A vital piece of legislation put forward by Republican Congressman Andy Barr is sweeping through the legislative process of the United States almost unnoticed. It quickly achieved Congressional support and is due to be placed before the Senate shortly.

Following hearings in March 2017 by The Monetary Policy and Trade Subcommittee and The Committee on Financial Services in July 2017, The House of Representatives passed H.R. 3326, the World Bank Accountability Act of 2017 in January 2018.

The World Bank Accountability Act of 2017 aims to help reduce poverty, fight corruption, lessen terrorism and improve transparency of those nations, which have almost routinely received blank cheques, despite wanton disregard for the rule of law.

Oversight, development outcomes and forensic audits are now crucial elements which have been introduced into the process for obtaining soft loans and project funds.

Importantly, until the Secretary of the Treasury has certified that the Bank has undertaken reforms to fight corruption, strengthen management accountability and combat violent extremism up to 30 percent of future U.S. appropriations for the World Bank's International Development Association could be withheld.

According to Congressman Barr, "Giving the World Bank a blank check from U.S. taxpayers has enabled the poverty-fighting organization to lose its way. The World Bank Accountability Act, which I introduced and the House passed today, makes our future contributions to the Bank conditional on reforms that will help better fight poverty, uphold human rights and democracy, prevent the flow of funds to corrupt governments and those who support terrorism, and improve oversight and accountability.  I appreciate the support of my colleagues, and Chairman Hensarling in particular, as we work to hold the World Bank more accountable and to help it better achieve its mission of reducing poverty around the world."

In the Act the section entitled (b) GOVERNANCE AND ANTICORRUPTION REFORMS is of particular interest for the future. 

"Paragraph (A) is emphasizing in appropriate operational policies, directives, and country strategies its support for secure property rights, due process of law, and economic freedom as essential conditions for sustained poverty reduction in World Bank borrowing countries;"

It is highly likely that other sponsors of the World Bank and its subsidiaries will enact similar legislation.

Perhaps we will now see a more robust application of the 1992 World Bank Guidelines on the Treatment of Foreign Direct Investment, specifically section IV EXPROPRIATION AND UNILATERAL ALTERATIONS OR TERMINATION OF CONTRACTS

  1. A State may not expropriate or otherwise take in whole or in part a foreign private investment in its territory, or take measures which have similar effects, except where this is done in accordance with applicable legal procedures, in pursuance in good faith of a public purpose, without discrimination on the basis of nationality and against the payment of appropriate compensation.
  2. Compensation for a specific investment taken by the State will, according to the details provided below, be deemed "appropriate" if it is adequate, effective and prompt.

Meanwhile, in its Urban Re-generation Decision Tool, the World Bank also adds a definition and comments about expropriation:

"Expropriation, also known as eminent domain or compulsory purchase, gives the government the right to acquire land in the hands of private ownership even if its owner does not want to sell. To limit potential abuses, the government's use of such power is typically restricted only to cases in which it needs to acquire the land for a public purpose, especially for the provision of infrastructure and public services. However, there are cases when the use of such power is extended to allow land assembly to attract private investment. In this case, the public purpose is to foster local economic development and job creation. This practice was prevalent in countries such as Indonesia prior to 1998 and Tunisia and Egypt prior to 2011. In these instances, it led to a serious backlash. Mandatory land acquisition has also been used in Singapore to facilitate regeneration."

Consequently, countries such as Antigua & Barbuda that practise expropriation without any obligation to prove any public purpose and then withhold compensation can expect much stronger sanction in the future than they have received in the past.

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