Compliance Advisor Ombudsman

Complaint
Aerovias del Continente Americano S.A. (Avianca) is a commercial airline based in Colombia providing air transportation services to domestic and international destinations.  Avianca plans to renew its fleet over the period 2008-2012 to reduce costs, improve efficiency and safety as well as provide better passenger service. The company has negotiated the purchase of 42 aircraft over this period to achieve these goals. The IFC will provide a $50 million corporate loan to the company and its subsidiaries to help finance the implementation of the company’s fleet renewal program.

In November 2011, a complaint was submitted to the CAO by the International Trade Union Confederation/Global Unions Washington Office with supported by the International Transport Workers’ Federation as well as the AFL-CIO Solidarity Center on behalf of three Colombian labor unions representing Avianca civil aviation and airline workers.

The complainants raise various concerns related to labor rights violations at Avianca, as well as violations surrounding the right of free association. The complaint also articulates issues regarding IFC’s due diligence on the project, particularly as it pertains to performance standards on labor and working conditions.   

CAO Action

The CAO found the complaint eligible for further assessment in December 2011 and a CAO Ombudsman team traveled to the field in February 2012 to meet with the relevant parties to discuss available options for addressing the issues raised in the complaint. 

During the assessment process, the CAO understood from the company that pursuing a dispute resolution process was not an option at this point in time. Given the voluntary nature of a dispute resolution process, the CAO Ombudsman team finalized its assessment report and concluded its involvement in the case. The assessment report is available at the below links in English and Spanish.

As per CAO's Operational Guidelines, the case was formally transferred to compliance for appraisal on June 19, 2012. An appraisal determines whether or not an audit of IFC’s role in the project is merited to provide assurance to the President and public that IFC is complying with relevant policies and procedures.

CAO completed the appraisal in January 2012. Having held discussions with the IFC team and reviewed relevant documentation, CAO has questions as to the extent of implementation of IFC’s policies and procedures, in particular requirements that IFC:

• make an informed judgment as to the likelihood that the investment would meet the requirements of the Performance Standards prior to financing new business activity (Sustainability Policy 2006, para 17); and

• take appropriate steps to supervise its Client’s disclosure obligations under Performance Standard (PS) 1.

At a more general level, CAO finds that this case demonstrates challenges in the assessment and supervision of PS2 risks that emerge from the nature of the relationships between an IFC client, its workers and the unions that represent them. Thus, in accordance with its Operational Guidelines, CAO will develop Terms of Reference for a compliance audit with regard to the following issues:

• whether IFC exercised due diligence in its review and supervision of the PS2 risks attached to the Project; and

• whether IFC policies, procedures and staffing structures provide a robust framework for the advancement of the objectives of PS2 in its clients.

Status
The Terms of Reference (TOR) for the audit are available under 'View Documents" below, along with CAO's appraisal report. Updates on the status of the compliance audit will be posted on this page.

Updated: April 24, 2013