A/HRC/4/99
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available money and capacity, project finance is now often provided by emerging market players
on their own or by large syndicates (in which an ECA might be approached in the later stages of
a deal and given as little as 10 days for due diligence). The Special Representative was
encouraged to recommend to relevant organizations such as the IFC and OECD that they account
for how they are implementing their standards. There are currently a few discussions about
coordination, for example between similar departments of different organizations and among
multilateral institutions stating their intention to harmonize with the Principles.
33.
There was also a discussion about the role of prescriptive standards or law in project
finance. It was suggested that if the Principles had been too prescriptive they might have
attracted the attention of anti-competitive lawyers; instead, they had to be a set of principles that
financial institutions could aspire to and adapt to suit their own risk appetite and culture.
Reference was made to the recent adoption by the Berne Union2 of a set of guiding principles,
which are not binding but encompass OECD and non-OECD institutions. It was also suggested
that guidelines work only for the well-intentioned, so binding laws are necessary. There was
debate over whether scrutiny should be directed to principles themselves, the processes and
mechanisms that underpin principles, FIs that adopt them, or FIs that have not adopted them.
34.
There was a great deal of discussion about the impact on human rights of stabilization
clauses in “host Government agreements”3 for project finance. The original intention of such
clauses was to protect companies from discriminatory actions by host Governments, namely
expropriation or punitive levies and taxes, but there was now concern that such clauses supersede
existing and new legislation or may stifle both the ability of host Governments to introduce new
measures to protect and promote human rights and access to justice for victims of human rights
abuses. It was stressed that these agreements must not be used to circumvent the local legal
system. Reference was made to a “human rights undertaking” by consortium members in a
pipeline project whereby the consortium agreed not to resist local laws or claims from aggrieved
citizens; and whereby the stabilization clause could be overridden in the case of the need to
implement obligations under human rights, environmental, labour, or health and safety
obligations. It was suggested that States would not challenge stabilization clauses because
(a) they are often equity holders in the project and therefore have an interest in steady revenues
and (b) such a challenge would be an admission that they had made a mistake when they
negotiated the clauses. Participants agreed that more discussion and guidance on appropriate
stabilization clauses and host Government agreements were necessary.
35.
The question arose as to whether intermediary holding companies, established for project
finance investments, could interfere with the protection and promotion of human rights. Some
participants suggested that such holding companies and tax havens should be scrutinized, as they
2
The Berne Union is an organization of the international export credit and investment insurance
industry.
3
A host Government agreement is a legal agreement between a foreign investor and the local
government which is designed to reduce financial and political risks posed to investors by
sudden changes in national law.
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