EBRD renounces its liability in Amulsar mine project

One of the main sponsors of the mining project planned on mountain Amulsar next to Jermuk town is European Bank for Reconstruction and Development (EBRD). EBRD was established in 1991 by the USA and European states to promote privatization in post-Soviet countries and support the businesses; it is a big lender to states and private sector there.

This bank is one of the major shareholders of Lydian International; it invested 5.8 million CAD as of 2009 and 10.5 million CAD as of 2016 to purchase shares of the company, as well as financed study and construction works at the mine. Similarly with the World Bank’s International Finance Corporation (IFC), EBRD is pointed by Lydian as an institution with “high” environmental and social standards and therefore its presence in Amulsar increases the reputation of this project.

Despite the misunderstanding of the society globally and particularly in Armenia regarding environmental and social standards (IFC performance standards), experts and environmentalists affirm that the project in Amulsar contradicts international environmental and social performance standards and the engagement of the Bank in this project actually contradicts its own principles. EBRD has a complaint mechanism and a civil society engagement department through which citizens can complain and present their demands related to projects financed by the Bank.

Back in 2013 citizens of Armenia raised the issue of Amulsar project with EBRD. In 2014, a complaint was registered both with the complaint mechanisms of IFC (which was among shareholders of Lydian until mid 2017) and EBRD. IFC Compliance Ombudsman’s Office proceeded with the complaints and examined it for 3 years.

Meanwhile, in February 2015 EBRD refused to proceed with the complaints claiming that these complaints refer to risks of mine exploitation, while the Bank is only financing the study phase and preparation works of the mine and not the mine exploitation. Moreover, EBRD concluded from the complaints that since complainants opposed direct dialogue with the company for solving the project related problems, therefore the complaint assessors considered both complaints as unfit for review.

Meanwhile IFC CAO studied the case for 3 years and in 2017 published its report which states that IFC environmental and social impact standards were not followed in the study phase, as well as the assessment of the impact on Gndevaz and Jermuk’s tourism industry during the project implementation was missing. This is a violation of IFC environmental and social impact assessment (ESIA) standard.

Thus, in similar conditions IFC proceeded with the complaints from Armenia, while EBRD did not.

Taking into consideration the fact that in 2017 Lydian finished its study phase of mine in Amulsar and it entered site preparation phase, while EBRD continued to be Lydian’s shareholder, Armenian Environmental Front (AEF) civil initiative decided to use the above mentioned complaint mechanisms and presented a complaint against gold mine project in Armulsar. A letter was sent to EBRD on the 26^th of October, 2017 to which environmental organizations, experts, citizens had joined.

At the beginning EBRD confirmed that they will respond to our letter, although due to the complexity of the request they required the full 40 working days to respond. On November 15, additional information package containing international experts’ reports regarding the risks of Amulsar project was sent to the Bank. A similar response was received that they will reply in 40 working days.

However on the 12^th of December, 2017 instead of stating the reasons why the Bank got involved in this disastrous project, EBRD informed AEF civil initiative that it no longer wants to have a dialogue with AEF since the latter had got involved in an “unprofessional advocacy practices in relation to the EBRD’s investment in Lydian International and disclosed information about Lydian International employees, including their photos, alongside offensive and threatening message”.

It was puzzling that EBRD used similar wording and actions as Lydian which back in September 2016 had applied to the police complaining that the member of AEF civil initiative Levon Galstyan disseminated an offensive and threatening message about Lydian’s employee in Facebook. The police found no violation since Levon Galstyan and AEF initiative could not be held liable for posts and words written by others.

We can only assume that EBRD is trying to avoid responsibility this way. Therefore, on January 16, 2018 AEF civil initiative responded to the Bank stating that its correspondence is not a friendly chat with the Bank. Instead the civil initiative filed a complaint with EBRD, which is a shareholder and investor and therefore does share responsibility for the risks and flaws of Amulsar project. The letter called for a serious investigation and for the Bank not to get involved in an environmental crime. The civil initiative also reminded the Bank that it is not the only signatory of the letter and there were other organizations and experts waiting for its response.

Three weeks have passed, yet there has been no response from EBRD to our call which is a violation of business ethics.