How can private sector financing support legal empowerment for communities affected by large-scale investments?

Recently, major legal wins have opened up conversation about creating a remedy fund at development finance institutions to address harms that result from investment projects. This would be a huge step forward.

Yet there’s also an urgent need to ensure communities can engage in shaping projects early and often to avoid potential harms. What if there were a global financing mechanism for independent legal support for affected communities?

Access to targeted support can help address asymmetries in power and access to information. It’s part of what’s needed to breathe life into commitments to free, prior, and informed consent. And for businesses it could reinforce a new norm that communities be empowered to act as an equal counterparty.

An independently administered pooled fund for community support could collect financial contributions from the private sector and pay out grants for local communities to obtain support to engage in shaping decisions about investments. It could tap into new sources of funding, ensuring communities across the world are able to access the resources needed to engage with large-scale investment projects. Check out the attached concept note for more on how a pooled fund could work.

Our community is campaigning to increase financing for legal empowerment (#justiceforall) and this could be an opportunity for innovation. But there are also challenges with taking funds from the private sector.

We’d like to hear from you. What would a fund need to get right if it’s going to meet communities’ needs?

Here are a few principles that could help guide the design of a basket fund:

  1. Any effort to create a financing mechanism with contributions from the private sector must be grounded in the principle that communities have the right to say no to investment.

  2. Contributions from the private sector should be tied to the ‘cost of doing business’. This could take multiple forms, e.g. setting aside a % of total operating costs. In contrast to a philanthropic contribution, building funding into corporations’ and investors’ core financial model reflects a commitment that affected communities deserve support to exercise their rights; without it a business deal is irresponsible.

  3. A financing mechanism should support and strengthen national law and environmental, social, and governance standards rather than substituting for them.

  4. Grants should cover support across the entire investment life cycle, ensuring communities can shape decision-making in the early stages and are able to address grievances that arise during operations or closure. In addition, grants can include supporting communities to engage effectively in both a) bilateral negotiations between communities and companies and b) public regulatory processes such as permitting and enforcement.

  5. Grants can cover a range of activities and types of support, including but not limited to rights awareness, advice on contract negotiations, reviewing impact assessments, environmental monitoring, and grievance redress. Communities may pursue support from CSOs, lawyers, scientists, and a range of others.

  6. It will be critical to maintain the independence of support providers and ensure they are directly accountable to communities. Communities can choose who to partner with to meet their needs. In addition, the fund should outline clear processes for protecting communities and support providers from undue influence by contributors.

  7. The fund should be managed by an independent institution. The governing body needs to include frontline civil society organizations. In addition, the fund should outline clear procedures for transparency and oversight.

  8. The grantmaking process (e.g. application, transfer of funds, reporting, etc) should be designed to minimize the burden on communities and support providers.

Do these reflect the important considerations? What would you add or change? Reply here to share your thoughts!

In solidarity,

Erin

Pooled Fund for Community Support During Investments.pdf (231.4 KB)

@soniapark @sonkitaconteh @michaelotto @marlonmanuel @ginococchiaro @SiddharthAkali @jocelynmedallo @Tom_Weerachat @vivekmaru @sam_szoke_burke @bharatpatel @lorenzowakefield @lorenzocotula

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Thanks for sharing, @erinkitchell - I’m looking forward to hearing what folks think about this important and nuanced financing initiative.

I wanted to flag the post with some members who may be interested in weighing in here. @exchange_2016kenya, @exchange_2018sierraleone @rahma @Tone_Marzan @Vuthy @bj_schulte @manolomorales @RoseBirgen @prasantmohanty

I want to pick up two important points that Erin mentioned in her post.

First, the need for funding to be available at the early stages of big projects. It is important that funding support will not be limited to addressing reparation/rehabilitation when the harm has already been done. In fact, support to communities must start even before they begin negotiating with companies/government agencies. Communities must have financial support to ensure that they have access to the relevant scientific data and other needed information at the stage of securing their free, prior and informed consent (FPIC). In many cases, data and information about projects and the potential risks are those that are provided by the project proponent, which, usually, presents a one-sided perspective, highlighting the benefits, and downplaying the potential harm.

Second, the importance of independence of the funding mechanism. The integrity of the fund is valuable, otherwise, organizations and communities will not be willing to receive support from such funding mechanism. Worse, there is a danger that the funding mechanism will be seen as an instrument for investors/corporations to secure communities’ consent, or to influence negotiations. Independence of the funding mechanism is not just in how the funds are administered but also in how the funds are generated. Even if funding will come from corporations, the contribution must be seen more as a compulsion, a requirement (even if collectively agreed upon), rather than a unilateral voluntary contribution (corporate social responsibility [CSR] program) from the corporations. The fund-generation and fund-administration aspects are crucial for this mechanism to succeed.

Interesting conversation, indeed. I hope to hear from members who are working with communities directly affected by big projects. Do you see a funding mechanism like this as valuable to your work?

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Several years ago, a sugar cane planter in Sierra Leone, concluded a lease agreement for 10,000 hectares of land with nearly sixty villages. The company was proud of its role in the process, largely because it paid a law firm to provide legal advice to the communities during negotiations. The final lease, which community reps thumb printed did not read favourably for the communities- it was like the communities never had legal representation. For example, the communities lost possession of “their forests, rivers, streams and the entire environment to the company”. In fact, the lease agreement covered the entire land space of the villages including the homes and backyards of the inhabitants. The company also reserved the right to give up land (which it would not pay rent for) but still retain rights over the surrendered land. There were many objectionable clauses in the lease but the lawyers that the company paid to represent the communities did not see anything wrong with the lease. A few years later, some of the communities requested Namati’s help when the company began enforcing the terms of the lease.

Without a doubt, communities require access to legal and other professional assistance in the course of negotiations and throughout the life of an investment. Companies have the resources to make this happen for communities. However, when they play a direct role in securing legal representation for communities, many problems arise. An independent mechanism, like a justice fund, to which companies contribute, is a better option than them having a direct hand in the selection of legal representation for communities. An independent justice fund serves both the interests of communities and corporations. The former will be unlikely to want to overturn a lease agreement for which they had independent legal and other professional assistance and the latter’s operations will not be threatened by a potential legal tussle.

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Greetings all,

I honestly believe private sectors considering those who are less fortunate could bring much success. Resulting in less despair, creating, implementing and giving each a chance. Once giving an opportunity to identify who they are creates a yearn for success in spite of. Sadly, society isn’t considerate of those who have and will overcome life challenges. Acknowledging those for their unexpected hardship, inabilities has so forth with introduce a new and improved era. Which would be a force to be reckoned with. So much could be avoided if all were “RELATABLE AND NOT DEFLATABLE”.