Memorandum submitted by Holly Hill Trust
The following submissions relate to experiences
and circumstances of the impacts of UK businesses outside of
the UK. My personal experiences relate primarily to the mining
and extractives industries.
As other submissions to the Committee will no
doubt confirm, many human rights abuses are committed by, or flow
from, UK extractives multinationals working overseas. As many
of these occur in States where governance is weak and enforcement
of local law is poor, many have gone by with little sanction or
criticism except by a few small NGOs or church groups, and the
local communities blighted by these activities.
UK companies operate overseas in ways they would
never dream of doing in the UK. There is after all gold in Snowdonia,
yet no attempt is made by UK companies to forcibly clear hill
farmers from the area with para-military groups and dogs, threaten
and oppress any local opposition to the project, and operate an
open cast mine in a protected area, heavily polluting local rivers
Impacts linked to the extractive industries
need to be addressed as a priority. Many of the easy mineral deposits
around the world have been mined already, so now increasingly
projects are being considered where people live, in areas of political
and social volatility, or in protected areas (whether national
parks, other nature reserves, and/or watersheds important for
nearby farms and towns). Such projects will be more difficult
to manage responsibly and require much higher standards of practice
than those exercised in the past in order to avoid social conflicts
and human rights abuses, and severe environmental destruction.
The fact that the Norgwegian state government
pension fund felt it necessary to publicly divest its £500 million
holdings in Rio Tinto due to human rights abuses and massive environmental
destruction in West Papua, and that it felt its attempts to engage
in meaningful dialogue with management to improve this had been
a waste of time should be an indication of the scale of the problem.
There is a significant problem, and the UK government
must have a role in trying to solve it.
OF UK BUSINESS
My main experiences of the human rights impacts
of UK business are of the negative impacts of mining companies
operating in Ecuador, where I have been working for several years
for a small UK charity sponsoring wildlife conservation and rural
sustainable development projects.
I have been told of threats, intimidation, and
violence against local residents who opposed a mining project.
They opposed peacefully, yet were demonised as terrorists. Many
were threatened with violence and some physically attacked. Spurious
legal cases were filed against them using false witnesses, which
subsequently fell apart. However, the cases needed to be defended.
Local residents were not consulted properly,
nor presented with the true picture including relevant information
from the Environmental Impact Assessment (EIA).
People should be entitled to express their views
without threats, and to live in a clean environment without pollution
of their water and lands.
Many serious negative human rights impacts also
flow from the activities of UK businesses as a result of contractual
relationships and their subsidiaries. This issue is discussed
in further detail below under point 3.
As far as I am aware the activities outlined
in this submission (impacts of UK companies outside of UK territory)
do not engage "hard" human rights obligations of the
UK government as the law currently stands.
Notwithstanding the above, it is clear that
the UK (and indeed all States with strong governance and legal
systems) should develop mechanisms to help prevent human rights
abuses abroad caused by companies based within their territory.
There is a need to reduce the governance gaps created by globalisation.
The UK, if dedicated to the process of ensuring that human rights
proliferate and are ensured worldwide, should seek to go beyond
its strict obligations to find opportunities to provide
mechanisms that protect human rights worldwide.
As the UN Special Representative identifies,
there is growing encouragement at international level for home
States to step forward and take regulatory action to prevent abuse
by their companies overseas.
As already noted, there is a broad gap at the
international level, when businesses operate in countries with
weak governance or corruption.
& SUBSIDIARY ACTIVITY
There is also a more specific but no less significant
gap in the legal framework for human rights protection, stemming
from the legal doctrine of separate legal personality, and restrictive
conceptions of responsibility in commercial arrangements.
Typically major UK mining companies don't carry
out human rights abuses themselves, but rely on small exploration
companies and para-military subcontractors to do the dirty work
for them. In the Ecuador case outlined above, Rio Tinto was working
with a small Canadian exploration company called Ascendant Copper
(now trading as Copper Mesa).
Rio Tinto's head office in the UK was repeatedly
warned of problems with the way their partner in Ecuador was operating,
but persisted in dealing with Ascendant Copper regardless. Rio
Tinto provided Ascendant Copper with its historical drilling data,
and had an option agreement to buy into the project as it was
developed. Essentially this arrangement allowed Rio Tinto to stand
on the sidelines disclaiming responsibility for the negative human
rights impacts, but with a foot in the door ready to buy into
the project once the dirty work had been done.
Rio Tinto and other UK mining companies which
operate in these ways are playing key facilitating roles in projects
with significant human rights impacts, and are standing to profit
considerably from these negative impacts. In this context it is
important to note that the UN Special Representative's report
of April 2008, which provides the framework to the Committee's
call for evidence,
recognised the legal and non-legal concepts of complicity, sphere
of influence and due diligence as key elements of the corporate
responsibility to respect human rights. These are key issues which
must be examined.
There is also the issue of contractual relationships
with military or para-military organisations (or "militarised
commerce"). Rio Tinto has been implicated in several cases
of human rights abuses flowing from military contractors working
for its joint venture partners. When questioned, Rio Tinto blames
its local partners or subcontractors, claiming that the project
is just an investment, while providing finance and sometimes management
data or expertise for it. But where your local partner is a military
dictator, how would you expect him to behave? Or where you choose
a military or paramilitary organisation to manage your "community
projects", is it surprising that social conflicts and human
rights abuses arise? There are numerous examples beyond Ecuador
where such problems arise (Colombia, Philippines, Burma, West
Papua, Nigeria and more).
UK companies should be forced to disclose in
their accounts when projects they are invested in or manage involve
militarised commerce. They should not be allowed to present such
projects as normal commerce. They should be obliged to disclose
which military or paramilitary forces are employed, how much these
contractors are paid, and if there have been reports of killings.
The legal framework for UK business fails to
account for these corporate roles in abuses, and these types of
relationship, and has very few ways of driving UK companies to
engage more fully with their responsibilities. This needs to change
if we are to reduce the incidence of these conflicts and UK business'
role in them.
Transparency obligations can be an effective
driver of higher standards of corporate practice with respect
to human rights. An effective regulatory system that ensures balanced
and thorough transparency on social impacts could help to fill
the "accountability gap", and better align company performance
with societal expectations.
The Holly Hill Charitable Trust and the Staples
Trust (one of the Sainsbury Family Charitable Trusts) have sponsored
work by ClientEarth (an organisation of public interest lawyers)
to examine the regulatory framework for social and environmental
reporting by UK companies, and how key aspects of Companies Act
2006 could be better implemented. I recommend you read a
copy of their report and talk to them about how it fits within
the broader question of business and human rights.
In addition to the disclosures suggested in
ClientEarth's report, examples of straightforward but key disclosures
that should be required of UK mining companies, that could drive
higher standards of human rights practice include:
Contractual or other arrangements with
military groups (including when done through a local partner).
Royalty or other payments made to overseas
All Environmental Impact Assessments
carried out relating to their projects.
Full minutes of their AGMs to be made
publicly available on the company website in a timely manner.
In the context of mining, a lot could be achieved
if companies were forced to provide performance bonds and insurance
to ensure that projects are managed in a responsible way, and
to compensate or restore any damage done.
An improved corporate transparency framework,
with appropriate regulatory scrutiny, has great potential to encourage
a culture of respect for human rights in UK business, whether
domestically or overseas. Furthermore, as ClientEarth's forthcoming
publication identifies, greater transparency can be good for both
the protection of human rights and for businesses' interests.
However, proper transparency requires external
scrutiny and regulation. The senior management of UK mining companies
like Rio Tinto are very smooth at presenting themselves as responsible
companies, and expert at telling half truths and making omissions
to mislead investors and others. In my personal opinion I believe
that Rio Tinto knowingly, deliberately and repeatedly misleads
its shareholders and others about the reality of its activities
in developing countries. There appears to be a culture of double
standards and impunity within UK companies like Rio Tinto, who
rely on a culture of "greenwash". There is a need for
regulatory intervention to ensure that transparency acts as an
effective driver of corporate culture, and that company reports
are "true and fair", and not just the financial
There is a role for the investment and fund
management community to play in driving a corporate culture of
respect for human rights.
The UK fund management sector, including pension
fund managers, have unfortunately not been effective in improving
current management practices. Human rights and environmental impacts
can significantly damage the long-term value of a company, and
so there is considerable scope for better aligning investment
interests with human rights protection.
The UK government could have a role in raising
awareness and encouraging proactive engagement by the investment
community with UK business.
The UK's change in economic fortunes should
serve as a reminder that business and finance do not operate in
a vacuumthat their activities are tied intrinsically to
the welfare of all. It should also be a point for reflection that
unregulated generation of short-term value will not necessarily
lead to the greater public good. We have seen clearly the impact
that shorttermism can have on UK shareholders as well as stakeholders
and communities around the world.
Returning to the potential role of transparency
obligations, in this context unreported human rights issues can
constitute intangible risks that investors should be aware of.
In this sense a more effective regulatory regime for social and
environmental transparency has a role to play in constructing
a robust financial system which can also help to provide investor
confidence and greater financial stability.
Gordon Brown changed the listing requirements
for AIM companiessince the change in listing requirement,
you can float a start-up company on AIM. While this resulted in
a boom on AIM, one of the unintended consequences has been that
the majority of the value of the AIM market now consists of small
exploration companies operating in the developing world, against
which there are numerous human rights complaints.
UK-based asset managers also have a key role
in human rights problems. RAB Capital was Ascendant Copper's largest
independent investor when it listed on Toronto Stock Exchange
TSX. RAB is an important investor in small aggressive exploration
companies in developing countries. Hedge funds are able to invest
in and benefit from projects involving social conflict and human
rights abuses, without providing transparency or accountability.
There is insubstantial examination of the role
that UK investment has in financing human rights abuses. The London
Stock Markets (both the main market and AIM) provide a lot of
the global finance for extractives activities in developing countries,
which flows to many human rights abuses.
In the context of the current economic situation,
there is an opportunity to re-assess the value and impact of the
UK's deregulated financial system, in the context of the human
rights abuses it may facilitate. Self regulation or so-called
"principles based" regulation is not working.
People who have been badly treated by UK companies
in other countries should be able to make legal claims against
the company and/or its directors in the UK under UK law. In practice
and principle this is very difficult at the moment.
The rare cases which reach British courts have
ended up with out of court settlements with confidentiality agreements
so the UK company concerned avoids further bad publicity and most
UK residents including investors may never hear the real story.
This is not an acceptable situation.
In brief, it is clear that the existing framework
does not provide adequate or effective access to remedies for
individuals overseas whose human rights are breached, or allegedly
breached by UK companies. There is a host of reasons that this
is the case, a proper examination of which would go way beyond
the allowed limit of this short submission.
In brief overview, factors which obstruct access
to remedies in the multinational context: the doctrines of separate
legal personality and limited liability in the context of subsidiaries;
underdeveloped liability for complicity and inaction within sphere
of influence in the context of joint ventures and contractual
arrangements; broad domestic legal frameworks that were not designed
with the modern globalised context in mind; high cost barriers;
lack of awareness of and information on available remedies for
It may be of interest that recently the community
in Ecuador affected by the Canadian exploration company working
with Rio Tinto have issued legal claims in Canada against the
Toronto Stock Exchange for over $1 billion, and against the
exploration company and two of its directors for combined claims
of $90 million for human rights abuses.
Inevitably, to create a robust framework that
provides appropriate and accessible remedies to potential claimants
in a rapidly changing world, reform attention will be required
at each of these levels. However, in my view, initiatives flowing
from public or judicial authority will be of particular importance.
Holly Hill Trust
28 Ruggie J, "Report of the Special Representative
of the Secretary-General on the issue of human rights and transnational
corporations and other business enterprises: Protect, Respect
and Remedy: a Framework for Business and Human Rights" (A/HRC/8/5,
7 April 2008), p. 7. Back
E.g. the Committee on the Elimination of Racial Discrimination
Ruggie J, op cit. Back