Tag Archives: CDA

Model Language for an Anticorruption Citizen Suit Provision in Community Development Agreements

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Community Development Agreements (CDAs) are contracts between extractive companies and the local communities that reside near their operations. The contracts are designed to funnel some of the financial and non-financial benefits of the project to those who are most likely to be negatively impacted by their inherent destructiveness. Some developing states require CDAs from extractive companies as a precondition for granting permits, and the World Bank publishes model regulations for CDAs—recommendations that hold significant sway for many developing states. The World Bank’s model regulations are often referenced, or adopted wholesale, by countries with capacity constraints.

The World Bank model CDA, and many of the existing national laws which govern CDAs, include required, substantive terms such as monitoring components, dispute resolution systems, etc. However, CDAs have not traditionally included provisions that might allow the contracts to be operationalized in the anticorruption fight. Building on the work of Abiola Makinwa and James Gathii, I have argued that CDAs should include anticorruption clauses that would give recognized community members the right to sue as third party beneficiaries in the case of corruption, and that the World Bank should amend its model CDA to include a third party beneficiary cause of action for corruption in the making or execution of a CDA.

While my previous post advocated for this reform in general terms, my objective here is to suggest specific language that the World Bank should incorporate into its model regulations. These provisions derive in part from recommendations of the Columbia Center on Sustainable Investment’s (CCSI) analysis of Emerging Practices in Community Development Agreements and transform the CDA into an anticorruption tool. The recommended provisions are as follows:

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Community Development Agreements: A New Anticorruption Tool?

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Projects in the extractive industries are often enormous, long-lasting, multi-billion dollar affairs. Given the disruption, potential for environmental disaster, and permanent changes in the state of the land, these projects tend to generate conflict and controversy, especially in low-income countries, where citizens may enjoy fewer legal protections. As a way to mitigate these risks, some nations require extractive firms to enter into “Community Development Agreements” (CDAs) with local communities. (CDAs—which are also sometimes known as Benefit Sharing Agreements, Impact Benefit Agreements, or Community Joint Ventures—are sometimes voluntary corporate social responsibility initiatives, but my focus here is on CDAs that are required by, and incorporated into, national regulatory frameworks.) At the most general level, CDAs are created through a process that engages local populations in important decision-making about the project and its profits. The process varies, but usually includes the following steps:

  • Identify the people who will be affected
  • Allow those identified to determine what the community could gain from the project (whether that be jobs, money, education, infrastructure, long-term benefits, etc.)
  • Write a CDA that encompasses the demands of the community and aligns with regulatory requirements
  • Provide monitoring tools to the affected population
  • Set up dispute resolution systems
  • Strategize for how to prepare the population for the end of the project’s lifespan.

This process takes time and can be expensive. But extractive projects typically last for decades, and so building a sustainable relationship with the local population is vital to the project’s success. After all, many corporations fund similar stakeholder engagement processes without being required by law to do so. That is because CDAs can be a good business decision: empowering the community allows the company to avoid violent conflict and signaling that the firm is a good corporate citizen.

For those countries that do require a CDA for extractive projects, the law also regulates the substantive terms, requiring CDA contracts to contain certain clauses–typically monitoring components, dispute resolution mechanisms, and local spending or employment quotas. However, one thing that is never included in a CDA is an anticorruption clause. The words “bribery” or “corruption” appear nowhere in the World Bank’s model CDA agreement, and the Columbia Center on Sustainable Investment (CCSI) is silent on the issue. Building on recent work by Abiola Makinwa and James Gathii, I posit that CDAs should include anticorruption clauses, to empower private citizens in fighting corruption in public contracts. The basic idea is to allow the recognized community members—those covered by the CDAs—as “third party beneficiaries” to the contract between the government and the extractive company. The community members would then be entitled to sue if there was corruption in the making or execution of the contract.
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