Book Chapter
Reference
Policy Guidance and Compliance: The World Bank Operational Standards
BOISSON DE CHAZOURNES, Laurence
BOISSON DE CHAZOURNES, Laurence. Policy Guidance and Compliance: The World Bank Operational Standards. In: Dinah Shelton. Commitment and Compliance : The Role of Non-Binding Norms in the International Legal System . Oxford and New York : Oxford University Press, 2000. p. 281-303
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http://archive-ouverte.unige.ch/unige:4748
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PoUcy Guidance and Compliance: The World Bank Operational Standards
LAURENCE BOISSON DE CHAZOURNES
In discussions of compliance with and the role of non-binding norms in the internationallegal system, it initiaJiy might appear curious to con,ider the Operational Standards develOped by the WOrld Bank.' They appear to be quasi-administrative in nature, for internai use by the Bank to guide its staff in their aetivities. However, th.y also are applied in the framework of finane- ing development projeets. through loan. and credit agreementS negotiated between the Bank and borrowing countries .. As ,uch, they gain an extemal dimension, potentiaJiy afTecting the behavior of the borrower.
The author wouldlike to thank Andres Riga, Acting Vice President and General Counsel, the World Bank, for rus comments and observations.
1 The tenns'WorldBank' and 'Bank' refer to the In1emationaJ Bank for Reconstruction and Development (IBRD) and the International Development Association (lDA)established in 1960, the latterproviding concessional (unding fadets ecdnomically developed countries. A more encompassing term, 'World Bank Group', refers to the IBRD and IDA, plus tbe Intcrnatiomil Finance Corporàtion (IFe) cstablished in 1956 to engage in priv.ate sectorfinanC-:
ing, the Multilateral Investmènt Guarantee Agency (MIGA), established in 1988 ta. provide guarantees against various types of noncommerqal ruks faced by foreign private irivestors in developing countries, and the International Centre for Settlement of lnvestment Disputes (ICSID), established in 1966 10 provide conciliation and arbitration facilities for the settlemenl of disputesrelated to transnational Învestments.
The Operational Standards are atypical of international policy and legal instruments. Their purpose
IS
to assist individuals working for an inter- national organization to fulfiJl their tasks pursuant to the mandate of the organization. As polieyinstruments they do nothaye legal status perse in the internationallegal system. They may enter the legal'order, however, and be regulatcd by the law of treaties by being incorporaied into ~ 101\11 or credit agreement.2 The Operational Standards also may play a crucial role in fos- tering the emergence of new international practices that scck to promote sus- 'tainablé development and in facilitating respect for international legalinstrumenis negotiated and adopted in pther arenas. Finally they play an important role in assessing the quality of the World Bank's activities.'
The World Bank Operational Standards reveal the multifaceted, complex . nature of the compliance issue. The Bank has developcd an 'lITay of procedures . and mcchanisms to eosure compliance with the Standa,ds during an opera- tional aetivity, taking into aocount lheirpolicy nature, as weU as their contrae-- tuai charaeter when incorpOrated into a loan or credit agreement In addition, the Standards promote compliance with international conventions and non- . legally binding instruments. Last but notleast, by favoring the participation of.
non-state actors the Standards make sueh actors the 'guardians' ofrespeet for the Bank's norms and procedures. The establishment of the World Bank Inspection Panel has significantly reinforced this last element.4 . ,
The present study begins by discussing the notion of Operational Standards, describing various environmental and social standards. This is fol- . 10wed by an asseSsment of the role of procedures and mechanisms in pro-
moting compliance with Qperational Standards and the.role. of OperationaJ Standards in fostering compliance with other international law. Links arc draWn between public participation in the Bank's activities and compliance.
The conclusion comments on the linkages between Operational Standards, compliance issues, and the intemationaJlegal system. .
A. OPERATIONAL STANDARDS IN THE WORLD BANK'S ACTIVITIES
0Perational'Standards, also termed ~'operational policies and procedures',' COIlsist of D':lII1crous instructîons fromthe Bank management to its staff.
l The expression 'Joan or credit agreements' encom"passes guarantee agreements, grant Agree·
menU, 5uch as Global Environmcnt Facility grants, as well as other legal documentation enlered iota by the World Bank and others for the purposesoftinancing specifie operations.
l See Wirth, D, 'Economie Assistance, The World Bank and Nonbinding Instruments', ln
Br~wn Weiss. E. (cd.), Inretnal;onal Compliat1l:e with Non-binding Accords (1997) 219,227-32.
, Res. No. IBRD 93-10. Res. No. IDA 93-6, 'The World Bank InsP'Ctjon Panel' (1995) 34 LL.M.503-
5 The Res. establishing the InspeCtion Panel caUs fOT reviewing complaints regarding 'opera- tional policies and procedures'. This lcrm is give"n a spec}fic meaning in thùontcx( orthe Res. and
\
\
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lAu_renee_Boisson de Chazou.rnes .. 283 They encompass a wide array'or topics intended to assist the Bank staff in ils work conceming financed aclivilies falling within the mand~te of the Bank, sueh-as specifie investment activities-or activities aimed at facilitating invest- ments for productive purposes.· The operation.1 policies. and procedures have been elaboraied around general themes, some. oftheII! desigoed to avoid or mitigate detrimental impacts of tinancial activities on certain groups of people and on the environment ..
Operational Standards encompass documents entilled 'Operlj.tional Policies'; 'Bank Procedures', and 'Operational Directives', as weil as various other documents including o'peràtional Slalements and ad hoc circulars embodying the Bank policiès and procedures. The various tilles rcllcet the evolution of the policy docUments towards codification of prescriptive con- dUCl7 Originally, Operational Standards were conceived as aspitational tar- gets drawn from practice and enshrined in policy documents. Over time, the Standards increasingly have been considered 10 express mandatory processes and prescriptions and have been more strictly and litera1ly interpreted.
Various events taking place in the udy 1990s contrlbuted to the change of perception, especially ihe rclease of IWo reports commissio!led by the Bank:
the 'Morse Report',' an independent r,e.view of highly-criticiud projcets
·known .s the 'Narmada projcets', and the 'Wapenhans Report',' an internai review of Bank operations commissioned by its President in the wake of the Morse Report. The latter assessed the implications of Bank financed projects to draw s6me -Iessons and recommendatioDs on how ta improve iheir efTec- tiveness. The Morse and Wapenhans Reports bath highlighted a need to strengthen quality control in the Bank's operations and ta enhance trans- parency and accountability in the implementation of projects. Compliance .with Operational Standards was identiJied as an important tool for achieving such objectives. Subsequent shifls in the role of the Operational Standards occurred in 1992, when the Bank's management clarined the extent to which
consists ,'of th~ Bank's Operational Policies. Bank. Procedures and Operational Directives and simitar documentsissued before these series were started.lt does not include Guidelincs and Sest
~ctices and similar documents of $tatemeots~. Ibid., para. 12.
6 Art. I(i) ,!f t~ Articles of Agreement establishes that the primary purpose of the Bank is to 'assisl in the reconstruttion and developmcnt of territories of iu members by racilitating the investmcnt of capital for productive purposcs', Articles of Agreement, 2 U.N.T.S. 134, as amcnded 606 V.N.T.S., 294. SCe 'Project and Non·Project Financing under the IBRD Anicles'.
Legal Opinion of the Senior Vice·President and General Counsel, December 21. 1984 . .' For most orthe Bank.'s history, operational policies and procedures have been codified in a referencedOcument called The ()peratiofJal Manual. A system ofOperatio:nal Manual Staterncnts (OMS) 8J1d Operational Poli,cy Notes (OPN)was usee! in the 1970$ and 1980s. After 1987, they were coosolidated into Operational Direct.lves (00); see World Bank Operational Policies:
Lessons of Experience and Future Directions, CODE97-73 (November 20, 1997).
8 Morsç, 8., and Berger, T.R., SOldoT SOTO VOT: Tnt RtpOTl of the Independefl' RevÎtw (1992).
Ste also Berger, T., 'The World Bank's Independent Review of India's Sardor Sarovar Projects' (1993) 9 Ain. U. J. lm"/ L 4< Po!'y 33-48.
" ElTective'lmplemenulIion: Key 10 Dcvelopmenl Impact (Rn-12S), November 3, 1992.
the Operational Standards are binding, and in 1993 when the World Bank
Inspection Panel was ~tablished. .
Operational Standards are now looked upon as nonnative and procedural benchmarks for asSessing the Bank's activities. This evolution was supple- mented by
a
change in the Bank.'s diselosure poliey. Originally, operational policies and procedures were not accessible ta the· public at large, as their pur-- pose was solely to guide Bank staifin the conduct ofits operational activities.The process ofmaking them publicly acèessible began at the end orthe 1980s and was strengthened, as discussed below, by the 1993 adoption of a genera!
disclosure policy'o concerning Bank documents.
1. Adoption and Bimling Nature of Operational Standards
The adoption process for Operatlonal Standards is not a systematic internal legislative process !hat covers every topic of relevance for the operational work of the organization. Insteae!, the process is ad hoc: a-topic emerges and eventually becomes sufficiently important and relevant to
justify
the adoption of an operationaJ policy or procedure." Wben the Bank feels that an issue - should be dea!t with !his way, its staff and management prepare draft docu- ments. Consultations are held -at different stages with extemal partnen, incJuding non-gove=ental organizations (NGOs). These partners may make comnients and observations before the drafting process stans and thereafter on draftdocurnents. There are no formai requirements for the con- sultation process, which may take place by electronic meansor other written modes, or orally when NGOs and other partnen areinvited to round tables.Wben finalized, operational polîcies and procedures are issued by the man- agement.
The Board, the Bank's executive body camposed of representatives of member states, is involved in the elaboration of Operational Standards. The Bpard's Executive Directors may. approve policy papers, to which are attached draft operational policies suhmitted for thcir consideration. The Board is thereby given an opportunity to discuss the proposed policy." Wben not attached to a policy paper, draft operational policies are circuJated to the Board for comment. In addition, ail policies and procedures must be consis- tent with the Bank's constituent agreement, i.e., the Articles of Agreement.
The Articles are interpreted by the Board, whlch is responsible for determin·
JO A poliey on disclosure of operational infonnation wasJormally adoptcd in 1993. Sec Shihata, I.F.l., 'The World Bank. and Non~Govemmcl1tal Organizations',in F. Tschofcn ànd A. Parta (eds.), Tht World Bank in a Changing World (1995),265--6.
Il For example, in 1982 the Bank issued an Operationsl Manual Statement on 'Tribal People În Bank-financed Projects' (OMS 2.4) whose, objective was to protect the interests orrelative!y isolated and non-acculturated tribal groups. The adoption of this policy had becn prompted by criticisms against projects financed by the Bank and dealing with the Amazonian rOfeSt.
12 Shihala, I.F.l., The World Bank Inspection Panel (1994), 43.
Laurence Boisson de Chazournes 285 ing ma:tters ofpolicy for the Bank. Operational Standards constitute one of the channels by which the mandate of the organization. is translated into
praetice. . ,
Sorne OperatiottaJ Standards are mandatory for Bank staff; \\Thile others are merely of persuasive value. The mandatory charaetet' of
a
policy.tleter- mines the jurisdfetion of the World Bank Inspection Panel te receive com- plaintS. The management of the Bank issued a dccision in 1992 that specified the extent of the binding nature of Operational Standards. The objective of the decision was to ensure. greater clarity of, and compliance with, Operational Standards. Within the Bank, .there had been discussions about the need to clarify thelimits offiexibility in applying a series of Operational Standards known as 'Opcrational Directives' to simplify the Bank's business practices and to better monitor the performance of Bank operations." The Bank decided, to replàoe the 'Operational Directives' (ODs) with statements termed' 'Operational Policies' (OPs), 'Bank Procedures' (BPs), and 'Good practices' (OPs). OPsare
'short statements (usually one or Iwo pages) ofpol- icy'. ·BPs 'spell out the required documentation and common set of proce- dures needed te ensure operational consistency and quality' .'. GPs are intended to disseminate knowledge and Î1ldicate suocessful examples.OPs and BPs are bindingon the staff Qi the Bank within the limits ofllexi- bility provided, while GPs are not hinding. The issue is complicated, however, by the fact that not all ODs and other earlier documents have been converted to OPs, BPs; and GPs. The situation may be a source of legal controversy because ODs include procedures and practioes that are not all binding on the staff of the Bank. An assessment of the binding nature of the provisions of ODs depends on the wordÎ1lg of each standard."
2. EDvironmental and Social OperatioDaI Standards
The Bank's operational policies and procedures cover a number of social and enviromnental considerations, ranging from the protection of specifie vulner- able groups of people to water 'resources management issues. Sorne of the instruments .are of general application, others are more specifie. AlI eontain provisions that are process-oriented, requiring respect for certain procedural steps and actions, while others add normative clauses, prescribing certain pat- terns of behavior. Thesepolieies and procedures not only provide guidelines for the' Bank staff, they also indicate what requirements the borrower must fulfill before the Bank will finance .a~ operation. The 'pillar' policiesl6 for
1) Jbid., at 44-5. 14 World Bank Poliey on Disciosure of Information (1994).
15 Shihata, suprQ note 12 at 45,
16 The operations! po1icies and procedures are availab!e on the Bank's Internet website
<http://www.worldbank.org>. As or June l, 1999. the Environment Assessment policy ha!> been issued as OP 4.01 (January 1999). The Indigenous Peoples policy and the Involuntary
integrating social and envirorunental cOnsiderations into the financial activi- ties of the Bank.17 are. found in the Environment Assessment policy, the Indigenous Pooples policy, and the Involuntary Resettlement potiey, as weU as the policies dealing with the lilyolvement of N9u-governmeutai Organiza- tions (NGO,) in Bank-supported Activities, and·Disclosure of Operational Information.
The Policy on Economic Evaluation of Investment Operations aise plays an important role, integrating envirorunentai concems ID the, cost·benefit analysis condncted for Bank-finanoed projects. The Bank ana1yzesevery pro-· posed proleet in order. 'to deter.mi.ne whether the project creates more net ben- efitS to the eçonomy than other mutually exclUsive options for the use ofthe re,ourees in question' ,'8 including the option of not undertaking the project at ail. Assc:ssment of project. stistainability requires ~g into account eco- nomic, financial, and institution al risks, as weU as environmentai risks on the territory of the borrower, on neighboring countries, and on the global envi- rorunent." This poticy is complemented by other requirements, notably the Envirorunent Assessment (BA) requirement.
The Bank's EA operational policy is the comerstone for evaluating project activities with potentia! cnvironmental impacts.20 It lays down standards and
· procedures· for conducting envirorunentai assessment and aims at improving decision,making by ensuring that the projeet options are environmentaily sound and sustainable. The Bank screens ail projeets for classificationinto
· one of three categories that deter.mi.ne the àppropriate level of environmelit
assessment.21 The most rigorous assessment is requited Cor. Category A"pro-
Resettlemenl policy arc sûU in the OD format. GP 14.10 on Involvemcnt of Nongovemmeatal OrganizatioDS in Bank-supported Activities was issuod in March 1997 'and BP 17.50 on Disclosut'C or Operational lriformatioD was. issucd in September 1993. The Environm~t
Assessment poliçy, the Indigenous PeopJes policy and the Involuntary R.esettlemcnt poliëy ~ part of a group of policies entitled 'Safeguard Policies'. Their commOQ feature is that they con- cern actions whlch May adverscly impact people, environmcnt and third countries. SCe Di Leva, C.E., "International EÔVÎronmentaJ Law and Dcvelopmcnt' (1998) 10 Georgetown Inl" Enl'll L.
&,. SOI, 518-42.
Il Most orthe rcquests sa far made 10 the Inspection Panel a11ege tbat the Bank has not fol-
lowod its enVÎronmental and social policies and procedures. $ce BissC:l, R.E., 'An Environmental Inspection Mechanism for World gan~ Projects' [1997] Ecodecision 47-50. For an analysis orthe
Planned Arun III Hydroelectric Project in Nepal(I994) sec Bradlow, 0.0 •• 'A Test Case for the World Bank' (1996) Il Am. U. J. In!,1 L & Po!",247-94,
11 OP 10.04 on.Economie Evaluation of lnvestment Projects (April 1994).
19 Impacts 00 lhe global environmenl are considered when (a)yayments rclated to a project
are made under an international agreement. or (b) projects or project components are firianced
by the Global Environment Facility./bid.
20 In fiseal year 1997, 18 projects totallingS2.9 billion of Bank lending underwent fullEA and a further 82 projects totalling about $6.1 biilionin Bank lending underwent sorne measure ofEA appropriate to their polential environmental impact. The World Bank, Annual Report 1991 '(1997),25.
· l i OP4.01 on Environmental Assessment incJud~ a four:th calegof)'. 'Calegory FJ'. Acc,?rdin,
tO the Bank. '(al proposed projecl is dassified as CategQry FI if il involves investment or Bank funds. t~rough a nnancial intermediary, in sup-projecis that may result in environmental
\
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La~rence Boisson de Chazournes 287 jects, those which
are
tikely .tohave a significant adverse environmental
impact, such as impacts-:thatare sensitive, diverse, or unprecedented or th~J.t
,affect an area beyond the sites or facilities subject to physical works."
Caiegory B projects are those whose environmentaI impacts are less serious andthus requir6 a less exhaustive fonn of environmeni assessment.23 No environmentaI impact assessment is required where the project bas no, or only mjnjmal, adverse environmental impacts (Category C projects).:l4
The borrower must conduet the assessment to ensure that development options under consideration are enviionmentally sound and sustainable, and ,
!hat possible environmental impacts are recognized. early in the project cycle and taken into account in the project design. Environmental assessments identify ways to improve projects to minimi~, mitigate, or compensate the adverse impacts. The,environment assessment also should ensure !hat the project is consistent with dom ... ûc law and !hat it does not conttavene any international trcaties to which the borrowing country is a party.
M:eaningful consultations with project-8ffected groups and localNGOs must he held during the environment asseSsment process and should he initi- atéd as carly as possible. For Category A projects. public participation must hegin shortly after classilication of the project and hefore the tenns of refer- ence for the EA are fin~. Public participation is required again once a draft EA is prepared, and throughout proj.:ct implemeotation.
Dam and reservoir projects receive special EA treatment in order to avoid, minimiz<:, or compensate for adverse environmental impacts 'whercver pos- sible, using deSign fcatures and other measures implemented as part of the project. Environmental specialists help identify potcotial project impacts at an early stage. Eve", hefore the project is catego~, the Bank must ensure that the borrower selects independent, recognized. experts to carry out envi- ronmcotalreconnaissance toidentify the project impacts,
ascertain
the scope of the' BA, assess the borrower's capacity to manage an EA process, and advise on the need for an independeni advi.ory panel, which would normally , he set up for large dain projects.Indigenous Peoples
The Bank bas aspecific policy to address the concern. of indigenous peoples, define<i as social groups whose social and cultural identity is distinct from that impacts'. Sub-projects under a tinancial intertnediary 'project would have to he categorized indi~
vidually as category A. B, or C projects. OP 4.01 also specifies that in the cORtext of evaluating a"
propose<! projcct, the al;lalysis ofaltematÎves should include a 'without project' option.
l~ OP 4.01 in relevant part provide~; '(a) proposee! projcct is c\assified as category A if il Î5 likely 10 have significant advcr;.e environmental i~pacts that are sensitive, dive~e or unproce- dented'. A potential impact is considered sensitive ifil may be irrcvcrsiqle or raise issues covered by operational policies and procedures on Indigenous Peoples. Natura! Habitats, Management of Cultural Propeny or Involuntary Resettlemertt. Ibid.
~~ Ibid. ~~ Ibid.'
of the dominant society and· who are vulnerable to being disadvantaged in the·
development process. The notion includes, but is notJimited to, 'indigenous ethnic groups', 'tribal groups', and 'scheduled tribes'. The definitional crite- ria focus on the issues ofvulnerability and distinctiveness,but other criteria have a role to play: close attacbment lO ancestral..territories, indigenous
ian·
guage, self-identification, presenCe of customary. social, and political institu- tions, and the existence of subsistence-oriented production. The purpose of the policy is to ensure that these groups benefit from development projects and that· potentially adverse effects are avoided or mitigated. The· policy requires the 'informed participation' of indigenous peoples in projects and programs that affect them. The borrowing country mustprepare an indigen- . ous peoples' development plan to provide the framework for their particip- ation in project activities and to ensure that they_ receive sociaIIy and culturally appropriate benefits_ The poliey requires that development plans . assess: (il the legal stalus of groups covered by the policy, as reflected in the country's constitution and le~ation; and (ü) the ability of sucb groups to obtain .lceess to and effective usé of the legal system to defend iheir rights.
[mo/untory Resett/ement .
The Bank's policy states as a basic objective tbat involuntaty resetUement should be avoided or miuiruized where feasible and that aIl viable alternative project designs should he reviewed. The Bank studies any o.peration that involvesinvoluntary land acquisition for potentÎal resetUemen! requirements wly in the project cycle. Th .. objective of the policy is to assis! displaced people who have lost their land, houses, or both, or their means ofliveIihood, in their efforts to restore or iinprove former living standards and earning
capacity_ .
Where displacement is unavoidable, the borrowing country must prepare resettlement plans or development programs that indicate compensatoty measures and an irnplementation scb=e, including a grievance mechanism perrnitting affected peoples to bring complaints, as weIl as a .tirnetable and a budget. Bank policy standards state that compensation fot displaced people shouid (i) evaluate their losses througb methods such as a land-for-Iand approach, a market value approach, or a mixture of land-based and .non- land-based strategies,
Oi)
assist with thoir move and support them during their transition to the resettlementsite, and (iii) assist them to improve their former living standards and the incorne eamingcapacity that they would have had without the proposed Bank project.Like the polie}! on indigenous: peopJe~. th. policy on reJ;:ettlernent requîres
informed participation and consultation with the affected people during the preparation of the resetUement plan. Community participation in planning , and implemeniing resettlement should be encouraged as weIl. The policy stresses the need to pay particular attention to the needs of the poorest and to
Laurence Boisson de Chazoumes 289 . giv~ appropriate attention toindigènous peoples, ethnie minorities and 'pas- toralists' who may have eustomary rights to the land or other resources taken for the project.
NGOs and Dise/asure of Information
Thepolicies andprocediJres on environmentalimpact assessment, indigenous peoples, and involuntary resettlement also contain specifie provisions reqlÛr- ing the involvement ofNGOs. In addition, a 'Oood Practices' policy sets out a framework for involving NGOs in Bank-supported .activities and provides stafflVith guidance for working \Vith ihem:
The policy on disclosure of operational'infonnationlS sets out procedures to be followed for making environmental assessments and environmental action plans accessible to .affected groups and local NGOs in borrowing countries. This policy, and the (lne on the involvement of NGOs, comple- ments the other policies. Legally, these policy requirernents are important vehicles for 'operationalizing' or implementiog broader international stan- dards on acoess to information, public awareness, and participation in decision making. 26 ~ Such they acknowledge the role of the beneficiaries of development assistance; activities in ensuring the sustainability of snch activ- ities.
3. Incorporating OperationaI Standards in LoàD and Credit Agreements Although Bank pract;ce cao make Operational Standards binding on the Bank's staff, it is aIse important to consider their status under international Iaw. In terms of complianœ, OperationaI Standards create normative and procedUraI expectations for the staff.nd partners orthe Bank and contribute in .many ways to forging and developing accepted praetices under inter- nationallaw. In addition, their incorporation in loan and credit agreements negotiated between the Bank and the borrowers cnables them to become binding under international treaty law. By entering iI;to an agreement \Vith the World Bank, a borrowing state is placed under an obligation to take the lDeasures necessary to comply with its contractual obligations. These obliga- tions may in sorne cases include rèferences to policy requirements, causing the latter to become part of the eontractual terrns. This practiee progressively has gained acceptanœ, \Vith respect to environmental and social policy require- ments.
~'The Bank has estahlished a Publie Infonnation Center, called the 'Infoshop', through -..hich much
Or
the material covered by the pOlicy is available. It is localed at the Bank Headquarters and serves the publidn member coun.tries thiough the Internet and Ihrough BankflCldoffices. . .
24 See the Convenlion on Access 10 Information. Public Participation and Access 10 Justice in r.nvironmental Matlers (Aarhus, June 25. 1998).998 EmuT. 48
A number of legal tecbniques bave been devised to ensure that' the ' OperationalStandards,reflected in loan and credit agreements are accompac nied by safeguards against non-compliance. The policy requirements thus becOme enforeeable under intemationallaw like any otherprovision ofa loan or credit agreement." The various contractual teç;hniques used for integrat- ing such measures and cornmitments into lo.an and credi\ agreements include;
inter a/w, drafting a stipulated prior condition, meaning that the loan or ' credit agreement only comes into force when the condition bas been met,21 or including a stipulated condition with respect to the disbursement of the loan or credit. Another technique is to include a covenant cornmitting the bor- rower to e~ecute specüi.c measures by a certain date. These obligatioJlS may be complemented by detailed requiremen~ in project agreeIIlents concluded, with the,project c~ecuting agencies. Loan and credit agreements thus may include detailed provisioJlS on resettlement and rehabilitation should these , issues be relevant to the project, making compliance a condition of effective- ncss for a 10an or a credit. The govemment then is required totake ail nCCCS- sary action to adopt and implemeni a resettlement action' plan designed in accordance with the Bank policy on Involuntary Resettlement, before the agreement wO,uld be declared effective, A1ternatively, an implementation pro- gra,m or plan of action may be attached as a schedule to theloan or credit agreement. Such a prograrn or plan of action speciJies the borrower's obliga- tions with respect
to
poHcy requirements.29 · ,The relevant policy on environmental assessment express1y requires the staff of, thci Bank to ensure thatmitigation measures ideotified in an Environmental Management Plan30 are fully integrated in the implementa- tion ànd operation of a projeç;t. References to sucb measures in projoct legal documents, for example in the project description, are part of the' measUIes taken for pursning such an objective.
B. COMPLIANCE WITH OPERATIONAL POLICIES AND PROCEDURES
Various mechanisms play a role in promoting compliance with. OperationaI Standards, and more panicuJarly with environmental and social operational
l' For a discussion of principles and rules ofinteroatiooaJ law as applicable law ta Joan and credit agreements between the Bank: and borrowing cOUDtries, sec Broches, A., 'International l.<gal'Aspects orthe Operations orthe World Bank' (1959111). 98R.CA,D,L ,297, '
11 The effectiveness deadline
is
nonnally 90 calendar days (ro111 signing 'the Joan or credit agreement.19 On the use oflegal techniques for environmental prot~tjon purposes,.5ee Shihata, I.F.I ..
'The World Bank and' the En\ljronment~ Legal Instruments (or Achieving Environmental ObjectÎves" in F. Tschofen.and A. Parra (OOs.), Th~ World BanJc in Q Clumging World(l99S), 183.
)() An Environmental Management Plan (EMP) iS 'an instrument that details (a) the measures .
10 be tak~n during the implemenlation and· operation or a projecno eliminate and offset adverse envieanmental impacts, or 10 reduce them to acceptable levels; and (b) the actions needed to implement the"se measures-'. See OP 4.0 (":""Annex A on Enviranment As.s.es.smenl.
Laurence Boisson tJ.e Chazournes. 291 policies ;md procedures. $ome mochanisms are rule-oriented, while others are .. more institutionaUy oriented.
1.' Rule-oriented and Quality Insurance MechanisntS
Rule.,oriented mechanisms promotè: respect for policy requirements in a num- ber oflV'ys. The legal techniques mentioned in the prior section, for example,
~ve boen deveJoped to ensure that policy requirements are reflected in loan and credit agreements. The borrowcr should resort to alI necessary means and measures toeomply with these contractual. collimitments. For its part, the Ilank should exorcise compliance supervision with due diligence. If the Bank is not satisfied with the borrower's performa.nce, it may suspend disbursement ofa loan or credit, câncel Ît, or accclerate its maturity.31 This Idnd of action is ratherexceptioual32 because dialogue with the borrowing country is usually persuasive,33 alIowing compliance to be readjusted before the cxtreme stage is reached. The interruption
'of
a contractual relationship is disfavored because it impedes ihecontinuation of a dialogue that may find ways to correct the non-complying situation and does nothingto foster the environmental andsocial policies. ,
'ln addition to legal techniques thaï aim to ensure implementation of and compliance with project legal documents, there are operaiional mechanisms and prOcedures that have boen established wittlln the organization to guar- antee the quality of the Bank', activities. One of the parameters of evaluation is compliance with operational policies and procedures. Internal review prOcesses during the preparation of"a project and random audits during the course of its preparation and implementation are among the quaIity insur- ance mechanisms put in place to ensure compliance. Eventually, disciplinary measures may be imposed.
The Operations Evaluation DepartInent (OED), an independent evalua- tion unit Within the Bank, plays an important role in the process, conducting a post-project evaluation that looks, inter a/id, at the environmentaJ and social aspects of completed operations, draws lessons from past practiees, and . suggests further roles 10 be played by operational policies and procedures. lt
rates the development ~pact and perfonnance of the Bank's operations, reporting its results and recommendations to the Board. By doing 50, it pro- moles the gpod practices ~ontained in operational policies and procedures
31 $ce General Conditions Applicable to Loan and Gu"arantee Agreements, Art. 6.02, January 1.1985. Sec also Shihata, 5IJpra note 29·at 199-208. .
, ) l For an example of suspension of the proceeds of a granl agreement, see Boisson de
Cliazoumes. L. 'The Global EnYÎronment Facility Galaxy: On Lînkages Amang Insfitutions' (1999) 3 Max Planck Y. B. UN u,w 26.
)3 Shihata, tF.J.. 'Implementation, Enforccment, and Compliance with Intemational Environmental Agreements-Practic.al Suggestions in Light of the World Bank's Experience' (1996) 9 George/ow" Inti. Em'II. L. Rey. 37, 50.
and )righlights the problems encountered in implementing such standards~
This assessment activity is supported by the publication of reports that pro- vide reconunendations and 'best practices' guidelines drawn from the Bank's development experience. TC> summarize, !his post-project evaluation cre~tes incentives for stricter and more effective compiiance witb Operational Standards.
2. The World Bank Iospectioo Panel
,The WorldBank Inspection Panel was created in 1993 to improve' quality control in the Bank's operations during project preparation and implementa- tion. The Panel a1so was cxpected to increase acrountability of the Bank's management and staff vis-à-vis the Bank's Board andto ensure transparency in the Bank's operations," and thu. was estahlished.as an independent and permanent organ within the BaDk', orgainzational structure. Il was granted the competence to recèive and, subjectto the approval of the Bank's Board, investigate complaints, from groups of individnals whoserÎghts or interests have been or are likely to he directly and adversely affected by the Bank'sfail-
Ure to comply with operational pollcie, and procedures." An Executive Director in the Bank or the Bank's Board also may instruct the PanO! to con- duct an investigation, even though affected people bave not introduced a roquest.
Individuals or any affected group of people" who share cominon concerns or interests' in the cpuntry where the project is located may submit a request ' on condition that it is possible to demonstrate that their 'rights or interests have been or are likely to he directly affected by an action or an omission of the Bank'. The affected party may present its requestdirectly or through local representativès acting as an agent. NGOs based in the country can take on Ibis representation role and international NGOs may assume representation i,nexceptional cases where the party subinitting the request asseits that appro·
priate local representation is not available, In thase circumstances, the Executive Directors bave to agree to sucb representation when they consider
the reqùest forinspection. '
;M On the motives for the establishment of the Inspection Panel, set Shibata. SllPra DOle 1,2 at 5-13.
" The mandate orthe Inspection Pa'nel covers projccu finaoeed by the Intemationall1ank for Reconstruction an'd Development (lBRD) and the International DeveJapment Association
(IDA), '
'6 The Resolution pro vides in a, non-restrictive manner that the 'Panel shall receive requests for inspection presC-lited to it by an affecled party in the territory of the borrowef wbich is not a singleindividual (i.e., a community of persans such as an organizalion,_~sociation.' society or o'ther grouping of individuals)'. The Clarifications endorsed by the"Executive DirectoTS on.
October 17, -1996 (hereinarter Oarifications-J) speciry (hat a group of individuals allegi?g to he afTected should be understood as meaning 'an y (wo or more individuals with common mle"reSls or concerns·.
Laurence Boisson de Chazournes )93
Outside scrutiny of the Bank's compliance with Operational Standards, through requests to the Inspection Panel, is • new means of promoting corn· . pliance witll Bank .standards. Compliance eoncerns are institùtionalized, in faet, by establishment of this specifie entity to conduet investigations, olTer·
ing the possibility of remedia! action by the Bank ifa violation is found.
Moreover, establishment of the Inspection Panel has encouraged a Bank·
wide pracess that cau help clarify for the staff and management the content of operationa! policies and procedures and increase their awareness of the need for compliancewith them.
Complaints must satisfy admissibility criteria. A complainant must alIege a violation of operationa! policies and procedures" and demonstrate thet the violation is due to an omission or action of the Bank withrespect to the design, appraisal, andimplementation phasesofa Bank·finanoed project, ie., from the tirné of the project design until its substantial completion.'·
Complainants must aIIego that such failure has had, or threatens to have, a materiaJ adverse effect OIi them. The ,notion of 'project' is wide and encom·
passes ail developmental activities eligible to he financed by the Bank." The terms design, appraisal, and implementation are understood in Iight of the Bank's concept of'project cycle', in.ach phaSe ofwhich the Bank has a role and different responsibilities.40 .
l i Res. No. IBRD 93-10, Res. No. IDA 93-6. 'The World Bank Inspection Panel' (1995) 34 LL.M.503.
. 31 Para. 12 orthe Res. establishing the Inspection Panel mers to the 'failure orthe Bank to foUowits operational policic:s and prooedURS with respect to the design, appraisal and/or impIe..
tnentadoa of & projcct financed by the Bank (mc1udiDg situations wheR: the Bank is aJlegœ to bave failed in its (oUow..up on the borrowers obüp.tiOIlS under loan ~u wjth respecuo ,'uch poliàes and procedum;j, pfO'ided in ail cases that ,ucb failu," bas hall, or th,....", to have,_ materiaJ,effect'. The Panet'. ratwne ntalerÜle competence abould he asc:ertained iD the Jiahtoffour requircmcnts: (1) an aUeecd (allure orthe Bank to foUow its pperational policies and procedures i:a the design, appraisa1.andlorimplementation of a projcct fioanced by the Bank; (2) the alJcged (dure must he of. certain gnivity; (3) the allegod failure must rdat,ç to the BanJc's own policies and procedures; and (4) the allegedfailwe must he such as to have orto bc Jikcly to bve an advene material efTect 00 the oomplaiDant. See 'Role of the Inspc:ctioD Pand in the Preliminary Assessment ofWhether to Recommend Inspec:tion-A Memorandwn of the Senior Vice Presid""t and General Couosel, January 3, I99S' (1995) 341.LM. S03, S25-34.
)9 Oarification$-l made cleu tbat the word'-projcct' as used in the R~. 'bas the same mean- Ing as in the Bank.', practice. and includes projects under consideration br Bank management as weil as projecu already approved by the Exccu,tivc Directors'. The notion of project is not lirn- itcd-ta specifie investments. Il include:s programs or açtivities other than specificphysical works.
See Decision No. 2 orthe Executive Direetol'1, Scope oftht Paners MantkJle-Com~nsolionflJr ExproprÜl,;olf and EXlensÎorr of rDA Credlls 10 Etlriopia UJfde OMS /.28, The Inspection Panel, Report. August l, 1994 to July 31, 1996.57, See gcnerally 'Project and Nqn·project Financin, under the IBRD Articles', Legal Opinion of the Senior Vice-Presidenl and Genera! Coun~I,
December 21.1984.
040 The Bank's project cycle cover"S the life afa project from identification of needs and prior- hies until the tinal completiolJ ofwork and evaluation of results. See. Braum. W.c.. Th~ ProjtCf CycJl!: (1982); The World Bank. TIlt World' Bank'! Parlnership with Non-goVf!rnm~nla' Orgoni:otions (1996), 7.
The request for inspection by the Panel may relate either ta a project in the design, preparation, pre-appraisal, or appraisal stage, or to a project already approved by thé Board and financed by the Bank. With respect to the impie- mentation phase, the Panel has the mandate ta investigate whether the Bank his properly ensured that the borrower carried. out its obligations under a loan or credit agrecmenL 4. .
The Inspection Panel is not vested with gerierallaw-making powers and thus lacks the competencc to enact new standards or 8lllend existing opera- tional policies and procedures. It niay only adopt rules for 'procedural mat- ters relating ta the work of the Panel' .• 2 The Panel adopted sucb rules on August 19, 1994 (hereinafter the 'Opcrational Procedures') based on the Resolution establishing the Inspection Pane!."
The Panel pçssesses limited investigatory powe~ with respect. to co,!,"
plaints alIeging a failure by the Bank ta foUow its policies ·and procedures in specifie operational activities.By implication, the. Panel is not entitied to review the consistency of the Bank's practice with ail of its policies and pro- . cedures," nor is the Panel entitied to decide on a genetal basis the adequacy
~f a particular policy or procedure." Within the limits of its mandate, how- ever, the Panel plays an important role in promoting compliance with
OpcrationaJ Standards. · .
The Panel exercises its investigatory and quasi-investigatory power'" on a case_by-a.se basis. In sa doing, the Panel decides on the applieability of
..,1 The Res. specifies that a coDlplaint can bc lodged for 'situations wherc the Bank 1$ aUeged to have failod in its follow-up on the borrower's obliptions under loan acrcements' wilh respect to opcratiooaJ policies and procedures. The Res. also states as. principlé lhat no requests will be dtclanod e1igible ItglIfding. project after the project', Ioàn 'clooiDg date' or alter 9lY. or more of
the loan procecds bave bccn disbursed. For an intetptctation of thîs reqwremCQt, $OC Tinu- UnJu on lM Eligibility of CornpWÛlIS SubmiUt410 tilt Insptction Panel, Legal Opinion of the Senior Vice President and OeneralCo~l. July 28, 1997.
"1
see
Para. 24 of the Res .... , See Worid Bank, "Introduction to the'Opcrating Procedures', in The Iospo:tion Panel, 'Operating Procedures (1994), 4~
"" Set ~C1a.rifications (Eligibility and Access)' in The Inspection Panel, A,1IIIW1 Rtport, August 1,199610 J.ly 31,1997, JO .
.. , Sec Forget, L., 'Le Panel d'inspoctiOD de la Banque mondiale' (1996) 42A..F.D.L 643, 6S4-S.
'" The practice developed so'far is dcscribc:d by Sbihata., 1.F.l., Tht World &nk /nsptclÎon Panel-'-Â. Background Paper OR ilS HfrloricaJ. Legal and Optra!ionaJ J4SpeClS, The World Bank Inspection Panel (forthcoming). The tirst set of aarifications isSued br the Bank', Executive Directors stated, in fact, the practice that has been followcd by the Panel by providiDg tbat 'where the Inspection Panel believes that it would he appropriate to undertake a 'preliminary assess- ment' of the damages alleged br the requester (in particular when such preliminary asscsSment could lead to a resolution of the maner without the need for a full investigation), the Panel may undertake the preliminary assessment and iodicate ta the Board the date on which il would pre- sent its findings and recommendatÎons as to the need, irany. for a Cull investigation'. The second sec of Clarifications, entitled 'Conclusions ofthe Board'sSccond Review of the Inspection Pane}'.
(hereinafter Clarifications-II), approved April 20, 1999 and with immediate,effect, states, how- ever. that '[t)he "preliminary assessment" concept, as described in the October 1996 Clarification.
is no longer needed. The paragtaph entitled "The Panel's Function" in the ÛC10ber 1996
"CJarifications~ is thus de!eled' (para.' 1 J). :.-
Laurence Boîsson de Chazournes 295
relevant policies and procedures, interprets their contenUn deciding whether or not the Bank failed to comply with them, and clarifies their content through interpretation." The Inspection Panel also has the opportunity to highlight best practices in applying Bank poliey instruments. Most impor- tantly, the Inspection Panel cao publicize the inadequate practices that gave rise to the complaint before it, and reveal possible failures and inconsistencies in compliance with Operational Standards.
The dynamics attached to sucb an interpretative function shoold be con- sidered in the broader institutional context as weil. The Panel engages in a dialogue with the Bank's management when. discussing'an alIeged failure of._.
the Bank to foUow its operational policies and procedures. The Executive Directors play a pivotai role when exercising thoir powers to decide whether or Dot to authorize an investigation and what action to take following an investigation. The end resolt of the process may contribute to a clarification of the content of pOlicies and procedures, as weU as to remedying the prol>- lems through the adoption of action plans. The Executive Directors also may adopt decisions on general matters relating to the Inspection Panel and have done so to define the scope. of the Panel's mandate. Exchanges of views on issues related to the institutional aspects of the Panel may contribute inciden- tally to clarifying some operational policieS and procedural requirements."
The Inspection Panel contributes generilly (0 improving the quality of Bank operations by signaling possible failures in following operational poli- cies and procedures and in~easing awareness among the Bank's staff of the importance of implemenling them. Most of the requests brought to the atten- tion Of the Panel so far have dealt with enviroDmentai and social standards.
The ensuing reconunendations and findings of the Inspection Panel have stressed the need for devoling greater attention to compliance. They have in .fact contributed to the establishmC?nt of abovem.entioned mechanisms, such as internaI review· processes ~d random audits, fOf. quality insurance purposes.
41 This interpretative fuDCtioD of operationaJ policics and procedures is ex.ercisod under the o"verall revicw ortbe Bank:'s Board, and to the extent"that il does Dot involve the Bank's legaI rights and obliptioDS. For marters relatcd to the 'Bank's Tights and obligations with respect to a request under consideration', the advice of the Bank's Legal Departme"nt should he sought
" (para. 15 of the Res.). As of the end or 1998, the General Counsel had given two legal opinions.
The fif$t one was issu.ed on January 3, 1995 and dealt with the 'Role of the Inspection Panel in the Prc.1iminary Assessment of Whether 10 Recommend Inspection'. The second one dealt with the question oC'Time-Limits on the Eligibîlity ofComplaints Submitted to the Inspection Panel' and was issu·ed on July 24,1997.
04.' The Decision orthe Executive Direètors on the Scope orthe Inspection Panel's Mandate- Compensation ror Expropriation and Extension or IDA Credits to Ethiopia under OMS 1.28 may provide an example of a nurturing process or 'constructive dialogue'. Althoughthe main issue WOlS the scope orthe Inspection Panel's mandate, the exchange ofviews that took place pro- vided some guidance as to the interprctation of OMS 1.28 (now OP 7.40 on Disputes ovet Defaults on ulemal Debt, Expropriation, and 8reach of Contract). See The Inspection Panel, Report. August 1. 1994 to July 31, 1996,56-8. .
