6: International financial institutions and FPIC
In 2011, the board of the International Finance Corporation (“IFC”) voted to incorporate the principle
of FPIC into its safeguard policy addressing indigenous peoples.177 The safeguard policy, which forms
part of the IFC’s Policy and Performance Standards on Social and Environmental Sustainability,
came into effect in January 2012, and has had a major ripple effect across the financial sector, and
by extension the mining sector. The IFC’s performance standards form the basis of policies of the
75 Equator Principle financial institutions, which between them finance a major portion of projects in
emerging markets. It also has implication for a host of other actors, institutions and processes which
invoke the IFC standards in the context of their activities. Particularly relevant for the extractive
industry is the fact that the standards were one of the key documents invoked by the UN Special
Representative to the Secretary General during the process of formulating the UN Guiding Principles
on Business and Human Rights.
The significance of this development has led to it being described as a ‘watershed moment in
international development history’.178 It is recognized across the investment community as ‘a
confirmation of the growing momentum behind the recognition of the requirement for FPIC’.179 The
policy applies to all new investments. Under it ‘clients are required to obtain FPIC for project design,
implementation and expected outcomes stages for the following categories of projects, those:
•
impacting on land or natural resources subject to traditional ownership or under customary use
•
requiring relocation of communities
•
significantly impacting on critical cultural heritage of indigenous peoples180
The IFC produced a set of Guidance Notes to provide advice to corporations in their implementation
of the Performance Standard. While the Notes are helpful in providing direction to corporations
unfamiliar with the concept of FPIC, they introduce some ambiguity in relation to when the requirement
should be triggered, what level of due diligence is required, and the relationship of FPIC processes
with indigenous peoples customary law and practices and self-governance processes.181 However,
it has been pointed out that in practice guiding principles cannot be used to justify limitations on the
role which indigenous peoples must play in defining and implementing FPIC processes.182
While the IFC is arguably the most significant actor among international financial institutions in the
context of the implications of its standards for financing of extractive sector projects, it is only one of
a number of these institutions which has affirmed the requirement for FPIC.
The 2008 Environmental and Social Policy of the European Bank for Reconstruction and Development
addresses the requirement for FPIC in a number of contexts, including in relation to the development
of natural resources.183 The policy recognizes that “the prior informed consent of affected Indigenous
Peoples is required for the project-related activities ... given the specific vulnerability of Indigenous
Peoples to the adverse impacts of such projects.”184 Similarly, the 2009 safeguard policy of the Asian
Development Bank’s affirms the requirement for FPIC. However, the definition of FPIC is somewhat
ambiguous and if interpreted narrowly is potentially inconsistent with the rights underpinning it.185
The Inter-American Development Bank does not explicitly require FPIC in its 2006 policy, which
was issued prior to the adoption of the UN Declaration. However, an interpretation of the policy in
a manner consistent with the regional and international framework of indigenous peoples’ rights
suggests that the consent requirement for large scale mining project is implicit in the policy.186 A
number of private investment institutions, in particular those targeting responsible investors have
also started to engage with the requirement for FPIC.187
The public sector arm of the World Bank is currently undergoing a review of its environmental and
social safeguard policies, including its Operational Policy 4.10 on indigenous peoples. The review
process has identified FPIC as one of the major themes to be addressed. In light of developments
within the international human rights framework following its last policy update, in particular the
adoption of the UN Declaration, and the response of the IFC and other international financial
institutions to these developments, it is difficult to see how the World Bank could justify delaying its
incorporation of FPIC into its policy in relation to indigenous peoples. In the context of discussions on
Making Free, Prior and Informed Consent a Reality
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