By Rabi Thapa

From the mashkim mediators of the ancient Sumerians to the medieval English judicial practice of setting aside arbitration “lovedays,” traditional societies have often preferred conciliation to confrontation. The desire to preserve the social order also manifested in Confucian China, where harmony was considered more important than the letter of the law, and the Indian subcontinent, where local five-person Panchayats acted as arbiters to resolve disputes.

With the ascendance of court litigation, mediation declined. But in the middle of the last century the practice underwent a revival, including to address community grievances. Following the creation of the compliance-based World Bank Inspection Panel in 1993, development finance institutions (DFIs) set up independent accountability mechanisms (IAMs) of their own. The Compliance Advisory Ombudsman, established in 1999 to receive complaints related to projects funded by IFC/MIGA, the private sector arm of the World Bank Group, included from the very beginning the option of dispute resolution. This was a problem-solving alternative to a compliance function focused on whether the parent institution had violated its own environmental and social (E&S) standards. The World Bank itself was relatively late in embracing dispute resolution, with the establishment of the Dispute Resolution Service (DRS) in 2020.

Despite these developments, stakeholders may struggle to understand how the E&S standards that DFIs are beholden to are integrated by IAM dispute resolution (DR) teams into their processes, including any agreements signed by parties to a complaint. They may thus attribute a lack of accountability in the DR process to the fact that DR mediators have to remain neutral and impartial, and that parties often wish to keep their agreements confidential. 

A breakout session on the relationship between DR and E&S standards at the recent IAMnet Annual Meetings in Barbados featured DR professionals from six IAMs. Subsequent conversations with practitioners reveal that while there are significant differences in how IAMs approach dispute resolution, their DR teams all emphasize the importance of reconciling the interests of the parties, and doing this in a manner that respects the rights of the complainants. Achieving this conciliation while being viewed as impartial by the parties can be a delicate task. So while DR teams across IAMs readily acknowledge that abiding by E&S standards is important, how this is reflected across the DR process can vary.

Going in through the front door

E&S standards tend to be more overtly considered at the beginning of the DR process. Philippe Galland, Head of the Environmental and Social Complaints Mechanism of the Agence Française de Développement (AFD), says, “Our rules of procedures refer to AFD E&S standards (the World Bank standards). However, when it comes to DR, we don’t have specific guidelines on applying E&S standards. But they are like the front door and our compass. We use the standards, first, because we want to ensure that they are respected by our clients. Second, to go into deeper conversation with the community and see if there is anything that puts the project in danger, and any negative impacts that can be resolved, to be sure that reconciliation is possible.” Martin Packmann, Senior Dispute Resolution Specialist at the Independent Consultation and Investigation Mechanism (MICI) at the Inter-American Development Bank, explains that when a complaint is being assessed for eligibility, both the alleged harm and the potential non-compliance with a specific E&S standard have to be identified. This is particularly relevant, since MICI’s policy “says that the consultation [DR] phase will not support agreements that counter to the policies of the bank or its code of ethics, and that infringe on local, national, or international law.”

At the World Bank Accountability Mechanism, according to Senior Dispute Resolution Officer Scott Adams, the DRS “doesn’t review an agreement or any other documents in mediation with the objective of making a determination about compliance with E&S standards and policies. We don’t want to blur the lines with our compliance colleagues or undermine our neutrality.” Besides, he adds, “The legal and contractual obligations of the borrower and management at the Bank don’t go away.” The obligations flowing from the E&S standards are transposed into documents such as the Environmental and Social Action Plans for a given project and, if necessary, the DRS will refer to these. Adams emphasizes that when this has happened, “There wasn’t a dispute whether the parties should honor the obligations—that was a given. It was more about what it meant and the practical ways to implement it.”

Philipp Koenig, Head of Dispute Resolution at the Complaints Mechanism, European Investment Bank Group (EIB), reiterates the need for DR agreements to comply with EIB policies, including the E&S standards. He explains, “We don’t operate in a vacuum. We operate within an accountability framework where environmental and social standards cannot be disregarded.” In fact, they can be of advantage to communities, aligned with or complementary to community satisfaction.

Leveling and defining the playing field

“This is particularly important because communities are not always aware of their rights under environmental and social standards,” says Koenig. “Under the EIB’s E&S standards, anyone actually or potentially adversely affected by a project is considered a rights-holder. Yet, especially when communities lack support from knowledgeable advisors, they often do not know which entitlements these rights involve.” Galland, AFD, adds that developing knowledge about the standards is also useful for the complainants because “you can have the same level of conversation” with the other stakeholders.

In this regard, information sessions on specific issues, such as resettlement action plans, which are likely to be influenced by E&S standards and domestic law, can be very useful. Consideration of the standards at the beginning of the DR process thus has the effect of not just leveling the playing field, but also defining it. Galland says, “You can start to define the perimeter of negotiation. You can use the vocabulary of standards or not, but before starting any negotiation, you have to fix what you are capable of doing with your clients and what you are not. They give us the framework where we can work and understand each other.” 

Respecting rights in the shadow of the law

For Koenig, negotiation between the parties to a complaint should take place in the “shadow of the standards,” borrowing a concept introduced by Mnookin and Kornhauser to describe the linking of mediation to the law: “If people know the law, you can negotiate in the shadow of the law. To enable people to negotiate in the shadow of E&S standards, the first step is to shine light on those standards, then for them to fade to the background so people can find solutions.”

However, the law is also a key factor in whether an agreement will hold. Most IAMs, whether or not their procedures explicitly state that E&S standards need to be part of DR, do require domestic and international law to be respected. There is a strong relationship between international law, treaties, and guidelines such as the United Nations Guiding Principles on Human Rights and the E&S standards adopted by DFIs. But DR practitioners are less likely to draw upon this more general and abstract corpus. 

Domestic law is more relevant in terms of the sustainability of agreements signed, but it is only rarely that DR practitioners carry out legal analysis vis-à-vis cases. Packmann, MICI, says that although his team does not have the mandate to investigate compliance with local law, both Bank management and borrower governments are parties to the process (most DR cases at MICI being from the public sector). Therefore, there is consideration of issues through the lens of the E&S standards and domestic law, respectively. As with the standards, DR processes thus operate “in the shadow of the law.”

As Adams explains it, “DR staff and mediators are focused on helping the parties work together to define the issues to be resolved in their own terms, to identify and satisfy their fundamental needs, and develop options for mutual gain wherever possible. Certainly, this is all happening in the context of very real power dynamics and legal and policy requirements, which also has to be understood and acknowledged.”

Trusting the process

MICI’s example throws into sharp relief the differences between how IAMs approach dispute resolution. The approach of the World Bank DRS, for example, draws on models of professional mediation as practiced in contemporary settings, with external mediators appointed who preserve impartiality and engender trust. When management joins the process at the World Bank, it is as an observer. DRS staff work closely with mediators who are generally familiar with its mandate and context in which they operate. Adams concedes that sometimes mediators don’t have a background in the E&S standards, “But that’s where we can help our mediators. That’s one of many reasons you have staff working with them. If there were a red flag, we would bring attention to it.”

However, at MICI, Packmann says, “You will see that we often don’t call ourselves mediators. We are conflict specialists, and we can play different roles in a process at different moments.” In practice, this translates into a much more hands-on involvement with the cases: “Dispute resolution is like an octopus, it has many arms. Mediation is just one tool. We can do facilitation, we can do negotiation. We try to leverage those tools to apply in a specific context.” Packmann observes that neutrality is a problematic concept, and states that one can be impartial if advice is offered to all parties: “If I as a third party don’t do that, who will? How do I empower those communities and those actors to think through this process critically and strategically? I have to help them in that process, if they’re open to that.”

Intriguingly, both these methodologies are focused on establishing trust in order to resolve the dispute in question; trust can generate the conditions for parties to consider and potentially integrate E&S standards into any agreement reached. Packmann says, “The main component of our DR processes is trust building. If you build trust, you can build rapport, you can build influence, and you can actually effect change.”

Working toward clarity of process and goals

Part of the confusion surrounding the extent to which E&S standards are integrated into DR stems from a perceived lack of transparency, both in general and specifically with regard to the standards. As it is not the mandate of DR to make compliance findings in black and white—compliance with standards per se is never the focus of DR processes and is unlikely to be the sole goal of parties—reporting on a DR case often fails to satisfy external stakeholders looking for evidence of attention paid to E&S standards. Many DR processes and resulting agreements are confidential at the behest of the parties, compounding a perception that the standards may fall by the wayside, or even that unethical deals are being made to get to an agreement, thereby compromising accountability. For the reasons stated earlier in this article, this appears improbable.

“Transparency is good practice and we continue to try and release information beyond what we are required to,” says Adams, DRS. But he advises against focusing on transparency for the benefit of external stakeholders at the expense of the primary parties: “It becomes a distraction. That, to me, bleeds into the compliance review, and would be something our Inspection Panel colleagues would do with great depth and authority.”

Practitioners note the importance of at least basic understanding on the part of DR units and their support teams of the applicable E&S standards. DRS staff, for instance, have participated in a five-day in-person course on the World Bank’s Environmental and Social Framework. Refresher courses are useful, and continuous learning can be reinforced through events on relevant issues such as resettlement and livelihoods restoration. Some, if not all, of this training could extend to external mediators. Specialized knowledge already exists within Bank management, in compliance units, or with external consultants, and DR teams should be able to call on additional expertise as needed—this is already happening. Finally, to improve the quality control of DR mediators/facilitators, Adams suggests that “a basic code of conduct for IAM mediators” could be developed.

Different strokes for different folks

IAM compliance and DR options both seek to provide access to remedy, albeit by different means. Packmann, MICI, speaks for many DR and compliance IAM staff when he says of communities, “They want to feel validated, and be heard and respected.” As Koenig, EIB, says, “The E&S standards of all our institutions are applicable globally, and they need to be implemented in very different jurisdictions, in very different projects. This inherently creates space for interpretation. This is where DR can play such a great role, because you fill this space with workable solutions that the parties come up with.”

An important thing to remember is that community satisfaction is not pitted against E&S standards. Knowledge of the standards, and the input of DR teams on how this might apply to a case, lays down a boardwalk from which parties can survey and navigate the difficult terrain of grievances felt and experienced. Travelling together under mutually agreed terms of respect and trust, the parties may be able to find creative ways to adhere to or even go beyond the standards, increasing accountability. From the perspective of a borrower government or a private executing agency for a project, this can be part of earning a social license to operate. For communities, this could improve the “social acceptability” and local, tangible benefits of projects. Koenig concludes, “Dispute resolution helps build communities’ trust in the projects financed by our parent institutions, thereby strengthening their social acceptability.”