FPIC in the Australian context: now and into the future

An increasing emphasis on the need for project proponents to secure free, prior and informed consent (FPIC) is impacting project developments on the traditional lands of Indigenous people around the world. 

In Australia, demands for the protection of the cultural heritage of First Nations people and recognition of their rights has increased expectations that FPIC will be incorporated into project planning, development, and lending and investment decisions.[1]

A failure to ensure FPIC has been obtained has the potential to result in significant legal, operational and reputational risks. The corollary is that early, effective and comprehensive operationalisation of FPIC principles will allow businesses to shield against these risks and gain first-mover advantage against competitors.

What is FPIC?

The principle of FPIC is derived from the right to self-determination and the right to be free from racial discrimination. Self-determination is a fundamental right of all people and is enshrined in article 1 of the International Covenant on Civil and Political Rights and article 1 of the International Covenant for Economic, Social and Cultural Rights. The realisation of this right in the context of Indigenous peoples was first reflected in specific United Nations instruments as early as 1957. These include the International Labour Organisation’s Indigenous and Tribal Populations Convention 1957 (No 107) (ILO Convention 107), replaced by the Indigenous and Tribal Peoples Convention 1989 (No 169) (ILO Convention 169) and most recently the United Nations Declaration on the Rights of Indigenous Peoples 2007 (UNDRIP).

In the early Conventions, the idea of free consent was important as an indication of respect shown to Indigenous peoples and in order to realise their rights and ensure their protection. UNDRIP explicitly refined the nature of consent to clarify the concepts of free, prior and informed (consent). In turn, this has led to an increase in advocacy on behalf of First Nations Peoples and attention to the application of FPIC around the world.

Elements of FPIC

FPIC has both procedural and substantive requirements, and is therefore best considered in an holistic way. However, it is nevertheless helpful to breakdown the component elements which make up FPIC:

• Free. Free means that consent should be provided free from coercion and manipulation, with sufficient time allowed for engagement in a culturally appropriate manner. Those from whom consent is sought should also be free to withhold consent.
  
  
• Prior. Prior means that consultation must begin, and consent must be provided, before any impact on the right to self-determination has occurred.
  
  
• Informed. Informed means that consent should be informed by accurate, timely, and sufficiently detailed information (in a manner that can be easily understood) to enable those giving consent to understand what they are consenting to and its impacts.
  
  
• Consent. Consent should be specific and obtained in accordance with culturally appropriate decision-making processes from the appropriate representative body or bodies. Consent must be ongoing, and modes of withdrawing consent should be built into the life of the engagement process with Indigenous peoples.

When is FPIC required?

When FPIC is required is an area of debate, as tensions between domestic legislation, international agreements and stakeholder expectations are exposed. Guidance can be taken from UNDRIP which requires FPIC to be achieved in at least the following circumstances:

• when relocating Indigenous peoples from their land (articles 10 and 28);
  
  
• when cultural, intellectual, religious and spiritual property is impacted (article 11);
  
  
• adopting and implementing legislative or administrative measures that may affect Indigenous peoples (article 19);
  
  
• in relation to the storage or disposal of hazardous materials on customary lands or territories (article 29); and
  
  
• prior to approval of any project affecting the lands or territories of Indigenous peoples (article 32).

For further discussion of the key principles of UNDRIP, listen to Episode 6 of our Essential ESG podcast.

There are several industry-based standards that seek to articulate both the content of FPIC and when FPIC is required by organisations in different sectors. However, these industry standards are not always well-aligned to UNDRIP. For example, some standards do not help organisations distinguish between the expectation of consent and the requirement for consultation, nor provide guidance on what to do where consent may not be provided. Others limit the need for consultation based on a qualitative assessment of the impact of a particular project (for example, only projects with “significant” impacts require FPIC).

FPIC in the Australian context – Stakeholder expectations and guidance

Australian domestic law does not currently require project proponents to achieve FPIC in accordance with the requirements of UNDRIP. However, a growing range of stakeholders including investors and financial institutions are expecting First Nations people to be consulted in respect of projects that impact them. Increasingly, they are looking for evidence that FPIC has been achieved. The recent Parliamentary Inquiry into the destruction of Juukan Gorge noted that legislative compliance alone may be insufficient to realise the rights of First Nations peoples.

Both the Australian Council of Superannuation Investors (ACSI) and the Responsible Investment Association of Australasia have released separate guidance on engaging with First Nations, setting the expectation that investors and investee companies commit to respecting First Nations peoples’ rights and cultural heritage in accordance with the United Nations Guiding Principles on Business and Human Rights and UNDRIP. For example, ACSI has noted that companies have a responsibility to respect the human rights and cultural heritage of communities impacted by their operations, and that increased costs from unconstructive relationships with First Nations peoples may represent a material investment risk.

The Australian Sustainable Finance Institute, whose membership includes some of Australia’s largest financial institutions, investors and insurers, has also recommended that financial institutions work to incorporate FPIC into decisions made by financial institutions, including reconsidering investment in projects or activities where that standard cannot be achieved.

FPIC in the Australian context – Legislative reform

Various inquiries and recommended regulatory reforms have considered how protection for First Nations people can be strengthened and FPIC adequately incorporated into Australian law.

Juukan Gorge inquiry findings and recommendations

In November 2022, the Labor Federal Government agreed to implement most of the recommendations in the final report of the Joint Standing Committee on Northern Australia into the destruction of Indigenous heritage sites at Juukan Gorge. The Commonwealth Government has committed to developing these new laws in partnership with First Nations people and detailed that they will be created ‘within the framework of [UNDRIP]’. The Government has expressly stated that FPIC will be considered as part of this co-design process. The Government has called the reform ‘urgent’ but a timeline for the co-design process and its outcome has not been released.

Inquiry into the Application of UNDRIP in Australia

The Senate is separately conducting an Inquiry into the Application of UNDRIP in Australia (UNDRIP Inquiry). Key stakeholder submissions have called for the Australian Government to review existing legislation for consistency with UNDRIP, while others have discussed the challenges of giving practical effect to FPIC.[2]

Submissions by the energy and natural resources sector have emphasised the need for greater clarity in Australian law surrounding the implementation of UNDRIP and application of FPIC, including calls for a definition of consent, the nature of an enduring consent, how consent can be given and demonstrated.[3]

During public hearings to the UNDRIP Inquiry on 10 March 2023, First Nations stakeholders called for the implementation of FPIC in Australian law as an integral part of achieving the right to self-determination of First Nations people. Several stakeholders noted the role of the Voice to Parliament in being a starting point for effective engagement and participation in decision-making.

• Constitutional Voice to Parliament and Executive. It is likely that if the referendum passes the proposed Voice, it may influence the implementation of FPIC in Australia. In particular, representations that the Voice will make to the Executive Government and Parliament will be central to ensuring that decisions take into account the views of First Nations people. In the event that the Voice referendum does not succeed, momentum in states and territories for state-based Voices such as that established in South Australia may continue and stakeholder representations to government there will increase.
  
  
• Environmental protection and biodiversity reforms. The Australian Government announced its Nature Positive Plan in December 2022, as part of broader reforms to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), to improve and expand the protection of biodiversity in Australia. A significant feature of the Nature Positive Plan is the prioritisation of First Nations peoples’ rights in environmental regulation. This includes development of a National Environment Standard for ‘First Nations Engagement and Participation in Decision-Making’ and introducing standalone cultural heritage legislation to replace the existing Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth). The National Environment Standard will aim to embed FPIC principles consistent with UNDRIP. It will also empower active participation in decision-making and greater consideration of First Nations land, freshwater and sea management knowledge, and create additional regulatory requirements for project proponents and investors to satisfy. 

FPIC in the Australian context – Litigation

The Federal Court’s recent decision in Tipakalippa v National Offshore Petroleum Safety and Environmental Management Authority (No 2) [2022] FCA 1121 and the Full Federal Court’s clarification of the requirements for consultation on appeal (Santos NA Barossa Pty Ltd v Tipakalippa [2022] FCAFC 193, the Full Court Decision) have also demonstrated a willingness of the courts to identify principles consistent with FPIC in legislated consultation processes. The Full Court Decision emphasised the need of the titleholder to:

• give each relevant person ‘sufficient information to allow [them]… to make an informed assessment of the possible consequences’ of the proposed activity on their ‘functions, interests or activities’;
  
  
• engage in ‘genuine’ consultation; and
  
  
• ‘adopt appropriate measures in response to the concerns conveyed to the titleholder’ during consultation.

While the Full Court Decision was limited to consideration of a single offshore gas project and the particular requirements of the relevant legislation, it is expected to have wide-reaching implications for significant offshore projects and onshore projects where the interests of First Nations people may be affected. For further information regarding the Full Court Decision and its potential implications, see our previous article Ensuring effective stakeholder consultation following Santos v Tipakalippa.

International developments

As in Australia, the implementation of UNDRIP and/or ILO Convention 169 in Canada, New Zealand, Nepal and other jurisdictions reflects a broader international trend towards integration of FPIC principles in domestic law.

FPIC issues are arising for companies overseas not just as a result of organisations developing projects that may impact the rights of Indigenous peoples, but also due to the investment decisions of organisations. Major project developers and investors with assets being developed or operated in the US, Canada, Nepal, Norway, Sweden, Ecuador and Cambodia, among others, have all faced pressure from stakeholders to recognise and respond to the rights of Indigenous peoples whose communities, lands and resources are impacted by various projects. For example, global insurer AXIS Capital announced in October 2022 that it would refuse to underwrite energy, mining and other projects undertaken by insureds on Indigenous lands that did not respect and observe the right to FPIC in accordance with UNDRIP.

Heightened stakeholder expectations are resulting in increased scrutiny of investors and financial institutions regarding whether they are implementing their environmental and social commitments when determining whether or not to invest in projects that may impact Indigenous peoples. For example, Indigenous communities in Nepal filed a complaint to the European Investment Bank’s (EIB) complaints mechanism, alleging that EIB’s investment in the 200 KV Marsyangdi Corridor transmission line was contrary to its recognition of FPIC in its environmental and social policies. EIB found that some of the complaints were ‘partly grounded’ and developed a ‘corrective environmental and social action plan’ to address the gaps in its policy implementation.

What can you do now to incorporate and operationalise FPIC?

In a fast-paced and changing environment, businesses should be reviewing and assessing the alignment of their organisational understanding and implementation of FPIC against UNDRIP. This will assist them to protect against project delays, litigation, and commercial and reputational risk. 

For further information about how to effectively incorporate and implement FPIC into your operations, please contact a member of our Responsible Business and ESG team.