USA – US International Development Finance Corporation (DFC)

The compliance review process assesses and reports on complaints regarding DFC’s compliance with its policies related to environment, social impacts, worker rights and human rights under an DFC-supported project. These policies include sections 231 (n), 231A, 237(m), 239(g) and 239(i) of the 1961 Foreign Assistance Act, as amended, as well as DFC’s environmental Handbook, that was published – February 2004 ³ . Most of the DFC’s policies are based on the policies and standards of financial institutions such as the IFC (the International Financial Corporation, which is part of the World Bank Group). The US Code requires the DFC to issue a “comprehensive set of environmental, transparency and internationally recognized worker rights and human rights guidelines with requirements binding on the Corporation and its investors that shall be consistently applied to all projects, funds and sub-projects supported by the Corporation (…)” (22 U.S.Code, paragraph 2291b – Worker rights and human rights guidelines).

According to its policies, the DFC must ensure the respect of:

Strict Environmental and Social Norms

Such norms are described in the DFC environmental Handbook. The Handbook ⁴ is intended to provide guidance to DFC’s investors, as well as the interested pub lic, with respect to the environmental and social standards. The Handbook also presents the assessments and monitoring procedures that the OPIC applies to prospective and ongoing investment projects. Furthermore, it contains a section on the publication of information concerning, for example, the number of potentially displaced persons, the impacts on lifestyle as well as the level of general acceptance and consent for the project (identification of affected people, consultations, etc.).

Worker’s Rights

The DFC may operate in countries if they currently have, or are taking steps to adopt and implement, laws that extend internationally recognized worker’s rights. The DFC cannot provide assistance to any program, project, or activity that contributes to the violation of “internationally recognized workers rights”, including the freedom of association and collective bargaining, the prohibition of forced labour, the respect pf the minimum employment age and of acceptable conditions of work ⁵ . The DFC includes a clause on the respect of workers’ rights in every contract it signs. exceptions can be made by invoking sections 231A (3) and 231A (4) of the 1961 Foreign Assistance Act if a solid justification is provided which supports the need to stimulate the economic situation of a country.

Human Rights

The DFC human rights clearance process is designed to ensure that DFC- supported projects meet their statutory requirements, and thus comply with the 1961 Foreign Assistance Act. The latter states that no assistance can be given to projects in countries in which serious and systematic human rights violations are taking place, such as torture and abduction, or in which the right to life, liberty and security of individuals are endangered ⁶ .

Economic Analysis

The project should not have a negative impact on the US economy. For example, DFC will not finance projects which favour the outsourcing of the production chain. Furthermore, restrictions are in place for the tobacco, gaming, and alcohol and arms industry.

Development Impact in the Host Country

The DFC undertakes a development impact analysis in each country and takes social practices and corporate social responsibility into account.

Projects that are likely to have significant adverse environmental or social impacts are disclosed to the public for a comment period of 60 days ⁷ .

In October 2010, the DFC adopted a framework for the evaluation and the monitoring of its environmental and social policies, called the environmental and Social Policy Statement (eSPS). ⁸

• Member/s of the local community affected by adverse environmental, social, worker rights or human rights impacts of an DFC-supported project, or their authorized representative
• The DFC’s President & CeO
• The DFC’s Board of Directors

The request must relate to a project for which the DFC has concluded a financial agreement or insurance contract with the sponsor responsible for the project and the DFC maintains a contractual relationship with the project.

At the time of publication of this guide, the OA conducted four compliance reviews. The the cases and reports are available on the website ¹⁰ .

The office of Accountability in action

Baku-Tbilissi-Ceyhan Pipeline Project (BTC) – Azerbaijan, Georgia and Turkey

In March 2006, Manana Kochladze, a Georgian national, and the NGO Central and Eastern European Bankwatch Network filed a request for a compliance review concerning the Baku- Tbilissi-Ceyhan Pipeline Project (Azerbaijan – Georgia – Turkey). The allegations brought forward concerned the environmental obligations of the public agency. In its report, the Office of Accountability (OA) assessed that due diligence processes were followed and respected in all areas apart from the anticipated date for the audit ¹¹ .

Cœur d’Alene mines corporation - Bolivia

In April 2008, an indigenous community affected by the Coeur d’Alene Corporation Mining project, the biggest silver mine in the world, filed a request for a compliance review. The complaint concerns violations of the public agency’s policies and procedures concerning relocation of indigenous people. The report concluded that the agency had indeed violated its policies. The report recommended continuing the dialogue in order to establish a sustainable relocation and development plan for the affected indigenous population ¹² .

OPIC, DFC’s predecessor was criticised for its failure to properly assess the social and environmental risks of projects seeking its financing. In 2011, protests against the construction of a hydroelectric plant in Mexico that was causing serious harm in the area of residents led to its shut-down ¹³ . In 2012, a biomass project in Liberia collapsed as a result of bad working conditions and impacts on Liberian farmers, charcoal producers and workers, including sexual abuse by company employees of local women. NGOs such as SOMO, Accountability Counsel and Green Advocates took action to denounce such institutional failures ¹⁴ . OPIC later published an independent investigation confirming the agency’s role in harm to communities and with actions to address accountability gaps. ¹⁵ These are only some examples illustrating serious shortcomings of the former U.S. export Credit Agency.

Other ECAs in action

Turning around the situation: the Ilisu Dam - Turkey

The Ilisu Dam is an extremely controversial project due to its social, environmental, cultural and political impact. Various companies such as the Swiss company Alstom and the Austrian company Va Tech – that is now part of Siemens- banks and export credit agencies from diverse countries (Germany, Austria and Swiss) helped finance the project. Initially the governments made assurances that the project respected international standards. However an expert report published in July 2008 claimed the contrary saying that forced migration threatened 78000 Kurds, archaeological sites were being buried among othersFollowing the report, the German, Austrian and Swiss export credit agencies decided to abandon the project, as they recognised that Turkey was not respecting the social and environmental standards demanded for the project ¹⁶ . Although this withdrawal does not illustrate a general tendency of all ECAs, it does show their increasing consideration for social and environmental standards. This is most likely due to the pressure they have faced from the critics. However and despite this relative success, the Turkish government moved forward with the project. ¹⁷ Despite continued challenges regarding expropriation without compensation.