The UBESF within the debate on accountability

267. Accountability is at the center of the debate between the competing approaches. While Borrowers and staff tend to advocate for the sovereignty of Borrowers in the management of environmental and social issues, civil society and certain Donors also demand institutional accountability for compliance with environmental and social safeguards.⁸⁹¹ In fact, striking a balance between sustainable development and ownership relates to a traditional adjudication question: how to mediate between the policy value for which accountability is sought, and the sovereignty of the decision-maker?⁸⁹² This question relates to the determination of a standard of review, as explained below. However, at this early stage of the UBESF, proponents of the second approach have stated their concern about the very competence of the Inspection Panel.⁸⁹³ Assuming that the Panel can overcome the manifest technical obstacles such as the costs, time and expertise required for reviewing programs with the UBESF, is the Panel even competent for this exercise? Will the Panel

890 On institutional culture, see for instance Galit A. Sarfaty, “Why Culture Matters in International Institutions: The Marginality of Human Rights ate the World Bank”, 103 The American Journal of International Law (2009), pp. 647-683.

891 Some have argued that mixing Borrower’s systems with gap-filling measures based on principles creates a potentially confusing legal environment - CIEL, “The Use of Country Systems in World Bank Lending”, op.

cit., pp. 3-4-: it would be difficult for an affected community, in the absence of clear information about the World Bank’s interpretation of each principle, to know if a given activity is acceptable, whether a principle has been violated, whether the “materially consistent” analysis has been well conducted and whether and to whom to file a claim - Bugalski, “The Demise of Accountability”, op. cit., p. 4-. This issue may be addressed with a complete, transparent, culturally appropriate and timely consultation and disclosure of the applicable local policies and gap-filling measures - Larsen, Ballesteros, Striking the Balance, op. cit., pp. 23-24-.

892 Steven P. Croley, John H. Jackson, “WTO Dispute Procedures, Standard of Review, and Deference to National Governments”, 90 The American Journal of International Law no. 2 (April 1996), p. 212.

893 Dann, Riegner, Safeguard–Review der Weltbankgruppe, op. cit., p. 16. On the Inspection Panel, see in general: Shihata, The World Bank Inspection Panel, op. cit.; Boisson de Chazournes, “The World Bank Inspection Panel: about Public Participation”, op. cit.; Naudé Fourie, The World Bank Inspection Panel and Quasi-Judicial Oversight, op. cit.

engage in examining if the “materially consistent” analysis has been undertaken correctly?⁸⁹⁴ If the Panel did not have this competence, there would be a risk of fragmentation in the World Bank’s activities. Some activities, undertaken under the World Bank’s new safeguards system, will not be deemed acceptable by the World Bank; the same activities under the UBESF may be deemed acceptable because they are immune to the Panel’s jurisdiction. Then, if the Panel is competent, how will it conduct this “materially consistent” review and strike a balance between sovereignty and sustainable development?

2.4.1. The competence of the Inspection Panel to review compliance in projects using the Borrower’s system

268. It is unlikely that the Panel will start reviewing the observance by a Borrower of its own national law in a program with the UBESF, as it is not part of its competences – exposed in Chapter One⁸⁹⁵ – and entails the risk of violating the Bank’s political prohibition.⁸⁹⁶ However, there are two strong indications of the preservation of the Panel’s mandate to review the Management’s compliance with the Operational Policies, even with the UBESF.

269. First, the mandate of the Panel was not limited by the Pilot UCS.⁸⁹⁷ Indeed, under the Pilot, the Panel is competent to review whether the World Bank: correctly assessed the Borrower’s system and the gap-filling measures; correctly supervised the operation; and complied with other applicable policies not affected by the Pilot UCS.⁸⁹⁸ Second, the Panel affirmed its competence and engaged in an equivalence review⁸⁹⁹ in the Eskom Investment

894 This test is of great importance: the majority of noncompliance with safeguards found by the Panel stems from inadequate consultation or inadequate assessment of environmental or community impacts, see IEG, Safeguards and Sustainability Policies, op. cit., p. 18.

895 On the Word Bank Inspection Panel, see also Chapter Four, for instance section 3.2.

896 IBRD, “Articles of Agreement”, op. cit., art. 4.X; IDA, “IDA Articles of Agreement”, op. cit., art. V, Section 6.

897 The absence of changes in the Panel’s mandate is stated, for instance in: Joint Statement on the Use of Country Systems, Mexico Decentralized Infrastructure Reform and Development Project (R2004-0077, 0077/3), Chairperson of The Inspection Panel and Senior Vice President of the World Bank (8 June 2004),

available at:

http://ewebapps.worldbank.org/apps/ip/PanelMandateDocuments/JointStatementUseCountrySystems.pdf;

World Bank, “Expanding the Use of Country Systems in Bank-Supported Projects: Issues and Proposals”,(4 March 2005), available at: http://documents.worldbank.org/curated/pt/856881468780905107/pdf/31734.pdf, paras. 39, 49, 52, 79; World Bank, “Frequently Asked Questions on the Use of Country Systems in Bank-Supported Operations” (18 October 2004), para. 20, p. 7, available at:

http://www1.worldbank.org/publicsector/pe/befa05/usecountrysystems.pdf.

898 See also World Bank Inspection Panel, Investigation Report South Africa: Eskom Investment Support

Project (21 November 2011), paras. 115-120, available at:

http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/Eskom_IPN_Investigation_Report _11.21.11.pdf, about Eskom Investment Support Project (IBRD Loan No. 78620-ZA).

899 On its own competence under the Pilot UCS, see World Bank Inspection Panel, Investigation Report South Africa, op. cit., paras. 112-120.

case in South Africa, which was part of the Pilot UCS. In its investigation report, the Panel undertook a two-level analysis: the “system level” and the “project level”.⁹⁰⁰ It analyzed the Management’s assessment of the equivalence and acceptability of South Africa’s environmental and social safeguard system (the system level) and then analyzed the Management’s appraisal and supervision of the Eskom Investment (the project level).⁹⁰¹ One can assume that the Panel’s competence⁹⁰² will be similar for the UBESF, mutatis mutandis: it will be competent to assess the World Bank’s “materially consistent” analysis (the system level) and the supervision of the operation and compliance with all applicable policies (the project level).⁹⁰³

2.4.2. The potential development of a standard of review by the Panel for projects that use the Borrower’s system

270. This system level analysis is new to the Panel. Indeed, only when reviewing a project that uses the Borrower’s system is the Panel called to look into the Borrower’s policies, in order to evaluate if these are aligned with those of the World Bank. The project level analysis is also new to the Panel inasmuch as it entails the review of Management’s supervision of the implementation of national laws. This is a stark departure from the Panel’s habitual tasks of reviewing the Management’s compliance with the Word Bank’s policies only. Furthermore, as one of the purposes of the Environmental and Social Framework is the increased use of the Borrower framework, the Panel may be confronted with a growing number of cases with the UBESF and at the same time with an increased uncertainty as to its new task, especially as to the degree of deference it should display toward the Management and Borrowers in their decisions of what constitutes the achievement of objectives “materially consistent” with the ESS objectives. To create a legal methodology in this new context which will determine its degree of deference, it may need to develop a standard of review.⁹⁰⁴ The standard of review can be defined as the nature and

900 Ibid., for instance p. viii.

901 Ibid.

902 On the Panel’s competence in the ESF, see World Bank, “Environmental and Social Framework”, op. cit., Overview, para. 12 and “Environmental and Social Policy for Investment Project Financing”, op. cit., para.

61.

903 Christina Passoni et al., International Organizations (IO) Clinic at NYU School of Law, Empowering the Inspection Panel, The Impact of the World Bank Safeguards Review (2016) p. 17, available at http://www.iilj.org/publications/empowering-the-inspection-panel.

904 See for instance Lucasz Gruszczynski, Wouter Werner, “Introduction”, in L. Gruszczynski, W. Werner (eds.), Deference in International Courts and Tribunals, Standard of Review and Margin of Appreciation, (Oxford: Oxford University Press, 2014), p. 1. On the question of the possible restraint exercised by the

intensity of review of the decision of the primary decision-maker, here the Management, by an adjudicator, here the Panel, relative to normative and/or factual issues.⁹⁰⁵ It may range from very intrusive, where the adjudicator’s decisions are substituted for the primary decision-maker’s decisions, to very deferential, which relies totally on the decision of the primary decision-maker.⁹⁰⁶

2.4.3. The reasons for using a comparative approach to a judicial standard of review 271. As explained in Chapter One, there are fundamental differences between traditional adjudicators, such as judicial mechanisms or investment arbitrators, and accountability mechanisms, such as the Inspection Panel.⁹⁰⁷ Indeed, the primary decision-maker in the Panel’s cases is not a State but the Management. Also, the final decision-maker is not the Inspection Panel but the World Bank Board of Directors. ⁹⁰⁸ However, there are also many similarities that justify a comparative approach to the judicial standard of review. First, although the primary decision-maker is the Management, its decision with respect to the UBESF is intrinsically linked to the Borrower’s decisions. Indeed, the decision to use all, or part, of the framework shall be agreed between the World Bank and the Borrower;⁹⁰⁹ furthermore, the Borrower has a vested sovereign interest in the use of its own national policies, as explained above. Second, the Inspection Panel’s findings have an important weight in the decision process. The Board of Directors’ decision is based on both the Panel’s investigation report – which reviews facts and compliance – and the Management’s report, which itself is a response to the Inspection Panel’s report.⁹¹⁰ Third and maybe most importantly, the Inspection Panel faces many of the same problems that many judicial mechanisms do: limited resources, democratic deficit, potential perceptions of inadequacy

Inspection Panel in cases which do not use country systems, see Naudé Fourie, The World Bank Inspection Panel and Quasi-Judicial Oversight, op. cit., pp. 284-293; this exceeds the scope of this research.

905 Gruszczynski, Werner, “Introduction”, op. cit., p. 2 and Caroline Henckels, Proportionality and Deference in Investor-State Arbitration, Balancing Investment Protection and Regulatory Autonomy (Cambridge:

Cambridge University Press, 2015), pp. 29-30.

906 Gruszczynski, Werner, “Introduction”, op. cit., pp. 1-2 and Henckels, Proportionality and Deference, op.

cit., pp. 29-30.

907 As explained in Chapter Four, section 3.1, the Inspection Panel has been deemed a quasi-judicial mechanism by some authors.

908 World Bank, The Inspection Panel at the World Bank, op. cit., “Operating Procedures”, para. 71.

909 World Bank, “Environmental and Social Framework”, op. cit., ESS 1, para. 20.

910 World Bank, The Inspection Panel at the World Bank, op. cit., “Operating Procedures”, especially paras.

67-71. On the “judicialization” of the Inspection Panel, see Naudé Fourie, The World Bank Inspection Panel and Quasi-Judicial Oversight, op. cit., for instance pp. 185-255.

in its findings and compliance.⁹¹¹ All these may advocate in favor of judicial restraint or deference. ⁹¹² Furthermore, the Inspection Panel will need to work with a particularly open-worded policy regarding the “materially consistent” analysis, which is an additional rationale for deference: deference is generally displayed by adjudicators when there is normative flexibility,⁹¹³ on the basis of regulatory autonomy, proximity, institutional competence and expertise of the primary decision-maker.⁹¹⁴ These factors relate to the principle of sovereignty (regulatory autonomy)⁹¹⁵ and to the rationales for the support of ownership by the aid effectiveness agenda (proximity, institutional competence and expertise of the Recipient).⁹¹⁶ The standard of review of the Panel is therefore directly related to the debate. If the Panel shows the highest degree of deference, meaning total reliance on the Management and the Recipient’s agreement in using Borrower’s system, it may support ownership but allow Borrowers to evade their obligations under the safeguards.⁹¹⁷ It may also entail a fragmented application of the safeguards and of the definition of principle sustainable development as understood by the World Bank.⁹¹⁸ Indeed, just like traditional adjudication, a consistent interpretation of the Environmental and Social Framework by the Panel would help to clarify safeguards and develop their contents.⁹¹⁹ On the other hand, if the Panel exercises a de novo review of the “materially consistent” analysis and often concludes that the Borrower’s system should not have been used, it will trump the decision of the Management and the Borrower and may defeat the objective of supporting

911 Yuval Shany, “Toward a General Margin of Appreciation Doctrine in International Law?”, 16 The European Journal of International Law no. 5 (2006), pp. 908-909. On an example of reception of the Inspection Panel’s findings by the World Bank staff, see Bottelier, “Was World Bank Support”, op. cit., pp. 47-55.

912 Croley, Jackson, “WTO Dispute Procedures”, op. cit., p. 212.

913 On “normative flexibility” or “normative uncertainty”, see respectively Shany, “Toward a General Margin of Appreciation Doctrine in International Law?”, op. cit., pp. 909-910, or Henckels, Proportionality and Deference, op. cit., pp. 29-30, retaking Robert Alexy.

914 Henckels, Proportionality and Deference, op. cit., pp. 37-41. See also Shany, “Toward a General Margin of Appreciation Doctrine in International Law?”, op. cit., pp. 918-922.

915 On sovereignty and International Human Rights instruments, see for instance Henkin, “That ‘S’ Word”, op. cit., pp. 1-14.

916 On aid effectiveness see also Chapter Four.

917 Croley, Jackson, “WTO Dispute Procedures”, op. cit., p. 194.

918 On criticisms to a large degree of deference, see Shany, “Toward a General Margin of Appreciation Doctrine in International Law?”, op. cit., pp. 922-926. On judicial review, relativism and Human Rights law, see for instance Henkin, “That ‘S’ Word”, op. cit., or James A. Sweeney, “Margins of Appreciation: Cultural Relativity and the European Court of Human Rights in the Post-Cold War Era”, 54 International and Comparative Law Quarterly (2005), p. 471.

919 Shany, “Toward a General Margin of Appreciation Doctrine in International Law?”, op. cit., p. 922.

ownership. The Panel may be deemed an “activist”, which may lessen the authority of its findings.⁹²⁰

2.4.4. Can there be lessons learnt from the Eskom case for the Panel’s work with the UBESF?

272. In its review of the Eskom Investment case in South Africa, the Inspection Panel did analyze the equivalence of the South African system and declared that, in certain aspects, it was not equivalent to World Bank policies.⁹²¹ The Panel found for instance that the South African law regulating environmental impact assessment, which the Management had deemed equivalent to the World Bank safeguards, was in fact not yet in effect at the time the environmental impact assessment was conducted.⁹²² Furthermore, the applicable law was not considered equivalent by the Panel, which stated that the Management’s analysis

“did not adequately recognize the gap between Bank Policy requirements and prevailing national legislation with respect to assessing cumulative impacts and environmental management planning in the EIA process at the time that the (…) EIA was prepared, as required by Table A1 of OP/BP 4.00”.⁹²³ Thus, the Panel did not hesitate to analyze South African law and determine the presence of gaps compared to the safeguards. Nevertheless, the Panel concluded that its findings “[did] not alter the overall conclusion that South African (…) systems are broadly equivalent (…), but point towards gaps that were not identified (…)”.⁹²⁴ As a consequence, the Board of Directors decided that the World Bank would comprehensively support project implementation, including environmental and social safeguards, but did not decide to revert to the use of the World Bank safeguards where gaps were found by the Panel.⁹²⁵ By concluding the overall equivalence of the country system even in the presence of gaps, the Panel seems to have adopted a standard of review which entails a rather high degree of deference to the Management and the Borrower as to the use of the country system. Time will tell whether this case constitutes an indication of

920 See on that matter in WTO law Croley, Jackson, “WTO Dispute Procedures”, op. cit., p. 212.

921 See for instance World Bank Inspection Panel, Investigation Report South Africa, op. cit., paras. 192-194.

922 World Bank Inspection Panel, Investigation Report South Africa, op. cit., paras. 182-186.

923 World Bank Inspection Panel, Investigation Report South Africa, op. cit., paras. 182-186.

924 Ibid., Overview, p. viii.

925 World Bank, “World Bank Board Discusses Inspection Panel Report on South Africa’s Eskom Investment Support Project” (25 May 2012), p. 1, available at: http://ewebapps.worldbank.org/apps/ip/PanelCases/65-Press%20Release%20on%20Board%20Discussion%20(English).pdf. Bank Information Center, “World Bank fails to correct missteps in Eskom coal project in South Africa” (4 June 2012), available at:

http://www.bankinformationcenter.org/world-bank-fails-to-correct-missteps-in-eskom-coal-project-in-south-africa/.

the standard of review that will be adopted by the Panel for UBESF cases, but as explained above, the UBESF contains a less stringent wording and no list of principles, which may push the Panel towards a different standard of review – maybe even more deferential.

2.4.5. Ways forward to apply the new UBESF

273. Four suggestions can be made at this stage in order to apply the new UBESF and avoid as much as possible sovereignty infringement, safeguards dilution, project implementation obstacles and reputational risks. First, the UBESF could be applied restrictively, only to Borrowers with systems as compatible as possible with the World Bank’s new safeguard objectives.⁹²⁶ Then, when the systems bear differences, the UBESF could be implemented in a capacity-building perspective when Borrowers require the World Bank’s support in upgrading their systems and therefore “own” the reform. This could be done through stand-alone programs,⁹²⁷ independently from investment projects. A transparent process, including meaningful consultation, should be committed to.⁹²⁸ Because of the technical difficulties, specialized staff should be appointed in sufficient numbers.⁹²⁹ For the rest of the projects, the World Bank’s new safeguards could be used.⁹³⁰ This could hopefully provide a middle ground between the two competing approaches. Finally, the competence of the Inspection Panel must be preserved, as it is a key actor in the balance between ownership and sustainable development. Indeed, if the UBESF is restricted to the cases suggested here, a consistent, even if deferential, standard of review by the Panel can provide some predictability and harmonization.

3. The integration of the Free, Prior and Informed Consent of indigenous peoples in