The Equator Principles and Social Rights: Incomplete Protection in a Self-Regulatory World

Abstract

The new Equator Principles (EP2) now require lending banks that have signed up to EP2, and also the borrower, to take account of the social rights of affected communities as provided by the rules in EP2. However, there continue to be criticisms by NGOs of individual EP2 banks, in particular, relating to the monitoring by the banks of the covenants entered into by the borrower. There are also ongoing concerns by NGOs as to the transparency of certain actions of individual EP2 banks, with allegations that some banks are not complying with the provisions in EP2. A statutory system of regulation might address these issues, although such a system is unlikely to be introduced on a worldwide basis. It is also unclear whether a statutory system would provide better protection for affected communities. EP2 requires affected communities to be consulted, but the affected community is not required to agree to the project in order for it to go ahead. It is suggested that this is a fundamental weakness of EP2: the balance is tilted so as to enable such projects to be carried out even if the affected community does not want the particular project to take place.