Accountability in International Project Finance: The Equator Principles and the Creation of Third-Party-Beneficiary Status for Project-Affected Communities
52 Pages Posted: 11 Apr 2011
Date Written: 2011
The Equator Principles are a set of voluntary social and environmental guidelines that apply to the majority of private commercial banks engaged in project finance, which is a method of financing often used to create large infrastructure projects. The Equator Principles provide ten standards to which a project must comply as a condition to obtaining funding, such as requirements to perform a social and environmental assessment and to communicate adequately with project-affected communities. Even for projects that promise to abide by these standards, however, noncompliance continues as investors try to maximize profit and avoid their contractual responsibilities. This failure results in serious social and environmental impacts that leave project-affected communities devastated and often without a legal remedy.
Recognition of a third-party-beneficiary right in US contract law may provide a legal remedy for project-affected communities. Recognition of such a right to enforce compliance with social and environmental standards would challenge borrowers to keep their contractual commitments under the Equator Principles. This Note discusses the viability of gleaning from the Equator Principles a third-party-beneficiary right for project-affected communities to ensure compliance with the project finance industry’s social and environmental standards.
Keywords: project finance, Equator Principles, third party beneficiary, third party beneficiaries, international legal remedies
JEL Classification: F2, F3, F4, I00, K00, L14, L3, L7, L9, O00, Q00
Suggested Citation: Suggested Citation