Legal accountability of international financial institutions in financing development

Abstract

This study interrogated the softness and hardness of the law of IFIs to determine the extent to which underlying accountability mechanisms have achieved or failed to achieve the level of accountability and justice expected by affected non-state third parties. It also aimed at investigating the process of financing for development in order to further the understanding of the challenges of holding IFIs to account for the unintended consequences of the projects they have funded. The study critically examined the legal accountability mechanisms of selected IFIs at the institutional, international, and domestic levels to highlight their strengths and weaknesses. The study showed that the robustness, practicability, and comprehensiveness of the standards against which the performance of IFIs is assessed are the determining factors of a better accountability process outcome. An outcome which truly advances the interests of an account holder without diluting his/her/it legally protected rights. However, the legal framework of IFI-operations does not provide the same standard of protections to IFIs, their clients, and affected non-state third parties. While the first two categories of stakeholders seem to enjoy a robust protection, laws and policies have been used sparingly regarding the protection of the last category of stakeholders. The weakness of the standards that apply to affected non-state third parties during the design, appraisal, and implementation of IFI-funded projects does not enhance a prospect of an accountability process outcome which truly advances the interest of this category of stakeholders. The study made some recommendations, including a shift in the focus of existing laws and policies towards a greater protection of the interests of affected non-state third parties. It also recommended the inclusion of community development agreements in the overall project structure to ensuring that affected non-state third parties and other local stakeholders benefit from an IFI-funded project.