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The Legal Mandate of Multilateral Development Banks as Agents for Change Toward Sustainable Development

Published online by Cambridge University Press:  27 February 2017

Günther Handl
Günther Handl*
Affiliation:
Tulane University School of Law
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Extract

In its June 1997 review of the state of the global environment and the implementation of Agenda 21, five years after the United Nations Conference on Environment and Development (UNCED), the UN General Assembly drew a rather gloomy picture. While acknowledging that some progress toward sustainable development had been made, for example, in curbing pollution and slowing the rate of resource degradation in a number of countries, the Assembly’s report noted that, overall, trends tended toward continued deterioration. Not surprisingly, therefore, the report also reiterated Agenda 21’s call upon, inter alia, multilateral development banks (MDBs) to ensure that development funding “contribute to economic growth, social development and environmental protection in the context of sustainable development.” The report, in short, enjoined MDBs to strengthen their commitment to sustainable development.

Type
Research Article
Information
American Journal of International Law , Volume 92 , Issue 4 , October 1998 , pp. 642 - 665
Copyright
Copyright © American Society of International Law 1998

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References

1 See Programme for the Further Implementation of Agenda 21, GA Res. S-19/2, Annex (June 28, 1997), 36 ILM 1639 (1997) [hereinafter Further Implementation].

2 In shortcut fashion, the Brundtland Commission report defines “sustainable development” as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” World Commission on Environment and Development, Our Common Future 43 (1987).

3 Further Implementation, supra note 1, paras. 9–10.

4 Agenda 21, ch. 33, para. 16(a), UN Doc. A/CONF.151/26 (1992).

5 Further Implementation, supra note 1, para. 76.

6 See id., para. 128.

7 For further analysis, see infra pt. 11.4(b).

8 For example, a report of the Asian Development Bank stated in 1993: “Building national capacities to implement Agenda 21 must start with the identification of environmental priorities by governments and their integration into development plans. Only then will the Bank be able to match its set of priorities with those of DMCs [developing member countries] and come out with a specific program for assistance … .” The Bank added that to “integrate the UNCED agenda in its activities, the Bank will need to further sharpen its development objectives, tailor its operational strategies, enhance its implementation policies and procedures …. Implementing the changes necessitated by UNCED within the Bank will require internalizing the principles of sustainable development in the strategic planning process … .” Asian Development Bank [ADB], President's Office, Incorporating the UNCED Agenda in the Strategic Planning Process, paras. 10, 14 (1993).

9 See, e.g., International Institute for Environment and Development, Banking on the Biosphere? (1978); see generally Robert Wade, Greening the Bank: The Struggle over the Environment, 1970–1995, in 2 The World Bank: Its First Half Century: Perspectives 611 (Devesh Kapur, John P. Lewis & Richard Webb eds., 1997).

10 Mitsuo Sato, President of the Asian Development Bank, Statement at the 27th Annual Meeting of the Board of Governors (May 1994).

11 Barry Metzger, Opening Remarks, Seminar on Legal Aspects of Regional Cooperation, in ADB, Law And Development: Seminar Proceedings 2 (1996).

12 See ADB, Governance: Sound Development Management (Aug. 1995); ADB, Operations Manual—Bank Policies (BP): Governance, OM 54/BP, para. 4 (1997).

13 See ADB, The Bank's Medium-Term Strategic Framework (1995–1998), at 9 (1995).

14 Agreement Establishing the European Bank for Reconstruction and Development, May 29, 1990, Art. 2, para, 1(vii), 29 ILM 1077 (1990). Additionally, Article 1 of the Agreement specifically refers to the Bank's purpose as fostering “the transition towards open market oriented economies” and as promoting “private and entrepreneurial initiative in the Central and Eastern European countries committed to and applying the principles of multiparty democracy, pluralism and market economics” (emphasis added).

15 Hereinafter, unless otherwise indicated, the term “MDB” will refer to multilateral development banks other than the EBRD.

16 Another exception in this respect is the European Investment Bank (EIB), the development bank of the European Community. Article 1 of the Statute of the EIB, 298 UNTS 11, by reference to the Treaty Establishing the European Community, incorporates the goal of “sustainable development” and various environmental principles, such as the “precautionary principle,” into the matrix of criteria pursuant to which it grants development loans.

17 See, e.g., Articles of Agreement of the International Bank for Reconstruction and Development, July 22, 1944, Art. V, §10, 60 Stat. 1440, 2 UNTS 134, as amended, 16 UST 1942, 606 UNTS 294; Agreement Establishing the Inter-American Development Bank, Apr. 8, 1959, Art. VIII, §5(f), 10 UST 3029, 389 UNTS 69; Agreement Establishing the Asian Development Bank, Dec. 4, 1965, Art. 36, para. 2, 17 UST 1418, 571 UNTS 123; and Agreement Establishing the African Development Bank, Aug. 4, 1963, Art. 38, para. 2, 510 UNTS 3.

18 For details, see infra text at notes 52–60.

19 Ibrahim Shihata, Democracy and Development, 46 Int'l & Comp. L.Q. 635, 639–40 (1997), who adds that, in so doing the Bank has all along respected “the overall purposes stipulated in these Articles.”

80 See, e.g., Further Implementation, supra note 1, paras. 23–24; and United Nations Environment Programme, International Environmental Law Aiming at Sustainable Development, Position Paper (No. 97-8510, 1997).

21 Hence various proposals to amend MDBs' constituent instruments. For a call to amend the World Bank's Articles of Agreement, see, e.g., Josephine Verspaget, Report on the Activities of the Bretton Woods Institutions (World Bank and International Monetary Fund), Eur. Parl. Ass., Doc. No. 7256, at 2, para. 5 (1995) [hereinafter Council of Europe Report].

22 See, e.g., Gūnther Handl, Sustainable Development: General Rules versus Specific Obligations, in Sustainable Development and International Law 35 (Winfried Lang ed., 1995). Indeed, sustainable development has correctly been called an “amorphous and multidimensional concept.” See Ulrich Beyerlin, The Concept of Sustainable Development, in Enforcing Environmental Standards: Economic Mechanisms as Viable Means? 95, 120 (Rūdiger Wolfram ed., 1996). But see Judge Weeramantry's separate opinion in Gabčíkovo-Nagymaros Project (Hung./Slovk.), Judgment (Sept. 25, 1997), 37 ILM 162, 204 (1998).

23 As highlighted in ch. 38.2 of Agenda 21, supra note 4. See also Report of the Secretary-General, Overall Progress Achieved since the United Nations Conference on Environment and Development, UN Doc. E/CN.17/1997/2/Add.29, para. 3 (1997):

There is a growing recognition that integration and interrelation are at the heart of sustainable development. They constitute the underlying theme of the Rio Declaration and Agenda 21, and consequently of the development of international law for sustainable development. Together they reflect the interdependence of social, economic, environmental, institutional and human rights issues that define sustainable development.

See further Dominic McGoldrick, Sustainable Development and Human Rights: An Integrated Conception, 45 Int'l & Comp. L.Q. 796 (1996).

24 See GA Res. 47/190, Report of the United Nations Conference on Environment and Development, UN GAOR, 47th Sess., Supp. No. 49, Vol. 1, at 141, para. 5, UN Doc. A/47/49 (1992); and GA Res. 47/191, para. 1, id. at 141–42.

25 See, e.g., G-7 Summit Communiqué, Halifax, para. 24 (June 16, 1995) (visited Aug. 7, 1998) ‹www.library.utoronto.ca/www/g7/95promo.htm›; and Declaration of Santa Cruz de la Sierra, Summit Conference on Sustainable Development in the Americas, Santa Cruz, Bolivia, para. 3 (Dec. 7, 1996) ‹www.oas.org/EN/PROG/BOLIVIA/sumiteng.htm›.

26 Copenhagen Declaration on Social Development, World Summit for Social Development, UN Doc. A/CONF.166/9, para. 4 (1995).

27 OECD Ad Hoc Working Group on Participatory Development and Good Governance, Final Report, pt. 1, at 3 (1997).

28 Thus, the committee counts among “qualitative factors of development progress” “capacity development for effective, democratic and accountable governance, the protection of human rights and respect for the rule of law.” See OECD Development Assistance Committee, Shaping the 21st Century: The Contribution of Development Co-operation 2 (1996).

29 Further Implementation, supra note 1, para. 23.

30 Weakness Seen in China's Economic Boom, N.Y. Times, Sept. 19, 1997, at A5.

31 Shihata, supra note 19, at 642.

32 See, e.g., Making Development Sustainable: From Concepts to Action (Ismail Serageldin & Andrew Steer eds., 1994); and Council of Europe Report, supra note 21, at 134, para. 29.

33 See Agreement Establishing the EBRD, supra note 14, Arts. 1, 2.

34 See John W. Head, Supranational Law: How the Move Toward Multilateral Solutions Is Changing the Character of “International” Law, 42 Kan. L. Rev. 605, 638 (1994). Drawing on the human rights analogy, he characterizes the EBRD as a “third-generation international financial institution.” Id. at 606.

35 Indeed, there is evidence to the effect that, to date, notwithstanding its express authority, the EBRD may have been somewhat less successful in incorporating “sustainable development” concerns into its loan activities than other MDBs. See, e.g., Donald M. Goldberg et al., The European Bank for Reconstruction and Development: An Environmental Progress Report (1996).

36 See Gūnther Handl, Multilateral Development Bank Operations in Developing Member Countries: Environmental Principles and Concepts Reflecting General International Law and Public Policy (forthcoming); and Charles Di Leva, International Environmental Law and Development, 10 Geo. Int'l Envtl. L. Rev. 501 (1998).

37 See, e.g., ADB, supra note 8, at ii, para. 5; and Shihata, supra note 19, at 639.

38 For a fuller discussion of the latter point, see infra part 2.

39 See Council of Europe Report, supra note 21, para. 26.

40 See, e.g., Can. House of Commons Standing Comm. on Foreign Affairs and International Trade, From Bretton Woods to Halifax and Beyond: Towards a 21st Summit for the 21st Century Challenge 39–40 (May 1995); and Council of Europe Report, supra note 21. See also Jerome Levinson, Multilateral Financing Institutions: What Form of Accountability? 8 Am. U.J. Int'l L. & Pol'y 47, 67 (1992).

41 For example, as epitomized in Arts. IV and VI of the Agreement between the United Nations and the International Bank for Reconstruction and Development, Sept. 16 & Nov. 15, 1947, 16 UNTS 346.

42 This view has been staked out most cogently and persistently by Shihata. See, e.g., Ibrahim Shihata, The World Bank and Human Rights: An Analysis of the Legal Issues and the Record of Achievements, 17 Denv. J. Int'l L. & Pol'y 39, 46–48 (1988). See also W. Michael Reisman, Through or Despite Governments: Differentiated Responsibilities in Human Rights Programs, 72 Iowa L. Rev. 391, 395 (1987) (warning of the “limit to “institutional elasticity,” i.e., the extent to which institutions created and still used for other purposes can be ‘stretched’ in order to get them to perform human rights functions, especially when those functions are accomplished at the expense of their manifest functions”).

43 For some very pertinent observations on the phenomenon of globalization and its implications for international law, see generally Symposium: The Changing Structure of International Law Revisited, 8 EUR. J. INT'L L. 399 (1997) (with contributions by Charles Leben, W. Michael Reisman, Serge Sur and Philip Alston). See also Richard A. Falk, Environmental Protection in an Era of Globalization, 6 Y.B. INT'L ENVTL. L. 3 (1995).

44 For example, a 1944 U.S. Treasury analysis of the “exclusively economic considerations” clause in the proposed draft articles for the yet to be established “International Bank for Reconstruction and Development” emphasizes that “no loan can be made to a country for other than purely economic purposes, and the standards which prospective borrowers must meet are those which protect the economic interest of lender and borrower.” U.S. Treasury, Questions and Answers on the Bank for Reconstruction and Development (Feb. 24, 1944), quoted in Ibrahim Shihata, The World Bank and “Governance” Issues in Its Borrowing Members [hereinafter Shihata, “Governance”], in The World Bank in a Changing World: Selected Essays 53, 72–74 (1991) [hereinafter Shihata, Essays].

45 In other words, it cannot be the task or legitimate function of MDBs to use development projects in DMCs as a vehicle to force changes in the general political climate of the borrowing country.

46 On the other hand, as Bleicher reminds us, “[t]he functionalist strategy does not demand that every functional agency be neutral in every political context for all time.” Samuel A. Bleicher, UN v. IBRD: A Dilemma of Functionalism, 24 Int'l Org. 31, 46 (1970). Indeed, MDBs would have every reason to support, to the extent possible, both international legal standards and public policy. See, e.g., Can. House of Commons Standing Comm. on Foreign Affairs and International Trade, supra note 40, at 38–39 (stressing that [the Bretton Woods institutions] as specialized agencies of the UN, … should recognize and make every effort to uphold UN standards and goals”).

47 See also Council of Europe Report, supra note 21, para. 20.

48 For details, see infra sec. 4(c).

49 For further discussion, see infra text at notes 111–19.

50 See Tunis-Morocco Nationality Decrees, 1923 PCIJ (ser. B) No. 4, at 24 (Advisory Opinion of Feb. 7), in which the Permanent Court of International Justice faced a closely analogous issue, the scope of domestic jurisdiction. The Court held that “[t]he question whether a certain matter is or is not solely within the jurisdiction of a State is an essentially relative question; it depends upon the development of international relations.”

For the very similar, persuasive argument that the prohibition in the respective articles of agreement against interference in “political affairs” and against decisions based on “the political character” of member states is of limited utility vis-à-vis claims that MDBs should not ignore violations of fundamental international legal norms, see Bleicher, supra note 46, at 41–42.

51 See infra sec. 5.

52 Edward S. Mason & Robert E. Asher, The World Bank Since Bretton Woods 481 (1973).

53 See generally Robert L. Ayres, Banking on the Poor: The World Bank and World Poverty (1983).

54 International Institute for Environment and Development, supra note 9, at 2.

55 Quite apart from bank monitoring and evaluation of compliance with noneconomic project conditionalities, an issue that had arisen earlier in the context of the World Bank's financing of the Polonoroeste project in northwest Brazil in the early 1980s. For details, see Bruce Rich, Mortgaging the Earth: The World Bank, Environmental Impoverishment, and the Crisis of Development 120–35 (1994); and Wade, supra note 9, at 637–64.

56 In its highly critical review of these projects, the Morse Commission castigated the Bank for failing to heed the self-evident truth that, “by factoring in and allowing for human and environmental considerations at the outset, projects can be substantially improved.” Sardar Sarovar, The Report of the Independent Review 354 (1992) (emphasis added). Similarly, the report of the World Bank's 1992 Portfolio Management Task Force identified institutional weaknesses in borrower countries as a major factor underlying the declining performance of the World Bank's loan portfolio. See Willi Wapenhans et al., Report of the Portfolio Management Task Force—Effective Implementation: Key to Development Impact 5, 24 (July 1, 1992). In response, the Bank acknowledged that improvement in the quality of the Bank's portfolio depended, inter alia, on effectively addressing the issues of public participation and involvement of nongovernmental organizations. See World Bank, Operations Policy Department, Portfolio Management: Next Steps—A Program of Actions 1, para. 2 (July 22, 1993).

Shihata, “Governance,” supra note 44, at 70. Also, “political events which have a bearing on the economic conditions of a member or on the member's ability to implement a project or the Bank's ability to supervise the project, may be taken into consideration by the [Bank's] Board.” Ibrahim Shihata, Prohibition of Political Activities Under the IBRD Articles of Agreement and Its Relevance to the Executive Directors, §M87–1409, at 8, quoted in The World Bank and Human Rights, in Shihata, Essays, supra note 44, at 97, 106–07. See also Legal Opinion by the Senior Vice President and General Counsel, Prohibition of Political Activities in the Bank's Work (July 11, 1995).

58 ADB, Operations Manual—Bank Policies (BP): Governance, OM 54/BP, para. 12 (1997). See also ADB, Compatibility of the Board Paper on Governance with the Bank's Charter: Legal Opinion of the General Counsel, §M46-95, para. 7 (Aug. 17, 1995): “It must be recognized, however, that the Charter does not prohibit recognition of the fact that economic considerations encompass the effects of non-economic factors, including social and institutional factors which directly relate to the effectiveness and efficiency of economic programs.”

59 For details, see infra sec. 4(b).

60 Thus, the EBRD's environmental policy statement bluntly acknowledges that “sustainable development is a fundamental aspect of sound business management and that the pursuit of economic growth and healthy environment are inextricably linked.” European Bank for Reconstruction and Development, Environmental Procedures 28 (rev. Sept. 1996).

61 See, e.g., Bank Assails Waste and Inequality in East Asia, Fin. Times (London), Aug. 27, 1997, at 3, which states:

“An increase in inequality is not only likely to slow down the rate of poverty reduction, but is also damaging in its own right, given the value that east Asian societies place on social cohesion, relative income equality and parity of opportunities.” … It may hamper economic growth by impeding the development of capital markets and through increased voter support for inefficient redistributive policies.

62 Thus, it has been noted that “[b]oth [Bretton Woods] institutions now contend that corruption and bad governance are in themselves obstacles to economic development, as are poor education, inadequate infrastructure and an ineffective health care system, all of which they have previously accepted as within the scope of their responsibility.” 2 Global Lenders Use Leverage to Combat Corruption, N.Y. Times, Aug. 11, 1997, at A4. Indeed, in the aftermath of the “Asian crisis,” the Asian Development Bank recently adopted a new anticorruption policy as part of its key conditionalities for lending to DMCs. See Asian Bank Unveils Tough Corruption Policy, Fin. Times, July 9, 1998, at 6.

65 Some of these human rights concerns have found expression in MDBs' operational policies or directives on such matters as poverty reduction, disclosure of information/access to information, public participation, indigenous people, “women in development” and involuntary resettlement. For a fuller account, see, e.g., Shihata, The World Bank and Human Bights, supra note 57, at 109–32. See also John Dixon & Andrew Steer, The World Bank and the Environment: A Fourfold Agenda, in Making Development Sustainable, supra note 32, at 25.

64 See, e.g., Can. House of Commons Standing Comm. on Foreign Affairs and International Trade, supra note 40, at 39: “[T]he Committee believes that there is a growing case for the [international financial institutions] to become more involved, in a frank and open way, in issues of whether international human rights standards—including of democratic expression—are being observed … .” See also Council of Europe Report, supra note 21, at 25, para. 73:

The rapporteur believes that the [World] Bank should broaden its understanding of the “good governance” concept, in particular as concerns the legal framework for development. In addition to its core interests in issues such as human resource development, institution-building and economic regulation, the World Bank should pay more attention to subjects such as (excessive) military expenditure, or basic economic and social rights.

See generally Pearson Nherere, Conditionality, Human Rights and Good Governance: A Dialogue of Unequal Partners, in Sustainable Development and Good Governance 289 (Konrad Ginther, Erik Denters & P.J. I. M. de Waart eds., 1995).

65 See, e.g., Shihata, supra note 19; James C. N. Paul, The United Nations and the Creation of an International Law of Development, 36 Harv. Int'l LJ. 307, 317–19 (1995); and Robert W. Kneller, Human Rights, Politics, and the Multilateral Development Banks, 6 Yale Stud. World Pub. Ord. 361, 421 (1980).

66 Shihata, “Governance,” supra note 44, at 93.

67 As to the crucial importance of “civil society” to lasting and successful social development, see, e.g., Report of the Secretary-General, Development and International Economic Cooperation, UN Doc. A/48/935, paras. 107–09 (1994). See also Robert D. Putnam, Making Democracy Work: Civic Traditions in Modern Italy (1993).

68 These essential aspects of “good governance” have been rightly labeled core elements of the emerging law of sustainable development. See International Committee on Legal Aspects of Sustainable Development, First Report, in 66 International Law Association, Conference Report 111, 132 (1994).

69 Indeed, recent events in Southeast Asia prove the point that economic reform without political reform, including in particular attention to the political realization of these cardinal aspects of good governance, cannot succeed in the long run. For a perspicacious analysis, see, e.g., And Now the Political Fall-out, Economist, Jan. 17, 1998, at 33–34; and James Wolfensohn, Asia: The Long View, Fin. Times, Jan. 29, 1998, at 10. In this vein, Malaysia's Deputy Prime Minister Anwar Ibrahim recently acknowledged that “[t]he great lesson we have learned, which is actually a major transformation and a revolution by itself, is that [the present crisis] has called for greater transparency, greater accountability and greater democracy.” See Transparency Key to Silver Lining in Asia's Eco Turmoil, Philippine Star, Mar. 12, 1998, at 34.

70 ADB African Advisory Council, Recommendations: The Democratization Process in Africa, Governance and the Role of the African Development Bank 10–11 (Report No. 1, January 1994).

71 Some would add the qualification “significant” to “direct economic effects.” See The World Bank and Human Rights, in 2 Shihata, supra note 44, Selected Essays and Lectures 567, 576 (1994).

72 Indeed, critics of MDBs concede that some international financial institutions, such as the World Bank, “recognize human rights concerns de facto if not de iure.” James C. N. Paul, The Human Right to Development: Its Meaning & Importance, 25 J. Marshall L. Rev. 235, 259 (1992).

73 See infra sec. 4(a) – (b).

74 See infra sec. 4(c).

75 See Peter Sand, The Potential Impact of the Global Environment Facility of the World Bank, UNDP and UNEP, in Enforcing Environmental Standards, supra note 22, at 479.

76 See Agreement between the Executive Committee of the Interim Multilateral Fund for the Implementation of the Montreal Protocol and the International Bank for Reconstruction and Development (World Bank) (entered into force Aug. 7, 1991), para. 1: “In performing its functions under these arrangements, the World Bank will act through the OTF [Ozone Projects Trust Fund] and will apply only those considerations relevant to effective and economically efficient programmes and projects which are consistent with criteria adopted by the Parties and guidelines adopted by the Executive Committee.” 30 ILM 1773, 1774 (1991).

77 As to the crucial terms of reference, see Report of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer, Doc. UNEP/OzL.Pro.4/15, Annex IX, para. 3 (1992): “Implementing agencies shall apply only those considerations relevant to effective and economically efficient programmes and projects which are consistent with any criteria adopted by the Parties.”

78 See Instrument for the Establishment of the Restructured Global Environment Facility, Mar. 16, 1994, para. 22, 33 ILM 1273 (1994) [hereinafter GEF Instrument]. For further details, see Laurence Boisson de Chazournes, Le Fonds pour l'environnement mondial: Recherche et complete de son identité, 41 Annuaire Français de Droit International [AFDI] 612 (1995).

79 See World Bank resolutions of the Executive Directors Nos. 94–2, 94–3 (May 24, 1994)—approving the restructured GEF Instrument—and of the Board of Governors No. 487 (July 7, 1994)—approving the revised ozone trust fund resolution, cited in Sand, supra note 75, at 484 n.22.

80 “To the extent that the GEF operates a funding mechanism for global environmental conventions, the Implementing Agencies will focus on joint programming and implementation with eligible countries … of the program priorities and criteria adopted by the Conference of the Parties to each Convention.” GEF Instrument, supra note 78, Annex D, para. 5.

81 Sand, supra note 75, at 496.

82 The possibility of such a relationship is specifically envisaged in, for example, GEF Council Decision on World Bank Accountability for Executing Agency Activities, Appendix to Chairs' Joint Summary, GEF Council Meeting, Doc. GEF/C.5, para. 13 (July 1995). The regional development banks “are requested to incorporate GEF-related concerns into their regular programs of assistance.” See further ADB, Office of the Environment, A Strategic Framework for Post-UNCED Environmental Action 12–23, paras. 42–43 (Aug. 1993).

To date, the Inter-American Bank (IDB) has “administered” GEF funds in connection with a single project in Costa Rica that was cofinanced with the World Bank. But the IDB's involvement was not based on a formal “executing agency” agreement with the World Bank. Similarly, in 1994 the Asian Development Bank took on the functions of executing agency vis-à-vis UNDP with respect to a single three-year “Asia Least-cost Greenhouse Gas Abatement Strategy (ALGAS) Project.” For details on the latter, see ADB, UNDP & GEF, algas in Kyoto: What It Means to the Third unfccc Conference of the Parties (1997). At present, the World Bank and the ADB are discussing the terms of a Memorandum of Agreement under which the ADB would act as executing agency on behalf of the World Bank in the administration of GEF funds for the development of a sustainable management and biodiversity conservation system for the Sundarbans region of Bangladesh.

83 Sand, supra note 75, at 496 n.85. Indeed, in offering this conclusion, Sand proceeds from the assumption of the existence of such arrangements or understandings, which, however, have yet to materialize, at least as formal agreements.

84 See Report of the Parties, supra note 77, Annex IX, Art. 4(d): “Other agencies, in particular regional development banks, shall also be invited by the Executive Committee to cooperate with and assist it in carrying out its functions.” To date, however, no regional MDB has acted in this capacity on behalf of the Montreal Protocol's Executive Committee.

85 On the complexity of these arrangements and their proper legal classification, see Jacob Werksman, Consolidating Governance of the Global Commons: Insights from the Global Environment Facility, 6 Y.B. Int'l Envtl. L. 27 (1995).

86 For a classic narrow definition, see, e.g., Sir Percy Spender's dissenting opinion in Temple of Preah Vihear (Cambodia v. Thail.), 1962 ICJ Rep. 6, 143–44 (June 15):

[As an international legal principle, estoppel] operates to prevent a State contesting … a situation contrary to a clear and unequivocal representation previously made by it to another State, either expressly or impliedly, on which representation the other State was, in the circumstances, entitled to rely and in fact did rely, and as a result that other State has been prejudiced or the State making it has secured some benefit or advantage for itself.

87 See generally Jorg Paul Müller, Vertrauensschutz im Vülkerrecht (1971); and Wolfram Karl, Vertrag uno spätere Praxis im Völkerrecht 156–57 (1983).

88 See Executive Directors Resolution No. 94–2, supra note 79, para. 1.

89 For a discussion, see infra sec. 4(c).

90 Interpretation of the Agreement of 25 March 1951 between the WHO and Egypt, 1980 ICJ Rep. 73, 89–90 (Advisory Opinion of Dec. 20).

91 Felice Morgenstern, Legal Problems of International Organizations 32 (1986). See also Michel Virally, L'O.N.U. devant le droit, 99 Journal du Droit international 501 (1972).

92 Mahnoush H. Arsanjani, Claims Against International Organizations: Quis custodiet ipsos custodes, 7 Yale J. World Pub. Ord. 131, 134 (1981). See also Henry G. Schermers & Niels M. Blokker, International institutional Law 988 (3d ed. 1995): “International custom will apply as much to international organizations as it does to states.” For an analysis of the theoretical justification of this “extension” of the rules of general international law to international organizations, see, e.g., Albert Bleckmann, Zur Verbindlichkeit des allgemeinen Völkerrechts für intemationale Organisationen, 37 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 107 (1977).

93 See Reparation for Injuries Suffered in the Service of the United Nations, 1949 ICJ Rep. 174, 179 (Advisory Opinion of Apr. 11).

94 Although in general an international organization is likely to be established by treaty, this need not be the case in every instance, as the “constituent instrument” might be a resolution of a conference of states or “a uniform practice.” For details, see Ian Brownlie, Principles of Public International Law 683 (4th ed. 1990).

95 See Ignaz Seidl-Hohenveldern & Gerhard Loibl, Das Recht der Internationalen Organisationen, einschuesslich der Supranationalen Gemeinschaften 43 (6th ed. 1996).

96 1949 ICJ Rep. at 180 (emphasis added).

97 See, e.g., Marshall Kaplan, Whither or Whether the MDBs: The Future of the Multilateral Development Banks, in Center for Strategic and International Studies, Background Papers Prepared for the Task Force on the United States and the Multilateral Development Banks 135 (1997), who, speaking of the World Bank, suggests that economic development and changing economic climates “appear to remain the Bank's principal overriding motivation.” Id. at 137. See also Rich, supraaote 55, at 314–15; and Catherine Caulfield, Masters of Illusion: The World Bank and the Poverty of Nations (1996).

98 See Mason & Asher, supra note 52, at 481.

99 See, e.g., ADB, supra note 13, at 9–10, paras. 22–23.

100 Stockholm Declaration, June 16, 1972, Principle 25, 11 ILM 1416 (1972).

101 World Commission on Environment and Development, supra note 2, at 312.

102 See Agenda 21, supra note 4, Preamble, para. 1.3.

103 GA Res. 47/191, supra note 24, para. 23.

104 Copenhagen Declaration on Social Development, supra note 26, Commitment 2, para, (h).

105 G-7 Summit Communiqué, supra note 25, para. 26.

106 Further Implementation, supra note 1, para. 81.

107 See, e.g., id., para. 87; and Chairman's Summary, Fourth Expert Group Meeting on Financial Issues of Agenda 21, Finance for Sustainable Development: The Road Ahead, paras. 38–42 (Jan. 1997).

108 See, e.g., UN Economic and Social Council for Asia and the Pacific, Ministerial Declaration on Environmentally Sound and Sustainable Development in Asia and the Pacific, UN Doc. ST/ESCAP/1653, para. 5 (Nov. 28, 1995).

109 For example, the Chairman's Summary of the High-Level Segment of the Fourth Session of the Commission on Sustainable Development notes that “[p]articipants encouraged … intergovernmental bodies, especially the Bretton Woods institutions … , to ensure that sustainable development issues were taken into consideration in a systemic and consistent manner.” See UN Commission on Sustainable Development, Report on the Fourth Session, ch. II, para. 37, UN Doc. E/1996/28, E/CN.17/1996/38 (emphasis added).

110 In an analogous context, EU environmental ministers recently urged the European Commission to draft a code of conduct for banks and insurers requiring small as well as medium-sized companies seeking their services to meet European environmental standards. Sec Fin. Times, Apr. 21, 1997, at 2.

111 For further discussion, see infra text at notes 152–55.

112 ADB, supra note 82, at 1, para. 3. The document goes on to note that “[t]he several conventions and commitments made at UNCED place obligations and demands on individual member countries … and, through them, on multilateral development institutions, such as the Bank.” Id., para. 4. Similarly, the EBRD's statement, Agenda 21—the EBRD's Response, expressly recognizes that Agenda 21 has direct implications for multilateral financial institutions. See also Lewis T. Preston's speech at the Rio Conference, “Reducing Poverty and Protecting the Environment: A Call to Action,” in which the former President of the World Bank acknowledged that “ [international institutions can and must play a leading role in bringing about a new era of international cooperation for sustainable development.”

113 As to the notion of so-called peremptory norms of international law or jus cogens—norms from which no derogation is permitted and that prevail over or invalidate any other conflicting rules of international law—see Article 53 of the Vienna Convention on the Law of Treaties, May 23, 1969, 1155 UNTS 331. As to the function and applicability of jus cogens, see further Gordon A. Christenson, Jus Cogens: Guarding Interests Fundamental to International Society, 28 Va. J. Int'l L. 585 (1988).

114 Of course, Article 31, paragraph 3(c) of the Vienna Convention on the Law of Treaties refers to “any relevant rules of international law applicable in the relations between the parties,” together with a treaty's context, as a means for interpreting that treaty. However, given the express limits stipulated in the constituent treaties, only a peremptory norm of international law (or subsequent practice modifying the instrument, see infra) could force a different interpretation of these provisions.

115 At the very least, it remains unclear whether today any one of the normative strands of “sustainable development” could as yet be characterized as reflecting peremptory rules of international law. On this point, see, e.g., Gabčikovo-Nagymaros Project, supra note 22, para. 112: “Neither of the Parties [to the dispute before the Court] contended that new peremptory norms of environmental law had emerged since the conclusion of the 1977 Treaty … .” But see J. Lücke, Universales Verfassungsrecht, Völkerrecht und Schutz der Umwelt, 35 Archiv des Völkerrechts 1, 14–16 (1997).

116 For a pertinent statement on the operation of the principle of modification by subsequent practice, see Case Concerning the Interpretation of the Air Transport Services Agreement between the United States of America and France (Fr./U.S.), 16 R.I.A.A. 5, 62–63 (1963):

[Subsequent] conduct may, in fact, be taken into account not merely as a means useful for interpreting the Agreement, but also as something more: that is, as a possible source of a subsequent modification, arising out of certain actions or certain attitudes, having a bearing on the juridical position of the Parties ….

It is true that Article 31, paragraph 3(b) of the Vienna Convention on the Law of Treaties recognizes the relevance of “subsequent practice” only for the purpose of “establishing the agreement of the parties regarding the interpretation of the treaty or the application of its provisions.” In other words, the provision envisages recourse to subsequent practice only for the purpose of establishing the intention of the parties at the time of the conclusion of the treaty. The Convention thus does not feature a provision on subsequent practice modifying a treaty. Furthermore, the Conference on the Law of Treaties expressly rejected the International Law Commission's draft Article 38 (which would have expressly recognized the possibility of such “tacit” modification through subsequent practice) on the grounds that such a provision might produce unpredictable effects, and hence cause instability in the law of treaties. See Richard D. Kearney & Robert E. Dalton, The Treaty on Treaties, 64 AJIL 495, 525 (1970). However, the conference's decision to delete the provision on “modification by subsequent practice” does not necessarily imply a rejection of tacit or informal treaty modification through subsequent practice as a generally valid concept of international law. See, in particular, Karl, supra note 87, at 295. See also Brownlie, supra note 94, at 626; and Giovanni Distefano, La Pratique subsequent des Etats parties a un traité, 40 AFDI 41, 57–67 (1994); Restatement (Third) of the Foreign Relations Law of the United States §334 reporters' notes 2, 4 (1987); and Myres S. McDougal, Harold D. Lasswell & James C. Miller, The Interpretation of Agreements and World Public Order 143–44 (1967) (noting that “[i]n a given case any factor, including the subsequent actions of the parties, may be of paramount importance in determining the relevant expectations” and that such evidence should override evidence of the parties' expectations at the time of the conclusion of the treaty).

117 See supra pt. 11(1).

118 See Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council resolution 276 (1970), 1971 ICJ Rep. 16, 31, para. 53 (Advisory Opinion of June 21). See also Gabčikovo-Nagymaros Project, supra note 22, paras. 111–13.

119 On this point, see again the Reparations for Injuries Advisory Opinion, 1949 ICJ Rep. 174.

120 World Bank, Operational Manual Statement (OMS) 2.36, Environmental Aspects of Bank Work, para. 9(e) (1984). At the same time, the World Bank has begun to promote global environmental policy objectives—“global overlays”—in assisting borrowing countries in drafting national strategies for sustainable development. According to Andrew Steer, then director of the World Bank's Environment Division, such “global overlays are essential if countries take seriously their commitments to international treaties such as the Montreal Protocol on Substances that Deplete the Ozone Layer.” 18 Int'l Env't Rep. (BNA) 760 (1995).

121 See, e.g., the decision in Nuclear Tests (Austl. v. Fr.; NZ v. Fr.), 1974 ICJ Rep. 253 & 457, respectively (Dec. 20), which, mutatis mutandis, also applies to unilateral undertakings by international organizations.

It is well recognized that declarations made by way of unilateral acts, concerning legal or factual situations, may have the effect of creating legal obligations… . When it is the intention of the State making the declaration that it should become bound according to its terms, that intention confers on the declaration the character of a legal undertaking ….

Id. at 267, para. 43, & 472, para. 46, respectively. Or, as Brownlie, supra note 94, at 638, puts it: “A state [or, by analogy, an international organization] may evidence a clear intention to accept obligations vis-à-vis certain other [international legal subjects] by a public declaration which is not an offer or otherwise dependent on reciprocal undertakings from the states concerned.” See also Eric Suy, Les Actes juridiques unilatéraux en droit international public (1962); Gian Carlo Venturini, La Portée et les effets juridiques des attitudes et des actes unilatéraux des Etats, 112 Recueil des Cours 363, 400 (1964 II); Müller, supra note 87, at 20; and Alfred P. Rubin, The International Legal Effects of Unilateral Declarations, 71 AJIL 1 (1977).

122 For a characterization of the process by which provisions of a treaty pass into the body of international customary law, see North Sea Continental Shelf (FRG v. Den.; FRG v. Neth.), 1969 ICJ Rep. 3 (Feb. 29). See also Article 38 of the Vienna Convention on the Law of Treaties, supra note 113; and the essentially identical text of Article 38 of the Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations, Mar. 21, 1986, 25 ILM 543 (1986): “Nothing … precludes a rule set forth in a treaty from becoming binding upon a third State or a third organization as a customary rule of international law, recognized as such.”

123 In other words, they generally preclude participation by international organizations on an equal footing with states (except for the cases noted in the following note); nor do they provide for a “third-party approach” under which the agreement would be open to ratification or accession by states only, but organizations would be invited to formally adopt a decision to implement the agreement once it enters into force for states. An example of the latter approach is Article 90 of the 1975 Convention on the Representation of States in Their Relations with International Organizations of a Universal Character, Mar. 14, 1975, 69 AJIL 730 (1975).

124 See, e.g., Convention on Biological Diversity, June 5, 1992, Art. 35, 31 ILM 818 (1992); UN Framework Convention on Climate Change, May 9, 1992, Art. 22, id. at 849; and UN Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, particularly Africa, June 17, 1994, Art. 33,33 ILM 1328 (1994). Similarly, the UN Convention on the Law of the Sea does not envisage participation in the Convention by international financial institutions. Instead, it makes room only for participation by international organizations “constituted by States to which its member States have transferred competence over matters governed by this Convention, including the competence to enter into treaties in respect of these matters.” See United Nations Convention on the Law of the Sea, opened for signature Dec. 10, 1982, Art. 305, para. 1(f), and Annex IX, Art. 1, UN Doc. A/CONF.62/122 (1982), reprinted in United Nations, Official Text of the United Nations Convention on the Law of the Sea with Annexes and Index, UN Sales No. E.83.V.5 (1983).

125 See Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations, supra note 122, Art. 34: “A treaty does not create either obligations or rights for a third … organization without the consent of that …organization.”

126 Thus, the International Court of Justice noted that, apart from obligations arising under general international law and the constitution of the organizations concerned, the obligations of international organizations as subjects of international law also encompass those arising “under international agreements to which [these organizations] are parties.” See Interpretation of the Agreement of 25 March 1951 between the WHO and Egypt, 1980 ICJ Rep. 73, 89–90, para. 37 (Advisory Opinion of Dec. 20) (emphasis added).

127 Decision 1983/11, para. 11, UN Doc. A/C.6/38/4, Annex (1983).

128 See, e.g., Judgment of the Court of Justice of the European Communities in Case 4/73, J. Nold, Kohlen-und Baustoffgrosshandlung v. Commission, 1974 ECR 491, 507: “international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories, can supply guidelines which should be followed within the framework of Community law” (emphasis added). See generally Christoph Schreuer, Die Bindung Internationaler Oganisationen an völkerrechtliche Verträge ihrer Mitgliedstaaten, in Völkerrecht zwischen normativem Anspruch und politischer Realität: Festschrift für Karl Zemanek zum 65. Geburtstag 223, 239 (K. Ginther et al. eds., 1994).

Exceptionally, however, namely with regard to the GATT, the European Community as functional successor to its member states had accepted that the Community was bound by GATT law, even though the EC itself—prior to becoming a party to the WTO—had not been a party to GATT. See, e.g., Joined Cases 21–24/72, International Fruit Co. v. Produktschap voor Groenten en Fruit, 1972 ECR 1219.

129 For details, see John W. Head, Evolution of the Governing Law for Loan Agreements of the World Bank and Other Multilateral Development Banks, 90 AJIL 214, 226–30 (1996).

130 EBRD, Standard Terms and Conditions §8.04(b)(v), para. (A) (Mar. 1994).

131 Schermers & Blokker, supra note 92, at 984.

132 Id. at 983.

133 Thus, Article 35 of the Convention, supra note 122, stipulates that a treaty obligation arises for a third organization only “if the parties to the treaty intend the provision to be the means of establishing the obligation and the … third organization expressly accepts that obligation in writing” (emphasis added).

134 There is growing acceptance among commentators of the existence of international practice supporting such a concept of “universal international law,” i.e., treaty provisions whose global normative reach cannot be explained in terms of treaty law proper, or of customary law in the traditional sense. See, in particular, Christian Tomuschat, Obligations Arising for States without or against Their Will, 241 Recueil des Cours 195, 269–71 (1993 TV); Christian Tomuschat, Völkerrechtlicher Vertrag und Drittstaaten, 88 Berichte der Deutschen Gesellschaft für Völkerrecht 9, 36–37 (1988); and Jonathan I. Charney, International Lawmaking in the Context of the Law of the Sea and the Global Environment, in Trilateral Perspectives on International Legal Issues: Relevance of Domestic Law and Policy 13, 18 (Michael K. Young & Yugi Iwasawa eds., 1996) [hereinafter Charney, International Lawmaking], who claims that “[m]uch of contemporary international law of the environment and of the sea is based on general international law.” This general international law is neither “treaty-based” nor “really customary-based.”

See also Günther Handl, Regional Agreements and Third State Vessels: Is the Pacta Tertiis Principle Being Modified? in Competing Norms in the Law of Marine Environmental Protection—Focus on Ship Safety and Pollution Prevention 217 (Henrik Ringbom ed., 1997); Malgosia Fitzmaurice, Modifications to the Principle of Consent in Relation to Certain Treaty Obligations, 2 Aus. Rev. Int'l & Eur. L. 275 (1997); Louis Henkin, Human Rights and State Sovereignty, 25 Ga. J. Int'l & Comp. L. 31, 37–38 (1995); Bruno Simma, From Bilateralism to Community Interest in International Law, 250 Recueil des Cours 217, 331–34 (1994 VI); Jonathan I. Charney, Universal International Law, 87 AJIL 529 (1993); Christine M. Chinkin, Third Parties in International Law 144 (1993); Geoffrey Palmer, New Ways to Make International Environmental Law, 86 AJIL 259, 278 (1992); 1 Oppenheim's International Law 1264 (Robert Y. Jennings & Arthur Watts eds., 9th ed. 1992); and Alain Pellet, The Normative Dilemma: Will and Consent in International Law-Making, 12 Austl. Y.B. Int'l L. 22, 35 (1992). See further Schreuer, supra note 128, at 249; Antonio Cassese & Joseph Weiler, Change and Stability in International Law-Making 102–36 (1988); and Hermann Mosler, The International Society as a Legal Community 17–20, 139 (1980).

135 Whether such multilateral “lawmaking” treaties can create obligations for “third states” or “third organizations” is clearly separate from, though related to, whether the provisions are themselves of a peremptory nature, i.e., whether they are norms that cannot be limited or derogated from by agreement among states in their relations with each other.

136 See, e.g., Oscar Schachter, Entangled Treaty and Custom, in International Law at a Time of Perplexity: Essays in Honour of Shabtai Rosenne 717, 733–35 (Yoram Dinstein ed., 1989); and Schreuer, supra note 128, at 249.

137 See Schermers & Blokker, supra note 92, at 986–87; and Lücke, supra note 115, at 13–14. Bleckmann, for example, explains the third-party effect of such multilateral treaties in terms of the operation of the principle pacta sunt servanda: “As the keystone to the whole of public international law, this principle protects the essential common interests of the public international community and is therefore binding on all States.” Albert Bleckmann, General Theory of Obligations under Public International Law, 38 Ger. Y.B. Int'l L. 26, 35 (1995).

138 Chamey, International Lawmaking, supra note 134, at 18.

139 See, in particular, W. Michael Reisman, International Lawmaking: A Process of Communication, 75 ASIL Proc. 101 (1981); Rosalyn Higgins, International Law and How We Use It 20–22 (1994); and 1 Harold D. Lassweix & Myres S. McDougal, Jurisprudence for a Free Society 163–64 (1992).

140 For a reminder that “[a] body of detailed rules is not to be looked for in customary international law which in fact comprises a limited set of norms for ensuring the co-existence and vital co-operation of the members of the international community,” see, e.g., Delimitation of the Maritime Boundary in the Gulf of Maine Area (Can. v. U.S.), 1984 ICJ Rep. 244, 299, para. 111 (Oct. 12). For a thorough analysis of the inadequacies of customary international law as the legal basis for detailed, technical regulatory objectives, see Bernard H. Oxman, The Duty to Respect Generally Accepted International Standards, 24 N.Y.U. J. Int'l L. & Pol. 109, 116–21 (1991).

141 See Convention on Biological Diversity, supra note 124, Art. 21.

142 See Framework Convention on Climate Change, supra note 124, Art. 11.

143 See Convention to Combat Desertification, supra note 124, Art. 21, para. 4.

144 Id., Art. 21, para. 2; see also Art. 20, paras. 2, 4.

145 For a recent analysis of the increasing problem of conflicting global and regional environmental regimes, see, e.g., Ben Boer, Ross Ramsay & Donald R. Rothwell, International Environmental Law in the Asia Pacific 285–303 (1998). See also Handl, supra note 134.

146 Note in this context Article 2 of the (consolidated version of the) Treaty on European Union, Feb. 7, 1992, Oct. 2, 1997, 37 ILM 56, 68 (1998), which lists among the Union's objectives “balanced and sustainable development”; and Article 2 of the Treaty Establishing the European Community, Mar. 25, 1957, Oct. 2, 1997, which calls upon the Community, inter alia, to “promote throughout the Community … a high level of protection and improvement of the quality of the environment,” id. at 79, 80.

147 Perhaps most succinctly stated by the PCIJ in the Lotus case: “International law governs relations between independent States. The rules of law binding upon States therefore emanate from their own free will as expressed in conventions or by usages generally accepted as expressing principles of law … .” S.S. “Lotus,” 1927 PCIJ (ser. A) No. 10, at 18 (Sept. 7).

148 Note in this context the Declaration by Judge Bedjaoui, President of the International Court of Justice, in Legality of die Threat or Use of Nuclear Weapons (Advisory Opinion of July 8, 1996), 35 ILM 1343, 1346, para. 13 (1996):

It scarcely needs to be said that the [face] of contemporary international society is much altered. Despite the still limited emergence of “supra-nationalism”, the progress made in terms of the institutionalization, not to say integration and “globalization”, of international society cannot be denied. Witness the proliferation of international organizations, the gradual substitution of an international law of co-operation for the traditional law of co-existence, the emergence of the concept of “international community” and its sometimes successful attempts at subjectivization.

149 As to the concept of an “obligation requiring the achievement of a specific result,” as against an “obligation requiring the adoption of a particular course of conduct,” see Articles 20–21 of part I of the International Law Commission's Draft articles on State responsibility, [1980] 2 Y.B. Int'l L. Comm'n, pt. 2, at 32, UN Doc. A/CN.4/SER.A/1980/Add.1 (Part 2).

150 For details, see Handl, supra note 36.

151 Andrew Bond, Protection of the World's Biodiversity, Environment Matters (World Bank), Fall 1997, at 54.

152 See supra note 120.

153 See, e.g., ADB, Guidelines for the Classification of Loan Projects in Terms of the Bank's Strategic Development Objectives (1995).

154 See, e.g., World Bank, Mainstreaming the Environment: The World Bank Group and the Environment Since the Rio Earth Summit, Fiscal 1995 (1995); ADB, Mainstreaming Participatory Development Process (1996); and Dixon & Steer, supra note 63, at 28 (who speak of “mainstreaming environmental assessments of projects”).

155 Thus, it has been suggested that “[m]oving beyond a ‘do no harm’ effort to a set of activities aimed at significantly improving the environment and extending choices of the poor in developing nations will require consideration of major normative, structural, operational, and resource allocation amendments.” Kaplan, supra note 97, at 147. See also Wade, supra note 9, at 613–14 (noting that while “environmental considerations have been defined and encoded in [World] Bank routines … in between the procedures and the operational practice is the ‘slippery clutch’ of the Bank's incentive system”).

156 Thus, bank officials themselves readily admit that, at the sectoral and macroeconomic levels, MDBs still have to incorporate environmental concerns into the banks' operations. See Andrew Steer, Five Years After Rio: The World Bank's Environmental Professionals Take Stock, Environment Matters, Winter/Spring 1997, at 4.

157 See supra text at notes 41–46.

158 See supra text at notes 41–46; and Shihata, The World Bank and Human Rights, in Österreichische Aussenpolitische Dokumentation, Special Issue: The Universal Protection of Human Rights: Translating International Commitments into National Action (Proceedings of the 40th International Seminar for Diplomats, Salzburg, Austria, 1997).

159 As to this corollary of specialized function and obligation/responsibility, see also Michel Virally, La Notion de fonction dans la théorie de l'organisation intemationale, in La Communauté Internationale. Mélanges offerts à Charles Rousseau 277, 299 (1974).

160 While the issue of the legal consequences flowing from MDBs' failure to heed their assigned roles in the development process is of intrinsic interest in this context, limitations of space do not allow for a discussion of this related and complex subject matter in the present paper.

161 Thus, the World Bank's tightening of environmental and resettlement conditions for its continued involvement in die Sardar Sarovar project in 1993, which prompted India to forgo payment of the final installment of the World Bank loan, did not also signal the end of the project per se. See, e.g., World Bank Restrictions Prompt India to Cancel Dam Project Loan, N.Y. Times, Mar. 31, 1993, at A4. Instead, in 1995, the Supreme Court of India blocked further construction at the dam site until resettlement could be carried out in line with India's and the Bank's guidelines. See Wade, supra note 9, at 706. For the time being, it remains unclear whether the project will be completed and, if so, whether it will be in compliance with Bank standards on resettlement.

Similarly, the World Bank's withdrawal from the Arun III dam project in Nepal in 1995 may not have sealed the fate of this highly controversial, on account of its likely environmental and social impact, project. See Revival of Arun Dam Project Sought, Fin. Times, Jan. 27, 1997, at 4.

162 See, e.g., ADB, supra note 13, at 6, para. 18. This is probably true of the long-term trend even though the flow of private capital now and then may diminish to a trickle. Thus, it has been noted that, in the aftermath of recent events in east Asia, the proportion of private finance in infrastructure for all developing countries declined. See E Europe “May Face Asian-Style Crisis,” Fin. Times, Apr. 1, 1998, at 2.

163 On the other hand, regional MDBs generally may well succeed in undercutting this trend by successfully claiming the role of “catalyst development institution.” See ADB, supra note 13, at 8, para. 20(iii). Besides, in respect of investment projects in least developed countries, which tend to be shunned by commercial/private lenders, the Bank will continue to play a crucial financial role.

164 See International Finance Corp., Environmental and Social Policies and Procedure Overview (visited Feb. 1998) ‹www.ifc.org/enviro/html/rev-1/pdf›.

165 For a discussion of these points, see, e.g., Shihata, supra note 158, at 197—98.