In December 2018, I published on Just Security an essay entitled, “The Rising Challenge of Funding Victims’ Needs at the International Criminal Court.” I described the significant shortfalls in voluntary funding for the Trust Fund for Victims (TFV) of the International Criminal Court (ICC). The mandate of the TFV aims to provide the funds necessary to cover reparations awards by the ICC when it convicts defendants of atrocity crimes (genocide, crimes against humanity, war crimes, and aggression) and to provide assistance to victims of those crimes even before judgments are reached. I described in some detail how the TFV has fared in meeting the financial targets to fulfill its mandate, which is not very well. In 2018, as in previous years, the TFV fell far short of the funds it needed to raise in order to meet the demands of the ICC judges in their reparations awards and of the victims, who number in the tens of thousands for specific cases and in the millions for the atrocity situations being investigated by the ICC.

I had hoped to report, following the seventeenth annual meeting of the Assembly of States Parties (ASP) of the ICC and the latest meetings of the Board of Directors of the TFV, which were all held in The Hague in early December 2018, that prospects for generating the minimum level of funding needed for the TFV’s mandated requirements would look more promising. But the TFV ended 2018 with about €4 million raised from voluntary government contributions, an amount that is €6 million ($6.8 million) short of what was identified as necessary and sought for 2018, and so far, much-needed pledges for 2019 have been lodged by Finland and the Netherlands but total only €400,000. Japan paid in €50,000 in January 2019. The TFV’s administrative costs for 2019, which are covered by the ICC’s budget paid for with State Party assessments, will be €3.13 million. So in real terms the TFV is extracting from governments’ assessed payments for payroll and other administrative expenses an amount that almost equals what was raised last year from governments through voluntary fundraising to assist the victims.

Unfortunately, there is no force multiplier on the horizon to catapult voluntary fundraising for the TFV into the higher levels so desperately required in the near future. It is unclear whether it is fully appreciated that the aim of seeking out private sector funding for the TFV requires highly sophisticated approaches and special expertise about what corporations, foundations, and high net worth individuals expect today regarding their own engagement in such projects.

The ASP noted in a resolution on December 12, 2018, “the intention of the Trust Fund for Victims to raise €30 million in voluntary contributions and private donations by 2020, in order to implement reparations orders and assistance mandates to the benefit of victims in cases and situations before the Court…” The ASP’s only guidance for achieving this goal is to call “upon States, international and inter-governmental organizations, individuals, corporations and other entities to make voluntary contributions, in accordance with their financial ability, to the Trust Fund for Victims in order to broaden its resource base, improve the predictability of funding and maintain responsiveness to harm suffered by victims as well as to the Court’s judicial developments, and [the ASP] renews its appreciation to those that have done so…” There is nothing in these words that offers a long-term systematic strategy to improve the TFV’s fundraising efforts, which show little promise of meeting the ambitious target of €30 million by 2020.

But there is such a strategy that has been explored for several years and in close consultation with the TFV over the last year. Dr. Caroline Kaeb, who is Co-Director of the Business and Human Rights Pillar and a Senior Fellow at the Carol and Lawrence Zicklin Center for Business Ethics Research at The Wharton School, University of Pennsylvania, and I have been examining options for an essentially self-financing mechanism to raise the necessary annual funds to meet the TFV’s objectives for the next 20 years and beyond. We have been guided by expert investment advisers and law firms, all working pro bono for the cause.  Many foundations have shown a strong belief in the project and have recognized the critical needs for the scaling of funds for the TFV. We based our recommendations on existing, successful models in other areas.

The concept, briefly, is to offer pre-qualified investors an opportunity to invest in a social bond that would be guaranteed by several States Parties of the ICC that rank as Category A, AA, or AAA sovereign risk governments. The interest rate on the bond would be discounted, as is common with social bonds, and the principal of the bond would be invested by a supervised management team to achieve an annual rate of return sufficient to cover the interest obligation payable to the investors, the fixed percentage management fee, and, importantly, the victim needs that must be met by the TFV (estimated currently at about €10 million per year).

Social bonds typically aim at improving social outcomes, resulting in public sector savings, in such areas as education, health, affordable housing, access to essential services, employment generation, food security, affordable basic infrastructure, and economic stabilization. The concept draws from the experience of similar financial instruments. For example, municipal bonds, backed by the full faith and credit of governments, are actually long-standing examples of social bonds typically designed for infrastructure projects. Economic stabilization bonds include a European Financial Stability Facility that temporarily helped safeguard financial stability in Europe, guaranteed by 13 Euro area member states; a European Stability Mechanism to permanently safeguard financial stability in Europe, guaranteed by 19 Euro area member states; and a European Investment Bank sustainability awareness bond to provide finance and expertise for sound and sustainable investment projects to further EU policy objectives, guaranteed by the 28 member states of the EU.

Examples of recent social bonds backed by paid-in and callable capital from member state governments include the Council of Europe’s bond for social housing for low-income populations, education and vocational training, and support to small and medium-sized enterprises for the creation of jobs and the International Finance Corporation’s bond for investments in companies that engage directly with smallholder farmers, provide utilities for low-income households, and offer affordable health services, education or housing to low-income households. The Instituto de Credito Oficial’s bond, guaranteed by the Spanish Government, extends credit to small, medium or micro enterprises to spur employment creation or retention in specific economically underperforming regions of Spain.

One of the most exciting examples of a social bond recently has been a $300 million vaccine bond with a three-year term issued by the International Finance Facility for Immunization Company (IFFIm). It gave investors a very worthy objective: funding immunization programs by Gavi, the Vaccine Alliance. This program protects millions of children from preventable diseases in some of the world’s poorest countries. The bond accelerated the availability of much-needed funds to distribute vaccines quickly while several governments pledged, with callable capital raised pursuant to annual legislative authorizations, to repay the bond investors at a later date. The vaccine bond sold on the market within a half day, and was oversubscribed.

This shows that (1) there is appetite in the market for social bonds pursuing worthy social objectives, and (2) that governments have a track record of backing such bonds whether through paid-in capital, callable capital, or a guarantee. Good practices developed for social bonds can also be applied to a bond concept for the benefit of victims of atrocity crimes.

The increasingly antiquated model of relying solely or largely on voluntary fundraising from governments for the critical needs of the victims of atrocity crimes could be overtaken by the first-ever social bond for international justice. In this case, the bond would function in essence like an endowment being prudently managed by an investment team that would reinvest the funds in largely passive investments in the same manner, for example, that university endowments manage their funds.

A possible alternative, of course, could be outright pledges by governments, private sector philanthropists, and foundations for an endowment established to assist the TFV. This option would require significant full-time staffing capabilities and new partnerships to raise the amount of funds (€1 billion) soon enough to achieve the rate of return needed each year to fund the needs of the victims identified by the TFV. So far, the most that has been raised voluntarily from governments during the life of the TFV is on average about €2.7 million a year. We have been told by our investment advisers that a social bond could attract €1 billion speedily from pre-qualified investors (namely, institutions and individuals pre-screened as credible investors) who would find very attractive a fixed long-term interest rate guaranteed by Category AAA, AA, and/or A governments. In that sense, the ICC’s most valuable asset is that ten of its States Parties are in Category AAA, ten are in Category AA, and nine are in Category A. All continents are represented in this club of 29.

We consulted with 20 States Parties of the ICC (all but one from the 29 governments with category A, AA, or AAA sovereign risk rating), and a good number on multiple occasions, and several times with a European Union official and a Member of the European Parliament about this concept. We have been greatly encouraged by the positive reception we received from key governments and EU officials and their hope that the initiative for a self-financing mechanism continue to be seriously explored, including with them. It is worth noting that any other State Party to the ICC or even non-party State, as well as multilateral organizations—as part of their development aid—could become a pre-qualified investor in the bond and thus take part in the initiative short of being part of a guarantee. This concept has been raised in our consultations as a feasible option and merits more examination. Further consultations about a self-financing structure for victims of atrocity crimes (even in non-ICC situations) are planned with the World Bank, International Finance Corporation, and European Council Development Bank, among other institutions.

We also met with ICC and TFV officials over the last 18 months to fully brief them and elicit their advice. The TFV Board of Directors approved our continuing to explore the concept during their May 2018 meeting. Yet the newly constituted Board of Directors of the TFV in early December terminated further exploration of the proposal, apparently bowing to the cautious and narrow views of the ICC’s Committee on Budget and Finance and a couple of governments about the innovative character of the endeavor. The outgoing Board of Directors, shortly beforehand, had decided to “suspend” the bond initiative because the “lack of appropriate financial resources is preventing continuation of the exploration.”

This turn of events is very troubling, particularly for the victims who deserve full payment of reparation awards and the assistance that they so desperately need in the aftermath of atrocities. Such a monumental challenge can be met, but it requires long-range strategic planning and exploration of new and systemic forms of financing. The current methodology is unsustainable and yet the leadership of the TFV and the ICC, as well as the ASP, appear committed to sputtering along with conventional means of fundraising paired with a seemingly half-hearted attempt at private-fundraising compared to other international efforts. In contrast, the Office of the U.N. High Commissioner for Refugees is implementing a $1 billion “Private Sector Fundraising Strategy for 2018-2025” that invites far bolder strategizing for the sake of refugees, who so often are the victims of atrocity crimes. UNHCR has put bold and systematic thinking and resources behind its fundraising efforts by building up its development team, which will help UNHCR to achieve its goals.

Victim participation in international justice was a novel concept in the negotiations leading up to the Rome Conference in June and July 1998, and it prevailed. Now we have reached a stage where there needs to be the same innovative spirit in how the TFV actually delivers on its mandate for the victims.

Such a systemic mechanism would remove funding for the victims from the “political headwinds” confronting the ICC, which are considerable. ICC judges are deeply concerned about how their reparations awards in fact will be enforced without being crippled by limited availability of funds. What would the victims have to say about such a lost opportunity to compensate and assist them?

I firmly believe that a self-financing mechanism—such as a social bond or alternatively an endowment structure—that can help victim populations globally should be fully explored. While well-intentioned governments operating on tight budgets and straining under the demands of so many humanitarian causes requiring voluntary contributions will continue to pitch in with what they can, that simply will not be enough. There is no way around the problem, other than a vehicle like a self-financing mechanism, for the sake of international justice and the victims whose needs are dire.

There remains a critical need to embrace innovative thinking in order to generate revenue for humanitarian causes and international justice that cannot and will not be fully met using traditional voluntary fundraising methods. We are committed to exploring the potential of an investment model tailored for victim populations and their critical needs in an increasingly chaotic, authoritarian, and still violent world.


Photo: Amer Almohibany/AFP/Getty Images