Compliance Assessment Report Corridor VC in FBH

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Compliance Assessment Report

Corridor VC in FBH – Part 3

EBRD Project Number 49058

Case 2020/06

April 2021

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The Independent Project Accountability Mechanism (IPAM) is the accountability mechanism of the EBRD. It receives and reviews concerns raised by Project-affected people and civil society organisations about Bank-financed Projects, which are believed to have caused harm. IPAM may address Requests through two functions: Compliance Review, which seeks to determine whether or not the EBRD has complied with its Environmental and Social Policy and/or the Project-specific provisions of the Public Information Policy; and Problem-Solving, which has the objective of restoring dialogue between the Requesters and the Client to resolve the issue(s) underlying a Request without attributing blame or fault. Affected Parties can request one or both of these functions. For more information about IPAM, contact us or visit https://www.ebrd.com/project-finance/ipam.html Contact information The Independent Project Accountability Mechanism (IPAM) European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN Telephone: +44 (0)20 7338 6000 Email: [email protected]

How to submit a complaint to the IPAM Concerns about the environmental and social performance of an EBRD Project can be submitted by email, telephone or in writing, or via the online form at: https://www.ebrd.com/project-finance/ipam.html

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Table of Contents

LIST OF ABBREVIATIONS .................................................................................................. 4

EXECUTIVE SUMMARY ...................................................................................................... 5

The Project ................................................................................................................................ 5

The Request .............................................................................................................................. 5

Conclusions .............................................................................................................................. 6

Next Steps ................................................................................................................................ 7

1. Background ........................................................................................................................... 8

1.1. The Project and its Current Status ................................................................................ 8

1.2. The Request ................................................................................................................. 8

1.3. IPAM Processing to Date ............................................................................................... 9

2. Compliance Assessment Approach .................................................................................... 11

3. EBRD Management Response............................................................................................ 11

4. Compliance Assessment Findings ...................................................................................... 13

4.1. Regarding the alternative analysis and route alignment. ........................................... 14

4.2. Regarding environmental and biodiversity impacts .................................................... 17

4.3. Regarding air, noise and water pollution .................................................................... 18

4.4. Regarding cultural heritage ......................................................................................... 19

4.5. Regarding impacts on livelihoods, resettlement, and economic displacement ......... 19

4.6. Regarding stakeholder engagement and consultation ............................................... 21

5. Conclusions and Next Steps ............................................................................................... 23

ANNEX 1. COMPLIANCE REVIEW TERMS OF REFERENCE ............................................... 25

Unless otherwise indicated capitalised terms used in this report are those as set forth in the 2019 IPAM Project Accountability Policy.

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List of Abbreviations

Abbreviation Long Form AIP Access to Information Policy BiH Bosnia & Herzegovina BMP Biodiversity Management Plan CR/EN/VU/CH Aquatic Animal Categorisations E & S Environment & Social EBRD European Bank for Reconstruction and Development EIA Environmental Impact Assessment EP Environmental Permit ESAP Environmental and Social Action Plan ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan ESP Environmental and Social Policy EU EIA European Union Environmental Impact Assessment Directive EUR Euro Currency FBH Federation of Bosnia and Herzegovina FBHM Motorways of the Federation of Bosnia and Herzegovina GIP Good International Practice HQ Headquarters IPAM EBRD’s Independent Project Accountability Mechanism IUCN International Union for Conservation of Nature JPAC JP Auto Ceste LALRP Land Acquisition and Livelihood Resettlement Plan LARF Land Acquisition and Resettlement Framework LARP Land Acquisition and Resettlement Plan MAP Management Action Plan NTS Non-Technical Summary PAP Project Accountability Policy PAPS Project Affected Persons PCM Project Complaint Mechanism PR Performance Requirements SEP Stakeholder Engagement Plan UNHCR United Nations Refugee Agency UXO Unexploded Ordnance

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Executive Summary The Project

On 5 September 2018, the EBRD Board approved a sovereign loan of up to EUR 180 million in favour of the Motorways of the Federation of Bosnia and Herzegovina (the Client”, “the Company” or the "FBHM") to fund the project Corridor Vc in FBH – Part 3 (49058) (the "Project") to construct four new key sections of Corridor Vc with a total length of approximately 15.8 km, as part of the Western Balkans Core Road Network and the greater Pan-European transport corridor.

The Project was categorised A as per the 2014 Environmental and Social Policy (ESP) and involves the construction of road and tunnel sections of the Corridor Vc. The loan is composed of two tranches: i) the first tranche finances the construction of three motorway sections (the construction of Tunnel Ivan of approximate length of 2 km) and co-finances with EIB the construction of a motorway section from Poprikusa to Nemila; ii) the second tranche shall finance the construction of a motorway section from the Mostar South Interchange to Tunnel Kvanj, approximately 9.1 km in length.

At the moment of approval of the Project in 2018, the environmental and social due diligence for the latter section had not taken place, thus the commitment of EUR 60 million to finance that section was conditioned to satisfactory completion of the ESDD. On 25 February 2021, the EBRD Board approved the disbursement of the second tranche.

Currently, the construction of the motorway section from the Mostar South Interchange to Tunnel Kvanj, referred to in the Request, has not been initiated.

The Request

On 5 January 2020, a Request was received by the Project Compliant Mechanism (PCM) related to the impacts of the south Mostar- Tunnel Kvanj section of the Corridor Vc in FBH - Part 3 Project (49058). The Request was signed by Azra Durakovic and Amna Popovac (the Requesters) representing a Coordination Task Force Group1 formed to voice concerns regarding the selected alignment of the Corridor Vc motorway for the section referred above. As per their communications and revision of documents, IPAM understands that there have been changes in the alignment from the originally proposed in 2007 to 2016. In their consideration the 2011 alignment would be preferable to the one finally approved as it had no impact on agricultural/populated land and no adverse social impacts on the community. The Requesters consider that the current alignment of the motorway generates adverse environmental, economic and cultural impacts thus harming the residents of South Mostar.

As per the Request, the Requesters consider that the Bank has not complied with its Environmental and Social Policy in relation to Performance Requirements PR1, PR3, PR5, PR6, PR8 and PR10, and by this alleged lack of compliance, irreversible harms would be generated as follows:

1 As per information provided by the Requesters on 8 September 2020, the Coordination Task Force Group is integrated by seven individuals Vujadin Berberovic, Azra Durakovic, Amna Popovac, Maja Popovac-Roso, Adnan Zoranić, Ahmed Dzubur and Nedim Durakovic. Sadly Mr. Berberovic passed away but his family have confirmed their desire to continue as Requesters in the process.

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Potential adverse environmental impacts to the Buna and Bunica Rivers, particularly in relation to water pollution thus impacting the fertile areas;

Impact to cultural sites due to the proximity of the road alignment; Impact on refugee returnees and the risk of displacement, via expropriation and loss of

livelihoods to give way to the road. In their Request, they also allege that there has been no consultation and, in general, the Project has been characterised by a lack of transparency in deciding alternative routes; that the impact assessment studies lacked robustness and independence and finally, that local legislation was being breached as regards expropriation of military property. In their consideration, the decision on current alignment selection was based solely on cost and that no assessment was made of the impacts to the region and the community.

For full details on the allegations presented, the Request can be accessed in the IPAM Case Registry.

The Requesters have also presented parallel complaints to the Complaints Mechanism of the European Investment Bank (EIB-CM) in 2017 and 2020. The first process was closed in 2019 with no recommendations. Following this, on 5 February 2020 EIB-CM received another complaint, and the case is currently under investigation as per the publicly disclosed information on EIB-CM case registry. IPAM is in contact with its sister mechanism at the EIB to avoid duplications and consider the processing status so as to collaborate wherever possible. Conclusions

The Requesters have raised allegations of actual and potential environmental and social harms, which include non-consideration of disproportionate impacts on ethnic minorities, negative impacts on biodiversity of the Buna-Bunica region, potential noise and water pollution, which are directly related to the construction and operation of the Corridor VC road, specifically the Mostar South-Tunnel Kvanj section, among others. The Request further states that from their perspective at least one alternative alignment considered during the scoping stage would generate lesser impacts than the one ultimately selected, but that the alignment decision was made based on cost with no due consideration of environmental and social impacts. They particularly emphasise that, there had been no environmental and social impact assessment studies at that stage, nor any significant consultation with project-affected people. Their view is that the Project has been designed and executed in a non-transparent fashion excluding Project-affected People and failing to undertake robust impact assessment studies, and that the Bank has failed to ensure compliance with the 2014 ESP requirements and GIP during the appraisal and approval process.

At the Compliance Assessment stage IPAM does not perform an exhaustive analysis of all relevant documentation nor engages with all relevant stakeholders, but it does perform a preliminary review to determine if the criteria to move forward with a Compliance Review is met. In this case, it has reviewed the documentation presented by the Requesters, Management and the Client. In addition to it, IPAM has revised public information, media reports and PAP statements related to the allegations raised. Finally, as the travel restrictions due to the Covid-19 pandemic have made it impossible for IPAM to travel to the Project site, it engaged with the Parties through virtual calls.

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As per the Compliance Assessment provisions outlined in Section 2.6 (b) of the 2019 Project Accountability Policy, the determination made by IPAM after assessing the Case is based on a preliminary review of the documentation. This preliminary review is undertaken with the only purpose of establishing whether the case meets the criteria for eligibility for a compliance review and does not represent a formal determination of compliance, which can only be obtained through the Compliance Review process in itself.

Thus, after the preliminary review done during the Compliance Assessment stage, IPAM finds that the Case meets the Compliance Review eligibility criteria in relation to the concerns raised by the Requesters and, recommends proceeding with a Compliance Review.

Next Steps

This Compliance Assessment Report, including the terms of reference for the compliance review presented in Annex 1, will be submitted to the Board and the President for information, shared with all Parties and disclosed in the IPAM Case Registry. As per the Terms of Reference, the Compliance Review will initiate immediately after the disclosure of this Report. After consulting with the Parties, IPAM has considered all comments and suggestions made on the draft Compliance Assessment Report and the proposed Terms of Reference, and adopted those deemed relevant. IPAM wishes to thank the Parties for their involvement in this stage and will continue engaging with them all during the Compliance Review process.

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1. Background

1.1. The Project and its Current Status2

On 5 September 2018, the EBRD Board approved a sovereign loan of up to EUR 180 million in favour of the Motorways of the Federation of Bosnia and Herzegovina (the Client”, “the Company” or the "FBHM") to fund the project Corridor Vc in FBH – Part 3 (49058) (the "Project") to construct four new key sections of Corridor Vc with a total length of approximately 15.8 km, as part of the Western Balkans Core Road Network and the greater Pan-European transport corridor.

The Project was categorised A as per the 2014 Environmental and Social Policy (ESP) and involves the construction of road and tunnel sections of the Corridor Vc. The loan is composed of two tranches: i) the first tranche finances the construction of three motorway sections (the construction of Tunnel Ivan of approximate length of 2 km) and co-finances with EIB the construction of a motorway section from Poprikusa to Nemila; ii) the second tranche shall finance the construction of a motorway section from the Mostar South Interchange to Tunnel Kvanj, approximately 9.1 km in length.

At the moment of approval of the Project in 2018, the environmental and social due diligence for the latter section had not taken place, thus the commitment of EUR 60 million to finance that section was conditioned to satisfactory completion of the ESDD. On 25 February 2021, the EBRD Board approved the commitment of the second tranche.

Currently, the construction of the motorway section from the Mostar South Interchange to Tunnel Kvanj, referred to in the Request, has not been initiated.

1.2. The Request 3 On 5 January 2020, a Request was received by the Project Compliant Mechanism (PCM) related to the impacts of the south Mostar- Tunnel Kvanj section of the Corridor Vc in FBH - Part 3 Project (49058). The Request was signed by Azra Durakovic and Amna Popovac (the Requesters) representing a Coordination Task Force Group4 formed to voice concerns regarding the selected alignment of the Corridor Vc motorway for the section referred above. As per their communications and revision of documents, IPAM understands that there have been changes in the alignment from the originally proposed in 2007 to 2016. In their consideration the 2011 alignment would be preferable to the one finally approved as it had no impact on agricultural/populated land and no adverse social impacts on the community. The Requesters consider that the current alignment of the motorway generates adverse environmental, economic and cultural impacts thus harming the residents of South Mostar.

2 Corridor VC in FBH – Part 3 (49058) https://www.ebrd.com/work-with-us/projects/psd/corridor-vc-in-fbh-part-3.html. 3For access to the Request and other case public documents go to https://www.ebrd.com/work-with-us/projects/ipam/2020/06.html . 4 As per information provided by the Requesters on 8 September 2020, the Coordination Task Force Group is integrated by seven individuals Vujadin Berberovic, Azra Durakovic, Amna Popovac, Maja Popovac-Roso, Adnan Zoranić, Ahmed Dzubur and Nedim Durakovic. Sadly Mr. Berberovic passed away but his family have confirmed their desire to continue as Requesters in the process.

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As per the Request, the Requesters consider that the Bank has not complied with its Environmental and Social Policy in relation to Performance Requirements PR1, PR3, PR5, PR6, PR8 and PR10, and by this alleged lack of compliance, irreversible harms would be generated as follows:

Potential adverse environmental impacts to the Buna and Bunica Rivers, particularly in relation to water pollution thus impacting the fertile areas;

Impact to cultural sites due to the proximity of the road alignment; Impact on refugee returnees and the risk of displacement, via expropriation and loss of

livelihoods to give way to the road. In their Request, they also allege that there has been no consultation and, in general, the Project has been characterised by a lack of transparency in deciding alternative routes; that the impact assessment studies lacked robustness and independence and finally, that local legislation was being breached as regards expropriation of military property. In their consideration, the decision on current alignment selection was based solely on cost and that no assessment was made of the impacts to the region and the community.

For full details on the allegations presented, the Request can be accessed in the IPAM Case Registry.

The Requesters have also presented parallel complaints to the Complaints Mechanism of the European Investment Bank (EIB-CM) in 2017 and 2020. The first process was closed in 2019 with no recommendations. Following this, on 5 February 2020 EIB-CM received another complaint, and the case is currently under investigation as per the publicly disclosed information on EIB-CM case registry. IPAM is in contact with its sister mechanism at the EIB to avoid duplications and consider the processing status so as to collaborate wherever possible.

1.3. IPAM Processing to Date

a) Registration of the Request The Request was received by the PCM (predecessor to IPAM) on 6 January 2020 and subsequently (on 5 February 2020) suspended under para. 15 of the PCM Rules of Procedure 2014 to allow EBRD Management and the Requesters to engage and address the issues raised in the Request.

On 1 July 2020, all active requests and cases were transferred from PCM to the Independent Project Accountability Mechanism (IPAM).

IPAM engaged with all Parties to understand whether the suspension period had allowed for concerns to be addressed. According to both Parties, a meeting was held on 13 February 2020 in the Regional Office (RO) of Sarajevo with video link to EBRD HQ in London to discuss the issues raised in the Request in more detail. During the suspension period, the ESIA for the Mostar South-Tunnel Kvanj section of the motorway was completed and the public hearing, initially scheduled for July 2020, took place in September 2020. However, the Requesters considered that their concerns had not been adequately addressed and requested IPAM to proceed with the processing of the Request opting for the IPAM Compliance Review function.

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The Request was registered on 1 October 2020 having complied with the formal requirements for registration set under para. 2.2.b of the 2019 Project Accountability Policy (PAP), thus initiating the Assessment stage.

b) Assessment

The Assessment stage was initiated on the date of Registration and completed on 5 January 20215. On that date, IPAM issued its Assessment Report determining that the Request was to be transferred to the Compliance Assessment stage as a Problem Solving initiative was not deemed feasible and after the Requesters expressly asked to have his Request considered for a Compliance Review. c) Compliance Assessment The transfer of a Request to the Compliance function is triggered by the determination by IPAM that a Problem-Solving initiative is not feasible and the Requesters have expressed their interest in having their complaint considered for a Compliance Review.

As per par. 2.6 of the 2019 PAP, under the Compliance Review Assessment stage, the Request is assessed to determine whether it meets the criteria for an investigation by IPAM. A Case is eligible for a Compliance Review if IPAM deems that:

i. upon preliminary consideration, it appears that the Project may have caused, or may be

likely to cause, direct or indirect and material harm to the Requesters (or, if different, the relevant Project-affected People); and

ii. there is an indication that the Bank may not have complied with a provision of the Environmental and Social Policy (including any provision requiring the Bank to monitor Client commitments); or the Project-specific provisions of the Access to Information Policy (AIP), in force at the time of Project approval.

The Compliance Assessment stage has a standard duration of 60 business days from the date of issuance of the Assessment Report. This period may be extended to ensure robust processing or if translation of documents is required.

At the end of this stage, a Compliance Assessment Report is prepared containing the findings made by IPAM and its determination on the eligibility of the case from within two alternative outcomes:

i. recommend proceeding to a Compliance Review, having determined that the criteria set out in para. 2.6 (b) are met. In this case, the Compliance Assessment Report is submitted for information to the Board and the President with terms of reference for a compliance review.

ii. recommend closing the case, having determined that the criteria set out in para. 2.6 (b) are not meet. In this Case, the Compliance Assessment Report is submitted to the Board for approval on a no objection basis.

5 The Assessment stage has an estimated timeframe of 40 business days as per the Project Accountability Policy. However, the Policy also provides for the possibility of time extensions due to translation requirements. In the current case, a longer timeframe was required for translation and review of documentation originally received by IPAM in Bosnian.

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After sharing with the Board and President, the Report is made available to Requesters, Bank Management and the Client and is publicly disclosed on the IPAM Case Registry.

In the current Case, the Compliance Assessment stage was initiated on 6 January 2021 and completed on 30 March 2021. The Terms of Reference for a Compliance Review were subsequently consulted with the Parties.

2. Compliance Assessment Approach

IPAM appraises the Case considering the documentation and information collected during previous processing stages (Registration and Assessment), as well as any newly gathered Project-specific and publicly available information. During the process, IPAM:

Engages with Requester, Bank Management and the Client, as well as other relevant stakeholders;

considers Bank management’s written response to the Request, where a management response has been requested by IPAM, outlining the steps taken by the Bank to ensure its compliance with the Environmental and Social Policy or the Access to Information Policy; and

considers the Client’s written response to the Request, where the Client has elected to submit a response.

In the current Case, a series of virtual meetings were held with the Requester, Client and Management during the Assessment stage. All through the process, the Requester and the Client have provided IPAM with documentation related to the concerns raised in his Request, the Project and have responded to specific questions raised by the IPAM team for the purposes of the Compliance Assessment. A written response from the Client was received by IPAM during assessment, sharing their perspective in relation to the issues raised in the Request and how they have responded to them.

At the express request of IPAM, Management submitted a written response6 and shared with IPAM diverse evidentiary documentation, as well as responses to specific queries related to the due diligence and monitoring actions undertaken by EBRD in relation to the Project. Additionally, they have provided information and documentation related to the Bank’s engagement with the Requester before the submission of the Request to IPAM.

IPAM wishes to thank all Parties for their cooperation and engagement with our team during this process.

3. EBRD Management Response

A summary of Management’s Response regarding the issues raised in the Request is provided in this section. In it Management confirms that the Project was approved by the Board in September 2018 with the second tranche left uncommitted. The Response affirms that the Tranche 2 section was “subject to environmental and social appraisal and assessment in line with the Bank’s E&S Policy (2014) and PRs, specifically PR1, PR2, PR3, PR4, PR5, PR6, PR8 and

6 Management’s Response is available in the Case Registry Summary

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PR10. [Including] an Environmental and Social Impact Assessment (ESIA) conducted in 2020 as required for category A projects.

They further comment that for the purposes of the E&S appraisal, an independent consultant was commissioned in 2019 to do a review and gap analysis of the draft national Environmental Impact Assessment that had been prepared in 2017 to meet national requirements7. Based on the independent review and gap analysis, the Bank concluded that the national EIA needed to be supplemented to meet the requirements of the EU EIA Directive and the PRs. As a result, in 2020, the national EIA was supplemented to produce an ESIA which provided additional baseline information and assessments in line with national legislation, the EU EIA Directive and PRs. In the Response, Management informs that on 22 July 2020, the ESIA package was disclosed in the EBRD and JPAC’s websites. In addition, hard copies of the ESIA were made available in the Sarajevo and Mostar offices of JPAC, in the Mostar Town Hall and the EBRD Resident Office in Sarajevo. On 29 July 2020, the competent authority also made available the package. The ESIA package included the ESIA, the Stakeholder Engagement Plan (SEP), the Non-Technical Summary (NTS), Environmental and Social Action Plan (ESAP), Biodiversity Management Plan (BMP) and Land Acquisition and Livelihood Restoration Plan (LALRP).

In relation to the allegations presented by the Requesters, Management in its Response refers to the relevant sections of the ESIA (2020) and the Environmental and Social Management Plan (ESMP) as follows:

In reference to adverse environmental impacts to the Buna and Bunica rivers, Management comments that the ESIA (2020) reference to Chapter 7.2 of the ESIA and Chapter 8.2 of the ESMP; and regarding the impacts to cultural sites due to the proximity of the road alignment, the Response refers to Chapter 7.3 of the ESIA and Chapter 8.6 of the ESMP for mitigation measures.

On impact on Serbian returnees and the risk of displacement, via expropriation and loss of livelihoods to give way to the road. Management comments that “a comprehensive assessment of impacts related to physical and/or economic displacement of Project Affected Persons (PAPs), including a review of their vulnerability status, was conducted as part of the ESIA and included the preparation of a project specific Land Acquisition and Livelihood Restoration Plan (LARLP) in line with PR5.” The Response also affirms that the preparation of the LARLP included a census of all PAPs and socio-economic assessment of the living and working conditions of the local communities. According to Management, Chapter 6.6. of the ESIA summarises the status of vulnerability, mainly elderly persons, those with disability and the unemployed. Serb returnees were identified as a vulnerable group in the settlement of Ortijes due to their socio-economic status. Management further comments that the ESIA consultant held a meeting with representatives of the Association of the Serb Returnees in Mostar during the development of the LARLP and was told that most members did not object to the alignment. It further states that as a result of the survey to PAPs, a majority of the respondents declared themselves as Serbs (56.82%), 20.45% as Bosniaks, 17.05% as Croats, 2.27 as “others” and 1.14 as “neutral”.

Management Response elaborates on stakeholder engagement by commenting that consultation has taken place at different phases of preparation of the Project for over a decade by various state and entity institutions with reference to Chapter 6.10 of the ESIA (2020). It states that as part of the ESIA process, a Stakeholder Engagement Plan (SEP) was prepared in 2017 and updated in 2020 for the Tranche 2 section. It states that JPAC has been undertaking

7 According to Management, this EIA was not submitted to the Federal Ministry of Environment and Tourism (the Competent Authority for environmental permitting) by JPAC as it did not meet all the national requirements.

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stakeholder engagement for the Tranche 2 section since 2017, starting with the Blagaj meeting with local communities and then through engagement with PAPs as part of the ongoing land acquisition process.

Management emphasises that the ESIA (2020) is public since 22 July 2020 and that it was used for national environmental permitting. Due to the latter, the Competent Authority organised a public hearing in the City Hall of Mostar on 14 September 2020. The participation was limited to 50 attendees due to social distancing measures. It further states that the EBRD representative “noted that all members of the public who turned up at the City Hall were granted access to the meeting on the day”. The Response then elaborates on how the process has complied with national requirements, leading to the disclosure of the draft Environmental Permit on 29 January 2021.

In relation to the ESIA assessment of alignment, Management Response affirms that the independent ESIA consultants reviewed the alternatives in detail and provided a summary of them in the document (Chapter 3 of the ESIA 2020) to clarify the processes followed.

Regarding the allegations of lack of robustness and independence of the Environmental Impact Assessment, Management comments that the ESIA local firm contracted for the EBRD E&S appraisal is part of the list of authorised consultancies of the Federal Ministry of Environment and Tourism and holds a good reputation.

Finally, in relation to the allegations of breach of local legislation regarding the expropriation of military property, Management comments that it understands that JPAC has been issued with various decisions and approval from relevant governmental authorities and agencies to implement the Tranche 2 section, including a decision from the State Ministry of Defense in 2017. “That decision granted consent to proceed with construction of the Tranche 2 section (specifically the section Mostar South-Buna) which was issued pursuant to the Expropriation Study submitted which does not include any of the premises or property of the Ministry of Defense of BiH.”8

4. Compliance Assessment Findings In order to determine whether the Case is eligible for a Compliance Review, IPAM has considered documentation and information collected during the Compliance Assessment stage for each of the allegations presented in the Request and checked the project documentation and information provided by all Parties. Here below is a summary of the preliminary findings: The strategic framework for Corridor Vc investments and technical cooperation projects was established by the Bank’s 2007 BiH Country Strategy. Corridor Vc was described as the ‘most important transport artery. In September 2018, the Project was approved by the Board of the EBRD as a category A project according to the 2014 Environmental and Social Policy due to the consideration that construction of tunnels and roads of four or more lanes has the potential to result in significant adverse environmental and social impacts. The Project consists of three section: (a) a 5.1 kms section between Poprikusa and Nemila; (b) 2 km tunnel section (Tunnel Kvanj) and (c) 9.2 kms section from Mostar South Interchange to Tunnel Kvanj. The Project also involves funding for consultancy services to support the implementation of the Project and environmental and social issues. 8 Management Response.

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The Request refers to environmental and social impacts to the settlements of Gnojnice, Ortijes, Kosor, Lakservine, Buna, Blagaj, Malo Polje and Hodbina to be generated by the construction of the Mostar South-Tunnel Kvanj section. The funding for the construction of this section (tranche II) remained uncommitted at the time of Project approval in 2018 as the environmental and social appraisal for that segment had yet to be undertaken at that time.

The ESIA (2020) describes the Project location as per the Preliminary Design9 as a 9.2 km long sub-section beginning with the Mostar South interchange and ending with the entrance into Tunnel Kvanj. The interchange is located near the Mostar Airport, and represents the intersection of the motorway with the existing main road M6.1 by connecting the motorway with the southern part of Mostar. After the interchange, the alignment is located in the immediate vicinity of the Mostar Airport where a tunnel (Mostar South Tunnel L=232 m) beneath the airport is envisaged to accommodate the development of an additional runway. After exiting this tunnel, the alignment follows the existing railway Mostar-Capljina in a very narrow 32 m corridor to the south. The route then passes parallel with the Mostar Airport runway towards Ortijes and Kosor settlements. The alignment then follows the auxiliary airport runway at a distance of 35-45 m, crossing agricultural fields in Ortijes. The sub-section further crosses the Buna Stream by Buna Bridge (L=326m), passes through agriculture areas of Malo Polje, crosses the Bunica Stream with a bridge (L=211m), and a viaduct (Viaduct Brijeg L=258 m) which leads to the Hodbina Hill and further to the entrance of Tunnel Kvanj. The sub-section ends at chainage 9+125+000 km.

The EBRD Environmental and Social Due Diligence for this section was conducted during 2019 and 2020 and the ESIA package was disclosed on 22 July 2020. A public hearing was held on 14 September 2020.

Ultimately, commitment of the second tranche was approved by the EBRD Board in February 2021 with the consideration by Management that all relevant environmental and social impacts had been identified as per the ESIA; and that any issues were to be addressed through the ESMP which would be carried out by the Client and monitored by the Bank.

4.1. Regarding the alternative analysis and route alignment. The Request raises the concern of community members regarding the approved alignment for the Mostar South – Tunnel Kvanj route as they consider that it generates a series of irreparable impacts on the livelihoods of people who rely on subsistence farming in one “of the most fertile lands in Herzegovina”; risking the biodiversity of the area and pollution of the waters of the Buna and Bunica Rivers; threatening the cultural heritage of the area and disproportionately impacting Serb returnees. From the perspective of the Requesters, the 2011 alignment was the optimal one as it did not involve expropriation and it would not involve “destruction of valuable agricultural land or the environment”10. The ultimately approved alignment, as per the Requesters allegations, was made without environmental impact studies nor public hearings.

The decision on the alignment of this section had been under discussion for a number of years. The consideration of the Project by the BiH Government dates back to 2003 when the BiH Ministry of Transport and Communications adopted the “Decision on public interest for construction of the motorway on Corridor Vc through Bosnia and Herzegovina” and started the

9 Preliminary Design and Study for Obtaining Urban Permit for the Motorway Section on Corridor Vc, Mostar South-Buna, developed in April 2018 by IPSA Institute Sarajevo. 10 Comments made during conference calls organised by IPAM.

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development of spatial, planning and technical documentation for it.11 The final alignment was not decided until 2017, and prior to that, a number of alternative routes were analysed:

In 2005-2006 the first alternative routes analysis was undertaken, and in 2007 the local Environmental Impact Assessment process was conducted for the entire corridor12. However, the environmental permit was not issued at the time.

In 2011, a second analysis of alternative routes took place and the alignment passing in the hinterland of Blagaj was selected as the optimal one. This route avoided degradation of the fertile land of Mostarsko field. In that same year the Government of the FBIH adopted the Proposal of Spatial Plan for an area of special interest for the Motorway on Corridor Vc 2008-2028.

Then in 2015, a third analysis of alternatives when JPAC decides to abandon the proposed alignment between Ostri rat and intersection Mostar South. Further changes take place in 2016 as a result of a multicriteria analysis of three variants, whereby the route passing near the airport Mostar is considered the most suitable. The same year, the FBiH Parliament adopted the Spatial plan for areas of special interest.

Finally, in 2018, the preliminary design of the section Mostar South-Buna was developed by the IPSA Institute of Sarajevo13 with two further amendments to the alignment near Mostar Airport and the village of Malo Polje.

During conversations held with the Requesters they commented that on 22 January 2017, the Client disclosed the current alignment during a meeting attended by the local population which provoked a heated reaction from the community who expressed their concerns about the impacts the proposed route would have. After that, they allege that they tried without success to engage with JPAutoceste. Due to this they presented the first complaints to both EBRD and EIB.

According to information submitted by the Requesters, the only information received by the community regarding consultation on the approved alignment prior to the January meeting was through three notifications posted in the town of Blagaj.

Management states that alternative alignments for the Mostar South-Tunnel Kvanj were assessed and were subject to consultation in line with national requirements. The final alignment selection was officially adopted by the Parliament of the FBiH in 2017.

Requesters allege that no information was provided to the affected communities prior to deciding the alignment and that it was decided without consideration of the environmental and social impacts and that there existed other alternatives that would generate lesser impacts but were dropped in a non-transparent fashion in 2016-2017.

Bank Management states in its response that alternative alignments were assessed and were subject to public consultation in line with national requirements before EBRD’s involvement, through feasibility studies, spatial planning documents and multi-criteria analysis. It further provides information on the process of approval of the “Spatial Plan” in 2011 and the adoption of a final version in 2017.

11 Environmental and Social Impact Assessment for Sub-section Mostar South Interchange to Tunnel Kvanj (2020). 12 EIA for Lot 1: Svilaj – Doboj South (Karuse), IPSA Institute (BiH), 2007 available on http://www.jpautoceste.ba/images/llot1.pdf; EIA for Lot 2: Karuse – Tarcin, IPSA Institute (BiH), 2007 available on http://www.mkt.gov.ba ;EIA for Lot 4: Mostar North – Border crossing, prepared by IGH (Croatia), 2007 available on http://www.mkt.gov.ba 13 Preliminary Design and Study for Obtaining Urban Permit for the Motorway Section on Corridor Vc, Mostar South-Buna, developed in April 2018 by IPSAA Institute Sarajevo.

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The ESIA (2020) includes a section summarising the alternatives considered. It mentions that based on the results of the multicriteria analysis the “most suitable alternative”14 was the one selected. The Non-Technical Summary (2020) confirms the use of a multicriteria analysis, stating that “even if the cost was the primarily criterion chosen for the public presentation, the multicriteria analyses for the motorway section on Corridor Vc Mostar North-Buna took into consideration other criteria: eliminatory criteria [such as] water supply sites – zone I, cultural and historical heritage (facilities and zones defined by decisions and planning documents), natural values and rarities (based on valid documents), urban structures, built industrial complexes, significant energy facilities, land of I category, amelioration, spatial-economic criteria and spatial-ecological criteria”15.

In the preliminary review of project documentation, IPAM has found information on the alternatives’ analysis summarised in chronological tables, but no detail on the criteria nor on the data used to reach a decision the “most suitable alternative”.

The Response does not provide information on the process followed by the Bank to “ensure through its environmental and social appraisal… that the [Project was] designed…. in compliance with applicable regulatory requirements and good international practice (GIP)”16 nor on how the mitigation hierarchy was applied at the scoping and design stage.

Good international practice establishes the need to consider alternatives, i.e. the road alignment feasible options, understand the issues and assess their feasibility (environmental, social, technical, economic, regulatory) through robust, transparent and participative assessment methodologies. As regards timing, the scoping stage is the stage of the environmental impact assessment when alternatives are to be considered and public participation sought.

The allegations raised by the Requesters regarding the lack of environmental and social impact assessment to support the selection of the alignment and absence of consultation with affected communities contradict some of the information provided by Management. They allege that an alignment with lesser environmental and social impacts had been analysed and discarded in favour of the current one, which from their perspective generates substantial impacts to the affected communities, particularly in relation to Serb returnees. IPAM has not reviewed information regarding the reasoning for discarding the alternative mentioned.

It is IPAM’s consideration that an IPAM Compliance Review will provide factual information on the actions undertaken by the Bank in reviewing the alignment decision process vis-à-vis the 2014 ESP requirements and GIP for an A category project and its reasoning for deciding that those requirements had been met and confirm that the Project could proceed. This information will assist IPAM to determine if the Bank effectively complied with PR1 and GIP by accepting to finance the Project with the alignment proposed by the Client. Additionally, it would serve to establish whether the Bank in its appraisal had followed the mitigation hierarchy established in the 2014 ESP for assessing impacts and identifying avoidance, mitigation or compensation measures.

14 ESIA 2020, page 10 15 Non-Technical Summary for Sub-Section Mostar South Interchange to Tunnel Kvanj, July 2020, footnote 8, page 8. 16 2014 Environmental and Social Policy, Section B, paragraph 6.

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4.2. Regarding environmental and biodiversity impacts

The Request raises concerns on the impacts on the environment and biodiversity that the road, particularly the bridges to be built across the Rivers Buna and Bunica will have, particularly in relation to water pollution thus impacting the fertile region. They also allege that there has been no assessment on the impact on a range of endemic species, some of the included in the IUCN Red List and the Red List of FBiH.

Management states that the ESIA for Tranche 2 section includes an assessment of impacts to the local water bodies in the relevant area, including the Buna and Bunica Rivers. They further mention that a set of mitigation measures is provided in the Environmental and Social Management Plan (ESMP) which are to be implemented by the Client and monitored by the EBRD.

In June 2020 Enova was commissioned to undertake the Environmental and Social Assessment for subsection Mostar South-Tunnel Kvanj. The ESIA states that at the moment of assessment, there was only a preliminary design of the road (Preliminary Design, IPSA 2018) which limited the possibility of defining certain environmental impacts and corresponding mitigation measures. Among the limitations for a comprehensive assessment the following were cited: need for a geotechnical survey, existence of UXOs and mine fields, restriction to access private properties and deadlines for submission of the report. The latter is underscored as a limitation for performing biodiversity surveys beyond the summer season. Thus, no biodiversity assessment was done for spring-flowering and autumn species and further biodiversity surveys are still required and included as needed in the Biodiversity Management Plan. Additionally, the ESIA states that most of the baseline was constructed through a desk review and that scarce data for the project area was encountered.

Regarding impacts on water, the ESIA further mentions that “the baseline survey of water quality in Buna and Bunica provided unreliable data for the chemical oxygen demand due to use of inadequate laboratory method. Dissolved oxygen and ammonia parameters are missing, both being necessary to be able to make appropriate conclusions about water quality. Baseline surveys need to be repeated with additional parameters measure and analysed before works commence”17.

The Requesters have raised concerns about the lack of robust assessment of impacts to the environment and the biodiversity of the region. In this regard, the ESIA acknowledges that a series of limitations were found during the E&S appraisal, thus underscoring the need to undertake further studies and surveys prior to construction. Further to that, the ESIA states that the project is considered to trigger critical habitat considerations for aquatic ecology of Buna and Bunica Streams and that “mitigation will require preservation of same conditions of the two watercourses Buna and Bunica without any disturbance, preservation of the riverine vegetation and preservation of the flow regime same as the current conditions downstream of the affected area. Consequently and due to the fact that this cannot be achieved without the changes to the design of the project and avoiding of any impacts to aquatic ecosystems, the changes to the Preliminary Design have been proposed in ESAP PR 6, ESIA and BMP”18

17 ESIA 2020, page 48. 18 ESIA 2020, page 77

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Performance Requirement 6 establishes that through the assessment process, the Client should identify and characterise, early in the project life cycle, the potential project-related opportunities, risks and impacts on biodiversity. The assessment process should include consideration of direct, indirect and cumulative impacts and evaluate the effectiveness and feasibility of the mitigation measures to be applied to the project. The assessment process should include consideration of potential landscape level impacts, as well as impacts on the ecological integrity of the ecosystems, independent of their protection status and regardless of the degree of their disturbance or degradation. Further, the assessment will consider the use of, and dependence on, ecosystems by potentially affected communities.19

The preliminary review performed by IPAM as regards the allegations of lack of assessment of impacts on the environment and biodiversity, found that the appraisal process faced limitations, thus requiring further studies prior to start of construction. Additionally, changes in design are required to avoid impacts on critical habitats. Finally, IPAM has not identified to date, how affected communities were consulted on these issues, nor how any direct or indirect impacts to them were considered as required by the relevant PRs.

From a preliminary review of project documentation, IPAM considers that a fact-finding investigation would assist in clarifying the actions undertaken by the Bank during E&S appraisal in regard to identification of environmental and biodiversity impacts and establishment of mitigation measures.

4.3. Regarding air, noise and water pollution The Requesters raised in their Request that the road will be traversing through the “most fertile region of Herzegovina” which will be negatively impacted by the pollution generated by the construction and operation of the highway. General concerns regarding their quality of life and the impacts that the road will have, with an emphasis on pollution of ground water due to the characteristics of the soil and the impact on wells.

In addition to that, during the Compliance Assessment stage, Requesters raised concerns on direct impacts to their properties due to the closeness of the proposed road to their properties. Some Requesters have commented that the distance between their houses and the road is almost negligible with expected adverse impacts regarding noise and air pollution among other things.

In a preliminary review of the ESIA to understand how the Bank had appraised these issues, IPAM found that a section on social impacts and community health and safety has been included in the document. However, some of the concerns raised by Requesters are assessed as either moderate or minor, with no further information on how this decision was made, nor on whether PAPs had been consulted.

In relation to some of the issues, the detailed measurement or identification of impacts appears to be only feasible once the final design is ready. For example, in relation to noise the ESIA states that “no information on noise modelling was available at the time of preparation of this Study, [and that] the noise modelling will be done as a part of the main design. Therefore, the assessment of impacts is based on expert judgment”.20

19 2014 Environmental and Social Policy, Performance Requirement 6, paragraphs 8 and 9. 20 ESIA 2020, page 172.

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At the moment of finalising this Compliance Assessment it is not clear to IPAM if the final design is ready nor whether studies and surveys have been initiated, however it is relevant to say that due to limitations faced during the appraisal, these studies need to be undertaken prior to start of construction in many of the instances.

IPAM finds that an investigation would provide factual information on the identification and assessment of project related risk and adverse impacts to the health and safety of the affected communities and the mitigation measures to be adopted as required by PR 3.

4.4. Regarding cultural heritage

In relation to Cultural Heritage, the Requesters raise concerns regarding adverse impacts to the heritage site Vrelo Bune and the Stjepan grad. They also raise concerns regarding the negative impact on the Mukosa Quarry, which they comment is the source of stones for the Stari Most Bridge.

Management’s Response states that impact on existing material assets is assessed in the ESIA and that mitigation measures to reduce impacts on cultural and historical heritage are provided in the ESMP.

The ESIA states that preliminary screening of presence of the cultural and historical heritage in the project area was done for the purpose of the 2009 Local EIA study for Lot 4. Then in June 2020 the Federal Institute for Protection of Monuments, upon a request from the Client, issued a list of 15 recorded and protected goods of cultural and historical heritage located near the alignment but with no precise locations provided.

Further to that, the potential impacts to cultural heritage during construction are considered high and significant. To mitigate impacts, the ESMP establishes the need to perform preventive archaeological surveys in line with the national requirements.

Performance Requirement 8 establishes as its aim to protect cultural heritage and to guide clients in avoiding or mitigating adverse impacts on cultural heritage. For that purpose, PR8 requires an early stage assessment to determine if any cultural heritage is likely to be adversely affected by the project. Once screening is done, the Client should select the location and design of a project so as to avoid significant impacts on cultural heritage.

During the Compliance Assessment process, IPAM has not found information to determine how early screening of cultural heritage was considered in the alignment decision process. Further to that the ESMP states that further preventive surveys are needed before construction. It is therefore IPAM’s consideration that a fact-finding process will be able to determine what actions were taken in relation to preservation of cultural heritage and avoidance of impacts as established in PR8.

4.5. Regarding impacts on livelihoods, resettlement, and economic displacement

In relation to impacts on livelihoods, the Request raises concerns regarding the approved alignment as they comment that “the planned route also trespasses on the most fertile land in Herzegovina with the unique combination of sunny days/year, fertile soil, and water access that is currently covered with 85,000 orchard trees and 800,000 grape trees that will be directly or indirectly affected by this route.” The Requesters raise concerns about the livelihood of those in the impacted communities in general and not only those that are subject of expropriation.

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The Requesters allege that the surveys performed are incomplete and based on outdated information, which has limited the assessment of impacts (e.g. they comment that the LARLP does not have information about exact parcels of expropriation and in several places it is mentioned that 197 additional parcels will be expropriated without providing further details). They state that the alignment impacts, disproportionately, Serb returnee communities as they allege that “this new route will have a major impact on the minority Serb population from the Malo Polje and Ortijes areas, who are returnees to their homes after being displaced during the war. UNHCR spent millions of dollars on a project that aided their return, helping people rebuild their homes, orchards of pomegranates, figs and different medicinal herbs and vineyards which are now the main source of their income. Furthermore, they comment that, maps of the route presented by officials do not accurately represent current landscape of this area. In the past seven years many more displaced people originally from this area who were living in Sweden, Norway and other European countries have returned to build new houses and start their life again in this region.”

In communications with Requesters during the Compliance Assessment stage, they asked IPAM for an explanation on why the LALRP report of this Project published in the same package differs significantly from those of other sections of the Corridor. From their perspective, the LARLP for the Mostar South-Tunnel Kvanj section provides only partial information (versus the LARLPs of the other sections) and raises issues of accuracy of the information provided. They mention that the process of expropriation has been going on for the last two years during which time they have received “significant pressure for JPAC”, and that those against expropriation have been intimidated or threatened.

Management Response regarding disproportionate impacts on Serbian returnees and the risk of displacement, via expropriation and loss of livelihoods to give way to the road states that a comprehensive assessment of impacts related to physical and/or economic displacement of PAP, including a review of their vulnerability status, was undertaken as part of the ESIA and that the LARLP included a census of all PAPs and socio-economic assessment of the living and working conditions of the local communities, whereby Serb returnees were identified as a vulnerable group in the settlement of Ortijes due to their socio-economic status21.

In the review of project documentation, IPAM found that a Land Acquisition and Resettlement Framework (LARF) had been prepared in March 2017 to serve as the basis for the preparation of the Land Acquisition and Resettlement Plans (LARPs) for the Project, which were to be developed once the exact nature and magnitude of the land acquisition or restrictions on land use related to the Project were known. According to the LARLF, the LARPs would provide more precise details on the Project Affected People, the eligibility criteria and the procedures to be applied for the Project in line with this LARF and in compliance with EBRD PR5.22

The 2014 ESP Policy definition of vulnerable group is reflected in the ESIA. It further details that based on the results of the socio-economic survey, several vulnerable households were identified in the six impacted settlements for three categories: elderly persons, persons with a disability or chronic illness and unemployed persons. In addition to those, the ESIA identifies two potential

21 The 2014 ESP defines vulnerable groups as referring to people who, by virtue of gender identity, ethnicity, age, disability, economic disadvantage, or social status may be more adversely affected by project impacts than others and may be limited in their ability to claim or take advantage of project benefits. Vulnerable individuals and/or groups may also include people living below the poverty line, the landless, the elderly, women and children headed households, refugees, internally displaced people, ethnic minorities, natural resource dependent communities or other displaced persons who may not be protected by national and/or international law. 22 LARLF, March 2017.

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vulnerable groups: female population and Serb returnees in a generic fashion. However, neither the LARLF nor the LARLPs or the ESIA provide specific details on Serb returnees or any specific mitigation measures, although they mention ethnicity as an element to consider for vulnerability.

Therefore, how vulnerable groups were considered in the assessment of impacts seems to require further investigation as according to both the ESIA and the LARLP, the results of the survey show that 56.82% of the interviewed landowners (88 out of 192) who do not live on impacted land plots declared themselves as Serbs.

Also, in relation to the data used to design the LARLP 2020, the “data for the analysis of population and demographics for the settlements in the vicinity of the motorway section [was] taken from the Census 2013 and from the socio-economic survey conducted in April-May and in November 2019 during the development of the LARLP for the section Mostar South-Tunnel Kvanj”23. It is further informed that data collection for the census database was based on information from the Expropriation Study developed in March 2018. However, Requesters allege that the public information provided does not accurately reflect the impacted settlements nor include a number of properties that are being negatively impacted due to the closeness to the alignment and have not been considered in the LARLP or the ESIA.

The 2014 ESP and PR5 include provisions that require the need to identify and address impacts to vulnerable groups and for the ESIA package (included the LARLP) to ensure a comprehensive consideration of impacts by the Client and for EBRD to consider whether the assessment meets those provisions. Thus, it is IPAM´s consideration that a compliance review would assist to determine if EBRD has ensured that the assessment of livelihood impacts resulting from resettlement, expropriation and/or economic displacement, was done in a comprehensive fashion based on recent, robust data, and that mitigation and livelihood restoration measures have been effectively established in line with PR5 requirements. Particularly relevant to the investigation would be to identify if the Client took the necessary actions to ensure that Serb returnees were not disadvantaged in the resettlement process, were fully informed and aware of their rights and were able to benefit from the resettlement opportunities and benefits as required by PR5.

4.6. Regarding stakeholder engagement and consultation

The Request raises allegations of lack of transparency and public participation all through the process of design and approval of the Project, in particular with reference to the process of analysis of alternatives and the consultation of impacted communities during the environmental and social impact assessment process.

According to the Requesters, stakeholder engagement was not undertaken appropriately for the selection of the current alignment. They state that prior to approval at the Federal Parliament and Dom Naroda “a single town hall meeting was held in Blagaj on 21 January 2017 when the proposed alignment was intensely rejected by local residents.”24 They further allege that the public hearing held in September 2020 was initially not disclosed, that the event was filled by employees of the Client and that only five community members were able to attend.

In its Response, Management states that stakeholder consultation for the Project has taken place for over a decade during different phases of the Project and refer to Chapter 6.10 of the ESIA (2020). In that document, it mentions that JPAC conducted the local EIA process for the 23 ESIA, page 115 24 As evidence of their allegations, they provide a video of the public audience.

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entire Corridor divided into four lots. Further, it states that Scoping decisions for the four lots were issued in 2005 and the EIAs were approved in 2007. “Public consultations were carried out in two stages: (i) after the Scoping Report and (ii) after the Final EIA.” No significant public complaints have been recorded in respect to environmental and social issues on the project section. However, only Environmental Permit (EP) for [three sections]…. EP was not issued for the sections Mostar North-Mostar South and Mostar South-Tunnel Kvanj.”

The ESIA further states that consultations took place in 2012 in relation to the Spatial Plan of FBiH 2008-2028. Particular mention is made of a public consultation meeting organised in Mostar on 13 March 2012 stating that “issues raised related to the Corridor Vc were not relevant for the Project section covered by the Stakeholder Engagement Plan developed for the Section Mostar South-Tunnel Kvanj”.

Regarding the meeting held in Blagaj in 2017, the NTS describes that “the local community expressed their concerns about impacts on ecology in the southern zone of Mostar, to settlements and agricultural land particularly orchards and vineyards. In addition, representatives of local communities cited their concern that the proposed motorway section will negatively impact the natural resources in the valley of Malo Polje. JPAC representatives took on board these comments and explained that the alignment was selected based on a multi-criteria analysis which took into account several factors, one of which is cost-effectiveness.”25

The ESIA mentions further that when local community expressed concerns about impacts on settlement and agricultural land, “JPAC representatives explained that the chosen route was the most cost effective and that all affected people would be properly compensated”26

Management notes in its Response that as part of the ESIA process, a Stakeholder Engagement Plan (SEP) was prepared in 2017 and updated in 2020 for the Tranche 2 section. It further mentions that JPAC has been in continuous engagement with Project Affected Persons (PAPs) as part of the ongoing land acquisition process and the preparation of Tranche 2.

In relation to the disclosure and consultation of environmental and social impacts of the South Mostar – Tunnel Kvanj section, Management’s Response informs that the ESIA was disclosed on 20 July 2020 in both the EBRD and the JPAC website. As part of the permitting process, a public hearing in the City Hall of Mostar took place on 14 September 2020 and the Response signals that notifications of the meeting were posted in two national newspapers on 28 August 2020 and on the webpage on the Federal Ministry of Environment and Tourism.

In preliminarily reviewing project documentation, IPAM found that the SEP (2020) effectively provides information on public consultations and engagements undertaken at different moments but does not provide detail on how affected communities were identified and engaged, nor does it elaborate on how those engagements resulted in meaningful consultation with stakeholders as required by the 2014 ESP and PR10. In addition, IPAM has not reviewed specific documentation related to how impacted population was identified during the assessment of alternative alignments nor if they were and how consulted as per the 2014 ESP.

The EBRD is committed to the principles of transparency, accountability and stakeholder engagement… [and] will promote similar good practices amongst its clients. To this end engagement with the project stakeholders is an integral part of assessing the potential environmental and social impacts and issues associated with the project and developing and implementing procedures for managing and monitoring these impacts. The process of

25 Non-technical summary for sub-section Mostar South interchange to Tunnel Kvanj. July 2020, page 8. 26 ESIA (2020), page 135

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engagement should occur as early as possible in the scoping stage and continue through the life of the project. Specific provisions of identification and meaningful consultation are also included in the 2014 ESP in relation to assessment of impacts in PR1, resettlement and livelihood restoration in PR5, as well as in the other PRs relevant to the Request.

Provisions of the 2014 ESP in relation to PR 10 on information disclosure and stakeholder engagement recognise the importance of an open and transparent engagement between the client…, local communities directly affected by the project and where appropriate other stakeholders as an essential element of good international practice (GIP).

In analysing the requirements set in PR10 and other PRs, IPAM considers that a fact-finding investigation on how stakeholder participation as per the 2014 ESP was undertaken from the very early stages of the Project up to the approval of the 2020 ESIA, as well as how does the Project envisage continued engagement through the life of the Project.

5. Conclusions and Next Steps

The Requesters have raised allegations of actual and potential environmental and social harms, which include non-consideration of disproportionate impacts on ethnic minorities, negative impacts on biodiversity of the Buna-Bunica region, potential noise and water pollution, which are directly related to the construction and operation of the Corridor VC road, specifically the Mostar South-Tunnel Kvanj section, among others. The Request further states that from their perspective at least one alternative alignment considered during the scoping stage would generate lesser impacts than the one ultimately selected, but that the alignment decision was made based on cost with no due consideration of environmental and social impacts. They particularly emphasise that, there had been no environmental and social impact assessment studies at that stage, nor any significant consultation with project-affected people. Their view is that the Project has been designed and executed in a non-transparent fashion excluding Project-affected People and failing to undertake robust impact assessment studies, and that the Bank has failed to ensure compliance with the 2014 ESP requirements and GIP during the appraisal and approval process.

At the Compliance Assessment stage IPAM does not perform an exhaustive analysis of all relevant documentation nor engages with all relevant stakeholders, but it does perform a preliminary review to determine if the criteria to move forward with a Compliance Review is met. In this case, it has reviewed the documentation presented by the Requesters, Management and the Client. In addition to it, IPAM has revised public information, media reports and PAP statements related to the allegations raised. Finally, as the travel restrictions due to the Covid-19 pandemic have made it impossible for IPAM to travel to the Project site, it engaged with the Parties through virtual calls.

Based on this initial analysis, it is IPAM’s consideration that it appears that the Project may have caused, or may be likely to cause, direct or indirect and material harm to the Requesters and the relevant Project-affected People. Further to this, there are indications that the Bank may not have complied with relevant provisions of the Environmental and Social Policy (2014) in relation to the allegations raised.

Therefore, as per the Compliance Assessment provisions outlined in Section 2.6 (b) of the 2019 Project Accountability Policy, IPAM finds that the Case meets the Compliance Review eligibility

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criteria in relation to the concerns raised by the Requesters. Based on this, IPAM recommend proceeding with a Compliance Review.

This determination is based on a preliminary review of the documentation and its analysis to establish whether the case meets the criteria for eligibility and does not represent a formal determination of compliance, which can only be obtained through a Compliance Review process.

Next Steps This Compliance Assessment Report, including the terms of reference for the compliance review presented in Annex 1, will be submitted to the Board and the President for information, shared with all Parties and disclosed in the IPAM Case Registry. As per the Terms of Reference, the Compliance Review will initiate immediately after the disclosure of this Report.

After consulting with the Parties, IPAM has considered all comments and suggestions made on the draft Compliance Assessment Report and the proposed Terms of Reference, and adopted those deemed relevant. IPAM thanks the Parties for their involvement in this stage and will continue engaging with them all during the Compliance Review process.

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Annex 1. Compliance Review Terms of Reference Introduction

EBRD is committed to promoting sustainable development in all its investments, as a key contributor to economic transition. To ensure that the environmental and social practices of Ban Projects meet EBRD standards, the Bank requires that Projects comply with its Environmental and Social Policy. In addition, the Bank is required to disclose certain Project information to the public in accordance with its Access to Information Policy, to enhance transparency and accountability, improve discourse with affected stakeholders, and foster good governance.

The 2019 Project Accountability Policy establishes that the purpose of the Independent Project Accountability Mechanism is to facilitate resolution of social, environmental and public disclosure issues among Project stakeholders, to determine whether the Bank has complied with its Environmental and Social Policy and the Project-specific provisions of its Access to Information Policy; and where applicable to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

As per Paragraph 2.7 of the 2019 PAP, the purpose of the Compliance Review is to determine whether the Bank, through its actions or inactions, has failed to comply with the ESP and the AIP, in respect of an approved Project. Where IPAM concludes that the Bank was not in compliance with either Policy, IPAM will recommend remedial changes related to the actions or omissions of the Bank.

The Compliance Review does not assess the compliance of performance of the Client: it assesses the compliance of the Bank with the Environmental and Social Policy or the Project-specific provisions of the Access to Information Policy, in respect of a Project.

Accountabilities

The Compliance Review is undertaken by the IPAM team in line with the mandate established in the Project Accountability Policy and guided by the principles of independence, impartiality, transparency, predictability, and equitability. IPAM may engage consultants on technical matters as needed but the responsibility to produce the Compliance Review Report remains with IPAM and any determinations of compliance or non-compliance are to be made by the Chief Accountability Officer based on the Compliance Review findings. Scope

These Terms of Reference are prepared on the basis of the issues raised in the Request for Case 2020/06 and apply to any inquiry, action or review process undertaken by IPAM as part of the Compliance Review, with a view toward determining, as per paragraph 2.7 literal (a) of the 2019 Project Accountability Policy, whether the Bank, through its actions or inactions, has failed to comply with the 2014 Environmental and Social Policy or the Project-specific provisions of the Access to Information Policy (or its predecessor), in respect to Corridor VC in FBiH-Part 3 (49058), and particularly in relation to Tranche II of this Project. The Compliance Review scope is outlined below and although it makes reference to specific PRs, it will also consider (and does not further preclude) potential inter-linkages between the different PRs.

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General Provisions

Did the Bank ensure through the environmental and social appraisal that the Project was designed and implemented in compliance with the applicable regulatory requirements and good international practice (GIP), and considered in its approach the mitigation hierarchy?

As a direct investment, did the Bank ensure that a formalised and participatory environmental and social impact assessment process was performed as required for a Category A project?

PR1: Assessment and Management of Environmental and Social Impacts and Issues

Did the Bank ensure that the environmental and social assessment process was based on recent information, an accurate description and delineation of the project, and social and environmental baseline data at an appropriate level of detail; satisfying itself that the mitigation hierarchy and GIP had been considered, in addition to meeting national requirements and relevant PRs?

Did the Bank ensure that the ESIA process identified the potential future environmental and social impacts associated with the project, including an examination of technically and financially feasible alternatives to the source of such impacts, and documented the rationale for selecting the course of action proposed?

Did the Bank seek within its mandate to ensure, through its environmental and social appraisal and monitoring processes, that the Project was structured to meet with stipulated Category A project requirements in accordance with PR 1.10?

Did the Bank satisfy itself that vulnerable groups27 had been identified through the process of environmental and social assessment, and included in the ESMP differentiated measures so that adverse impacts do not fall disproportionately on them?

Did the Bank satisfy itself that the assessment process covered, in an integrated way, all relevant direct and indirect environmental and social impacts and issues of the project, and the relevant stages of the project cycle (for example, preconstruction, construction, operation)?

Has the Bank satisfied itself that monitoring requirements will address the environmental and social impacts and issues identified during the environmental and social assessment process, including relevant actions in the ESMP and the ESAP?

PR3: Resource Efficiency and Pollution Prevention and Control

Did the Bank satisfy itself that the Client determined the appropriate pollution prevention and control methods, technologies, and practices to be applied to the project, in relation to noise, air, visual and water pollution risks?

Has the Bank satisfied itself that the Client has established methods to apply pollution prevention and control techniques consistent with the mitigation hierarchy approach to minimise potential adverse impacts on human health and the environment while

27 For the purpose of the 2014 ESP, vulnerable groups refer to people who, by virtue of gender identity, ethnicity, age, disability, economic disadvantage or social status may be more adversely affected by project impacts than others and may be limited in their ability to claim or take advantage of project benefits.

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remaining technically and financially feasible and cost effective, including consideration of the release of pollutants due to routine, non-routine, or accidental circumstances?

Did the Bank satisfy itself that the Client had adequately assessed the impacts of its activities on the water supply to third parties and sensitive ecosystems, and established adequate mitigation measures? Was the Bank satisfied that the client has identified appropriate mitigation measures that favour the prevention or avoidance of risks and impacts over minimisation and reduction in line with the mitigation hierarchy approach and GIP?

PR4: Health and Safety

Did the Bank satisfy itself that the Client has identified and assess project-related risks and adverse impacts to the health and safety of the potentially affected communities and will develop protection, prevention and mitigation measures that are consistent with the mitigation hierarchy approach and GIP, and proportionate to the impacts and risks, and appropriate to the stage, size and nature of the Project?

Did the EBRD satisfy itself that the Client has incorporated technically and economically feasible and cost-effective road safety components into the project design to mitigate potential road safety impacts on the local affected communities?

PR5: Land Acquisition, Involuntary Resettlement and Economic Displacement

Did the EBRD satisfy itself that the Client had considered feasible alternative project designs to avoid or at least minimise physical and/or economic displacement, while balancing environmental, social and economic costs and benefits?

Did the EBRD ensure that the Client took into account any individuals or groups that may be disadvantaged or vulnerable. In particular, did the Bank satisfied itself that the Client took the necessary actions to ensure that vulnerable groups were not to be disadvantaged in the resettlement process, were fully informed and aware of their rights, and able to benefit equally from the resettlement opportunities and benefits?

Did the Bank ensure that the Client carried out a socio-economic baseline assessment on people affected by the project, including impacts related to land acquisition and restrictions of land use? Further to that, if carried out, the assessment identified impacts within a project’s social context and the needs and rights of the affected people and developed appropriate actions to minimise and mitigate resettlement impacts?

Did the Bank satisfy itself that the Client had carried out a detailed census to (i) identify persons to be displace by the project; (ii) determine who would be eligible for compensation and assistance; and (iii) take inventory of affected land and property. Further to this, did the census take into account the needs of seasonal resource users who may not be present in the project area during the time of the census?

Did the Bank satisfy itself that the Client has offered all displaced persons and communities’ compensation for loss of assets at full replacement cost and other assistance, with the intention to restore, and potentially improve, their standards of living and/or livelihoods of displaced persons to pre-displacement levels? Were the standards for compensation will be transparent and consistent within the project? Was compensation offered to be provided before displacement or imposition of access restrictions

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PR 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

Did the Bank ensure that the client as part of its assessment process identify and characterise the potential project related opportunities, risks and impacts on biodiversity? Specifically, how did the Bank ensure where potential project related impacts to biodiversity had been identified that risks were managed in accordance with the mitigation hierarchy and GIP in line with provisions in PR6?

Did the Bank ensure that the assessment process includes consideration of potential landscape level impacts, as well as impacts on the ecological integrity of the ecosystems, independent of their protection status and regardless of the degree of their disturbance or degradation?

PR8: Cultural Heritage

Did the Bank satisfy itself that the Client had identified any adverse impacts on cultural heritage, as well as assessed the likelihood of any chance finds; and in doing so it has consulted with relevant authorities, experts, local communities, and other stakeholders as appropriate?

Has the Bank ensured that the Client has developed appropriate measures for minimising and mitigating adverse impacts on the cultural heritage?

PR10: Information Disclosure and Stakeholder Engagement

Taking into consideration that the Project could result in potentially significant adverse future environmental and/or social impacts and was categorised A, did the Bank ensure that the Client identified the project’s stakeholders and design a plan for engaging with the stakeholders in a meaningful manner to take their views and concerns into consideration in planning, implementing, and operating the project in accordance with PR10? And aligned with relevant provisions in PR1 and PR5?

Did the Bank make reasonable efforts to confirm that the consultation process met not only the formal regulatory process in the country, but also the applicable requirements regarding: appropriate stakeholder identification; meaningful consultation; and relevant aspects of information disclosure in line with the relevant provisions of PR 10?

Compliance Review Methodology The compliance review will include the following activities:

a. a review of relevant project files (project documents, studies, minutes, emails, and other files as considered relevant by IPAM);

b. the conduct of a site visits to BiH

c. consultation, including interviews, with:

EBRD Management and staff Consultants involved in the Project. Requesters and other Project Affected People the Client. Officials from the relevant government regulatory agencies; and Any other Third Parties considered relevant by IPAM.

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d. the engagement of consultants or technical experts, as appropriate, to provide technical

inputs as required by IPAM, and

e. any other review or investigatory methods that IPAM considers appropriate in carrying out its work.

Collaboration with other Independent Accountability Mechanisms

IPAM has become aware of a similar process being currently handled by the Complaints Mechanism of the European Investment Bank. Coordinating efforts and exchanges of information as appropriate will be continued during the investigation.

Expertise

IPAM will require hiring experts to assist in some of the technical aspects of the compliance review. Additionally, it will engage translation and interpretation services to ensure that the processing of the Case allows Project-Affected-People to participate effectively and relevant Case documentation is accessible to them.

Time Frame

The Compliance Review will commence as soon as possible following the posting of the Compliance Assessment Report containing these Terms of Reference in the IPAM Case Registry on the EBRD website. Every effort will be made to ensure that the Compliance Review is conducted as expeditiously as circumstances permit, and it is intended that the Draft Compliance Review Report will be ready within 140 Business days of the publication of the Compliance Assessment Report. Should IPAM require an extension of this timeframe due to Covid-19 related impacts or case-specific circumstances, Parties will be promptly notified and the case registry updated to reflect the new deadlines.

A preliminary schedule of the main milestones to be delivered is presented below:

Activity Estimated Timeframe1 Conducting compliance review

26 April – 20 September 20212

Desk review Identification and compilation of relevant documents and studies.

(may involve translation to English), as well as identification of interviewees

Identification of relevant stakeholders for interviewing Consultations and interviews (virtual or in person as appropriate.

and in compliance with social distancing measures)

Site visit (subject to lifting of travel and quarantine restrictions and agreement of dates with relevant stakeholders)

July 2021 (tentative)

Draft Compliance Review Report IPAM will circulate the draft report for Comments.

Around mid-September 2021. Parties will have 10 business days to provide written comments to IPAM on the Draft Compliance Review Report by end of September 2021

Compliance Review Report (final version) If IPAM finds the Bank to be compliant, IPAM will submit the final

Compliance Review Report to the President and the Board for information and close the case.

Public disclosure and sharing of final Compliance Review Report with the Parties by end of October 2021.

If IPAM finds the Bank to be non-compliant, the Compliance Report will include recommendations to address the findings of non-compliance; as well as a Management Action Plan Monitoring to be initiated following the preparation and approval of the Management Action Plan

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Activity Estimated Timeframe1

Development of Management Action Plan Management shall prepare a Management Action Plan in response to the findings of non-compliance. It may also prepare a Management Response addressing the findings of the Compliance Review Report, if it deems appropriate.

30 business days from the date of receipt of the draft Compliance Review Report Submission of Draft Management Action Plan to IPAM – by end of October 2021

Circulation of Draft Management Action Plan to Requesters for comments on the draft MAP.

20 business days from the date of IPAM circulation. Submission of Requesters comments to IPAM – by end of November 2021

Finalisation of Compliance Review Report IPAM will finalise the Compliance Review Report once it has considered the Requesters’ comments on the draft Management Action Plan

10 business days from the date of receipt of comments Compliance Review Report finalisation and circulation to Management – by mid-December 2021

Finalisation of the Management Action Plan

15 business days from date receipt of both the final Compliance Review Report and Requesters’ comments Final Management Action Plan – end of January 2022

Submission of the Compliance Review documents to the EBRD Board of Directors IPAM will submit the final Compliance Review Report, the Management Action Plan, and Requesters’ Comments. The Management Action Plan is submitted to the Board for decision while the other documents relating to the finding of non-compliance will be submitted to the Board for information

Board decision on MAP - estimated end of February 2022 Public disclosure of Compliance Review Package including approved Management Action Plan – estimated March 2022 (if no revisions to MAP are requested by the Board)

1 Estimated deadlines for each activity and/or deliverable are calculated according to the Policy provided timeframes. 2 IPAM seeks to complete its investigation in a shorter timeframe than the one set in the Policy.

The proposed timelines may be revised due to external factors beyond the control of IPAM. Should this be the case, IPAM will notify the Parties and register in the Public Registry the revised timelines. Access to Information

In order to ensure timely completion of this compliance review, IPAM shall require from Bank Management full, unrestricted access to relevant Bank staff and files. All relevant Parties are encouraged to comply with requests from IPAM for obtaining access to sites, submission of written materials, provision of information and attendance at meetings. Any situations where the actions or lack of action by any Party hinders or delays the conduct of the Compliance Review may be referenced in the Compliance Review Report.

Access to, use and disclosure of any information gathered by IPAM during the Compliance Review process shall be subject to the Bank’s Access to Information Policy and any other applicable requirements to maintain sensitive commercial and/or other information confidential. IPAM will not release any document or information that has been provided on a confidential basis without the express written consent of the party who owns such document.