US Congress Blocks World Bank Move to Slash Safeguards

Environmental and social justice groups in the United States and around the world are applauding a provision of the 2015 Omnibus Appropriations Act, passed by the U.S. Congress just before the Christmas recess. The measure requires the U.S. Treasury Department to oppose any World Bank policy that provides less protection for the environment or for human rights than the bank’s current safeguards.

For months, the groups, some members of Congress and even another multilateral bank have criticized the World Bank’s July 2014 proposal known as the Environmental and Social Safeguards Framework and the Safeguards Review Process by which it was developed.

Critics say the proposed policy would weaken the World Bank’s longstanding environmental and social protections from harm caused by Bank-funded projects and allow governments to opt out of safeguarding affected indigenous peoples.

By passing the 2015 Omnibus Appropriations Act, Congress is requiring the United States, the World Bank’s largest contributor, to vote against any new loans or grants if the World Bank or any member of the World Bank Group weakens its safeguard policies.

The World Bank Group includes five organizations: the International Bank for Reconstruction and Development, established in 1945; the International Finance Corporation, established in 1956; the International Development Association, established in 1960; the International Centre for Settlement of Investment Disputes, established in 1966; and the Multilateral Investment Guarantee Agency, established in 1988.

“The Secretary of the Treasury shall instruct the United States Executive Director of the International Bank for Reconstruction and Development to vote against any loan, grant, policy or strategy if such institution has adopted and is implementing any social or environmental safeguard relevant to such loan, grant, policy or strategy that provides less protection than World Bank safeguards in effect on September 30, 2014,” the Appropriations Bill states on page 1199.

“We are very pleased to see that the bill bans U.S. support for large-scale logging and mining in primary tropical forests and sets strict limits on U.S. support for large hydropower dams,” said Michelle Chan of Friends of the Earth-US.

“Congressional action to prevent the World Bank’s efforts to weaken environmental and social safeguards is of the utmost importance for the rights of communities impacted by destructive projects,” said Stephanie Fried of the Ulu Foundation, based in Hawaii.

Rio Ismail of Ecological Justice Indonesia said, “The fact that the U.S. now requires ‘rigorous human rights due diligence’ at all multilateral financial institutions, including for projects likely to involve displacement of local communities, is of enormous importance to local communities impacted by international financial flows.”

The Omnibus Appropriations Act requires the Secretary of the Treasury to, “inform the management of the international financial institutions that it is the policy of the United States to vote against any assistance by [international financial institutions]… for the extraction and export of a natural resource if the government of the country has in place laws, regulations or procedures to prevent or limit the public disclosure of company payments…”

In the Anti-Kleptocracy and Human Rights section, the new budget law states, “Officials of foreign governments and their immediate family members about whom the Secretary of State has credible information have been involved in significant corruption, including corruption related to the extraction of natural resources, or a gross violation of human rights, shall be ineligible for entry into the United States.”

“The Secretary may also publicly or privately designate or identify officials of foreign governments and their immediate family members about whom the Secretary has such credible information without regard to whether the individual has applied for a visa,” the law continues on page 1208.

Jocelyn Medallo of the Center for International Environmental Law said, “The World Bank is at a critical crossroads. It can – and should – stake its claim as the leading public development bank by explicitly committing to respect human rights in its lending, carrying out human rights due diligence, and requiring clear protections for communities and the environment.”

The bill also calls for the United States to seek to require the International Finance Corporation, IFC, and other multilateral institutions to publish the identities of the “beneficial owners” of private companies receiving public funds and blocks entry to the United States of foreign officials or their immediate family members “about whom the Secretary of State has credible information” regarding their involvement in significant corruption, including corruption related to the extraction of natural resources, or gross violations of human rights.

“By insisting on the publication of the names of the shadowy owners of offshore funds supported by the IFC and other public financial institutions, and by making those engaged in corruption unwelcome in the U.S., Congress is taking important steps to lift the veil of secrecy that has enabled international criminal activity to flourish,” said Fried.

One example of harm caused by a World Bank-funded project with inadequate safeguards comes from the nonprofit group Cultural Survival.

In 2010, the World Bank approved funding for a $3.5 billion dollar project enabling oil exploitation in Chad and Cameroon. The project includes the construction of 3 oil fields in the Doba Basin of southern Chad, with oil production estimated at 225,000 barrels per day. Once the oil is extracted, it will be transported through a 600 foot-wide pipe crossing Cameroon, Cultural Survival explains.

Among the consequences of this development are its effects on the roughly 100,000 Bagyeli “Pygmies” who live in the region. Construction of the pipeline will entail forced resettlement as the animals the Bagyeli hunt are driven away, the land they live on is destroyed, and their groundwater is contaminated. The Bagyeli maintain that they were not properly informed or consulted at the project’s outset.

In December 2014, when the Democrats still controlled the Senate, then Chair of the Senate Foreign Relations Committee Robert Menendez, together with then Chair of the Environment and Public Works (EPW) Committee and Senator Barbara Boxer as well as EPW member Senator Edward Markey wrote a letter to Treasury Secretary Jacob Lew about the World Bank’s flawed consultation process and undermining of safeguards.

The senators warned that the Bank plans to replace existing environmental and social safeguards with weaker mechanisms for transparency, oversight, and accountability and to eliminate essential protections for biodiversity, forest-dependent peoples and communities displaced by Bank projects.

While applauding the World Bank for adding language on labor fairness, climate change, the rights of persons with disabilities and the displacement of indigenous peoples, the senators’ greatest concern is a new process that moves away from the fulfillment of safegard requirements before Board approval of a loan with increased monitoring of environmental and social impacts after the disbursement of funds.

The senators warned the World Bank plans to reduce current due diligence requirements, and eliminate the requirement to allow affected communities to provide input on the environmental impact assessment of projects with significant impacts prior to project appraisal.

The World Bank’s new draft policy would “introduce narrow labor standards, excluding third party contractors, collective bargaining, freedom of association,” the senators warned. It would “reduce access by affected communities to the Bank’s Inspection Panel, and hamper the Panel’s work.”

The policy falls short of international law and best practices pertaining to indigenous peoples, human rights, labor, gender, financial intermediaries, subprojects, and climate change,” the senators warned in their letter to Secretary Lew.

Even another multilateral bank criticized the World Bank’s draft policy. The Asian Development Bank’s Independent Evaluation Division identified the proposed draft World Bank safeguards as “aspirational” measures which “could dilute the strength of social and environmental protections” and called for “continued use of a requirements-based safeguards system.”

Pieter Jansen of the Dutch organization Both Ends, “We in Europe share the U.S. Senate concern that the World Bank’s proposed safeguards fall short of international law on human rights, and are neither in accordance with the Charter of Fundamental Rights of the European Union, the principles guiding EU external action, nor the implementation of international environmental agreements to which the EU is a party, including biodiversity commitments.”

“We applaud the U.S. initiative,” said Korinna Horta of German NGO Urgewald. “Together with efforts in Germany and elsewhere, we hope that it will make human rights due diligence a matter of routine at the World Bank and consequently in global financial decision-making.”

“The Appropriations bill is an unmistakable message to the Bank from its largest contributor that development must not come at the expense of human rights,” said David Pred of Inclusive Development International. “We hope this Congressional action will stop the race to the bottom that the World Bank unleashed when it proposed abandoning its 30-year commitment to do no harm.”

The World Bank has extended the consultation period to allow for one more round of consultations, which will have to take the requirements of the 2015 Omnibus Appropriations bill into account.