Comments on OPIC’s Application for Political Risk Insurance

Re: Comments on OPIC’s Application for Political Risk Insurance (OPIC-52)

Dear Mr. Bobbitt,

Thank you for the opportunity to comment on the Overseas Private Investment Corporation’s (OPIC) Application for Political Risk Insurance (OPIC-52). As civil society organizations and practitioners who advocate for accountability in development finance and support those who have been harmed by development projects, we have a deep interest in ensuring that OPIC’s projects adequately address risks to communities affected by these projects, which can undermine the sustainability of OPIC’s investments.

OPIC-52, in accordance with Title IV of the Foreign Assistance Act of 1961, aims to assist OPIC in determining whether applicants meet eligibility criteria for political risk insurance. Political risk insurance helps facilitate investment into potentially risky emerging markets. In order to facilitate investments that are mutually beneficial and increase opportunities for American businesses and workers while supporting economic development abroad, OPIC must ensure that political risk insurance clients have robust environmental and social practices, including human rights, environmental, and social due diligence and monitoring of projects as well as access to accountability and remedy for project-affected communities. OPIC must properly screen and identify potential clients that lack these practices. Although this form is just one part of OPIC’s assessment of potential clients and projects, it is important that the form be robust enough to properly identify, at an early stage, clients and projects that could result in negative impacts to communities affected by OPIC-supported activities. We accordingly provide the following recommendations for strengthening OPIC-52:

QUESTION 7: Project Description

Question 7 requests applicants to attach a copy of information memoranda, business plans, and other descriptions of the project that would be helpful to OPIC’s understanding of the project. The avoidance of harm to the U.S. economy, employment, and project-affected communities, and ultimately the sustainability of investments, depend on the proper planning, monitoring, and implementation of projects. These processes should be developed and conducted in consultation with project-affected communities, and impacts (both positive and negative) should be revisited and updated by the applicant in consultation with these communities. This should occur at each stage of implementation – construction, operation, rehabilitation, or decommissioning – and upon any changes in project design or context. Additionally, applicants should provide access to remedy for project-affected communities in case of negative impacts from projects. We recommend the following additions to Question 7:

• Please describe the project’s plans for environmental, social, and human rights due diligence processes that will be used to assess, avoid, mitigate, and monitor risks. Please attach any supporting documentation.
• Please describe the project’s plans for consultation with project-affected communities (including disadvantaged and vulnerable groups) at each stage of design and implementation. Please attach any supporting documentation.
• Please describe the project’s plans to provide access to accountability and remedy for negative project impacts on individuals and communities. Please attach any supporting documentation.

Investor Representations

The Investor Representations section of Form 52 currently includes several questions concerning the history of the investor(s), including past investigations under the Foreign Corrupt Practices Act of 1977 and past criminal convictions. This section should be expanded to further assess the soundness of investors. The Investor Representations section should require applicants to disclose if they are currently listed on any debarment lists at an International Financial Institution (IFI). Several IFIs have these lists including, the World Bank Group, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and the Inter-American Development Bank. This requirement would help OPIC identify applicants that have engaged in sanctionable conduct at these and other IFIs.

In addition to debarment lists, several IFIs, including OPIC, have Independent Accountability Mechanisms (IAMs) that receive complaints concerning IFI-financed activities and offer to convene the complainants (often from project-affected communities) and the IFI’s client to resolve the conflict, conduct an investigation to determine if the IFI’s environmental and social policies have been violated, or both. Similarly, adhering governments to the Organisation for Economic Co-operation and Development’s (OECD) Declaration on International Investment and Multinational Enterprises,1 including the United States, are required to establish a National Contact Point (NCP) to receive complaints (known as specific instances) against companies that are operating in or from their respective countries and that have allegedly violated the standards in the OECD Guidelines for Multinational Enterprises.2 NCPs are able to offer “good offices,” which can include conciliation or mediation, to the complainants and the company to facilitate resolution of the dispute.3

In order to minimize risks to OPIC and its investments, OPIC should require applicants to disclose prior, current, or pending involvement in or association with an IAM, NCP, or other community-related complaint. This can provide useful information on both the applicant’s practices, including environmental and social practices, and their willingness to rectify problems that may occur.

We accordingly suggest that the Investor Representations section add the following:

5. Is the Investor, any related party or affiliate of the Investor, or any supplier to the project:

1. currently listed on any publicly available debarment lists at an International Financial Institution, including the World Bank Group, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and the Inter-American Development Bank? Yes or No. If yes, please provide additional information.
2. currently or previously involved in or associated with a complaint at an Independent Accountability Mechanism of an International Financial Institution, including, but not limited to, the World Bank Group, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and the Inter-American Development Bank? Yes or No. If yes, please provide additional information on the nature and status of the complaint(s).
3. currently or previously involved in or associated with an OECD National Contact Point complaint? Yes or No. If yes, please provide additional information on the nature and status of the complaint(s).

Although applicants are given opportunities to provide some (not all) of this information later in the application process, and OPIC engages in environmental and social screening processes for proposed clients and projects, OPIC would benefit from an additional level of early screening to get an indication of projects that could have negative impacts. Additionally, applicants would be incentivized to start developing these processes sooner rather than later in the application process.

Thank you for considering our recommendations. We look forward to continued engagement with OPIC to ensure that the agency is a leader in environmental, social, and human rights accountability so that projects will result in benefits to the American people and communities around the world.

Sincerely,

Accountability Counsel – USA
Center for Biological Diversity – USA
Center for International Environmental Law (CIEL) – USA
Collectif Camerounais des Organisations des Droits de l’Homme et de la Démocratie (COCODHD) – Cameroon
Crude Accountability – USA
Friends of the Earth U.S. – USA
Friends with Environment in Development – Uganda
International Accountability Project (IAP) – USA
Observatoire d’Etudes et d’Appui à la Responsabilité Sociale et Environnementale (OEARSE) – Democratic Republic of the Congo
Ulu Foundation – USA

cc: The Honorable Ray Washburne, President and CEO, OPIC
Mr. Ryan Brennan, Vice President, Office of Investment Policy, OPIC

1 OECD. OECD Declaration on International Investment and Multinational Enterprises. 2011, http://www.oecd.org/daf/inv/investment- policy/oecddeclarationoninternationalinvestmentandmultinationalenterprises.htm.

2 The OECD Guidelines for Multinational Enterprises are a component of the OECD Declaration on International Investment and Multinational Enterprises.

3 OECD. “Specific Instances Mechanism of the OECD Guidelines for Multinational Enterprises.” 2017, http://mneguidelines.oecd.org/specificinstances.htm.