Inter-American Investment Corporation (Immunities and Privileges) Order 2022

Lord Goldsmith of Richmond Park Excerpts

Thursday 3rd November 2022 Grand Committee

Moved by

[Lord Goldsmith of Richmond Park]

That the Grand Committee do consider the Inter-American Investment Corporation (Immunities and Privileges) Order 2022.

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Goldsmith of Richmond Park) (Con)]

This instrument, which is subject to the affirmative procedure, was laid before Parliament in draft on 11 October 2022. It will be made once it is approved by both Houses. It confers immunities and privileges on the private sector lending arm of the Inter-American Development Bank Group, the Inter-American Investment Corporation. This arm of the bank is known commercially as “IDB Invest” and I shall refer to it in that way hereon.

The Inter-American Development Bank Group works to promote greater security and stability within Latin America and the Caribbean. The bank is a key partner as we work towards our objectives in the region, which include promoting democracy and economic growth, preventing organised crime and taking action on climate change. We are also working to deepen trade and investment relationships, and to prevent and prepare for the next pandemic.

The Inter-American Development Bank Group is an international financial institution, headquartered in Washington DC. It is the largest source of development finance for Latin America and the Caribbean. It provided $22.9 billion in 2021. It shares similar policy objectives with other international financial institutions, such as the World Bank Group, to accelerate economic and social development. The UK has been a member of the bank since it was established in 1959 and we have used our shareholding to help shape it. This includes securing a commitment from the bank, ahead of COP 26, to align its portfolio with the Paris Agreement by 2023 and to increase the volume of finance that it provides for climate change.

The bank plays a critical role in providing loan finance to Governments across the region to support development projects, including in infrastructure, health and education. However, private sector investment across the Latin America and Caribbean region is also critical to driving growth, creating jobs and tackling climate change. To strengthen the group’s focus on investing in the private sector, it agreed with its shareholders in 2015 to merge out its private sector operations to form IDB Invest. This is now a separate legal entity within the group, with its own board and shareholding structures.

Today, IDB Invest provides around $6 billion of finance per year to businesses, with a focus on small and medium-sized enterprises. The UK voted in favour of the merge-out and agreed to transfer $7 million of UK capital from the bank to IDB Invest. In 2018, the IDB Invest treaty was presented to the UK Parliament. The final stage of the process to join IDB Invest is to ratify this treaty.

As we join an international organisation, we are required under international law to grant it the necessary immunities and privileges. The International Organisations Act 1968 allows His Majesty to do this by Order in Council. It is long-standing UK policy to grant immunities and privileges only where they are needed, and I can assure Members that the immunities and privileges afforded to persons connected with IDB Invest are strictly limited to those required for them to conduct their official activities. They are not for their personal benefit. They are also in line with those offered to officials of other international financial institutions of which the UK is a member. They include immunity from suit and legal process for staff in respect of their official acts, and tax exemption. Members should note that the income tax exemption does not apply to British citizens.

--- Later in debate ---

[Lord Collins of Highbury (Lab)]

My Lords, I thank the noble Lord for those questions. I shall not repeat them, although I was going to cover some of the issues myself. One thing that struck me, which the Minister mentioned, was that, when we presented the treaty in 2018 to join the bank, the associated impact assessment stated that secondary legislation would be required to grant immunities and privileges. I am not at all surprised that we have this SI, but I am slightly interested to know why it is happening four years later. Just to pick up the point, it would be good to better understand what prompted it to come now.

The Minister mentioned that there was no physical presence of the bank in London, but is there going to be? If there is going to be, what are the reasons for that? Is it something that we can positively influence and shape? We heard from the noble Lord about how we might be able to have influence, even as a minor shareholder. He is absolutely right to draw attention to the election in Brazil and the fact that there will be a greater opportunity to push the green agenda. Given that the Amazon is the lungs of the world, it is even more important that we focus on that.

I have just a couple of technical points. When SIs of this nature have come up before, particularly as part of privileges, I have asked the specific question about road traffic offences and immunities and whether they are part of those privileges. I hope that the Minister can reassure us on that. On the question of physical presence, if he is expecting there to be one, is there any anticipation about the number of officials who are non-UK citizens who might be here?

In conclusion, I agree with the comments that have been made. This is positive news; we welcome this, and we certainly welcomed the treaty and our engagement with the bank in 2018. In its original presence, it has been around since 1984, and the more we can influence it, the better. Such investment has an important role to play in development and reaching the UN’s 2030 agenda on sustainable development goals. We certainly welcome these regulations, which should allow the corporation to contribute to that.

[Lord Goldsmith of Richmond Park (Con)]

I am grateful to noble Lords for their contributions and questions, and I shall do my best to answer them. I welcome the support for our membership of IDB Invest.

I turn to the questions from the noble Lords, Lord Bruce and Lord Collins, who both mentioned the scope for further alignment of international objectives between the UK and IDB Invest. We are very much moving in the same direction already; the IDB played a very important role in the run-up to and at COP 26. Noble Lords will remember that, as part of our forest package, we secured commitments from what are now 145 countries, representing 91% of the world’s forests, to end deforestation and reverse it by the end of this decade. We secured $20 billion in finance from Governments and philanthropists to help them to do that, and, as part of it, we got the multilateral development banks, including the World Bank, to commit to aligning their portfolios not just with Paris but with those broader deforestation goals as well. We would not have been able to do that had it not been for the intervention of key figures in the IDB. I am personally very grateful to them for the support that they provided during COP and in the run-up to it.

Obviously, climate change continues to be a top international priority for us and is a key priority for the IDB. In the context of that region, the obvious contribution that can be made to the challenge of tackling climate change is protecting the lungs of the earth, as the noble Lord, Lord Collins, said. There is no solution to climate change that does not involve nature and protecting and restoring degraded forests. From the perspective of the IDB, the Amazon is absolutely central. This remains a priority for us. At COP, we committed £200 million of UK ODA to support efforts to protect the Amazon, and we are working in many other ways to amplify that support; it is not just financial.

Both noble Lords mentioned the election in Brazil. From the point of view of the environment, climate change and the protection of the Amazon, the result was wildly good news. The previous Government had a hostile attitude to environmental protection and, in particular, the indigenous people who live in the forest. President-elect Lula takes a completely different approach. He has been bullish and ambitious in the statements he has made about his plans to protect the Amazon. We will of course do absolutely everything we can to support him in those endeavours.

I should also say that he has a record: under his previous two terms, deforestation in the Brazilian Amazon came down very markedly, and it went up very sharply under the last Government. So we know that it can be done, and we stand ready to support our friends in Brazil in whatever way we possibly can, alongside other donor countries, with which I have had many conversations in the past few days about how we might work together to support the new Government in that objective. I thank noble Lords for raising this issue.

The noble Lord, Lord Bruce, talked about other areas of the IDB’s performance. IDB Invest certainly has space to improve but it is found to be good for transparency, and it is rated as one of the highest-performing organisations in that regard. As one of its priorities, the UK will use its membership of the IDB to invest in and push for higher levels of transparency still, greater learning across the bank and the sharing of best practice. This very much remains on the agenda for us but we are happy with our relationship with the multilaterals. There are numerous big multilaterals, and not all of them are as easy to deal with as the IDB on the issues I have just talked about.

Both noble Lords asked about the likely presence of the IDB in the UK. It does not have a staffed office at the moment; the only people who are expected to be granted immunities and privileges, therefore, are staff members who travel to the UK on official business—for example, to meet UK Ministers or businesses. We anticipate that fewer than 10 IDB Invest staff will travel to the UK per year on official duties.

With respect to the important point made by the noble Lord, Lord Collins, about road traffic accidents, it is hard to discuss this issue without making reference to the tragic case of Harry Dunn. Before moving on, I should say—I know that everyone in the Room will echo this—that my deepest sympathies very much remain with his family; I pay tribute to their resolve. We are pleased that criminal proceedings are now taking place in that case. It is a long-standing government policy to seek a carve-out of immunities relating to road traffic accidents when granting privileges and immunities. However, the possibility of such a carve-out was not included in the establishment charter for the IDB in 1959, so it was not passed through to the IDB Invest treaty. Instead, the FCDO has negotiated a bilateral memorandum of understanding with IDB Invest to mitigate this risk. The MoU states that IDB Invest staff members are not permitted to drive a vehicle on official business in the UK.

The noble Lord, Lord Collins, asked why it has taken so long to ratify the UK’s membership. The delay in laying the required legislation was the result of two factors: first, the higher priority given to legislation to facilitate our exit from the EU; and, secondly, the time taken to negotiate an MoU with the bank to clarify that IDB Invest staff members are not permitted to drive a vehicle on official business in the UK.

It is good news that we are now here. In taking up our membership of IDB Invest, we will undoubtedly be better placed to influence the investment that it makes to support private sector development. This will allow us to support the UK’s goals of promoting development and reducing poverty in a region of enormous strategic importance. Once again, I thank noble Lords for their contributions and commend the instrument to the Committee.

Motion agreed.