NGO Recommendations on the EU Action Plan for Forest Law Enforcement, Governance and Trade (FLEGT)

Introduction

The undersigned NGOs welcome the European Commission’s FLEGT Action Plan as a first step in the fight against forest crime. The Action Plan rightly acknowledges the seriousness and complexity of the problem, and we specifically welcome the acknowledgement that the EU, as a major consumer of timber products, should direct demand towards only legally harvested timber. In addition we welcome the Commission’s recognition that law enforcement – without changing unjust laws[1] – can make the situation worse for forest peoples. This understanding is crucially important in the search for solutions that will work. We also welcome the Commission’s commitment to the goal of sustainable development and sustainable forest management.

However, there are some serious shortcomings in the Action Plan:

1. The Action Plan mentions only the need for “further research, in the absence of multilateral progress” into the feasibility of legislation to make it illegal to import illegally-sourced timber into the European Union. This is wholly inadequate and more far-reaching proposals are necessary. Companies and individuals can, and do, import massive quantities of illegally-logged timber into the European Union. This practice is perpetuated because it is currently legal, and no punitive action can be taken to stop it. It is essential therefore, that legislation is put in place that makes it illegal to import or sell any illegally-sourced timber or wood products. However, the failure to include such a provision in the EU Action Plan amounts to the EU's tacit support for illegal activities in timber producing countries, and the condoning of organised crime.
2. Although the Commission lists a number of different action points, none is sufficiently concrete to give clear guidance to member states. Furthermore, by listing ‘options’ alone, the Commission presents no clear strategy, which one would expect in an Action Plan. Therefore the Commission fails to ensure that these initiatives will adequately address forest crimes.
3. The Action Plan fails to fully acknowledge the global nature of the problem of illegal logging, which is occurring in accession countries (an estimated 50% in Estonia) and Canada, as much as in Russia and in many tropical countries.
4. No new funds are made available to implement the suggested actions. The only funds currently available are through the Tropical Forest Budget Line and Country Strategy Papers (if recipient countries agree).

Therefore we believe that the Council needs to instruct the European Commission to develop clear steps forward. We call on the Council to instruct the European Commission to develop a new Regulation that will:

• make it illegal to import illegally-sourced timber into the EU (see point 1.b below).
• provide the European Commission with a mandate to negotiate bilateral agreements to ensure legality in the trade of forest products that include licenses of legality based on a system of independently-monitored legality verification in the producer country. These agreements need to be fair and workable, include the participation of affected communities and respect human rights (see point 1.a below).

In addition to new legislation we believe that it is important for the Council to:

· ensure mandatory application of the best available environmental and social standards and procedures to European Export Credit Agencies in all their operations, and instruct the European Commission to develop and apply binding standards and procedures to the Cotonou Investment Facility;

· ensure all EU member states adapt their procurement policies to incorporate legality criteria as well as sustainability criteria for timber and wood products, and ensure that similar policies are introduced for Commission funded projects;

· instruct the European Commission to include illegal logging in the list of offences in the draft of the new Money Laundering Directive, to be agreed within the next three years, and shift the burden of proof so that banks have to report any activity they should consider suspicious based on the information they have available;

· ensure all member states implement the EU Money Laundering Directive in such a way that banks have to report on any activity they should consider suspicious and that all criminal activities are eligible;

· instruct the European Commission to include funds for the prevention of illegal logging under the programming of Country Strategy Papers;

· request the European Commission to develop concrete strategies to address illegal logging in accession countries and Russia.

Main issues identified

1. Promoting equitable and just solutions

The Action Plan rightly acknowledges the seriousness and complexity of the problem of illegal logging, and we specifically welcome the acknowledgement that the EU as a major consumer of timber products should direct demand towards only legally- and sustainably-harvested timber. In addition, we welcome the Commission’s recognition that law enforcement – without changing unjust laws[2] – can make the situation worse for forest peoples. Therefore the Action Plan stresses the need to address illegal logging without threatening the livelihoods of the most vulnerable people in society. This understanding is crucially important in the search for solutions that will work.

The European Union and the Commission will need to make a twofold response:

a. Bilateral agreements to ensure legality in the trade of forest products

The EU should negotiate a series of bilateral or regional agreements with as wide a range of timber-exporting countries as possible. The FLEGT Action Plan states that: “There will be some elements common to each agreement – notably that partner countries should have or be committed to developing credible legal and administrative structures and technical systems for the purpose of verifying the legality of wood production according to national law (page 13)”.

In order for fair and equitable bilateral agreements to be negotiated and enforced, the Council must instruct the European Commission, as part of the negotiation and implementation of bilateral agreements, to:

• ensure that all relevant law is consistent, enforceable and equitable; therefore it cannot discriminate against vulnerable, forest-dependent communities and should support sustainable forest-management practices. In practice, this will mean a review of existing forest laws as well as other national and traditional legislation (e.g. land tenure) that may impact on the forest sector and forest dependent communities;
• consult fairly and effectively with all non-state actors in producer countries (specifically local and indigenous peoples as well as local NGOs) and in the European Union during the negotiation of these agreements, and establish monitoring and complaints mechanisms for non-state actors within the framework of the agreements;
• bilateral agreements must also contribute to an environment where human rights are respected and good governance is applied. In some countries participation in negotiations may expose local stakeholders to the risk of human rights abuses. Where this is possible, the Commission should assess the risk and act accordingly, taking every opportunity to seek participation without endangering vulnerable stakeholders.
• build these agreements around establishing a license of legality based on a system of independently-monitored legality verification in the producer country as well as spot checks;
• agree with partner countries the amount of funds to be allocated for the implementation of these bilateral agreements in the review of Country Strategy Papers (EDF 9), due to take place during 2004.

The implementation of these agreements requires a new Regulation. Therefore the Council must provide the European Commission with the mandate to draft such legislation. This legislation will be best addressed under either art. 175 (environment) or art. 177 (development) of the Nice Treaty.

It is highly likely, however, that some producer countries will not wish to enter into such bilateral agreements with the EU. The Commission acknowledges this and states in the Action Plan that further research is needed to address this issue: ‘the Commission will therefore review options for and the impact of legislation to control imports of illegally harvested timber into the EU, and report back to the Council on this work during 2004’ (page 15).

b. Legislation to make it illegal to import illegally-sourced timber and wood products

As the Action Plan correctly points out: “In the EU there is currently no Community legislation prohibiting the import and marketing of timber or timber products produced in breach of the laws of the country of origin” (page 15). This fact, combined with the acknowledgement that not all countries will enter into bilateral agreements, has led NGOs to believe that new legislation is required that makes it illegal to import, export, transport, sell, receive, acquire, or purchase timber produced in violation of the laws of the country of origin. NGOs phrase it as ‘to make illegal the import of illegally-sourced forest products’.

We are therefore calling for legislation that would allow law enforcement and customs agencies to confiscate timber sourced in breach of the legislation of the producer country. This legislation would also allow law enforcement agencies to impose penalties against companies and individuals importing and selling illegally-sourced timber.

We are not suggesting a self-standing piece of legislation but instead recommend an additional article in the Regulation that the European Commission will anyhow draft to make their bilateral agreements possible.

2. Transparency:

Transparency is the most important weapon in the fight against corruption, and other fraudulent activities in the forest sector. In countries with poor forest law enforcement the FLEGT Action Plan proposes the use of independent, third-party monitors to enhance the credibility of systems to track and verify the legality of timber.

In order to determine what is illegal, it is essential to know first what is legal. The first step in controlling the international trade in illegally-sourced timber is the establishment of a system to identify legally-produced timber and timber products (see section 1). There are no insuperable technical obstacles to overcome; however any system is only as good as the people applying it. Therefore increasing transparency and eliminating corruption are major first hurdles to take before putting any system in place. The EU should contribute to increasing transparency by focusing on the following action points:

• The EU and other donors should make any assistance in the forest sectors of producing countries contingent on the publication of information.

• All legislation, rules and regulations, concession maps, expiry dates, details of concession companies, cutting licenses, ownership of sawmills and transport permits should be made fully accessible to all stakeholders including civil society.
• Relevant politicians and officials in consumer and producer countries should be required to disclose financial and familial links with the forestry industry, the military and the judiciary.
• Data on export and import of timber should be collected and exchanged more systematically between producer and consumer countries.

· The EU should introduce uniform trade statistics that facilitate analysis and increased transparency and harmonise custom codes for timber and timber products.

In order to verify the legality of the logging operations a number of initiatives in producer countries will need to strengthened and developed further:

• forestry services in producer countries will need to be strengthened. Besides administrative monitoring (e.g. control concession allocation, verify legality of transport documents, payment of taxes), the crucial activity to organise is the monitoring of field inspections in the logging operations and the sawmills, if necessary supported by teledetection (use of satellite images).

• in countries where the forestry service is weak and vulnerable to corruption, external expert assistance should be organised to ensure independent monitoring of the forestry sector in collaboration with local forestry services. Independent monitoring is equally needed to ensure that fines imposed on companies involved in illegal logging are in fact paid and end up in the public treasury.

• all findings of the forestry inspections have to be made public.

3. Conflict timber:

The Action Plan defines timber traded by armed forces and that funds armed conflict as conflict timber. An intense debate is currently taking place over how the trade in “conflict timber” could be made illegal under international law.

The EU could play a pro-active role in promoting this issue in the UN and other suitable forums, such as the G8. The EU should ensure that member states do not veto UN Security Council resolutions that refer to conflict timber issues for the sake of commercial and/or national political interests.

4. Policy reform:

The European Commission and its partner countries should in coordination with member state representatives set up consultative forums with non state actors (NGOs, indigenous peoples, local communities, trade unions and the private sector) in order to list and review all relevant legislation. This forum can be part of the bilateral agreement negotiations mentioned above.

Forest land tenure reform and access rights for local people can be key tools to reduce the control and misuse of forest resources by elite groups in developing countries. Links with the reform of justice systems and decentralisation processes are also relevant. Securing customary rights and common property regimes may be an effective means of promoting equity, ensuring respect for marginalised social groups, such as indigenous peoples and stimulating prudent management of forest resources.

Some countries’ national laws and constitutions, and some international laws and jurisprudence, recognise the local and indigenous peoples’ rights to their lands as inherent based on ‘aboriginal title’, ‘immemorial possession’ and customary use or occupation. However, practical recognition of these rights is often incomplete, leading to social and political marginalization, increased poverty and costly land conflicts. The European Commission and member states should foster mechanisms for guaranteeing indigenous peoples’ rights to their lands. These measures to secure the rights of indigenous peoples and local communities must be based on respect for customary laws and land tenure regimes. Capacity-building measures may be required to overcome entrenched prejudices in the national administration and to allow indigenous peoples to participate effectively in policy and legal reforms and programmes of implementation. Special attention should also be paid to transboundary issues where ethnic groups’ territories overlap national frontiers.

The Council should support the European Commission’s initiative to draft a Communication on land-policy guidelines and emphasise the importance of practical activities to be implemented by the Commission and member states.

5. Programming of aid:

Funding for initiatives on illegal logging must be addressed through the programming of aid to target countries, particularly through Country Strategy Papers (CSPs) and Regional Strategy Papers (RSPs). The mid-term reviews of CSPs and RSPs due to begin in mid-2004 are an important opportunity to ensure that appropriate allocations of funds are made available under CSPs and RSPs.

As part of the CSP and RSP mid-term reviews, we recommend that the Council requests:

• In addition to the mid-term review of the 9^th European Development Fund (EDF) CSPs and RSPs, all Asia, Latin American and TACIS CSPs and RSPs should not be left to the discretion of Asia and Latin America desk officers/heads of unit but must submit to a full mid-term review managed by the European Commission’s Interservice Quality Support Group (IQSG).

• The Commission must integrate a full environmental profile[3] into every Country and Regional Strategy Paper. These should clearly analyse the link between natural resources, poverty and sustainable development. In addition, a specific forest-sector analysis should be provided for all potential FLEGT partner countries.

• The Commission’s headquarters in Brussels should provide the delegations with an outline of the necessary information to be included in the forest profile with specific reference to addressing illegal logging. This would include guidelines for consultation with non-state actors in country.

• As requested in the Council Conclusions of November 2002, CSPs must include an analysis of the political, social, economic and cultural situation of indigenous peoples as well as an assessment of the impact of EU co-operation policies, programmes and projects on indigenous peoples. For the purpose of ensuring that FLEGT bilateral agreements do not undermine livelihoods of forest-dependent peoples, particular attention must be placed on their needs.

• In co-ordination with the member state donors present, the EC’s strategic response to the environmental and forest profiles should be presented in each CSP. This response must be accompanied by appropriate amendments to the financial allocations under the National and Regional Indicative Programmes.

• In addition to funding under the CSPs and RSPs, the Commission should review its proposal to drop funding for indigenous peoples under the Human Rights Budget Line programming as many indigenous peoples are dependent on forest resources and are vulnerable to illegal-logging operations.

• Priority regions are: Central Africa (this should include the Democratic Republic of Congo), Western Africa, Latin America[4], ASEAN and TACIS.

Furthermore the Development Working Group should provide advice on the role of Export Credit Agencies (ECAs), the European Investment Bank (EIB) and the Cotonou Investment Facility. Indeed these agencies provide financing and loans for the forest sector in producer countries. Furthermore, the EIB and Cotonou Invesstment Facility form part of EC development co-operation (see section 7).

6. The role of the private sector:

History has shown us that industry self-regulation will not work. We believe that the only remedy is to have new legislation in place that makes it illegal to import or sell any illegally-sourced timber or wood products. This will allow for enforcement officials to seize illegally-sourced timber and wood products and prosecute those that are trading in them.

There is no evidence to suggest that industry ‘codes of conduct’ have led to the elimination of or even reduction of the trade in illegally-sourced timber. Voluntary codes of conduct have also failed in other fields. The undersigned NGOs believe that voluntary initiatives cannot be presented as an alternative to agreed binding rules. Insufficient corporate control is one of the key reasons why illegal logging has continued in the last decade. Consequently, we believe that there is an urgent need for corporate social responsibility legislation.

7. Use of domestic EU policy instruments to tackle illegal logging:

a. Public procurement:

As major buyers of timber and wood products, governments and local authorities can positively influence the market for timber from legal and sustainable sources. A number of member states, including the UK, Denmark and Germany are developing procurement policies, all of which have to be in line with the EU Procurement Directives, which are currently in the process of being amended. EU procurement policies and government procurement policies should be used to give preference to legally-produced timber, guaranteeing a substantial share of the market. This would provide a powerful incentive to countries that are willing to implement bilateral agreements with the European Union.

• Member states should develop public procurement policies that only allow governments and local authorities to buy timber from ‘legal and sustainable’ sources.
• The Council should ensure that the new Directives on public procurement currently being adopted allow timber and wood products to be bought from ‘legal and sustainable sources’. The Council should therefore adopt the amendments made by the European Parliament in its second reading in July 2003, specifically to article 53, which allows the use of environmental and social criteria in the contract award phase.
• The Commission should immediately implement timber procurement policies for Commission-funded projects.

b. Money laundering:

In the FLEGT Action Plan, the European Commission undertakes to establish the extent to which existing member state legislation on money laundering is applicable to forest-sector crimes and disseminate this information to banks, financial institutions, financial crimes units and relevant NGOs in the European Union. The Commission also encourages member states to designate illegal logging as a crime for the purpose of EC Directive 97/2001 on money laundering. However, the Action Plan fails to point out that EU member states are committed to agreeing a third Directive within a further three years (due by 2006), which is likely to expand the scope of the legislation even further. It is hoped that the new Directive will increase the onus on banks, from ‘banks having to report any activities they consider to be suspicious’ to ‘banks having to report any activity that they should consider to be suspicious, given the information they have available’. Several member states have already adopted such text in their current legislation.

• Therefore the European Council should instruct the Commission to list illegal logging as an offence under the third Directive on money laundering and shift the burden of proof so that banks have to report any activity they should consider suspicious based on the information they have available, in the draft legislative proposal the European Commission will submit to the Council and Parliament. In turn, the Council must commit to adopting these amendments.

c. Export Credit Agencies (ECAs) the European Investment Bank (EIB) and the Cotonou Investment Facility:

Many EU-based ECAs and the EIB are providing financial support for companies and projects that are involved or implicated in illegal logging.[5] Unlike ECAs in the US and Japan, most European ECAs are not bound by any environmental or social standards and procedures. The European Commission’s Action Plan has rightly identified the need for European ECAs, the EIB and the Cotonou Investment Facility to abide by environmental and social standards and procedures. To ensure that this need is met, EU governments should:

· ensure that European ECAs and the EIB apply best available environmental, human rights and social standards and procedures[6] in all their operations;

· improve information disclosure practices of ECAs and the EIB on basic project information and on environmental, social and human rights impact assessments and economic analyses; and

• implement independent, third-party monitoring of projects to assess them against the above-mentioned standards and procedures, once in force.

Under the Cotonou Agreement with the African, Caribbean and Pacific (ACP) countries, the European Commission has set up the Cotonou Investment Facility to be managed by the EIB. The Investment Facility is a €2.2 billion rotating investment facility to finance projects in the ACP countries that have signed up to the Cotonou agreement. Therefore, the Council should instruct:

· the European Commission to develop and implement legally-binding environmental, social, human rights and information-disclosure standards and procedures for the Cotonou Investment Facility.

Signed by:

Sébastien Risso Chantal Marijnissen Frederic Castell Hilde Stroot,

Greenpeace EU Unit FERN Amis de la Terre, France Milieudefensie

Ed Matthew,

Friends of the Earth, EWNI

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[1] See FLEGT Action Plan points 4.1.1 Equitable and just Solutions and 4.1.5 Policy reform

[2] See FLEGT Action Plan points 4.1.1 Equitable and just Solutions and 4.1.5 Policy reform

[3] see SEC (2001) 609, Brussels, April 2001

[4] Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Mexico, Colombia, Ecuador, Bolivia, Peru, Venezuela, Argentina, Brazil, Uruguay, Paraguay and Chile.

[5] See FERN briefing sheet ‘Export Credits: Fuelling illegal logging, April 2002 available at: www.fern.org

[6] Key Reforms Needed for Export Credit Agencies January 2003 available at www.fern.org