What Export Credit Agencies Can Do for Sustainable Development © 2007 Both ENDS Acronyms

Both ENDS BRIEFING PAPER JANUARY 2007 Balancing Risks

Orders and all other correspondence ASCM Agreement on Subsidies and Countervailing concerning this publication should be Measures sent to: Atradius CI Atradius Credit Insurance N.V. Both ENDS Atradius DSB Atradius Dutch State Business N.V. Nieuwe Keizersgracht 45 CSO Civil Society Organisation 1018 VC Amsterdam CSR Corporate Social Responsibility The Netherlands DNB De Nederlandsche Bank (Central Bank of the Netherlands) Telephone +31 20 623 08 23 Fax +31 20 620 80 49 EBRD European Bank for Reconstruction and E-mail [email protected] Development Website www.bothends.org ECA Export Credit Agency ECG Working Party on Export Credits and Credit Guarantees (in the OECD) EDC Export Development Canada Text Wiert Wiertsema, Both ENDS, Amsterdam EIA Environmental Impact Assessment Editing Mike Croall, Txtworks, Amsterdam EIS Environmental Impact Statement Design Margo Vlamings, Arnhem EU European Union Printing Drukkerij Roos en Roos, Arnhem HIPC Heavily Indebted Poor Country IFC International Finance Corporation ILO International Labour Organisation IMF International Monetary Fund JBIC Japanese Bank for International Cooperation MPR Minimum Premium Rate ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development SDR Special Drawing Right (IMF defined currency Standard; SDR 1.00 is around 1.15/US$ 1.48) SFO Serious Fraud Office UN United Nations UNCED United Nations Conference on Environment and Development Both ENDS Briefing Papers present UNECE UNE conomic Commission for Europe information on important environmental UNEP United Nations Environment Programme and developmental issues. Readers are WTO World Trade Organisation encouraged to quote or use material from the briefing papers for their own publications or articles, but we would like to request acknowledgement and a copy of the publication. The Both ENDS Briefing Paper Series is also available on the web: www.bothends.org, as are other Both ENDS publications, factsheets, reports and news articles. Balancing Risks

What Export Credit Agencies can do for sustainable development

Table of Contents

1 Introduction to ECAs 3 1.1 Mandate and role 3 1.2 The ECA of the Netherlands: Atradius DSB 4 1.3 ECAs and sustainable development 5

2 ECA policies and sustainable development 6 2.1 Information disclosure and transparency 6 2.2 Environment 9 2.3 Bribery and corruption 10 2.4 Debt and economic sustainability 11 2.5 Human and social rights 13 2.6 Consultation and participation 14 2.7 Monitoring and compliance 16

3 Sustainable development and export credit policies in the Netherlands 17

4 Recommendations for Atradius DSB to avoid negative impacts on sustainable development 20 4.1 Information disclosure and transparency 20 4.2 Environment 21 4.3 Bribery and corruption 21 4.4 Debt and economic sustainability 22 4.5 Human and social rights 22 4.6 Consultation and participation 22 4.7 Monitoring and compliance 23

1 This publication is meant to provide an overview of additional steps ECAs could take to limit their negative social and environmental impacts, while at the same time exploring possibilities for ECAs to promote sustainable development. Since most ECAs are slightly different from each other, the policy recommendations formulated in Chapter 4 are primarily directed at the export credit policies of the Netherlands.

2 NOTES

1While private ECAs are operating in the financial markets too, this publication only addresses issues relating to government supported, official, public ECAs.

2While the ECG is a formal OECD Introduction to ECAs body, the group of Participants to 1 the Arrangement is not.

3Arrangement on Officially Supported Export Credits - 2005 Revision (effective as of 1 December 2005), Article 23, 1.1 OECD (TD/PG(2005)38/FINAL). 4 Mandate and role them with a kind of level playing field. Council Directive 98-29-EC, 7 May 1998. The OECD countries and ECAs Companies that export goods and participating in the Arrangement are services or make investments abroad cooperating in the Working Party on face several risks, often different from Export Credits and Credit Guarantees those encountered in domestic busi- (ECG)2. One of the principles of the ness. Such risks may be related to OECD Arrangement is that the specific uncertainties regarding the participants agree to charge a Mini- nature of the transaction, but also mum Premium Rate (MPR) for the political uncertainties in foreign coun- cover provided to companies. tries result in additional risks. In order The premium rates also “shall be risk- to be able to go ahead with transac- based, shall converge and shall not tions in such circumstances, compa- be too inadequate to cover long-term nies usually look for an insurance that operating costs and losses3.” Within would provide adequate protection the European Union, this break-even against such risks. Export Credit requirement has been incorporated Agencies (ECAs) provide such export into EU law4. credit insurances. Exports to, or investments in, developing countries ECAs provide at least three types of often only materialise with the sup- official export credit support: port of ECAs. • Direct credits • Guarantees Many of the risks that are covered • Insurances by ECAs are considered too big for private insurance companies. Since ECAs always charge interest and/or governments can act as last-resort a premium for the financial services lenders, most ECAs are official, they provide. In general, many non- government-supported agencies. OECD markets are considered risky, A government supported ECA1 can often too risky for private insurance take more risks and offers backing companies. ECAs mainly provide their for transactions that purportedly services for domestic corporations cannot find export credit support in exporting to, or investing in, develop- private financial markets. Within the ing countries. Most officially support- Arrange-ment on Officially Supported ed export credits cover transactions Export Credits of the Organisation for with repayment terms of 2 years or Economic Cooperation and Develop- more (medium and long-term). ment (OECD), most ECAs of industrialised countries have agreed The Agreement on Subsidies and to common principles, which provide Countervailing Measures (ASCM) >

3 > of the WTO5 provides the legally A total value of US$ 65 billion of While Atradius DSB is a private binding international framework for private transactions received medium- company, the Dutch government regulating government subsidies and and long-term ECA support in 2004. ensured a construction that allows the other private sector support. It aims By including also short-term transac- State under all circumstances to to minimize government support for tions, the total cover provided by continue the provision of export private sector activities. The ASCM ECAs exceeds an amount of US$ 100 credit insurances to Dutch compa- leaves a specific “carve-out” or “safe- billion. In the same year, the total nies7. In case Atradius DSB or haven” allowing government support amount of Official Development Atradius CI would face serious to business through ECAs. In item (k) Assistance (ODA) was a little less than financial problems, or in case the of Annex I to the ASCM, reference is US$ 80 billion6, which illustrates the Nederlandsche Bank (DNB, the made to the OECD Arrangement, significance of ECA-supported capital central bank) would prevent or limit stating that export credit support to flows. Atradius DSB in offering public corporations in compliance with this export credit insurances, Atradius Arrangement shall not be considered CI will be forced to sell the shares an export subsidy forbidden by the of Atradius DSB to the Dutch State. ASCM. In other words, the partners Regarding the role of the ECA in the in the OECD Arrangement are left to management of export credit debt, define what is permissible within the Atradius Provenuen8 B.V. should also WTO with regard to export credits 1.2 be mentioned as a 100% subsidiary and subsidies. Developing countries of Atradius DSB. Atradius Provenuen that are signatories to the ASCM, The ECA of the Netherlands: B.V. is in charge of the management therefore, are subjected to a set of Atradius DSB of all claims of the official public provisions over which they have no export credit insurance facility. immediate say. The official Dutch ECA is Atradius Dutch State Business N.V. (Atradius In addition to Atradius DSB, three ECAs collectively provide a large DSB). Atradius DSB is a 100% subsidi- other government institutions are source of public financial support for ary of Atradius Credit Insurance N.V. stakeholders in the Dutch export foreign corporate investment in (Atradius CI), an international private credit facility. The Ministry of Finance largescale industrial projects in the export credit insurance company. formulates the policies according to developing world. The table below Atradius DSB is charged with which Atradius DSB implements the presents the figures for the year 2004 providing export credit insurances official export credit insurance of medium- and long-term transac- and guarantees to Dutch companies scheme. It is in charge of, and partici- tions of ECAs from OECD countries. on behalf of the Dutch Government. pates in, all international meetings Unlike the ECAs of some other coun- and negotiations of official ECAs. The tries, it does not provide direct credits. Ministry of Finance is also responsible

Value of ECA-supported medium- and Key data Atradius DSB long-term transactions from OECD 2005 2004 countries in 2004 Premium income  46,000,000 77,000,000 Region US $ (millions) Claims  39,000,000 83,000,000 Asia 31,666 Recoveries  549,000,000 205,000,000 Africa 4,108 Americas 13,277 Number of applications 314 244 Europe 13,308 Number of promises and Oceania 764 advices of cover issued 200 122 Various 2,142 Number of policies issued 121 112

World Wide Total 65,265 Value of promises and advices of cover issued  6,900,000,000 4,800,000,000 Source: OECD Statistics on Export Credit   Activities, TD/ECG (2005) 13/FINAL Value of policies issued 2,500,000,000 2,100,000,000

Source: Annual Review 2005, Atradius DSB

4 NOTES

for the budget of the export credit 5See:http://www.wto.org/English/ insurance facility. It closely cooperates docs_e/legal_e/24-scm.pdf with the Ministry of Economic Affairs 1.3 in shaping the oversight of the 6Global Development Finance 2006, government. The central bank (DNB) ECAs and sustainable World Bank, p. 80. has an advisory role, particularly development regarding the risk management 7Letter Minister of Finance to the policies and the use of financial Multilateral development banks Dutch Parliament, 17 January 2006, instruments. consider sustainable development BFB 2006-0023M. The letter describes how the Dutch State and poverty reduction as part of their ensured itself of all necessary legal The stated policy aim is that mandate. Since ECAs only aim to sup- rights over Atradius DSB. Atradius DSB obtains the authority to port domestic companies, sustainable process and make decisions itself on development objectives are not part 8‘Provenuen’ is Dutch for a substantial percentage (70-80%) of of their mandate. Often ECAs would ‘Recoveries’. all applications it receives, mostly rather provide funding for projects transactions with a perceived limited that multilateral banks, such as the 9Letter Minister of Finance to the risk. Determining factors for this man- World Bank, would not touch, for Dutch Parliament, 3 October 2005, date are the country risk classification reasons of potential negative social BFB 2005-2155M. This letter of the host country for the trans- and environmental impacts. This introduces the innovations of the Dutch export credit facility, that action, as well as the size of the trans- practice attracted the attention of became effective on 1 October 2005. action for which the export credit several Civil Society Organisations insurance is requested. All trans- (CSOs) and led to the establishment 10See: http://www.eca-watch.org/ actions beyond the mandate of of the international ECA-Watch net- Atradius DSB are to be approved by work10. 11 a credit committee in which all four See: http://www.oecd.org/ direct stakeholders of the export Project-affected community organi- document/15/0,2340,en_2649_34181 _1888847_1_1_1_1,00.html credit facility mentioned above have a sations and CSOs started to criticise seat. The Ministry of Finance has the ECA support of many projects final responsibility for and veto power because of substantial negative envi- over the support of individual trans- ronmental and social impacts. While actions9. many multilateral development institutions had formulated elaborate safeguard policies to avoid such negative impacts, it was noted that ECAs had none of these. In contra- diction to the commitments of their governments to ensure sustainable development, most ECAs did not take into consideration the impacts of their support for business transactions on the environment or on the rights of local communities.

Only in 1998 did the ECG issue its first statement of intent on Officially Supported Export Credits and the Environment11. In this statement the desirability to strengthen environmental considerations in risk assessment practices of ECAs is acknowl- edged. However, it also acknowl- edged the differences in national systems of export credit support, and thus, no concrete measures were >

5 > proposed at that time. The statement provided a kind of starting point for negotiations to overcome differences and achieve common approaches to officially supported ECA policies and export credits and the environment. In December 2001, a first “Draft sustainable development Recommendation on Common 2 Approaches on Environment and The business of ECAs is to support the domestic private sector in promoting Officially Supported Export Credits: exports and international investments, often in developing countries. ECAs Revision 6” was published12. In differ distinctly from development agencies that primarily aim to contribute to December 2003, these Common development abroad. Approaches were revised, in 2005 updated13, and currently (2006) Although ECAs have no sustainable development mandate, many of the negotiations on another revision are activities they support do impact sustainable development, especially within underway. developing countries. As government-supported public agencies, however, they have a significant responsibility to minimise negative impacts on sustainable CSOs have regularly called for development efforts and prospects. much stricter environmental guidelines than those provided for in the Sustainable development is generally defined as development that meets the Common Approaches. They have also needs and aspirations of the current generation without compromising the argued for the inclusion of several ability to meet those of future generations. The broad concept of sustainable other concerns of sustainable development is closely identified to that of environmentally friendly develop- development into ECA-supported ment that does not overexploit natural resources. However, various other business transactions. For example, closely related dimensions of development are essential ingredients to facilitate on transparency, bribery, community sustainability. Several mutually related aspects of sustainable development are participation and debt. As an ac- relevant to the activities of ECAs. knowledgement of a responsibility for avoiding contributing to the debt problems of many developing countries, the ECG adopted in 2001 a Statement of Principles on Official Export Credit Support to Heavily Indebted Poor Countries (HIPCs)14. 2.1 This statement is meant to discourage ECA support for “unproductive Information disclosure For reasons of commercial confi- expenditures” in such countries. Also, and transparency dentiality, a project sponsor tends to the ECG formulated measures to prefer all documentation pertaining combat bribery in an Action ECA-supported activities have, in to the activity that ECA support is Statement on Officially Supported many cases, inevitable and long sought for, to remain outside the Export Credits that was adopted in lasting impacts on the environment public arena. The sponsor does not 200615. To many CSOs these initial and the people that live in the area want other competitors to be able to steps are hardly sufficient. where such activities are situated. familiarise themselves with the busi- These impacts may pose risks to the ness plans. Similarly, project sponsors sustainability of the transactions that prefer the general public not to be the ECA provides support for. In informed, so as to avoid community order to identify and map those risks concerns and other possible compli- beforehand, proper impact assess- cations hampering a swift implemen- ment studies are required before a tation of the activities planned. While decision on eventual ECA support is understanding these considerations, taken. The project sponsor generally such a secretive approach causes commissions specific experts to con- local communities to remain unaware duct these impact assessments. of the eventual risks they, and the environment they depend on, may

6 NOTES

be exposed to. Their right of access General Kofi Annan, said about the 12See: http://www.oecd.org/ to environmental information is not Aarhus Convention16: dataoecd/2/32/2726700.pdf honoured, while at the same time the project sponsor will not obtain proper “Although regional in scope, the sig- 13See: OECD document TD/ understanding of relevant local nificance of the Aarhus Convention is ECG(2005)3 knowledge and information. global. It is by far the most impressive elaboration of principle 10 of the Rio 14See: http://www.oecd.org/docu- Whereas ECAs depend on public Declaration, which stresses the need ment/43/0,2340,en_2649_34179_234 money to provide the requested for citizen's participation in environ- 8715_1_1_1_1,00.html support, one would expect that ECAs mental issues and for access to infor- would require substantial transpar- mation on the environment held by 15See: http://www.oecd.org/depart- ency of the companies that request public authorities. As such it is the ment/0,2688,en_2649_34177_1_1_1_ 1_1,00.html their services. Unfortunately, many most ambitious venture in the area of activities that receive support of ECAs environmental democracy so far 16 remain shrouded in secrecy. Only undertaken under the auspices of the See:http://www.unece.org/env/pp/ welcome.html when pressured by CSOs which United Nations.” called for more transparency has a little more information on ECA-sup- This “Convention on Access to 17Directive 2003/4/EC of the ported activities been gradually Information, Public Participation in European Parliament and of the Council of 28 January 2003 on public disclosed in recent years. Decision-making and Access to access to environmental information. Justice in Environmental Matters” is a Improved transparency of ECA-sup- new kind of environmental agreement ported activities has been a demand that links environmental and human from CSOs for a number of reasons. rights. It acknowledges that we owe Transparency is about: an obligation to future generations. • Improving the quality of due It establishes that sustainable diligence through a broadened development can be achieved only base of information, including local through the involvement of all knowledge stakeholders. It links government • Reducing the risks of project failure accountability and environmental as public comments may help protection. It focuses on interactions identify risks the project sponsor between the public and public au- has overlooked, or not shared with thorities in a democratic context, and the ECA it is forging a new process for public • Reducing the reputational risk of participation in the negotiation and ECAs implementation of international • Avoiding corruption through agreements. The subject of the enhanced scrutiny Aarhus Convention goes to the heart • Enhancing democracy as it allows of the relationship between people participation in decision-making and governments. The Convention is • Enhancing the accountability of not only an environmental agreement public entities towards the public in it is also a Convention about govern- the ‘host’ country as well as the ment accountability, transparency home country of ECAs. and responsiveness. The Aarhus Convention grants the public rights Regarding the environmental and imposes on parties and public dimension of information disclosure authorities obligations regarding and transparency, reference has to be access to information, public partici- made to the Aarhus Convention. This pation and access to justice. convention was adopted at a minis- terial conference of the UN Econo- The first part of the Convention mic Commission for Europe (UNECE) on access to information has been held in 1998 in the Danish town incorporated into EU law (Directive of Aarhus. The then UN-Secretary 2003/4/EC)17, which required >

7 > transposition into national laws of Category A projects shelved by Atradius DSB after receiving public the EU member states by 14 February comments following the release of environmental information: 2005. All ECAs fall into the category of public authority, which means that • Tuticorin Port Trust: Setusamudram Shipping Channel Project all ECAs in EU member states are (India) legally required to make environ- In January 2006, Atradius DSB decided not to approve the application mental information that is held by for export credit insurance for the financing of the Setusamudram them available to anyone asking for Shipping Channel Project, sponsored by the Tuticorin Port Trust (India). it. So far, ECAs themselves committed This project aimed to dredge a shipping canal through the shallow sea to limited disclosure of information in waters between India and Sri Lanka. The project would have serious the Common Approaches agreed in environmental (and socio-political) consequences. For this reason, the ECG of the OECD. They agreed Atradius DSB classified the project as a Category A project, and made to publish national environmental the Environmental Impact Assessment, as well as a more general policy statements and principles as project assessment available to the public for a period of 30 days well as procedural guidance. In the before the scheduled decision. Both ENDS and NGOs in India and Netherlands, this information is Sri Lanka expressed serious concerns about this project. placed on the website of Atradius DSB18. • Dredging activities for the construction of oil pipelines in Varanday (Russia) Under reference to limitations due In late October 2006, Atradius DSB decided to postpone a decision to to the competition between different support a dredging project in the Arctic sea off the northern Russian ECAs and the constraints of business coast of Varanday. The plan was to dredge a trench of 18 km, for an oil confidentiality, ECAs are required to pipeline to be laid one meter below the seabed. This 18 km pipeline is share information with a view to supposed to connect an on-shore oil pipeline with an oil-loading seeking common positions on the station to be reached by oil tankers off the Varanday coast. Due to environmental review of projects. The shallow waters and regular icy conditions, such ships cannot come ECG annually publishes aggregated close to the coast. While the dredging itself might have limited information that has been reported site-specific environmental impacts (Category B project), Atradius by the individual ECAs. Furthermore, shared the opinion that this 18 km pipeline is a shackle in a much ECAs are required to make environ- wider programme of oil shipping from the Russian arctic coast. Serious mental impact information (e.g. EIAs, environmental risks of oil transportation in arctic waters turn this case or summaries thereof) publicly avail- into a Category A project. Due to serious comments on the absence of able at least 30 days before a final an EIA study, Atradius decided to postpone the approval of this commitment to grant official support project. for projects likely to have significant adverse environmental impacts (Category A projects). ECAs are also expected to annually (at a minimum) make information on projects classified as environmentally sensitive available to the public.

8 NOTES

A key feature of the Common 18See: http://atradius.com/nl/dutch- Approaches is that all applications for statebusiness/overheid/milieu/ 2.2 officially supported export credits for projects with a repayment term of 19See OECD-Document Environment two years or more should be TD/ECG(2005)3 screened on potentially adverse The environmental impact of environmental impacts. The parties projects has been the first aspect of involved in the project – such as sustainable development that applicants and project sponsors obtained the attention of ECAs. – should provide all relevant informa- Increasing environmental awareness in tion to carry out the screening. Based recent decades resulted in a wide on the results, all projects in sensitive body of legislation to protect the areas and all ECA-supported projects natural environment against further with a value of more than SDR 10 mil- destruction. Over-exploitation of lion are to be classified according to natural resources and environmental the potential environmental impact pollution resulted far too often in and the extent of the environmental irreversible damage. Mitigation review required: efforts and compensation of victims • Category A: A project has the led to huge costs. While initially these potential to have significant costs were left for the (local) public adverse environmental impacts. sector, environmental legislation more These impacts may affect an area and more requires that those respon- broader than the site or facilities sible for environmental damage subject to physical works. Projects should also be held liable for the in sensitive sectors or located in or expenses for adequate mitigation and near sensitive areas are included compensation efforts. The polluter- (illustrative list is included in the pays principle became a commonly Common Approaches as Annex I). accepted standard. In this way, • Category B: Projects with potential- negative environmental impacts have ly less adverse environmental become a risk of business that ECAs impacts than Category A projects, have to take into account in their risk mostly site-specific, and less assessments. In this respect, it is fairly irreversible. surprising that the ECG did not issue • Category C: Projects likely to have statements on these issues before minimal or no adverse environ- 1998. mental impacts.

Since then, the ECG has developed Category A projects require an certain guidelines for ECAs to Environmental Impact Assessment consider environmental concerns (EIA) to be provided, while Category before they take decisions on B projects only require an environ- officially supported export credits. mental review (Environmental Impact The “Recommendation on Common Statement or EIS). Category C pro- Approaches on Environment and jects require no further action. In per- Officially Supported Export Credits” forming environmental reviews, ECAs calls for evaluating environmental are required to benchmark projects impacts of projects and exports of against host country standards as well capital goods and services destined as relevant standards of other to projects, including the impacts on multilateral agencies (for example, involuntary resettlement, indigenous the World Bank). ECAs are themselves peoples and cultural property. While responsible to ensure projects comply these Common Approaches are cur- with these conditions, and they are rently (2006) under review within the required to report to the ECG on an ECG, the latest version dates from annually basis on their implementa- 200519. tion of the Common Approaches.

9 forcement authorities instances of the Ministry of Finance, who will ‘credible evidence’22 of bribery. If decide whether or not to notify 2.3 enhanced due diligence concludes investigative authorities. that bribery was involved in a transac- The examiners of the Working Group Bribery and corruption tion, the ECA has to refuse support. recommend that efforts to detect bribery may be enhanced through Bribery and corruption in interna- The OECD Working Group on improved information exchange tional business undermine good Bribery completed a review of the on suspicions of bribery between governance and contradict sustain- Netherlands’ enforcement of the Atradius DSB, the Ministry of Finance able development. Bribes make Anti-Bribery Convention23 in June and Dutch missions in the countries projects more expensive, resulting in 2006. The main conclusion is that the where the companies operate with increased costs for people in the host Netherlands needs to take a more official export credit support. countries. Within the OECD, a proactive approach in investigating Convention on Combating Bribery and prosecuting bribery offences. of Foreign Public Officials in Given the size of the Dutch economy International Business Transactions – and the level of exports, the Working the Anti-Bribery Convention – was Group finds it surprising that no com- adopted in 199720. In the preamble of pany or individual has been the sub- the Convention text, bribery is ject of an investigation or prosecution referred to as “a widespread since the ratification of the Conven- phenomenon in international business tion in 2001. transactions, including trade and investment, which raises serious moral The Working Group also looked and political concerns, undermines into the practice of the Dutch ECA. It good governance and economic noted that Atradius DSB informs its development, and distorts interna- clients that the payment of bribery is tional competitive conditions”. a crime under Dutch law. Atradius DSB requires applicants to declare in Since ECAs have a significant role the application form that there is no in promoting international business, involvement in bribery, and itself they also have an important role in declares that it may report suspicions combating bribery and corruption. of bribery to the legal authorities. In The ECG acknowledges this responsi- cases where the commission report- bility in an Action Statement on edly paid for a contract exceeds 5% Bribery and Officially Supported of the contract price or an amount of Export Credits. The latest version of  4,538,000, enhanced due diligence this Action Statement was negotiated will automatically take place. While all in the first half of 200621. The Action such measures are quite good, the Statement requires ECAs to take Working Group observes that various measures to deter bribery in Atradius DSB employees are not business transactions that they under any specific legal obligation to support. Applicants for ECA support report instances of foreign bribery to have, amongst others, to declare that investigative authorities. Also it notes neither they, nor anyone acting on that there are no sanctions for such their behalf (agents), have been employees failing to report cases of engaged or will engage in bribery. bribery. They are also required to disclose the amounts of commissions and fees to It is pointed out that Atradius DSB be paid in connection to a trans- does not perceive itself as an investi- action. In case of previous involve- gative agency and that it therefore ment in corruption, enhanced due does not investigate irregularities or diligence is called for. ECAs are suspicions of a criminal offence. In expected to establish procedures to case of suspicions it will not report promptly disclose to their law en- to legal authorities, but only to

10 NOTES

NLNG plus (Nigeria) 20See:http://www.oecd.org/about/ 0,2337,en_2649_34859_1_1_1_1_1,0 0.html Nigeria Liquefied Natural Gas Limited (NLNG) is a joint venture company owned by the Nigerian National Petroleum Corporation (49%), Shell (25.6%), 21 Total LNG Nigeria Limited (15%) and ENI (10.4%). This company is operating a See:http://www.oecd.org/topic/ huge natural gas processing and shipment plant at Bonny Island, generally 0,2686,en_2649_34177_1_1_1_1_ 37431,00.html referred to as the largest foreign direct investment in Sub-Saharan Africa. NLNG plus was a project involving the expansion of the facilities with two extra 22 units, generally referred to as trains. The total cost of this specific project is Credible evidence is defined as evidence of a quality, which, after estimated at US$ 2.1 billion. International bank loans for the project have been critical analysis, a court would find to supported by Export Credit Agency (ECA) guarantees or insurances totalling be reasonable and sufficient grounds US$ 620 million with an eight-year maturity period. Atradius DSB provided upon which to base a decision on the issue if not contrary evidence were cover for an amount of US$ 125 million. submitted.

While the project is said to help reduce the problem of gas flaring in 23 Nigeria’s oil sector, the project has serious local and regional environmental See: http://www.oecd.org/dataoecd/14/49/36993012.pdf impacts. The project has also been tainted by allegations of corruption by sub- contractors. To win substantial amounts of work from NLNG, including in the 24 NLNG plus project, the American company Halliburton is said to have paid US$ The Financial Times, August 7, 2006. 170 million in bribes. In the United Kingdom, the Serious Fraud Office (SFO) launched investigations24, while in France and the USA corruption allegations have been under scrutiny. Although Atradius DSB carries responsibility for this project, it is unknown whether official legal investigations have been launched from the Netherlands.

2.4

Debt and economic feature is that the support of an ECA sustainability for an export or investment deal regularly includes a so-called sover- The support of an ECA means that eign counter guarantee from the host a company exporting or investing government, pledging payment in abroad is insured against commercial case of default by a buyer in that and political risks involved in the country. ECAs have specific debt transaction. In case the counterpart in collection departments that hold sub- the host country does not pay up, the stantial leverage over governments of ECA is required to compensate the developing countries to negotiate company under the insurance and enforce repayment schemes for scheme. In exchange, and on behalf export credit debt. In the case of the of the government, the ECA takes Netherlands, Atradius Provenuen B.V. over the claim against the counterpart seems to be specifically established buyer. In this way, the result of ECA for this purpose. ECAs are thus able support is that a private risk of a to shift the original private risk of a company may well become a public company to the governments of many sector claim. developing countries. That is how ECAs have generated a substantial After a company has been compen- part of the total external official debt sated, the ECA will try to recover pay- of developing countries. > ment from the host country. A typical

> As summarised in the table below, Due to the lack of information on losses that ECAs incur. According to in 2002 some 34% of all external project data it is quite impossible to the requirements of the OECD public debt of aid receiving (develop- draw project-specific conclusions on Arrangement, these ‘expenses’ ing) countries originated from export the export credit debt accumulated should, in the long run and in combi- credit support. from the past. One may safely nation with the operation costs of assume, however, that most export ECAs, be covered by the premiums credit debt originates from 15-30 and arrear payments that they External public debt statistics 2002 years back. Thus, the amounts of receive. Unfortunately, there is no (US$ millions) debt increased tremendously due to standard accounting and reporting Aid recipients (world wide) interest accrual and fines for arrears. mechanism to verify and ensure that Multilateral 489,738 (46%) In light of the scale of the export ECAs comply with this requirement26. Bilateral 206,477 (20%) credit debt problems of many coun- What’s more, contrary to standard Export Credits 368,503 (34%) tries, both the cancellation of this corporate accounting practice, they debt, as well as the introduction of usually only monitor the net cash Total 1,064,718 (100%) measures to prevent new export costs and benefits, not the full credit debt, has become a matter of financial and operating costs. Source: External Debt Statistics 1998-2002, priority. ISBN 92-64-10621-9, OECD 2004 With the exception of Norway, all All export credit debt is classified creditor countries are reporting the as bilateral debt. Countries that cancellation of export credit debt as cannot pay their bilateral debt and Official Development Assistance Most export credit debts are wish to obtain rescheduling and (ODA) because the Development defaults from many years ago. In cancellation are forced to negotiate Assistance Committee (DAC) of the general, it is hard to obtain concrete such arrangements with the Paris OECD is allowing them to do so. data about ECA-supported projects Club, which is an informal club of 19 Although debt cancellation may be that defaulted in the past, and thus creditor countries. In line with their beneficial to development efforts of have contributed to the export credit responsibility for debt collection, countries in the South, the original debt of a country. In the Netherlands, representatives of ECAs are normally export credit support that led to Both ENDS tried to obtain a list of part of the delegations of creditor massive export credit debt was only such projects, but its request under countries to such negotiations. Any provided to back up the companies the Dutch public information disclo- heavily indebted country that needs a of industrialised countries. The sure act was rejected in court. way out for its persistent bilateral practice of reporting the cancellation Because the government promised debt problems is forced to negotiate of export credit debt as ODA, allows companies confidentiality in the past, such a solution with the Paris Club ECAs to evade their responsibility the court ruled that it couldn’t change members. It is common practice that by avoiding covering the bill for the this in retrospect. such negotiations take place behind damages and losses they incurred. closed doors. Obviously, all ECAs will Despite the fact that companies do their utmost to ensure that in- expressed approval of ex post pub- debted countries pay in full. They lishing of summary data on individual have substantial leverage to do so; export credit-supported transac- for example, by blocking new exports tions25, much of the data remains con- and investments to indebted coun- fidential. Following the request of tries. Any settlement in the Paris Both ENDS, the Dutch government Club, therefore, is the result of exten- decided to disclose (as of the 1st of sive political wheeling and dealing. July 2002) limited project information for new ECA backed projects. This Most rescheduling agreements policy, however, is not applied to pro- include a partial cancellation of the jects approved before that date. It is unpayable debt, while the repayment too early to review eventual defaults terms for the remaining debt will be amongst the ECA-supported transac- revised. Any cancellation of export tions that were approved in the last credit debt will ultimately be booked four years. by the ECA as an expense. Such ‘expenses’ are the only damages or

12 NOTES

Iraq and Nigeria 25cf. Eindrapport Werkgroep Transparantie van de Rijkscommissie voor export-, import- en investerings- In recent years (2004 & 2005) these two important oil-producing countries garanties, December 2001, Ministry concluded significant debt cancellation agreements with the Paris Club. The of Finance, EKI 2001-744 debts of both countries were mostly export credit debts originating from non- payments by dictatorial regimes (Saddam Hussain and General Abacha 26The Dutch Minister of Finance respectively). In the case of Iraq, the total debt to the Paris Club was estimated wrote in early January to the Dutch to be about US$ 37 billion, and in the case of Nigeria some US$ 30 billion. Parliament, saying that no internatio- While Iraq was offered a cancellation of 80% (US$ 30 billion), Nigeria was nal agreements have been made about the way in which the break- forced to accept a cancellation of only 60% (US$ 18 billion). Iraq is left with a even requirement of the export credit rescheduled debt of about US$ 7 billion, while Nigeria had to pay its remaining facility is calculated, nor about the debt of US$ 12 billion upfront to its creditors. way in which interest costs are asses- sed (Kamerstuk 2005-2006, 30300 V, nr. 99, Tweede Kamer). For these countries alone, a total amount of US$ 48 billion of export credit debt was cancelled. International agreements would require that this amount of damages for ECAs should be paid from premiums and arrear payments these agencies received in the past. However, nearly all these damages are reported as ODA contributions. The total annual ODA expenses of all OECD countries amount to about US$ 80 billion. Hence, the export credit debt cancellations for Iraq and Nigeria contributed to a huge inflation of the aid budgets of industrialized countries.

2.5

Human and social rights ECAs thus warn that they should stay away from interfering in policies and In general, ECAs are aware that the regulations regarding human and projects and export transactions they social rights of host countries. Also, support may have other, negative, ECAs regularly signal that their busi- sustainable-development related ness is to support domestic corpora- effects in addition to the purely tions, not to police them. In all such environmental impacts. Issues such as cases, negative impacts on human the impact on involuntary resettle- and social rights are not considered ment, indigenous peoples and cul- to be serious risks for the business of tural property have been included in the ECAs or their clients. the general category of environmental impacts in the Common Such a position has been receiving Approaches. The prevention and quite a lot of criticism. Over the mitigation of such adverse impacts by course of the years ECAs have, for ECAs is thus encouraged to be part example, provided support to many of the environmental screening of projects that resulted in involuntary projects. resettlement of many thousands of people, leaving them without access Nevertheless, ECAs tend to per- to the natural resources they de- ceive only a limited role for them- pended on for their livelihood. Often selves in the field of the protection of the support of ECAs has been a human and social rights. Often it is decisive factor to make sure that such stressed that such issues are a primary projects went ahead. While it is true responsibility of host governments. that governments have the primary >

13 > responsibility to promote and operations to the best of their ability. ensure respect and protection of In case of investment insurance, appli- human rights, the UN established that cants are also required to confirm that 2.6 companies also have a responsibility child labour or forced labour did not to promote and secure the human happen. No limitations to the right of Consultation and rights set forth in the Universal association of workers, and the right participation Declaration of Human Rights27. to collective bargaining, should have In such a context it is hard to under- occurred. Doubts about the commit- Sustainable development requires stand how ECAs would not bear res- ment to fundamental labour norms28 the involvement of all relevant ponsibility for the social and human may serve as a ground for rejecting stakeholders. The Rio Declaration rights impacts of the transactions they the application of support. So far, no on Environment and Development support. evidence of such rejections actually (UNCED, 1992) stated that: happening has emerged, and no The awareness that ECAs function information on eventual screening “Environmental issues are best as public institutions, and cannot be activities of impacts on social and handled with participation of all exempted from the legal obligations human rights is available. concerned citizens,…….” (Art 10)29. of the state they are representing, has grown over time. In this frame of Sustainable development is about the thought, ECAs are obliged to pay interactions between the public and attention to the protection of human public authorities in a democratic and social rights. While governments context, and it is about the relation- have the public responsibility to pro- ship between people and govern- mote human and social rights, it is a ments. Both governments and the matter of policy coherence that ECAs private sector increasingly recognise also try to contribute, and try to en- that development projects require sure that they do not undermine such active support of those people that policy objectives. ECAs, therefore, are directly affected. In the absence should ensure that they introduce of such support, development pro- safeguard policies which explicitly jects are likely to fail in their goals, address issues of human and social generating social conflict, undermi- rights. ning livelihoods and leaving the poor poorer. Consultations with, and parti- Many ECAs take some sort of cipation of, project-affected commu- middle position. They do not formu- nities, therefore, are important late explicit responsibilities for them- requirements to reduce the risk of selves, but rather stress the impor- failure of projects and activities tance of the companies they support supported by ECAs. to comply with principles of corporate social responsibility (CSR). These Consultation and participation ECAs may put, as a condition for their are about the reduction of political, support, that companies make refe- reputational as well as financial risks rence to the OECD Guidelines for in projects. Effective consultation is Multinational Enterprises. They see it not just about informing potentially as part of their job to encourage af-fected people. It aims to involve these business principles amongst those people in the planning of their clients, but they do not insist projects, in its implementation, its on them being complied with. management, its monitoring and its evaluation. There is an emerging The Dutch ECA takes a similar posi- consensus that affected communities tion. Applicants of Dutch ECA sup- should be recognised as rights port are required to declare that they holders, whose consent for projects are familiar with the OECD and programmes that directly impact Guidelines, and that they will apply upon their lives and livelihoods must these Guidelines in their business be obtained through negotiated,

14 NOTES

legally-binding agreements in which context of the environmental 27Recognised in the Resolution on communities are able to secure out- screening of projects. This falls well “Responsibilities of transnational cor- 30 porations and other business enter- comes that are acceptable to them . short of the requirement to facilitate prises with regard to human rights”, participation, negotiation and free, adopted in the year 2003 in the Sub- Many development agencies and prior and informed consent. Commission on the Promotion and multilateral development banks have Protection of Human Rights of the United Nations, explicit policies to promote the in- It is a requirement in the Common E/CN.4/Sub.2/2003/12/Rev.1 volvement of civil society in one form Approaches that the ECG and its or another in project planning and members have an exchange of views 28This refers to labour norms implementation. The social and envi- on its substance with appropriate mentioned in the 1997 Declaration of ronmental safeguard policies of the stakeholders on a regular basis35. the International Labour Organisation World Bank require project develop- Unfortunately, these meetings have (ILO). ers to consult with affected communi- hardly been an exchange of views, ties and to encourage their participa- but rather a place where stakeholders 29See: http://www.unep.org/ tion31. In addition, the International are expected to talk, whilst ECA Finance Corporation (IFC), the private representatives only listen. Proper 30ECAs and the Licence to Finance: sector arm of the World Bank, consultation and participation proce- Consultation, Participation and expects its clients to engage with dures would likely result in the reduc- the OECD’s Recommendation on affected communities through disclo- tion of risks, and therefore should be Common Approaches, 2006, The Corner House / ECA Watch. sure of relevant project information, considered key activities for ECAs. consultation and informed participa- Hence, it would be recommendable 31 tion32. In cases affecting indigenous that ECAs leave consultations with The World Bank policy on indigenous peoples - OP/BP 4.10, people, the IFC is expecting its project affected communities not just Indigenous Peoples - underscores the clients to foster good faith negotia- to their clients, but rather would take need for Borrowers and Bank staff to tions with, and informed participation on themselves a joint responsibility identify indigenous peoples, consult of, indigenous peoples when projects with their clients for full consultations with them, ensure that they participa- te in, and benefit from Bank-funded are to be located on their traditional to materialise in processes of partici- operations in a culturally appropriate or customary lands33. pation, negotiation and free, prior way - and that adverse impacts on and informed consent. Regular and them are avoided, or where not feasi- ble, minimized or mitigated. Some 40 major privately owned publicly transparent reporting on the commercial banks have signed on to experiences in this field would contri- 32 the Equator Principles, a benchmark bute to enhancing a meaningful level Policy on Environmental and Social Sustainability, section 3, paragraph for the financial services industry to playing field. 10. manage social and environmental issues in project finance. In their 33 endorsement of the Equator Performance Standard 7 (Indigenous Peoples), objectives, Principles, they commit to follow the para. 2. performance standards of the IFC, including the commitment to free, 34See Equator Principles, Principle 5: prior and informed consultation and Consultation and Disclosure. the facilitation of informed participation of project-affected communi- 35 34 See OECD-Document TD/ ties . ECG(2005)3, para. 17.

Unlike all these institutions, most ECAs do not yet have much reference to these issues in their policies. The Common Approaches do not mention the issue of "participation". With regard to affected communities, the word "consultation" is only brought up in the requirement of applicants for ECA-support having to report on the views of affected people in the

15 Local voices: Sakhalin Environment Watch on Sakhalin II (Russia)

Since 1994, Shell has been spearheading an oil and gas extraction project in 2.7 Sakhalin Island, a far eastern Russian territory. This development will affect the world's last 100 or so western pacific grey whales; it will destroy the marine Monitoring and compliance environment; and it will threaten the livelihood of tens of thousands of fisher- men. To avoid negative impacts on sustainable development, it is impor- Currently Shell, together with Mitsubishi, Mitsui and, recently, Gazprom, are tant that ECAs have good policies on expanding their environmental and social destruction of Sakhalin Island, with all of the above issues. Such policies further potential support from international financial institutions and ECAs. They obtain their true value only by them have started to build two pipelines in one of the most seismic regions in the being fully implemented. For that world. They will destroy the key salmon fishing area off the island by dumping purpose it is recommended that each one million tons of waste into the sea. The permanent threat of a large oil spill ECA makes its own operational in the Okhotsk and Japanese seas will be ensured by Shell's development. And, policies, clarifying how it will take all as has recently been discovered, the project's construction, involving a very concerns relevant to sustainable large influx of foreign male workers to the island, is generating a harrowing rise development into account. Such in prostitution, HIV/AIDS and violence against women. operational policies provide guidance to the staff of ECAs to diminish For this project Shell, together with Mitsui and Mitsubishi, established undesirable negative impacts. By Sakhalin Energy Investment Company LTD, registered on Bermuda Island. In making these operational policies 1998 Shell embarked on the construction of the first phase of the Sakhalin II available to the public, ECAs would project, with financial support from the European Bank for Reconstruction and enhance their accountability as public Development (EBRD) and the Japanese and US Export Credit Agencies. Not institutions. only was the Environmental Impact Assessment flawed, the company also failed to respect Russian legislation and refused to release environmental information. Operational policies provide refe- Since the construction of the platform there have been reports of a reduction in rence for a systematic monitoring saffron cod fishing that is especially important for the island's indigenous com- and evaluation of the performance of munities. ECAs. Most multilateral financial institutions have substantial experience in Now the company is expanding its operation. They are constructing two new this field and could serve as a source oil and gas platforms in the north of Sakhalin; two 800 km oil and gas pipelines of inspiration to ECAs. Regular moni- running through the whole island; a Liquid Natural Gas production plant toring and evaluation allows lessons together with an oil and LNG terminal in Aniva Bay. The company is now to be learned from past experiences. negotiating with the EBRD, US Ex-Im Bank and the Japanese Bank for The public disclosure of evaluation International Cooperation (JBIC) to secure the loan for the second phase. As reports will provide ECAs with a wel- the company so far refuses to have any meaningful dialogue with affected come opportunity to improve their people about the need for changes in the project, there is increasing frustration oversight by political authorities across the island and many people are calling for the project to be stopped and their reputation with the public completely until required changes are implemented properly. So far the only at large. The results of evaluations change from the original plan was the rerouting of the undersea pipe-line to will present welcome input to policy avoid the grey whale feeding ground. adjustments and enhanced performance targets. Source: http://www.sakhalin.environment.ru/en/ Operational policies at an ECA are essential to improve accountability to project-affected communities as well. Affected communities are to be provided with an opportunity to file complaints to an ECA in formal complaint procedures. Some ECAs36 already have a complaint mechanism, but all ECAs ought to follow this example. Complaint mechanisms for project-

16 NOTES

affected communities ensure that investigations to be conducted in a 36For example, the Japanese ECA experiences from eventual ineffective satisfactory manner, ECAs are recom- (JBIC) or the Canadian Export Development Canada (EDC). consultation efforts can be taken on mended to establish formal accounta- 37 board, and likely mistakes corrected. bility mechanisms . Under such a 37A good example of an accountabili- mechanism the experts to investigate ty mechanism is the Compliance In addition to complaint mecha- non-compliance complaints are to be Review Panel of the Asian Development Bank, cf. nisms, accountability mechanisms will independent of the management of http://www.compliance.adb.org/ greatly enhance the public govern- the ECA. The mandate of these ance of ECAs. In those cases where experts would be to establish actual 38Letter of Deputy Minister of project-affected communities feel that non-compliance of the ECA with its Economic Affairs to the Dutch their complaints do not result in operational policies, to establish the Parliament, 4 May 2001, BEB?BHI/FIB improvements that mitigate their damages resulting thereof, and to 01019100. complaints, they have to be able to issue recommendations for mitigation file formal allegations asserting how measures. To ensure its independence these complaints originate from ECAs and credibility, the accountability not complying with their own opera- mechanism has to report to the tional policies. To enable compliance supervisory board of the ECA.

Sustainable development and export credit policies 3 in the Netherlands After the OECD adopted the Guidelines for Multinational Enterprises in 2000, the Dutch government announced in May 2001 in a letter to Parliament the introduction of corporate social responsibility (CSR) concerns in its financial instruments to support Dutch companies doing business abroad38. As the export credit facility is one of the leading financial instruments, this letter, describing the fundamental policy principles of the Dutch government, also applied to the export credit facility. Until today, these principles are determining the scope of the export credit policies and sustainable development.

The fundamental assumption familiar with the OECD Guidelines for underlying all policy innovations is Multinational Enterprises, and to that the business sector has to regula- apply these Guidelines in their busi- te itself. However, in foreign markets, ness operations to the best of their especially in developing countries, it ability. Each request for support will is noted that self-regulation does not be screened on aspects of corruption, suffice. The government aims to com- on environmental impacts, and on plement this deficiency by focusing its social conditions. Space is left for dif- CSR requirements specifically on ferentiation in applying such screens, official support to business transac- depending on issues like: > tions in these countries. The policy principles require a corporate client to declare, in writing, that they are

17 > of human rights, transactions in such to obtain the contract for the 1 Leverage for policy influence, countries would be denied any export transaction, and they have to state relating to the level of government credit support. in the application form that they involvement are not involved in bribery while 2 Level of international competition The government deliberately did obtaining the contract. In case of (presence of level playing field) not assume a responsibility for the corruption, policyholders will not 3 Proportionality (administrative monitoring of, and compliance to, the be entitled to make claims under burden for companies in relation to policy requirements it announced. the insurance. total cost of project) These responsibilities were given to the implementing agencies; in other 3 Environment: What these differences in the applica- words, in the case of export credit All applications with a value tion of the said screens mean in real- support to Atradius DSB. exceeding  10 million are required ity, is not elaborated upon. to fill out a form detailing environ- Since the adoption of the OECD mental information of the trans- After 2001, the following specific Common Approaches in 2003, the action. Exemptions from this screening requirements for export policies of Atradius further evolved requirement are provided for: credit support were introduced: on some details. The implementation of the Common Approaches is ex- • All applications below  10 million • Corruption: Denial of support in plained in a specific brochure of (unless environmental impacts are case of suspicion of involvement in Atradius DSB, which is available on its obvious) corruption due to too high com- website. Similarly, a screening form is • All transactions that obtain a missions published. Both documents are contribution from ODA sources, as • Environment: Promotion and imple- available in Dutch and English39. the Netherlands Development mentation of OECD Common Atradius DSB does the appraisal on Finance Company (FMO) providing Approaches, introduction of the basis of information the applicant the ODA support will already make environmental screening, and provides in the special screening form an assessment of environmental refusal of cover in case of high for environmental impacts. Environ- impacts negative environmental impacts mental analysis of Atradius DSB is • All military transactions done parallel to the financial • All transactions involving aeroplanes Surprisingly, no screening on social screening of the projects in order • All requests for exchange rate cover conditions was introduced for export to avoid delays in overall project • All requests for guarantee cover credit support. It was noted that appraisal. A conditional promise of exporters have “no formal responsibi- cover may be provided before the All applications that included a lity” after their goods are sold. finalisation of the environmental filled out environmental information Though a responsibility is acknowl- analysis, but the issuing of a policy is form will be appraised. The majority edged in case of support for invest- not possible without the completion of applications are categorised as ments abroad, in the case of guaran- of the environmental screening. either Cat. A, Cat. B, or Cat. C, while tees or insurances, no screening on ILO several applications do not get a norms has been introduced. The Currently, the export credit facility categorisation at all. For a Cat. B 2001 introduction letter announced of the Netherlands features the classification, an additional Environ- the presentation at a later stage of following measures relating to mental Impact Statement (EIS) will be explicit screening criteria for social sustainable development: requested from the applicant. Such an issues. Currently, the website of EIS needs to describe the environ- Atradius states that in cases of invest- 1 OECD Guidelines for mental impacts, as well as the mitiga- ment insurance, applicants are re- Multinational Corporations: tion measures taken. In case of a Cat. quired to confirm in the application Applicants have to state in the A classification, a detailed Environ- form that child labour and forced application form that they are mental Impact Assessment (EIA) will labour did not happen, and also the familiar with the OECD Guidelines be requested. In such cases, the envi- rights of association and collective and that they will apply these to ronmental information, or a summary bargaining of workers have not been the best of their ability. thereof, will be made available to the limited. Another relevant norm in this public during a period of 30 days ex field is that in the case of inter- 2 Corruption: ante to the issuing of the insurance national sanctions against specific Applicants have to provide data on policy. In summary, with regard to countries on the ground of violations the amounts paid for commission environmental impacts, 5 categories

18 NOTES

of ECA-supported transactions are 39See downloads on: http://atradius. distinguished: com/nl/dutchstatebusiness/overheid/ milieu/ or http://atradius.com/nl/en/dutchstate- 1 Exempted from environmental business/government/milieu/ screening 2 Environmentally screened, but no categorization 3 Cat. C (limited environmental impacts) 4 Cat. B (substantial environmental impacts) 5 Cat. A (major adverse environmental impacts)

The decisive question to categorise applications is whether balancing positive and negative factors results in the assessment of a negative environmental impact. The factors that Atradius DSB looks at are:

• Sector • Location • Technology applied • Use of natural resources • Energy consumption • Emission of waste (air, water, soil) • Management of waste flows • Impacts on flora and fauna • Resettlement • Indigenous peoples • Cultural heritage

N.B. The key aspects of Atradius DSB policies on the environment are explained in a special brochure, available on the Atradius DSB website.

4 Transparency: Since 1 July 2002, Atradius DSB has published the following data on individual transactions, 30 days after insurance policies are issued:

• Country • Name of exporter • Investor or financier • Name of buyer • Name of eventual guarantor • Description of transaction • Maximum cover or investment amount • Result of environmental screening • Eventual additional ODA financing

All information is published on the 19 website of Atradius DSB. Recommendations for Atradius DSB to avoid negative impacts on 4 sustainable development From the overview of measures of Atradius DSB in relation to aspects of sustainable development, one may conclude that the Dutch export credit facility is in tune with the recommendations of the OECD Common Approaches. In other words, it is in harmony with the international standards of ECAs.

In reality, the record of most ECAs falls well short of the safeguard policies of most other international financial institutions. The Netherlands could make significant improvements in its policies to enhance the sustainable development impacts of ECA-supported transactions.

Recommendations: • Atradius DSB formulates an overall sustainable development policy that contains quantified policy targets and outputs • Atradius DSB produces an annual sustainability report that complements its annual report

4.1

Information disclosure website of Atradius DSB, which are Recommendations: and transparency available in English. Access to infor- • Atradius DSB formulates an mation is essential to enable all Information Disclosure Policy, which Atradius DSB publishes limited relevant stakeholders in processes of clarifies what information Atradius information on individual transactions sustainable development to partici- DSB will make available to the 30 days after issuing a policy. Also in pate in decision making. In addition, public. It should explain what kind the case of Cat. A projects, environ- access to information is critical for of information Atradius DSB is mental information, or a summary developing access to justice on issues keeping, and why specific informa- thereof, is made available to the of contention. tion is either disclosed or not. For public during a period of 30 days ex information that may be disclosed, ante to the issuance of the insurance The OECD Common Approaches it should indicate what information policy. The website of Atradius DSB also require ECAs to, at least once will be disclosed automatically on also provides the main points of its per year, make available to the public its website, and what information policies regarding CSR and environ- information on projects that have may be made available upon ment. The release of this information been classified as environmentally request only. seems to be mainly inspired by inter- sensitive. Apart from a few general • Atradius DSB makes sure that national agreements within the con- sentences in its Annual Review, stakeholders of the activities it sup- text of the OECD Common Atradius DSB does not make further ports abroad have access to its Approaches. information on environmentally sensi- information. For that reason, all tive projects available. Information on information relevant to sustainable So far, this information is only avail- the monitoring and/or evaluation of development should be made able in the Dutch language. This is in the impacts of supported transactions available in appropriate (local) contrast to many other sections of the is lacking. languages.

20 Recommendations: • Atradius DSB provides an overview 4.2 of the environmental information 4.3 that it keeps and indicates which Environment information it may share with the Bribery and corruption public. The policies of Atradius DSB regar- • Atradius DSB publishes the The policies of the Dutch export ding the environmental impacts of detailed procedures that determine credit facility on issues of bribery and supported transactions are in line with the qualification of adverse environ- corruption are quite good, and better the internationally agreed OECD mental impacts and describes the than those of most other ECAs. Common Approaches. Since February indicators used for this. Atradius DSB requires details on 2005, additional requirements regar- • Atradius DSB decides that it will commission eventually paid to obtain ding access to environmental informa- apply the environmental screening the contract for which export credit tion following the Aarhus Convention process for the complete project support is requested. Enhanced due are in force. Atradius DSB did not yet that the transaction for which diligence will automatically happen indicate what this implies for its obli- support has been requested may in all cases where the amount of gations on the publishing of environ- be part of. commission reportedly paid for the mental information that it keeps. • Atradius DSB screens adverse contract exceeds 5% of the contract Under the Aarhus Convention there is environmental impacts of all price or an amount of  4,538,000. a clear case for the publication of all transactions it receives applications However, it is noted that in the case information relating to the environ- for. of suspicions of bribery, Atradius DSB mental screening of projects. So far, employees are not required to report Atradius DSB does not screen the such instances to investigative au- environmental impacts of transactions thorities. Since Atradius DSB does not that request an exchange rate cover consider itself an investigating or a guarantee cover. It is hard to agency, cases of suspicions are only understand why such transactions reported to the Ministry of Finance. should continue to be exempted. No cases of investigation have be- Also, it is unfortunate that Atradius come public. While the policies on does not specify how it exactly bribery and corruption are good, their decides when adverse environmental implementation might be strength- impacts are absent, limited, substan- ened. tial or major. The distinction of these categories determines the categorisa- Recommendations: tion of transactions, and therefore • Atradius DSB makes it a matter of the kind of environmental information policy that any suspicion of bribery that is requested from applicants. is reported to relevant investigative authorities in the justice department. • Atradius DSB announces any referral of cases of suspected bribery to the public at large in a press release. • Atradius DSB annually reports on the results of enhanced due diligence investigations.

21 4.4 4.5 4.6

Debt and economic Human and social rights Consultation and sustainability participation Atradius DSB does not screen the Persistent debt problems are a major social conditions in transactions Atradius DSB has no policies obstacle for the sustainable develop- for which export credit support is regarding consultation and partici- ment of many developing countries. A requested. Though in 2001 screening pation, despite these issues being substantial part of the bilateral debt criteria for social issues were an- critical aspects of sustainable devel- of developing countries originates nounced, such criteria were never opment. Occasionally, consulta- from the default of export credit introduced. Atradius DSB requires tions are organised with CSOs in supported business transactions. The applicants to state that they are the Netherlands, but these are not cancellation and prevention of such familiar with and will implement the a structural element of the policy export credit debt is in the interest of OECD Guidelines on Multinational development process of the Dutch developing countries. On the other Enterprises to the best of their ability. export credit facility itself. Atradius hand, it is in the interest of the Dutch Applicants for investment insurances DSB does not require its applicants to export credit facility – like any other also need to state in the application consult with local stakeholders regar- ECA – to recover all claims, and to form that child labour and forced ding eventual impacts of the planned provide cover for as many new trans- labour did not happen, and that no transaction. Atradius DSB itself also actions as possible. In that way there limitations have been imposed on the does not include consultations with is need for a fair balance between rights of workers to organise them- local stakeholders as regular part of these sometimes opposing interests. selves and to engage in collective its review activities. bargaining. International sanctions Recommendations: against specific countries for reason Recommendations: • Atradius DSB introduces a transpar- of structural violations of human • Atradius DSB formulates a consul- ent accounting mechanism that rights will be followed. In addi- tation and participation policy that shows its compliance to the inter- tion, social issues mentioned in the facilitates access to decision- national break-even requirement, OECD Common Approaches, such as making for all relevant stake- according to which income from impacts on involuntary resettlement, holders. premiums, interest and recoveries indigenous peoples and cultural pro- • Atradius DSB requires applicants to in the long run balance the costs perty are taken into account. Though report on consultations with local and losses of the export credit it is good that applicants have to re- stakeholders in all transactions facility. spond to some questions on social requiring an environmental • To avoid the cancellation of export issues, it would be better for Atradius appraisal. credit debt to be paid from the to introduce a review of a social • Atradius DSB promotes applicants ODA budget of the government, impact assessment to be submit- to explore possibilities to negotiate Atradius DSB reserves its income ted by the applicants. Such a review legally binding agreements with to account for future losses due would complement the environmental affected communities. to agreements to cancel bilateral screening process. • Atradius DSB includes stakeholder debt. consultations as part of its moni- • Atradius DSB formulates a trans- Recommendations: toring and evaluation activities of parent policy that balances the • Atradius DSB develops a screening supported projects. (increasing) demand for export procedure for all social issues in credit support against the interest which all its screening criteria are of developing countries to avoid clarified. building up new unpayable debts. • Atradius DSB annually reports on • Atradius DSB clarifies the role and the results of the social screening function of its debt collection procedures. department and annually reports on the performance of Atradius Provenuen B.V.

22 4.7

Monitoring and compliance

Contrary to its mother company, Atradius DSB does not publish an annual report. It only publishes an annual review, which is available at its website. Atradius DSB does not publish monitoring and/or evaluation reports. Atradius DSB has no mechanism through which project-affected people could file complaints about transactions it supported.

Recommendations: • Atradius DSB publishes annual reports in which it reports on its performance, both in terms of finances as well as in terms of impacts on sustainable development dimensions. • Atradius DSB introduces and presents a manual describing all its operational policies. • Atradius DSB annually presents an overview of its monitoring and/or evaluation reports on the impacts of supported transactions. • Atradius DSB initiates a complaint mechanism for people affected by supported transactions. • Atradius DSB introduces an accountability mechanism to address claims of project-affected communities of non-compliance with its operational policies.

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