Beyond Adjudication: Dispute Resolution at Multilateral … · 2010-03-19 · • course of action agreed by ADB, government of Sri Lanka, & complainants • disagreement by the parties

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Beyond Adjudication: Dispute Resolution at Multilateral Development Banks &

ADB Accountability Mechanism

Cumberland Lodge Residential SeminarBirkbeck College, School of Law

United Kingdom

23 September 2007

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Outline

1. Multilateral Development Banks (MDBs)

2. MDBs - immunities & dispute resolution

3. MDB accountability mechanisms

4. MDB accountability mechanisms - significance & limitations

5. ADB Accountability Mechanism

6. Southern Transport Development Project in Sri Lanka

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Global and regional development banks from 1945• World Bank – International Bank for Reconstruction and Development

and International Development Association• International Finance Corporation (IFC)• Multilateral Investment Guarantee Agency (MIGA)• African Development Bank (AfDB)• Asian Development Bank (ADB)• European Bank for Reconstruction & Development (EBRD) - latest, 1991• Inter-American Development Bank (IDB)

Owned by member states

Development mandates • foster economic growth, promote foreign direct investment in developing

countries, foster transition towards open market-oriented economies, alleviate poverty

Operations• finance or assist projects which impact on people Primary clients are its shareholders (member states)

Multilateral Development Banks

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MDBs - immunities & dispute resolution

MDBs have general immunity from national jurisdictions • immune from judicial proceedings and legal process except for

borrowings, guaranteeing obligations, or buying and selling or underwriting sale of securities e.g. ADB charter, Article 50.1

• purpose – to allow banks to carry out international public functions without interference from member national authorities including judicial authorities

MDBs have dispute resolution provisions• lending to borrowing countries under loan agreements – arbitration • borrowings e.g. public offering of bond issues – submission to local court

jurisdiction (exception above applies)• administrative contracts with third parties – arbitration• employment-related disputes between staff & MDBs

- MDBs are immune from jurisdiction of employment tribunals and courts of its member countries

- administrative tribunals established, starting with World Bank Administrative Tribunal, 1980: they can act as judicial bodies awarding compensation and ordering specific performance

- decisions final and binding; no right of appeal

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From late 1980s, growing need by MDBs to consider other stakeholders including civil society and people adversely affected by their projects, starting with the World Bank

NGOs played catalytic role in creation of World Bank Inspection Panel, 1993

• concerns on poorly designed and environmentally damaging projects, for example, Sardar Sarovar Project in India

• no involvement of people in decision-making process when MDBs lend countries billions of dollars on projects impacting billions of people

• prevent and mitigate adverse projects and promote beneficiary participation through formulation of environmental and social policies, including involuntary resettlement

MDB accountability mechanisms

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Additionally, donors' demand that MDBs strengthen or establish accountability systems, G-7 Finance Ministers and Central Bank Governors Report, 2001

Since 1993, other MDB accountability mechanisms in place:

• IDB Independent Investigation Mechanism, 1994• ADB inspection function 1993, replaced by ADB

Accountability Mechanism, 2003• IFC/MIGA Compliance/Advisor Ombudsman, 1999• EBRD Independent Recourse Mechanism, 2003• AfDB Independent Review Mechanism, 2004

MDB accountability mechanism• an avenue for citizens to file claims against the institution to

address their grievances in the institution’s operations• development since 1993 - from investigation (inspection, fact-

finding) to problem-solving (consultation) and investigation (compliance review, making recommendations)

MDB accountability mechanisms

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• for the first time, project affectees can file complaints with MDB on projects for material harm suffered or likely to be suffered

– a right of access at the international level

• mechanisms are "internal governance tools" to enhance institutional development effectiveness and improve project quality (Suzuki & Nanwani, 2005)

• not a judicial proceeding and no legal redress

– mechanism is not "a judicial review capable of providing legal remedies" such as damages or injunctions (Shihata, 2000)

MDB accountability mechanisms -significance & limitations

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• do not investigate the executing agency’s actions

– claimants - use MDBs as additional leverage to obtain relief

– NGOs - support claimants' complaints in their strategy to check behavior of MDBs against MDB policies

– MDBs - concerned on outcomes of their investments; limited leverage over executing agencies; establish accountability mechanisms to check on MDB compliance, not of executing agencies

– Panel investigation and findings - central issue is whether MDB has practical impact on behavior of executing agency by application of MDB policies

MDB accountability mechanisms -significance & limitations

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Principles of the Mechanism: include• enhancing ADB’s development effectiveness and project

quality

• being responsive to concerns of project-affected people and fair to all stakeholders

Mechanism has 2 separate, but related, phases

• Consultation Phase and

• Compliance Review Phase


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Purpose: assist project-affected people with problems caused by ADB-assisted projects through informal consensus-based methods. These include consultative dialogue, good offices, and mediation.Focus: address problem, not identify blameScope: broader than compliance reviewClaimant: files a complaint; a group of 2 or more people or with their authorized representativePrerequisite: problems must first be addressed by ADB operations department (OD)Implementation: by Special Project Facilitator (SPF) SPF: appointed by & reports directly to the President; independent of ODsSPF’s role: confined to operational issues in ADB-assisted projects; does not interfere in developing member country’s internal matters; does not mediate between complainant & local authorities; monitors implementation of agreements reached by parties

Consultation Phase


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Purpose: provide a forum for project-affected people (and in special cases, any Board member) to file grievances on ADB operations

Focus: ADB’s acts or omissions

Scope: investigate possible violations of ADB's operational policies & procedures that result or will result in direct, adverse & material harm to project-affected people; make recommendations to ensure project compliance with ADB’s policies and procedures

Claimant: files a request; a group of 2 or more people or with their authorized representative

Prerequisite: claimant must first go through consultation phase

Implementation: by Compliance Review Panel (CRP)

CRP: appointed by & reports directly to Board on all activities, except for specific activities to Board Compliance Review Committee (BCRC); independent of ADB Management

Compliance Review Phase


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BCRC: 6-member standing Board committee; clears CRP's terms of reference for conducting compliance review; reviews CRP's draft monitoring reports

CRP’s role: does not investigate the conduct of borrowing country, executing agency, borrower or private project sponsor; does not provide judicial-type remedies; monitors implementation of Board-approved remedial actions


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Institutional Setup of the Mechanism

Board Compliance Review Committee

President

Vice-Presidents

Office of the Compliance

Review Panel

Board of Directors

Operations Departments

Compliance ReviewPanel

Office of the Special Project

Facilitator

Special Project Facilitator

Robert C. May

CRP MembersAugustinus Rumansara-Chair

Richard BissellAntonio La Viña

Officer-in-Charge Suresh Nanwani


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Who can file a claim?• A group of 2 or more people or a local representative of

affected people • In exceptional cases, a non-local representative• In special cases, a Board member may file a request for

compliance review

When to file a request?

Claimant can file a compliance review request if:• complaint is found ineligible by the Special Project Facilitator• claimant is not satisfied with consultation process• consultation is at advanced stage and there are serious

concerns on compliance issues (as in the claim on the Southern Transport Development Project in Sri Lanka)


Start of the Consultation Phase Start of the Compliance Review Phase

Flow

chart

If the complainant finds the

consultation process not

purposeful, the complainant may file a request for

compliance review

Step 1: Filing of the Request

Step 2: Registration and Acknowledgement of the

Request

Step 3: Determination of the Eligibility of the Request

Step 8: CRP’s Final Report

Step 6: Compliance Review Panel (CRP)’s Draft Report

Step 9: Board’s Decision

Step 5: Conducting the Compliance Review

Step 4: Board Authorization of the Compliance Review

Step 7: Management’s Response and Requester’s Response to CRP’s Draft

Report

If complaint is found ineligible, the complainant can file a request for compliance

review

If the complainant finds the

consultation process purposeful

but has serious concerns on

compliance issues, the complainant may

file a request for compliance reviewMonitoring of Implementation of

Agreements from the Consultation Process

Monitoring of Implementation of Remedial Actions Approved by the

Board

Step 1: Filing of the Complaint

Step 4: Review and Assessment of the Complaint

Step 5: Decision by the Complainant to Carry on with the Consultation

Process

Step 3: Determination of Eligibility of the Complaint

Step 2: Registration and Acknowledgement of the

Complaint

Step 6: Comments on the Special Project Facilitator (SPF)’s

Findings by the Operations Department and the Complainant; and Recommendation by the SPF

Step 7: Implementation of the Course of Action in the Consultation Process

Step 8: Termination of the Consultation Process


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Claims received under the Mechanism20041. Melamchi Water Supply Project, Nepal 2. Southern Transport Development Project, Sri Lanka - case study3. Sixth Road Project, Philippines20051. Community Empowerment for Rural Development Project, Indonesia20061. Chashma Right Bank Irrigation Project (Stage III), Pakistan2. Khulna-Jessore Drainage Rehabilitation Project, Bangladesh3. Rural Electrification, Distribution & Transmission Project, Nepal4. National Highway Development Sector Investment Program, Pakistan5. Assam Power Sector Development Project, India6. Greater Mekong Subregion: Mekong Tourism Development Project,

Viet Nam20071. Urban & Environmental Improvement Project, Nepal2. GMS: Phnom Penh to Ho Chi Minh City Highway Project


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Southern Transport Development Project, Sri Lanka

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Project: construction of a 128-km highway linking Colombo with Matara, the district capital of the south of Sri LankaComplainants/Requesters: Joint Organization of Affected Communities in Colombo-Matara Highway/28 requesters as project affectees living in the area – confidentiality asked on names of 25 requesters Consultation phase:

• complaint filed & registered, June 2004 & found eligible• review & assessment done by SPF• course of action agreed by ADB, government of Sri Lanka, &

complainants• disagreement by the parties on necessity to revisit change of trace• SPF hired a consultant with consent of parties but consultant

concluded that "resolution could only be effectively sanctioned within the judicial system" & "complainants' perceived grievances were incapable of resolution within the forum of a mediated settlement" - SPF's Final Report, page v

• SPF concluded the consultation process in February 2005


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Claims in the request include• change of highway trace for which required studies &

consultations were not properly done• adverse effects such as loss of homes, loss of livelihoods,

damage to the environment, and negative effects of resettlement

Remedies sought include• payment of full compensation for resettlement• conduct of gender analysis• completion of an environmental impact assessment for the Final

Trace• suspension of disbursements under the loan• investigation of the highway to be constructed under the project by

an independent committee

Request filed & registered, December 2004 & found eligible


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Investigation by CRP

• Meetings with claimants and affected people, in addition to CRP's consulting with other stakeholders

• CRP Draft Report – claimants can respond, together with ADB management

• CRP Final Report, July 2005 (7 months from filing of claim) for Board of Directors to decide & approve remedial actions

Policy violations include: environmental considerations; involuntary resettlement; gender & development; benefit monitoring & evaluation; & incorporation of social dimensions


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Some remedial actions – Project-specific and general – approved by Board• assess environmental impacts of sections of highway different from

the Combined Trace, and incorporate recommendations in Environmental Management Plan

• ADB review cofinancing arrangements with Japan Bank for International Cooperation to enhance policy compliance for entire project

• affected persons be compensated before they are moved• assist in the Income Restoration Program and establishment of

household benchmarks in the Resettlement Implementation Plan (RIP)

• ensure that full project information especially essential elements of RIP be provided in an appropriate language to each affected household

• helping establish well-staffed monitoring of resettlement activities by an independent institution

• review cofinancing arrangements in selected projects to determine if arrangements have damaging effect on policy compliance for wholeproject & make recommendations to strengthen policy compliance for whole project


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Disposition of remedies

• CRP recommends to the Board measures to bring project into compliance with ADB's policies and procedures

• some covered in remedial actions approved by the Board• suspension of loan is matter to be agreed between ADB & the

government

References by some of the requesters to Sri Lankan courts on their rights or interests affected by the project

• CRP's Final Report: CRP deferred to the courts' jurisdiction and decisions reached; "these decisions do not bind ADB as it is not a party to the cases." (page 21)

• CRP's investigation is based on ADB's acts or omissions in complying with its policies and procedures.


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Reference by 49 project affectees to United Nations High Commissioner for Human Rights in 2004 on violations by the government of the International Covenant on Civil and Political Rights

• Committee decided that the claimants' communication was inadmissible, July 2006

Monitoring – ongoing

• CRP Annual Monitoring Report in 2006

• for CRP Annual Monitoring Report in 2007, desk review and draft report with BCRC for review


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References:1. Agreement Establishing the Asian Development Bank (ADB charter) at

http://adb.org/Documents/Reports/Charter/default.asp2. Eisuke Suzuki and Suresh Nanwani, Responsibility of International Organizations: The

Accountability Mechanisms of Multilateral Development Banks, Michigan Journal of International Law, Vol. 27, No. 1 (Fall 2005), p. 181 at http://students.law.umich.edu/mjil/27.1/SuzukiNanwani.pdf

3. Ibrahim F. I Shihata, The World Bank Inspection Panel: In Practice Oxford University Press Second edition 2000, p. 240.

4. SPF Final Report on the Southern Transport Development Project (February 2005) at http://www.adb.org/Documents/SPF-Reports/SRI/26522/SF-SRI-1711.pdf

5. CRP Final Report on the Southern Transport Development Project (July 2005) at http://www.compliance.adb.org/dir0035p.nsf/attachments/STDP-CRPFinalReport-12Jul05.pdf/$FILE/STDP-CRPFinalReport-12Jul05.pdf

6. ADB Consultation Phase: http://www.adb.org/SPF/7. ADB Compliance Review Phase: http://www.compliance.adb.org

Thank you.The views expressed are the personal views of the presenter and do not necessarily reflect those of the Asian Development Bank.

Suresh NanwaniAssociate Secretary, Compliance Review PanelEmail: [email protected] September 2007

Copyright © 2007 Compliance Review Panel for Asian Development Bank