Anyone who causes or contributes to injury to someone else has an obligation to provide a remedy to the injured party. This is a basic legal principle that everyone understands–except the International Finance Corporation.
The IFC is the arm of the World Bank Group that lends money to private corporations for “development” projects. IFC’s stated mission is to end poverty and promote sustainable development while doing no harm to people and the environment. But too often, IFC funded-projects leave their neighbors worse off, and neither IFC nor the borrower does anything to remedy that harm. This is often referred to as the “remedy gap,” whereby people are harmed by IFC projects, and neither IFC nor its client remedies such harm. Instead, they bear the unintended cost of development projects.
EarthRights International represented Indian communities harmed by the Tata Mundra coal-fired power plant and left without remedy in the first such lawsuit against the IFC, Jam v. IFC. As a result of that case, the crisis of accountability at IFC gained additional international attention and broader scrutiny, as did the clash between IFC’s assertions of immunity from suit on the one hand and its role in harming communities like those near the Tata Mundra project and the need for remedy. That prompted the IFC’s Board to request an external expert team to review IFC’s “Environmental and Social Accountability,” which resulted in a comprehensive report issuing extensive recommendations for IFC to address its accountability problem, including creating and implementing a framework for remedial action.
That is what the IFC was supposed to be working on. But the “Draft Approach to Remedial Action” IFC released is anything but. EarthRights submitted comments this week on that draft explaining why it is an abject failure. The Draft Approach completely disclaims any responsibility to provide remedy. It does not address the accountability crisis that led to this effort in the first place, and it rejects most of the recommendations that could have resulted in meaningful change. It proposes nothing new, commits to nothing, and will not impact access to remedy. The strategy behind the Draft Approach is a mistake. If adopted, it would harm IFC’s institutional interests, undermine its mandate, and inflict substantially greater damage on its reputation–while failing to do anything to change the fact that communities are left to suffer in the name of development.
IFC justifies inaction to remedy harm in the name of minimizing litigation risk and legal exposure, but the Draft Approach would just further entrench the practices that expose the institution to legal risk. Indeed, it is clear that IFC management has learned the wrong lessons from the Jam case. IFC had numerous opportunities to prevent, mitigate, and remedy harm from the Tata Mundra project that would have eliminated any reason for it to be sued. But it failed to do anything, leaving communities with no other options. The Draft Approach promises to leave other communities with no remedy and no recourse. Thus, by ignoring why IFC was sued, the Draft Approach would guarantee that IFC will face future lawsuits.
More broadly, the Draft Approach reflects a pervasive, entrenched culture problem at the institution, confirming that management does not view its development mandate as central to its work and considers itself accountable to no one. It is the latest example of IFC’s commitment to fighting against accountability at all costs. This benefits no one. It has left the communities to suffer and has damaged IFC’s reputation and credibility as a development institution. It has sent the message to communities worldwide that IFC cannot be trusted. IFC says it will ensure its projects do no harm, but its position is that it can go back on its word at any point, and there is nothing that communities can do about it and nowhere that they can go to hold IFC to its promises.
Ultimately, the failure to even acknowledge the harm that led IFC to draft this document in the first place undermines the entire legitimacy of this process. The Draft Approach completely ignores the need for remedy in cases like Jam where harm has already occurred; it does not even mention past cases of harm and purports to be forward-looking only. Meanwhile, the Jam communities are still suffering and still awaiting remedy.
IFC cannot chart a new path forward without remedying the harm that led to this process, and no one will take IFC’s claim of addressing remedial action seriously until it does right by the Tata Mundra Project’s neighbors.
