National Quaqiao University Dr.CHEN Binbin

1. THE IFC PERFORMANCE STANDARDS ON ENVIRONMENTAL AND SOCIAL SUSTAINABILITY AND THEIR ENLIGHTENMENTS TO CHINA National Quaqiao University Dr.CHEN Binbin

2. Contents 1. IFC and its Performance Standards 2. Historical evolution of the IFC Performance Standards 3. The nature of the IFC Performance Standards 4. The references of IFC Performance Standars for China 5. Conclusions Dr. CHEN Binbin

3. 1. IFC and its Performance Standards • 1. Established in July 1956 • 2. Providing the most loans and equity financing to private sectors in developing countries. • 3. Owning 184 member states and 3,757 staffs from over 140 countries, with 104 branch offices in 98 countries and 2000 private sector clients around the world. • 4. Purpose：Further economic development the Performance Standards Dr. CHEN Binbin

4. 2. Historical evolution of the IFC Performance Standards Environmental and Social Safeguard Policies The 2012 Performance Standards The 2006 Performance Standards 1.the “Cultural Property” (September 1986) 2.the “Involuntary Resettlement” (June 1990) 3.the “Indigenous Peoples ”(September 1991) 4.the “Safety of Dams” (September 1996) 5.the “Child and Forced Labor Policy Statement”(March 1998) 6.the “Environmental Assessment”(October 1998) 7.the “Forestry” (November 1998) 8.the “Pest Management” (November 1998) 9.the “Natural Habitats” (November 1998) 10.“International Waterways” (November 1998) Dr. CHEN Binbin

5. 2. Historical evolution of the IFC Performance Standards Comparison of the names and content changes of the 2006 and 2012 Performance Standards Dr. CHEN Binbin

6. 2. Historical evolution of the IFC Performance Standards Comparison of the names and content changes of the 2006 and 2012 Performance Standards Dr. CHEN Binbin

7. the organization /constituent body has been granted legislative powers; the basic documents or charters on which the international organization was established had a mandate. Text 3. The nature of the IFC Performance Standards Is the set of the Performance Standards an international treaty or agreement? A Binding international contract the IFC Performance Standards NO the IFC Agreement, does not authorize the IFC itself, nor does it authorize any agency within the IFC to set regulatory standards for the environmental and social development of global project financing __________ Dr. CHEN Binbin

8. 3. The nature of the IFC Performance Standards States' practice (the material element) international custom opinion juris (the psychological element) Dr. CHEN Binbin

9. 3. The nature of the IFC Performance Standards States' practice (the material element) • During the past sixty years, about 1200 projects have been presented to the Board of IFC for approval, up to more than $200 billion in financing for IFC’s own account delivered to investments in emerging markets, covering 115 developing countries worldwide. • By the end of 2016, the amount of IFC’s project financing had occupied approximately 10% of the global total. In addition, more and more staffs in IFC were getting professional training or arranged to support the business of financial intermediaries in order to ensure the implementation of the Performance Standards. • In March 2007, the MIGA Executive Director Board had approved the adoption of the Performance Standards in MIGA. • In June 2012, a memorandum seeking Board approval of the application of the IFC Performance Standards to be shared by IBRD/IDA in private sector projects was put forward. Dr. CHEN Binbin

10. 3. The nature of the IFC Performance Standards States' practice (the material element) • In July 2006, the Equator Principles, were revised and republished taking the Performance Standards as a mirror, requiring that the new projects of a total investment amount of more than $10 million dollars and the expansion of old projects that may have a significant impact on the society and the environment, project financing related to the upgrading of existing equipment, as well as financial practices such as advisory services for project financing, shall apply to the Performance Standards. • At present, 80 banks in 34 countries around the world have announced the adoption of the Equator Principles, such as HSBC, Citibank Bank, Berkeley Bank, Mizuho Industrial Bank, etc., occupied approximately 70% of the global project financing market. Dr. CHEN Binbin

11. 3. The nature of the IFC Performance Standards opinion juris (the psychological element) • First of all, in the international community, the International Court of Justice has also begun to have jurisprudence requiring the environmental impact assessment of the trans-boundary impacts of projects to fit the requirements of the Performance Standards. • For member states, the Performance Standards are influencing their domestic environmental and social legislations in different ways and to varying degrees. • For international commercial banks, as a kind of conventional “rules”，the Performance Standards have made them have a sense of obligation that they should also follow and obey them. • For the client firms, the Performance Standards become a prerequisite in the loan contracts of the projects, and the client firms’ compliance with the Performance Standards is a manifestation of the performance of the contractual obligations. Dr. CHEN Binbin

12. 3. The nature of the IFC Performance Standards Is the set of the Performance Standards an international custom? NOT YET International Practice Dr. CHEN Binbin

13. 3. The nature of the IFC Performance Standards international custom, as evidence of a general practice accepted as law • The traditional narrative or subject of international law is the state. • The set of Performance Standards mainly mirrors the individual’s conducts and actual behaviors. • It is an individual-based “practice + opinio juris” formulation. in the second stage Dr. CHEN Binbin

14. 3. The nature of the IFC Performance Standards International custom is a compulsory norm that must be complied with and cannot be changed at will. • International practice is a random norm and is binding on the parties only when they agree to apply it. The recognition or transformation of the legislature in member states through their domestic laws; To be incorporated into the sales contracts or standard clauses when the parties have agreed their contracts to be governed by them, resulting in the binding force of the contract law. Dr. CHEN Binbin

15. WHAT 3. The nature of the IFC Performance Standards The set of Performance Standards, as a kind of international practice, has been a mature international business practice in the field of private law, but an emerging international custom in the field of public law. Dr. CHEN Binbin

16. 4. The references of IFC Performance Standars for China A Regarding the Performance Standards as the primary references for China to apply for IFC funding and strengthen the social regulation of foreign capital. • Firstly, China’s legislations on the regulation of foreign investments should be guided by the concept of sustainable development in Performance Standards in the future, so as to improve the quality and efficiency of utilizing foreign investments. • Secondly, China should improve the EIA standards of project construction and promote the improvement of relevant environment and social legislations. Dr. CHEN Binbin

17. 4. The references of IFC Performance Standars for China A Regarding the Performance Standards as the primary references for China to apply for IFC funding and strengthen the social regulation of foreign capital. Dr. CHEN Binbin

18. 4. The references of IFC Performance Standars for China B Improving China’s overseas investment legislations by drawing on the successful experience of the Performance Standards in regulating environmental and social issues. • Due to the long-term influence of extensive economic development model, Chinese enterprises’ awareness of protection in the environmental and other social rights and interests is weak, so that many overseas investments have been repeatedly accused of “predatory development” in recent years. • The types of risks encountered by Chinese enterprises in overseas investments have gradually changed from the traditional nationalization, expropriation and other political risks to a variety of new social and environmental risks. Dr. CHEN Binbin

19. 4. The references of IFC Performance Standars for China 2011:the Myitsone hydro-power station 2012: the Mirado copper mine 2013:the Sino-Ukrainian Railway 2014:Dragon Mart Cancun Dr. CHEN Binbin

20. 4. The references of IFC Performance Standars for China Statistics of cases where overseas investments of Chinese enterprises encountering environmental and social risks in the first half of the 2005-2014. The data are derived from the “China Global Investment Tracker” Database of the Heritage Foundation of the United States. Dr. CHEN Binbin

21. 4. The references of IFC Performance Standars for China B Improving China’s overseas investment legislations by drawing on the successful experience of the Performance Standards in regulating environmental and social issues. China should refine the social responsibility provisions for overseas investments of enterprises. China should strengthen the social responsibility information disclosure of its enterprises’ investments in foreign countries. China should add the new regulatory obligation item to investment agreements during negotiation with other state counter-parties. Dr. CHEN Binbin

22. The set of Performance Standards, as a kind of international practice, has been a mature international business practice in the field of private law, but an emerging international custom in the field of public law. 5. Conclusions The set of Performance Standards' “sustainable development” concept, which it strongly advocates, not only benefits the economic and social development of the host countries, is also in the interest of the capital importing countries, and eliminates the environmental and social risks encountered by foreign capital in the host countries at the same time. Under the background of promoting the “Belt and Road” Initiative, it is necessary for China to seriously summarize the institutional experience of the Performance Standards in achieving sustainable development, and to actively absorb it from the two layers of domestic law and international law. Dr. CHEN Binbin

23. Thank You ! Dr. CHEN Binbin