Memorandum submitted by RAID
& ACCOUNTABILITY IN
Rights and Accountability in Development (RAID)
works to promote human rights and responsible corporate behaviour.
RAID has investigated the human rights impacts of the privatisation
of Zambia's copper mines and its report Zambia: Deregulation
and the denial of human rights was published in 2000. RAID
participated in the 2000 review of the OECD Guidelines
for Multinational Enterprises and is a founder of OECD WATCH,
an international network of NGOs that works for the effective
implementation of the Guidelines. RAID has submitted more than
a dozen complaints against companies using the OECD Guidelines'
implementation procedures and has submitted recommendations for
improving the mechanism to the UK Government and to the OECD.
RAID's 2004 report Unanswered questions:
Companies, conflict and the Democratic Republic of Congo RAID
examined the role of companies in human rights abuses, corruption
and in perpetuating the conflict in the Democratic Republic of
the Congo (DRC). RAID analysed the companies' reactions to being
listed by a UN Panel of Experts set up by the Security Council
to investigate the illegal exploitation of the Congo's natural
resources. In the report RAID explored the issue of how corporations
should conduct business in zones of conflict and whether their
behaviour ought to be regulated.
RAID initiated the international campaign for
a review of the mining contracts in the DRC; its 2007 report
"Key Mining Contracts in Katanga: the economic argument for
renegotiation" proposed an economic rationale for renegotiating
some of the key copper and cobalt mining contracts in the Democratic
Republic of Congo (DRC).
In 2006, in response to the UK Government's
consultation on the UK NCP's implementation of the OECD Guidelines,
RAID with The Corner House submitted detailed proposals many of
which, with support from the All Party Parliamentary Group on
the Great Lakes' Region, were adopted. RAID has written a number
of reports about the OECD Guidelines including Five
Years On: a Review of the OECD Guidelines for Multinational Enterprises
(2005), A Model National Contact Point (2007) and most
recently Fit for Purpose? A Review of the UK National Contact
Point for the OECD Guidelines for Multinational Enterprises (2008).
RAID is the moderator of the Corporate Accountability
Working Group of the International Network on Economic, Social
and Cultural Rights (ESCR-Net) and has actively engaged with the
Special Representative of the United Nations Secretary General
on Business and Human Rights, by drafting joint submissions and
attending consultations and expert meetings.
RAID's director is an alternate external member
of the Steering Board for the UK NCP.
1. Rights & Accountability in Development
(RAID) welcomes this opportunity for presenting written evidence
to the Committee. This memorandum contains four sections: the
first addresses gaps in the Protect, Respect and Remedy Framework;
the second looks at weaknesses in the regulation of London's secondary
market, the Alternative Investment Market (AIM), and the implications
for human rights; the third section comments on the government's
proposals for the self-regulation of private military companies;
the fourth section considers the effectiveness of the OECD
Guidelines for Multinational Enterprises. Recommendations
are listed at the end of the Memorandum. Case studies based on
some of RAID's investigations in the Democratic Republic of the
Congo (DRC) are included in an annex.
The Protect, Respect and Remedy Framework
2. The framework of the Special Representative
of the United Nations Secretary-General on Business and Human
Rights (SRSG) was adopted by the Human Rights Council in June
2008. Although they have not endorsed the framework, a number
of NGOs have recognized that it provides a useful basis for the
continuing business and human rights deliberations. RAID shares
that view but, like many other NGOs, remains concerned that the
framework and the priorities for further study are not sufficiently
informed by the experiences of those negatively affected by the
activities of companiesnamely workers and communities in
developing countries. It is troubling that the British Government
did not support efforts at the Human Rights Council to ensure
that in his second term the SRSG was given an explicit mandate
to examine situations of corporate-related abuses. NGOs believe
that case studies and an understanding of the particular contexts
in which abuses occur should underpin the elaboration of the framework
and proposed policy responses.
It is to be hoped that the Committee in the course of its own
inquiry can rectify this omission by considering some specific
cases in depth.
3. The Committee should take note of the
fact that the text of the Human Rights Council's June 2008 resolution,
in acknowledging the need for efforts to bridge governance gaps
at the international level, draws attention to the need for transnational
solutions to help address corporate abuses, a point also raised
in relation to the role of "international cooperation"
to help give effect to the state duty to protect.
The Council's resolution recognizes the need to consolidate standards
with a view to developing a comprehensive international framework
in the future. This is in line with the long-held view among academics
and human rights activists that there is a serious gap in the
international human rights architecture. With the growing importance
of companies based in emerging economies such as China and India
a global standard on business and human rights becomes increasingly
relevant. Ultimately there is a need for States to agree global
standards by, for example, the adoption of a UN Declaration, to
define a common benchmark for business conduct in relation to
4. In 2001 the OECD conducted a review
of business approaches to corporate responsibility. It noted that
voluntary initiatives have a crucial, but necessarily only partial
role, to play in the effective control of business conduct.
Some initiatives have been used by business to deflect calls for
formal regulation. The effectiveness of voluntary codes is closely
linked to the effectiveness of the broader system of private and
public governance from which they emergeprivate initiatives
cannot work well if other parts of the system work poorly. Nevertheless
the British Government continues to insist that voluntary initiatives
offer the only solution to the growing problem of corporate abuse
of human rights. Yet these mechanisms lack the means to hold companies
to account for human rights abuses. As Human Right Watch has pointed
out after almost a decade the Voluntary Principles on Security
and Human Rights still lack clear rules and an independent means
to verify implementation.
The UK Government is an active proponent of corporate responsibility
and has advocated various multi-stakeholder initiatives. But its
record is less good as regards enforcing existing legislation
as a means of correcting corporate misconduct.
5. The UK Government does have extraterritorial
human rights obligations and by amending or tightening existing
laws or regulation and adopting more effective policies it could
do much more to restrain the harmful human rights impacts of companies
abroad. When public funds are engaged as with the CDC (formerly
the Commonwealth Development Corporation) or the Export Credit
Guarantees Department (ECGD) these bodies should be required to
undertake human rights due diligence checks and where companies
in receipt of such funds abuse human rights support should be
withheld or withdrawn.
Tighter Regulation of the Alternative Investment
6. There is widespread agreement that business
should respect all human rights (economic, social and cultural
as well as civil and political). The social and economic development
of a country is dependent on how business is regulated. This in
turn has an impact on the population's enjoyment of their fundamental
human rights including rights to health, education and housing.
For over a decade the reckless way in which some extractive industries
have negotiated agreements in resource rich developing countries
with weak institutions or poor governance has been a major cause
of concern for the international community.
7. In 2000, the United Nations Security
Council appointed a Panel of Experts on the Illegal Exploitation
of Natural Resources and Other Forms of Wealth of the Democratic
Republic of the Congo. In its 2002 report the UN Panel listed
85 companies as in violation of the OECD Guidelines on
Multinational Enterprises for helping to perpetuate the war
and of profiteering from it.
The British Government has responded to these concerns by promoting
multi-stakeholder initiatives like the Extractive Industries Transparency
Initiative EITI). But there are more effective means at the government's
disposal. It should enforce or strengthen the regulations of the
Alternative Investment Market (AIM) as a means of curbing or correcting
corporate misconduct overseas. The time has come for a re-appraisal
of AIM's rules and procedures in particular in relation to disclosure,
transparency and accountability.
8. AIM's self-regulatory regime has arguably
been a significant factor in its success as the leading international
growth market. But this success has been achieved not only at
the cost of the London Stock Exchange's reputation, but also at
the expense of the human rights of communities in developing countries
like the Congo. To draw a parallel, the global financial crisis
has exposed the dangers of over-reliance on self-regulation as,
the Secretary General of the OECD recently observed, "One
of the main lessons of this crisis is that companies and markets
can't rule themselves. Financial innovation sacrificed business
ethics for the sake of extraordinary profit."
9. Although, in the wake of the global economic
downturn, the number of companies listed has fallen and the aggregate
value of AIM companies has dramatically declined, the case for
reform remains compelling.
AIM, with its minimal approach to regulation, remains the index
of choice for many mining and natural resources companies. Over
a quarter of overseas AIM companies are registered in Bermuda,
the British Virgin Islands or the Cayman Islands.
Oil, gas and mining companies, many with assets in the developing
world, make up over 30% by market value of international AIM companies.
Many of these resource companies have exploration rights but no
proven track record, capital or income.
10. Some oil and mining companies operate
in highly volatile, unstable and even lawless parts of the world.
About a dozen mining companies that are or have been listed on
AIM have concessions in the Democratic Republic of the Congo where
the true provenance of the assets has not been established and
the legitimacy of mine licences continues to be keenly disputed.
The Exchange has adopted a permissive attitude towards non-disclosure
of information concerning the acquisition of DRC mining concessions,
which means that neither investors nor affected peoples have been
alerted to the reputation of key individuals associated with AIM-listed
companies, who have personally profited from the transactions.
In the case of the DRC, such individuals have appeared on UN,
EU or US Sanctions lists, or in expert reports to the Security
Council as meriting financial or other restrictions. Significant
shareholders or key managers have been the subject of legal proceedings
or even criminal investigations abroad. Complaints have been filed
against some companies for alleged breaches of the OECD Guidelines
for Multinational Enterprises. Yet such crucial information
is not automatically disclosed under existing AIM rules, especially
when a company makes such acquisitions after it has been admitted
to the market: the level of due diligence undertaken at admittance
is not repeated in the case of most subsequent transactions.
11. Much of the responsibility for AIM's
regulation is delegated to Nominated advisors (finance firms,
accountants or brokers). Nominated advisors (known as nomads)
are supposed to be independent from the companies they represent
and to demonstrate that no conflict of interest exists.
Since October 2004 the Exchange has taken disciplinary action
against a small number of AIM companies and nomads. In only a
handful of prominent cases has censure been public. The Exchange
has been criticised for neither naming parties found to have breached
AIM rules nor for releasing details of these cases and the rationale
behind any action taken. This secrecy puts the interests of the
company above those of investors and the wider public. (See Annex
1: Oryx Natural Resources Ltd.)
Private Military and Security Companies
12. The operations of private military and
security companies (PMSCs) are unique in that they have the potential
to have a direct and negative impact on individuals' human rights.
PMSCs are active in a number of highly sensitive areas including
security and risk management services for private companies operating
in conflict or post-conflict situations; business intelligence,
pre-employment screening, counter-surveillance as well as activities
previously performed by national militaries, which are now increasingly
outsourced to private contractors.
Where PMSCs act as agents of the State they may be seen to have
positive duties to protect human rights. At the end of April 2009 the
Foreign and Commonwealth Office (FCO) launched a public consultation
on the government's proposals to improve standards across the
Private Military and Security (PMSC) industry globally.
The scope of the consultation is limited because the government,
after discussions with "the industry", has ruled out
of consideration a national licensing regime and instead favours
self-regulation through an industry association. This is despite
the fact that the previous consultation on the 2002 Green
Paper on Options for Regulation elicited a large number of responses
that called for more robust form of regulation.
13. Given the length of time that has lapsed
since the Green Paper, the three-month period for the FCO's consultation
is extremely short. RAID is concerned that the FCO's proposals
seem unduly influenced by the interests and wishes of the British
Association of Private Security Companies (BAPSC) which enjoys
high level political contacts.
Both the UK government and the (BAPSC) are participants in the
Swiss Initiative which was launched in 2006.
The aim of the Swiss initiative is to develop a Code of Conduct
for PMSCs to address "the normative and accountability gaps"
in the sector. While the perils of deregulation in the banking
sector have belatedly been recognized, the wider lessons of the
failings of self-regulation have not been drawn by the government.
While an international code of conduct for PMSCs may be desirable,
self-regulation is not sufficient to control the activities of
individuals deploying lethal force or engaged in activities that
directly impinge on the human rights of others.
14. RAID is not convinced that the secretive
and unregulated world of PMSCs can be made accountable through
market forces alone. In RAID's experience it is often not possible
to draw a distinction between reputable and disreputable PMSCs.
As BAPSC acknowledges "Most tenders and bidding processes
on the private market happen under severe time constraints";
how therefore would it be possible for PMSCs to vet staff thoroughly
or assess the likely impact upon human rights of the contract
15. The FCO proposes that once an international
code of conduct has been agreed it should be supported by "an
effective complaints mechanism" (Paragraph 21). An international
secretariat would be established paid for by an annual licence
fee levied on PMSCs. The right to lodge a formal complaint with
the international secretariat against a PMSC for a specific incident
would reside primarily with the host state. But such a mechanism
would seem to exclude directly affected people from filing a complaint.
There are situations where governments in developing countries
would be unwilling to lodge a complaint for example where their
security forces are parties to human rights violations involving
the private sector. Furthermore, such a mechanism would not apply
to PMSCs that are not participants to the scheme. Without more
effective methods of scrutiny, there is a risk that the outsourcing
of security functions to PMSCs will continue to be used as a means
of shielding governments and their agents from accountability
for violations of international law. (See Annexe 2: Avient Limited)
CDC (formerly the Commonwealth Development Corporation)
and human rights
16. The International Commission of Jurists
(ICJ) recognises "that civil liability is increasingly important
as a means of ensuring legal accountability when a company is
complicit in gross human rights".
Nevertheless, victims of human rights abuses continue to face
considerable obstacles when seeking an effective remedy. These
obstacles are compounded when companies facing allegations of
complicity in grave human rights violations are supported by the
British government. Investments by the the British publicly owned
international development fund, CDC (formerly the Commonwealth
Development Corporation) are not subject to the scrutiny or human
rights due diligence procedures. CDC does not make its development
impact assessments and reports public on the grounds of commercial
17. Anvil Mining, a Canadian-Australian
company has been accused of involvement in serious human rights
violations and war crimes in the DRC. Despite the gravity of the
allegations against the company and some of its employees, and
the manifest failure of the Congolese government to investigate
the incident properly or to conduct a trial in conformity with
international standards, Anvil Mining has received support from
the British publicly owned international development fund, CDC
(formerly the Commonwealth Development Corporation). The DFID
Minister, Gillian Merron, defended CDC's investment in a letter
to RAID and Global Witness.
According to DFID the fact that CDC has no direct stake in Anvil
Mining and that the investment is made through the Emerging Capital
Partners (ECP), which specializes in private equity investing
in Africa, there is no cause for concern. In 2005 CDC contributed
$47.5 million to ECP's second pan-African fund. ECP (a US-based
fund) made the investment in Anvil Mining in March 2006, following
approval of its Investment Committee. The Minister explained that
CDC is not a member of the ECP Investment Committee and does not
pre-approve investments by its fund managers. It is unacceptable
that at the time CDC's investment was made, Anvil's role in the
Kilwa massacre was under investigation by the Australian Federal
Police (see Annex 3: Anvil Mining Limited and the Kilwa Massacre).
The OECD Guidelines for Multinational Enterprises
18. Given the obstacles to an effective
remedy RAID believes that the OECD Guidelines for Multinational
Enterprises remains an important additional tool for enforcing
higher standards of corporate behaviour. It is to date the only
corporate accountability instrument that offers a complaints mechanism.
Since 2000, the UK National Contact Point (NCP) for the OECD Guidelines
has received 25 complaints from unions and trade unions about
the alleged misconduct by British companies abroad. It was only
after the introduction of major reforms following a consultation
(which ended in June 2006) that the UK NCP has started to show
some capacity to hold companies to account. In 2008 the UK
NCP decided that the activities of two companies (DAS Air and
Afrimex) operating in Eastern Democratic Republic of the Congo
had contributed to human rights violations. These decisions have
set an important precedent in making companieseven when
they are not publicly listedanswerable for their actions
19. The OECD Guidelines for Multinational
Enterprises cannot of course offer a remedy to the victims
of abuse and cannot impose penalties on companies for their misconduct
and so are therefore not sufficient. There is also the important
question of what should happen when a company that has been found
to have breached the Guidelines, continues to act abusively. If
the Guidelines are to act as a credible deterrent some further
measures should be taken eg delisting if the company is publicly
listed; or debarring company directors. Professor Ruggie has expressed
concern at the failure of most export credit agencies to consider
explicitly human rights at any stage of their involvement.
Where companies have proved themselves unable to adhere to the
Guidelines, government support such as export credit guarantees
or political risk insurance, should be witheld or withdrawn.
20. For serious human rights abuses the
government should consider developing a more effective redress
mechanism for victims of corporate abuse. It should have powers
to sanction companies and impose penalties. Nonetheless, as the
UK NCP has shown, when there is political will to examine complaints
fairly the Guidelines can contribute towards improvements
in company behaviour.
But this progress can only be sustained if there are continued
adequate levels of staffing and resources as well as oversight
by the Steering Board and parliament of the UK NCP.
21. The OECD is poised to review the Guidelines
in particular the human rights provision in response to the criticisms
contained in the reports of the SRSG. It is imperative that the
UK offers leadership in these efforts to ensure that the standards
are not diluted but strengthened. Despite repeated demands by
members of parliament and others, there has been little progress
in producing guidance for companies working in areas of conflict
and weak governance.
While there is a place for voluntary
initiatives and private codes of conduct, theses should be balanced
by credible means of regulation, sanction and redress.
The rules and procedures of the Alternative
Investment Market (AIM) should be tightened to curb or correct
corporate misconduct overseas, particularly that of extractive
The government's proposals for the self-regulation
of private military and security companies are insufficient and
need to be complemented by other measures including legislation.
CDC should be required to conduct human
rights due diligence before public money is invested in companies
abroad. Given the public interest, its development impact assessments
and reports should be made available.
The government should offer leadership
in strengthening the OECD Guidelines for Multinational Enterprises,
particularly in relation to its human rights provision and guidance
to companies operating in areas of conflict or weak governance.
The government should consider taking
further measures against companies who, having been found in breach
of the Guidelines, continue to act abusively such as by withholding
or withdrawing export credits; delisting companies or debarring
For grave human rights abuses the government
should consider developing a more effective redress mechanism
such as a Commission for Business, Human Rights and the Environment
with powers to sanction companies and impose penalties which has
been proposed by the Corporate Responsibility (Core) Coalition.
The government should acknowledge the
need for States to agree global standards by, for example, the
adoption of a UN Declaration, to define a common benchmark for
business conduct in relation to human rights.
433 Joint NGO Statement to the Eight Session of the
Human Rights Council concerning the Third Report of the Special
Representative of the Secretary-General on Human Rights and Transnational
Corporations and other Business Enterprises available at: http://www.hrw.org/en/news/2008/05/19/joint-ngo-statement-eighth-session-human-rights-council Back
Organisation of Economic Cooperation and Development (2001) Corporate
Responsibility: Private Initiatives and Public Goals. Paris. OECD
available at: http://www.oecd.org/dataoecd/58/54/35315900.pdf Back
Arvind Ganesan, Human Rights Watch (2009) "Viewpoint: Why
Voluntary Initiatives Aren't Enough" in Leading Perspectives-Spring
Report of the UN Panel of Experts on the Illegal Exploitation
of Natural Resources and Other Forms of Wealth of the Democratic
Republic of the Congo, 16 October 2002, S/2002/1146.
According to the World Bank many of the Congo's state-owned enterprises
entered into mining contracts at a time of distress or without
proper evaluation of the assets under the partnership agreement.
In 2007, the manifest unfairness of these contracts led the Congolese
government to undertake a wholesale revision of mine licences
issued during the war or its immediate aftermath. Back
Remarks by Angel Gurría, OECD Secretary-General, 22 January
2009 delivered at the European Business Ethics Forum (EBEF)
available at: http://www.oecd.org/documentprint/0,3455,en_2649_34855_42033219_1_1_1_34529562,00.html Back
Richard Wachman Wednesday 4 March 2009 "AIM is
way off after downturn slices 64% from share values" The
Guardian p. 29. "Since January 2008 the AIM 100 index
has fallen more heavily than the FTSE 100 losing 65% against
the FTSE's 43% drop. At the height of the boom, AIM companies
had an aggregate value of £107 billion, but by the end
of February 2009, that had plummeted to £38 billion,
a fall of 64%
Bermuda, the British Virgin Islands and the Cayman Islands account,
respectively for 7.8%, 10.4% and 10.1% of international AIM companies
by number, as of December 2007. See http://www.londonstockexchange.com/en-gb/products/companyservices/ourmarkets/aim_new/Trade+and+Investing/statistics.htm
(visited 27 March 2008). Back
White Nile (now Agriterra) controversially acquired oil concessions
in Southern Sudan (which it later lost). The Australian company,
Range Resources Limited, has acquired rights to oil blocks in
the disputed semi-autonomous region of Puntland in Somalia. Back
RNA, Part Two, 21-22. Independence in relation to rule 21 is
elaborated in Schedule One. Back
Andy Bearpark and Sabrina Schulz (2007) "The future of the
market" in Simon Chesterman and, Chia Lehnardt (ed) From
Mercenaries To Market: The Rise And Regulation Of Private Military
Companies. Oxford. Oxford University Press available at: http://www.bapsc.org.uk/key_documents-policy_papers.asp Back
Foreign and Commonwealth Office "Consultation on Promoting
High Standards of Conduct by Private Military and Security Companies
(PMSCs) Internationally" available at: www.fco.gov.uk Back
Sir Malcolm Rifkind, a former Foreign Secretary and Minister of
Defence, is the chairman of Armor Group, the biggest private security
company operating in Iraq. Andy Bearpark, was the Private Secretary
to Prime Minister Margaret Thatcher and Press Secretary to the
ODA Minister Baroness Chalker. From 1991 to 1997 he
was Head of the Information and Emergency Aid Departments of the
Overseas Development Administration (ODA). Back
On 17 September 2008, 17 States-Afghanistan, Angola,
Australia, Austria, Canada, China, France, Germany, Iraq, Poland,
Sierra Leone, South Africa, Sweden, Switzerland, the United Kingdom,
Ukraine, and the United States of America-finalised the so-called
"Montreux Document on Pertinent International Legal Obligations
and Good Practices for States related to Operations of Private
Military and Security Companies during Armed Conflict". The
Montreux Document is the first international document to describe
international law as it applies to the activities of private military
and security companies (PMSCs) whenever these are present in the
context of an armed conflict. It also contains a compilation of
good practices designed to assist states in implementing their
obligations under international law through a series of national
International Commission of Jurists (2008) Corporate Complicity
& Legal Accountability Volume 3 Geneva p 4. Back
Gillian Merron, Parliamentary Under-Secretary of State, DFID letter
dated 29 September 2008 to Patricia Feeney, Executive
Director of RAID and Simon Taylor, Director of Global Witness. Back
Ruggie, Protect, Respect and Remedy: a Framework for Business
and Human Rights, April 2008; A/HRC/8/5, paragraphs 39 and
RAID (2008) Fit for Purpose? A Review of the UK National Contact
Point (NCP) for the Organisation for Economic Co-operation and
Development (OECD) Guidelines for Multinational Enterprises in
association with The Corporate Responsibility Coalition and The
Trades Union Congress. Back