The World Bank's Inspection Panel: Background and an Update

Based on information provided by the Center for International Environmental Law (CIEL)

The World Bank Inspection Panel was created in 1993 to increase the accountability of World Bank lending and to provide local people with a forum of last resort to enforce their rights under Bank policies and loan conditions. Claims can be brought by peoples affected by a World Bank project if they can demonstrate that they have been harmed by Bank failures to adhere to its policies. For the most part, the Panel has been successful in bringing problems with project implementation to the attention of the Bank's Board of Directors. To date, fourteen claims have been brought to the Panel, with mixed success. The very first claim, that brought by a Nepalese group opposing the giant Arun Dam, resulted in the project's cancellation. No other claim, however, has succeeded so completely.

Although the Panel process has been politicized and undermined by the Bank and the Board of Directors, often simply the act of filing a claim has led to significant improvements at the project level. The Panel members, themselves, have been individuals of high integrity and have brought credibility to the Panel process and to the Bank generally. Their involvement has given hope to some of the claimants that finally someone from Bank headquarters would really listen to their concerns.

Unfortunately, significant elements of the Bank's management and Board of Directors are not committed to the kind of accountability and oversight that the Panel brings to the institution. Management has continually tried to circumvent the Panel process by developing secret 'action plans' with the Borrower country whenever a claim is filed. By the time the Panel is ready to seek authority from the Board to investigate a claim, management and Borrower can oppose the investigation on the grounds that the action plan is sufficient. For its part, the Board of Directors has politicized virtually every claim, obstructing full investigations in most of them.

The controversy created by the Board's treatment of Inspection Panel claims forced the Bank to initiate an unprecedented public review of the body, which included a session in March at which a special Board Working Group heard testimony from claimants, NGO representatives, and other affected peoples. Unfortunately, what the witnesses were commenting on was a plan for reforms that in many ways actually would have weakened the Panel.

Apparently as a result of the interventions in March, the reform plan approved at the semi-annual meeting of the World Bank in April was not as destructive as the original proposal. But NGOs still feel that by trying to appease large borrowing governments such as Brazil's and India's, which see the Inspection Panel as an infringement on their sovereignty, the Inspection Panel emerged weaker than before.

Under the original Board Resolution creating the Panel, the Panel must receive authorization from the Board before it can conduct any full investigation. Thus, after conducting a preliminary review of a new claim, the Panel recommends to the Board whether a full investigation is warranted. Only once has the Board approved a full investigation. Every other time, the Board has looked for a political compromise to save the borrowing government from embarrassment. The resulting politicization of the Panel process has crippled the ability to conduct full investigations.

The new policy adopted in April aims to eliminate the confrontation between the Panel and the borrowing government at the Board level by making a "gentleman's agreement" that if the Panel recommends a claim in the future with only a preliminary review of the technical eligibility, then the Board will approve the investigation. But the "gentlemen's agreement" is not enforceable; there is no real reason to believe it will be maintained. The new policy also prohibits the Panel from doing preliminary in-country investigations of any depth. It also restricts the Panel's right to comment on a borrowing government's responsibility for problems with a project.

The better option would be to modify the way the Panel works by eliminating the Board's authority to approve an investigation altogether. This would eliminate the opportunity for politicization of the Panel process until after a full investigation is conducted and report made available.

The claim filed by Brazilian groups regarding the Cedula da Terra program was the third taken to the World Bank's Inspection Panel from Brazil, and one of the first considered since the formal adoption of the new operating procedures in April. The Brazilian government was one of the leading forces calling for the changes in the way claims are handled. The two previous claims were:

PLANAFLORO

The second major Inspection Panel claim was filed on behalf of 25 organizations representing indigenous peoples, traditional forest users, and environmental NGOs in the western Brazilian Amazon. The claim challenged the $167 million Planafloro project, which was designed to allow some extension of roads into the Amazon region, while also protecting the uses and homelands of traditional forest users (i.e. rubber tappers and indigenous peoples). The claim alleged that the Bank failed to enforce its policies and loan conditions in its agreement with Brazil and the state of Rondonia. As a result, critical elements of the Planafloro project were being neglected -- most significantly, the demarcation and protection of lands for indigenous peoples and rubber tappers. The Bank's Executive Directors rejected the claim in January 1996. Nonetheless, the claim led to increased Bank supervision of the project and a commitment to allow the Panel to review project implementation in six months. More importantly, some immediate steps were taken to protect thousands of hectares of Amazonian rainforest either as rubber tapper reserves or indigenous homelands.

In January 1997, the Inspection Panel was asked to review the 18 month progress on Management's Action Plan and in April 1997 submitted their report to the Board.. The Panel's report found that deforestation continues at an alarmingly rate, nearly 450,000 hectares annually, and emphasized the need for stronger mechanisms to protect the borders of protected areas. The report also found little progress in the implementation of the promised health program for the indigenous people.

ITAPARICA

In March 1997, 121 community leaders and a Brazilian organization called Polo Sindical do Submedio Sao Francisco filed an inspection panel claim on behalf of local communities who have been adversely affected by the Itaparica Resettlement and Irrigation Project in Brazil. The Itaparica Resettlement and Irrigation Project, which sought to provide compensation for the irreversible cultural, environmental, economic, and social losses caused by involuntary resettlement due to the construction of the Itaparica dam, has instead worsened the living conditions of the resettled communities. Almost ten years after the population's involuntary resettlement, only 35% of the irrigation systems have been installed, and of the 35% in operation many fail to function properly. Therefore, some of the communities that have already been forced to resettle are unable to harvest crops due to the absence of irrigation systems. The resulting dislocation and increased poverty has also led to increased crime and unemployment rates and face excessive cases of alcoholism.

On June 24, 1997, the Inspection Panel recommended a full investigation of the Itaparica claim to the Board of Executive Directors. After a heated and highly politicized discussion and a rare vote by the Board, the Board narrowly rejected the Panel's recommendation for an investigation. Instead, they accepted the Government of Brazil's word that it would implement a $290 million Action Plan. The Panel was not allowed to evaluate the effectiveness of the Action Plan, nor were affected people allowed to participate in its development. Despite the setback at the Board level, the claimants believe the Panel's preliminary investigation vindicated their allegations and this process has mobilized broader and more effective campaigns in the project area.