Virginia Journal of International Law Summer, 1995 35 Va
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Virginia Journal of International Law Summer, 1995 35 Va. J. Int'l L. 777 Environmental Reform at the World Bank: The Role of the U.S. Congress Ian A. Bowles * and Cyril F. Kormos ** * Vice President for Conservation Policy Programs at Conservation International, a Washington D.C.- based nonprofit organization which supports conservation of tropical forests and other endangered ecosystems in more than twenty countries. Prior to joining Conservation International in 1991, Mr. Bowles served as Legislative Assistant in the U.S. House of Representatives where he worked on issues related to foreign affairs and international development assistance. ** M.Sc., International Political Economy, London School of Economics; J.D. expected 1996, George Washington University Law School. Mr. Kormos is a Research Associate at Conservation International. The authors would like to thank the following people for taking time to be interviewed for this Article: Glenn Prickett, Chief Environment Advisor for the U.S. Agency for International Development; E. Patrick Coady, former U.S. Executive Director of the World Bank and Conservation International Senior Fellow; Bruce Rich, Environmental Defense Fund; Larry Williams, Sierra Club; Lawrence Summers, Deputy Secretary of the Treasury; Congressman Barney Frank; World Bank advisor and former Congressman Matt McHugh; Tim Rieser of Senator Patrick Leahy's office; Alec Echols of the National Fish and Wildlife Foundation; Robert Gustafson of Congressman John Porter's office; David Wirth, Associate Professor of Law, Washington and Lee Law School; Alex Shakow, Judy Maguire and Robert Goodland of the World Bank; Chad Dobson, the Bank Information Center; Charles Dallara, former Assistant Secretary of the Treasury; Jeff Morrelli, former staff person for the House Committee on Banking; Mark Murray, House Committee on Appropriations; Jonathan Sanford, Congressional Research Service; Abby Sutherland, Bretton Woods Committee; Brian Crowe, Mark Rentschler, David Joy and Mike Kaplan of the Treasury Department; and Susan Levine of the Overseas Private Investment Corporation. All were generous with their time and many provided valuable comments on early drafts. SUMMARY: ... Donor countries continue to provide financial support to the Bretton Woods institutions in the hopes of spurring development and opening new markets, but their assistance has not been without increasingly vocal calls for reform of lending practices, particularly with regard to the environmental impact of international projects. ... It begins with a brief summary of the congressional and executive branch frameworks for interaction with the World Bank and other MDBs. ... As a result, the MDBs were forced to enter into a dialogue with NGOs and to consider the possible negative effects on congressional funding that might result from alienating these groups. ... For example, the legislation amended the IFIA to reemphasize the need for greater cooperation between the World Bank and NGOs and to instruct the U.S. executive director to push for procedures that would give NGOs and affected parties access to information on projects before submission to the Executive Board. ... As the above account of congressional legislation concerning environmental reform of the MDBs indicates, there has been a progression from hearings in the early 1980s to the enactment in the late 1980s and 1990s of a large body of policy guidance and a number of limitations on the ability of the U.S. executive directors at the MDBs to vote in favor of individual projects. ... TEXT: [*777] I. Introduction More than fifty years ago, the world's major economic powers met at the Bretton Woods Conference and created the World Bank n1 and the International Monetary Fund (IMF). Since their [*778] creation, these institutions' influence on the economic affairs of industrialized countries has diminished significantly, but their impact on the economies of developing countries has become pervasive. n2 Donor countries continue to provide financial support to the Bretton Woods institutions in the hopes of spurring development and opening new markets, but their assistance has not been without increasingly vocal calls for reform of lending practices, particularly with regard to the environmental impact of international projects. n3 In the early 1980s, a number of U.S. environmental groups, n4 working in collaboration with developing country partner organizations, actively began to publicize the adverse environmental impact of World Bank lending. They charged that World Bank and IMF policies promoted the unsustainable use of natural resources, failed to provide for sufficient public access to information and did not allow local community participation in project development. What has unfolded over the last ten years is a fascinating story of how public activism spurred the U.S. government to demand significant changes in the lending procedures of the world's largest development institution. n5 This Article examines the particular role Con- [*779] gress has played in promoting environmental reform of the World Bank. n6 Congressional activism toward the World Bank raises a number of questions: What are the appropriate roles of the legislative and executive branches in directing U.S. policy toward multilateral institutions like the World Bank? To what extent does the change of political parties in the executive and legislative branches affect Congress-World Bank dynamics? What are the effects of drafting specific and directed, rather than vague and open-ended, legislation? Are the various policy goals and reforms sought by Congress always compatible? This Article attempts to answer some of these questions in light of environmental reform of the World Bank. Section II reviews relevant congressional legislation and related actions n7 concerning the World Bank since 1983. Section III attempts to answer some of the legal aspects of the questions posed above, including the debate about the proper role of the legislative and executive branches under the World Bank Articles of Agreement, the constitutional issues related to foreign assistance, and the predominant use of appropriations, not authorization, legislation as a vehicle to dictate U.S. policy toward multilateral development banks (MDBs). Section IV examines six specific changes in the World Bank and discusses the role Congress may have played in their evolution. It also discusses the efficacy of different types of legislation in effecting change at the World Bank. Section V concludes by considering the costs and benefits of congressional activism on environmental reform of the World Bank and speculates about the role of political parties and nongovernmental organizations (NGOs) in changing World Bank policies. II. Congressional Legislation on Environmental Issues and MDBs This Section reviews congressional legislation related to environmental issues and the World Bank. It begins with a brief summary of the congressional and executive branch frameworks for interaction with the World Bank and other MDBs. It then summarizes [*780] the different types of legislation available to Congress to influence World Bank policies. Finally, it reviews the actual legislation, beginning in 1983 and including a short discussion of some of the historical events in the early 1980s that set the tone and pattern of congressional involvement in these issues. Congressional involvement in MDB issues is divided between authorizing and appropriating committees. n8 The authorizing committees are charged with the enactment of legislation to authorize U.S. participation in and annual appropriations to the MDBs. Although the purpose of the authorizing committees is to provide policy guidance and the purpose of the appropriating committees is to allocate budgetary resources, these roles have become somewhat blurred, particularly in the foreign affairs arena. n9 Congress has not enacted a comprehensive foreign assistance reauthorization act since 1985. n10 Thus, most of the relevant MDB legislation has been enacted by the appropriations committees in consultation with the authorizing committees. n11 The use of annual appropriations to enact authorizing legislation creates two distinct types of law: appropriations law that applies only during the fiscal year for which it is enacted and law that amends the U.S. Code and remains permanent until repealed. Although Congress authorizes U.S. participation in the MDBs and provides funds for this purpose, the Secretary of the Treasury formally represents the U.S. government at the MDBs in his capacity as a governor of the banks. The MDBs are independent international organizations and are run by their own independent management. Their boards of executive directors, which are in continual session, supervise daily operations and oversee all loans. The President appoints the U.S. executive director who reports to [*781] the Secretary of the Treasury through the Assistant Secretary for International Affairs. A. Types of Legislation Congress has three principal types of legislation available to influence MDBs: policy guidance, voting restrictions and the power of the purse. n12 In general, policy guidance states congressional findings and U.S. government policies. For example, in 1988, Congress enacted legislation that stated, "United States assistance to the multilateral development banks should promote sustainable use of natural resources and the protection of the environment, public health, and the status of indigenous peoples in developing