Response to EDC - September 17, 2007

Rosemarie Boyle
Corporate Communications and External Relations
Export Development Canada
151 O’Connor St.
Ottawa, ON
K1A 1K3

September 17, 2007

Dear Ms. Boyle:

Thank you for your letter of July 16 regarding the Canadian Network on Corporate Accountability’s publication, Dirty Business, Dirty Practices: How the Federal Government Supports Canadian Mining, Oil and Gas Companies Abroad.  You identify two errors in the report regarding EDC.  The Halifax Initiative makes every effort to ensure the factual accuracy of both its publications and those to which it contributes.  We sincerely appreciate your correspondence in this regard.  

The first error that you identify concerns consultations with communities affected by EDC-supported projects. The Dirty Business, Dirty Practices publication states that EDC does not require that its clients consult with communities affected by proposed investments.     

You state that this is inaccurate and refer to EDC’s Environmental Review Directive:

EDC expects that for each Category A project public consultations with affected parties, if any, will be held in the host country, and that the results of these consultations will have been taken into account in the environmental assessment of the project.  EDC’s expectations regarding the nature, scope and extent of the public consultation will take into account the political, legal and cultural context of the host country (paragraph 9).

You assert that the Environmental Review Directive establishes a requirement that EDC clients consult with affected communities.  It remains our position that there is a substantial difference between a stated expectation that consultations be undertaken and a requirement that they be carried out.  This is also the view of the Auditor General who, in her 2004 report, stated that “[p]ublic consultation under the Directive is discretionary. The Directive states that EDC "expects," rather than requires, public consultation on Category A projects.”

Are consultations with affected parties a condition of support from EDC?  Does EDC have guidelines for how the results of these consultations are to be “taken into account” in the environmental assessment?  Does EDC have guidelines regarding how the nature, scope and extent of the public consultation are influenced by the political, legal and cultural context of the host country?  Is any information on the specific application of EDC’s  “expectation of consultation” publicly accessible?

In your letter, you further explain that EDC benchmarks its review of the environmental and social impacts of projects against international standards, notably World Bank standards, which contain requirements for community consultations.  This information is provided in support of the assertion that EDC requires that clients undertake community consultations.

Does this mean that EDC requires that project proponents comply with World Bank standards or are these standards merely used as a point of reference?  What exactly does “benchmark” mean?

Your statement regarding the use of World Bank standards is at odds with the Environmental Review Directive:

[i]n conducting environmental reviews, EDC will benchmark projects against one or more relevant environmental standards and guidelines published by the World Bank Group, the European Bank for Reconstruction and Development, the Asian Development Bank, the African Development Bank and the Inter-American Development Bank, any applicable safeguard policies published by the World Bank Group or any higher international recognized environmental standards such as European Community standards (paragraph 21).

Are we to understand, based on your letter of July 16, that EDC consistently applies World Bank standards when assessing community consultations, as opposed to choosing from among those standards listed in the Directive, on an ad hoc basis?  Does this mean that EDC assesses community consultation processes against the International Finance Corporation’s Policy on Social and Environmental Sustainability and the Performance Standards?  In other words, does EDC assure itself that the client’s community engagement is one that involves free, prior and informed consultation and enables the informed participation of the affected communities, leading to broad community support for the project within the affected communities?  If so, how does EDC define “broad community support”?

The second inaccuracy that you identify concerns EDC’s analysis of human rights impacts.  The Dirty Business, Dirty Practices document argues that in its treatment of human rights, EDC focuses on how human rights violations could adversely affect a client company’s investment.  You explain that in the first instance, EDC analyzes human rights impacts from the perspective of how a project might affect the local human rights situation. 

Based on the limited information that is available regarding EDC’s treatment of human rights, it has been our understanding that EDC examines the issue of human rights in the context of political risk.  We have understood that EDC assesses whether the human rights context in which a project is developed could adversely impact on the successful implementation of the project.  Human rights assessments have been described by EDC staff as useful to “highlight the eventuality of potential political risk.”  The EDC website explains that “[h]uman rights violations are typically a symptom of systematic country-level or localized political risk” and that “human rights violation will indicate an authoritarian regime with serious problems with respect to due process and the rule of law.”  These statements indicate an approach to human rights that is focused on political risk, meaning one that is preoccupied with the risk that a local political regime may pose to a foreign investment. 

Following this description, the EDC website explains that, “EDC is also interested in building a capacity to analyze how potential projects can impact upon and alter the social and human rights environment in developing countries” (emphasis added).

Based on this information, it comes as a welcome surprise to learn that EDC’s priority in the area of human rights is in analyzing the impact of proposed projects on local human rights.  However, EDC does not appear to have an explicit  human rights policy regarding client operations and there is no mention of human rights in the EDC Environmental Review Directive.  How does EDC assess the human rights impacts of a proposed project?  Against which human rights standards does EDC assess projects?  How do human rights assessments influence project design and /or implementation?  Does EDC publish its human rights impact assessments or are they considered to contain “commercially confidential” information? 

The EDC web site explains that “[m]onitoring human rights is an ongoing function at EDC.”  Does EDC monitor projects in order to assess whether the human rights impacts that are experienced coincide with the human rights impact assessment?  Does EDC publish the results of its human rights monitoring activities or are they considered to contain “commercially confidential” information?

Thank you for your feedback on the CNCA document.  The document will be modified, as necessary, to reflect any information that you provide.  Both your letter and this response have been posted on the Halifax Initiative web site.     

Yours truly,

Karyn Keenan
Program Officer