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

Memorandum submitted by Harrison Grant

INTRODUCTION

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.

THE DUTY OF THE STATE TO PROTECT HUMAN RIGHTS

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.[202]

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 practices.[203]

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.[204] 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 occurs.

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.[205]

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.[206] In addition, public and private funding has been provided to farms directly implicated in human rights abuses.[207]

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.[208]

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.[209] 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 markets.

THE RESPONSIBILITY OF THE BUSINESSES TO RESPECT HUMAN RIGHTS

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 business?

How, if at all, should the current economic climate affect the relationship between business and human rights?

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 regard.

EXAMPLE: EXTRACTIVE INDUSTRY

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.

Factual Background

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 including:

— 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

prior to the repairs having been carried out

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.[210] 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 prospecting licences.

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 of operation".

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 with.

Conclusion

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 long—and ultimately awareness of our submission of evidence to the JCHR—to 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.

EXAMPLE: SOYA FARMING

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 corporate responsibility.[211]

6. If changes are necessary, should these include:

Judicial remedies;

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 actors

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.[212]

7. Views on the UN Special Representative framework

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 framework".

Harrison Grant

May 2009

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

203 See further the soya industry example set out below. Back

204 Ss. 172(1)(d) and (e)) Back

205 The Greenpeace report, "Eating up the Amazon", has been attached to this submission. See, in particular, pages 27-33. Back

206 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

207 It is not clear to us whether this includes any UK banks. Back

208 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

209 There is specific AIM "Guidance for Mining and Oil & Gas Companies". However, this contains nothing concerning human rights obligations. Back

210 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

211 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