Balancing immunity with accountability

By Christopher Stephens

The Asian Development Bank has a vital role – to promote economic development and prosperity in the Asia-Pacific. To do it well, ADB must be able to operate independently, while being accountable to the countries and communities that it serves. This is especially important in relation to any non-compliance with ADB policies.

In short, it must balance the need for both immunity and accountability.

The Agreement Establishing the ADB is a treaty signed by each of the 67 countries that joined the Bank. One of the conditions for membership is that each member country confers immunities on the Bank and its personnel, which exempt them from most processes in local courts and agencies.

It provides that, “[t]he Bank shall enjoy immunity from every form of legal process.” In addition, Bank personnel are “immune from legal process with respect to acts performed by them in their official capacity.”

These immunities are common to international organizations and have long been accepted for a wide range of entities, including the World Bank, the United Nations, the World Health Organization.  Immunities are considered necessary for these organizations to fulfill their public service roles and function independently and free from the unilateral actions of a member country.

Immunities are an implicit recognition of the fact that these organizations are a collective of member countries pursuing beneficent public actions on a multilateral basis.

But immunity does not mean that people adversely affected by ADB-assisted projects are without recourse or that their rights and concerns are ignored. Quite the contrary.

It’s important to remember that ADB does not actually own projects. Instead, ADB provides financial support and technical assistance to countries for projects that are owned and undertaken by ministries or agencies, or by private companies in those countries.

In accepting ADB support, borrowers agree to comply with the national laws of that country and additionally with the many ADB policies, rules and procedures that cover project design, planning, implementation and operation.

The financial resources that ADB invests in projects come from capital contributed by member countries, funds raised from the sale of ADB’s public bonds, and income from interest payments by borrowing countries.

Therefore, ADB has a special responsibility to ensure these funds are managed and loaned responsibly. To safeguard the funds and the Bank’s operations, ADB has a Board comprised of 24 Directors and Alternative Directors, including one from the Philippines. 

Unlike boards of private companies who may meet quarterly or semi-annually, the role of an ADB director is a fulltime job. They live in Manila and work at the Bank.

ADB Board members are responsible for determining ADB policies – the strategies and principles of action, operations and conduct of the Bank – including those on the environment, social safeguards, procurement, anticorruption and accountability, among many others. They also perform oversight roles by reviewing and approving each project undertaken by the Bank, and directly overseeing assessments of project effectiveness as well as complaints and allegations that Bank policies were not followed.

An important example is the Bank’s Accountability Mechanism Policy. This policy provides a forum for people affected by ADB-assisted projects to seek solutions to grievances and to report alleged violations by ADB of its operational policies and procedures.

The policy requires investigation, validation and remediation of alleged violations. The investigations are conducted by an independent panel of experts who are not ADB staff, and who report directly to the Board, rather than to ADB management.

One example is the Visayas Base-Load Power Development Project to build and operate a 200-megawatt electricity power plant in Naga City, Cebu.

The plant was designed to alleviate power shortages and support sustainable growth in the Visayas region by increasing the availability of reliable, cheaper electricity to meet growing consumer demand. Financial closing occurred in 2010.

In 2011, a group of affected people near the plant site filed a complaint with ADB’s independent compliance review panel under the Accountability Mechanism Policy, claiming that the project would violate ADB’s environmental standards and policies on clean energy and cause harm to them. Within a month, the independent panel had reviewed and assessed the complaint and declared it eligible for consideration by ADB’s Board.

Less than three weeks later, the Board authorized and directed the independent panel to undertake a full-blown compliance review. Within eight months, the panel had completed a thorough investigation, including interviews of staff, affected people and groups, site visits, and technical reviews and assessments.

The panel’s report found that ADB had failed to adhere to required environmental, social and public consultation processes and assessments during project planning and implementation, and did not satisfactorily take into account community concerns about the plant’s adverse impact. The panel recommended remedial steps, which ADB’s Board approved and directed ADB management to implement.

ADB’s accountability policy is just one of a range of processes available to address allegations and grievances against the Bank and its personnel by stakeholders. There are other processes – all published and publicly available – for people to raise allegations of corruption, procurement complaints and other concerns or grievances.

And, of course, people and groups remain free to pursue all available recourse to project owners, developers and sponsors under national and local laws.

ADB currently administers more than 800 projects in more than 40 countries. Some of these projects are immensely challenging and complex, taking place in some of the world’s most difficult technical, geographical, political and legal environments. These projects are considered too risky and therefore unsuitable for commercial banks or private sector investors.

These challenges also mean that the risk of error is greater. Bank staff are the most technically skilled and experienced people available, and have a genuine passion for development work. But the combination of project complexity and the fact that staff and contractors are human and therefore fallible, means that mistakes sometimes happen.

Rigorous processes for identifying, investigating and remediating these errors – thoroughly, competently and transparently – are compelled by the Bank’s fiduciary obligations and the policies required by its Board. These processes are among the healthiest and beneficial to the Bank as they ensure the efficient and effective pursuit of its development objectives. 

The systems provide recourse and remedy to affected people and accountability to communities and shareholders. They also deliver essential lessons that help the Bank to learn from its errors, and to improve the efficiency and efficacy of future projects.

Since its founding half a century ago, ADB has invested almost $270 billion in the region’s development. Ensuring that its assistance leads to tangible gains for Asia’s poorest and most vulnerable has always been ADB’s highest priority.

ADB and its 3,000 dedicated staff – 2,000 of whom are Filipino nationals – are committed to pursue this mission with competence, diligence and accountability.

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(Christopher Stephens is General Counsel of the Asian Development Bank.)

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