Any of our business? Human Rights and the UK private sector

Any of our business? Human Rights and the UK private sector - Human Rights Joint Committee Contents

4 THE INTERNATIONAL DEBATE

72. Perhaps unsurprisingly, we received far more evidence on the operations of UK companies abroad than about the human rights record of UK firms at home. The international debate on the impact of globalisation and the cross-border influence of companies on human rights is more advanced than the discussion of corporate responsibility and human rights in the UK. Lord Malloch-Brown, then Minister for the UN and Africa, told us that UK companies operating overseas were experienced in dealing with the potential impacts of their business on human rights in developing countries:

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73. The Government, UK businesses and NGOs have been involved in a range of international voluntary initiatives and programmes designed to address human rights impacts and spread good practice on human rights and corporate responsibility, including the:

OECD Guidelines for Multinational Corporations ("OECD Guidelines");
Work of the UN Special Representative on human rights, transnational corporations and other business entities ("Special Representative");
UN Global Compact;
Voluntary Principles on Security and Human Rights;
Extractive Industries Transparency Initiative;
Ethical Trading Initiative;
Kimberley Process;
Business Leaders Initiative on Human Rights; and
Institute for Business and Human Rights.

74. We focus on the OECD Guidelines and the work of the UN Special Representative, below.[102]

The OECD Guidelines

75. The OECD Guidelines are a series of principles and standards which adhering states, including the UK, undertake to promote to their businesses. They are the "only multilaterally endorsed and comprehensive code that Governments are committed to promoting".[103] The Guidelines set voluntary standards for business conduct, including in employment and industrial relations, human rights and the environment. They provide that multinational enterprises:

should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard, enterprises should:

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76. The OECD has also produced a Risk Awareness Tool for Multinational Corporations in Weak Governance Zones. It addresses risks and ethical dilemmas that companies are likely to face in weak governance zones, including in respect of obeying the law and observing international instruments, managing investments, due diligence about business partners and clients, dealing with public sector officials, and "speaking out about wrongdoing".[105]

77. Since they were revised in 2000, the OECD Guidelines have been implemented on a national basis by National Contact Points (or NCPs). These are generally government offices responsible for promoting the guidelines and handling inquiries and complaints against companies. The UK NCP is also responsible for the promotion of the Risk Assessment Tool to UK companies.[106] After complaints about its operation and structure, the UK NCP was subject to reforms in 2006 to enhance its operation.[107]

78. Witnesses told us that the 2006 reforms had had a significant and positive effect on the operation of the UK NCP.[108] Others raised concerns about its operation, including a lack of independence from Government; a lack of guidance for companies on the standards to be met; and the absence of sanctions against companies and remedies for individual victims.[109] Insufficient information in the Guidelines about human rights obligations has also been the subject of critical comment.[110] Amnesty International told us that the OECD NCP system itself was "too flawed" to provide victims of alleged abuse with a remedy.

79. The latest Final Statement of the UK NCP, dated 26 September, upholding a complaint by Survival International against Vedanta Plc in respect of its mining operations in Orissa, India seems to us to support the arguments of witnesses who argue that there are shortcomings in the investigatory powers of the NCP. The UK NCP reported that Vedanta did not participate in mediation, even after an offer of independent professional mediation, external to the NCP. Other than providing submissions that the NCP should not accept the case and a copy of its own sustainable development report, the company did not engage with the examination and did not submit any evidence in response to that provided by Survival International. The NCP had no powers to compel Vedanta to participate and expressed disappointment at the decision of Vedanta Plc not to "engage fully" with their work.[111] Vedanta has reportedly rejected the substantive findings in the report, arguing that it complied with all local regulatory requirements in India.[112]

80. The Government published the result of a initial review of the NCP in January 2009, looking in particular at the 2006 reforms. It concluded that the "NCPs performance [had] significantly improved since the revamp…although there remains room for improvement". It considered that limited resources remained a risk for the NCP and that higher priority should be given to promotion of the Guidelines, as opposed to the processing of complaints.[113]

81. The way the Government reacts to final statements from the UK NCP will clearly affect the impact made by the statement. Global Witness told us that the Final Statement in August 2008, in the case of Afrimex, was a clear example of why the UK NCP could not provide an effective sanction against a company. Global Witness brought this complaint to highlight a number of alleged breaches of the OECD Guidelines by Afrimex in respect of minerals from the Democratic Republic of Congo ("DRC"). The NCP upheld the majority of the complaints made by Global Witness and made a number of recommendations to Afrimex, including for better due diligence.[114] Global Witness told us that these recommendations had not been acted on by Government departments.[115]

82. We asked Lord Malloch-Brown, the then Minister for the UN and Africa, for further information on the Government's approach, but he told us he was "constrained" by ongoing inquiries.[116] In its written submission, the Government explained that it is considering how to follow up a negative decision of the UK NCP. [117] Since the recent UK NCP Statement in the Vedanta case, the High Court has been asked to consider a challenge to loans offered to Vedanta by the Royal Bank of Scotland, a bank in which the Treasury holds a over 70% share.[118]

83. It is unacceptable for the Government not to have a strategy in place to deal with companies subject to negative final statements by the UK NCP [National Contact Point]. The credibility of findings of the UK NCP would be enhanced considerably if the Government had a clear and consistent policy on its response to final statements. We recommend that such a policy should be drawn up and disseminated widely.

84. There has been significant improvement in the way the UK NCP approaches complaints that UK companies have failed to comply with the OECD Guidelines for Multinational Corporations. The UK NCP can perform only a limited role, however, as a Government-led organisation with few investigative powers and no powers to sanction individual companies. As a non-judicial mechanism for satisfying individuals who may have a complaint against a UK company, it falls far short of the necessary criteria and powers needed by an effective remedial body, including the need for independence from Government and the power to provide an effective remedy. There is little incentive for individuals to use a complaints mechanism which offers no prospect of any sanction against a company, compensation or any guarantee that action will be taken to make the company change its behaviour.

85. We recommend that the Government consider options for increasing the independence of the UK NCP from Government and enhance the ability of the NCP to promote the OECD Guidelines, including ensuring that it has the necessary resources and powers to fulfil this part of its role effectively.

Reform of the OECD Guidelines

86. There is a general consensus that the OECD Guidelines are out-dated and in need of reform.[119] The OECD is due to launch a review in June 2010. The UK NCP is currently consulting on the scope of the review and this consultation will inform the Government's position in the forthcoming negotiations.[120] In the light of the development of the debate on human rights and business over the past decade, the OECD Guidelines are ripe for review and reform. Reform of the Guidelines should reflect the work of the UN Special Representative on human rights and transnational corporations and other business entities. The Government should take a lead in ensuring that the Guidelines are reformed to give clearer direction to business about their responsibilities to respect human rights, especially including operations in states which do not recognise or respect the rights guaranteed by the fundamental UN human rights treaties.

The Work of the UN Special Representative

87. Over the past five years, there has been a lively debate about whether the approach to human rights embraced by many businesses is sufficiently effective in practice or whether more binding forms of international regulation than the OECD Guidelines are required. In 2003, the UN Sub-Commission on Human Rights adopted the UN Norms on the Responsibilities of Transnational Corporations and other Business Enterprises (the Norms).[121] The Norms proposed a more coercive approach, setting out a series of human rights standards for companies and requiring companies to respect and promote those rights. The Norms were strongly opposed by many businesses and Governments on the grounds they were too broad and too vague.[122] The debate became polarised and the situation was described by Professor Ruggie as a "train wreck".[123]

88. The UK played a key role in proposing a way forward with the appointment of the UN Special Representative, Professor Ruggie, in 2005. The broad purpose of his mandate was to consider how to take the debate on business and human rights forward following the failure of the Norms.[124] In oral evidence, Professor Ruggie told us that the human rights challenges arising from the activities of corporate or other business entities arise from a series of "governance gaps." Although not simple to overcome, these could each be addressed by states within their own jurisdictions or by countries working together. Professor Ruggie's analysis of the debate on business and human rights and the key drivers for action were broadly reflected in our evidence.[125] The main themes include:

Gaps between the aims of the private sector and the aims of individual states;[126]
A lack of policy coherence within individual Governments in relation to their human rights responsibilities;
Governments taking on human rights obligations without ever intending to fulfil them; Governments lacking the capacity to fulfil their human rights obligations; and Governments neglecting to enforce human rights standards as they fear competitive disadvantage; and
Corporate governance rules that rarely address the human rights impacts of companies, something which, in the words of Professor Ruggie, does not send "the appropriate signals to companies".[127]

89. In April 2008, Professor Ruggie proposed the "protect, respect and remedy" policy framework for the business and human rights debate, based on three core principles:

the state duty to protect against human rights abuses by third parties, including businesses;
a corporate responsibility to respect human rights; and
the need for individuals to have effective access to remedies for breaches of their human rights.[128]

90. In June 2008, the UN Human Rights Council approved the framework and extended the mandate of the Special Representative until 2011.[129] He has been asked to make practical recommendations on ways to help states protect human rights from abuses involving businesses, and to enhance access to remedies for those whose human rights are affected by corporate activities. In his most recent report, published in April 2009, Professor Ruggie recognised that further work is necessary, to:

address domestic policy incoherence and the failure of Governments to work together effectively;
consider the impact of trade and investment agreements on human rights;
encourage companies to make human rights due diligence effective and appropriate for their businesses;
clarify how to 'demystify human rights' for businesses;
explore the relationship between judicial and non-judicial remedies,
increase the effectiveness of NCP decisions on the OECD Guidelines; and
explore the role to be played by National Human Rights Institutions, such as, in the UK, the Equality and Human Rights Commission, the Scottish Human Rights Commission and Northern Ireland Human Rights Commission (NHRIs).[130]

91. Witnesses who commented on Professor Ruggie's work welcomed both his mandate and the 'protect, respect and remedy' framework.[131] For example, BP told us that Professor Ruggie had:

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92. Most witnesses recognised that drawing a distinction between voluntary arrangements and binding legal standards for business is no longer helpful.[133] Sir Geoffrey Chandler emphasised that there was a role for both voluntary and regulatory action:

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93. The 'protect, respect and remedy' framework proposed by Professor Ruggie, the UN Special Representative, is a valuable and constructive contribution to the debate on business and human rights. The polarised positions previously taken by the proponents of voluntary or regulatory initiatives were unhelpful. While there continue to be many areas of contention over the respective roles and responsibilities of states and individual businesses, this framework provides a solid platform upon which these issues can be debated and, hopefully, resolved. We welcome the renewed commitment to constructive dialogue that the framework appears to have provided and call on states, businesses and civil society to approach any operational recommendations made by the UN Special Representative in a positive way. It would be disappointing if the years of work and careful engagement undertaken by the UN Special Representative and his team were wasted by a return to the stalemate that arose after the UN Norms.

LIMITATIONS OF THE PROTECT, RESPECT AND REMEDY FRAMEWORK

94. Some witnesses pointed to limitations of the Ruggie framework. One criticism was that the 'protect, respect and remedy' framework treats the role of communities affected by business activities as a passive one.[135] Others expressed concern that the framework contained very little detail on what standards should apply to business conduct to ensure that rights are respected.[136] Professor David Kinley told us that as a conceptual framework, 'protect, respect, remedy' was "unobjectionable", but that it did little to answer the problem which Professor Ruggie had identified: "in which states are so weak or unwilling to protect human rights and corporations are so comparatively strong or conveniently transnational to evade human rights responsibilities".[137] A joint submission by a number of international academics expressed a similar view, arguing that the existing division of responsibilities between states and businesses failed to recognise that the division must be flexible and that in circumstances where states were unwilling or unable to fulfil their duty to protect, the responsibility on companies operating in those countries should be more onerous.[138]

95. While we recognise the value of the 'protect, respect, remedy' framework, further work is needed to increase its value to individual states and businesses. We look forward to the further recommendations which Professor Ruggie is due to make in 2011. They need to give clear guidance to home and host states and businesses, on how they should meet their obligations under the 'protect, respect, remedy' framework. While the value of consensus in this debate is clear, Professor Ruggie should not be afraid to tell states and business what positive steps must be taken to protect human rights, however difficult or unwelcome his message may be.

96. There is a case for further recognition of the role of communities in the Ruggie framework. The need for consultation and engagement appears to form part of the due diligence process envisaged by Professor Ruggie. However, greater clarity on the role of individuals and civil society could lend greater coherence to the development of the framework.

97. We call on the Government to continue to support the mandate of the UN Special Representative, to encourage UK businesses and civil society to engage with his work, and to respond constructively to his recommendations.

WAITING FOR 2011?

98. We asked a number of witnesses whether states could sensibly take any unilateral action before the Special Representative completed his work in 2011. Professor Ruggie criticised the notion that states should ignore business and human rights issues until he makes his final recommendations.[139]

99. Peter Frankental, of Amnesty International, told us that both unilateral and multilateral action was desirable and that the two were not mutually exclusive.[140] BP, on the other hand, said that it was "imperative" that businesses and states should not "pre-empt" the outcome of the work of the Special Representative, adding that there was "a risk of a multiplicity of new country-based business and human rights…standards and adjudication systems" if states acted on their own account. [141]

100. Sir Brian Fall of Rio Tinto and the CBI also counselled against unilateral action without coordination by major industrialised states.[142] The Government shares this view. In oral evidence, Lord Malloch-Brown said it was "too soon" to start incorporating Professor Ruggie's work into UK policy.[143] He explained that the Government thought that what Professor Ruggie was trying to do was to determine a "conceptual framework" which tied together strands of work that the UK Government was already working on, including through its support for voluntary mechanisms such as the Kimberley Process. He explained that he did not want to "pre-judge" the conclusions of Professor Ruggie but that he thought that the Special Representative was taking an approach which was similar to the view of the UK Government, that the focus should be on strengthening host state capacity, rather than introducing any international dimension.[144]

101. We are disappointed that the Government appears to have ruled out unilateral policy measures to deal with the human rights impacts of UK companies operating overseas while the Special Representative carries out his work, particularly as Professor Ruggie has encouraged states to do more. International debate should not preclude innovative policies at home.

An international agreement on business and human rights?

102. A number of witnesses told us that international agreement was the only way to achieve a global solution to the problems identified by Professor Ruggie.[145] The UN Special Representative told us, however, that an international agreement was unrealistic in the current climate:

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103. Peter Frankental, for Amnesty International agreed: "such a treaty is unlikely to happen within the next decade, but that is not a reason not to promote it now.[147] He argued that an overarching UN treaty was only one aspiration and that there were a number of other forms of international cooperation, including through the OECD and the EU, which could address the impacts of business on human rights.[148]

104. The CBI and a number of businesses do not support a formal international agreement. The CBI said:

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105. International agreement comes in many forms. It would be disappointing if the failure of the UN Norms overshadowed the debate about any future international agreement on the steps which individual states could take to meet the governance gaps identified by Professor Ruggie. Although consensus took a significant period of time to reach on the issue of cross-border bribery and corruption, the obligations in the UN Convention against Corruption and the OECD Convention on Combating Bribery of Foreign Officials are now widely supported. The measures in each of these agreements have been accepted as positive steps towards meeting a global problem affecting both the fundamental rights of many communities and the credibility of international business. A number of the academics and civil society groups we met in the US urged us to look at the long process through which these agreements were debated and agreed as indicative of how a debate on business and human rights could lead to a broad international agreement in the future.

106. An international agreement on business and human rights is unlikely in the near future. However, the impact of business on human rights is a global issue that ultimately requires a global solution. We are concerned that reluctance by states to take unilateral action coupled with failure to commit to an international solution will mean that little progress is made. We believe that an international agreement should be the ultimate aspiration of any debate on business and human rights. There is considerable scope for joint working on a regional level and globally to agree a consistent approach to business and human rights. We recommend that the Government develops such joint-working programmes.

101 Q385 Back

102 Further details about each of the other programmes is outlined in Annex 3. Back

103 UK National Contact Point Website: http://www.berr.gov.uk/whatwedo/sectors/lowcarbon/cr-sd-wp/nationalcontactpoint/page45873.html Back

104 OECD General Principles, II, General Policies. Back

105 For further information, see http://www.oecd.org/document/26/0,3343,en_2649_34889_36899994_1_1_1_34529562,00.html Back

106 In the UK, the Department for Business Innovation and Skills is responsible for the NCP. Back

107 The All-Party Parliamentary Group on the Great Lakes first criticised the operation of the UK NCP in its 2005 Report, The OECD Guidelines and the DRC. After the publication of this report, the Government initiated a review of the OECD Guidelines in the UK. Reforms to the UK NCP in 2006 included the creation of a Steering Board, including Government departments, business, NGO and Trades Union representatives. Back

108 Ev 293; Q111 (Owen Tudor, TUC) Back

109 Q77.See Q108 (Janet Williamson, TUC), where she explains that despite 5 challenges to the practices of Unilever in India and Pakistan, in respect of labour and trade union rights, no change has been achieved. Back

110 Ev 170, Q111, Ev 293 Back

111 Final Statement, Complaint by Survival International against Vedanta Plc, 25 September 2009, para 17.For further, see http://www.berr.gov.uk/files/file53117.doc Back

112 The Guardian, Treasury taken to court for RBS loans to Vedanta resources, 18 October 2009. Back