Supplementary memorandum submitted by
1. The Confederation of British Industry
(CBI) is the national body representing the UK business community.
It is an independent, non-party political organisation funded
entirely by its members in industry and commerce and speaks for
some 240,000 businesses that together employ around a third
of the UK private sector workforce. The CBI's membership includes
the majority of the FTSE 100, some 200,000 small and medium-sized
enterprises (SMEs), more than 20,000 manufacturers and over
150 sectoral associations. It also represents UK business
internationally through membership of international business organisations,
through its extensive network of contacts, and through offices
in Brussels, Washington DC, Beijing and representation in New
2. During oral evidence, the Joint Committee
asked for additional information from the CBI. This submission
covers those points.
3. The CBI would wish, however, to stress
the strong support it has given for the work of Professor John
Ruggie, the UN Secretary-General's Special Representative (SRSG)
on business and human rights. We believe his mandate is the best
and most effective way to address an extremely complex set of
issues in a balanced, objective and practical manner. The work
that he is undertaking to operationalise the framework of state
duty to protect, corporate responsibility to respect and access
to remedies will address much of what the Joint Committee is examining.
We therefore urge the Joint Committee to ensure that it reflects
and reinforces the SRSG's work.
4. The London Stock Exchange exists to fulfil
a particular role. We doubt that human rights falls within the
statutory financial markets regime regulated by the Financial
Services and Markets Act and so not within the remit of the London
Stock Exchange. Furthermore, we do not see that listing rules
can easily and practically be adapted to regulate human rights
conduct by companies listed on the Exchange. One suggestion that
was made to us in oral evidence included the phrase "firms
which have committed or are complicit in human rights abuses".
It is not clear to us the basis upon which such judgements would
be made and by whom. The CBI would therefore not support this
5. There are two other broader points we
would make. First, the Companies Act 2006 includes the concept
of materiality and the Business Review may include a wide range
of issues deemed to be material. Second, it is important to focus
on what a company does when it finds out that something has gone
wrong, often in circumstances that were not of its making. Any
policy response should therefore allow those companies to find
ways of resolving the matter and to improve performance.
6. It is a matter for the contract framers
to consider how they wish to construct a contract, given all the
factors that they will have to take into account. This includes
the duties they have under various pieces of legislation. Tender
documentation will need to reflect any of those duties that will
then be passed on to the suppliers.
7. Value can be seen as a concept that encompasses
multiple elements. Multilateral obligations to which the UK is
a signatory, such as those at the World Trade Organisation under
the Government Procurement Agreement, embody the principles of
transparency, non-discrimination and fair and effective competition
amongst contracting parties as key elements of ensuring optimal
8. In addition, companies have codes of
conduct, belong to sectoral or trade associations that run compliance
programmes, and are members of schemes that provide kite marks
or other endorsements related to sourcing, behaviour and compliance.
All these may be drawn upon if the contracting parties so wish
and they can serve as important criteria in evaluating bids for
9. The business community has very severe
reservations about the extraterritorial application of legislation.
These are both principled & practical in nature. We believe
that extraterritoriality undermines basic legal principles whereby
a State regulates persons and activity within its borders. In
addition, it increases legal and commercial uncertainty; increases
the prospects of retaliation, protectionism and political disputes;
distorts trade and investment; and produces conflicting requirements
that have negative consequences, including enhanced transaction
and compliance costs, on business.
10. In general, the CBI believes that this
argues for a State to refrain from attempts to exercise jurisdiction
unless there is a clear, demonstrable and substantial link to
11. In oral evidence, the question of the
US Alien Tort Claims Act (ATCA) of 1789 was raised. The CBI
wishes to re-affirm that we do not believe that an Act that was
passed to deal with the actions of States can be made applicable
to other actors. The US Supreme Court has narrowed the scope of
the extraterritorial impact of the Act quite considerably when
it has been petitioned. As of now, there have been no judgements
handed down from US courts involving companies that impose financial
or other penalties. Any settlements that have been made have been
agreed out of court. This statute will not work for actions for
which it was never intended and should not accommodate.
12. Finally, we would note in this context
the recent statement by the Republic of South Africa welcoming
the decision of the US District Court (Southern District of New
York) to dismiss claims made under ATCA "based solely on
the fact that companies merely did business with the apartheid
government". This decision addressed some of the South African
Government's concerns. The same statement also welcomes moves
to have remaining matters resolved outside the court process in
the Republic of South Africa.
13. The CBI has discussed the proposal for
a UK commission on human rights with the Core Coalition. It seems
to be a mix of legal, quasi-legal and non-legal activity. We are
unable to support it for significant reasons, mainly because it
makes no attempt to analyse current instruments, codes, processes,
conventions, how law is enforced, or where the gaps are in any
objective manner. In that sense, we are concerned that there is
a danger that it could undermine the global solutions that the
SRSG is seeking to put in place.
14. In addition, the extraterritorial nature
of the proposal whereby a UK public entity is set up to judge
standards of behaviour in other jurisdictions raises major barriers
and problems. This is separate to the issue of upon which and
whose standards will such activity be based. We doubt whether
the effect of the commission in this area will be anything other
than to drive the wrong-doer away from any influence that good
practice UK companies can seek to deploy. Even in the area of
advising and guidance, which is perhaps the better part of the
proposal, we remain to be convinced that the UK-centric basis
of such a commission could properly address complex and evolving
15. Finally, we believe the commission would
undermine the operation of the OECD Guidelines and the National
Contact Point (NCP) process at a time when the UK reforms of the
NCP have been endorsed by all stakeholders as major advances.
Such a move would hamper the ability of the UK to lead opinion
in the forthcoming review of the Guidelines, as well as making
access to remedies more confrontational and combative.
16. For all of these reasons, the CBI strongly
endorses the statement of the Minister of State at the Ministry
of Justice, Mr Michael Wills MP, who told the Joint Committee
in oral evidence on 14 July 2009 that there was no need
for a commission as a working framework was already in place.
17. In concluding this supplementary submission,
we reiterate the positive role that the CBI will continue to play
in contributing to the mandate and work of the SRSG.
20 September 2009