Closing Accountability Loopholes and Ensuring Compensation for Environmental Harm
While international investment can provide transfers of capital and technology that spread the use of environmentally sound products and processes, and enable countries to “leapfrog” more polluting phases of development, it can also give rise to certain environmental risks. For one, strategies that firms use to structure their operations across borders and the doctrine of separate legal personality can make it difficult for stakeholders in the host country to secure compensation or other remedies for harms caused by a multinational enterprise’s domestic affiliate. Additionally, some environmental harms caused by firms with foreign ultimate beneficiaries may be harms to the commons, raising practical and legal challenges regarding who is willing and able to sue for what environmental injuries.
Against this background, CCSI is exploring how international legal tools can be designed to improve, rather than undermine, accountability for environmental harms, and/or provide compensation for harms caused. Relevant work includes research on legal structures for special purpose vehicles, and on potential roles for and feasibility of new civil liability and insurance schemes.
In this report, CCSI sets forth certain steps that host-governments can take during the pre-investment, operation, and enforcement phases of extractives projects to provide financial and other protection in the context of environmental disasters associated with private sector investments.