Indigenous communities in Panama succeed in holding World Bank to account

We are grateful to the Centre for International Environmental Law (CIEL ) for making their relevant press release available. We have used CIEL’s material before and are pleased to be able to do so again on account of their reliability. “CIEL uses the power of law to protect the environment, promote human rights, and ensure a just and sustainable society.” , July 2023

Key words: Panama; Indigenous communities; free, prior and informed consent (FPIC); World Bank; Fourth electrical transmission line; Ngäbe-Buglé comarca.

In a historic investigation published on 16 June [2023], the independent accountability mechanism of the World Bank’s International Finance Corporation (IFC), the Compliance Advisor Ombudsman (CAO), found that the IFC failed to act in accordance with its own sustainability policy when helping to structure and tender a public-private partnership for the financing, construction, and operation of Panama’s Fourth Electrical Transmission Line project.

The investigation concluded that, as a consequence, free, prior, and informed consent (FPIC)[1] processes have not been carried out properly with the Indigenous Peoples in the region who could be affected. The CAO’s findings also recognise that Indigenous communities located outside of the officially recognized territory of the Ngäbe-Buglé Comarca have been excluded from FPIC processes altogether.

The IFC has been advising Panama’s state-owned electrical transmission company, ETESA, during the initial phases of the Fourth Line project before construction begins. According to the CAO, the IFC failed to provide adequate guidance regarding the need to engage with stakeholders before ETESA began a preliminary FPIC process, despite known contextual risks that could make it difficult to carry out proper consultations with Indigenous communities in the region. Similarly, the IFC’s guidance about designing the primary FPIC process left significant gaps regarding how to ensure an inclusive and culturally appropriate FPIC process. The investigation found that the IFC’s reliance on ETESA’s assurances regarding the adequacy of its FPIC processes was a key factor that led to these shortcomings.

In response to the CAO’s findings and recommendations, the IFC Board of Directors approved the IFC’s Management Action Plan to address these shortcomings. The plan was approved after the IFC added commitments to advise ETESA on an ongoing basis about the measures required to ensure that all Indigenous communities that could be affected by the project are identified and properly included in mandatory FPIC processes. In addition, the IFC agreed to provide guidance regarding the project’s environmental and social impact assessment, including the expertise and resources needed to conduct proper FPIC processes. The IFC also agreed to take steps to ensure that contextual risks are considered in similar projects going forward.

The case will now enter a monitoring phase, during which the IFC will report every six months to the CAO and the IFC Board of Directors regarding the actions it has taken to fulfill the commitments made to address the shortcomings identified in the CAO’s investigation report.

Feliciano Santos, a representative of Indigenous Ngäbe, Buglé, and Campesino communities and coordinator of the Movement for the Defense of the Territories and Ecosystems of Bocas del Toro (MODETEAB), stated:

When we submitted our complaint about the Fourth Line project to the CAO in 2018, we hoped that the CAO would recognize the legitimacy of our concerns and emphasize the need for the IFC to take action to ensure that our rights as Indigenous Peoples are respected in this project.  Now, four years later, the CAO has done just that.

We welcome the CAO’s findings and the actions that the IFC has committed to take in response. We reiterate that the IFC’s role is particularly important in light of ETESA’s previous failures to carry out adequate consultations — let alone proper FPIC processes — with communities affected by its projects, including the Third Electrical Transmission Line. 

While the hard work of ensuring full respect for our rights in practice still lies ahead, the outcome of this investigation reinforces the centrality of FPIC for development actors and paves the way for the IFC to play a constructive role in assisting ETESA in carrying out robust FPIC processes with our Indigenous communities. This is essential not only to meet the IFC’s own standards, but also to safeguard our Indigenous communities, our cultural heritage, our lands, and our resources in the face of the Fourth Line project.

Sarah Dorman, an attorney with the Centre for International Environmental Law (CIEL), stated:

This is just the second case to be completed under the CAO’s new policy, which provides new guarantees for consulting with complainants about the commitments and actions that should be taken in response to CAO findings. This case shows that these accountability processes can work, especially when the concerns and insights of affected community members are taken seriously and incorporated in action plans at early, pre-construction stages of development projects — before irreparable harm might be done.

Just as importantly, the findings in this case represent a milestone for ensuring that Indigenous Peoples’ rights are respected in the context of projects supported by the IFC — not just in policy, but in practice. Through this investigation, the CAO confirmed that respect for Indigenous Peoples’ right to free, prior, and informed consent is a prerequisite for sustainable development. And it sets the critical precedent that development finance actors cannot shirk their responsibilities to Indigenous Peoples with impunity.

[1]  Note regarding FPIC: The right of Indigenous Peoples to free, prior, and informed consent allows Indigenous Peoples to give or withhold their consent for projects that would affect them or their territories. FPIC is now a well-established right: Not only is it enshrined in numerous regional and international instruments related to Indigenous Peoples, but it has also been incorporated into the environmental and social policies of development banks such as the IFC.