The complaint was filed in September 2017 by Save Teghut Civic Initiative (an alliance of NGOs and individuals) and Armenian Environmental Front Civic Initiative. The complaint centred on the Danish Export Credit Agency EKF’s 2013 backing of a loan to a high-risk mining project in Armenia, and whether EKF had conducted adequate due diligence.
The Teghut copper-molybdenum open-pit mining project involved serious and known risks from the start: the mining was to take place in the last 10% of forested space in Armenia, in an active seismic territory, and using a tailing dam design the World Bank determined is not recommended and that risked leaking pollutants into the water basin. Further, there was evidence that participation by local communities in decision-making was falsified, and that land would be expropriated without compensation.
Relevant OECD Guidelines
The Danish NCP concluded from its Initial Assessment delving much too far into facts at this stage without benefit of mediation to better understand the core concerns of the complainants that EKF had carried out effective due diligence over the investment. The Danish NCP reached this conclusion because EKF set contractual environmental and health requirements on the client (a subsidiary of Vallex), and then monitored the client during the investment, met with stakeholders and local communities, (unsuccessfully) attempted to use leverage to secure better conduct, and finally withdrew from the investment after two years of mine operation.
But as the complainants see it, the Danish NCP’s analysis missed the key point: that EKF’s due diligence prior to the investment was inadequate, because the risks were so well-known and so unavoidable that effective due diligence should have prevented EKF’s investment in the first place. The mine projected depended on Danish financing and equipment to take place. Hoping to prevent the project, civil society met with EKF in 2012 and told them of the legal, environmental, and human rights risks inherent in the project. Then in October 2013 just a few months after the official investment statement was made, civil society sent EKF an urgent appeal to divest, detailing the project’s non-compliance with the OECD Guidelines and national and international law. But EKF proceeded. EKF chose to overcome the non-compliance of the project by mandating the company to commit to environmental and social management plans, but without assessing the company’s actual capacity and good faith to meet such commitments.
The Danish NCP refused the complainants request to critique the “gap analysis” EKF had received from an independent consultant about the project’s risks. Had the NCP critiqued the analysis, the NCP would have realized that EKF was aware of such level of risk that it should have declined to invest. When the complainants tried to raise concerns about wrong-doing of other entities and persons directly-linked to the case, the Danish NCP insisted these should be filed as separate complaints, a significant and seemingly bureaucratic burden for the complainants.
The complainants were left deeply dissatisfied with the complaint’s processing and the lack of results for communities. The mining company has gone bankrupt, and meanwhile the dam is in a critical state and cannot be further operated as its walls may collapse, there are signs of a strong acid drainage into nearby rivers, soils that have been irrigated with polluted water are now themselves polluted, and local communities are left in poverty with neither land nor mining jobs. Nobody has taken responsibility for the situation, but Danish entities have benefited royally, receiving their investment back through liquidation of company equipment and also saving themselves the reputation of being involved in a failed project. The complainants’ frustration over the process with the Danish NCP was so great that it caused them to lose faith in the whole NCP system, discouraging them from filing a similar complaint to the Swedish NCP on mining investments in Armenia.