Case Study of the CAO’s Approach to the PT Weda Nickel Mine Complaint: Barriers to Mediation in a Climate of Fear

BY shelley marshall, kate taylor and Samantha Balaton-chrimes

This case studies the human rights impact of the PT Weda Bay Nickel mining company on indigenous and seaside communities in north-west Indonesia, and their attempts to stop the mine or gain fair compensation for loss of their land.  It demonstrates the immense barriers to accessing meaningful redress for communities that are remote.

Issues:

The project was embroiled in significant controversy over the disruption of the livelihoods of the affected villages, and the Tobelo Dalam, an indigenous tribe inhabiting part of the mine’s concession area.  The initial exploration and feasibility phase of the project was marred by the encroachment of the rights of these people — including improper land acquisition and compensation procedures, corruption, intimidation sponsored by state and company, and also raised issues regarding cultural, environmental and health rights.

Non-judicial redress mechanism:

A complaint was made to the CAO.  The CAO complaint had no tangible effect on human rights outcomes for affected communities. The Ombudsman function was unable to establish a problem-solving process because communities were too fearful for their safety to be identified, and did not adequately understand other options (such as shuttle diplomacy) available to them via the Ombudsman. The Compliance function elected not to conduct an audit.

At the time research for this report was undertaken, the human rights concerns that triggered the CAO complaint remain unaddressed.

An executive summary can be found below. 

EXECUTIVE SUMMARY

This report studies the human rights impact of the PT Weda Bay Nickel mining company on indigenous and seaside communities in north-west Indonesia, and their attempts to stop the mine or gain fair compensation for loss of their land.  It demonstrates the immense barriers to accessing meaningful redress for communities that are remote.

In 1998, a mining license was granted to PT Weda Bay Nickel in respect to land located on Halmahera Island in North Maluku, Indonesia. The mining licence would allow the company to proceed with a nickel mine, with potential for the extraction of 500 million tons of nickel. As of July 2016, the project remained suspended due to weak market conditions and in order to seek new investors, and the project had not yet entered phase one of construction.[1] However, extensive land preparation for the construction project had already begun, as part of the project’s feasibility and exploration phase.  

The project was embroiled in significant controversy over the disruption of the livelihoods of the affected villages, and the Tobelo Dalam, an indigenous tribe inhabiting part of the mine’s concession area.  The initial exploration and feasibility phase of the project was marred by the encroachment of the rights of these people — including improper land acquisition and compensation procedures, corruption, intimidation sponsored by state and company, and also raised issues regarding cultural, environmental and health rights.

This report outlines a number of complaints made to transnational, non-judicial grievance processes about this project in Indonesia, focusing on the CAO.

Human rights breaches

Environmental concerns

The PT Weda Bay Nickel project mining concession covers a significant proportion of Halmahera Island in the Indonesian province of North Maluku in the Maluku Islands.  Around 21 per cent of the company mining area is within ‘protected forest areas’, in fragile and ecologically significant areas.

Displacement

Affected ethnic Sawai communities have lost access to forest agricultural land they have cultivated for generations. Loss of access to forest agricultural land has resulted in the loss of their primary source of livelihood.

No Free, Prior and Informed Consent and Consultation                       

Affected communities have not enjoyed the right to meaningful free, prior and informed consultation and consent in relation to changes to their land rights brought about by the project.

Pressure and Intimidation

The Indonesian National Human Rights Commission (Komnas HAM) found that members of Korps Brigade Mobil (BRIMOB), the paramilitary arm of the Indonesian police, had been involved in pressuring and intimidating community members to sign agreements. The Commission further found that a staff member of PT Weda Bay Nickel had threatened a community member if he did not sign an agreement.

Inadequate and Improper Forms of Compensation

PT Weda Bay Nickel has offered communities whose land falls within areas required for imminent construction IDR8000 per square meter (the equivalent of USD 55 cents or EUR 0.55 per square metre) plus compensation for plants. By way of reference, in most parts of Indonesia IDR8000 is only about enough to purchase a single meal. In isolated North Maluku, a meal of rice and fish costs around IDR 15 000.

Allegations of Corruption

The Indonesian National Human Rights Commission (Komnas HAM) found that the process of assessing land allotments in order to compensate per metre of farming land was marred by corruption on behalf of the relevant bureaucracy.

The CAO complaint

The CAO is the recourse mechanism for projects supported by the IFC and Multilateral Investment Guarantee Agency (MIGA). The CAO has three separate functions:

Ombudsman:    a problem-solving and dispute resolution function — working with affected communities or workers and the relevant company

Compliance:       conducts audits of the IFC and MIGA’s own decision-making

Advisor:               provides advice to the IFC and MIGA about their policies in relation to environmental and social sustainability based on lessons learned from handling cases.

The CAO is available to receive complaints regarding any project in which IFC or MIGA have financial involvement, including via supply chains. Any individual, group or representative may make a complaint, provided they can demonstrate a connection to affected people.

In this case, a complaint was made to the CAO in 2010 alleging that PT Weda Bay Nickel was in violation of all eight of the International Finance Corporation’s (IFC) required Performance Standards on Environmental and Social Sustainability. The complaint argued that the project will have widespread negative environmental and social consequences that were not fully considered or disclosed in the Environmental Impact Assessment(AMDAL) required by the Indonesian government. Particularly in relation to social risks, the complaint argued that PT Weda Bay Nickel had not taken seriously the risk of displacement of and impacts on the Tobelo Dalam people in their assessments (IFC Compliance Advisor Ombudsman). The complaint was made by a consortium of Indonesian NGOs primarily concerned with the project’s environmental impacts. The CAO’s jurisdiction over this case is established on the basis that MIGA provides insurance for the project.

The CAO complaint had no tangible effect on human rights outcomes for affected communities. The Ombudsman function was unable to establish a problem-solving process because communities were too fearful for their safety to be identified, and did not adequately understand other options (such as shuttle diplomacy) available to them via the Ombudsman. The Compliance function elected not to conduct an audit.

At the time research for this report was undertaken, the human rights concerns that triggered the CAO complaint remain unaddressed.

Factors influencing access to remedy for affected communities

The persistence of human rights problems for people affected by PT Weda Bay Nickel can be explained by a variety of factors. 

Failures of domestic legal and regulatory processes: The CAO was pursued because the Indonesian legal system was perceived to be unable to provide redress due to corruption and the readiness of government to intervene to protect mining interests. The affected communities were unable to rely upon a strong domestic legal framework to adequately protect their rights — meaning that PT Weda Bay Nickel was often acting within the scope of the law in many respects and did follow the existing legal procedures.  The lack of formal legal protection for the affected communities in this case has led some stakeholders to pursue a range of non-judicial strategies in addition to the CAO complaint, such as complaints to Indonesia’s national human rights commission (Komnas HAM), and various advocacy and media campaigns, though these have also had limited effects in this case.

Environment of fear and intimidation: The case illustrates the difficulties for non-judicial redress mechanisms with engaging with affected communities and holding mediation when affected community members are fearful of being identified following threats and intimidation by those supportive of the development project, including other community members, the company and the government. This research found that even when community members sought genuine negotiation regarding their land rights and compensation, they encountered threats and intimidation throughout the process. This demonstrates that unless redress mechanisms can provide a basic level of security to complainants, their effectiveness is limited in some cases.

Internal community divisions: The attainment of acceptable outcomes in this case has been severely hampered by division within affected communities over demands. This division has been exacerbated by the lack of impartial information about the project and their rights, which may have helped to facilitate a community-based decision making process. Those with economic interests in the project have been able to use this division to their advantage, in order to undermine community-led resistance. This dynamic becomes even more complex where NGOs, who may have strategic interests which differ from the interests of the community, become involved. The lack of a united vision, goals or strategic approach significantly weakens community efforts to seek redress.

Compromised claim-making: Our research found that some community members did not want the mine to go ahead, while others did, but on certain conditions. In all cases, the claims made to the company demonstrated a lack of awareness and/or a lack of faith in their rights or the alternative claims that could have reasonably been made. These might have included their right to free, prior and informed consent regarding the project and changes to land tenure, higher levels of compensation, requests to retain farming land and assurances of employment and trading opportunities with the mining company, and more robust benefit sharing arrangements. The communities’ isolation and the environment of fear and intimidation in which they live led them to make only compromised claims (and even these have not been met).

Lessons for the CAO and its complainants

The CAO’s impact on this case was limited by a variety of factors. Not all of these were in the control of the CAO. The most important of these were the low level of understanding by community members who opposed the mine about their options in relation to the CAO’s process, or the independence of the CAO relative to the government and the company. Perhaps most determinative was the inability of the CAO to address the concerns of community members about their safety. Our research in this case provides the following lessons for the CAO and its users:

1.       With respect to mediation (ombudsman function), an unwillingness on the part of the affected community to engage in mediation was explained by fear for their safety if their identities were to be revealed. Our research suggested other options, such as shuttle diplomacy, were available to complainants but they did not fully understand these. Though the CAO cannot single-handedly guarantee the security of complainants in circumstances such as this, our research suggests that community groups may have taken up an Ombudsman problem-solving function had they better understood their options and how each of them would address the issue of safety, and better understood the independence of the CAO relative to the government and the company. This suggests that in cases where complainants live in an environment of fear and intimidation, the Ombudsman assessment process could potentially be more rigorous and patient to open up space for problem-solving where it might seem there is none. The demands of this work should not be underestimated — the CAO Ombudsman assessment team conducted risky field visits and did demonstrate a commitment to fully communicating the possibilities and the nature of the CAO.  The CAO’s time in the field was extended considerably to give complainants time to consider their options, but this was not sufficient in this case.

2.       The impact of compliance audits on human rights remedy could be enhanced by a greater willingness on the part of the CAO to conduct audits, particularly in the early stages of projects, and particularly where land acquisition is at stake. This could be further enhanced by an expansion of the CAO’s mandate to audit not only the IFC/MIGA, but also project proponents. In this case an audit (either of PT Weda Bay Nickel or, depending on its nature, an audit of MIGA) could have been worthwhile insofar as it would have generated a) important information that could be used by community groups to seek redress and b) discussion around how negative social impacts had occurred, and how IFC/MIGA should manage social and environmental risk in the very earliest stages of a project when assessments are not yet complete but business activity is taking place. The risks in these early phases can be significant, and rights violations were already evident in this case. In fact, in cases where land acquisition takes place, it is these very early stages that are the most significant, and this was arguably the point in the Weda Bay mine development at which an audit could have the most impact on the social and environmental conditions of the project.

3.       Supporting NGOs play an important role in making effective use of the CAO (or any grievance mechanism) in many respects. In this case, many opportunities to make better use of these mechanisms were missed because supporting NGOs lacked a full understanding of how the mechanisms work, advice from other NGOs that had used the mechanism, and a close working relationship with community groups that might have brought about a more rigorous engagement with the CAO Ombudsman assessment team and a greater appreciation for possible options.

Having said that, in this case the supporting NGOs were primarily environmental, and may not have seen much value in pursuing a problem-solving process, while our research suggests community groups may have. This underscores the need for close working relationships between NGOs and community groups. One option not utilised here would have been for the complainant NGOs to hand over the role of supporting communities to, for example, AMAN, a local indigenous NGO that had closer relationships with communities and might have helpfully shepherded a problem-solving process. In such a case, the environmental aspects of the complaint might have been pursued with the CAO by the NGO complainants separately.

Geographic and communicative isolation caused by remote living and poor communication networks make the development of these community–NGO relationships difficult for both sides. Building community–NGO relationships stands out as a potentially productive site for resourcing from donors and larger NGOs, as well as potentially the CAO or other grievance mechanisms.

4.       Distrust in the CAO process in general due to its connection with the World Bank further hampered the CAO’s effects in this case, as the NGO complainants were quick to back away from the process when it became apparent that the CAO would not stop the mining project. Our research suggested that many of the NGOs believed that the values of the CAO would be aligned with those of the World Bank as a whole, which the group’s hold responsible for many of the problems they engage with in Indonesia, and that this partly explained the inability of the CAO to stop the mine. In some cases this lack of trust constitutes an inherent limitation on the effectiveness of a mechanism to contribute to human rights remedy. In these cases, such NGOs should consider alternative options for addressing human rights harms. A further lesson related to this point is that the CAO is not in a position to stop projects, and should not be used if this is the goal of complainants.

[1] Yuka Obayashi, ‘Eramet Seeks New Partners for Indonesia's Weda Bay Nickel Project: CEO’, Jakarta Globe (online), 7 July 2016, <http://jakartaglobe.beritasatu.com/business/eramet-seeks-new-partners-indonesias-weda-bay-nickel-project-ceo/>; Sarah Mughal, ‘Eramet Seeking New Partners for Indonesian Nickel Project’, SNL Metals & Mining Daily: East Edition (Hong Kong), 12 July 2016.