The Brazilian government has officially recognized around 200 indigenous peoples and lots of traditional communities, such as Quilombolas. Most of these populations dwell within forests or in territories fit for the implementation of infrastructure projects, such as ports, mines, pipelines, transmission lines and similar facilities. In spite of this, most companies are not aware of the mandatory rules of the ILO 169 Convention (C169) in Brazil. It is also important to highlight that all major banks in Brazil are members of the Equator Principles.
C169 determines that governments shall ensure that indigenous peoples benefit equally from rights and opportunities granted to other members of the population; promote full realization of social, economic and cultural rights; and assist with eliminating socio-economic gaps in a manner compatible with their aspirations and ways of life.
To achieve such goals, C169 article 6(1) establishes that governments shall: (a) consult the peoples concerned through appropriate procedures and, in particular, through their representative institutions whenever consideration is being given to legislative or administrative measures that may affect them directly; (b) establish means by which the peoples can freely participate, to at least the same extent as other sectors of the population, at all levels of decision-making in elective institutions and administrative and other bodies responsible for policies and programs that concern them; (c) establish means for the full development of the peoples' own institutions and initiatives and, in appropriate cases, provide the necessary resources for this purpose. In addition, article 6(2) stresses that the consultations carried out as a result of this convention shall be undertaken, in good faith and in a form appropriate to the circumstances, with the objective of achieving agreement or consent to the proposed measures.
Brazilian federal courts have granted injunctions halting many projects that do not comply properly with the terms of C169 mostly due to inadequate observation of the Free, Prior and Informed Consent (FPIC) standard. The standard to the injunctions granted by the Brazilian courts so far is based upon the Saramaka case ruling by the Inter-American Court of Human Rights.
As an example, in a civil class action regarding the construction of a road passing through an indigenous land, the judge ruled that, for major infrastructure projects directly affecting the peoples' land, prior consent should be granted as a condition for the implementation of the project. However, in the event of less-invasive activities that indirectly affect the traditional community, consultation in good faith and adoption of the methods defined by the community would suffice.
In the same sense, in one of the guidance notes prepared by the International Finance Corporation detailing how clients applying for project financing from the bank may observe the Performance Standards on Environmental and Social Sustainability, interaction with traditional communities is considered. In this sense, pursuant to Guidance Note 7 (Performance Standard 7), to be applied during the environmental and social risk impacts identification process, the client shall take measures to avoid adverse impacts on affected communities or, if unavoidable, minimize and compensate those impacts. Clients shall also engage with the communities to allow their consultation and participation in a culturally appropriate manner and, in cases in which their projects impact lands and natural resources subject to traditional ownership or under customary use, clients shall obtain FPIC from the affected peoples. The guidance provides details on how clients should document and obtain FPIC.
Principle 5 of the Equator Principles (a risk management framework to which many private banks voluntarily adhere) sets forth how clients should proceed—including informed consultation and participation with indigenous peoples—when financing is required for a project affecting traditional communities.
The Equator Principles are defined as minimum standards for due diligence and monitoring to support risk-making decisions by the banks on whether and how to grant private financing to clients.
Complying with the rules of C169 is crucial to investors and companies developing, or intending to develop, infrastructure projects in Brazil—especially if they intend to seek out project funding from private banks.
On a daily basis in environmental and corporate social responsibility practices, these issues still remain blurred for some investors and companies involved in mining, oil and gas, ports, hydropower and other areas. Despite recent discussions and debates by Brazilian government representatives with respect to the power of ILO to interpret the ILO 169 Convention, we understand that C169 is here to stay, and in the near future it will likely be a major issue that impacts new projects in Brazil.
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Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."
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This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
