EcoLur
S.O.S. Amulsar Initiative considers the decision of the PCM of the European Bank for Reconstruction and Development on the Amulsar project implemented by Lydian International Company to be non-grounded. The rejection of the РСМ EBRD is based on the fact that the ban directs funds for mine development, while the complaint deals with the probable consequences of the mining. The letter of the initiative says,
“Dear representatives of the EBRD Project Complaint Mechanism Office
We, the representatives of NGOs and civic initiatives in Armenia (S.O.S Amulsar initiative group), submitted a Complaint to the Project complain mechanism office of the European Bank for Reconstruction and Development (РСМ EBRD) on the EBRD actions policy on Amoulsar open pit mining in Armenia implemented by Lydian International LLC.
We feel compelled to express our concern regarding the eligibility decision in the case, which is inconsistent with the PCM’s Rules of Procedures (RoP) and demonstrates a worrying disconnect with complainants. More specifically, the PCM relied on an improper argument on the merits to find that the complaints were not eligible for a compliance review. To avoid a miscarriage of justice, we would urge the EBRD Board to direct that the PCM re-open the complaint and reconsider its decision.
The decision unites two different complaints on Amoulsar: the first was submitted by S.O.S Amoulsar initiative (РСМ registration - 29.07.2014), while the second complaint was submitted by Gndevaz villagers (РСМ registration - 29.10.2014). The complaints are different in their essence. The complaint submitted by S.O.S Amoulsar initiative refers to global risks for the environment in Armenia, it lists the violations of the national and international environmental legislation. This complaint is grounded with expert opinions provided in the course of public monitoring of Amoulsar project for 2011-2014.
The complains of Gndevaz villagers refers to the certain risks for the village, where Lydian International Company is going to construct a heap leach facility and where toxic wastes will be collected.
The PCM Eligibility Assessors ignored the fact while the complaint was being assessed, Lydian International Company started the process of receiving the environmental expertise opinion from Nature Protection Ministry on the EIA of Amoulsar open pit mining and the construction of a heap leach facility. During the expertise violations of the national violations and the provisions of the Aarhus Convention on public participation in decision-making process and provision of information on environmental matters were recorded, announcements on exercising pressure and cheating were made, attempts were made to exercise pressure on activists, limitation of public participations in discussions with the help of the police, protest demonstrations were held in Gndevaz and Yerevan. All this was published in the mass media.
In this connection S.O.S Amoulsar initiative sent additional materials and video recordings on the violations to the РСМ EBRD. The letter of the initiative dated on 19.11.2014 says: “For more details of the incidents occurred during the public hearings, we would like to offer the videos and scripts made on 25 August - 30 October:
http://ecolur.org/en/news/amulsar/attempt-to-legalize-amulsar-project-failed-photo/6733/,
http://ecolur.org/en/news/amulsar/statement-of-the-civil-initiative-sos-amulsar/6731/,
http://ecolur.org/en/news/amulsar/minister-karen-tchshmarityan-mining-and-amulsar-project/6635/,
http://ecolur.org/en/news/amulsar/environmental-expertise-must-turn-down-amulsar-project/6620/,
http://ecolur.org/en/news/amulsar/amulsar-passions-transferred-to-yerevan/6530/,
http://ecolur.org/en/news/amulsar/why-did-gndevaz-villagers-get-angry/6526/,
http://ecolur.org/en/news/amulsar/scandal-at-public-hearings-of-amulsar-project/6520/”.
Nevertheless, РСМ ЕБРР assessment doesn’t say a word about these processes, taking into consideration that the assessors refused to visit the spot of the project and complaints and pointed they relied on the information provided by the EBRD management and Lydian.
We consider worrying such position of the assessors on the environmental expertise of Amoulsar project, though the expertise opinion is the main permitting document for Amoulsar project implementation and no action is possible without this document.
More specifically, the PCM relied on an improper argument on the merits to find that the complaints were not eligible for a compliance review. To avoid a miscarriage of justice, we would urge the EBRD Board to direct that the PCM re-open the complaint and reconsider its decision.
The PCM’s new RoP came into force on November 7, 2014, and should be apply to all complaints registered on or after that date. As the second complaint regarding EBRD’s investment in Lydian International was registered on November 7, 2014, one, if not both, of the complaints should be handled using the RoP currently in force.
Paragraph 24 of the RoP state that the Eligibility Assessment is “a preliminary process,” in which the “Eligibility Assessors do not judge the merits of the allegations in the Complaint and do not make a judgment regarding the truthfulness or correctness of the Complaint.”
Instead, the Eligibility Assessment should determine whether the criteria in Paragraphs 25-28 have been met. For a Problem-Solving Initiative (PSI) that includes that the complainants are located in the impacted area and raised issues covered by an EBRD Policy.[1] The Eligibility Assessors will then determine whether a PSI would assist in resolving the dispute.[2] To be eligible for a Compliance Review (CR), the complaint must be filed within 24 months after the date on which the Bank ceased to participate in the Project and must relate to a Relevant EBRD Policy.[3] Further, the Eligibility Assessors must determine that the complaint relates to actions or inactions that are the responsibility of the Bank, more than a minor technical violation of a Relevant EBRD Policy, or a failure of the Bank to monitor Client commitments pursuant to a Relevant EBRD Policy.[4]
The complaints relate to the environmental and social impacts of Lydian International’s proposed gold mining activities at Amulsar in Armenia. As described in the Eligibility Assessment Report (EAR), both complaints raise concerns about the adequacy of the environmental and social assessment of the project, which would relate to the Bank’s failure to ensure the implementation of Performance Requirement 1.
It appears to be undisputed that EBRD is still invested in Lydian. If EBRD were not invested in Lydian, then the complaints would not have been registered. Paragraph 12 of the RoP states that in order for a complaint to be registered, it must “relate to a Project where the Bank has provided and not—and not withdrawn—a clear indication that it is interested in financing the Project,” in the case of PSI, or “relate to a Project that has either been approved for financing by the Board or by the body which has been delegated authority to give approval to the financing of such a Project,” in the case of CR.
So the dispute is not whether EBRD is invested in Lydian but rather how to define the scope of that project. The EAR determines that Project EBRD is financing is only the exploration phase of Lydian’s mine. Because the complainants are concerned with the environmental and social impacts of the eventual mine and not the impacts of the exploration phase, the PCM finds that the complaint does not relate to the Project and, therefore, is ineligible. This argument is flawed for the reasons set forth below.
Defining a project’s boundaries, scope, and impacts is one of the most commonly contested issues in complaints to the mechanisms associated with development finance institutions (DFIs).[5] In the environmental assessment laws of some jurisdictions, this issue is known as segmentation.[6] The concern is that the Banks, at times, improperly define the scope of projects in order to avoid responsibility for the full set of environmental and social impacts. That is the concern here. The critical question in the complaints is whether the EBRD has properly defined the scope of this project. That the complainants did not explicitly argue this in their complaint should not prevent the PCM from recognizing it. Complainants should not be required to make sophisticated legal arguments or obtain legal counsel in order to file a complaint to a non-judicial grievance mechanism (NJGM).
There are very good arguments in favor of complainants’ interpretation. In a similar case, the International Finance Corporation’s Compliance Advisor Ombudsman[7] found that the categorization of a project, and, consequently, the scope of the environmental and social assessment, should be determined based on the magnitude of the impacts of the proposed mine and the likelihood that the mine would move into development, combined with the potential impacts of the pre-development stage.[8] This is especially so when the Bank takes an equity investment in a project. Money is fungible. When a company receives funds for one activity, it can devote or re-direct its own funding to another activity. Thus a subscription agreement limiting the use of EBRD’s investment to one set of activities is not dispositive of whether the additional investment has allowed the company to undertake activities that it would otherwise not have been able to conduct, with corresponding impacts.
But regardless of whether the argument that the project should have assessed the impacts of the eventual mine is persuasive, it is undeniably an argument on the merits. And the PCM’s RoP prevent them from making decisions on the merits of the allegations in the complaint. A full compliance review would need to be undertaken in order to come to a decision about whether EBRD properly defined the scope of the project in this case. Thus, it was an inappropriate to make that decision as part of an Eligibility Assessment, and thereby find the complaints ineligible. As the EAR does not include any other information that would demonstrate that the complaint has not met the CR requirements in Paragraphs 25-28, the complaints should have been found eligible for a compliance review, at a minimum.
In addition to the improper decision on eligibility, the EAR also displays a worrying disconnect from complainants. Complainants to non-judicial grievance mechanisms, like the PCM, by design will generally be local community members. They will generally not be lawyers. The burden is on DFIs and their mechanisms to understand their concerns. In that vein, the EAR repeatedly mentions disapprovingly that the complainants have failed to clearly state which function they are seeking from the PCM. However, Paragraph 18 of the RoP state that after registration, the PCM will verify with the complainants whether they are seeking PSI, CR, or both. If it is unclear to the PCM which function the complainants are seeking, that is the PCM’s failure, not the complainants’. Similarly, for those who are intimately familiar with DFIs and their policies, it would seem implausible that the project affected zone would include the host country’s entire territory as claimed by complainants, but taking issue with that argument misses the larger point that the complainants are concerned with the appropriate definition of the project’s boundaries. Again the burden is on the PCM to understand the complainants’ concerns, not take them to task for the deficiencies in their legal analysis.”
[1] Paragraph 24(a).
[2] Paragraph 26.
[3] Paragraph 24(b).
[4] Paragraph 27.
[5] http://ewebapps.worldbank.org/apps/ip/Documents/IPN_SpringMeetingsAreaofInfluence_session_Apr2013.pdf
[6] “Another important aspect of the scope of the federal action to be assessed is the issue of ‘segmentation’ -- the division of a project, program or decision into component parts or temporal ‘phases.’ Segmentation was frequently employed in the context of federal highway funding, where the [federal highway administration] would release funds for a small segment of a federal highway and consider only that segment, rather than the entire highway, in determining the need for an EIS. Such divisions of an action have, for the most part, been disallowed by the federal courts, both in highway and other contexts as well… Where an action, or part of an action, is hypothetical, or where future stages of a project are indefinite, [the environmental assessment law] does not apply. Sierra Club I, however, makes it very clear that the federal courts will view with skepticism attempts to characterize planned and definite future stages of an action as ‘indefinite’ in an effort to avoid a determination of significance and the consequential obligation to prepare an EIS.”
[7] The CAO has also received a complaint regarding the IFC’s investment in Lydian International.
[8] http://www.cao-ombudsman.org/cases/document-links/documents/CAOInvestigation-IFCInvestmentinQuellaveco_08-29-14.pdf
March 06, 2015 at 17:45