CAO Cases

Arne Hoel, The World Bank

Europe & Central Asia

Armenia / Lydian Intl3-01/Gndevaz & Jermuk

Complainant
Members of Gndevaz and Jermuk villages and Local NGOs
Date Filed
April 16, 2014
Concerns
Water pollution, biodiversity, violation of national laws and PS
Case Status
Closed
 

Synopsis

Complaint 

In April 2014, a complaint was submitted to CAO by two residents of the Gndevaz and Jermuk villages in Armenia with support from nine NGOs with regard to IFC's investment in Lydian International Limited, a junior mining company sponsoring the exploration of the Amulsar gold project.

 

According to IFC, the project is at an advanced feasibility stage, subject to completion of a bankable feasibility study, and environmental and social impact studies. Subject to obtaining all outstanding permits, the project is expected to move into the development and construction stage, targeting first gold production in 2016. IFC is a 7.9% shareholder and has invested over $16 million in stages since 2007.

 

The complainants highlight concerns about project impacts on the local water basins' quality, red-listed species and a local tourism center. Other issues raised include criticisms of the EIA conducted and alleged violations of IFC’s Performance Standards and national regulations.

 

CAO Action

CAO found the complaint eligible for further assessment in April 2014. During the assessment, CAO held several informational sessions with the parties where clarity on CAO’s mandate, functions and services was provided. Ultimately, the complainants informed CAO that they believe their interests and those of the Armenian public would be best served by a compliance process. Hence, in accordance with CAO’s Operational Guidelines, the complaint has been referred to CAO’s Compliance function for appraisal of IFC’s environmental and social due diligence with regard to the project.

 

In April 2015, CAO completed a compliance appraisal with regard to the Lydian 01 complaint. On the basis of the compliance appraisal, CAO decided to conduct a compliance investigation into IFC's investment in Lydian International Ltd. In October 2015, the case was merged with the Lydian-02 complaint for the purpose of the compliance investigation.

 

The compliance investigation was released in August 2017.

 

The investigation found that IFC’s pre-investment review was not commensurate to risks associated with the mine’s exploration phase, and a more detailed E&S action plan would have been appropriate. However, an advance in IFC’s supervision of the project after 2013 resulted in a significant improvement in the client’s performance reflected in the development of an exploration phase Environmental and Social Management System, and an international standard Environmental and Social Impact Assessment (ESIA).

 

The investigation found shortcomings in IFC’s supervision of the assessment of impacts on local tourism in the spa town of Jermuk and impacts on the nearby community of Gndevaz. IFC’s supervision related to environmental issues, land acquisition, consultation and stakeholder engagement provided reasonable assurance of compliance with the IFC Performance Standards.

 

IFC released a public response to CAO’s investigation on July 19, 2017.

 

In October 2018, CAO released a monitoring and closure report regarding the two Lydian cases. Overall, CAO’s monitoring found that IFC’s response to CAO’s compliance investigation has only partially addressed the findings at systems-level and has not addressed the project-level findings. Nevertheless, CAO has decided to close the case considering that IFC has no ongoing investment in the company, and in light of IFC’s decision not to engage in a project-level response with its former client or the complainants.



 

Status

CAO released a compliance monitoring and closure report on October 5, 2018 which closes both the complaints to CAO regarding IFC’s investment in Lydian.

 

All documents pertaining to this case, including CAO's compliance appraisal, investigation, and monitoring reports, can be found via the "View Documents" link below. 

 

Status as of October 5, 2018

 

Project information

Institution
IFC
Project Name & Number
Lydian Inlt 3 27657
Department
Infrastructure
Company
Lydian International
Sector
Oil, Gas and Mining
Region
Europe & Central Asia
Country
Armenia
Environmental Category
B
Commitment
US$16 million in stages since 2007

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Transferred

Compliance

  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: Closed

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