Memorandum submitted by Harrison Grant
Harrison Grant (HG) is a small law firm
that specialises in human rights and environmental law. Much of
the work we undertake is for individuals, charities and campaigning
organisations with limited resources. This submission is based
on the firm's experience working for clients that have been affected
by extractive industries and other related examples.
1. How do the activities of UK businesses
affect human rights both positively and negatively?
UK businesses can impact on human rights in
a positive way by ensuring an appropriate robust corporate social
responsibility (CSR) programme is in place and applies
throughout the corporate group. However, where there are inadequate
monitoring mechanisms in place these CSR strategies are likely
to prove at best piecemeal and at worst meaningless.
Further, businesses can influence the behaviour
of local companies operating in other countries by conducting
adequate due diligence on those companies and only trading with,
or investing in, those that are human rights compliant. Where
a business does not investigate, or turns a blind eye to, those
directly responsible will be encouraged to continue their abusive
2. How do these activities engage the human
rights obligations of the UK?
The State is responsible for ensuring that the
private sector is adequately regulated. It follows that the UK
should have adequate and accessible legislation, guidance and
reporting systems in place to enable victims and businesses to
know what standards are expected of business and what avenues
of redress are available where those standards are not met.
3. Are there any gaps in the current legal
and regulatory framework for UK business which need to be addressed,
and if so, how?
a. We note and welcome the OECD Guidelines
for Multinational Enterprises and the new duties on UK directors
contained in the Companies Act 2006.
However, the statutory duties themselves are not self executing,
and there is therefore a practical issue as to how breaches are
monitored, and what remedies can be put in place where a breach
b. A further issue that we have come across
is how multi-national corporations (MNCs) and financial
institutions are enabling companies operating abroad to profit
from activities involving human rights abuses. For example, although
companies that commit human rights violations may be located and
operate entirely abroad, the businesses that trade with or facilitate
the operations of (by providing funding directly or by funding
key infrastructure projects) those local companies are often large
MNCs or financial institutions, which may have parent companies/branches
in the UK or trade with the UK.
There is often little incentive for these corporations
to conduct thorough due diligence and yet they are a critical
link in the chain in ensuring that companies who do carry out
the abuses are able to profit and have an incentive to continue
operating in this manner.
One example we have come across is in the soya
industry. Greenpeace, a client of HG, has issued a report tracking
various human rights violations and environmental issues that
soya farms operating in the Amazon are directly responsible for,
including slavery and land grabbing.
In some cases these farms may be owned directly
by one of the large MNCs involved in the soya trade. However,
more frequently they are indirectly involved by funding illegal
roads into the area for soya farms to take advantage of or by
buying and exporting soya from the farms involved in abusive practices.
In addition, public and private funding has been provided to farms
directly implicated in human rights abuses.
Although there are systems in place in Brazil
to place farms involved in slavery on a "Dirty List",
this only occurs once cases have been discovered and successfully
prosecuted. Given the geographical remoteness of the farms, the
lack of resources of the State's monitoring agencies and the cumbersome
judicial process, only a fraction of farms involved in human rights
abuses are placed on this list. Even if farms have been black-listed
this does not necessarily prevent MNCs from trading with them.
Sufficient obligations and incentives do not
exist to ensure that MNCs and financial institutions conduct sufficient
due diligence and act on evidence of abusive practices. As a result,
this crucial link in the chain will not be broken.
c. Another way in which the market facilitates
human rights abuses is through the gap between investors, the
company they invest in and the local operations of that company
abroad. For example, a UK investor investing in a company listed
on the London Stock Exchange or on AIM is not required to investigate
the human rights record of that company. They may choose to do
so for ethical or financial reasons but there is no obligation
to do so. Where a company is listed on AIM it does not need to
be incorporated in the UK and only has to state whether or not
it complies with its domestic corporate governance rules. The
AIM Admission Rules, which companies wanting to list must comply
with, are concerned primarily with protecting investors and not
in ensuring respect for human rights.
However, once listed on AIM the company is able to reap financial
advantages and gains an aura of respectability.
The issues outlined above are not ones that
the UK can tackle alone but the UK can have a powerful impact
given the global importance of London's financial and trading
4. How should UK businesses take into account
the human rights impact of their activities (and are there any
examples of good or bad practice which the Committee should consider)?
How can a culture of respect for human rights in business be encouraged?
Should UK businesses' responsibility
to respect human rights vary according to:
Whether or not they are performing
public functions or providing services which have been contracted
out by public authorities; Is it clear when the Human Rights Act
1998 does and does not apply directly to businesses?
Whether they are operating inside
or outside the UK;
The size, type or nature of their
How, if at all, should the current
economic climate affect the relationship between business and
Standards and obligations that might apply to
a company or branch located in the UK and CSR strategies publicised
on a company's website are unlikely to apply in a uniform way
throughout the corporate group. The reasons for this disparity
vary. In some cases it may result from wilful blindness on the
part of the UK company, in others the geographical remoteness
of a subsidiary might create practical difficulties in terms of
ensuring standards of business are maintained worldwide.
Our experience has shown that this mismatch
may also be due to a lack of adequate monitoring mechanisms for
CSR strategies and human rights commitments. Where human rights
violations occur outside the UK, it is harder to ensure a UK parent
company takes adequate responsibility or appropriate steps to
engage and deal with the matter. There are also practical difficulties
for individuals who have had their rights violated in countries
where the legal system is inadequate, for example because it is
weak and/or corrupt, for providing redress and where significant
resources might be required in order to take their claim further
up the corporate chain. We set out below our experience in this
HG was instructed in 2008 to assist an
independent human rights organisation representing various communities
in Sierra Leone (the Client) to seek redress from an international
corporation involved in diamond mining (the Company). The
Company has various offices around the globe and is listed on
AIM with a registered office in London and a UK subsidiary company.
In 2004-05 the Company was involved in
prospecting operations in a specific region in Sierra Leone. The
operations resulted in various forms of damage to the local communities
the digging of numerous prospecting pits
on the communities' land ranging in size from about four metres
square to pits that are about 60 metres long by 50 metres
wide. Despite promises to the contrary, these pits were not filled
upon completion of the prospecting. They remain open. Many of
the larger pits have flooded and pose health and safety issues
to local communities: they are mosquito infested and villagers
fear that local children, most of whom cannot swim, may drown.
The larger pits are of such a size and depth that they can only
be filled using heavy earth moving equipment;
the damming of a river resulting in the
flooding of surrounding land, damage to crops and property and
cutting off of transportation routes. Although the river was partially
unblocked, this was done in an unsatisfactory way and flooding
is still an issue;
failure to repair/build schools; this
had been promised to communities at the outset of the prospecting
operations. The Company has denied making any such promise;
damage to the land and crops of more
than 114 farm-owners through flooding and/or the construction
of access roads. In some cases the damage to the land has been
more permanent, preventing the replanting of crops. Compensation
has either not been paid or has been grossly insufficient; and
damage to a road bridge. This bridge
was later repaired, but only after representations from HG to
the UK Company. In addition, the Company's representatives demanded
that our Client sign a Memorandum of Understanding confirming
the satisfactory completion of the repairs, prior to the repairs
having been carried out. There are numerous other examples
of the Company seeking to bully/force agreement from our Client,
individuals and/or the communities concerned.
As a result of the above, our Client has been
seeking compensation and reparation from the Company. They have
also sought a full and public apology.
The efforts of the Client and the communities
to raise these issues with the Company's local representatives
in Sierra Leone were almost completely ignored. Although the actions
of the Company are contrary to Sierra Leone law, the legal system
in Sierra Leone is under-resourced at best.
In addition, our client has not the financial or other means to
litigate against an international company. In these circumstances,
litigation before the Sierra Leone courts does not provide an
effective way of seeking redress. As one illustration of the difficulties,
the Company has not even been willing to provide copies of its
We were therefore instructed to contact the
UK offices of the Company.
The Company's CSR policy
In its Admission Document for listing on AIM,
the Company has a CSR policy, which includes promoting "local
empowerment and community development". The Company's website
also highlights its commitment to "developing the educational
sector in remote areas of the country" and to "implement
programs that support poor communities in the Company's areas
Correspondence with the Company
HG first wrote to the Company on 7 March
2008. Initially, we received a prompt response, seemingly accepting
responsibility for dealing with the majority of the matters outlined
above. However, since our initial contact, only the bridge repairs
have been carried out. The Company advised us that the local communities
had agreed that they would fill the open pits themselves; when
we queried this, we were provided with copies of MoUs purportedly
signed by community members and representatives. However, our
instructions are that some of the signatures were improperly obtained,
and others were written on behalf of individuals who had not nominated
proxies. The compensation paid was nominal, and payment to the
Company's representative was deducted from it. In the case of
the schools, the Company categorically denied it had agreed to
repair or rebuild. We followed up these issues with a detailed
letter and witness statement, setting out the facts and dealing
with issues raised by the Company.
We have received no substantive response.
However, upon informing the Company that we
intended to make a submission to the Joint Committee on Human
Rights (JCHR), we received an immediate response promising
action, and the Company's local representatives immediately contacted
the Client to try and resolve some of the issues outlined above.
It remains to be seen whether the most recent promises will be
followed through and whether the outstanding issues will be dealt
The issues outlined above are not examples of
the most egregious forms of human rights violations. However,
at the same time, given the comparatively small sums involved,
it is surprising that it has taken so longand ultimately
awareness of our submission of evidence to the JCHRto galvanise
this Company into action.
HG has undertaken this work pro bono. The acute
disparity in resources between the client and the type of organisation
they are up against poses severe difficulties in these types of
cases, especially because the violations concerned are not the
sort that attract widespread publicity, and are not likely to
be appropriate for conditional fee arrangements given the comparatively
small sums involved. It is time consuming work and many of the
larger law firms who might have the resources to fund this type
of pro bono work, may find themselves unable to do so for conflict
of law reasons, where the companies involved are MNCs that are
past, present or potential clients of the firm.
We are able to provide more detailed information
should the JCHR consider it useful; we will, of course, update
the JCHR in due course on any future developments in relation
to this matter.
See 3(b) above for details of this example.
Extensive resources are required in these types
of cases to investigate and document the link between human rights
abuses and the various national and international actors involved.
Effective access to remedies
5. Does the existing legal, regulatory and
voluntary framework in the UK provide adequate opportunity to
seek an appropriate remedy for individuals who allege that their
human rights have been breached as a result of the activities
of UK businesses?
Judicial remedies for the type of human rights
violations outlined in the extractive industry example above are
likely to be prohibitively expensive. The compensation sought
is comparatively small and the resources required to carry out
sufficient on-site investigations and bear the risk of costs being
awarded against are potentially huge.
The same is true for cases like that outlined
in the soya farm example. In addition, there are potential barriers
stemming from the need to prove jurisdiction and to demonstrate
6. If changes are necessary, should these
Non-judicial remedies. If non-judicial
remedies are appropriate, are there any examples of good or bad
practice which the Committee should consider?
Government initiatives, whether by
legislation, statutory or other guidance or changes in policy;
Initiatives by business or other non-Government
A useful mechanism would be an ombudsman or
independent complaints commission authorised to examine complaints
regarding violations of human rights by businesses.
A statement from a respected independent human
rights body would likely be something that could be used as a
tool to galvanise a company into acting, especially where the
size of the claim was relatively small. It may also be welcomed
by companies which would have a chance to vindicate themselves
where claims were unfounded.
In addition, companies should have systems in
place to ensure that the statutory duties on directors contained
in the Companies Act 2006 become a part of the decision-making
process. To enable the duties to be meaningful there must be sufficient
transparency and monitoring of the implementation of these duties.
In the soya farm example, a crucial starting
point would be a requirement for businesses not to fund or trade
with companies that have been placed on the "Dirty List".
This type of mutual recognition mechanism could be adopted for
other industries and other countries where available.
The UK is a supporter of the Extractive Industries
Transparency Initiative, however that does not appear to involve
specific obligations for UK businesses. Something similar to the
Canadian system could provide useful guidance for businesses as
well as a means of holding UK parent companies to account for
violations committed abroad.
7. Views on the UN Special Representative
HG welcomes the policy framework proposed by
the UN Special Representative as a useful starting point for examining
the impact of businesses on human rights. We also endorse the
most recent report of 22 April 2009 on the progress
achieved in "operationalizing the protect, respect and remedy
202 See the extractive industry example set out below,
which had the potential to positively impact on-for example-the
right to education in Sierra Leone but utterly failed to do so
and in fact has made a mockery of the company's CSR strategy. Back
See further the soya industry example set out below. Back
Ss. 172(1)(d) and (e)) Back
The Greenpeace report, "Eating up the Amazon", has been
attached to this submission. See, in particular, pages 27-33. Back
Three MNCs mentioned in the Greenpeace report (ADM, Bunge and
Cargill), although not incorporated in the UK, all have significant
operations in the UK. Back
It is not clear to us whether this includes any UK banks. Back
See page 31 of the Greenpeace report, which refers to a voluntary
pact to prevent companies from trading with black-listed farms.
At the time of the report, two of the MNCs had refused to sign
the pact. Back
There is specific AIM "Guidance for Mining and Oil &
Gas Companies". However, this contains nothing concerning
human rights obligations. Back
The Sierra Leone Mines and Minerals Decree of 1994 requires:
the written consent of the land owner before any rights under
a licence are exercised (s.23(1)(b)), a company to "backfill
or otherwise make safe any bore holes of exactions" (s.55(1)(e));
and "any damage done to the surface of the land" and
"any disturbance" to the rights of the owner to be paid
for (ss. 25 and 26). Back
We note in this regard the recent LSE report, "The Reality
of Rights" (May 2009), which builds on this issue, in particular
at pages 37-38. Back
In the extractive industry sector, Canada has recently published,
"Building the Canadian Advantage: A CSR Strategy for the
Canadian International Extractive Sector". This builds on
the Canadian Government's endorsement on the OECD Guidelines for
Multinational Enterprises and aims to promote widely-recognized
international CSR performance guidelines for Canadian extractive
companies operating abroad. Back