Noncompliance with the Sustainability Framework

61. Just as with the World Bank’s environmental and social safeguards, the consequence of the noncompliance with the conditionality required by the IFC depends on the actor and the time of application. The Sustainability Framework’s provisions first apply to the IFC’s staff, directly in the case of the ESS Policy, and indirectly for the Performance Standards. The applicable provisions of the Performance Standards are not mandatory on Recipients, except in order to sign the agreement.¹⁴⁹ The panorama changes once the loan agreement has been signed, incorporating performance conditionality: it becomes enforceable contract law.

Therefore, the enforcement mechanisms differ. One can observe the same two “layers” as described for the IBRD. The first concerns the Sustainability Framework and is the task of the Compliance Advisory Ombudsman (hereinafter CAO).¹⁵⁰ The CAO acts as an independent recourse mechanism to enhance the environmental and social accountability of the IFC.¹⁵¹ It reports directly to the President of the World Bank Group and addresses complaints from people affected by the development projects.¹⁵² The second “layer” of obligations of the IFC appears in its legal obligations, but just as with the IBRD, the organization enjoys immunity as an international organization.¹⁵³ Concerning the Recipient,

148 Bridgeman, Hunter, “Narrowing the Accountability Gap”, op. cit.; Wirth, “Trade and Finance”, op. cit., pp. 335-336.

149 Bridgeman, Hunter, “Narrowing the Accountability Gap”; see Wirth, “Trade and Finance”, pp. 335-336.

Again, on the influence of these norms even if they are non-binding, see Chapters Three and Five.

150 See below Chapter One, section 5.

151 The CAO is also the accountability mechanism of the Multilateral Investment Guarantee Agency (or MIGA), the World Bank guarantee institution which is not covered in this research.

152 CAO, “CAO Audit of IFC Investment in Corporación Dinant”, op. cit., p. 4.

153 Reinisch, “The Immunity of International Organizations”, op. cit., p. 286.

its compliance is legally required only for performance conditionality arising from the loan agreement.

62. Graph 1: World Bank Group’s conditionality: compliance and enforcement

This graph schematically illustrates some of the abovementioned findings regarding similarities and differences between the World Bank’s and the IFC’s safeguards.

Compliance World Bank:

Current safeguards.

IFC:

Sustainability

Framework, inter alia.

Recipient:

Loan Agreement.

Selectivity conditionality

Review by the Inspection Panel.

Review by the CAO.

N/A

Performance conditionality

IBRD: Enforceable under treaty law.

IFC: Enforceable under contract law.

Compliance: The World Bank has to comply with the policies contained in its current safeguards (the OP), while the IFC must comply with the Sustainability Framework. In both cases, the Recipient shall comply with the obligations contained or referred to in the Loan Agreement.

Noncompliance with selectivity and / or performance conditionality: In case of the World Bank or the IFC’s noncompliance with the abovementioned obligations (selectivity and / or performance conditionality), a review can be undertaken by their respective accountability mechanisms, the Inspection Panel or the CAO. There can be no noncompliance with selectivity conditionality by the Recipient, because the conditionality is not binding on the Recipient before the signing of the loan agreement. In case of the Recipient’s noncompliance with the loan agreement (performance conditionality), the loan agreement is enforceable respectively under treaty law (loan agreement with the World Bank) or under contract law (loan agreement with the IFC).

4. Brief literature review of the legal nature of the Bank’s environmental and social safeguards before the signing of a loan agreements

63. The question remains as to the legal nature of the safeguards within international law, before their incorporation in a loan agreement. As internal documents developed by an international organization yet often binding on its staff and with external legal effects,¹⁵⁴ the answer is not straightforward. Contrary to the founding treaties of international organizations, such as the World Bank’s Articles of Agreements, which pertain to classical sources of international law,¹⁵⁵ the safeguards fall beyond the limits of the traditional sources of international law.¹⁵⁶ Worries have arisen that international organizations have started to take on a life on their own beyond the traditional functionalist perspective, as

“global Frankenstein monsters”.¹⁵⁷

64. In response, some scholars have explained that the safeguards are simply “institutional policies with legal effects”,¹⁵⁸ “non-treaty normative instruments”¹⁵⁹ and “secondary law”¹⁶⁰ of the Bank.¹⁶¹ In this context, they suggest that the safeguards are best analyzed under the framework of global administrative law,¹⁶² defined by Benedict Kingsbury as

“comprising the mechanisms, principles, practices, and supporting social understandings that promote or otherwise affect the accountability of global administrative bodies, in

154 See on five types of direct effect of the safeguards Kingsbury, “Operational Policies of International Institutions”, op. cit., pp. 338-339.

155 Traditional sources are: treaties, international custom, the general principles of law and, as subsidiary means, judicial decisions and the teachings of the most highly qualified publicists, see art. 38 of the ICJ Statue (Charter of the United Nations and Statute of the International Court of Justice).

156 Alvarez, International Organizations as Law-makers, op. cit., pp. 237-238; Jokubauskaite,

“Accountability”, op. cit., pp. 76-79.

157 Alvarez, International Organizations as Law-makers, op. cit., pp. 585-586.

158 Kingsbury, “Operational Policies of International Institutions”, op. cit., p. 338.

159 Benedict Kingsbury, Lorenzo Casini, “Global Administrative Law Dimensions of International Organizations Law”, 6 International Organizations Law Review (2009), p. 323.

160 Dann, The Law of Development Cooperation, op. cit., pp. 187-189.

161 For an interesting contradictory view, stating that the safeguards are in fact international law, see Giedre Jokubauskaite, “The Legal Nature of the World Bank Safeguards”, 51 Verfassung und Recht in Übersee / Law and Politics in Asia, Africa and Latin America (2018), p. 78.

162 See for instance Kingsbury, Casini, “Global Administrative Law Dimensions”, op. cit.; Alvarez, International Organizations as Law-makers, op. cit., pp. 244-257; Frydman, Van Waeyenberge, Gouverner par les standards, op. cit.; Dann, “The Global Administrative Law of Development Cooperation”, op. cit., pp.

415-435; Boisson de Chazournes, “Functionalism! Functionalism!”, op. cit., pp. 953-954; Jokubauskaite,

“Accountability”, op. cit., pp. 29-30; Michael Riegner, “The Equator Principles on Sustainable Finance Assessed form a Critical Development and Third World Perspective”, 5 Transnational Legal Theory no. 3 (2014), pp. 495-496.

particular by ensuring they meet adequate standards of transparency, participation, reasoned decision, and legality, and by providing effective review of the rules and decisions they make”.¹⁶³ Global administrative law scholars recognize the Bank as a global administrative body which produces rules and decisions and should meet certain adequate standards.

Safeguards have been qualified more precisely as pertaining to a specific branch of global administrative law, which is sometimes called the institutional law of development, or the law of development cooperation and finance, and is defined by Philipp Dann as “concerned with establishing the structures for the process of transfer by constituting the actors, delineating their powers and setting procedural rules as well as substantive standards for the process”.¹⁶⁴ The global administrative law perspective is not incompatible, according to Boisson de Chazournes, with an evolving notion of functionalism,¹⁶⁵ which comes to terms with the development of the activities of international organizations as global administrations. This approach is also adopted by this dissertation and safeguards, until their incorporation in a loan agreement, are considered procedural rules and substantive standards of global administrative law. The fitting of the safeguards within global administrative law therefore grants the safeguards a certain legal pedigree.¹⁶⁶

5. The implementation of environmental and social conditionality in practice: the