BANKS DODGY DEALS CAMPAIGNS
About BankTrack
Visit us
Organisation
Our team
Our board
Guiding principles
Team up with us
Jobs at BankTrack
Our annual reports
Funding and finances
History
BankTrack in the media
Our privacy policy
Donate
2023-03-17 00:00:00
Briefing: The role of financial institutions in decarbonising the steel sector
2023-03-09 00:00:00
Dutch bank ING supports controversial pipeline to import gas from authoritarian Azerbaijan
2023-02-23 00:00:00
Financial institutions need to address steelmaking’s coal addiction
2023-02-07 00:00:00
What COP15 means for banks: meeting the Global Biodiversity Framework requires protecting Indigenous rights and divesting from harmful industries
2023-03-28 13:43:00
French bank Société Générale withdraws from Rio Grande LNG
2023-03-20 08:50:41
Who dares to finance Eni and Exxon’s dangerous Rovuma gas plans in Mozambique?
2023-03-14 14:59:00
New ING policy could spark bank shift away from financing oil and gas infrastructure
2023-02-24 13:46:14
Pego power station conversion plans halted
Connect
2022-11-22 00:00:00
Banking on Thin Ice: Two years in the heat
2022-11-17 00:00:00
BankTrack Global Human Rights Benchmark 2022
2022-10-21 00:00:00
Burning forests in the name of clean energy? How banks are failing to exclude the harmful wood biomass industry from finance
2022-06-28 00:00:00
The East African Crude Oil Pipeline (EACOP): Finance Risk Update No. 3
2022-04-05 00:00:00
The BankTrack Human Rights Benchmark Asia
2022-03-30 00:00:00
Banking on Climate Chaos 2022
See all publications
Sections
Banks Dodgy Deals Campaigns
Our campaigns
Banks and Climate
Banks and Human Rights
Banks and Nature
Banks and Pandemics
Our projects
Tracking the NZBA
Banks and Putin's war in Ukraine
Tracking the Equator Principles
Tracking the PRBs
Banks and steel
Find a Better Bank
Banks and the OECD Guidelines
Media
News Publications
Fossil Banks No Thanks StopEACOP Forests & Finance Banks & Biodiversity Drop JBS Bank of Coal Don't Buy into Occupation
BankTrack
About BankTrack Visit us Organisation Our team Our board Guiding principles Team up with us Jobs at BankTrack Our annual reports Funding and finances History BankTrack in the media Our privacy policy Donate
Successes Contact BankTrack
Donate Mailing list Facebook Twitter Login
Home › Partner news ›
Partner News

International Court of Justice rules on Uruguayan Botnia case

World Bank’s IFC, Nordea, Calyon and Finnvera complicit in violations of International Law
2010-04-20 | The Hague
By: CEDHA
Contact:

Center for Human Rights and Environment*
CEDHA- Argentina
cedha@cedha.org.ar
Tel +54 351 425 6278
Cel: + 54 9351 5078376    

2010-04-20 | The Hague
By: CEDHA
Contact:

Center for Human Rights and Environment*
CEDHA- Argentina
cedha@cedha.org.ar
Tel +54 351 425 6278
Cel: + 54 9351 5078376    

With nearly a 4-year road block firmly in place on the Argentine Uruguayan border in protest over a World Bank (IFC-financed) Finnish pulp mill, the long-awaited International Court of Justice (ICJ) verdict came in today, clearly legitimizing local protests and indicating that ‘Uruguay violated international law' in the unilateral decision to allow the Finnish mega pulp mill Uy Metsa Botnia to go up on the border.

"By thirteen votes to one, , that the Eastern Republic of Uruguay has breached its procedural obligations under Article 7 to 12of the 1975 Statute of the River Uruguay" ... "Uruguay did not transmit to the CARU ... despite the request made to it by the Commission to that effect on several occasions.  The initial environmental authorizations were therefore ... without complying with the procedure".

"Uruguay granted an authorization for Botnia for the first phase of the construction of the Botnia mill and an authorization to construct a port terminal for its exclusive use and to utilize the river bed for industrial purposes, without informing ... by not informing ... has failed to comply with the obligation ".

"Uruguay failed to comply with its obligations to notify plans to Argentina . *

The court finds that Uruguay was not entitled ... either to authorize the construction of or to construct the planned mills and the port terminals. And that by authorizing the construction of the mills and the port terminal at Fray Bentos ... Uruguay failed to comply with the obligation to negotiate . Uruguay therefore, in the view of the Court, "disregarded the whole of the co-operation mechanism."

This verdict is a blow to the World Bank's International Finance Corporation (IFC) and the international financial community that came in behind the Finnish pulp mill Botnia, providing key financing that made the project viable. Today, the magnitude of the social and political dispute caused by this project is enormous. Communities are divided, two otherwise friendly countries are engaged in a long standing legal battle, and millions, even billions of dollars are lost yearly due to road blocks in place opposing this now illegal investment.

Knowing full-well of the outstanding legal dispute between Argentina and Uruguay over the pulp mill, the World Bank (IFC), Nordea (a Swedish private bank), Calyon (the financial arm of the French Credit Lyonnais), and Finnvera (the Finnish state owned Export Credit Agency), pushed by the IFC, all decided to move forward with the loan, ignoring the World Bank's Legal Council concerns over the potential illegality of the project, and ignoring the World Bank's International Waterways Policy 7.0 which states that the World Bank should not finance projects that violate international law.

The World Bank's IFC decided in November of 2006 to give US$370 million to Botnia, a Finnish paper pulp mill producer, despite the unresolved legal dispute between Argentina and Uruguay over the legality of the mill. The affected community within the sphere of impact (which is overwhelminglyaligned against the investment), NGOs and the Argentine government insisted that the IFC and other banks, such as Calyon and Nordea, should wait for the ICJ verdict, before moving to provide financing for the mill. IFC's portion of the investment, which amounts to 20% was key, as it would in turn give a green light to other financial institutions such as ING, Calyon, Nordea, Finnvera (the Finnish State Export Credit Agency) to participate in theinvestment, making the project viable.

The Dutch bank, ING, decided to pull US$480 million in financing following a verdict by the World Bank's Compliance Advisory Ombudsman, which agreed with the local community on alleged violations of the project of the IFC's Social and Environmental Safeguards. Calyon's Corporate Social Responsibility team, also showed concern over financing the mill, but financial drivers at Calyon pushed forward, despite their sustainability team's warnings, claiming they did not need to follow social and environmental safeguard commitments under the Equator Principles because the loan to Botnia was a general loan and not project finance.

The IFC, which collected and guided information about the projects' social and environmental compliance, had to send Botnia back to the drawing board several times, following an unfavorable verdict from its Compliance Advisory Ombudsman (the CAO) who found the project seriously violated the IFC's procedural norms and safeguards. The question of legality, at the time, was being defined at the International Court of Justice, and would not be resolved for several years (the verdict took 4 years in total). The World Bank's lawyers expressed concern over the bank's potential complicity if it financed the project if it later turned out that authorization of the project was in violation of international law, which is precisely what has happened.

Nonetheless, IFC plowed on, despite the warnings, despite egregious procedural errors in project preparation which were uncovered by the Ombudsman, and most importantly despite massive protests by stakeholder communities.

In the final stretch to the World Bank's Board of Director's decision, IFC's Executive Vice President, the Swedish national Lars Thunnel stated to the Bank's Board of Directors "If we had to stop financing every time a community complained, we'd never finance any projects". At the time of the Board vote, the Finnish government (which was a financial stakeholder in the project) held the EU Presidency, and strongly lobbied the World Bank to approve the loan, despite many indicators that showed the project was not only in non-compliance with bank policy, but that indeed it was likely the ICJ would rule it violated international law.

This insensitivity of the IFC to stakeholder communities has been a repeated problem in large scale private investment projects in sensitive environmental sectors and several members of the Board of Directors confided to representatives of stakeholders in the Uruguayan pulp mill conflict, and to officials of the Argentine government, that they were unhappy with how the IFC has handled consultations, but that politics at the Bank were likely to favor investment. EU Trade Commissioner Perter Mandelson even traveled to Argentina to pressure then President Nestor Kirchner to back off from the Finnish investment or face eventual trade problems with the EU.

Lars Thunnel, who heads the IFC, is an investment banker from the Nordic states; coincidentally Nordea and Finnvera are two large multinational banks (private and State owned, respectively) composed of Nordic financial interests. They both came in strong with funding for Botnia. Both banks are run by many of Thunnel´s financial colleagues, raising accusations from stakeholders that this is just another example of how the banking community makes back-room business deals amongst buddies, ignoring community concerns. NGO´s have claimed for years, that voluntary agreements under the Equator Principles signed by some 60+ multinational banks have had little influence in steering bank decisions on sensitive social and environmental investments.

The IFC was adamant about approving the loan, and fought hard at the Bank's Board of Directors, ignoring local concerns. At one point the IFC misinformed the Board of Directors indicating that the project enjoyed broad public support, only to see the largest over march against one of their projects 10 days later. Community stakeholders who met with Thunnel shortly before the Board vote insisted that either his environmental and projects staff was incompetent in missing such large local opposition, or it was lying to the Board, and that IFC should hold financing until the ICJ case was resolved. This fumbling of consultative procedures and errors in due diligence by IFC has characterized the handling of the Uruguayan Botnia pulp mill investment from the beginning.

The community has marched yearly to commemorate its´ struggle against the World Bank and the Finnish pulp mill, with upwards of 100,000 marching each year. The next march planned this month on April 25th will likely draws thousands following this ICJ verdict, legitimizing local claims that Botnia's project is illegal. On the eve of the World Bank loan approval, on November 20th, 2006, the community held a vigil awaiting the vote. After the IFC confirmed two loans to Botnia for US$370 million, they never left and no one has been able to cross from Uruguay to Argentina (or back) at its' most important border crossing since.

The ICJ ruling clearly establishes that Uruguay violated the bi-national waterways treaty that governs the water border between Argentina and Uruguay, by not consulting Argentina on the decision to allow for such a large contaminating industrial project to go up in what have historically been pristine river lands and a sensitive ecosystem, with local economic development grounded on eco-tourism. Pulp mills bring algae, noise pollution, heavy industrial traffic and putrid rotten egg smell, which have already destroyed the Uruguayan tourist sector at the mills site, and will likely do the same over time to the Argentine region immediately across from the mill.

But the verdict comes much too late as the mill, largely thanks to IFC and the other financial institutions that followed behind (Calyon, Nordea, and Finnvera among others) has already been built and began operations in 2007, one year after the IFC gave Botnia the two loans. Botnia is one of the world's large pulp mill operations, dumping millions of gallons of contaminated water into the Uruguay River each day. The plant operators claim that their production is so clean that it actually improves the quality of the river, which they claim is already polluted. The plant dwarfs other similar plants in Finland which have been progressively closed to transfer operations to developing countries where environmental controls are more lax, where it is cheaper to operate, and which offer lucrative financial benefits. Botnia operates in an entirely tax free zone, exports all of its production for European and Asian consumption, and employs only 300 people.

The verdict provides some formal retribution to the community, who can now claim that they were indeed right in opposing the mill on ground of its' illegality, however, it fails to order a plant relocation, which is what the IFC should have recommended from the early stages of project preparation to ease the bi-national tensions which quickly escalated as time passed and no action came from IFC.

Now everyone must live with the a poor decision made by the World Bank which has led not only to promoting an illegal industrial project, but which has caused unimaginable strife between two otherwise friendly communities and countries. The road block remains firmly on the bridge, the community shows no intention of tiring, and with this verdict it is very likely that it will be there for a long time to come!    

Banks

Crédit Agricole

France
Active

Nordea

Finland
Active
Dodgy Deals
There are no active project profiles for this item now.

Botnia pulp and paper mill

Uruguay
Project
On record
Pulp, Paper and Paperboard Mills

Botnia pulp and paper mill

Uruguay
Sections
Banks Policies Dodgy Deals Campaigns
Our campaigns
Banks and Climate Banks and Human Rights Banks and Nature Banks and Pandemics
Our projects
Tracking the NZBA Banks and Putin's war in Ukraine Tracking the Equator Principles Tracking the PRBs Banks and steel Find a Better Bank Banks and the OECD Guidelines
Media
News Publications
Fossil Banks No Thanks StopEACOP Forests & Finance Banks & Biodiversity Drop JBS Bank of Coal Don't Buy into Occupation
BankTrack
About BankTrack Visit us Organisation Our team Our board Guiding principles Team up with us Jobs at BankTrack Our annual reports Funding and finances History BankTrack in the media Our privacy policy Donate
Successes Contact BankTrack
Vismarkt 15
6511 VJ Nijmegen
The Netherlands
Tel: +31 24 324 9220
Contact@banktrack.org
Donate Mailing list Facebook Twitter
©2022 BankTrack
BankTrack is a registered charity in the Netherlands (ANBI) - RSIN 813874658
Find our privacy policy here

Stay up to date

Sign up now for all BankTrack's news


Make a comment

Your comment will be reviewed, before being posted