Narrowing the Accountability Gap: Toward a New Foreign Investor Accountability Mechanism

• Date: 01 August 2009

8-2009 ENVIRONMENTAL LAW AND POLICY ANNUAL REVIEW 39 ELR 10803

H O N O R A B L E M E N T I O N

Narrowing the Accountability Gap:

Toward a New Foreign Investor

Accountability Mechanism

by Natalie L. Bridgeman and David B. Hunter

Natalie L. Bridgeman is an Independent Consulting Attorney and Director of Accountability Counsel in San Francisco, California.

David B. Hunter is an Associate Professor of Law and Director of the Program on International and

Comparative Environmental Law at the American University Washington College of Law.

I. Introduction

is Article addresses the “accountability gap”1 in foreign

investment projects and proposes the creation of a Foreign

Investor Accountability Mechanism (the Mecha nism) to

ensure t hat multinational enterprises (MNEs) may be held

accountable to the social and environmental standards to

which they have agreed.

MNEs have adopted an ever-increasing number of stan-

dards, guidelines, principles, norms, and best practices (here-

inafter standards and norms)2 to address the environmental

and social impacts of their investments. However, a number

of barriers often prevent implementation of those standards

and norms in the countries where these investments are

located (host countries). Barriers include weak host country

regulatory authority capacity, lack of politica l will, lack of

leverage over violators, and corruption. In addition, invest-

ment treaties, host government agreements, foreign policy

pressure from home country governments, and jurisdictional

challenges may further weaken t he ability of host countries

to enforce laws, norms and standards. In home countries

1. We use the term “accountability gap” to describe the policy space between

the many international standards and norms and the lack of corresponding

mechanisms to require adherence to those norms. Consult full article for a

more detailed account of the current shortcomings and weaknesses of existing

forums and procedures. e authors also discuss some of the existing enforce-

ment mechanisms, such as the World Bank Inspection Panel and the Inter-

national Finance Corporation’s (IFC) Compliance Advisor/Ombudsman, and

their aws.

2. Well-known examples of these standards and norms include the Organization

for Economic Cooperation and Development’s (OECD) Guidelines on Mul-

tinational Enterprises, the United Nations Global Compact, the World Com-

mission on Dams’ Principles and Recommendations, the IFC Environmental

and Social Standards, the Equator Principles, the Roundtable on Sustainable

Palm Oil, Rio Tinto’s corporate sustainable development policies and literally

dozens of other industry- or company-specic standards and norms.

(generally speaking, the OECD countries where M NEs

are headquartered), a similar gap exists, with limited rem-

edies available for project-aected people and, where avail-

able, challenges in enforcement. us, MNEs operate in a

“norm-rich” environment that lacks eect ive governance

struc tures for monitoring or en forcing compliance with

their commitments.

Certain international institutions have developed

accountability mechanisms, in part because of an increas-

ing recognition that locally-aected communities have little

eective access to justice under international law. By allow-

ing locally-aected people to bring claims, these mechanisms

have expanded citizen access to some international decision-

makers aecting their lives. In some contexts, use of the

mechanisms has improved lives and has served to strengthen

the accountability of MNEs. To an extent, the existence

of t hese mechanisms sets a precedent for the creation of a

broader citizen-based mechanism, such as the one promoted

here. Unfortunately, the contexts in which these mechanisms

are eective tend to be narrow, either because the scope of

the mechanism’s jurisdiction is itself narrow or because the

remedies available through the mechanism are inadequate to

force meaningf ul change on the ground. While these insti-

tutions are important, they do not suciently narrow t he

MNE accountability gap.

A new mechanism is needed to close t he accountability gap

between the aspirational quality of these standards and norms

and their implementation. While support for a new mecha-

nism is mounting, few proposals have discussed in detail

how a new, community-driven mechanism would function.

is Article proposes a new Foreign Investor Accountability

Mechanism to narrow the accountability gap by providing

communities aected by foreign investment projects with

an avenue for voicing their concerns and for holding MNEs

accountable for the various promises that they make during

is Article is excerpted from 20 G. I’ E. L. R. 187

(2008) and is reprinted with permission.

Copyright © 2009 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.