Engaging With Free, Prior,and Informed Consent
September 2012www.bsr.org

About This Report
This report was written by Jasmine Campbell, BSR Manager, Advisory Services,
who specializes in the energy and extractives sector, with contributions fromMichael Oxman, BSR Director, Advisory Service, who specializes in the energy
and extractives sector; Faris Natour, BSR Director, Human Rights; and Farid
Baddache, BSR Director, Europe.
The report is based on a literature review and includes input and ideas fromthose who attended the BSR-sponsored Free, Prior, and Informed Consent
Workshop for Extractives Companies held in London on June 19, 2012. Special
thanks to those who attended including our guest speaker, Dr. Conrad Feathersof the Forest Peoples Programme and those representatives from the extractives
and financial services sectors, the International Council on Mining and Metals(ICMM), and the International Petroleum Industry Environmental Conservation
Association (IPIECA).
Any errors found are those of the authors. Please direct comments or questions
to Jasmine Campbell at jcampbell@bsr.org.
DISCLAIMER
BSR publishes occasional papers as a contribution to the understanding of therole of business in society and the trends related to corporate social responsibility
and responsible business practices. BSR maintains a policy of not acting as arepresentative of its membership, nor does it endorse specific policies orstandards. The views expressed in this publication are those of its authors anddo not reflect those of BSR members.
ABOUT BSR
BSR works with its global network of nearly 300 member companies to build ajust and sustainable world. From its offices in Asia, Europe, and North and SouthAmerica, BSR develops sustainable business strategies and solutions throughconsulting, research, and cross-sector collaboration. Visit www.bsr.org for more
information about BSR’s more than 20 years of leadership in sustainability.

BSR | Engaging With FPIC

2Contents
4

Introduction

6

Interpreting FPIC and Consent: Legal Frameworks and Standards
FPIC and International Frameworks and Standards
FPIC and State and National Frameworks and Standards

13

Applying FPIC to Everyday Business
The Conditions for Applying FPIC
Applying FPIC Where Legislation Is Absent or Gaps Exist

16

FPIC’s Relationship With Stakeholder Engagement Management
Integrating FPIC into Stakeholder Engagement Management
Practical Questions to Determine SEMP Integration
Considerations When Integrating the FPIC Decision-Making
Process into an SEMP

20

Engaging With FPIC: Benefits and Challenges

21

Conclusion

22

Recommendations

23

References

BSR | Engaging With FPIC

3

Introduction
As part of a BSR-sponsored series of events called Building Shared Value in aComplex World, BSR held a Free, Prior, and Informed Consent Workshop for
Extractives Companies in London on June 19, 2012 (hereafter referred to as the
BSR Workshop). Representatives from the mining, oil and gas, and financial
services sectors discussed current thinking surrounding FPIC and, more
specifically, its application to interactions with indigenous peoples. Dr. Conrad
Feathers of the Forest Peoples Programme presented an NGO perspective on
FPIC that further enriched the analysis and recommendations resulting fromthese discussions.
Participants highlighted several topics that require further examination:»

The general interpretation and application of FPIC»

The interpretation and application of consent and whether it equates to aright to veto»

The state’s relationship with FPIC and its effect on corporations»

The relationship between FPIC and the UN Guiding Principles on Businessand Human Rights1 (UN Guiding Principles)»

The relationship between FPIC and stakeholder engagement practices»

The extent to which FPIC, the social license to operate, and benefit-sharing
are intrinsically linked

Free, prior, and informed consent (FPIC) may be characterized by the following
major attributes:»

It has its roots in a number of legal and normative principles focused
primarily on engagement and consultation with indigenous peoples on issues
that impact their land and rights.

1

Ruggie, J. UN Guiding Principles on Business and Human Rights: Implementing the United Nations“Protect, Respect, and Remedy” Framework, Report of the Special Representative of the SecretaryGeneral on the Issue of Human Rights and Transnational Corporations and Other BusinessEnterprises, March 21, 2011, www.business-humanrights.org/media/documents/ruggie/ruggieguiding-principles-21-mar-2011.pdf.
BSR | Engaging With FPIC

4»

Presents numerous definitional, legal, procedural, and accountability
challenges for states, companies, affected indigenous populations, and civilsociety.

»

Integrates concepts such as consent, consultation, right to veto, good faith,
and representation. These concepts are highly nuanced, subject tointerpretation, and significantly impacted by international law, domestic
legislation, standards, and guidelines.

»

Offers best practices for stakeholder engagement that can be used as
participatory tools throughout project development in sectors, such as oil andgas, mining, forestry and paper, food and beverage, and fisheries and2
gaming.

FPIC can assist companies in mitigating risks associated with both the social andlegal license to operate by improving the quality of social impact assessments, by
supporting the corporate responsibility to respect human rights,3 and bystrengthening corporate stakeholder engagement effectiveness. Failure toadequately address FPIC, particularly in the context of addressing the rights ofindigenous populations, has resulted in numerous court cases, advocacy
campaigns, and adverse attention to companies pursuing large-scale extractives,
infrastructure, and other commercial projects.
Though FPIC has the potential to mitigate these risks as well as to strengthen
indigenous peoples’ and communities’ relationships with companies, it remains a
concept that presents several challenges. Namely, FPIC can:»Test notions of state sovereignty (and boundaries of corporate activities)
through its recognition of indigenous peoples’ rights to land and resources.

»

Disadvantage a company’s access to permits for project development wherea company pursues FPIC, but the state does not recognize or promote it.

»

Stretch company capabilities and resources when navigating the legal andpractical complexities associated with FPIC implementation.

This report:»

Summarizes the major discussion points from the recently held BSR
Workshop.

»Raises awareness regarding FPIC principles and their relevance to corporate
performance.

»

Highlights the major challenges, opportunities, and high-level implications
facing companies that want to adopt best practices related to stakeholder
engagement and risk management.

»

Invites companies to embrace the concept of FPIC by integrating its
principles into their stakeholder engagement management plans (SEMPs).

2

This paper is focused on FPIC’s application to issues affecting indigenous people; however, FPIC
principles may arguably be extended to companies engaging with non-indigenous communities
affected by projects.
3
Ruggie, J. Promotion and Protection of All Human Rights, Civil, Political, Economic, Social, andCultural Rights, Including the Right to Development, Protect, Respect, and Remedy: A Frameworkfor Business and Human Rights, Report of the Special Representative of the Secretary-General on
the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, April
2008, www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf.
BSR | Engaging With FPIC

5

Interpreting FPIC and Consent: Legal Frameworks
and Standards
Since there is no universally applicable definition of FPIC, it must be understood
through the lenses of international and national legal frameworks. An
understanding of these frameworks is necessary for developing robust bestpractices related to engagement with indigenous peoples (and broader
stakeholders), which ultimately requires an application of FPIC principles that
effectively balances the expectations of affected indigenous peoples, civilsociety, government, and companies.
BSR Workshop attendees acknowledged that the definition of consent, its
application, and its implementation remain unclear and that it can be difficult todistinguish between the concepts of consultation and consent. Despite the lack ofclarity, attendees generally agreed that securing consent from indigenous
peoples means a deeper commitment to engage than mere consultation. To
achieve the former, the parties must reach a clear agreement about a project’s
development.4
More specifically, the distinction between consent and consultation comes down
to whether indigenous peoples’ have a right to veto a project during the decisionmaking processes that make up its development. Whereas Oxfam Australiainterprets FPIC as a right to veto, other institutions, such as the World Bank,5
suggest that it is not.

FPIC AND INTERNATIONAL FRAMEWORKS AND STANDARDS
Some states have chosen to apply principles of both consultation and consent
through an international legal framework addressing FPIC principles, which
commenced more than 20 years ago with the establishment of the International
Labour Organization (ILO) Convention No. 169.6 More recently FPIC, withrespect to indigenous peoples, has been incorporated into wider internationalframeworks and standards through its incorporation into the UN Declaration on
the Rights of Indigenous Peoples (UNDRIP) 7 and the updated version ofInternational Finance Corporation (IFC) Performance Standard 7 (PS7)8 and theassociated Guidance Note 7 (GN7).94

However, it also argued (and follows logically) that consultation implies an ultimate objective ofconsent.
International Finance Corporation, ILO Convention 169 and the Private Sector: Questions andAnswers for IFC Clients, 2007, p. 6,
www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/p_ILO169/$FILE/ILO_169.pdf.
6
ILO Convention No. 169 was adopted in 1989, came into force in 1991, and was ratified by 20
countries, mostly in Latin America, Indigenous and Tribal Peoples Convention, ILO 169, 1989,
www.ilo.org/indigenous/Conventions/no169/lang--en/index.htm. In addition the notion of FPIC wascited in the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous
Chemicals and Pesticides in International Trade, (adopted September 1998); the Convention on
Biological Diversity, specifically Article 8(j) (adopted May 1992); and the Cartagena Protocol on
Biosafety to the Convention on Biodiversity (adopted January 2000) ..
7
UN Declaration on the Rights of Indigenous Peoples, March 2008,
www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf.
8IFC, Performance Standard 7 Indigenous Peoples, January 1, 2012,www1.ifc.org/wps/wcm/connect/1ee7038049a79139b845faa8c6a8312a/PS7_English_2012.pdf?M
OD=AJPERES.
9
IFC, Guidance Note 7 Indigenous Peoples, January 1, 2012,www1.ifc.org/wps/wcm/connect/50eed180498009f9a89bfa336b93d75f/Updated_GN72012.pdf?MOD=AJPERES.
5

BSR | Engaging With FPIC

6The application of FPIC is also guided by the UN Guiding Principles that were
10
endorsed by the UN Human Rights Council on June 16, 2011, and provides
clarity on the role of states and corporations regarding business and humanrights.
ILO 169“Convention No. 169 is a legally binding international instrument, which deals
specifically with the rights of indigenous and tribal peoples. Today, it has been
ratified by 20 countries. Once ratified, the country has one year to alignlegislation, policies, and programmes to the Convention before it becomes legallybinding. Countries that have ratified the Convention are subject to supervision
11
with regards to its implementation.”
Both consultation and consent and their application were introduced in ILO 169.
While Article 15 refers to consultation with respect to rights related to natural
resources, Article 16 applies consent as the standard for resettlement matters(although with a qualifying statement in italic below).
Article 15. Consultation: “The rights of the peoples concerned to the natural
resources pertaining to their lands shall be specially safeguarded. These rights
include the right of these peoples to participate in the use, management, andconservation of these resources.
In cases in which the state retains the ownership of mineral or sub-surface
resources or rights to other resources pertaining to lands, governments shallestablish or maintain procedures through which they shall consult these peoples,with a view to ascertaining whether and to what degree their interests would be
prejudiced, before undertaking or permitting any programmes for the exploration
or exploitation of such resources pertaining to their lands. The peoples
concerned shall wherever possible participate in the benefits of such activities,
and shall receive fair compensation for any damages which they may sustain asa result of such activities.”
Article 16. Consent: “Where the relocation of these peoples is considerednecessary as an exceptional measure, such relocation shall take place only with
their free and informed consent. Where their consent cannot be obtained, such
relocation shall take place only following appropriate procedures established bynational laws and regulations, including public inquiries where appropriate, which
provide the opportunity for effective representation of the peoples concerned.”
While ILO 169 provides the foundation for FPIC principles, its implementation is
also limited by:»

Only 20 countries have ratified the convention»

The inconsistent and varied application of existing FPIC legislation fromcountry to country»

The remaining lack of clarity on what constitutes adequate consultation andachievement of consent and differences between the two concepts

10

Human Rights and Transnational Corporations and Other Business Enterprises: Resolution
Adopted by the Human Rights Council, UN General Assembly, www.businesshumanrights.org/media/documents/un-human-rights-council-resolution-re-human-rights-transnationalcorps-eng-6-jul-2011.pdf.
11
Indigenous and Tribal Peoples Convention, ILO 169, 1989,
www.ilo.org/indigenous/Conventions/no169/lang--en/index.htm.
BSR | Engaging With FPIC

7

UN DECLARATION ON THE RIGHTS OF INDIGENOUS PEOPLES
The concept of consent was recognized in the 2007 UNDRIP.12 Though thedeclaration is a nonbinding instrument and, consequently, does not lend itself tothe usual rules of international law applied to binding international instruments(such as ILO 169), it does acknowledge the vulnerabilities of indigenous peoples’
and affirms their rights with somewhat stronger language (concerning projects
affecting their land or resources) than the provisions contained in ILO 169:
“States shall consult and cooperate in good faith with the indigenous peoples
concerned through their own representative institutions in order to obtain their
free and informed consent prior to the approval of any project affecting theirlands or territories and other resources, particularly in connection with thedevelopment, utilization, or exploitation of mineral, water, or other resources.”13

In 2007 the UN Permanent Forum on Indigenous Issues (UNPFII), an advisory
body to the Economic and Social Council (ECOSOC) with a mandate to discussa range of indigenous issues, defined FPIC and, in particular, consent in the
14
following way:

12

UN Declaration on the Rights of Indigenous Peoples, March 2008,
www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf.
Article 32(2), UN Declaration on the Rights of Indigenous Peoples, March 2008,
www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf.
14
UN-REDD Programme, Guidelines on Free, Prior, and Informed Consent, Draft, December 2011,
http://www.unredd.net/index.php?option=com_docman&task=cat_view&gid=1333&Itemid=53
13

BSR | Engaging With FPIC

8

Expanding on the UN Permanent Forum’s definition of FPIC (2003):
Free: A process that is self-directed by the community from whomconsent is being sought, unencumbered by coercion, expectations ortimelines that are externally imposed.
Prior: Refers to a period of time in advance of the activity or process
when consent should be sought, as well as the period between whenconsent is sought and when consent is given or withheld.
Informed: Refers to the type of information that should be provided prior
to seeking consent and also as a part of the ongoing consent process.
Consent: A decision made by indigenous peoples and local communities
through customary decision-making processes. The collective right togive or withhold consent applies to all projects, activities, legislative andadministrative measures and policies (and their associated processes
and phases) that directly impact lands, territories, resources, andlivelihoods of indigenous peoples and other local communities. Consent
must be sought and granted or withheld according to the unique formal orinformal political-administrative dynamic of each community.

As BSR Workshop attendees pointed out, some states are reluctant to entertain
the adoption of UNDRIP for fear that consent equates to a right to veto. The
concern is that a right to veto may be intrinsically linked to a right to selfdetermination, which in turn can allow communities to manage their development
independent from the state—a notion that begins to challenge traditional
concepts of state sovereignty.
Nevertheless, the UN General Assembly has adopted UNDRIP, and as such, it
reflects the collective view of UN members regarding the rights of indigenous
peoples’. Though nonbinding, its adoption does have legal relevance. Members
are expected to take into account this declaration in good faith; as such, this may
reflect obligations of states under other sources of international law, including
customary laws. 15
INTERNATIONAL FINANCE STANDARDSThe IFC introduced FPIC into its Sustainability Framework16 through its revision
17
of Performance Standard 7 (PS7) in 2012. The IFC Performance Standards are18
also the basis for the Equator Principles, a voluntary set of standards
developed by private sector banks to guide their social and environmental risk in

15

Equality Team of the International Labour Standards Department, ILO Standards and the UN
Declaration on the Rights of Indigenous Peoples, Information note for ILO staff and partners,
January 9, 2007, www.ilo.org/indigenous/Resources/Publications/WCMS_100792/lang-en/index.htm.
16
The IFC’s Sustainability Framework consists of policy on environmental and social sustainability,
performance standards, and access to information policy. Learn more about all these subjects at
www1.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Sustainabil
ity/Sustainability+Framework/.
17
IFC, Performance Standard 7, new version effective January 1, 2012,www1.ifc.org/wps/wcm/connect/50eed180498009f9a89bfa336b93d75f/Updated_GN72012.pdf?MOD=AJPERES.
18
Equator Principles, June 2006. Please note: The IFC’s revised Performance Standards apply to theEquator Principles Framework that also take effect as of January 1, 2012, www.equatorprinciples.com/resources/equator_principles.pdf.
BSR | Engaging With FPIC

9

project financing. Importantly, the IFC recently incorporated FPIC principles into19
the revised draft of the Equator Principles (EP III).
The IFC attempted to clarify the meaning and application of FPIC through GN 7,
stating that FPIC “. . . will be established through good faith negotiations between
the client and the Affected Communities of Indigenous Peoples. The client will
document (i) the mutually accepted process between the client and the Affected
Communities of Indigenous Peoples, and (ii) evidence of agreement between theparties as the outcome of the negotiations. FPIC does not necessarily require
unanimity and may be achieved even when individuals or groups within the20
community explicitly disagree.”
Whereas PS7 previously referred to consultation, the revised version introduces“consent,” even though its application may be limited to new projects or certain
types of project loans vis-à-vis the Equator Principles. The parameters forseeking consent are somewhat defined through the notion of establishing goodfaith negotiations, a legal term that can differ in meaning depending on thejurisdiction to which it is applied. Furthermore, whereas consultation implies only
an exchange of information among the company, regulators, and those affectedby the project,21 consent encompasses the power to transfer or share decisionmaking authority with those who will be directly affected and, where possible,
through their representative institutions.
The adoption of FPIC into lending and investment standards demonstrates its
potential impact on private sector development. Though PS7 and the EP III are
limited in their application to those companies financed by the Equator Banks
and/or the IFC, companies that avoid FPIC by using alternatively sourced funds
and/or loans for projects may nevertheless be subject to national legislation
addressing FPIC or a ‘de facto’ veto by the affected community.
THE UN GUIDING PRINCIPLES
The importance of the relationship between human rights and the businesspractices of large multinational companies in the extractives sector has gained
further support from international bodies, including the International Council on
Human Rights Policy, the UN High Commissioner for Human Rights, the ILO,
and the Inter-American Court of Human Rights.22 The most recent endorsementof the UN Guiding Principles by the UN Human Rights Council23 enhances thebasic need for corporations to incorporate human rights considerations into theirbusiness practices.
These UN Guiding Principles aim to help distinguish between government andbusiness responsibility by upholding the notion of state sovereignty and19

Equator Principles III, Draft and Summary of Key Changes, 13 August 2012 www.equatorprinciples.com/index.php/ep3.
IFC, Guidance Note 7, January 1, 2012, paragraph 12, p. 7
www1.ifc.org/wps/wcm/connect/50eed180498009f9a89bfa336b93d75f/Updated_GN72012.pdf?MOD=AJPERES.
21
This information is stemming from a quote by Interfaith Center on Corporate Responsibility (ICCR)
cited in the following article, B. Baue, Communities, Corporations, and the Difference between
Consent and Consult, Corporate Responsibility Magazine, www.thecro.com/node/498.
22
L. M. Jimenez, Community Right to Participate in Mining Policies with Reference to Tinaya and Rio
Blanco Mining Conflicts in Peru, Institute of Social Studies, 2008, p. 13,
http://oaithesis.eur.nl/ir/repub/asset/7223/Lenny%20Maritza%20Merino%20Jimenez%20PPM.pdf
23
UN Human Rights Council, Chapter 1: Human Rights and Transnational Corporations and Other
Business Enterprises, July 6, 2011,www.unglobalcompact.org/docs/issues_doc/human_rights/A.HRC.17.RES.17.4.pdf.
20

BSR | Engaging With FPIC

10

24

delineating the obligations of the state from those of corporations. The UN
Guiding Principles stipulate that in all circumstances corporations are expected torespect human rights while states retain primary responsibility for protecting
human rights. Similarly, FPIC may be seen as a vehicle for the state to protect
and the corporation to respect indigenous peoples’ rights.
Such a distinction in responsibilities may be difficult to apply in countries withweaker governance structures, a lack of public institutions, and a lack ofresources (human, financial, and technical) to support the public sector and ruleof law. These institutional deficiencies coupled with an environment of mistrust
between stakeholder groups (e.g., indigenous peoples and government) andindigenous peoples high expectations that companies solve these institutional
issues can often lead to confusion around these responsibilities.
Corporations have a business imperative to ensure transparency andaccountability; they should be careful not to rely entirely on the state sovereignty
principle for addressing FPIC-related challenges. In addition, where governments
abuse human rights, companies should avoid complicity and use or increase
leverage to influence the state’s actions in a positive manner.
FPIC, through a human rights lens, provides an opportunity for corporations tointegrate international human rights standards and principles into stakeholder
engagement. Incorporating FPIC principles from the international legal
frameworks and standards into impact assessments, such as a human rights risk
assessment, can promote best practice SEMPs in a manner that mitigates risk
and promotes the social license to operate.

FPIC AND STATE AND NATIONAL FRAMEWORKS AND STANDARDSIn addition to international legal frameworks and standards, national law
significantly determines FPIC’s application. For example, courts have cited ILO
169 in cases concerning the rights of indigenous peoples’, especially in theratifying countries (for example, Peru, Mexico, Bolivia, Denmark, Ecuador, andColombia25)—thereby establishing a precedent for implementation at the national
level.26
The presence of FPIC within national legislation and regulations is a crucial
indicator of the extent to which the state recognizes indigenous peoples within its
jurisdiction. Countries such as the Philippines, Malaysia, Australia, and Peru all
have national legislation addressing aspects of FPIC for activities affecting the27
lands and territories of indigenous peoples. For example, for more than 30
years Australian states have enforced legislation that permits indigenous peoples
to be recognized, consulted, and negotiated with through indigenous-controlled
Land Councils with respect to exploration and mining activities.

24

However, a recent report of the UNPFII on the state’s duty to protect indigenous peoples who are
affected by transnational corporations and other business enterprises argues that a corporation
may have exactly the same duties as states, although these duties would be secondary after thestate’s.
25
MacKay, F. A Guide to Indigenous Peoples’ Rights in the International Labour Organization, Forest
Peoples Programme,www.forestpeoples.org/sites/fpp/files/publication/2010/09/iloguideiprightsjul02eng.pdf.
26“Application of Convention No. 169 by Domestic and International Courts in Latin America,” 2009,www.ilo.org/wcmsp5/groups/public/---ed_norm/---norms/documents/publication/wcms_123946.pdf.
27
Tamang, P. An Overview of the Principle of Free, Prior, and Informed Consent and Indigenous
Peoples in International and Domestic Law and Practices, Workshop on Free, Prior, and Informed
Consent, January 19, 2005.
BSR | Engaging With FPIC

11

The reality for many resource-rich states who are not members of theOrganisation for Economic Co-operation and Development (OECD) is that theyoften lack the institutional capacity to adequately address protection measuresthat will guarantee protection of their citizens’ (including indigenous peoples)
human rights. The relationship between extractives revenue and national wealthobjectives can adversely influence a states’ will to protect. Even if a corporation
has the best intentions to apply FPIC, a state may be reluctant to follow suit
when the project is a priority for the state’s economic growth. Such situations
may disadvantage FPIC-friendly corporations, with states choosing instead toprovide permits, licenses, and state-company joint venture arrangements tocorporations that do not otherwise require the application of FPIC.
Given these circumstances, states need to be the primary driver of FPIC and its
application. The existence of a right as national law requires all companies—
irrespective of their lending conditions, corporate identity, or size—to apply theconcept when conducting business affairs in that national jurisdiction.
However, even where states have enacted laws to address FPIC, company due
diligence is needed on a case-by-case basis to understand the implications ofthese laws on both corporate activities and indigenous rights, especially where
there are gaps in the legislation pertaining to its implementation.
BSR was recently involved in a mining project applying FPIC legislation in thePhilippines and faced the following challenges:»

Ambiguity in the legislation left both the company and stakeholders at a
disadvantage. Legislation provided broad guidelines but failed to provide anapproved process for obtaining FPIC.

»Time and resources were required to establish an approved process for
FPIC with stakeholders, where legislation did not otherwise establish such a
process.
Formalizing the process of consent meant that the company must be able
to provide information about the benefits and the costs of the project early in
its life cycle.

»»

Informed consent in an effective manner compliant with its meaning
required more time, expertise, and resources than mere consultation.

»

Social investment as a requirement of project development affected FPIC
where government more strongly influenced the use of investment funds thanthe community.

Gaps in legislation may exist, but as we shall discuss below, companies can use
the international and national frameworks and standards for FPIC to supplement
these gaps.
In the case of a joint venture arrangement with government, the state may
significantly influence FPIC’s interpretation and implementation; however, acompany always has the choice to exercise its influence and leverage on
government to protect the rights of indigenous peoples’ with a view toward
mitigating its own social performance risk.

BSR | Engaging With FPIC

12

Applying FPIC to Everyday BusinessCompanies may struggle to incorporate FPIC throughout the project
development timeline. Internal community or sustainability teams can and should
influence internal project development and finance teams to allow for its
implementation.
BSR Workshop attendees explicitly agreed that the language used internally to
express FPIC and promote internal buy-in is crucial to ensuring its effectiveness.
Such buy-in depends heavily on the following:»

The impact of project development on indigenous peoples and the existenceor absence of domestic FPIC legislation»

The strength of communication among company departments on matters ofsocial risk and performance»

The extent to which social issues are understood and integrated internally as
matters of importance»

Effectiveness in managing the expectations of multiple stakeholders,
including investors and senior management

Because of the differing interpretations of FPIC principles noted in this document,such as variations across national legislation and unique local circumstancesfacing individual extractives projects, it is essential for companies to integrate
FPIC into their internal communications. Companies must also collectively
understand its impact by conducting due diligence on how to incorporate an
FPIC-aware approach in their interactions with affected indigenous populations.

THE CONDITIONS FOR APPLYING FPIC
Whether recognized by the state or not, FPIC is relevant in any of the following
circumstances:
»

»

»

28

Projects commencing in countries that have incorporated legislation
addressing FPIC: Where national laws require companies to apply FPIC,
companies should implement the relevant laws while recognizing that there
are likely to be gaps in the legislation (discussed below) required for FPIC
application.
New IFC-funded projects applying PS7, as well as projects that rely on
borrowed funds from Equator Banks that in turn apply PS7: When projects
use funding from the IFC or Equator Banks, corporations must apply any
existing national legislation as well as the Equator Principles and/or the28
requisite PS7 and GN7 to their project.
Where a company is otherwise willing to implement FPIC through theirinternal policies as a result of social performance risk management priorities
and/or by virtue of best practice stakeholder engagement objectives: FPIC
application will largely depend on how a company chooses to implement it.
When choosing to apply FPIC, the company should consider the applicationof the international framework and standards, as well as assess the following
details within the relevant location:

Companies should be aware that the draft Equator Principles III incorporate aspects of the UN
Guiding Principles and the 2012 amendments to PS7.

BSR | Engaging With FPIC

13

a. Recognition of indigenous peoples within state territorialboundaries,
b. Recognition of FPIC within state and local legislation andregulations, andc.

Other national legislation that may evoke indigenous peoples’
rights in relation to a project.

APPLYING FPIC WHERE LEGISLATION IS ABSENT OR GAPS EXIST
Where gaps exist in national legislation, a corporation should conduct legal due
diligence on the relevant international and national legal frameworks andstandards noted in this document and consider FPIC as part of its approach tooverall risk management and social performance. For example, in situations
where national legislation does not exist or is unclear, the company should
ensure that through this due diligence-approach, they integrate FPIC
considerations into SEMPs.
A key consideration is that the extent to which a company may choose to apply,
facilitate, or help to define consent (i.e., the option for an indigenous community
to approve or disapprove a project’s development) is the individual company’s
decision, unless otherwise prescribed by law.
Inmet’s Cobre Panama project is a recent positive and innovative example of acompany applying consent where national legislation does not exist.29 The
company was confronted with the issue of resettling a number of indigenous
families as a necessary first step to developing one of the largest undeveloped
copper deposits in the world. In-depth consultation and negotiation processes
were developed which, in addition to other factors, incorporated a policy that wasdeveloped to recognize indigenous peoples right to free, prior, and informed
consent; a right that was further explained to them.
Companies must also keep in mind that in some cases where jurisdictions do notincorporate FPIC directly into legislation, other legislation may provide
indigenous peoples a right similar to that of consent. For example, the only lawsthat existed historically addressing the notion of FPIC in the Russian Federation
were those that required companies to consider the local population’s opinion
when implementing projects involving the development of natural resources. The
laws related to environmental impact assessment did not differentiate between
the general population and indigenous peoples. As a result indigenous peoples
could use such mechanisms to assert their rights to preserve land for future
30
generations, such as in the case of Raisa Tevlina.
In this case, the owner of a communal family plot said “no” to the assignment of
their land for oil production in the Surgut region. The right to develop wasprovided by Regional Authorities to Surgutneftgas Oil Company and after many
months of negotiation Raisa decided to preserve the lands for future generations.

29International Council on Mining and Metals. Securing Free, Prior, and Informed Consent at Inmet’s
Panama Project, Good Practice, volume 10, June 2012,www.republicofmining.com/2012/06/18/securing-free-prior-and-informed-consent-at-inmet’spanama-project-icmm-june-2012-newsletter/.
30
J. Corpuz, O. Masardule, and M. Todyshev, Indigenous Peoples Free, Prior, and Informed Consent
in the Convention on Biological Diversity: An Overview, p. 85, Indigenous Peoples’ Contributions to
COP-8 of CBD, 2006, www.ffla.net/new/es/bibliografia-recomendada/doc_download/63.
BSR | Engaging With FPIC

14

“This was not a right to veto; it was standard practice where due to exceptional
31
circumstances project proponents had to accept a zero option.”
In situations where legislation is absent or where implementation gaps exist,
corporations must ensure (from a risk mitigation and best practice perspective)that they deploy an engagement process with all of the following attributes. The
process must:»

Not be unilaterally imposed»

Not be time-bound»Be thoroughly documented and agreed to by all parties»

Be designed with a decision-making process that incorporates traditional or
customary decision-making processes, the correct representative
institution(s), and the input of vulnerable groups such as women and youth»

Build capacity within the indigenous communities to understand internationaland national frameworks and standards»

Provide technical assistance to indigenous communities in language andmodes of communication that ensure a complete understanding of thedevelopment phases and processes (including principles, impacts, andalternatives) in advance of project development»

Encourage indigenous peoples to the use external third-party advice

Findings ways to integrate FPIC into project development plans and SEMPs,
whether it is part of national legislation or not, is an essential step toward
reducing unforeseen risks to a project.

31

J. Corpuz, O. Masardule, and M. Todyshev, Indigenous Peoples Free, Prior, and Informed Consent
in the Convention on Biological Diversity: An Overview, p. 85, www.ffla.net/new/es/bibliografiarecomendada/doc_download/63.

BSR | Engaging With FPIC

15FPIC’s Relationship With Stakeholder
Engagement Management
Where indigenous peoples are present, whether the state formally recognizes
them or not, companies should diligently ensure that these groups are contacted
and consulted through their stakeholder engagement framework andmanagement plans for that site. FPIC is no doubt a time-consuming process andis likely to conflict with project development timelines. In the absence of an FPIC
process, however, opposition by indigenous peoples may result in a de facto vetothat causes a far more protracted route toward project development and32
damages a company’s reputation.
BSR recommends that corporations conduct their own (or third-party)
assessment of how a project is likely to impact indigenous peoples. Corporations
can conduct this assessment as a separate activity or through other relevant andcustomary baseline studies necessary for project development, such as asocioeconomic impact assessment or human rights impact assessment.

INTEGRATING FPIC INTO STAKEHOLDER ENGAGEMENTMANAGEMENT
Where indigenous peoples are identified by expert social scientists through thesebaseline studies, companies should incorporate the following indigenous-specificstudies or other further studies into an SEMP to ascertain land use,socioeconomic conditions, governance processes, and customary practices for
decision making and conflict resolution. Companies should conduct such studies
prior to project development and update them throughout a project’s life cycle.
Even in those situations where project development has already commenced, acompany may be able to mitigate risks through integrating these findings into
project development schedules.

In many corporations, SEMPs also help to prioritize and target social investment
initiatives and other local benefits for indigenous peoples as well as the broader
local community. These plans are crucial not only for securing permits and a

32

Companies should be mindful that even where a right to veto does not exist, it may be applied
indirectly. BSR is of the view that a de facto veto exists as a result of civil society demonstrations,riots, and other civil society activities that have the ability to either halt and/or seriously affect minedevelopment.

BSR | Engaging With FPIC

16

social license during the project’s design and development, but also for33
preserving strong relationships during the operations phase.

PRACTICAL QUESTIONS TO DETERMINE SEMP INTEGRATION
Companies should ask several questions and take practical steps up-front tosatisfy due diligence processes and determine whether and if so how, theyshould integrate FPIC into their project development plans and SEMPs.
These questions shall:»

Determine whether a project affects any indigenous groups.

»

Identify the formal or customary structure representing the affectedindigenous communities.

»

Assess how to apply the principles of FPIC.

Illustrative questions include:»

What mapping has been done to identify the indigenous peoples who may beaffected by the project’s development?

»

What sources have been used to determine whether the lands and territories
in question have been traditionally owned, occupied, or used by theindigenous peoples in question?

»

What mapping has been done to identify the representative institutions of any
concerned indigenous peoples?

»

What mapping has been done to identify the FPIC-related laws andregulations within the relevant country?

»

What mapping of recent case law (both domestic and international) has been
done to determine the status of FPIC within the relevant location?

»

What principles are driving the engagement process? Does the processensure that information is shared and that decision making considers thecustomary processes of the concerned indigenous peoples?

»

Prior to critical decisions such as potential land or resource confiscation,
relocation, storage, or disposal of hazardous materials, what engagement
process shall be used to determine the types of restitution or “just, fair, andequitable compensation” that the company will offer the indigenous peoples?

»

Where there is a disagreement within the community, how will the company
manage individual as well as collective rights?

»

What effort has been made to ensure that the concerned indigenous peoples
understand the impacts of project development on lands affecting theirlivelihoods and living situation, particularly those critical issues related toutilization or exploitation of minerals, water, or other such resources?

33

To preserve social license and FPIC license, companies must often make very difficult choices
when designing social investment programs in order to balance the need to ensure that benefits
are reaching communities with that of avoiding the risk of supplanting (or perpetuating the absenceof state) responsibility. Benefit-sharing in extractives projects is principally the responsibility of
governments who collect taxes, royalties, and other payments for allocation within the respective
national, state, regional, and local governments. However, companies can play important roles; forexample, initiatives like the Extractives Industry Transparency Initiative (EITI) help to promotetransparency, mitigate corruption, support stronger governance, and boost civil society confidence
in government activities .

BSR | Engaging With FPIC

17»What mechanisms are in place to monitor project development and its impact
on the concerned indigenous peoples throughout the project’s life cycle?
What governance structures are used to analyze the project’s impact? How
neutral are they?

»

Which mechanisms enable the concerned indigenous peoples to review
decisions in light of practical implications unanticipated during previous
discussions between the parties?

The answers to the questions above will equip corporations to determine how tobalance their stakeholders’ expectations and tackle FPIC in their stakeholder
engagement planning process and SEMPs. In some cases a company may
establish a separate SEMP tailored to address precise risk management issues
catered toward a particular group of indigenous peoples. In other cases
companies may incorporate indigenous peoples concerns into broader SEMPs.

CONSIDERATIONS WHEN INTEGRATING THE FPICDECISION-MAKING PROCESS INTO AN SEMP
Allowing indigenous peoples enough time to make decisions in a way that
embodies their preferred decision-making practices is a key ingredient forsuccessfully incorporating FPIC principles into SEMPs. During the BSR
Workshop, participants outlined the factors that companies should consider when
including indigenous peoples in the decision-making process.

CAPACITY-BUILDING AND ACCESS TO INFORMATION
Project proponents and states must obtain a good understanding of the views ofindigenous peoples, and conversely indigenous peoples must be able to fullycomprehend the information provided by corporations. To achieve thisunderstanding, the choice of language and format as well as venues for sharing
information are crucial factors. Companies should tailor their engagement
approach to provide meaningful disclosure and avoid being perceived ascoercive. In addition, complex issues need to be broken down for accessibility
and understanding through culturally appropriate communication methods. For

BSR | Engaging With FPIC

18

example, an indigenous group may prefer informal storytelling forums over formal
meetings or visual materials rather than written ones.
Giving indigenous peoples the time to gain ownership of and make legitimate
decisions will also ensure that the parties craft a shared vision likely to support
their varying interests. On one hand, this approach can help the state better
assess what type of sustainable development makes sense for their country. On
the other hand, it can help indigenous peoples gain ownership of a project,understand its practical implications, formulate jointly owned community
development initiatives, and build on consent instead of making quick decisions
that are likely to be criticized at a later stage in the process.
LEGITIMACY OF REPRESENTATIVES AND
DECISION-MAKING PROCESSESThe thorny issue of finding legitimate representation has two major challenges.
Indigenous peoples should be empowered to nominate their own representative,
in consideration of their customary practices. Meeting this challenge may provedifficult where legislation calls for a representative body that they believe does
not adequately represent their interests.
Political dynamics among indigenous groups may result in multiple claims ofrepresentative legitimacy. This in turn, may lead to conflicting agendas and input
into the project development and decision-making process.
As a result, a decision-making process that strikes a balance between the official
collective rights of the relevant indigenous peoples and different factions or
individuals is critical. Getting the decision-making process right is crucial tosupporting due diligence.
After all, the extent to which consent applies remains questionable (i.e., whether
it can revoked at some later stage). Much like a social license to operate,
consent is clearly not a single decision—it is an ongoing process of engagement,
investment, and relationship building.

BSR | Engaging With FPIC

19

Engaging With FPIC: Benefits and Challenges
This paper has highlighted the numerous benefits and challenges of corporations
engaging with FPIC, some of which are outlined below. FPIC can:BENEFITS» Decrease the risk of financial loss by mitigating the potential of a de facto
veto.
»

Increase reputational advantages with civil society, responsible investors,
and indigenous groups.

»

Provide an expanded social license to operate for the development of future
projects.

»

Help to reinvigorate and/or improve existing internal engagement processes.

»

Mitigate social and legal risks through rigorous engagement processes.

»

Play an appropriately supportive role in the realization of indigenous peoples’
rights.

»Provide corporations with a mandate to leverage states to encourage theprotection of indigenous peoples’ rights.

»

Better inform risk management databases.

CHALLENGES» Invite challenges to a company’s operations where FPIC is unsupported by
the state.
»

Be seen to undermine national sovereignty.

»

Delay established project development timelines.

»

Contribute to civil unrest where indigenous peoples are regarded as having
unwarranted preferential treatment over other community and/or indigenous
groups affected by the project.

»

Lead to governments wanting to develop natural resources rapidly, opting
instead to provide concessions to companies who do not have FPIC
obligations to exploit their resources faster.

»Use extra financial and human resources to ensure FPIC is included into
existing engagement processes.

»

Lead to confusion over what constitutes consent and the extent consent
should be voluntarily applied by the company.

BSR | Engaging With FPIC

20

Conclusion
Though FPIC outcomes may be contentious, corporations should consider theapplication of FPIC and a sound decision-making process involving indigenous
peoples as good business practices. Growing global awareness of indigenous
peoples unique circumstances is adding substantial pressure on both the public
and private sector to recognize indigenous peoples’ rights, protect theirlivelihoods, and assure the provision of their economic and social benefits. As aresult, companies that fail to a) identify the existence of indigenous peoples
affected by their operations, b) ask specific questions as highlighted above, andc) apply FPIC principles may elevate future risks to legal and social license,
production timelines, and project development, as well as to their overall
reputation.
In order to mitigate unforeseen risks associated with project development,
companies should map the existing or potential impacts on indigenous peoples in(or near) the project area, as well as review all national and local legislation(including any domestic or international case laws) relevant to the project’s
location during its early stages of development. Through this mapping, thecompany will understand the legal framework and the extent to which legislation
may either positively or negatively affect the rights of indigenous peoples’ and the
proposed project.
FPIC principles can also add rigor to stakeholder engagement and reaffirm goodengagement practices as an essential baseline for companies’ social
performance management systems, risk mitigation, and project development
activities. Where companies are reluctant to apply FPIC as a separate process,some of its principles may, at a minimum, be deployed through a combination of
baseline studies such as a human rights impact assessment. Companies shouldincorporate these findings into SEMPs, which will help them to mitigate potentialsocial, reputational, and financial losses related to these issues.
Companies that choose not to apply FPIC should carefully weigh this decision
against the possible consequences of not following an FPIC-specific process,i.e., through a de facto veto and future claims by indigenous peoples against the
government issuance of licenses or against company performance.34
While consent as a formal right to veto may be debatable, securing legal andsocial license is increasingly linked to robust consultation and engagement
processes that seek consensus and agreement. On one hand, the application ofconsent may seem to impede rapid development and global economic growth; onthe other hand, consent has the capacity to conserve, protect, and encouragealternative economic activities in the pursuit of human development andsustainable growth.

34

Recent Supreme Court rulings in Chile have employed the country’s ratification of ILO 169 as abasis for determining that existing mandated environmental impact assessments were insufficient toachieve FPIC among indigenous populations.

BSR | Engaging With FPIC

21

Recommendations
This report has highlighted numerous considerations when engaging with FPIC inparticular, consent. BSR recommends that corporations undertake the following
to navigate these concepts their interpretation and application:»

Conduct due diligence and map national and international laws andregulations related to FPIC and relevant to a project’s location.

»

Leverage states to incorporate FPIC into national legislation in pursuit of acommercially stable investment environment.

»

Incorporate FPIC principles into SEMPs using a human rights lens and risk
management approach.

»

Articulate the business case for securing internal FPIC buy-in to effectively
deploy resources and mitigate risk.

»

Integrate FPIC into project development planning, risk management, andstakeholder engagement management.

»

Support constructive multi-stakeholder forums among states, NGOs, andcorporations to enhance awareness of FPIC, encourage states to incorporate
FPIC legislation, sharpen understanding of FPIC objectives, and build
capacity for its implementation.

BSR | Engaging With FPIC

22

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