The ‘New’ World Bank Accountability Mechanism: Observations from the ND Reparations Design and Compliance Lab

On 8 September 2020, the World Bank’s Board of Executive Directors approved a Resolution establishing the World Bank Accountability Mechanism [hereafter, “Accountability Mechanism Resolution”], composed of the original World Bank Inspection Panel established in 1993, and a new entity called the Dispute Resolution Services.  A counterpart updated Resolution was also passed relating to the World Bank Inspection Panel [hereafter, “Inspection Panel Resolution”], with Terms of Reference and Selection Procedures for the Secretary of the Accountability Mechanism.  According to the World Bank’s 14 September 2020 Statement on World Bank Inspection Panel Toolkit Review, these Resolutions and other documents:

“…reflect the March 5, 2020 and October 18, 2018 decisions of the Board and conclude a three-year Board review process aimed at enhancing the Bank’s accountability framework. The process received input from a broad range of external stakeholders, including client countries’ authorities and civil society, over this period.”

Significantly, the Bank’s 14 September 2020 Statement does not name the external stakeholders that were consulted during the three year review process.  There is a 71-page 2018 External Review of the Inspection Panel Toolkit prepared by Professor Daniel D. Bradlow (American University and University of Pretoria), which compares the practices of the World Bank Inspection Panel with other independent accountability mechanisms of other development banks and institutions, on five topics, namely: 1) potential changes to the Inspection Panel Toolkit on monitoring the implementation of Bank management’s action plans, and offering dispute resolution and advisory services; 2) evaluating the time limits on the eligibility of requests, especially for projects supported by guarantees; 3) assessing the extension of the Inspection Panel’s case eligibility to include Bank-executed Trust Funds (BETFs); 4) determining accountability gaps in the Bank’s co-financing operations due to differences in institutions’ accountability mechanisms; and 5) assessing measures to improve communications with requesters regarding investigation findings.

This post examines various features of the World Bank’s new Accountability Mechanism, particularly from the lens of local communities (e.g. the requesters) that submit requests in regard to environmental or social concerns regarding Bank-financed development projects.  We find that while the Bradlow External Review contained very useful insights and options for each of the above five topics, the end result for the World Bank’s ‘new’ Accountability Mechanism is a process that has significant spaces of deference to Bank Management, without a corresponding significant expansion of participation opportunities for the requesters in these proceedings.  The new Accountability Mechanism, with its Dispute Resolution Service, is expected to start operating in early 2021.

Eligibility Determination and Criteria: The Bank Management’s Evidence of Actual Compliance or Intent to Prospectively Comply

Requests for inspection are submitted to the World Bank Inspection Panel for the initial eligibility determination.  Each Request by affected parties must “demonstrate that its rights or interests have been or are likely to be directly affected by an action or omission of the Bank as a result of a failure of the Bank to follow its operational policies and procedures with respect to the design, appraisal and/or implementation of a project financed by the Bank (including situations where the Bank is alleged to have failed in its follow-up on the borrower’s obligations under loan agreements with respect to such policies and procedures) provided in all cases that such failure has had, or threatens to have, a material adverse effect.” [Inspection Panel Resolution, para. 13].  Neither the 8 September 2020 Resolution or the World Bank Inspection Panel’s 2014 Operating Procedures, define “material adverse effect”. [2014 Operating Procedures, para. 12]

Before any Request is registered, and within 21 business days of being notified of a Request for Inspection, the Bank Management is now required to provide the Panel with evidence that it has complied or intends to comply with the Bank’s policies and procedures. [8 September 2020 Resolution, para. 19].  After the Panel receives the Bank Management’s response, it then makes a determination of the technical eligibility criteria [2014 Operating Procedures, paras. 32-40].  The Panel may decide to visit the project country as part of the eligibility determination phase. [Inspection Panel Resolution, para. 26].  If the Request meets the eligibility criteria, the Panel can recommend to the World Bank’s Executive Directors that they authorize an investigation.  [8 Inspection Panel Resolution, paras. 28 and 29.] This process remains similar to the Inspection Panel’s 2014 Operating Procedures.  What is significantly new is that there is now a specific procedure during the eligibility determination phase, where the Bank Management can submit evidence of actual compliance, or intent to prospectively comply, with the Bank procedures and policies that are alleged in the Request to have been violated by Bank Management.  There is no provision that enables Requesters to access this evidence, much less respond to it, at this stage.

An Intermediate Phase Before Investigation: Dispute Resolution Services

If the World Bank’s Executive Directors authorize the Panel to conduct an investigation, then the World Bank Accountability Mechanism Secretary “shall offer an opportunity for dispute resolution to the Requesters and the borrower”.  [Inspection Panel Resolution, para. 30]. This entire phase of resort to dispute resolution services is completely new and is not in the 2014 Operations Procedures of the Inspection Panel. Resort to a Dispute Resolution Service effectively freezes the Inspection Panel process, for the maximum length of a dispute resolution process (one year from the date the Accountability Mechanism Secretary informs the Panel and the parties in the case, extendible by agreement to another six months, for a possible maximum total of 18 months). [Accountability Mechanism Resolution, para. 12(g)]. The dispute resolution process is only deemed concluded in the earlier of any of three circumstances: 1) parties reaching agreement; 2) withdrawal of a party from the dispute resolution process; or 3) the expiration of the dispute resolution period. [Accountability Mechanism Resolution, para. 13(a).]

At first glance, this innovation appears to afford the Requesters an alternative channel to expeditiously resolve a dispute with the Bank Management and the borrower State or entity before an investigation of its Request is made by the Panel.  There is no limit to the form that the dispute resolution process will take, since the mandate of the Dispute Resolution Services is to “facilitate a voluntary and independent dispute resolution option for Requesters and borrowers (the “Parties”).” [Accountability Mechanism Resolution, para. 9.]. Mediation may be one possible process [Accountability Mechanism Resolution, para. 12(b), but Parties can also also agree on other methods of dispute resolution, such as “consultative dialogue, information sharing, joint fact-finding, mediation, conciliation, and other approaches.” [Accountability Mechanism Resolution, para. 12(c).] It is unclear what the phrase other approaches means and if such approaches may also encompass other alternative dispute resolution methods such as arbitration.

During this entire dispute resolution phase, the World Bank project will still continue according to its original terms, scope, and specifications, until there is a contrary instruction from the World Bank Executive Directors, either as a result of agreement by the parties in a dispute resolution phase, or as a result of the Bank’s Executive Directors taking a recommendation by the Inspection Panel (which resumes after the dispute resolution phase concludes) for either project modification, suspension, or in extremely rare cases, project termination.  This is significant, especially if the Requesters are alleging that the material adverse effects to affected communities are continuing while the dispute resolution process is pending.

Efficacy and Effectiveness of Dispute Resolution Services for Requesters

One can certainly raise questions as to how Requesters could ultimately achieve the object of their Request through a dispute resolution process designed to reach a contract or agreement between them, the borrower (State or State entity or institution), and the World Bank.  In the first place, local communities making these Requests do not have the same technical, legal, financial, or fiscal resources and capacities as either the borrower State or institution and the World Bank Management as the lender.  There is an inbuilt asymmetry of positions among these Parties, with the Requesters at the obvious disadvantage.  Unlike the World Trade Organization Advisory Centre that assists developing country Members of the WTO in disputes, there is no facility created in the World Bank Accountability Mechanism to impartially or independently assist the Requesters in the Dispute Resolution phase (or even to help shoulder costs), especially with the inherent complexities of mediation, conciliation, arbitration, among other approaches. Because the Accountability Mechanism Resolution is silent on this subject, the ultimate contours of the dispute resolution process (and how parties agree to this process) could foreseeably be more consequentially shaped or influenced by the borrower and/or Bank Management.  The Accountability Mechanism’s efficacy, effectiveness, and legitimacy, in our view, depend significantly on the recognition of these asymmetries, and the guarantees of rules-based, impartial, and non-discriminatory administration of the process in a manner that enables Requesters to fully access information and meaningfully participate in the dispute resolution process to achieve a fair outcome or result.

The 12 month to 18 month time maximum time limit could also be an impediment for all Parties to conduct thorough fact-finding required in any dispute resolution process that is chosen.  In the first place, the bulk of evidentiary material on World Bank-funded projects is presumably not in the possession of the Requesters.  The Accountability Mechanism is silent on the extent of access that Requesters can have to the materials, reports, documents, testimonies, and/or other primary and secondary bases of fact-finding that are presumptively in the possession of either the borrower State (or entity) and/or the World Bank Management as the lender.  A rushed process can risk perfunctory, cursory, or undisciplined fact-finding, which can also militate against succeeding in resolving the dispute.  Even worse, Requesters may deem themselves pressured to achieve the object of their Request, even if it means watering down their ultimate claims against the borrower State (or entity) and/or the World Bank Management as the lender.

The Inspection Panel takes no role whatsoever in the Dispute Resolution Services.  The Accountability Mechanism Resolution does not specify which entities will specifically provide dispute resolution services – even if there is an approved list of mediators, there is no counterpart list for any other dispute resolution processes (e.g. conciliation, arbitration, fact-finding, among others).  Requesters who are unrepresented and often unfamiliar with dispute resolution institutions, service providers, practitioners, among others, may well find themselves at a disadvantage in the bespoke design of the dispute resolution process.  There are distinct spaces for likely higher levels of deference, subjectivity, and influence of other more established institutional actors through the borrower State (or entity) and/or the World Bank Management as the lender. 

The Inspection Panel’s Impartiality Mandate: Is this subject to the Parties’ ultimate consent, regardless of any actual violations of Bank policies and procedures in World Bank-funded development projects?

If the parties reach an agreement, then the Panel shall close the case pursuant to paragraph 33 of the Inspection Panel Resolution. Only in the event that an agreement is not reached during the proposed time limits would the Panel proceed to investigate the violations alleged in the Request. As an impartial fact-finding body, the Panel was created to give voice and ensure redress for people and communities adversely impacted by the World Bank’s projects. It is hard to imagine how this mandate can be fulfilled if the role of the Panel is restricted to merely accepting the outcome of the dispute resolution process and closing the case if the parties reach an agreement. Could Parties lawfully waive – by agreement – violations of Bank policies and procedures, regardless of the legal consequences of the material adverse effects of these violations on the Requesters and the communities they represent?  The Accountability Mechanism Resolution and the Inspection Panel Resolution are both silent on the nature and binding scope of any contemplated agreement reached under the Dispute Resolution process.  Neither do either of these Resolutions deal with the collective and intergenerational harms that violations of Bank policies and procedures can cause, especially when it comes to environmental impacts that pose health consequences in both the short and long term.  We are skeptical that such a settlement agreement (through mediation or conciliation, or any other configuration within the dispute resolution services of the World Bank Accountability Mechanism), within the terms of a contract, would so easily stand or automatically prevail against any legal system’s default mandatory rules voiding contracts that are contrary to public policy. 

Most importantly, we doubt if the wholesale privatization of the dispute resolution process in both the Accountability Mechanism Resolution and the Inspection Panel Resolution would be consistent with the original independent and impartial mandate of the Panel to investigate and monitor compliance with the Bank’s own policies, procedures, and operational directives.  Taken to its hypothetical extreme, if Parties agree to accept the continuation of violations of Bank policies and procedures, is the Inspection Panel bound to accept this situation?

The Accountability Mechanism Resolution makes clear that the dispute resolution services are not meant to substitute the compliance review process reserved for the World Bank Inspection Panel. In practice, much ambiguity remains as to how the former would not impede the latter, and vice-versa. Suppose a settlement between the parties is reached. In that case, the final dispute settlement might forestall any Inspection Panel review or investigation of the matter and prevent any members of the affected community, who otherwise feel that their concerns were not addressed in the process from meeting the eligibility Criterion (f) to request a new investigation. That is because the case is considered closed by the Panel, which cannot make a recommendation in the same subject matter unless the new requesters can prove that new evidence or circumstances not known at the time of the prior request are present.

Can Requesters Achieve Reparations for the Harmful Consequences of Violations of Bank Policies and Procedures in World Bank-funded Development Projects?

The ultimate missed opportunity in both the Accountability Mechanism Resolution and the Inspection Panel Resolution is for the World Bank’s Executive Directors to clearly articulate or elaborate on the possibility of reparations for the harmful consequences of conduct of either the borrower State (or entity) and/or the Bank Management as the lender (or the project vehicle or designated contractors tasked with project operations), as experienced by the Requesters and the communities they represent.  Both the Accountability Mechanism Resolution and the Inspection Panel Resolution are silent on the World Bank’s possible constructive role in enabling reparations for affected local communities when World Bank-funded development projects generate harmful consequences as a result of violating the Bank’s operational policies and procedures, including the Bank’s own Environmental and Social Framework.

The cost is high for affected communities, who must await the outcome of the World Bank Inspection Panel’s eligibility determination, the result of any possible resort to the Dispute Resolution Services, as well as the reports from any Inspection Panel investigation (should dispute resolution fail), as well as the implementation over time of any new Bank Management Action Plan that is supposed to respond to the Inspection Panel’s ultimate recommendations after the conclusion of its investigation.  Although the Accountability Mechanism Resolution allows the Inspection Panel to verify the implementation of the Bank’s Management Action Plan, it remains nebulous if the Panel as part of the Accountability Mechanism will have any meaningful supervisory role in monitoring the implementation of the final agreement that will result from the dispute resolution process. The parties will indeed sign the final agreement and consent on a “time-bound implementation schedule for agreed actions,” as outlined in paragraph 13 (b) of the Accountability Mechanism Resolution. Nevertheless, the resolution fails to state how compliance with the agreement can be institutionally monitored.  Neither is there any space created for Requesters to participate in the monitoring and oversight process, or to have transparent access to all information pertaining to the implementation of the Bank’s Management Action Plan.

While the Accountability Mechanism Resolution and the Inspection Panel Resolution laudably aim to present better clarity in the investigation process and the dispute resolution process relating to World Bank-funded development projects, our concerns as researchers, scholars, and practitioners lie with the effectiveness, efficacy, legality, and legitimacy of these processes for the long haul.  At the end of the day, it is Requesters’ communities that live the felt experiences of short-term, medium-term, and long-term material adverse effects from any violations of Bank policies and procedures. The World Bank’s Accountability Mechanism will succeed if it addresses the real concerns of affected communities as the actual urgent constituencies of the Accountability Mechanism’s innovations in institutionalized procedures, investigations, fact-finding, and dispute resolution processes.  We await the start of the World Bank Accountability Mechanism’s operations in 2021 with these considerations foremost in mind.