MDBs’ integration of the principle of sustainable development

130. The most commonly cited definition of sustainable development was expressed in the Brundtland Report, as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.³⁴⁹ The aspirational, abstract and variable nature of this definition has left room for different interpretations and,

343 Sands, Peel, Fabra, Mackenzie, Principles of International Environmental Law, op. cit., p. 207. The International Court of Justice has labeled sustainable development a “concept” in the Gabčíkovo-Nagymaros case (Gabčíkovo-Nagymaros Project (Hungary v. Slovakia), Judgement, ICJ Rep. (1997), p. 7, para. 140), an

“objective” in the Pulp Mills case (Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment, ICJ Rep. (2010), p. 14, para. 177), while, in the Iron Rhine case, the arbitral tribunal has deemed the duty to prevent and to mitigate environmental harm a “principle of general international law” (Award in the Arbitration regarding the Iron Rhine (‘Ijzeren Rijn’) Railway between the Kingdom of Belgium and the Kingdom of the Netherlands, 27 RIAA (2005) p. 35, para. 59).

344 On the evolution of MDB mandates until 1997, concluding that MDBs have an international legal obligation to take sustainable development concerns into account, see Handl, The Legal Mandate of Multilateral Development Banks, op. cit.

345 On that question, see a complementary account by Susan Park, “The World Bank’s global safeguard policy norms”, in S. Park, A. Vetterlein (eds.), Owning Development: Creating policy norms in the IMF and the World Bank (Cambridge: Cambridge University Press, 2010), pp. 181-203. On the move past the “old consensus” to “emerging views of development” for MDBs, see Bradlow, “Southern African governments”, op. cit., pp. 289-305.

346 See for instance Macekura, Of Limits and Growth, op. cit., pp. 173-175, 198, 201-218; Park, “Norm diffusion within international organizations”, op. cit., pp. 122-134; I.F.I. Shihata, “The World Bank and the Environment: a Legal Perspective”, 16 Maryland Journal of International Law no. 1 (1992), pp. 1-8; Wade,

“Greening the Bank”, op. cit. For a detailed history of the Social Development Network in the World Bank, see Gloria Davis, “A History of the Social Development Network in The World Bank, 1973-2002”, Social Development Papers no. 56 (March 2004).

347 The dissertation retakes and expands the concept of emulation phenomenon between MDBs analyzed in Laurence Boisson de Chazournes, “Partnerships, Emulation, and Coordination: Towards the Emergence of a Droit Commun in the Field of Development Finance”, in H. Cissé, D. Bradlow and B. Kingsbury (eds.), The World Bank Legal Review, Vol. 3: International Financial Institutions and Global Legal Governance (Washington: World Bank, 2012), pp. 173-174.

348 Boisson de Chazournes, “Partnerships, Emulation”, op. cit.

349 G.H. Brundtland et al., Our Common Future: The Report of the World Commission on Environment and Development (Oxford: Oxford University Press, 1987); see on that matter for instance Sands, Peel, Fabra, Mackenzie, Principles of International Environmental Law, op. cit., pp. 206-217.

consequently, for debate.³⁵⁰ When defining rules of international law, in order to minimize the controversial character of any assumption of universal application, principles such as sustainable development should be found in international law sources.³⁵¹ However, in the case of sustainable development, the academic debate remains open. Some scholars have declared that it is part of customary international law,³⁵² while other have concluded that sustainable development is, at best, part of soft law.³⁵³ Nonetheless, it is generally understood that sustainable development is composed of an economic, a social and an environmental pillar,³⁵⁴ and that it entails at least the following principles: the sustainable use of natural resources and equity between generations, or intergenerational equity; the equitable use and distribution of the outcomes of development within one generation, or intragenerational equity; and the integration of environmental protection in the development process.³⁵⁵

131. The United Nations General Assembly had declared in 1997 that “development is a multidimensional undertaking to achieve a higher quality of life for all people. Economic development, social development and environmental protection are interdependent and mutually reinforcing components of sustainable development”.³⁵⁶ The principle of integration was also endorsed by the international community in Principle 4 of the 1992 Rio Declaration on Environment and Development (hereinafter the Rio Declaration), which states that “[i]n order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot be considered in isolation

350 See in general Barral, “Sustainable Development”, op. cit., pp. 377-400. Gilles Fievet, Réflexions sur le concept de développement durable: prétention économique, principes stratégiques et protection des droits fondamentaux, 1 Revue Belge de Droit International (2001), p. 141.

351 These are: treaties, international custom, as evidence of a general practice accepted as law, the general principles of law and, as subsidiary means, judicial decisions and the teachings of the most highly qualified publicists – art. 38.c of the ICJ Statute mentions the “general principles of law recognized by civilized nations”

(Charter of the United Nations and Statute of the International Court of Justice) and this terminology is now considered unfortunate, see for instance Daniel Barstow Magraw, Lisa D. Hawke, “Sustainable Development”, in D. Bodanski, J. Brunnée, E. Hey (eds.), The Oxford Handbook of International Environmental Law (New York: Oxford University Press, 2007), p. 626.

352 Sands, Peel, Fabra, Mackenzie, Principles of International Environmental Law, op. cit., p. 207.

353 Fievet, Réflexions sur le concept de développement durable, op. cit., pp. 140-143.

354 See for instance United Nations, Programme for the Further Implementation of Agenda 21, G/RES/S-19/2 (28 June 1997), paras. 23-32.

355 The principles of the 1992 Rio Declaration on Environment and Development are often cited as a basis for these concepts, for instance: 3 and 4 (intergenerational equity and integration) or 8 (sustainable use) -United Nations Conference on Environment and Development, Rio Declaration on Environment and Development-.

See for instance Sands, Peel, Fabra, Mackenzie, Principles of International Environmental Law, op. cit., p.

207 or Barral, “Sustainable Development”, op. cit., pp. 380-381.

356 United Nations, Agenda for Development, A/RES/51/240 (15 October 1997).

from it”.³⁵⁷ The principle is part of international law, as explained by the Permanent Court of Arbitration in the Iron Rhine case: “international (…) law require[s] the integration of appropriate environmental measures in the design and implementation of economic development activities”.³⁵⁸ MDBs are actors of the international agenda for the integration of sustainable development. Indeed, they are international organizations, with the World Bank being a specialized agency of the United Nations since 1947;³⁵⁹ therefore, the principle of integration applies to them, as recognized by the international community.³⁶⁰

132. The three pillars of sustainable development are generally integrated by MDBs:

environmental and social considerations come alongside economic considerations. While sustainable development is already included in the Charter of the European Bank for Reconstruction and Development (hereinafter EBRD),³⁶¹ other MDBs have included the principle of integration in their strategic documents. For instance, the Asian Development Bank’s “Strategy 2020” directs the institution’s focus on three agendas: inclusive economic growth, environmentally sustainable growth, and regional integration.³⁶² The African Development Bank announced that economic inclusiveness and sustainable development shall be mainstreamed in the implementation of its strategy.³⁶³ The Inter-American Development Bank mentions gender equality, climate change and sustainability amongst its cross-cutting issues for 2010-2020.³⁶⁴ In its 2013 mission statement, the World Bank Group reformulated the integration principle by affirming that ending poverty and promoting shared prosperity “requires promoting environmental, social, and fiscal sustainability”.³⁶⁵ The World Bank also declared that “The three pillars of sustainable development – economic growth, environmental stewardship, and social inclusion – carry across all sectors of development (...) The question (…) today is not whether to embrace sustainable

357United Nations Conference on Environment and Development, Rio Declaration on Environment and Development, op. cit.

358 Award in the Arbitration regarding the Iron Rhine, op. cit., para. 59.

359 Agreement between the United Nations and the International Bank for Reconstruction and Development, 16 U.N.T.S 346 (1947). See on that matter Dann, The Law of Development Cooperation, op. cit., pp. 263-283.

360 Handl, The Legal Mandate of Multilateral Development Banks, op. cit. The dissertation will not examine the debates around sustainable development’s application to MDBs; on that matter see for instance Bradlow,

“International Law and the Operations of International Financial Institutions”, op. cit., pp. 19–21.

361 EBRD, “Agreement Establishing the European Bank for Reconstruction and Development”, signed on 29 May 1990, art. 2.I.vii, available at: http://www.ebrd.com/news/publications/institutional-documents/basic-documents-of-the-ebrd.html%20.

362 ADB, “Strategy 2020”, op. cit.

363 AfDB, “Regional Integration Policy and Strategy”, op. cit.

364 IADB, “Update to Institutional Strategy”, op. cit.

365 World Bank, “The World Bank Group Goals”, op. cit.

development but how”.³⁶⁶ The increasing importance of sustainable development in international law translates into the objectives for the insertion of conditionality presented in Chapter Two. For instance, projects are selected (third objective) and reforms are induced (second objective) in conformity with sustainable development.

2.2. The influence of civil society on the integration of sustainable development

133. The environmental degradation caused by some development projects and the consequent pressure from environmental NGOs have contributed to the inclusion of sustainable development in MDB mandates.³⁶⁷ Problematic projects, such as the World Bank Polonoroeste cited in the introduction,³⁶⁸ have drawn the attention of transnational networks composed of NGOs, activists, church groups and the media.³⁶⁹ These networks have launched campaigns and influenced major Donors such as the United States.³⁷⁰ Both networks and Donors pressured the Bank, especially at times of IDA replenishment³⁷¹ or through national regulations on loan approval, to include sustainability in its operations by adopting safeguards to avoid implementing environmentally or socially damaging projects.³⁷² This relates directly to the fifth objective of the insertion of conditionality introduced in Chapter Two: answering the pressure of a domestic constituency. The influence of civil society is not unique to the Bank or other MDBs. As Robert Keohane, Peter Haas and Marc A. Levy argue: “'If there is one key variable accounting for policy change, it is the degree of domestic environmentalist pressure in major industrialized democracies, not the decision-making rules of the relevant international institution”.³⁷³ Some influential NGOs are even specialized in the survey of MDBs, such as the Bank

366 World Bank, “Sustainable Development: Overview; Context”, op. cit.

367 See for instance Macekura, Of Limits and Growth, op. cit., pp. 173-175, 198, 201-218; Park, “Norm diffusion within international organizations”, op. cit., pp. 122-134; Shihata, “The World Bank and the Environment”, op. cit., pp. 1-8; Wade, “Greening the Bank”, op. cit.; Davis, “A History”, op. cit.; de Moerloose, “Sustainable Development and the Use of Borrowing State Frameworks”, op. cit.

368 Northwest Region Development Program, op. cit.; see Wade, “Greening the Bank”, op. cit., pp. 637-675.

369 Park, “Norm diffusion within international organizations”, op. cit., pp. 122-125.

370 Ibid., pp. 122-127.

371 This bargaining power is likely to change, see Scott Morris, “Why the World Bank Can Now Afford to Say No to the United States” (15 December 2016), available at: https://www.cgdev.org/blog/why-world-bank-can-now-afford-say-no-united-states.

372 Park, “Norm diffusion within international organizations”, op. cit., pp. 122-134. On the pressure and success of environmental activism on the Bank policies, see also Macekura, Of Limits and Growth, op. cit., pp. 173-175, 201-218.

373 Robert Keohane, Peter Haas and Marc A. Levy “The Effectiveness of International Environmental Institutions”, in P.M. Haas, R.O. Keohane and M.A. Levy (eds.), Institutions for the Earth: Sources of Effective International Environmental Protection (Cambridge, Massassuchets: MIT Press, 1993), p. 14.

Information Center (BIC) or the Center for International Environmental Law (CIEL).³⁷⁴ Civil society has a continuous influence on the day-to-day work of MDBs. This has been especially explicit during the process leading to the adoption of the new World Bank safeguards, as explained below in Chapter Six.³⁷⁵

2.3. Internal adjustments within the Bank in favor of sustainable development

134. Changes have simultaneously come from within. For instance, in the World Bank, officers’ personal convictions that sustainable development should be taken into account have pushed the Bank towards the incorporation of social and environmental concerns.³⁷⁶ Since 1970, the World Bank Management has issued guidelines to its staff on policies and procedures, including environmental and social considerations.³⁷⁷ Furthermore, former Presidents of the Bank, such as Robert McNamara and, later, Barber Conable, showed their concern for the potential damage that economic development could do to the environment and implemented measures such as the preparation of the environmental guidelines in 1970,³⁷⁸ or, respectively, the establishment of the Environment Department in 1987.³⁷⁹ In 1992, two internally commissioned reports participated in the integration of environmental and social concerns. The “Morse Report”³⁸⁰ on the Narmada Dams³⁸¹ in India revealed

374 See BIC’s website, http://www.bankinformationcenter.org; see CIEL’s website http://www.ciel.org.

375 Interestingly remarking that civil society has had notable success at increasing accountability at the World Bank project and policy level, but had overall limited success, due in part to the Bank’s inability (or unwillingness) to fully integrate accountability to affected peoples into incentive structures for staff, see Ebrahim, Herz, “The World Bank”, op. cit., p. 76.

376 See for instance Shihata, “The World Bank and the Environment”, op. cit., pp. 1-8; Macekura, Of Limits and Growth, op. cit., pp. 198, 205, 211; Michael M. Cernea, Judith Freidenberg, “Oral History Interview for the Society for Applied Anthropology” (30 June 2003), e.g. pp. 9-10, available at:

https://www.sfaa.net/files/5613/9613/2881/oral-history-Cernea-Freidenberg.pdf. On the question of the influence of the Donors in the process, see also Daniel L. Nielson, Michael J. Tierney, “Delegation to International Organizations: Agency Theory and World Bank Environmental Reform”, 57 International Organization no. 2 (Spring 2003), pp. 241-276; Tamar Gutner, “World Bank Environmental Reform:

Revisiting Lessons from Agency Theory”, 59 International Organization no. 3 (Summer 2005), pp. 773-783;

Daniel L. Nielson, Michael J. Tierney, “Theory, Data, and Hypothesis Testing: World Bank Environmental Reform Redux”, 59 International Organization no. 3 (Summer 2005), pp. 785-800.

377 Shihata, “The World Bank and the Environment”, op. cit., pp. 1-8; Freestone, Legal Aspects of Sustainable Development, op. cit., pp. 12-13.

378 Shihata, “The World Bank and the Environment”, op. cit., pp. 3-4.

379 Freestone, Legal Aspects of Sustainable Development, op. cit., p. 9.

380 Bradford Morse and Thomas R. Berger, Sardar Sarovar: the Report of the Independent Review (Ottawa:

Resource Futures International, 1992).

381 Narmada River Development (Gujarat) Sardar Sarovar Dam and Power Project (IDA Credit Agreement No. 1553-IN) and Narmada River Development (Gujarat) Water Delivery and Drainage Project (IBRD Loan Agreement No. 2495-IN). After numerous criticisms, the World Bank had declined its financing of dams but this tendency may be changing, see Ian G. Baird, Bruce P. Shoemaker, Kanokwan Manorom, “The People and their River, the World Bank and its Dam, Revisiting the Xe Bang Fai River in Laos”, 46 Development and Change no. 5 (2015), pp. 1080-1081.

serious flaws in the implementation of an environmental action plan and resettlement policies. Then, the “Wapenhans Report” underlined the need for an enhanced control of the Bank’s operations.³⁸² Both contributed to the development and the strengthening of environmental and social safeguards as well as to the creation of the Inspection Panel and later the Compliance Advisor Ombudsman in order to review compliance with the Bank’s policies.³⁸³ This process can be linked to the first and fourth objectives of the insertion of conditionality introduced in Chapter Two, respectively: ensuring the responsible use of aid by balancing the absence of national scrutiny and increasing aid effectiveness by enhancing the quality level of aid projects.

135. But these internal dynamics do not unfold without difficulties. Galit Sarfaty has explained that the World Bank cannot be seen as a “monolithic institution”.³⁸⁴ There are disagreements within the Bank on sustainable development related issues, such as the application of environmental and social safeguards.³⁸⁵ This originates in personal preferences of the members of staff, but also in conflicting incentives. On the one hand, as explained in Chapter Two, the staff is subject to the pressure to disburse, which gives priority to the approval of projects rather than to the screening of projects for compliance with the environmental and social safeguards.³⁸⁶ Therefore, when a Borrower resists the application of certain policies, the staff has the incentive to accept the Borrower’s position in order to avoid conflict with the Borrower and delays.³⁸⁷ On the other hand, the environmental and social safeguards specialists have traditionally occupied position of less power in the World Bank than economists.³⁸⁸ Their integration in project teams does not seem ideal either. The World Bank IEG has stated in 2010 that:

Too often, safeguards activities are considered an add-on, and left to environmental and social specialists who are under resourced and not well integrated into supervision teams. This is not simply a resource constraint.

382 Boisson de Chazournes, “Policy Guidance and Compliance”, op. cit., pp. 283–284.

383 Shihata, The World Bank Inspection Panel, op. cit., pp. 5-8, 16; Freestone, Legal Aspects of Sustainable Development, op. cit., p. 16; Boisson de Chazournes, “Policy Guidance and Compliance”, op. cit., p. 284.

384 Sarfaty, “The World Bank and the Internalization of Indigenous Rights Norms”, op. cit., p. 1794.

385 Ibid.

386 See for instance Svensson, “Why conditional aid does not work”, op. cit., p. 383; Ebrahim, Herz, “The World Bank”, op. cit., e.g. p. 58; Accountability in Complex Organizations”, op. cit.; Bugalski, “The Demise of Accountability”, op. cit., p. 55.

387 Effective Implementation: Key To Development Impact (Wapenhans Report), op. cit.; see Bugalski, “The Demise of Accountability”, op. cit., p. 55, n. 246; Sarfaty, “The World Bank and the Internalization of Indigenous Rights Norms”, op. cit., p. 1806.

388 Sarfaty, “The World Bank and the Internalization of Indigenous Rights Norms”, op. cit., pp. 1806-1807;

Bugalski, “The Demise of Accountability”, op. cit., p. 55.

Staff surveys reveal that task team leaders complain about unavailability of environmental and social specialists when they are needed (…) and environmental and social specialists complain about the lack of predictability of demand for their services.³⁸⁹

136. However, it appears that environmental and social specialists’ power increases when the Borrower agrees with the application of safeguards as well as when local and international NGOs campaign for the application of safeguards in given projects.³⁹⁰ NGOs even sometimes informally ally with environmental and social specialists in order to push for compliance, both externally and internally.³⁹¹

3. The emulation phenomenon between the international effort for sustainable