International Financial Institutions and Labour Standards: An Abtruse Encounter?
Mpoki Mwakagali LL.M (Lund), LL.D (Stockholm)
Introduction…why are IFIs relevant?
● IFIs have increasingly become important actors in labour policy-making processes
● Standards established by these institutions influence other international actors
● A catalyst for progressive development of
international law
Generational emergence of IFIs
First generation
(IBRD and MF) 1940s
-Post WWII
-Reconstruction of Europe
-Development finance for non-European
developing countries -Extensive project lending
Second generation
(IDA, IDB,ADB,AfDB) 1960s
-Heightened need of financial resource-new states (decolonisation) -To cater for the needs of least developed
countries
-Greater say for regional members -Soft loans
Third generation ( EBRD)
1990s
-Focus on central and eastern Europe in
post-Cold War era
International Financial Institutions: An Overview
Nature (WB and IMF, ADB, IDB, AfDB, EBRD)
• Interntional organisations
• Created by states for a public purpose Governance
• Board of Governors
• Each member state is represented here
• More general issues such as annual budget, policy etc
• Board of Executive Directors
• Oversee day to day operations
• Weighted voting Mandates
• Specified in respective Articles of Agreement - Broad eg. ”…under adequate safeguards…”
- Conflicting, evolving interpretations (eg. Political Prohibition) - Increasingly expanded constructively (”mission creep”)
• Mainly: to contribute to economic development by providing financial assistance (loans) to members
Emergence of Labour Rights in the Work of IFIs
Began in the the 70s/80s and a result of ”the shift”…
● Shift of ideology
– From lending institutions to development institutions – Shift in the meaning of ”development”
● Shift of Operations/ activities
– From project lending to policy-based lending – The rise to prominence of conditionality
● Shift in the role of IFIs (Constructivists Theories) – Normative actors
– Creators, diffusers and transmitters of norms
– Eg. environment protection, anti-corruption, rights of women – Influence at both the international( other actors) and the
domestic (states) levels
The Concept of Conditionality
●
Defn: conditions that regulate the aspects of the economic
program or specific institutional or structural reform that is being financed by an IFI. ( not the same as ”conditions for financing”)
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The use of conditions attached to a loan, debt relief, bilateral aid etc. by IFIs or donor countries.
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A means of regulating the behaviour of the recipient party by use of leverage
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Actors: States and IFIs negotiate
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Multifaceted- economic, political, structural and social conditionality
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Various types: Ex-ante and ex-post conditionality
Conditionality…process
Conditonality….a legal concept?
● The legal status of arrangements between states and the IFIs…contracts or arrangements?
– Letters of intent and MoU – Negotiation process
● No legal aspects
– No legal obligations
– No legal consequences
– No legal remedies
Conditionality…a tool
● Regulation by appropriation
● Insertion of regulatory norms into a jurisdiction through conditions of credit disbursment
● Outside conventional arenas of law-making or norm-creating
● Overlapping, contradicting already existing
norms
Enforcement of Conditionality
● Despite a lack of legal obligations and consequences in IFIs’ arrangements, there are various ways in which
IFIs ensure that recipient countries comply with conditionality.
● Surveillance
-IMF Article IV consultaions
● Suspension of financing
● Debt relief
● Credit signals
IFIs Conditionality and Labour Rights
● Traditionally focused on the fiscal sector and more economic factors
● The shift in the 80’s from financing investment to policy reforms
● The 90’s- further emergence of workers’rights in IFI conditionality (WB and IMF) alongside other social policy eg. Environmental protection, rights of women, anti- corruption measures
● Presently, further intrusion in national policy- making processes and
implementation of extensive structural reforms esp. of the labour market (conditionality has increased in number and degree of intervention
● Legal implications of IFIs conditionality on labour rights can be categorized into direct effects and indirect effects of conditionality
The direct effect of labour conditionality
● Conditionality affects labour rights directly by touching the recipient’s national legal system
● The rights are a target of conditionality
● WB in Zambia-reforms in the Labour Relations Act
● IMF in Greece (decentralized collective bargaining-reforms to the collective bargaining system…firm level agreements take precedence over sectoral
agreements;characterized by extensive intrusion and reforms of collective labour rights
● EBRD in Georgia
”…despite modifications in consultation with the ILO, gaps still persist between Georgian legislation and the EBRD Performance Standards 2 requirements with respect to child labour, collective bargaining…EBRD will continue efforts to
ensure…are compliant with relevant ILO conventions…”
The indirect effect of labour conditionality
● Conditionality does not target labour rights
● Labour rights are affected in the sense of ”collateral damage”
● Reorientation/cuts in government expenditure
● Privatisation
● Foreign direct investment
– The IFC has adopted Performance Standards 2
incorporating CLS
IFIs Operational Policies and Core Labour Standards
World
BAnk IMF IDB ADB AfDB EBRD
FACB X X X X ✓ ✓
Discrimination ✓ (not
CLS) X X X ✓ ✓
Child Labour ✓ (not
CLS) X X X ✓ ✓
Forced Labour ✓ (not
CLS) X X X ✓ ✓
Impacts of IFI conditionality
● Negative effects
– Undermining labour rights
– Influence non-compliance with obligations under international labour standards
– Adverse standard setting – Lack of consultation
– Inconsistency
● Positive effects
– Promotion of labour standards – Incentives for policy reform
– Effects on adherence with labour standards
– Implementation tool
Theoretical contentions
●
Rights-based approaches
– Labour rights as human rights are a goal
– HRs trancend over economic arguments and special political interests
●
Instrumenatlist approaches
– Labour rights are a means and not a goal
– Labour rights come into play only when they are necessary for the success of a project/program
”Requiring member countries as a general proposition to enforce certain labour law standards regardless of their relevance to Bank operations would raise broader issues with respect to the Bank’s mandate and cannot be limited only to the subject of child labour. Therefore, the Bank can only impose conditionalities in this area to the extent that an absence of consistency with child labour standards
undermines the execution or the developmental objective of
its specific programs and projects.” (World Bank)
Promotionality…the other tool
● The role IFIs can play to persuade states
● Not as concrete as conditionality, but nevertheless important
● WB and IMF have used this as well
– Eg. Doing Business
IFIs and International Law
● International organisations with international legal personality
● Functional immunity
– The Jam Case has brought new insights
● Responsibility of international organisations (eg.
DARIO)- difficult to establish primary obligations of IFIs
● Accountability mechanisms
Accountability Mechanisms
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Began with the WB’s Inspection Panel in 1993 and quickly spread to the other IFIs
-ADB’s Accountability Mechanism,2003
-EBRD’s Independent Recourse Mechanism,2003 -AfDB’s Independent Review Mechanism,2004
-IDB’s Independent Consultation and Investigation Mechanism,2010 (IIM,1994)
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