoption by the client

m)    Stipulate (without any derogation) that the IFC will not finance projects where clients have not developed an Action Plan acceptable to the IFC and affected communities

n)      Move requirement that IFC must be satisfied with the client’s Action Plan prior to approval to the Performance Standard

o)      Likewise move the requirement that the Action Plan will be incorporated into the legal agreements of the project to the PS

p)      Increase the pre-Board minimum public disclosure period of the final ESIA, particularly for projects affecting indigenous peoples.

There are serious problems with the draft policy on resettlement and land acquisition that must be rectified. Problems with the draft include (but are not limited to) the following:

-          The draft policy and guidance notes on involuntary resettlement do not expressly prohibit forced resettlement

-          The policy contains permissive language on the relocation of indigenous peoples where “there is no feasible alternative” (PS5GN28)

-          Potentially useful language introducing the Broad Community Support Safeguard is now bracketed in January 2005 PS5 text in guidance notes under “Physical displacement of Indigenous Peoples”

-          A dangerous perverse incentive is contained in PS5GN29 which allows indigenous peoples to be relocated “in anticipation of the project”. This creates a real risk that companies and governments may collude in forcible relocation and still subsequently obtain IFC financing

-          PS5 adopts an unacceptable two tiered approach that differentiates between persons with ‘formal legal rights’ and persons without “legally recognized claims to land.”  In a number of countries, indigenous peoples will fall into the latter category irrespective of the nature and duration of their relationship to and customary rights over traditional lands, territories and resources.  In other countries, the full extent of indigenous peoples’ rights to their traditional lands and territories is not legally recognized.  Where this is the case, compensation is not provided for the land expropriated, only for the loss of “dwellings and other improvements to the land.”  The same distinction is applied in cases of so-called ‘economic displacement’

-          Affected communities are only offered the possible opportunity to “participate in the negotiation of compensation packages” (PS5:GN17)

-          Independent review of the RAP is optional (PS5GN15)

-          No requirement of baseline studies prior to relocation

Recommendations:

a)      Strengthen protections against forced resettlement by stipulating that the IFC will not finance a project that involves relocation without the free prior and informed consent of affected communities

b)      The PS must include mechanisms for independent (of the IFC and client) verification and certification that prior consent and broad community support exists and has been freely obtained.  Additionally, and most importantly, prior consent and broad community support must be confirmed and the nature of that support detailed in written agreements between the client and indigenous peoples (see draft OP 4.10, para 11(e)) and these agreements shall be incorporated into covenants in the IFC loan agreement.  These covenants also shall provide mechanisms to ensure that indigenous peoples can access and obtain meaningful remedies in cases of breach of the written agreement

c)      Eliminate language in GN 29 on relocation of indigenous peoples in anticipation of the project

d)      Eliminate discriminatory provisions that distinguish safeguard requirements for indigenous peoples with formal title and those without

e)      Clarify that IFC requires that all displaced persons have their standards of living improved and their livelihoods restored

f)        Remove restrictive language and loopholes that tie mandatory safeguard requirements to their “economic” and “technical” feasibility

g)      Make minimum requirements for a RAP mandatory

h)      Make prior baseline socio-economic and cultural studies mandatory

i)        Require informed participation of affected communities in negotiation of mutually agreed compensation arrangements

j)        Make independent audit of the RAP mandatory in the PS

k)      Require IFC engagement and oversight until all RAP measures are fully implemented.

Shortcomings include, but are not limited to the following:

-          Eliminates existing OD on Forestry and only makes perfunctory mention of forest issues in the PS (one paragraph) and gives narrow and defective treatment to forests and forest certification schemes in guidance notes (PS6:GN19-21)

-          Does not require that certification schemes eligible for IFC financing respect the rights of indigenous peoples

-          Only recommends “meaningful consultation” with all “stakeholders” (PS6: Annex B) . The draft PS thus does not meet the existing World Bank safeguards for certification set out in OP/BP4.36

-          international principles and criteria

-          No clear inclusion of IFC criteria for “no go” zones

-          Applies a restricted definition of “critical natural habitats”

-          Excludes existing criterion for “critical natural habitat” based on areas recognised as protected by traditional local communities (OP4.04)

-          Permits conversion of areas that are deemed as “non-critical habitat” without the consent of affected communities

-          Lacks requirements for social license for the location and size of “offset areas”

-          Leaves decisions relating to biodiversity issues that might “preclude” investment up to the client (PS6:GN1)

-          Does not contain an explicit procedure for assessing if the area of project influence may have as yet undocumented “high conservation value”

-          Includes vague and loose provisions that may create loopholes e.g., “where appropriate”, “depending on the nature and scale”, “where necessary” etc. These derogations are not defined or qualified in any way

Recommendations:

a)      Where potential offset areas may affect the traditional lands and territories of indigenous peoples, ensure that decisions on location and size of “offset” areas are fully subject to the BCS safeguard

b)      Require participation of affected communities and civil society in the determining which habitats, are “critical” and of “high conservation value”

c)      Require informed participation of affected communities in rapid biodiversity appraisals and the elaboration of Biodiversity Action Plans (PS6: Annex A)

d)      Make the sections on forests in Draft PS6 a stand-alone performance standard

e)      Make all minimum requirements for forest certification schemes mandatory preconditions for IFC financing

f)        Clarify which forest certification standards will be applied in the absence of agreed national rules

g)      Require that a forest certification scheme must require recognition and respect of indigenous peoples’ rights

h)      Include stronger safeguards for the protection of the rights of other forest dwellers and forest-dependent communities

i)        Require that, as a minimum, certification schemes must meet FSC standards

j)        Ensure informed participation of affected communities for in a process at agreeing an acceptable forest certification systems

As it stands, draft PS8 is contrary to international law and protections regarding the

cultural heritage of indigenous peoples and local communities. Specific problems with the draft include the following:

-          The PS only requires compliance with national laws, which is problematic given that ratified treaties are not incorporated into national law where dualist legal systems operate

-          Allows the sponsor, rather than the host government, to make critical determinations regarding cultural heritage.

-          Replaces the current requirement that exceptions only be made where expected benefits are “great,” with a requirement that benefits need only outweigh costs.

-          Does not require that the IFC will not finance projects that contravene host country’s obligations under ratified international environmental law treaties (see, for instance, article 8j of the Convention on Biological Diversity concerning traditional knowledge of indigenous and local communities)

-          Indigenous peoples are not “stakeholders”, but “rights-holders” in relation to their cultural heritage and have priority interests in relation to that heritage

-          Allows relocation of tangible cultural heritage subject simply to mere consultation (GN paragraph 9). This is unacceptable as its is incompatible with indigenous peoples’ right to define and control cultural heritage give or withhold consent prior to any relocation of tangible cultural heritage

-          The prior consent standard for intangible heritage is only applied in relation to sacred knowledge. In relation to traditional knowledge, the draft PS is arguably in violation of the Convention on Biological Diversity (Article 8(j)) and numerous related decisions) that stipulates that States Parties obtain the prior approval of the holders of such knowledge in relation to the use of application of their traditional knowledge. There is no condition that such consent only be sought “where relevant” or for knowledge that “remains in use for sacred or ritual purposes.”

-          Draft OP 4.10 also requires that commercial development of the cultural resources and knowledge of indigenous peoples is “conditional upon their prior agreement to such development”. PS8 does not meet this standard.

-          There is no protection at all for copyrightable materials other than a reference to national law, which will not be of much use to most indigenous peoples.

Recommendations:

a)      Indigenous peoples’ rights to define, own and control their tangible and intangible cultural heritage must be respected, including their right to consent to any activity that may affect such cultural heritage. A present PS 8 and the Guidance Notes are substantially inconsistent with these rights.

b)      Require that any plans for the commercial use or application of intangible property of indigenous people be subject to their free prior and informed consent. As a minimum the PS should be consistent with Draft OP4.10 that requires that: “Commercial development of the cultural resources and knowledge of (these) indigenous peoples is conditional upon their prior agreement to such development” (para. 19).

c)      Where cultural heritage or traditional knowledge is used for project purposes, benefits should be shared equitably through a negotiated agreement with the community

d)      The GN requirement that project sponsors be required to comply with all national legislation and regulations, including regional regulation and international conventions, should be included in the PS

e)      GN paragraph 12 (the requirement that indigenous and local community consent be obtained (in all cases) must be included in the PS

f)        GN paragraph 14 (relating to the need for free prior informed consultation and broad community support) must be converted to ‘obtaining consent’ in order to comply with international standards and to be consistent with para. 12 of the Guidance Notes, and must be in the PS.

Gaps and defects in this draft standard include:

-          Ambiguity about which minimum elements in stemming from the SEIA must be included an acceptable Action Plan

-          No explicit mandatory requirement that the Action Plan address issues and requirements under all PS and national and international laws (though this is implied in various parts of the guidance notes)

-          Though there is a clear precondition that an “acceptable” social and environmental management system must be established (PS9GN8), the draft policy does not include minimum requirements for such an “acceptable” system other than that there be sufficient financial and human resources to implement the Action Plan

-          Social and poverty indicators are for monitoring implementation of the Action Plan are optional (PS9GN16)

-          Project level grievance procedures are the sole responsibility of the client

Recommendations:

a)      Include minimum mandatory requirement for an “acceptable” social and environmental management system

b)      Require social and poverty impact indicators for monitoring the implementation of the Action Plan where projects affect communities or involve workers or other rights holders

c)      Require that the draft Action Plan be made publicly available in accessible form to affected communities and that the final Action Plan be mutually agreed before its adoption by the client

d)      Clarify that failure to implement agreed action plans will constitute a violation of project legal agreements which will result in IFC reviewing its support for the project