Consent versus Consultation & the IFC

Souce: PinkMoose

Free, prior and informed consent has a sister acronym: one that up until now, surfaced more regularly in documents produced by industry (and governments) – free, prior, and informed consultation. By and large, if you are looking at enforceable standards (as opposed to soft standards, such as UN Declarations) consultation is the focus of FPIC, rather than consent.

This distinction has long been the ‘thorn in the side’ of this right in the view of Indigenous Peoples and their advocates. However, this trend is changing, with the International Finance Corporation (the lending arm of the World Bank) releasing its new Performance Standards, which will come into effect in January 2012.

The updated Performance Standards were a result of an 18 month consultation with affected stakeholders. As a result, free, prior and informed consent is now enshrined in Performance Standard 7.

Updated Performance Standard 7 – IFC

At the moment, where and how FPIC will be operationalised under the IFC standards is the burning question. The accompanying Guidance Notes are yet to be published – although they were due for publication at the end of October 2011*.

For more commentary, see: Foaley Hoag

* Anyone been able to track them down?

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Free, Prior and Informed Consent and the Extractive Industry

Protesting in the Highway, John Donaghy

Since becoming an international standard in non-binding law, free, prior, and informed consent (FPIC) has been increasingly recognised by major actors in the extractive industry, such as Rio Tinto, Anglo American Alcan, and Xstrata. Despite this, the industry as a whole has not endorsed FPIC and has publicly stated reservations in regards to the principle and its implementation. However, FPIC is arguably a necessary component of the CSR agenda for the extractive industry, as it acts as both a fundamental tool of good engagement practice and aides to mitigate the social risk imbedded in projects that neighbor Indigenous Peoples.

What is FPIC?

FPIC is the principle that Indigenous Peoples’ have the right grant or withhold their FPIC in relation to the development of extractive projects that will affect their lands and livelihood. Specifically:

  • ‘free’ = Indigenous Peoples’ are not coerced
  • ‘prior’ = consent is sought before the initiation of development activities.
  • ‘informed’ =  Indigenous Peoples’ are provided with full information in regards to the project, including negative impacts, in a manner that they comprehend and understand.

Importantly, the FPIC process differs from consultation, in that it places Indigenous Peoples’ in a position of authority over the project’s development. In contrast, consultation only requires that companies engage with communities, and address their concerns. Increasingly, the principle of FPIC is being implemented by companies as the risk of not implementing this process is seen to be too great.

Why do it?

Put simply, the FPIC process is becoming an integral principle in corporate social responsibility (CSR) programmes because previous consultative methods have failed to prevent costly community opposition. Indeed, despite the growth of the CSR agenda in the extractive industry in the last twenty years, it appears that community opposition has grown simultaneously.

Instances of mines either being temporarily or permanently shut-down because of community actions abound, which can be interpreted as physical manifestations on non-consent. For example, in 2006, Esquel was forced to abandon the Argentinean Esquel Gold Project, resulting in $378.9 million written off of Esquel’s balance sheet, in addition to a loss of $1.81 billion (est) in reserves (Herz, La Vina, and Sohn 2007).[1]

In the past, companies have attempted to respond to community opposition through engagement, consultation, and philanthropic programmes. However, communities’ responses have neither been systematic or desired. This is arguably a result of the fact that these programmes are not meeting the core or root causes of opposition. Indeed, surveying a range of studies on community opposition, Laplante and Spears found that the central issue of the majority of complaints from communities in regards to extractive industry projects concentrated on the lack of consultation and consent sought by the company (Laplante and Spears 2008).

In contrast, the process of gaining a communities’ FPIC arguably results in a stronger social license to operate, that in turn presents real financial benefits to companies. Indeed, Shell estimates that through engaging in a FPIC process for the Malampaya project cost approximately $6 million, while accruing $50 to $70 million in avoided expenditure and fast-tracked production.  

FPIC – Legal Status

The divergence in opinions on FPIC in regards to the extractive projects begins with issues around its legal status. The legal concept of FPIC is based on a number of international instruments, jurisprudence, and human rights standards. These include:

  • the UN Declaration on the Rights of Indigenous Peoples’(2007) (Declaration)
  •  a binding judgment by the Inter-American Court of Human Rights (Saramaka People (2007)(Weitzner 2009)),
  • the International Labor Office’s (ILO) Convention No. 169, Concerning the Indigenous and Tribal Peoples in Independent Countries (1989).

Advocates point to these instruments and argue that the right of Indigenous Peoples’ to give FPIC is now universally recognised under international law. (Weitzner 2009; Herz, La Vina, and Sohn 2007). In contrast, opponents to the implementation of FPIC, such as the International Council on Mining and Metals’ (ICMM) John Mitchell argue that the FPIC is not a universal legal requirement: rather, it is, ‘a requirement in only a small number of jurisdictions’ (Mitchell 2004). In truth, the legal status of FPIC rights for Indigenous Peoples’ lies somewhere in between.

At present, the only binding instrument that recognises FPIC rights for Indigenous Peoples’ is the ILO Convention No. 169, which has only been ratified by 22 countries, as shown in Figure 1 (Chan 2008).

Figure 1: Global ratification of ILO Convention No. 169

Source: (Maziotis 2010)

Further to this, the Convention does not provide for FPIC in cases where the state owns mineral or sub-surface resources; however, in such instances, Indigenous Peoples’ are given the right to consultation, participation in benefits, and fair compensation (International Labour Office 1989). In contrast, the right to FPIC for Indigenous Peoples’ is provided for in the Declaration, although it is a non-binding legal instrument.

Despite its status as ‘soft law’, the Declaration, which has been endorsed by 147 countries, is reflective of social expectations globally, and very well may start to affect domestic legal frameworks in the future (Lehr and Smith 2010). Indeed, as Lehr and Smith note, there exists a risk that that the right to FPIC may be implemented and be applied retroactively, which would ‘affect existing company concessions’ considerably (2010). On this basis, it becomes clear that the current soft status of FPIC is largely irrelevant, as both the risk of future implementation and increasing awareness of the concept socially, demands that companies begin to implement FPIC processes in their dealings with Indigenous Peoples’.

Incompatibility with state sovereignty

In a related issue, opponents of FPIC argue that the principle of FPIC is inconsistent with a state’s sovereignty over natural resources (Buxton 2010; ICMM 2003; Perrault, Herbetson, and Lynch 2007). While states generally hold sovereignty over natural resources, it is important to note that a state’s authority to manage these is constrained by both the Declaration and other human rights conventions. Indeed, as Weitzner notes,

‘a company failing to ensure FPIC is implemented in such a context may be opening itself and the country’s government to a potential court challenge (2009).

Further, through not implementing a FPIC process, companies increase the risk that they will encounter various physical manifestations of non-consent, as addressed earlier in this essay.

Right to veto

Perhaps the key issue for opponents of FPIC is the matter of ongoing consent, or more bluntly, the right of Indigenous Peoples’ to say ‘no’ during the project cycle. Recognising FPIC as a right may result in companies having to abandon projects. In the initial instance, this may in fact result in better outcome for companies, wherein they do not invest in projects that they may have to abandon at significant loss in the future (Lehr and Smith 2010; Laplante and Spears 2008). More importantly, the issue of withdrawal of consent during the project life-cycle is arguably a greater cause of concern for companies. However, in this instance, one must first consider that consent acts as a formalised representation of a social license to operate, and ‘any license that is authorised can also be revoked if the rules are not followed’ (Weitzner 2009). Furthermore, current research demonstrates that rather than increasing instances of project shut-downs, FPIC processes tend to decrease such instances. Indeed, as noted earlier, there are a variety of ways for a community to demonstrate non-consent, many of which are incredibly costly for the companies involved.

Finally, opponents argue that FPIC is simply too difficult to operationalise. Indeed, by the very nature of FPIC, there will never be a clear cut process map that can be effectively implemented across all sites, because no two communities are exactly the same. Specifically, the greatest challenges to the process are identifying consent givers and the intricacy of ensuring that the consent is informed.

Practical implementation – an insurmountable task?

While guidelines are clear in that they state that consent should be derived consensually from a community in accordance with traditional customs, one of the greatest difficulties in obtaining consent in this instance is ensuring that minorities within the community and minoritised communities as a whole are given the capacity to grant or withhold their consent. In regards to gaining consent from minorities within a community, a major road-block to overcome in the FPIC process is ensuring that women, who often hold lower social status in traditional communities, or whose societal functions prevent them from participating in the FPIC process are included (Macintyre 2003)[2]. However, to argue that including minorities within a community is solely an issue for the FPIC, rather than CSR practices as whole is disingenuous. Identifying and engaging minorities is recognised as an issue within a wide variety of CSR practices and processes. Indeed, there are a range of tools and processes for ensuring companies adequately engage with minorities, such as women.[3]

Similarly, the issue in regards to engaging Indigenous communities as whole when they are often minoritised points to an ongoing reality for CSR practice, rather than an indictment on the validity of the FPIC process. The fact that companies may have to build the capacity of affected communities is becoming an operational reality in the extractive industry (IUCN-ICMM Dialogue on Mining and Biodiversity 2008). While ensuring capacity may lengthen the early stages of the project cycle, it is important to note that an investment in a community prior to exploration helps protect a company’s later and much larger investment during construction and production.

Ensuring that communities are able to provide informed consent is a hurdle, but it is not an insurmountable one. Macintyre rightly notes that communicating the environmental and social impacts of extractive projects to communities is highly problematic, particularly in instances where a community has had no prior exposure to the extractive industry (Macintyre 2003). However, as with engaging minority groups, the burden of adequately informing a community is not unique to the FPIC process, but is an issue for CSR practice as a whole. And again, companies are presented with a range of options for effectively communicating with the affected communities. As has been noted earlier, in this instance, there will never be an off-the-shelf solution for this process, and it will often need to be tailored according to the capacity and knowledge of the community in question. However, examples of effective communication abound. For example, for the Camisea oil project, Shell utilised bilingual written material, a website, participatory workshops, posters, videos, pictures, and scale models to inform the community of the project’s scope and impact (Environmental Law Institute 2003)

Evidently, the arguments against FPIC are neither unique to the principle itself, nor insurmountable. The process of FPIC offers companies a formalised manner in which to engage in communities. Indeed, through engaging in FPIC with affected Indigenous Peoples, companies can both solidify their social licence to operate and reduce the risks involved in operating in developing countries. The legal status of FPIC, while non-binding, is at the very least, an indication of things to come, and more presently, reflective of wider social expectations that are placed on actors when dealing with Indigenous Peoples. While it is possible to argue that companies are not legally obligated to implement FPIC, companies will increasingly find themselves judged on their implementation (or lack thereof) of the principle, by Indigenous Peoples and the wider international forum. Similarly, it is a given that implementing FPIC is complex, time consuming, and places an onus on companies to engage and build the capacity of Indigenous communities and minorities within them. However, without doing so,  companies invite the very real risk that communities will demonstrate their non-consent by engaging in action to prevent the company from operating.

Further, the issues that are identified in operationalising FPIC are inherent in engaging with Indigenous Peoples, and will not disappear if the right to FPIC does. On this basis, FPIC represents a growing necessity to the CSR and operating agendas of the extractive industry.

Bibliography

Buxton, Abbi. 2010. Democratic Pragmatism or Green Radicalism: A critical review of the relationship between Free, Prior and Informed Consent and Policymaking for Mining. Working Paper Series. London: Development Studies Institute.

Chan, Connie K. 2008. Lisa J. Laplante & (and) Suzanne A. Spears, Out of the Conflict Zone: The Case for Community Consent Processes in the Extractive Sector. Yale Human Rights & Development Law Journal 11: 117.

Environmental Law Institute. 2003. Prior informed consent and mining: promoting the sustainable development of local communities. Washington, D.C.

Herz, Steven, Antonio La Vina, and Jonathan Sohn. 2007. Development without Conflict: the Business Case for Community Consent. Washington, D.C.: World Resources Institute.

Hill, Christina, and Kelly Newell. 2009. Women, communities and mining: the gender impacts of mining and the role of gender impact assessment. Australia: Oxfam Australia.

ICMM Letter. 2003. ICMM PRELIMINARY COMMENTS ON THE
DRAFT FRAMEWORK FOR RESPONSIBLE MINING. June 16.

International Labour Office. 1989. C169 Indigenous and Tribal Peoples Convention, 1989.

IUCN-ICMM Dialogue on Mining and Biodiversity. 2008. Mining and Indigenous Peoples
Issues Roundtable: Continuing a Dialogue between Indigenous Peoples and
Mining Companies
. Roundtable discussions record. Sydney.

Laplante, Lisa J, and Suzanne A Spears. 2008. Out of the Conflict Zone: The Case for Community Consent Processes in the Extractive Sector. Yale Human Rights & Development Law Journal 11: 69.

Lehr, Amr, and Grace Smith. 2010. Implementing a Corporate Free, Prior, and Informed Consent Policy: Benefits and Challenges. Foley Hoag, July.

Macintyre, Martha. 2003. Informed Consent and Mining Projects : Some Problems and a Few Tentative Solutions. Mining Certification Evaluation Project. CSIRO.

Maziotis. 2010. File:ILO 169 countries.PNG – Wikipedia, the free encyclopedia.

Mitchell, PaulLetter. 2004. RE: 2004 Mining Ombudsman’s Report. December 6.

Perrault, Anne, Kirk Herbetson, and Owen Lynch. 2007. Partnerships for success in protected areas: the public interest and local community rights to prior informed consent (PIC). Georgetown International Environmental Law Review 19, no. 3: 475-542.

Rio Tinto, and Centre for Social Responsibility in Mining. 2009. Why gender matters: a resource guide for integrating gender considerations into communities work at Rio Tinto.

The ethical funds company. 2008. Winning the social license to operate: resource extraction with free, prior, and informed community consent. Sustainability Perspectives.

Weitzner, Viviane. 2009. Bucking the Wild West –
Making Free, Prior and Informed Consent Work. In Speaking Notes for Free, Prior and Informed Consent Panel. Canada.

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[1] For further examples of projects shut-down because of community opposition, see: (The ethical funds company 2008)

[2] Women are used here as an example of a minority group.

[3] For example, see: (Rio Tinto and Centre for Social Responsibility in Mining 2009; Hill and Newell 2009)