Risk, Responsibility and Human Rights: Taking a Rights-based Approach to Trade and Project Finance

This discussion paper was prepared as the starting point for an expert meeting with the aim to discuss how the human rights impacts of trade and project finance can be assessed. The paper is concerned with public international financial institutions (PIFIs), especially export credit agencies (ECAs). It tries to find out what a HRIA for PIFIs, as well as corresponding PIFI review mechanisms, should look like.

After a brief overview of how PIFIs operate and the extent to which they take human rights into account, the paper presents a draft framework for a HRIA. This HRIA framework aims to translate international standards and voluntary mechanisms into policy, and builds upon traditional impact assessment processes and best practices as well as on a human rights based approach to international trade and project finance. The framework covers the entire project cycle.

The paper also includes proposals for how the HRIA framework might be used by PIFIs, as well as monitoring and compliance mechanisms. The report does not aim to offer a solution, but rather a starting point for discussion, leaving various challenges and questions.

 

NGO Working Group on EDC, a working group of the Halifax Initiative Coalition

2004, Halifax Initiative

Pages: 1-59

Source(s):

Language	Format	Source
English	PDF document	http://www.halifaxinitiative.org/updir/Final_HR_discussion_paper.pdf

Bibliographic notes

This discussion paper was prepared for an expert meeting on human rights, trade and finance in Ottawa in 2004. It was originally produced to help prepare participants for an Expert panel meeting on HRIA. Following the conference, the original background paper was revised to reflect a number of observations made by participants, and was then distributed to a broader number of people in July 2004. This constitutes the final revised version.

Abstract

Public International Financial Institutions (PIFIs), such as export credit agencies (ECAs), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) are a key source of loans, guarantees and insurance to companies and sovereign states doing business in developing countries. Largely mandated to promote trade and investment, over the past few decades PIFIs have supported numerous projects, such as large dams, mining projects, and oil and gas exploration, that have had devastating impacts on the environment, communities and human rights.

In response to public and political pressure, IFC, MIGA and ECAs have adopted separate environmental, social and cultural safeguards and policies for taking into account some of the harmful impacts of these projects. Policies (and practices) between ECAs and the World Bank Group (WBG), however, still remain disparate. Different national ECAs are also still implementing their ‘common approaches to the environment’ to a widely varying degree. Social issues and human rights concerns are for the most part included as ‘addons’ to a primarily environmental assessment.

As international human rights law and public perception evolves identifying new roles and responsibilities for nonstate actors, such as multinational corporations (MNCs) and the institutions that fund them there is a growing pressure on PIFIs to be more comprehensive in how they take account of the human rights impacts of projects. The WBG has long steered clear of the issue of human rights, citing its limited focus on purely economic considerations. But pressure from both within the Bank, and from without, may be shifting the issue of human rights at the Bank. Similarly, ECAs have long deferred their responsibility for human rights by hiding behind a trade (rather than a development) mandate. Some have made tentative steps into the issue of human rights. However, most continue to focus their energy on refining their political risk assessments so that they better take account of human rights impacts on investment risk, rather than at the risk that the investment poses on human rights. Such a vision is not sustainable. Continued PIFI support for projects that have devastating impacts on human rights, and perverse incentives within these institutions that distort project outcomes, are two of many reasons for going beyond existing measures.

To address this shortfall, this discussion paper proposes a framework, based on best practices, for mainstreaming human rights concerns into all stages of the project cycle. It focuses on developing better process, incentives and disincentives to promote enhanced project outcomes. Consequently, the framework covers four key phases: i) the preparatory phase of the project (feasibility study, needs and options assessment); ii), the project development phase (Human Rights Impact Assessment); iii) PIFI project categorization, review and appraisal (screening, categorization including ‘No Go’ zones and categorical prohibitions review, setting conditionalities); and finally, iv) project implementation (monitoring and compliance). The paper also includes annexes highlighting potential human rights baseline studies and compensation measures, an illustrative categorical prohibitions list and human rights screening mechanism for PIFIs.

The main premise behind the paper is that a new framework needs to be developed that firmly roots corporate and PIFI processes and practice in international human rights law, because accountability and obligation – the ‘responsibility’ part of ‘corporate social responsibility’ are missing from current voluntary codes and safeguards. In doing so, this rightsbased approach to trade and project finance revives key issues of accountability, participation, equity and sustainability.

The paper is an initial attempt at moving beyond the theoretical debates about human rights and investment, to making some initial suggestions as to how this might occur in practice.

Table of contents

Executive Summary

Glossary of acronyms

1) Introduction

2) Public International Financial Institutions and Human Rights
2.1) What are PIFIs?
2.1.1) Export Credit Agencies (ECAs) 
The Canadian Context - Export Development Canada (EDC) 
2.1.2) World Bank Group
About the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) 
2.2) PIFIs and Human rights
2.2.1) International Human Rights Law
2.2.2) Beyond the ‘catchall’ of the environment
2.2.3) Addressing human rights within IFC, MIGA and ECAs
2.2.4) Assessing human rights at EDC
2.2.5) Going beyond existing measures – Compliance and human rights

3) Human Rights Impact Assessment – a model of ‘best practices’
3.1.1) EIAs, SIAs and Voluntary Codes – Where do human rights fit in?
3.1.2) Use of best practices
3.1.3) Rightsbased framework
3.1.4) Use of human rights language
3.1.5) Identification of stakeholders – World Commission on Dams rights and risk framework
3.1.6) Identification of rights
3.2) Phase I: Preparatory Stage Feasibility study
3.2.1) Appropriate identification of stakeholders through a Consultation and Participation Plan 
3.2.2) Preliminary Needs Assessment and Human Rights Baseline Survey
3.2.3) Preliminary analysis of Comprehensive Options Assessment and proposal of alternatives 
3.2.4) Trusted and effective grievance mechanism
3.3) Phase II: Project Development – Conducting the HRIA
3.3.1) Executive summary
3.3.2) Policy, Legal Regulatory, and Institutional Framework.
3.3.3) Project Description
3.3.4) HRIA Methodology
3.3.5) Participation and Involvement
3.3.6) Baseline Studies
3.3.7) Identification of Human Rights Impacts
3.3.8) Human Rights Protection Plan
3.3.9) Appendices

4) Phase III: PIFI Project Categorization, Review, Appraisal and Loan Negotiation
4.1) General requirements
4.2) Screening projects
4.2.2) Review and project appraisal by PIFI 
4.2.3) Financial Conditionalities and Covenants 

5) Phase IV: Project Implementation
5.1) Monitoring
5.2) Compliance mechanism
5.2.1) Scope of work and objectives
5.2.2) Characteristics of the Compliance Mechanism

6) Challenges and Further Questions

7) ANNEX I – Baseline Studies
ANNEX II – Examples of potential compensation measures
ANNEX III - Illustrative list of Category A projects
ANNEX IV – Illustrative Categorical Prohibitions List
ANNEX V - Illustrative screening mechanism for reviewing HRIAs by PIFIs
ANNEX VI – Flow chart illustrating Phases IIV

8) ENDNOTES

Risk, Responsibility and Human Rights: Taking a Rights-based Approach to Trade and Project Finance

NGO Working Group on EDC, a working group of the Halifax Initiative Coalition

2004, Halifax Initiative

Pages: 1-59

This discussion paper was prepared as the starting point for an expert meeting with the aim to discuss how the human rights impacts of trade and project finance can be assessed. The paper is concerned with public international financial institutions (PIFIs), especially export credit agencies (ECAs). It tries to find out what a HRIA for PIFIs, as well as corresponding PIFI review mechanisms, should look like.

After a brief overview of how PIFIs operate and the extent to which they take human rights into account, the paper presents a draft framework for a HRIA. This HRIA framework aims to translate international standards and voluntary mechanisms into policy, and builds upon traditional impact assessment processes and best practices as well as on a human rights based approach to international trade and project finance. The framework covers the entire project cycle.

The paper also includes proposals for how the HRIA framework might be used by PIFIs, as well as monitoring and compliance mechanisms. The report does not aim to offer a solution, but rather a starting point for discussion, leaving various challenges and questions.

 

Source(s):

Language	Format	Source
English	PDF document	click here to view/download

Bibliographic notes

This discussion paper was prepared for an expert meeting on human rights, trade and finance in Ottawa in 2004. It was originally produced to help prepare participants for an Expert panel meeting on HRIA. Following the conference, the original background paper was revised to reflect a number of observations made by participants, and was then distributed to a broader number of people in July 2004. This constitutes the final revised version.