The concept of FPIC was added to Performance Standard 7 in the 2012 iteration of the IFC Performance Standards, which are incorporated by reference into the Equator Principles III framework. The integration of FPIC into PS 7 relates to an international movement recognizing that Indigenous Peoples must participate in the development of projects likely to affect them, as an element of sustainable development. Whether Indigenous People may refuse a project as part of FPIC, however, remains a controversial topic.
Performance Standard 7, states that FPIC applies:
- when the project is likely to have an impact on the land and natural resources subject to traditional ownership or under customary use; when the project involves the relocation of Indigenous Peoples from land and natural resources that are subject to traditional ownership or under customary use;
- when the project is likely to have significant impact on the cultural heritage essential to the identity of the Indigenous Peoples; and
- when the project involves the use of the cultural heritage of the Indigenous Peoples, including their knowledge and customs, for commercial purposes.
Relationship Between FPIC in Performance Standard 7 and Legal Requirements
Because the Performance Standards apply to relationships between private parties and indigenous communities, the State preserves the right to make decisions concerning the development of its resources. Performance Standard 7 does not contravene this right. However, some governments may have committed to ensuring that the Indigenous Peoples give their consent before a development project can be approved.
In Canada, for example, certain agreements signed with aboriginal communities require project sponsors to enter into Impacts and Benefits Agreements with these communities in order to obtain government authorizations and permits. Regardless of State based legal requirements, when the project has adverse impacts for indigenous and non-indigenous communities, Performance Standard 7 requires that the Client aim to comply with the most stringent norm, which means (pursuant to Performance Standard 7) at least a good faith negotiation and an agreement demonstrating FPIC where required in relation to Indigenous Peoples. This is subject to the "justified deviation" caveat present in both the IFC Performance Standards and the Equator Principles.
International Legal Context
The meaning of "consent" is without doubt the most controversial aspect of the FPIC process. For indigenous organizations, consent is generally understood as the right to approve or reject proposed actions or projects that may affect them or their lands, territories and resources. Consent by this definition is a decision made by Indigenous Peoples that is reached through their customary decision-making process. To some, this sounds like a veto right over the furthering of a project. Such a postiion is highly contentious and not likely reflective of the prevailing understanding of FPIC.
Certain international legal instruments that address the relationship between States and Indigenous Peoples recognize FPIC as a right of Indigenous Peoples in certain circumstances. For example, Convention No. 169 of the International Labour Organization obliges signatory countries to obtain the FPIC of Indigenous Peoples before resettling them. Application of this requirement is conditional however, as the State can override the FPIC requirement for relocation if it follows appropriate legal procedures that allow for the effective representation of Indigenous Peoples.
The United Nations Declaration on the Rights of Indigenous Peoples (the Declaration) also addresses FPIC and does not subject the concept to domestic legislation. The relevant provisions of the Declaration include:
- “No relocation shall take place without the free, prior and informed consent of the indigenous peoples concerned…” (Article 10).
- “Indigenous peoples have the right to redress, by means that can include restitution or, when this is not possible, just, fair and equitable compensation, for the lands, territories and resources which they have traditionally owned or otherwise occupied or used, and which have been confiscated, taken, occupied, used or damaged without their free, prior and informed consent” (Article 28).
- “States shall take effective measures to ensure that no storage or disposal of hazardous materials shall take place in the lands or territories of indigenous peoples without their free, prior and informed consent” (Article 29).
- “States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water and other resources” (Article 32).
This reflects deep divisions among the drafters of the Declaration over the scope of the Declaration’s provisions, including those which recognize FPIC. While indigenous groups generally accept FPIC as an international human rights norm, many also believe that the right to grant or withhold approval for actions affecting their rights is an integral element of the right of self-determination.
Many States have proposed a narrow definition of FPIC that focuses only on the consultative process. For example, in statements confirming support for the Declaration, the United States Government recognizes the significance of the Declaration’s provisions on FPIC, which it understands to call for a process of meaningful consultation with tribal leaders, but not necessarily the agreement of those leaders, before the actions addressed in those consultations are taken. In Canada, the courts have decided that actual consent is appropriate only in the case of established rights and then by no means in every case. In some cases, the full consent of an aboriginal nation may be required before development may occur.
However, the Canadian Supreme Court also noted that aboriginal title has an economic aspect, which suggests that fair compensation is relevant to the question of justification. The amount of compensation payable will therefore vary with the nature of the particular aboriginal title affected, the nature and severity of the infringement and the extent to which aboriginal interests were accommodated. The Supreme Court of Canada has also held that even if an aboriginal people has not yet proved its aboriginal right or title, governments have a duty to consult and if necessary accommodate the interests of aboriginal people before authorizing action which diminishes the value of land or resources that they claim. This duty does not encompass a duty to obtain agreement however, and does not give aboriginal groups veto power over what can be done with land pending final proof of their claims.
FPIC in the IFC Performance Standards
Both Performance Standard 7 and international legal instruments like the Declaration are silent on whether the right of consent entails a right of veto. Using a plain language interpretation, “consent” is commonly defined as “the voluntary agreement by a competent person to another person’s proposition”. This definition of “consent” does not necessarily equate to the right of a “veto”, which may be defined as “the power of one person or body to prohibit a course of action chosen by another”. A veto right, by such definitions, entails more than a right of consent and involves a capacity to exercise power to impede a course of action chosen by another from occurring.
In light of this lack of clarity over the meaning of “consent”, no strong conclusions can be drawn as to whether Indigenous Peoples’ consent is an absolute precondition for approval of actions that may affect them (in the nature of a veto) or simply a good faith aspiration that requires a procedural process aimed at the establishment of agreement between stakeholders and Indigenous Peoples, or something between the two.
It would certainly be contrary to the spirit of FPIC for communities to have the power through FPIC requirements to frustrate reasonable good faith attempts, or to take unreasonable positions to thwart decisions or actions in cases where, despite meaningful consultation, agreement is not reached. This suggests that a right of veto is not consistent with the concept of FPIC, although the ultimate definition of FPIC continues to evolve.
A Better Approach to Understanding "Consent" in FPIC
Rather than attempting to understand “consent” only in relation to the question of veto rights, it is probably more useful to interpret Performance Standard 7 with emphasis on how to gain and maintain the consent of the indigenous communities affected by a project to ensure, from a practical perspective, that the Client has a social license to operate throughout the span of the project.
When viewed this way, FPIC and the processes and outcomes it entails can be seen as a cost-saving measure and a safeguard (both for the Client and indigenous communities) against the project’s environmental and social risks.
FPIC, as part of Performance Standard 7 and the Performance Standards more generally, offers a practically useful approach to managing such risks and promoting the long term viability and sustainability of project activities affecting Indigenous Peoples. Performance Standard 7 does not provide a singular definition of FPIC. Rather, it provides the following explanation: FPIC builds on and expands the process of ICP described in Performance Standard 1 and will be established through good faith negotiation between the Client and the Affected Communities of Indigenous Peoples.
Good faith negotiation supposes that the parties have the will to engage in a consultative process, be available for meetings, provide necessary information for informed negotiation, explore the principal questions at issue, use procedures mutually acceptable for the negotiation, have an open mind to change from their initial positions, modify their offers when feasible and give sufficient time to permit sound decision-making.
In this context, FPIC should be understood as a process that permits communities of Indigenous Peoples to define a collective position in response to a project while recognizing the fact that different and diverging viewpoints may exist within those communities. FPIC, as understood by Performance Standard 7, should not be viewed as a “one-size-fits-all” and “once-and-for-all” formality. It is an ongoing process of engagement and meaningful consultation with Indigenous Peoples with the explicit objective of disclosing relevant information, identifying impacts, accommodating Indigenous Peoples’ rights and interests and obtaining their consent.
Guidance Note 7 explains that it is not necessary to obtain the unanimous support of the members of indigenous communities affected by the project. Performance Standard 7 proposes a complex process that, if it is applied by the Client, should permit the conclusion of an agreement with the indigenous communities impacted by a project. The conclusion of such an agreement would constitute proof that the community has given their consent to the project, to the degree that this consent was free and informed. An FPIC agreement is aimed at capturing the Affected Communities’ broad agreement on the legitimacy of the engagement process and the decisions made.
Performance Standard 7 is silent on important questions regarding the scope of support and decision making processes for assessing consent. For example, if unanimity is not a prerequisite, can the consent be simply expressed by a band council resolution or should it involve a community referendum? In the case of a project that would affect several communities, must the Client obtain the distinct consent of all the concerned communities at the time of a referendum, or can the Client consider that this consent was obtained because the majority of voters support the project? It can be difficult to define all the aspects of a project, to identify the indigenous communities affected and to evaluate the impact of the project before it is fully conceived. In such circumstances, it will be difficult to attain FPIC since the impacts of the project are still imprecise. Little guidance on such issues is provided by Performance Standard 7, and will need to be resolved with professional legal advice.
If consent is obtained, it applies to the project at the moment when the consent is given. While the agreement between the Client and the indigenous community may well be intended to have validity for the length of the project, it is a good practice to follow-up and update action plans in order to adapt them to new circumstances while conserving the mutually agreed to principles, undertakings and responsibilities.
What if consent cannot be obtained?
A successful FPIC process results, ideally, in an agreement between the parties. Performance Standard 7 and the associated Guidance Note do not discuss the possibility that a Client might be unable to obtain FPIC of the Indigenous Peoples impacted by a project. Guidance Note 7 suggests only that the parties use mediation or ask for a third party opinion where there are delays or difficulties in achieving agreement. This makes the scenario of a failure to make agreement a very difficult one to address in light of the requirements of Performance Standard 7.
However, since Performance Standard 7 does not establish a link between the right of consent and the right of veto, there may be circumstances where the Client could be in a position to demonstrate that they have followed and respected all the requirements contained in Performance Standard 7, even if formal agreement has not been reached with affected Indigenous Peoples. That being the case, where agreement cannot be achieved, careful deliberation with appropriate expert advice should be sought to determine the continued viability and sustainability of the project.