¹ See e.g., Vandenbergh, Michael, The New Wal-Mart Effect: The Rule of Private Contracting in Global Governance, 54 UCLA L. Rev. 913, 919 (2007) (“although private environmental contracting is potentially deeply problematic, it may be the only viable means to fill important gaps in the regulatory regime”); David Vogel, The Private Regulation of Global Corporate Conduct: Achievements and Limitations, 49 Bus. & Society 68, 80 (2010) (“By creating new expectations of global corporate conduct and by establishing new regulatory institutions to address them, civil regulations have thus partially reduced the governance deficits and regulatory failures that characterize many global firms and markets”). This view is compatible with the view that public regulation remains a necessary element in addressing transnational problems. See e.g., John Ruggie, Taking the Embedded Liberalism Global: The Corporate Connection, in Embedding Global Markets: An Enduring Challenge 231, 232 (John Ruggie ed., 2008) (“the corporate sector, which has done more than any other to create the growing gaps between global economies and national communities, is being pulled into playing a bridging role between them. In the process, a global public domain is emerging, which cannot substitute for effective action by states but may help produce it”).Google Scholar

² See e.g., McInerney, Thomas, Putting Regulation Before Responsibility, 40 Cornell Int'l. L.J. 171, 199-200 (2007) (“While the coercive power monopolized by state regulatory authorities has its limitations, it also has many benefits which must not be understated. It is at great peril that we cede these responsibilities to untested methods [i.e., private regulation] that intuition, analysis, and experience suggest are bound to fail”); Terry Collingsworth, Corporate Social Responsibility, Unmasked, 16 St. Thomas L. Rev. 669, 670-71 (2004) (“The already questionable idea of trusting corporations to self-police compliance with their broad codes of conduct is rendered ridiculous, given the aggressive refusal of these same companies to accept being bound to the minimal constraints of ATCA [the U.S. Alien Tort Claims Act, 28 U.S.C. section 1350]”). For a critique aimed at a more general audience, see Robert Reich, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life 170 (2007) (“Corporations that have signed codes of conduct promising good behavior appear to have taken important steps toward social responsibility, but the pressures operating on them to lure and keep investors haven't eased one bit. In supercapitalism, they cannot be socially responsible, at least not to any significant extent” [emphasis in original]).Google Scholar

³ See Raustiala, Kal, Compliance & Effectiveness in International Regulatory Cooperation, 32 Case W. Res. J. Int'l. L. 387, 392-93 (2000).Google Scholar

⁴ This article does not address the second regulatory relationship to which the Equator Principles give rise: a self-regulatory relationship between lenders by which they commit to negotiate the substance of the Equator Principles into loan agreements and attempt to enforce them. See infra note 61 and accompanying text.Google Scholar

⁵ Press Release, Equator Principles, Draft of updated Equator Principles (EP III) released for stakeholder consultation and public comment (13 August 2012), available at: http://www.equator-principles.com (last accessed: 1 December 2012). See also Oliver Balch, Sustainable finance: how far have the Equator Principles gone? The Guardian, 15 November 2012, available at: http://www.guardian.co.uk/sustainable-business/sustainable-finance-equator-principles (last accessed: 1 December 2012).Google Scholar

⁶ See infra notes 50-52 and accompanying text.Google Scholar

⁷ See Christopher Hood, Henry Rothstein, & Baldwin, Robert, The Government of Risk: Understanding Risk Regulation Regimes 24-28 (2001); Colin Scott, Regulating Everything: From mega- to meta-regulation, 60 Administration 61, 67-68 (2012).Google Scholar

⁸ See infra notes 150-51 and accompanying text.Google Scholar

⁹ A special purpose entity, or SPE (also known as a special purpose vehicle, or SPV) is a business organization, typically but not always a corporation, whose business is limited to a specific purpose. They are often used as a means of insulating their creators, which are often also business organizations, from liability for the business that the special purpose entity undertakes. See Edward Yescombe, Principles of Project Finance section 2.2 (2002).Google Scholar

¹⁰ Id. at sections 4.1, 4.3, 5.1-5.2.Google Scholar

¹¹ Id. at section 8.2.Google Scholar

¹² Id. at section 2.1.Google Scholar

¹³ Benoit, Philippe, Project Finance at the World Bank: An Overview of Policies and Instruments (World Bank Technical Paper No. 312, January 1996), available at: http://www.worldbank.org (last accessed: 1 December 2012).Google Scholar

¹⁴ Yescombe, , supra note 9, at sections 5.1, 11.3, 11.6.Google Scholar

¹⁵ Herbertson, Kirk & Hunter, David, Emerging Standards for Sustainable Finance of the Energy Sector, 7 Sustainable Dev. L. & Pol'y 5, 6 (2006).Google Scholar

¹⁶ Conley, John & Williams, Cynthia, Global Banks as Global Sustainability Regulators?: The Equator Principles, 33 L. & Pol'y 1, 2 (2011).Google Scholar

¹⁷ See Lewis, Paul, Export Agency Likely to Deny China Dam Aid, N.Y. Times, 14 October 1995, at 1; International Rivers Network & Human Rights in China, Major Problems Found in Three Gorges Settlement Program (1998), available at: http://www.hrichina.org (last accessed: 1 December 2012).Google Scholar

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¹⁹ Oster, Shai, Reservoir of Fear: In China, New Risks Emerge at Giant Three Gorges Dam, Wall St. J., 29 August 2007, at A.1.Google Scholar

²⁰ Hardenbrook, Andrew, The Equator Principles: The Private Financial Sector's Attempt at Environmental Responsibility, 40 Vand. J. Transnat'l L. 197, 205–206. The Rainforest Action Network's four year naming and shaming campaign against Citigroup has been cited as “[o]ne of the most documented and successful advocacy campaigns” of this period. See Niamh O'Sullivan & Brendan O'Dwyer, Stakeholder perspectives on a financial sector legitimation process: The case of NGOs and the Equator Principles, 22 Acct., Audit'g & Accountab. J. 553, 562 (2009). See also Heiko Spitzek, Innovation and Learning by Public Discourse: Citigroup and the Rainforest Action Network, (Working Paper No. 36, Center for Responsible Business, University of California, Berkeley, 2007).Google Scholar

²¹ Richardson credits the campaign against the Chad-Cameroon pipeline as being “the specific catalyst” for the NGO pressure that led to the adoption of the Equator Principles. Benjamin Richardson, Financing Sustainability: The New Transnational Governance of Socially Responsible Investment, 17 Yb. Int'l Env. L. 73, 89 (2006).Google Scholar

²² Conley, & Williams, , supra note 16, at 17-18. See also O'Sullivan & O'Dwyer, supra note 20, at 464 (noting that NGO leaders also tended to believe their campaigns were a primary cause of financial institutions’ adoption of environmental and social standards); Christopher Wright & Alexis Rwabizambuga, Institutional Pressures, Corporate Reputation, and Voluntary Codes of Conduct: An Examination of Equator Principles, 111 Bus. & Soc. Rev. 89, 109-10 (2006) (noting that financial institutions that are more vulnerable to being targeted by NGOs – largely due to their location in major Western city centres – were more likely to adopt and implement the Equator Principles).Google Scholar

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²⁴ The Equator Principles Association – Governance and Management, Equator Principles, available at: http://www.equator-principles.com/index.php/about-ep/about-ep/governance-and-management (last accessed: 1 December 2012).Google Scholar

²⁵ Equator Principles, Official First Draft of EP III (13 August 2012), available at: http://www.equator-principles.com (last accessed: 1 December 2012) [hereinafter “Draft EP III”]. The comment period closed on 12 October 2012.Google Scholar

²⁶ As the preamble to Draft EP III notes, the Equator Principles are “intended to serve as a common baseline and framework for the implementation of each EPFI's internal environmental and social policies, procedures and standards related to its financing of Projects.” Id. at Preamble.Google Scholar

²⁷ Draft EP III would apply to “Project-Related Corporate Loans” where “i. the loan is related to a single Project, ii. the total aggregate loan amount is at least US$100 million, iii. the EPFI's individual Initial Exposure is at least US$50 million, iv. the loan tenor is at least two years, and v. the borrower has Effective Operational Control (either direct or indirect) over the Project,” along with “Bridge Loans with a tenor of less than two years that are intended to be refinanced by a Project Finance or Project-Related Corporate Loan.” Id. at Scope statement. EP II does not apply to bridge loans or project-related corporate loans. Equator Principles, at Scope statement (2006), available at: http://www.equator-principles.com (last accessed: 1 December 2012) [hereinafter “EP II”].Google Scholar

²⁸ Id. at Preamble.Google Scholar

²⁹ Id.Google Scholar

³⁰ Id. at Principle 1.Google Scholar

³¹ Id. at Principle 2.Google Scholar

³² “High Income OECD Countries” are countries that are members of the Organization for Economic Cooperation and Development (OECD) that are designated as High-Income by the World Bank Development Indicators Database. Id. at Exhibit I – Glossary of Terms.Google Scholar

³³ Id. at Principle 3. EP II does not provide an exemption from Principle 2 for such projects. EP II, supra note 27, at Principle 3.Google Scholar

³⁴ IFC, Performance Standards and Guidance Notes (2012), available at: www.ifc.org/performancestandards (last accessed: 1 December 2012. There are eight performance standards: (1) Assessment and Management of Environmental and Social Risks and Impacts, (2) Labor and Working Conditions, (3) Resource Efficiency and Pollution Prevention, (4) Community Health, Safety, and Security, (5) Land Acquisition and Involuntary Resettlement, (6) Biodiversity Conservation and Sustainable Management of Living Natural Resources, (7) Indigenous Peoples, and (8) Cultural Heritage).Google Scholar

³⁵ IFC, Environmental, Health and Safety Guidelines (2007), available at: http://www.ifc.org (last accessed: 1 December 2012, the Guidelines include general guidelines that apply to all projects, e.g., with regard to energy conservation, occupational hazards, community emergency preparedness, and construction and decommissioning, and specific industry sector guidelines, e.g., for mining, offshore oil and gas development, and pulp and paper mills).Google Scholar

³⁶ III, Draft EP, supra note 25, at Principle 3.Google Scholar

³⁷ Id. at Principle 4. But see EP II, supra note 27, at Principle 4 (Under EP II, the borrower was required only to develop an AP, and the lender was not explicitly authorized to recommend additional mitigation measures if it found the AP insufficient).Google Scholar

³⁸ This process of “Stakeholder Engagement” entails disclosure by the borrower of “the Assessment documentation and the ESMP … to the public in the relevant local language and in a culturally appropriate manner.” This process must also be “free from external manipulation, interference, coercion and intimidation.” See Draft EP III, id. at Principle 5.Google Scholar

³⁹ See III, Draft EP, id. at Principle 10.Google Scholar

⁴⁰ Compare EP II, supra note 27, at Principle 5 (which states that the borrower is required to conduct a “free, informed, and prior consultation” process); Draft EP III, id. at Principle 5 (which, drawing from the UN Declaration on the Rights of Indigenous Peoples, infra note 91, requires the borrower to establish Indigenous Peoples’ “free, prior and informed consent” to a project).Google Scholar

⁴¹ III, Draft EP, id. at Principle 8.Google Scholar

⁴² Id. at Principle 9.Google Scholar

⁴³ The lender must retain either an “Independent Environmental and Social Consultant,” defined as “a qualified independent firm or consultant (not directly tied to the borrower) acceptable to the EPFI,” or other “qualified and experienced external experts.” See id. at Principle 9, Exhibit I – Glossary of Terms.Google Scholar

⁴⁴ For Project-related loans, if the applicable project requires “an Independent Review … under Principle 7, the EPFI will require the appointment of an Independent Environmental and Social Consultant, or require that the borrower retain qualified and experienced external experts to verify its monitoring information which would be shared with the EPFI.” See id. at Principle 9.Google Scholar

⁴⁵ EP II, supra note 27, at Principle 10.Google Scholar

⁴⁶ Draft EP III, supra note 25, at Principle 10.Google Scholar

⁴⁷ Watchman, Paul, Banks, Business, and Human Rights, Butterworths J. of Int'l. Banking and Financial L., February 2006, 46 at 46, available at: http://www.banktrack.org (last accessed: 1 December 2012).Google Scholar

⁴⁸ Collevecchio Declaration on Financial Institutions (2003), available at: http://www.banktrack.org (last accessed: 1 December 2012).Google Scholar

⁴⁹ NGO Collective Analysis of the Equator Principles, GlobalPolicy.org (June 2003), available at: http://www.globalpolicy.org/component/content/article/213/45635.html (last accessed: 1 December 2012).Google Scholar

⁵⁰ BankTrack, Bold Steps Forward: Towards Equator Principles that Deliver to People and Planet 2 (14 January 2010), available at: http://www.banktrack.org (last accessed: 1 December 2012).Google Scholar

⁵¹ Lazarus, Suellen & Feldbaum, Alan, Equator Principles Strategic Review Final Report iii (17 February 2011), available at: http://www.equator-principles.com (last accessed: 1 December 2012).Google Scholar

⁵² Id. Google Scholar

⁵³ Hood, Rothstein & Baldwin, , supra note 7, at 24-28; Scott, supra note 7, at 67-68.Google Scholar

⁵⁴ See generally Christopher Hood et al, Regulation Inside Government: Waste-Watchers, Quality Police and Sleaze Busters (1999).Google Scholar

⁵⁵ See generally Porter, Tony & Ronit, Karsten, Self-regulation as policy process: The multiple and criss-crossing stages of private rule-making, 39 Policy Sciences 41 (2006).Google Scholar

⁵⁶ Krasner, Stephen, Structural causes and regime consequences: regimes as international variables, 36 Int'l. Org. 185, 185 (1982).Google Scholar

⁵⁷ See e.g., Levine, Michael & Forrence, Jennifer, Regulatory Capture, Public Interest, and the Public Agenda: Toward a Synthesis, 6 J.L. Econ. & Org. 167 (1990); Laurence Helfer, Regime Shift: The TRIPS Agreement and New Dynamics of International Lawmaking, 29 Yale J. Int'l. L. 1 (2004).Google Scholar

⁵⁸ Hood, Rothstein & Baldwin, , supra note 7, at 28.Google Scholar

⁵⁹ See Yang, Tseming & Percival, Robert, The Emergence of Global Environmental Law, 36 Ecology L.Q. 615, 616, 633 (describing the rise of a system of global environmental law, of which they claim the Equator Principles is a part; though they refer to this “set of legal principles developed by national, international, and transnational regulatory systems to protect the environment and manage natural resources” as a “body of law” rather than a regime, their emphases on converging expectations and approaches and the role of principles and norms that are not strictly binding, such as the Equator Principles, indicates that this system of principles can likely also be characterized as a regime).Google Scholar

⁶⁰ The use of contracts as a regulatory tool has been well-documented in existing literature. See e.g., Arthur Miller, Administration by Contract: A New Concern for the Administrative Lawyer, 36 N.Y.U. L. Rev. 957 (1961); Michael Vandenburgh, The Private Life of Public Law, 105 Colum. L. Rev. 2029 (2005).Google Scholar

⁶¹ See Shamir, Ronen, Corporate Social Responsibility: Towards a New Market-Embedded Morality?, 9 Theor'l Inq. L. 371, 385 (2008) (which describes the Equator Principles in the same terms).Google Scholar

⁶² Evaluating the effectiveness of the second of these relationships also poses considerable challenges that require deeper examination than would be possible here. For example, how likely is it that Chinese and Russian banks, which account for a growing portion of the project finance sector, will be convinced to adopt the Equator Principles? By what means can the governance of the Equator Principles Association, along with the standards that apply to lenders’ disclose of their implementation of the Equator Principles, be modified so as discourage lenders from free riding, that is, taking advantage of the reputational benefits of being associated with the Equator Principles without incurring the short term costs of compliance. For summaries of various stakeholders’ views of these challenges, see Conley & Williams, supra note 16, at 25-26; Lazarus & Feldman, supra note 51, at 7, 9.Google Scholar

⁶³ But see Hood, , Rothstein & Baldwin, supra note 7, at 24-28 (which begins by examining regulators’ roles as monitors, on the basis that a regulator can only determine whether regulation is necessary by observing activity within a regime).Google Scholar

⁶⁴ See generally Focus: The Equator Principles, BankTrack, available at: http://www.banktrack.org/show/pages/equator_principles (last accessed: 1 December 2012).Google Scholar

⁶⁵ I work from the assumption that regulation is an effective and legitimate means of achieving policy goals. I acknowledge, however, that this assumption is far from uncontroversial. See e.g., Gerald Frug, The Ideology of Bureaucracy in American Law, 97 Harv. L. Rev 1276 (1983) (arguing for the replacement of impersonal regulatory bureaucracies, in the form of administrative agencies and corporations, with more participatory, community-oriented forms of governance); Ian Macneil, Bureaucracy, Liberalism and Community – American Style, 79 Nw. U. L. Rev. 900, 901 (1984-85) (also citing “fundamental problems with a fully bureaucratized world”).Google Scholar

⁶⁶ See e.g., IOSCO, Objectives and Principles of Securities Regulation, section 6.3 (2003), available at: http://www.iosco.org (last accessed: 1 December 2012) (“The regulator should be operationally independent from external political or commercial interference”); Giandomenico Majone, Regulating Europe (1996) 299-300 (“the root problem of regulatory legitimacy in Europe today is not an excess of independence but, on the contrary, the constant threat of politically motivated interference. With greater independence would go greater accountability”); Rachel Barkow, Insulating Agencies: Avoiding Capture through Institutional Design, 89 Tex. L. Rev. 15, 17 (2010) (“policy makers seek to create independent agencies … [in the hope that they] will better resist short-term partisan pressures and instead place more emphasis on empirical facts that will serve the public interest over the long term”); Cass Sunstein, Constitutionalism After the New Deal, 101 Harv. L. Rev. 421, 500 (1987) (referring to “the New Deal conception of administration sought to insulate public officials in order to protect governmental processes against the distortions produced by factionalism”).Google Scholar

⁶⁷ The presumption that technical expertise lends itself to superior decision-making dates back at least to the New Deal era. See e.g., James Landis, The Administrative Process 23-24 (1938) (“with the rise of regulation, the need for expertness became dominant: for the art of regulating an industry requires knowledge of the details of its operation, the ability to shift requirements as the conditions of industry may dictate, the pursuit of economic measures upon the appearance of an emergency, and the power through enforcement to realize conclusions as to policy”); Sunstein, id. at 442 (referring to “the New Deal belief in the importance of technical expertise and immersion in the facts”). This view remains relevant today: see e.g., Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C. Cir. 1976) (“the court must give due deference to the agency's ability to rely on its own developed expertise”); IOSCO, Objectives and Principles of Securities Regulation, id. at section 6.4 (noting that an effective securities regulator “requires adequate funding . [to] retain[] experienced staff”).Google Scholar

⁶⁸ See e.g., IOSCO, Objectives and Principles of Securities Regulation, id. at section 6.5 (“In exercising its powers and discharging its functions, the regulator should adopt processes which are … fair and equitable”); OECD, Engaging Citizens in Policy-making: Information, Consultation and Public Participation (OECD Public Management Policy Brief, No.10, July 2001) (“Strengthening relations with citizens … allows government to tap new sources of policy-relevant ideas, information and resources when making decisions”); Richard Stewart, U.S. Administrative Law: A Model for Global Administrative Law?, 68 L. & Contemp. Probs. 63, 75 (2005, noting that procedural fairness in rulemaking serves the “broader goal of promoting responsiveness and securing accountability to social interests and values” [emphasis in original]); Allen Lind & Tom Tyler, The Social Psychology of Procedural Justice (1988) at 187 (“fair procedures lead to greater compliance with the rules and decisions with which they are associated”).Google Scholar

⁶⁹ Though regulators, as noted above, are ideally expert in their field, courts, in reviewing the decisions of regulators established by legislatures, have routinely held that non-experts (i.e., courts) are capable of assessing whether regulatory standards reasonably relate to the policy goals defined in the regulator's enabling statute. See e.g., Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984); Associated Provincial Picture Houses v. Wednesbury Corporation [1947] EWCA Civ 1, [1948] 1 K.B. 223; Jan Oster, Judicial Review in German and US Administrative Systems, 9 Germ. L.J. 1267, 1271 (2008), available at: http://www.germanlawjournal.com/pdfs/Vol09No10/PDF_Vol_09_No_10_1267-1296_Articles_Oster.pdf (last accessed: 1 December 2012, stating that judicial review in Germany, absent an explicit statement by the legislature on the issue of deference, is based on a similar consideration of whether the regulator's rulemaking is based on “irrelevant elements”). In assessing the reasonableness of the standards set in the Equator Principles, I look to standards set by other regulators within the same regime.Google Scholar

⁷⁰ See e.g., Barton, David, Capitalism for the Long Term, 89(3) Harv. Bus. Rev. 84 (2011); James Hawley, Keith Johnson & Edward Waitzer, Reclaiming Fiduciary Duty Balance, 2 Rotman Int'l J. of Pension Mgmt. 4 (2011); Andrew Haldane & Richard Davies, The Short Long (Paper presented to the 29th Société Universitaire Européene de Recherches Finanacières Colloquium, Brussels, May 2011), available at: http://www.bankofengland.co.uk (last accessed: 1 December 2012).Google Scholar

⁷¹ Ayres, Ian & Braithwaite, John, Responsive Regulation: Transcending the Deregulation Debate 22 (1992); Margaret Blair & Lynn Stout, Trust, Trustworthiness, and the Behavioral Foundation of Corporate Law, 149 U. Pa. L. Rev. 1735, 1789-99 (2001, emphasizing the role of corporate law in framing corporate fiduciaries’ view of their responsibility to act responsibly and in good faith, with adequate regard for the interests of others); Conley & Williams, supra note 16, at 20-21 (noting that project finance professionals they surveyed cited lenders’ motivation to “be a good citizen,” along with sustained advocacy by “internal champions” working in lenders’ upper echelons, as factors that contributed to widespread adoption of the Equator Principles). For a more incentives-based view of the value of a corporation's reputation as a good citizen, see Vandenbergh, supra note 1, at 946-47.Google Scholar

⁷² See Hoepner, Andreas & Wilson, John, Social, Environmental, Ethical and Trust (SEET) Issues in Banking: An Overview, in Research Handbook on International Banking and Governance 427, 447-48 (James R. Barth, Chen Lin & Clas Wihlborg eds., 2012) (which reviews studies showing no obvious link between the adoption of environmental and social standards by banks and “financial performance” or “stock performance”).Google Scholar

⁷³ See supra notes 20-22 and accompanying text.Google Scholar

⁷⁴ Amalric, Franck, The Equator Principles: a step towards sustainability?, at 5-6 (Working Paper Series, No. 1/5, Center for Corporate Responsibility and Sustainability, University of Zurich, 2005); O'Sullivan & O'Dwyer, supra note 20, at 565. See also Vandenberg, supra note 1, at 947, 950 (describing how major firms in the retail sector have used similar tactics to protect themselves from smaller competitors).Google Scholar

⁷⁵ Vives, Antonio, Corporate Social Responsibility: The Role of Law and Markets and the Case of Developing Countries, 83 Chi.-Kent L. Rev. 199, 222 (2008); Kenneth Abbott & Duncan Snidal, Strengthening International Regulation Through Transnational New Governance: Overcoming the Orchestration Deficit, 42 Vand. J. Transnat'l L. 501, 526 (2009) (noting that “firms’ business expertise and management capacity,” if brought to bear in the standard setting process, will result in more effective standards).Google Scholar

⁷⁶ Administrative Procedure Act, 5 U.S.C. section 553 (2011).Google Scholar

⁷⁷ IOSCO, Consultation Policy and Procedure (April 2005), available at: http://www.iosco.org (last accessed: 1 December 2012).Google Scholar

⁷⁸ The IOSCO Consultation Policy does not formally require IOSCO to undertake a consultation process analogous to that set out in the USAPA before promulgating new standards. It takes a “flexible” approach, determining whether consultation is necessary based on the weighing of a number of enumerated factors. That being said, the policy does state that “projects that contemplate the issuance of international standards and principles for the securities sector will generally include the conduct of a public consultation as part of the project.” Id. at 3.Google Scholar

⁷⁹ Exec. Order No. 12,866, 3 C.F.R. 638 (1993), section 6(a)(1).Google Scholar

⁸⁰ IOSCO, Consultation Policy and Procedure, supra note 77, at 4; Administrative Procedure Act, 5 U.S.C. section 553 (2011).Google Scholar

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⁸⁵ About Equator Principles Update and Timeline, supra note 83.Google Scholar

⁸⁶ These rights have been recognized in the Rio Declaration of 1992, the Aarhus Convention of 1998, and by a 2000 resolution of the Organization of American States. Report of the United Nations Conference on Environment and Development, UN Doc A/CONF/151/26 (Vol. I), Annex I (1992); Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, 25 June 1998, reprinted in I.L.M., Vol. 38, 1999, 517; Organization of American States, Inter-American Strategy for the Promotion of Public Participation in Decision Making for Sustainable Development CIDI/RES. 98 (V-o/00), OEA/Ser.W/II.5, CIDI/doc.25/00 (20 April 2000).Google Scholar

⁸⁷ Reflexive law rejects legal formalism's contention that law and regulation have an innate logic. It also rejects the contention, inherent in welfare state-style regulation, that public authorities have the capacity to set detailed rules that serve the interests of society as a whole. It holds that society is in fact fragmented into different, increasingly specialized social systems led by distinct fields of experts. Law is merely another form of social system, and legal experts are often not capable of accurately predicting how the rules they promulgate will affect behavior within the external social systems they aim to regulate. The proper role of regulation, it holds, is to design procedures that allow for dialogue within each of these social systems, with the aim of developing tentative and experimental regulatory frameworks that reflect the culture and policy goals of the social systems to which these frameworks would apply. See Gunther Teubner, Substantive and Reflexive Elements in Modern Law, 17 Law & Soc'y Rev. 239 (1983); Niklas Luhmann, Operational Closure and Structural Coupling: The Differentiation of the Legal System, 13 Cardozo L. Rev. 1419 (1992); Gunther Teubner, Autopoiesis in Law and Society: A Rejoinder to Blankenburg, 18 Law & Soc'y Rev. 201 (1984); Peer Zumbansen, Law after the Welfare State: Formalism, Functionalism and the Ironic Turn of Reflexive Law, 56 Am. J. Comp. L. 769, 789-95 (2008). See also Dennis D. Hirsch, Green Business and the Importance of Reflexive Law: What Michael Porter Didn't Say, 62 Admin. L. Rev. 1063, 1107-1108 (2010) (citing the U.S. Clean Air Act New Source Review program, which had the effect of increasing emissions from industry, as an example of how legislators’ and legal experts’ lack of understanding of the systems they seek to regulate can lead to undesirable outcomes).Google Scholar

⁸⁸ Hirsch, id.; Sanford E. Gaines, Reflexive Law as a Legal Research Paradigm for Sustainable Development, 10 Buff. Envtl. L.J. 1 (2002-2003).Google Scholar

⁸⁹ See Collevecchio Declaration on Financial Institutions, supra note 48, at section 2(b).Google Scholar

⁹⁰ III, Draft EP, supra note 25, at Principle 3; EP II, supra note 27, at Principle 3.Google Scholar

⁹¹ Declaration on the Rights of Indigenous Peoples, UN Doc. A/C.3/61/L.18/Rev.1 (2007); Draft EP III, id. at Principle 5.Google Scholar

⁹² Human rights and transnational corporations and other business enterprises, Human Rights Council Res. 17/4 of 6 July 2011; Draft EP III, id. at Preamble.Google Scholar

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⁹⁴ See David M. Ong, From ‘International’ to ‘Transnational’ Environmental Law? A Legal Assessment of the Contribution of the ‘Equator Principles’ to International Environmental Law, 79 Nordic J. Int'l L. 35, 51-72 (2010) (which provides a more complete comparison of the Equator Principles with other environmental norms, but which also concludes that the Equator Principles accord, albeit not perfectly, with these norms).Google Scholar

⁹⁵ Hood, Rothstein & Baldwin, , supra note 7, at 24-25.Google Scholar

⁹⁶ These investigations are not intended as a service to lenders. Their results are shared with the public at large and used as a means of pressuring lenders into using their leverage to bring project companies into compliance with the Equator Principles, as interpreted by the investigating NGO. This dynamic will be explored further in this subsection below, and in subsection C(III).Google Scholar

⁹⁷ III, Draft EP, supra note 25, at Principles 4, 7; EP II, supra note 27, at Principles 4, 7.Google Scholar

⁹⁸ Vandenburgh, , supra note 60, at 2054 (“Anecdotal accounts suggest, though, that a substantial amount of lender enforcement occurs both before and during the term of the loan”); Frederick Tung, Leverage in the Boardroom: The Unsung Role of Private Lenders in Corporate Governance, 57 UCLA L Rev 115, 117 (2009) (“banks and other private lenders exercise influence over firm management that is both routine and significant”); Michael Gerrard, Trends in the Supply and Demand for Environmental Lawyers, 25 Colum. J. Envtl. L. 1, 3 (2000) (“Banks, frightened by a tiny handful of lender liability cases, became the most diligent enforcers of environmental law”).Google Scholar

⁹⁹ Yescombe, , supra note 9, at sections 8.2, 8.6.Google Scholar

¹⁰⁰ See supra notes 71-72 and accompanying text.Google Scholar

¹⁰¹ Tung, , supra note 98, at 150-52. The range and likelihood of enforcement action in respect of the Equator Principles will be addressed in subsection C(III), below.Google Scholar

¹⁰² About the Company: Shareholders, THPC, available at: http://www.thpclaos.com (last accessed: 1 December 2012).Google Scholar

¹⁰³ Theun Hinboun: Hydro against the current, Project Fin. & Infrastructure Fin., April 2009, at 38.Google Scholar

¹⁰⁴ Equator Principles, Members & Reporting, Equator Principles (15 May 2012), available at: http://www.equator-principles.com (last accessed: 1 December 2012).Google Scholar

¹⁰⁵ Barney, Keith, Power, Progress and Impoverishment: Plantations, Hydropower, Ecological Change and Community Transformation in Hinboun District, Lao PDR: A Field Report 13-45 (York Centre for Asian Research Papers, No. 1, 2007); Association for International Water Studies (FIVAS), Ruined Rivers, Damaged Lives: The Impacts of the Theun-Hinboun Hydropower Project on Downstream Communities in Lao PDR 46-50 (2007), available at: http://www.internationalrivers.org (last accessed: 1 December 2012). For example, efforts to set aside new land for farmers to plant crops reportedly failed in a number of villages due to problems with the irrigation systems supplied by THPC and managed by village governments. THPC has reportedly stated that “[p]oor leadership and internal conflict [among village leaders] are the main reasons for the failure of programs that have been successful or at least more successful in other villages.” See Barney, id. at 26, n.14. Furthermore, these measures were not promised until 2000, two years after the project was completed, and only after sustained pressure from NGOs. See Ikuko Matsumoto, International Rivers, Expanding Failure: An assessment of the Theun-Hinboun Hydropower Expansion Project's compliance with Equator Principles and Lao law 7-8 (5 November 2009), available at: http://www.internationalrivers.org (last accessed: 1 December 2012).Google Scholar

¹⁰⁶ Norplan, S.A., Theun Hinboun Expansion Project, Final EIA/EMMP, Section 1: EIA, section 6.2.2 (30 April 2008), available at: http://www.thpclaos.com (last accessed: 1 December 2012) [hereinafter “Norplan EIA”].Google Scholar

¹⁰⁷ Id. Google Scholar

¹⁰⁸ Norplan, S.A., Theun Hinboun Expansion Project, Final EIA/EMMP, Section 2: Environmental Management and Monitoring Plan (30 April 2008), available at: http://www.thpclaos.com (last accessed: 1 December 2012) [hereinafter “Norplan EMMP”].Google Scholar

¹⁰⁹ Norplan, S.A., Theun Hinboun Expansion Project, Final Report, Resettlement Action Plan, Part 1 – Overarching Issues (30 April 2008), available at: http://www.thpclaos.com (last accessed: 1 December 2012) [hereinafter “Norplan RAP”].Google Scholar

¹¹⁰ Norplan, S.A., Theun Hinboun Expansion Project, Final RAP Executive Summary xiv (30 April 2008), available at: http://www.thpclaos.com (last accessed: 1 December 2012) [hereinafter “Norplan RAP Executive Summary”].Google Scholar

¹¹¹ Norplan, EIA, supra note 106, at section 6.4, Norplan RAP, supra note 108, at sections 2.1-2.4 (describing the policies with which the RAP is intended to comply); Norplan EMMP, supra note 108, at sections 9.1-9.3. The ADB is not involved in the financing of THPX but did finance the initial construction of the Theun Hinboun power plant. See Ted Bardacke, 'Battery of Asia’ may run flat: Thailand's economic crisis is raising questions over the energy exporting hopes of neighbouring Laos, Fin. Times, 6 April 1998 at 3.Google Scholar

¹¹² See e.g., Blake, David J.H., Review of Draft Final EIA/EMMP for Theun-Hinboun Expansion Project, Lao PDR 2-8 (April 2008) (unpublished manuscript), available at: http://www.internationalrivers.org (last accessed: 1 December 2012); Matsumoto, supra note 105, at 14.Google Scholar

¹¹³ Blake, , id. at 5-6.Google Scholar

¹¹⁴ Matsumoto, , supra note 105, at 11-25; EP II, supra note 27, at Principle 3.Google Scholar

¹¹⁵ See infra notes 122, 124.Google Scholar

¹¹⁶ Norplan, EIA, supra note 106, at sections 1.2-1.3 (this text applies to both the EIA and the EMMP); Norplan RAP, supra note 109, at section 1.2.Google Scholar

¹¹⁷ While THPC maintains that the reports produced by RMR were not in a format that met Lao legal requirements, RMR's heavy criticism of the Norplan Reports’ characterization of THXP's environmental and social risks indicates that RMR may have been dismissed because it refused to frame these risks in a way that was favourable to THPC. See Blake, supra note 112, at 1-2; Tom Fawthrop, A dam shame, The Guardian / Comment is Free, 24 September 2008, available at: http://www.guardian.co.uk/commentisfree/2008/sep/24/energy.norway (last accessed: 1 December 2012); Norplan EIA, supra note 106, at section 1.2; Norplan RAP, supra note 109, at section 1.2.Google Scholar

¹¹⁸ Norplan, EIA, id. at sections 2.1-2.3; Norplan RAP, id. at sections 2.1-2.5.Google Scholar

¹¹⁹ See IFC, Performance Standards, Performance Standard and Guidance Note 7: Indigenous Peoples, paras. G3, G14-G31 (2006), available at: http://www.ifc.org (last accessed: 1 December 2012); EP II, supra note 27, at Principle 5.Google Scholar

¹²⁰ See IFC, id.Google Scholar

¹²¹ THPC, THPC Response to International Rivers Report 1 (21 December 2009), available at: http://www.thpclaos.com (last accessed: 1 December 2012).Google Scholar

¹²² See generally Dodgy Deals: Theun-Hinboun dam expansion project, BankTrack, available at: http://www.banktrack.org (last accessed: 1 December 2012).Google Scholar

¹²³ For example, THPC has repeatedly refused to concede that the ethnic minorities who will be affected by the construction of the dam qualify as indigenous peoples. It claims that the term “indigenous peoples” is generally not used in Asia, even though the Norplan Reports classify these individuals as indigenous peoples, and ADB policy in place when THXP was launched supports the classification of certain classes of ethnic minorities as indigenous people. See id. at 4; THPC, THPC response to Banktrack, Netherlands 1 (24 May 2010), available at: http://www.thpclaos.com (last accessed: 1 December 2012); ADB, Policy on Indigenous People (April 1998), available at: http://www.adb.org (last accessed: 1 December 2012).Google Scholar

¹²⁴ See generally Documents: Project Implementation, THPC (May 2012), available at: http://www.thpclaos.com (last accessed: 1 December 2012, which includes three responses to reports by NGOs, the most recent of which was released in May 2012).Google Scholar

¹²⁵ O'Sullivan & O'Dwyer, supra note 20, at 573.Google Scholar

¹²⁶ Ayres, & Braithwaite, , supra note 71, at 19-20.Google Scholar

¹²⁷ Id. at 26.Google Scholar

¹²⁸ Id. at 35-38. See also Scott, supra note 7, at 69-70; Tung, supra note 98, at 550-52 (which indicates that the tactics lenders use when enforcing loan agreements tend to follow this model).Google Scholar

¹²⁹ Ayres, & Braithwaite, , id. at 36.Google Scholar

¹³⁰ See supra note 70.Google Scholar

¹³¹ ING ended its involvement with the proposed Botnia paper mill to be built on the Uruguay River in 2006. This incident is addressed later in this subsection. See also ANZ and Gunns Limited's proposed Bell Bay Pulp Mill, ANZ (May 2008), available at: http://www.anz.com (last accessed: 1 December 2012); Press Release, The Wilderness Society, NGOs welcome ANZ decision not to finance Gunns proposed pulp mill (28 May 2008), available at: http://www.banktrack.org (last accessed: 1 December 2012, discussing ANZ Bank's 2008 decision not to provide a loan to finance the proposed Gunns pulp mill to be built in Tazmania).Google Scholar

¹³² IFC/Multilateral Investment Guarantee Agency (MIGA), Compliance Advisor/Ombudsman (CAO), Complaint Regarding IFC's Proposed Investment in Celulosas de M'Bopicuá and Orion Projects, Uruguay, Preliminary Assessment Report 4 (November 2005), available at: http://www.cao-ombudsman.org (last accessed: 1 December 2012) [hereinafter “IFC/MIGA, CAO, Preliminary Assessment Report”].Google Scholar

¹³³ Id. Google Scholar

¹³⁴ CEDHA, Complaint Regarding IFC's Proposed Investment in Celulosas de M'Bopicuá and Orion Projects, Uruguay 7, 9-12 (September 2005), available at: http://www.cao-ombudsman.org (last accessed: 1 December 2012) [hereinafter “CEDHA, CAO Complaint”].Google Scholar

¹³⁵ Id.Google Scholar

¹³⁶ Letter from Jorge Daniel Taillant, CEDHA, to ING Groep N.V. (December 2005), available at: http://casopasteras.cedha.net/wp-content/uploads/2011/09/complaint-letter-to-ing-eng.pdf (last accessed: 1 December 2012) [hereinafter “CEDHA, Equator Principles Complaint”]; see also Annie Dufey & Diana Morales, Orion and CMB Pulp Plants in Uruguay, in Global Project Finance, Human Rights and Sustainable Development 416, 451-52 (Sheldon Leader & David Ong, eds., 2011).Google Scholar

¹³⁷ CEDHA, CAO Complaint, supra note 134, at 2.Google Scholar

¹³⁸ Id; CEDHA, Equator Principles Complaint, supra note 136, at 5.Google Scholar

¹³⁹ IFC/MIGA, CAO, Preliminary Assessment Report, supra note 132, at 9-12; IFC/MIGA, CAO, CAO Audit of IFC's and MIGA's Due Diligence of Celulosas de M'Bopicua and Orion Paper Mills 25-26 (22 Februrary 2006), available at: http://www.cao-ombudsman.org (last accessed: 1 December 2012).Google Scholar

¹⁴⁰ IFC/MIGA, CAO, Complaint Regarding IFC's Proposed Investment in Celulosas de M'Bopicuá and Orion Projects, Uruguay, IFC's Response to Preliminary Assessment Report 1, 3-5 (January 2006), available at: http://www.cao-ombudsman.org (last accessed: 1 December 2012).Google Scholar

¹⁴¹ See Letter from Jorge Daniel Taillant, CEDHA, to the President and Board of Directors of the World Bank Group, with carbon copy to ING Groep N.V. 3-4 (10 March 2006), available at: http://casopasteras.cedha.net/wp-content/uploads/2011/09/letter-cedha-board-directors-march-10-2006.pdf (last accessed: 1 December 2012, summarizing protests, media reports, and legal complaints relating to the Botnia mill).Google Scholar

¹⁴² Letter from A. Cohen Stuart, ING Groep N.V., to J.D. Taillant, CEDHA (12 April 2006), available at: http://198.170.85.29/ING-statement-re-pulp-mill-in-Uruguay-12-April-2006.pdf (last accessed: 1 December 2012).Google Scholar

¹⁴³ Id. Google Scholar

¹⁴⁴ Mander, Benedict, 'Green’ dispute means trouble for investors at Uruguay Mills, Fin. Times, 10 June 2006 at 5.Google Scholar

¹⁴⁵ Press Release, IFC, IFC and MIGA Board Approves Orion Pulp Mill in Uruguay: 2,500 Jobs to Be Created, No Environmental Harm (21 November 2006), available at: http://www.ifc.org (last accessed: 1 December 2012). See EcoMetrix, Inc., Cumulative Impact Study, Uruguay Pulp Mills (September 2006), available at: http://www.upmuruguay.com.uy (last accessed: 1 December 2012). See also AMEC, Orion BKP Mill Pre-Startup Audit 1 (September 2007), available at: http://ww.ifc.org (last accessed: 1 December 2012, which provides an update on Botnia's construction, and states that Botnia is being constructed in accordance with the CIS).Google Scholar

¹⁴⁶ Press Release, CEDHA, Calyon to support controversial Botnia pulp mill (15 January 2007), available at: http://www.banktrack.org (last accessed: 1 December 2012).Google Scholar

¹⁴⁷ Pulp Mills on the River Uruguay (Argentina v. Uruguay), Application Instituting Proceedings (4 May 2006), available at: http://www.icj-cij.org (last accessed: 1 December 2012).Google Scholar

¹⁴⁸ Pulp Mills on the River Uruguay (Argentina v. Uruguay), [2010] I.C.J. Rep. 14, 106.Google Scholar

¹⁴⁹ Press Release, Argentina, Office of the President, El acuerdo ambiental entre Argentina y Uruguay “marcará un hito”, afirmó Timerman (The environmental agreement between Argentina and Uruguay “a milestone “, said Timerman) (30 August 2010), available at: http://www.prensa.argentina.ar (last accessed: 1 December 2012).Google Scholar

¹⁵⁰ Calls for the Equator Principles to provide for an ombudsperson date back at least to 2005. See Freshfields Bruckhaus Derringer, Banking on Responsibility: Part 1 of Freshfields Bruckhaus Derringer Equator Principles Survey 2005: The Banks 22 (July 2005), available at: http://web.archive.org/web/20100210172210/ http://www.freshfields.com/publications/pdfs/practices/12057.pdf (last accessed: 1 December 2012).Google Scholar

¹⁵¹ See McInerney, , supra note 2, at 175 (also proposing that local regulators be supplied with technical assistance).Google Scholar