25. As a continuum to and a link between the abovementioned literature, the dissertation aims to analyze environmental and social safeguards as conditionality and as a problematic yet promising legal vector for the integration of sustainable development.70 It argues that environmental and social safeguards should be reinforced in order to support sustainable development, while sovereignty infringement and safeguards’ noncompliance should be avoided. For that purpose, the dissertation is divided in seven chapters.
26. After the introduction, the first objective of Chapter One is to present the World Bank’s environmental and social conditionality for Investment Project Financing. The requirements on environmental impact assessment are explained as an example of the application and implementation of the safeguards, both as selectivity and performance conditionality. It is argued that the safeguards transform from internal policies into binding treaty loan agreement conditions. This has legal implications in case of safeguards’ noncompliance by the Recipient or the World Bank. Chapter One then presents the World Bank’s new safeguards. The second objective of the Chapter is to explain the IFC’s Sustainability Framework and its similarities and differences with the World Bank safeguards regarding its structure, the environmental and social due diligence requirements and the consequences of safeguards noncompliance. Here, it is argued that the IFC’s safeguards transform after the signing of the loan agreement from internal policies into binding contractual conditions.
A graph illustrates these findings. The third objective of the chapter is to briefly reflect on the safeguards’ legal nature before their insertion in the loan agreement. Here, it is argued that the safeguards are, prior to insertion, procedural rules and substantive standards of global administrative law. The final objective of Chapter One is to highlight its findings through the first case study. The IFC’s investment in the Dinant Corporation, a Honduran
69 See Michael Riegner, “How universal are international law and development? Engaging with postcolonial and Third World scholarship from the perspective of its Other”, 45 Verfassung und Recht in Übersee / Law and Politics in Africa, Asia and Latin America no. 2 (2012), pp. 243-245, citing, for a criticism of GAL from a TWAIL perspective, Sundhya Pahuja, Decolonising International Law. Development, Economic Growth and the Politics of Universality (Cambridge: Cambridge University Press, 2011), pp. 8, 252. On the criticisms to global administrative law, see in general Andrea Bianchi, International Law Theories, op. cit., pp. 65-66, 68-71.
70 Boisson de Chazournes, “Policy Guidance and Compliance”, op. cit., p. 297.
palm oil and food company, is a particularly telling example of the specific difficulties of complying with selectivity and performance conditionality in a high-risk context.
27. Chapter Two aims at completing the legal analysis of environmental and social conditionality presented in Chapter One by placing the environmental and social safeguards within the debates on conditionality in development cooperation. Both chapters inform the rest of the dissertation’s analysis of environmental and social safeguards as development cooperation conditionality. The first objective of Chapter Two is to introduce environmental and social safeguards within the debate over sovereignty and conditionality and present some general principles supporting the different perspectives on that matter. Then, its objective is to situate the particular case of environmental and social conditionality in the principal-agent relationship traditionally used to describe conditionality. It presents six objectives for the insertion of conditionality and argues that depending on the objective, the preference of the Donor or the Recipient will vary, along with the degree of infringement on the Recipient’s sovereignty. A graph is presented in order to clarify the argument. The third objective of Chapter Two is to place environmental and social conditionality within the different classical groups of criticisms addressed to conditionality, namely the inadequate design of conditionality, the vicious circle of noncompliance with conditionality and the ineffectiveness of conditionality. It then relates these groups of criticisms to the specific time of application of the conditionality and argues that the World Bank’s environmental and social safeguards are combined conditionality which allows it to face some, but not all, of the criticisms to conditionality. A graph is inserted in order to illustrate the findings.
28. Chapter Three aims at explaining how environmental and social conditionality is a product of and an instrument for the gradual integration of sustainable development considerations in MDB activities. The first objective of the chapter is to examine the combined forces behind the integration of sustainable development in MDB activities, especially the World Bank Group. The integration has been prompted by international law, mainly through the principle of integration, by civil society and by internal adjustments within the Bank. The second objective of the chapter is to show that this integration is also due to an international emulation phenomenon between MDBs and the international effort for sustainable development, starting before the 1972 United Nations Conference on the Human Environment in Stockholm and lasting until today. It concludes, from the
observation of MDBs’ environmental and social safeguards, that although there is a regulatory convergence towards a general definition of sustainable development there is no common law of sustainable development yet.
29. Chapter Four argues for the harmonization of safeguards in order to create a common law of sustainable development. The first objective of this chapter is to explain that harmonization of Donors’ practices has in fact been demanded by the aid effectiveness agenda since 2003 and that this call can apply to the harmonization of environmental and socials safeguards across MDBs. The second objective is to show that harmonization of environmental and social safeguards is also heavily criticized, first, because harmonization may trigger a “race to the top”, then paradoxically, because harmonization may prompt a race to the bottom. Harmonization is also criticized because it may represent a “one-size-fits-all” approach, with major operational difficulties. The third objective is to demonstrate that, despite the criticisms, a Human Rights-based harmonization of environmental and social safeguards constituting a “race to the top” is in fact desirable. Indeed, it promotes compliance with international law and creates a common law of sustainable development while it reduces costs, increases predictability and facilitates sustainable investments.
Finally, a case study highlighting these findings is presented. The analysis of the Kenya Electricity Expansion Project co-financed by the IBRD and EIB, amongst others, explains how MDBs can and should, through a managerial approach, contribute to the harmonization of environmental and social conditionality in practice.
30. Chapter Five’s first objective is to explain how MDBs’ endorsement of the principle of sustainable development is an example of the persistence of the law and development approach. Indeed, safeguards have an “external effect”: they are legal vectors for the transposition of sustainable development into national contexts. A case study is presented in order to illustrate this dynamic. The objective of the examination of the World Bank’s
“Matanza-Riachuelo Basin Sustainable Development Adaptable Lending Project” in Argentina is to explain how environmental and social safeguards aim to regulate local behavior. It unpacks the potential obstacles to the implementation of the safeguards in the case, as exposed by the law and development literature, which can be fitted into the groups of criticisms to conditionality exposed in Chapter Two. The case study shows the importance of the assessment of local context for the implementation of environmental and social conditionality. The final objective of the chapter is to determine whether
environmental and social safeguards infringe upon a Recipient’s sovereignty through the transplantation of sustainable development. It explains how sovereignty infringement is influenced by many factors, amongst which power asymmetry is an important element, and that the infringement in fine depends on the degree in which the preferences of the Borrower and the Bank are shared regarding sustainable development.
31. Chapter Six focuses on the new World Bank safeguards. Its first objective is to explain the main positions presented during the consultation phases as to the extent to which the new safeguards should support sustainable development. The second objective is to study the potential increased reliance on the country system brought by the new safeguards and its potential impact on the support of sustainable development. Here, it is argued that the rationale for the use of country systems can be based on four main grounds: respect for the Borrower’s sovereignty, the implementation difficulties of safeguards, the international aid effectiveness agenda and structural changes in multilateral development banking. Then, the previous Pilot Policy on the use of the country system is analyzed, specifically the Policy’s dire appraisal that seems to have come from all sides. Finally, the new policy, the “Use of Borrower’s Environmental and Social Framework”and its differences and similarities with the previous Pilot Policy is evaluated as well as the potential role of the Inspection Panel in these new settings. The third objective is to analyze the extent of the harmonization effort undertaken through the adoption of the new safeguards. One of the most contentious issues of the new safeguards is chosen for this purpose, namely the integration of the Free, Prior and Informed Consent of indigenous peoples. It is found that, although the inclusion of the Free, Prior and Informed Consent into the new safeguards does mark the integration of an emerging Human Rights standard in the safeguards, its interpretation by the Bank may differ. Practice will tell whether we are witnessing a harmonization of the Bank’s safeguards with Human Rights standards or rather the appropriation and operational reinterpretation by the Bank of Human Rights standards.
32. Chapter Seven builds on the previous chapters’ findings of environmental and social conditionality noncompliance and proposes avenues to address these situations, within the three groups of criticisms to conditionality. The first objective is to present institutional reforms as a solution to the vicious circle of noncompliance with conditionality. Indeed, reforms regarding staff incentives, training, communication and resources seem necessary in order to orient the Bank’s operations toward social and environmental sustainability on
an equal footing with the organization’s quest for economic sustainability. Furthermore, safeguards should be understood as a tool for resolving conflicts of interest. This objective in fact limits the Bank staff’s autonomy, in favor of environmental and social protection.
The second objective is to propose harmonization of safeguards across MDBs as a solution to the ineffectiveness of conditionality. In cases of co-financed projects, when safeguards are not harmonized, MDBs should adopt a managerial approach to avoid the application of a different set of safeguards and potential conflicting decisions of the respective accountability mechanisms. Furthermore, there should be a general quest for the Human Rights Based harmonization of safeguards across MDBs. The third objective is to advocate for a strict assessment of a Borrower’s context to determine the context’s suitability for environmental and social safeguards implementation. On that basis, the potential resistance of the Borrower should be evaluated and the project modified accordingly or even dropped.
In addition to a sovereignty violation, attempting to export safeguards in an unsuitable context may result in delays, project failures, Human Rights violations and reputational damages for the Bank.
Chapter I. Multilateral Development Banks’ Social and Environmental Conditionality