Memorandum submitted by the Corner House
1. The Corner House is a non-governmental
organization that focuses on environment, development and human
rights. It has a track record on policy research and analysis
on overseas corruption and on corporate accountability.
2. The Corner House welcomes the International
Development Committee's inquiry into "Cross-departmental
Working on Development and Trade".[1]
This submission addresses two main areas on which the Committee
has sought views from organisations with relevant expertise and
experience, namely:
— Progress in implementing the OECD
Guidelines for Multinational Enterprises.
— The OECD review of UK implementation
of the anti-bribery convention.
THE OECD GUIDELINES
FOR MULTINATIONAL
ENTERPRISES
3. The Government has repeatedly signalled
the high priority its gives to the OECD Guidelines for Multinational
Enterprises[2],
describing them as "integral" to its policy on corporate
social responsibility. [3]Although
the Guidelines are voluntary, the Government nonetheless states
that its "expects companies operating in the UK, and UK companies
investing overseas, to act in accordance with the principles set
out in the Guidelines and to perform to at least the standards
they suggest." [4]
4. The Guidelines were first agreed in 1976.
In 2000 (the most recent revision) it was agreed that all OECD
member states would set up a National Contact Point (NCP) "to
promote the Guidelines and to contribute to the resolution of
issues arising from their implementation".[5]
Under the 2000 revisions, Non-Governmental Organisations (NGOs)
and others were granted the right to submit complaints against
OECD-based companies. The complaints are handled by the NCP of
the companies' home government.
5. The implementation of the Guidelines
in the UK has been subject to repeated criticism by parliamentary
bodies and by NGOs. In its 2006 Report on Conflict and Development,
the International Development Committee itself stated: "There
is a serious deficiency in the manner in which the Government
approaches the actions of UK companies abroad ... The Government
does not send out a strong message to UK companies about the significance
it attaches to OECD Guidelines. The Government needs to demonstrate
that it takes the OECD guidelines seriously, in practice as well
as in theory, by drawing up practical measures to ensure their
implementation."
6. In response, the Government assured the
Committee that steps had been taken—following a public consultation
in 2005—to "revamp" the office of the UK NCP in
order to ensure better handling of complaints. These changes included
"the expansion of the NCP to include officials from DFID
and FCO as well as DTI, and the establishment of a Cross-Government
Steering Board to oversee the work of the NCP". This Board
includes independent members drawn from outside Government.
7. Announcing the changes, the then Minister
of State for Trade, Investment and Foreign Affairs, The Rt Hon
Ian McCartney, stated: "The Government wants the new NCP
to work with businesses, employees and other parties to deal with
issues raised under the Guidelines. I believe that this approach,
allied with the changes set out in the Government's response,
will deliver a more open and transparent system in which all organisations
can put their faith in encouraging responsible business activities
overseas" (emphasis added). [6]
8. On paper, the changes made to the
NCP are to be welcomed—and broadly align with recommendations
made by the non-governmental sector. In practice, however, the
NCP's handling of Complaints continues to be dogged by bias, delays
and a failure to adhere to stated procedures.
9. The recent history of a four-and-half-year-old
Complaint jointly submitted by The Corner House, Friends of the
Earth (England, Wales and Northern Ireland), Kurdish Human Rights
Project, PLATFORM and Milieudefensie against BP over its Baku-Tbilisi-Ceyhan
(BTC) oil pipeline[7]
is illustrative.
10. Annex 1 sets out a detailed chronology
of the Complaint from the dialogue phase to the present. In brief:
— The Complaint was submitted in April
2003.
— In September 2005, the NCP undertook
an "information gathering mission" to the region, confirming
a range of problems at the community level.
— This was followed in November 2005
by a dialogue session with BP. Although all parties agreed to
pursue further dialogue, the company unilaterally disengaged from
the process, instead supplying the NCP with a report, alleged
based on visits to the villagers in November 2005, which purported
to document how the issues complained had been resolved. The report
was withheld, at BP's request, from the Complainants.
— In December 2005, the Complainants
provided the NCP with written evidence that BP had not visited
the villages concerned and that the issues complained of remained
unaddressed. Further evidence to the same effect, including videoed
statements by villagers, was made available to the NCP in January
2007.
— In September 2006, the new institutional
procedures for handling complainants were introduced by the Government.
— In December 2006, the NCP sent Corner
House a draft of the NCP's proposed statement on the case, requesting
"comments of a factual nature". In response The Corner
House identified 28 factual errors. In addition, The Corner House
also raised procedural concerns relating, in particular, to the
unfairness of the NCP's reliance on the undisclosed and contested
BP report to exonerate the company.
— In January 2007, the NCP assured
The Corner House in writing that the Complainants would be shown
the next draft of the Statement and "advised of the reason
why any comments have not been incorporated therein".
— In August 2007, the NCP issued its
Final Statement.
11. The NCP's Final Statement on the
BTC Complaint strongly suggests that the lessons identified in
the Government's 2005 Consultation on the Guidelines have yet
to be learned. In particular, the NCP has conspicuously failed
to adhere to basic standards of fairness and has simply disregarded
commitments made to the Complainants with respect to procedure.
12. The Complainants were not shown a draft
of the Final Statement, contrary to the NCP's written undertaking,
nor was any explanation been given by the NCP as to why the bulk
of the Complainants' comments on the first public draft had not
been incorporated.
13. The Statement relies almost exclusively
on BP's withheld report to exonerate the company. The Corner House
hold that, as a matter of basic fairness, the complainants should
have been given the opportunity to see and comment on this important
report before the final statement was published. It was wholly
unfair to give BP the opportunity to comment on the complainants'
representations, but not to extend the same duty of fairness to
the complainants.
14. Although a redacted version of the BP
report, which had not previously been shown to the Complainants,
is annexed to the Final Statement, the documentary evidence supplied
by the Complainants, which disputes BP's claims, is not included.
15. Although the Government has undertaken
that the NCP will "justify its decisions and any recommendations
that it makes",[8]
the Final Statement in the BTC case offers neither an attempt
at a proper analysis of the facts nor any serious justification
for the conclusions reached.
16. The Complainants have now appealed to
the Steering Board on procedural grounds.
17. The Corner House considers that
the NCP has conducted itself throughout the Specific Instance
process with conspicuous unfairness, favouring the commercial
organisations involved at every stage. The consultation with the
complainants has been one-sided, limited and partial, and wholly
fails to meet basic standards of fairness or natural justice.
Moreover, this bias and procedural laxity has continued despite
the introduction of the new handling procedures in 2006.
18. It remains to be seen whether the Steering
Board is in a position to offer Complainants redress in circumstances
where the NCP has acted unfairly. It is not known, for example,
whether the Steering Committee has the powers to direct the NCP
to reassess the Complaint, should the Complainants' appeal be
upheld.
19. In The Corner House's view, the handling
of the BTC Complaint casts grave doubts over whether the institutional
reforms made to the NCP are sufficient to ensure the fair handling
of Complaints. Indeed, whilst the NCP remains housed within the
Department for Business, Enterprise and Regulatory Reform (previously
the Department for Trade and Industry), there will always be institutional
pressures that militate against Complainants receiving a fair
hearing.
20. Given the importance of the Guidelines
as an (albeit weak) mechanism for holding corporations to account,
The Corner House would recommend that the NCP is reconstituted
as an independent body.
THE OECD REVIEW
OF UK IMPLEMENTATION
OF THE
ANTI-BRIBERY
CONVENTION
21. In its 2006 White Paper on International
Development, the Government states: "The UK is committed
to tackling corruption, bribery and money laundering. This includes
making sure that we rigorously enforce relevant UK laws so that
people who pay bribes are prosecuted ..." [9]
22. Recent events, notably the decision
in December 2006 to terminate the Serious Fraud Office's investigation
into alleged corruption by BAE in its dealings with Saudi Arabia,
have thrown into question the UK's commitment to tackling corruption
by UK companies. Indeed, the response of the Government to
the international furore that followed the SFO decision strongly
suggests that the UK's anti-bribery policy is nothing short of
a shambles—legally, institutionally and politically.
Significantly, that the government's appointed "Corruption
Tsar" was not even consulted on the BAE decision.
23. Current international standards relating
to combating bribery in international trade are set out in two
OECD instruments: the OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions
(the "OECD Anti-bribery Convention"[10])
and the 1997 Revised Recommendation[11].
Parties are monitored against their implementation of both the
Convention and the 1997 Revised Recommendation, using the OECD
peer review process.
24. The UK signed the OECD Anti-Bribery
Convention in 1997 and ratified it a year later. Since then, the
OECD has conducted three peer reviews—in 1999, 2003, 2005.
Following concerns expressed by the OECD Working Group on Bribery
over the BAE decision, as well as the UK's failure to implement
key recommendations arising from the 2005 review, a further review
is planned before March 2008.
25. Each of the evaluations undertaken to
date by the OECD has expressed grave reservations over whether
the UK is fully compliant with the OECD Convention. In response,
the UK Government has repeatedly stated that the concerns raised
by the OECD have been addressed or are in the process of being
addressed.
26. These assurances have been cast
into severe doubt by Government statements and actions since the
termination of the BAE-Saudi investigation. Indeed, it is now
clear that the Government has misled the OECD—and Parliament—as
to the extent of its compliance with the Convention. For example:
27. Agent-Principal Defence
The OECD Working Group on Bribery expressed
concern in 2005 that, under UK law, corruption is conceived "as
the suborning of the agent to the detriment of the principal".
So if a bribe to an official (the "agent") is sanctioned
by the official's superiors (his or her "principal"),
no offence is held to have been committed.
In response, the Government assured the OECD
Working Group on Bribery that a defence based on the consent of
the principal to the agent receiving the bribe "has no basis
in current UK law" and would not apply in foreign bribery
cases. [12]
Yet, in justifying the decision to terminate
the BAE-Saudi investigation, both Lord Goldsmith[13],
the then Attorney-General, and Mr Robert Wardle[14],
the Director of the Serious Fraud Office, stated that the "agent-principal"
issue—supposedly no longer a defence under UK law—posed
a major obstacle to bring any successful prosecution.
28. Article 5 and the SFO Decision to
Terminate the BAE-Saudi Investigation
Article 5 of the OECD Anti-Bribery expressly
forbids the termination of corruption investigations on grounds
other than the merits of the case. Signatory governments specifically
undertake not to be influenced "by the potential effect [of
an investigation] upon relations with another State ..."
In response to concern raised by the OECD Working
Group on Bribery, the UK Government gave a categorical assurance
that "none of the considerations prohibited by Article 5
would be taken into account as public interest factors not to
prosecute".[15]
Despite this assurance, the SFO's decision to
terminate the BAE-Saudi investigation was based on the grounds
that clearly breach Article 5—namely that continuing the
corruption investigation would damage relations with Saudi Arabia.
Such a breakdown in relations, argued the SFO, could result in
the Saudis withdrawing security cooperation and hence constituted
a threat to the UK's national security.
The Corner House and Campaign Against Arms Trade
are currently seeking a judicial review of the SFO decision.
29. Claims as to Non-Justiciability
of Article 5 in the UK
The Government has repeatedly stated that it
will comply with the OECD Convention when considering prosecution
of corruption cases involving bribery of foreign officials. In
the BAE-Saudi case, the SFO was explicit that considerations arising
from Article 5 had been taken into account.
Such statements have a considerable legal significance,
since it is a well-established principle of English public law
that where a public body announces that it will comply with an
international law obligation when making a decision, or that it
has taken into account such obligations when taking its decision,
the international law obligations—specifically, in the BAE-Saudi
case, Article 5 of the OECD Anti-Bribery Convention—are
justiciable in the UK. [16]
Yet in its response to The Corner House/CAAT
judicial review claim on the BAE-Saudi decision, the Government
denies categorically that Article 5 of the Convention is justiciable
in the UK. [17]
30. Willingness to Ignore the Convention
The SFO and the Attorney General have stated
that, in deciding to terminate the BAE-Saudi investigation, they
had regard "at all times ... to the requirements of the OECD
Anti-Bribery Convention".[18]
Yet in response to The Corner House/CAAT judicial
review challenge, the UK Government states that, far from considering
itself bound by the requirements of the Convention, it was prepared
to break the Convention entirely in order to terminate the inquiry:
"It is true that the Director [of the SFO]
considered, and remains of the view, that his decision to discontinue
the investigation did not put the UK in breach of its international
obligation [under the OECD Convention] ... But this was not for
him a critical or decisive matter: the threat to national and
international security was such that, even if consideration of
those matters had been contrary to that provision, he considered
them to be of such compelling weight that he would still have
taken the same decision." [19]
31. Mutual Legal Assistance
Article 9 of the OECD Convention requires parties
to act "promptly" and "without delay" when
a request for Mutual Legal Assistance (MLA) is received.
The UK's compliance with this Article is in
doubt. According to a recent report in the Guardian, [20]it
would appear that the Home Office is failing to co-operate with
the US Department of Justice requests for information relating
to the BAE-Saudi Arabia corruption allegations.
32. The Corner House has written to the
OECD Working Group on Bribery, drawing its attention to a number
of the above discrepencies. It remains to be seen whether they
will form part of the OECD Working Group's 2008 review.
33. The Corner House views the Government's
actions over the BAE-Saudi investigation as clear evidence not
just of a lack of political will to tackle alleged corruption
by UK companies operating abroad but, perhaps more worryingly,
of immense political will to turn a blind eye to such corruption,
placing the interests of the company above the UK's international
law obligations. Indeed, there is a high risk that the UK's actions
could fatally undermine the OECD Convention itself.
34. Within this context, the restructuring
of responsibility for trade policy between DfID and and the Department
of Business, Enterprise and Regulatory Reform (DBERR) carries
a high risk that anti-corruption concerns will be still further
marginalised. Whilst, in theory, the "merger" may
give DfID, which has a strong record of concern over corruption,
a stronger voice within trade policy, the likelihood is that the
DBERR, with its mandate to promote UK companies, will prove the
senior partner, to the detriment (on past experience) of the international
fight against corruption.
22 September 2007
Annex 1
CHRONOLOGY OF CLOSING STAGES OF BTC SPECIFIC
INSTANCE
In November 2005, following an "information
gathering mission" by the NCP to the region, a dialogue meeting
was held with BP. Although it was agreed that a follow up meeting
would be arranged, BP withdrew unilaterally. BP also undertook
to look into complaints made to the NCP by villagers he had visited
and to report back to the parties. BP subsequently refused to
disclose its report to the Complainants.
Although BP claimed that it had investigated
the complaints made to the NCP, Complainants provided the NCP
with written evidence in December 2005 that BP had not visited
the villages concerned and that the issues complained of remained
unaddressed. Further evidence to the same effect was provided
to the NCP in January 2007.
On 22 December 2006, the NCP sent Corner House,
as lead NGO for the Complainants, a draft of the NCP's proposed
statement on the case, requesting "comments of a factual
nature" by 12 January 2007, later extended by mutual agreement
to 30 January 2007.
Subsequently, on:
| 4 January 2007 | Corner House requested clarification as to the procedures that would be followed prior to publication of the Final Statement. Specifically, it asked the NCP: "Will the Complainants be shown the next draft of the Statement to ensure that their comments have been taken into account before it is issued? And will the NCP respond with reasons where comments have not been taken into account?"
|
11 January 2007 | The NCP replied to Corner House's email of 4 January, stating, "I can also confirm that the answer is yes to your two earlier questions—You will be shown the next draft of the statement and also be advised of the reason why any comments have not been incorporated therein."
|
29 January 2007 | Corner House submitted, on behalf of the Complainants, a response to the draft Statement, identifying 28 factual errors.
Corner House also raised procedural concerns relating, in particular, to the NCP's reliance on the undisclosed and contested BP report to exonerate the company. The Corner House argued that relying on an undisclosed and contested report violated the principle of fairness to which the NCP process was officially committed.
Further evidence was supplied denying that BP had visited the villagers during the period when the report was written—and confirming that numerous problems remained unresolved. Video statements by the villagers were also recorded. The Complainants also made available video testimonies by the villagers but failed to avail himself of these.
|
31 January 2007 | After receiving an earlier (October 2006) draft of the Statement, released under FOIA, Corner House submitted further comments on the current December 2006 Draft, highlighting further factual errors.
|
14 March 2007 | The NCP sends a partial response to the comments submitted by Corner House on 29 January 2007. The NCP states: "I can confirm that your submission is being carefully examined. However, I thought it would be helpful to provide you with the response of the NCP to some of the alleged factual misrepresentations that are the subject of the third section of your submission."
No comments were offered on other concerns raised by Corner House.
The NCP:
— Acknowledged that a number of questions and issues remain "unresolved" and proposed a further dialogue meeting with BP.
— Confirmed that the issue of project standards (do they or do they not conform to EU standards, as claimed by BP?) was "currently under investigation".
— Confirmed that BP had been asked for "an update on a number of outstanding issues in respect of villager complaints in Turkey".
Despite acknowledging that there were unresolved issues and that further reports and investigations were being undertaken, the NCP never informed The Corner House of their outcome.
|
31 March 2007 | Corner House responded to the NCP's letter of 14 March 2007, again pointing to factual errors in his comments, some (but by no means all) of which were subsequently corrected in the Final Statement.
Corner House noted that no reply had yet been received to the procedural and other factual issues raised in its letters of 29 and 31 January 2007.
|
4 April 2007 | The NCP acknowledged Corner House's letter of 31 March 2007 and stated "I will reply substantively as soon as possible".
|
There was no further contact from the NCP until the UK National
Contact Point for the Guidelines (the NCP) wrote to The Corner
House on 15 August 2007 (received 20 August 2007), enclosing the
final statement on the Complaint, including (as an Annex) a redacted
version of the previously undisclosed and contested report by
BP.
The Statement and the Annex have both been posted by the
NCP on the Government's Society and Business website—http://www.societyandbusiness.gov.uk/oecddoc/N0000M4A.doc.
1
International Development Committee, Press Notice 52, Session
2006-07, http://www.parliament.uk/parliamentary_committees/international_development/ind0607pn52.cfm Back
2
The Guidelines are a set of "recommendations addressed by
governments to multinational enterprises operating in or from
adhering countries". They provide "voluntary principles
and standards for responsible business conduct in a variety of
areas including employment and industrial relations, human rights,
environment, information disclosure, combating bribery, consumer
interests, science and technology, competition, and taxation".
The Guidelines were first agreed in 1976. In 2000 (the most recent
revision) it was agreed that all OECD member states would set
up a National Contact Point "to promote the Guidelines and
to contribute to the resolution of issues arising from their implementation".
Under the 2000 revisions, NGOs and others were granted the right
to submit complaints against OECD-based companies. The complaints
are handled by the NCP of the companies' home government. Back
3
UK National Contact Point Information Booklet, http://www.societyandbusiness.gov.uk/oecddoc/UKNCPbookletdocD.pdf,
p.7. When Chancellor of the Exchequer, the current Prime Minister
Gordon Brown, stated: "Where multinationals are unaccountable
across boundaries-and sometimes appear more powerful than the
developing countries in which they operate-businesses and government
must do more to restore the right balance, increase stakeholder
awareness and achieve cross border accountability ... I urge more
companies to follow the principles of good corporate practice
laid out in the OECD's guidelines for multinational enterprises"
(Gordon Brown, speech at the September 2002 Commonwealth Finance
Ministers Meeting). Back
4
UK National Contact Point Information Booklet, http://www.societyandbusiness.gov.uk/oecddoc/UKNCPbookletdocD.pdf,
p.7. Back
5
Department for Business, Enterprise and Regulatory Reform, "OECD
Guidelines for Multinational Enterprises", http://www.dti.gov.uk/europeandtrade/trade-policy/oecd-multinat-guidelines/page10203.html. Back
6
Written Ministerial Statement, Minister of State for Trade, Investment
and Foreign Affairs, The Rt Hon Ian McCartney, "OECD Guidelines
for Multinational Enterprises", 13 July 2006, http://www.societyandbusiness.gov.uk/oecddoc/Ifile32039.doc. Back
7
The Complaint is available at http://www.baku.org.uk/publications/oecd_complaint_final_uk.doc.
The Complaint held that the BTC Consortium, of which BP is a part,
had: exerted undue influence on the regulatory framework; sought
or accepted exemptions related to social, labour, tax and environmental
laws; failed to operate in a manner contributing to the wider
goals of sustainable development; failed to adequately consult
with project-affected communities on pertinent matters; and undermined
the host governments' ability to mitigate serious threats to the
environment, human health and safety. Back
8
"Government Response to the Consultation of the National
Contact Point's Promotion and Implementation of the OECD Guidelines
for Multinational Enterprises", http://www.societyandbusiness.gov.uk/oecddoc/Hfile32038.pdf,
paragraph 57. Back
9
Department for International Development, "World Poverty:
Making Governance work for the Poor, 2006", paragraph 3.12,
p.33, available at http://www.dfid.gov.uk/wp2006/whitepaper-printer-friendly.pdf. Back
10
OECD, "Anti-bribery Convention", available at http://www.oecd.org/document/21/0,2340,en_2649_34859_2017813_1_1_1_1,00.html Back
11
1997 Revised Recommendation of the Council on Combating Bribery
in International Business Transactions, available at: http://www.oecd.org/document/32/0,2340,en_2649_34855_2048160_1_1_1_1,00.html. Back
12
See OECD's Phase 2 Monitoring Reports, March 2005, paragraphs
(181-182), http://www.oecd.org/dataoecd/62/32/34599062.pdf Back
13
"Goldsmith's dilemma on Saudi royals in BAE case",
Financial Times, 1 February 2007. According to the Financial
Times: "The Attorney-General defended the decision to scrap
the inquiry. He said the main obstacle was the difficulty of proving
corruption under current laws. These require prosecutors to show
the person receiving bribes-the `agent' was acting without approval
of their boss-the `principal'. The reason I was concerned was
because of the particular constitutional position of Saudi Arabia
... And, indeed, how, in this context, do you ever succeed in
showing that? BAE were asserting that the payments had been authorised
at the highest level [in Saudi Arabia]", he said. Back
14
"Britain's anti-corruption laws are outdated", Financial
Times, 23 February 2007. Wardle told the Financial Times that
"the SFO could have faced a problem in any prosecution of
BAE because of the need under existing anti-corruption rules to
prove that Saudi officials who had allegedly received bribes-known
in law as the `agents'-had acted without the consent of the country's
king, the `principal'." Back
15
OECD Directorate for Financial and Enterprise Affairs, United
Kingdom, Phase 2-Report on the Application of the Convention on
Combating bribery of foreign public officials in international
business transactions and the 1997 Recommendation on combating
bribery in international business transactions, paragraph
171, p.54, available at http://www.oecd.org/dataoecd/62/32/34599062.pdf. Back
16
See: Corner House and Campaign Against Arms Trade, Grounds, available
at http://www.thecornerhouse.org.uk/pdf/document/JudicialReviewAppln.pdf. Back
17
Serious Fraud Office, Summary Grounds of Resistance, http://www.controlbae.org/background/summary_grounds_of_resistance.pdf Back
18
Attorney General and Serious Fraud Office, "Serious Fraud
Office Investigation into BAE Systems-Note for the OECD by the
Serious Fraud Office and Attorney General's Office", http://www.attorneygeneral.gov.uk/attachments/SFO%20-%20OECD%20Note.pdf Back
19
Serious Fraud Office, Summary Grounds of Resistance, http://www.controlbae.org/background/summary_grounds_of_resistance.pdf Back
20
"Labour tries to block new BAE inquiry", The Guardian,
http://www.guardian.co.uk/baefiles/story/0,,2173947,00.html Back
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