Accountability for Bilateral Agencies
The call for human rights accountability in development cooperation has become undeniable.1 Development is not a mere state affair but is equally strongly driven by private actors.2 In 2017, the EU financing for developing countries amounted to 74,477 million Euro of official development assistance (ODA) and 80,185 Million Euro of private flows.3 The outcome document of the Rio + 20 Conference on Sustainable Development clearly recognises that ‘the implementation of sustainable development will depend on the active engagement of both the public and the private sectors’.4 The 2030 Agenda for Sustainable Development calls upon ‘all businesses to apply their creativity and innovation to solving sustainable development challenges […] while protecting labour rights and environmental and health standards in accordance with relevant international standards […]’.5 Human rights accountability in development cooperation needs therefore to encompass both public and private development actors.
This book focuses on two key national intermediary actors which exercise major impact on public and private financing for developing countries, namely bilateral development and export credit agencies. At first glance, their mandates seem to be opposites of each other. However, upon taking a closer look it becomes quite evident that development and trade have always been closely interrelated. Development cooperation has often been driven by various underlying interests including security, resources or trade relations.6 Despite the internationally promulgated concept of a human rights based-approach to development, many developing countries still see development primarily from an economic perspective and accept a range of adverse side effects including adverse human rights impacts as trade-offs to the benefit of economic growth.7 Numerous cases of persons suffering the consequences of economic development projects have been highlighted by complaints to the World Bank Inspection Panel or the IFC Compliance Advisor Ombudsman.8 In particular, export credit agency-supported activities are often linked to economic development and infrastructure projects which still make a considerable share in development cooperation and pose very complex human rights challenges. According to Eurostat, between 2002 and 2017, humanitarian aid was the fastest growing type of bilateral ODA with an annual growth rate of 10.9 per cent. It was closely followed by ODA for economic infrastructure and services with an annual growth rate of 9.9 per cent.9
Linkages between development cooperation and official export credits are equally evident in ODA calculations which include not only bilateral aid but also debt relief. Eurodad research revealed that almost 80 per cent of developing countries’ debts to European countries result from export credit guarantees. In the case of export credit agencies’ losses due to debt cancellation for developing countries, they are compensated by ODA funds.10 Despite harsh criticism and the call not to detract debt relief and other non-development related spendings from ODA budgets, this practice has persisted.11 Only recently did the OECD Development Assistance Committee (DAC) start to discuss a new concept which should differentiate between development related and non-development related flows.12
In contrast to leading international multilateral development actors such as the World Bank and the International Finance Corporation (IFC) which have, in response to heavy criticism, stepped up their efforts with respect to human rights accountability, the human rights accountability of bilateral development and export credit agencies has so far remained widely in the opaque.13 International human rights bodies have partially highlighted critical projects but do still not require donor countries to comprehensively report on their development cooperation and export credit agency supported activities.14 The Universal Periodic Review has started to include a section on development cooperation which provides, in a very general way, information about development policies and budgets.15
Acting as key intermediaries between the state and the private sector bilateral development and export credit agencies have substantial influence on the undertakings they support. Despite their close state nexus, the agencies’ primary accountability is still only a financial one to taxpayers in their own country (home state) through the treasury. Home state accountability, i.e., accountability of the donor state, to the state where the projects and programmes are implemented (host state) is only of a loose political and diplomatic nature, not of a legal one.16 The same holds true for host state accountability to the donor (home) state. Direct home state accountability to the people who are ultimately affected by development or investment undertakings is still non-existent and sanctions for the contributions of the home state’s development or export credit agencies to human rights violations are generally lacking.17
It seems also that home and host states are often reluctant to deal with human rights violations in the development and foreign investment context due to underlying other interests. The host state may have a vital interest in obtaining future development aid, attracting foreign investment and satisfying its strategic political interests. The home state may also have an interest in maintaining its strategic political and economic alliances, achieving quick, successful and politically marketable development cooperation results, and promoting national business abroad. Transnational companies benefiting from export support or development partnerships are interested in securing or entering foreign markets, strengthening their competitiveness, as well as exporting knowledge, goods and services.18 The only ones who have a genuine interest in addressing human rights violations in the context of development and export credit agency supported projects are those persons and communities whose rights are affected. However, due to global power structures, their position tends to be weak and their ability to require accountability and secure remediation limited. From a human rights perspective there exists thus a significant accountability gap in bilateral development cooperation and export support. This gap does not allow for a genuine realisation of a human rights-based approach whose intrinsic rationale is to transform unequal power relations by enabling those who are affected to claim accountability from public and private actors.19
This book will shed light on this gap and assess under which pathways of the current human rights system individuals may claim accountability for human rights violations resulting from bilateral development and export credit agency supported undertakings. To this end it will explore three legal options.
Drawing on the concept of state responsibility, it will analyse:
1. to what extent the host state, i.e., the state where the project or programme is implemented, can be held accountable for human rights violations through foreign development and export credit agency supported undertakings;
2. to what extent the home state, i.e., the state where the agency is incorporated and on whose behalf it acts, can be held accountable for extraterritorial human rights violations.
Drawing on the concept of corporate responsibility, it will analyse:
3. to what extent development and export credit agencies themselves may be held directly accountable for human rights violations.
The analysis will identify the states’ and agencies’ concrete human rights obligations and the possibilities for holding these three actors accountable. In case of state responsibility, it will draw on international jurisprudence. In case of corporate responsibility, which is still of a legally non-binding character, judicial cases are lacking. The agencies’ compliance with their corporate responsibilities will therefore be assessed on the basis of empirical research.
Source: Barbara Linder.
The analysis will focus on development and export credit agencies which have been outsourced from ministries and set up as separate agencies. This construction has become an increasing trend among OECD countries and poses a range of difficult legal challenges, particularly because many agencies are of a hybrid nature and comprise elements of state and non-state organisations. At the same time however, this hybrid identity has also resulted in the fact that many agencies have recognised their human rights responsibilities as corporate actors. Thereby, they adhere to the same international standards as their corporate partners and have taken a very interesting approach which might pave the way towards a common human rights accountability framework for public and private development actors. The author argues that from a legal point of view, development and export credit agencies are comparable because they have a similar status and fulfil similar intermediary functions. Both show a close state nexus as they:
• are mandated by the state
• offer state services and state support
• report to national parliaments, and
• are guided by international regulations addressed to the state.
Bilateral development and export credit agencies in Germany, Sweden and Austria will serve as examples in order to discuss the most common legal natures of outsourced agencies. They may either be classical state agencies, state-owned enterprises or private enterprises with a public mandate. All of the selected agencies have committed either to the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises or the Global Compact. Some of them have already started to integrate human rights due diligence in their business conduct. Empirical research on these agencies will provide experiences on this process and give first insights into the possibility of establishing a common accountability framework for public and private actors.
This book will be structured in three parts: Part I will set the scene by presenting two exemplary case studies and providing contextual information on the difficulties of integrating human rights in the development and export credit realm. The case studies in Ethiopia and Turkey will reveal that human rights risks are often not adequately taken into consideration, which results in complex dilemmas and human rights violations. The ones who pay the price are always the persons affected by the project or programme. They may ultimately lose their lands, livelihoods, health, access to basic services, etc. Both cases have been well documented and evaluated by human rights experts. They have been selected because they illustrate a comprehensive range of human rights issues frequently arising in the context of large-scale economic development undertakings and are therefore considered to be representative with regard to the problem dealt with in this book.20
Chapter 1 will discuss the relationship between the development system and the human rights system which has traditionally been a difficult one. On the basis of the Protection of Basic Service Programme (PBS) in Ethiopia it will illustrate a range of human rights challenges donors may face when they cooperate with weak or undemocratic governments. Taking a closer look at the background and context of both systems it will provide insights on why human rights aspects may still be marginalised in a range of development programmes and projects, particularly economic ones.
Chapter 2 will show that social and human rights concerns have only very recently entered the framework official export credit regulation. In contrast to development agencies, export credit agencies strongly compete with each other. This holds particularly true for ECAs of OECD and non-OECD countries. The call for raising human rights standards in OECD countries has therefore frequently been answered with the economic objection that it might impair ECAs’ competitiveness on the international market. On the basis of a case study on the Ilisu Hydropower Dam Project in Turkey this chapter will illustrate the difficulties in ensuring respect for social and human rights standards against political and economic interests.
Part II of the book will provide an in-depth legal analysis on how individuals may hold the host state, the home state and the agencies accountable for human rights violations resulting from development and export credit agency supported projects.
Chapter 3 will analyse the host state’s obligations to respect and protect human rights in the context of projects and programmes supported by foreign development and export credit agencies. For the host state, foreign development and export credit agencies constitute third parties against whose human rights violations it has to protect. However, the agencies are part of a complex network of actors and frequently function as intermediaries in the background. The implementing agents are usually companies, NGOs or even the host state itself.
Chapter 4 will analyse to what extent human rights victims in the host state may hold the home state, which is the state where the agency is based and on whose behalf it acts, accountable for extraterritorial human rights violations resulting from development or export credit agency-supported projects. It will take a close look at the legal relations between the agencies and their home states, extraterritorial human rights responsibilities, and the home state’s liability for extraterritorial human rights violations.
Chapter 5 will assess to what extent the selected development and export credit agencies themselves may be held accountable for human rights violations under the concept of corporate responsibility. As a first step it will outline the current state of the international discussion on corporate responsibility and specify the particular responsibilities of development and export credit agencies. In a second step it will present the results of the empirical research on the implementation of these responsibilities in the agencies’ practice in Germany, Sweden and Austria.
Part III will draw the conclusions of the analysis and provide recommendations and future outlooks.
Chapter 6 presents conclusions from the legal analysis. It reveals that all actors, the host state, the home state as well as the development and export credit agencies themselves bear responsibilities to ensure human rights compliance in bilateral development and export credit agency-supported undertakings. The principle of due diligence has emerged as the overarching standard of conduct for all actors. It requires them to take serious and reasonable measures to avoid human rights violations if they know (because they allowed or supported) or should have known about the existence of a real risk of human rights violations. The enforcement of these responsibilities, however, poses a range of legal and factual challenges which lead de facto to a huge accountability gap and to a very unsatisfying situation for the adversely affected people.
Chapter 7 presents a range of recommendations to address this protection gap. It suggests enhanced monitoring of development cooperation, export credit agency supported and foreign investment undertakings, ensuring access to justice for human rights victims as well as the creation of a common human rights accountability framework for public and private actors.
Figure I.2 illustrates the research design.
Source: Barbara Linder.
This book is written from a human rights perspective. The assessment of the implementation of corporate human rights responsibilities equally included empirical methods. To this end the author conducted 22 semi-structured qualitative interviews with representatives of the selected development and export credit agencies’ key departments.21 To avoid potential adverse consequences for interviewees all interviews were conducted on a fully confidential basis.
The author is fully aware of the fact that the law constitutes only one aspect within a broader and much more complex debate on global and geopolitical power relations. To address the inequalities in today’s world and to strive towards empowerment, equity and accountability, a broader process of change is certainly needed which cannot be achieved only through legal reforms. Some scholars have even questioned whether ‘[…] a rights-based framework can remedy the structural or institutional ailments of the developing world’ and whether, ‘when development policies have failed, is it because of a failure to include a rights framework, or […] because of political interference, corrupt state leaders and institutions, inadequate resources or capacity, or local class, or political struggles’.22 This book will not answer this fundamental question, neither does it pretend to provide the silver bullet for one of the most complex challenges in today’s world. It will however provide a comprehensive analysis of the legal pathways for human rights accountability under the current international human rights system and shed light on existing protection gaps. Thereby it aims to raise the awareness on a so far fairly under-researched topic and draws the attention to critical actors who would have a high potential to strengthen human rights compliance and accountability – given the necessary political will.23
1 See e.g., United Nations Development Group, The Human Rights Based Approach to Development Cooperation: Towards a Common Understanding Among UN Agencies (2003), http://www.unicef.org/sowc04/files/AnnexB.pdf accessed 1 Feb 2018; Mac Darrow and Tomas Amparo, Power Capture and Conflict: A Call for Human Rights Accountability in Development Cooperation, Human Rights Quarterly, 27/2 (2005), http://resolver.ebscohost.com.ludwig.lub.lu.se/openurl?sid=EBSCO%3aedsjsr&genre=article&issn=02750392&isbn=&volume=27&issue=2&date=20050501&spage=471&pages=&title=Human+Rights+Quarterly&atitle=Power%2c+Capture%2c+and+Conflict%3a+A+Call+for+Human+Rights+Accountability+in+Development+Cooperation&btitle=Human+Rights+Quarterly&jtitle=Human+Rights+Quarterly&series=&aulast=Mac+Darrow&id=DOI%3a&site=ftf-live, accessed 14 Jul 2018, 484–8; Andrea Cornwall and Celestine Nyamu-Musembi, Why Rights, Why Now? Reflections on the Rise of Rights in International Development Discourse, IDS Bulletin, 36/1 (2005), https://onlinelibrary-wiley-com.ludwig.lub.lu.se/doi/epdf/10.1111/j.1759-5436.2005.tb00174.x, accessed 14 Jul 2018, 9–18.
2 United Nations, Monterry Consensus on Financing for Development, (18/03/2002); http://www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf accessed 2 Mar 2016.
3 Eurostat, EU-financing to developing countries, https://ec.europa.eu/eurostat/databrowser/view/sdg_17_20/default/table?lang=en, accessed 02 Sep 2019.
4 UN General Assembly, The future we want, A/RES/66/288, (27/07/2012), http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/66/288&Lang=E, accessed 11 Feb 2018, 46.
5 United Nations, Transforming our World: the 2030 Agenda for Sustainable Development, A/Res/ 70/1 (25 Sep 2015) http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E, accessed 11 Feb 2018, para 67.
6 Franz Nuscheler, Entwicklungspolitik, (6th edn., Bonn: Dietz, 2005) 433–8.
7 Asbjorn Eide, Human Rights-Based development in the Age of Globalization, in Bard A. Andreassen and Stephen P. Marks (eds), Development as a Human Right. Legal, Political and Economic Dimensions (2nd edn., Antwerp – Oxford – Portland: Intersentia, 2010) 293; Jakob Kirkemann Boesen and Hans-Otto Sano, The Implications and Value Added of a Human Rights-Based Approach, in Andreassen and Marks, ibid., 54–7.
8 Compliance Advisor Ombudsman, CAO cases http://www.cao-ombudsman.org/cases/ accessed 26 Oct 2016; The World Bank, Inspection Panel, Cases http://ewebapps.worldbank.org/apps/ip/Pages/Home.aspx accessed 26 Oct 2016.
9 Eurostat, Sustainable Development in the European Union – Monitoring report on progress towards the SDGs in an EU context (June 2019) https://ec.europa.eu/eurostat/documents/3217494/9940483/KS-02-19-165-EN-N.pdf/1965d8f5-4532-49f9-98ca-5334b0652820, accessed 02 Sep 2019, 333.
10 Eurodad, Exporting Goods or Exporting Debts? Export Credit Agencies and the roots of developing country debt, (2011) http://eurodad.org/files/pdf/4735-exporting-goods-or-exporting-debts-export-credit-agencies-and-the-roots-of-developing-country-debt-.pdf, accessed 14 Jul 2018.
11 Wiert Wiertsema, Export Credit Debt: How ECA support to corporations indebts the world’s poor – Briefing Note 05, (01/01/2008) http://www.bothends.org/uploaded_files/document/Briefing_paper_Export_Credit_Debt.pdf, accessed 6 Mar 2016; OECD, Roundtable Discussion on External Financing for Development- Summary Report, (01/01/2014), http://www.oecd.org/dac/stats/documentupload/DC%20CSO%20Roundtable%20Summary%20Report%20FINAL%20for%20circulation%2022%20May.pdf, accessed 6 Mar 2016, 4.
12 Concord, Aidwatch Report: Looking to the future don't forget the past – Aid beyond 2015 (01/01/2015), http://www.concordeurope.org/publications/item/480-aidwatch-report-looking-to-the-future-don-t-forget-the-past-aid-beyond-2015, accessed 7 Mar 2016, 21.
13 The research for this book has revealed that there exists considerable documentation and NGO monitoring on foreign investment and large-scale multi-donor supported development projects such as those supported by the World Bank or the IFC. Independent reviews and NGO reports on bilateral development projects are however fairly inexistent. Project or programme evaluations are usually contracted by development agencies. Independent information may only very occasionally be found in literature, expert interviews or treaty body reports.
14 Andrea Cornwall and Celestine Nyamu-Musembi, Putting the ‘Rights-Based Approach' to Development into Perspective, Third World Quarterly, 25/8 (2004), http://www.jstor.org/stable/3993794, accessed 31 Oct 2017, 1433; Brigitte Hamm, A Human Rights Approach to Development, Human Rights Quarterly, 23/4 (2001), http://www.jstor.org/stable/4489369, accessed 31 Oct 2017, 1014–16.
15 See e.g., United Nations, National report submitted in accordance with paragraph 5 of the annex to Human Rights Council resolution 16/21: Germany, A/HRC/WG.6/16/DEU/1 http://ap.ohchr.org/documents/alldocs.aspx?doc_id=21440, accessed 5 Jul 2018; United Nations, National report submitted in accordance with paragraph 5 of the annex to Human Rights Council resolution 16/21: Belgium, A/HRC/WG.6/24/BEL/1 http://ap.ohchr.org/documents/alldocs.aspx?doc_id=25760, accessed 14 Jul 2018.
16 Rosalind Eyben, Donors Rights-based Approaches and Implications for Global Citizenship: A Case Study from Peru in Naila Kabeer (ed.), Inclusive Citizenship. Meanings and Expressions (London: Zed Books, 2005), http://rosalindeyben.net/category/papers-and-articles/, accessed 5 Mar 2016, 251–68.
17 Ibid., 251–68; Cornwall and Nyamu-Musembi, Putting the ‘Rights-Based Approach' to Development into Perspective, 1433.
18 Chris Sidoti, It’s Our Business: Ensuring Inclusiveness in the Process of Regulating and Enforcing Corporate Social Responsibility, in Karin Buhmann, Lynn Roseberry, and Mette Morsing (eds), Corporate Social and Human Rights Responsibilities (Basingstoke: Palgrave Macmillan, 2010), 147; Cornwall and Nyamu-Musembi, Putting the ‘Rights-Based Approach' to Development into Perspective, 1432–3.
19 Cornwall and Nyamu-Musembi, What is the ‘rights-based approach’ all about? Perspectives from international development agencies, (10.11.2004), Institute of Development Studies, 47; Cornwall and Nyamu-Musembi, Putting the ‘Rights-Based Approach' to Development into Perspective, 1432–3.
20 This does not imply however that they are equally meant to be representative for an average development or export credit agency supported project. It is important to note that there exist many development programmes and projects which do have a very positive impact on human rights. Export credit operations tend to bear higher risks, in particular when they support large-scale undertakings or assure transactions of high-risk goods such as arms or nuclear goods. Yet, also in their case many operations, in particular those supporting the delivery of technical equipment or machinery, are less human rights sensitive. Since this book analyses pathways of accountability for human rights violations it takes however only critical projects as examples.
21 The selection of interview partners took into consideration the diverse organisational structure of the agencies. Interviews with development agencies were conducted with experts from the departments for human rights, private sector, evaluation or strategic management. Interviews with export credit agencies were conducted with experts from the environmental and social departments, the credit department and the strategic policy department.
22 Kirkemann Boesen and Sano, The Implications and Value Added of a Human Rights-Based Approach, 54.
23 The research does not deal with bilateral development financing institutions such as development banks. Many of its legal findings may however be analogously applied to these institutions.