59 Pages Posted: 7 May 2009
Date Written: May 5, 2009
Pressures rippling through the universe of international development aid over the last fifteen years are transforming overseas development aid from a top-down, government-only endeavor into a multi-layered, multi-party endeavor which engages governments and citizens at every level. In addition, aid priorities now reflect the reality that global problems (such as climate change and HIV Aids) need serious attention and that developing countries need grant finance to address these problems and other problems that stem from abject poverty. For the reasons described in this Article, these changes have made overseas development aid heavily dependent on grants channeled through the World Bank (referred to, throughout this article as "World Bank grants"). This dependence poses challenges for an institution set up to provide loans, not grants, and accustomed to thinking of a grant as a form of gentleman’s agreement rather than a binding commitment which may range from millions to hundreds of dollars and which, whatever the amount, reflects a host of interests and voices that clamor to be heard. These challenges set the context for this Article’s inquiry.
This Article begins by describing the changes that recent trends in international development aid have wrought and the reasons those changes have placed the World Bank at center stage of development grant finance. It then focuses on the legal framework governing World Bank grants. Its key inquiry is the extent to which that framework facilitates and effectuates the goals and values that development grant finance aims to achieve. The article is not about whether grants for development aid achieve their targets (for example a reduction of greenhouse gas emissions in a recipient country or in the number of Aids-related deaths), an important question but one for another day. Rather, it is about whether such grants are negotiated, agreed to and delivered in a way that promotes the inclusive, participatory and collaborative approaches that recent trends in development aid hold paramount.
As a starting premise, this Article concedes that the legal framework governing development grant finance is unclear (an inevitable state of affairs given the legal of clarity surrounding the legal status of a grant in the national jurisdictions of most developed countries, and, therefore, in an international legal system built on principles drawn from them). In the face of this lack of clarity the terms of the grant agreements pursuant to which development grants are made, become the operative legal framework. And so, this Article looks to those terms to determine whether such grants comport with current thinking on optimal development approaches.
But not all terms of an agreement are created equal. This Article posits that in the world of development grant finance, the key elements of a grant agreement to evaluate in order to determine whether the agreement reflects an inclusive, participatory and collaborative approach are the elements that deal with the right of the grantor to cancel or suspend a grant and the provisions that apply when things go, or appear to have gone, wrong; namely the dispute resolution arrangements. The grantor is always in a position of power; dispute resolutions arrangements set the parameters within which such power may be exercised. For this reason, this Article examines the dispute resolution arrangements in World Bank grant agreements.
That examination reveals that World Bank grant agreements reflect a top-down, take it or leave it relationship that does not promote or facilitate inclusion, participation and grantor/grantee collaboration. This Article concludes with some suggestions for the principles that should guide the redress of these deficiencies and the re-design of the dispute resolution arrangements that is required.
Keywords: international development, world bank, dispute system design, grants, alternative dispute resolution, overseas development aid, global trust funds, international development association, global public goods
JEL Classification: K10, K19, K33
Suggested Citation: Suggested Citation
Smyth, Sophie E., World Bank Grants in a Changed World Order: How Do We Referee This New Paradigm? (May 5, 2009). University of Pennsylvania Journal of International Economic Law, Vol. 30, No. 2, Winter 2008; Temple University Legal Studies Research Paper No. 2009-24. Available at SSRN: https://ssrn.com/abstract=1398976