Global Project Finance, Human Rights and Sustainable Development by Sheldon Leader & David Ong

Author:Sheldon Leader & David Ong
Language: eng
Format: mobi, pdf
Tags: Politics & Social Sciences, Politics & Government, Economics, Business & Investing, Public Affairs & Policy, Foreign & International Law, Political Science, Economic Policy & Development, Economic Policy, Public Policy, Law, Social Sciences
ISBN: 9780521762601
Publisher: Cambridge University Press
Published: 2011-09-28T18:30:00+00:00

Cambridge Books Online

http://ebooks.cambridge.org/

Global Project Finance, Human Rights and Sustainable Development

Edited by Sheldon Leader, David Ong

Book DOI: http://dx.doi.org/10.1017/CBO9780511974311

Online ISBN: 9780511974311

Hardback ISBN: 9780521762601

Chapter

10 - Irreparable damage, project finance and access to remedies by thi

rd parties pp. 278-316

Chapter DOI: http://dx.doi.org/10.1017/CBO9780511974311.011

Cambridge University Press

10

Irreparable damage, project finance and access to

remedies by third parties

j u d i t h s c h önsteiner

Introduction

Imagine an investment project in the extractive sector, such as an oil

pipeline, during the construction phase. Assume as well that the invest-

ors, usually a consortium of companies, have opted for project finance

(PF) and have made available considerable amounts of money for the

overall project, including exploration and construction, that will later

produce a revenue stream coming from oil, gas or minerals being

marketed. Until the extraction begins, the investors run a heightened

commercial risk: they have advanced their money, but cannot yet begin

to recover return. Furthermore, they know that lenders most probably

have, albeit limited, recourse to the sponsors’ assets to service the loans,

until the revenue phase begins. Sponsors therefore anxiously await the

flow of crude oil or the start of mining, fearing any prior surge in costs,

including those due to unexpected measures to protect human rights or

the environment. Time is money, especially when investment costs have

yet to be recovered. In that sense, projects that are quickly implemented

tend to heighten the risk of worker accidents, death threats for com-

munity members resisting economic activity, spills and damages to the

environment and irreversible health damages (see also Chapter 5 by

Sheldon Leader). At the same time, the host state, in this situation,

may be eager to create or maintain its reputation for an investor-friendly

environment, and be more lenient on the implementation of social

standards.

I am grateful to Sheldon Leader for his challenges to this argument throughout the process of drafting. Our discussions taught me a lot. I also thank Rasmiya Kazimova and Joo-Young

Lee for their helpful comments, and David Ong and Martin Barr for their fine editing. All

remaining errors are of course my own.

278

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i r r e p a r a b l e d a m a g e , p f a n d t h i r d - p a r t y r e m e d i e s 279

Imagine as well those individuals and communities living in proximity to

the project. While these projects do not usually require their labour, as

foreign specialists or workers are brought in, the people whose houses, fields,

or fresh water sources are close to the project’s installations fear that their

rights to property, health, food etc. may be violated. Environmental and

social impact assessment (ESIA) as well as human rights impact assessment

(HRIA) (see Chapter 7 by Tamara Wiher) should prevent most of the

damage from happening, and lenders in PF settings do usually require

such assessments. What is more, the International Finance Corporation

(IFC) Policy on Environmental and Social Sustainability requires its bor-

rowers to consider the implementation of risk avoidance measures, ‘when-

ever technically and financially feasible’. This provision constitutes a

conditional preventive approach.

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