Examination of Witnesses (Questions 20
WEDNESDAY 3 JUNE 2009
Q20 Lord Dubs: Maybe the world has
got a bit tougher but some companies have got away with appalling
human rights abuse for a long time, and I quote Shell in Nigeria,
and there seems to be nothing that can be done about it. Maybe
now there is but for many years there was not.
Professor Ruggie: That is precisely
my point. Because they were able to get away with it and because
no-one required them to do anything more at the time or no-one
urged them to do more at the time you have the outcome that you
have, and todayand I think it is today literallythe
court case opens in New York against them.
Q21 Earl of Onslow: I have followed
with interest what you have been saying since I arrived and I
apologise for being late because I have been to another committee.
One of the greatest problems for companies in human rights was
Bhopal in India. If I remember rightly it was 60 per cent Indian
Professor Ruggie: It was majority
Indian owned, yes.
Q22 Earl of Onslow: The American
company got very considerable stick for it. How do you get round
the problem of a nominally outside company, independently owned
inside, behaving as laxly as the Bhopal management obviously did;
I do not know at what level it was the American management or
whether it was the Indian management. That strikes me as a very
serious problem. How do you address it?
Professor Ruggie: Actually, in
the case of Bhopal almost all of the management was Indian. There
were maybe one or two Americans left in the management of the
Indian subsidiary at the time.
Q23 Earl of Onslow: But the blame
went back to the American headquarters.
Professor Ruggie: Legally speaking,
the reason that the US courts even entertained a case against
the parent company was the charge that there were flaws in the
design of the plant to begin with and the plant was designed by
the parent company because the subsidiary did not exist at the
time the plant was designed, and, secondly, that it had built
into it lesser safety features than an American equivalent plant
which was operating, I believe, in Virginia; I cannot remember
exactly where. So there were fairly narrow technical legal reasons
why a court would have contemplated a case against the parent
Q24 Chairman: Can I ask you a question
relating to the different types of this? Are the things we are
talking about herecorporate social responsibility, human
rights obligations, the luxury of the multinationals? How do you
see them related to the SME sector? I think 90-odd per cent of
business in the UK is SMEs, and if you said to them, "You
have got human rights responsibilities" and all the rest
of it, they would look at you peculiarly and wonder what on earth
you were talking about. You have previously said that the moral
and social responsibilities of businesses are being universally
accepted but I am not entirely sure that is right when we see
how SMEs often kick against regulation which is not necessarily
human rights but has that feel to it, such as health and safety
or labour rights.
Professor Ruggie: That is certainly
a good question. In general my argument would be that the basic
principles of respecting human rights ought to apply to everybody
but the modalities of implementation would surely differ. A company
that has an annual turnover that is equivalent to the GDP of 80
per cent of the countries in the world has different capacities
and also a different impact than a company that employs 50 people
and operates in Manchester or wherever. So the modalities surely
are different depending on the size and scope and impact of the
company, but the basic principles ought to be similar. That would
be my response.
Q25 Chairman: You were talking earlier
on about due diligence. Can you see a position where businesses
do due diligencethis is I suppose getting into the voluntary/compulsory
debate which you thought was probably a false debatebut
can I put it this way: how can we get companies to do due diligence
without additional legal requirements or regulation, for example
through reporting requirements in their annual reports or other
changes to corporate law?
Professor Ruggie: I think some
of those things would be good ideas. I think having various forms
of reporting requirements would be a good idea. I also think that
certain modifications in corporate law would be a good idea. In
the case of my own country, the way in which the statutes and
regulations are written, if a board of directors strays too far
from maximising shareholder value in the short term they could
actually be sued by a shareholder, so the more the company worries
about its social impact, it potentially increases its liability,
which is perverse, and therefore the regulations ought to be modified
to encourage companies to pay greater attention on any potential
adverse impact, so there are many areas of regulation that could
be better aligned and should be better aligned.
Q26 Chairman: That form of regulation
would act as a shield for the corporate bosses against their shareholders
in terms of doing this due diligence and reporting and checking
that things were being done properly?
Professor Ruggie: It would also,
I believe, of course be in the long-term interest of the company
itself. Short-term shareholder value, for all of the wonders that
it has contributed to the world, also has significant adverse
consequences, as we have seen in the last year.
Q27 Chairman: So I take it that your
view is that businesses have nothing to fear from performing human
rights impact assessments on their activities and in fact in the
longer term they have got a lot to gain from doing that?
Professor Ruggie: I would think
so. The only thing they would have to fear, apart from fear itself,
is if they lie about what they find out and that fact gets out
or if they suppress evidence and that gets out, otherwise they
have nothing to fear.
Q28 Chairman: Unless they find bad
things and do not do anything about them?
Professor Ruggie: Exactly.
Q29 Chairman: Whose responsibility
is it to demystify these obligations for businesses? Is it your
job, is it our job?
Professor Ruggie: It is everybody's
job. Mystification is a cultural phenomenon, a cultural product,
and we all have roles to play in that, including parliaments.
Q30 Lord Morris of Handsworth: Can
I just pick up the point of demystification, because the debate,
such as it has been, has been at a fairly high level intellectually,
and I suspect that a huge tranche of the population, certainly
in the UK, has been left behind. I just wonder whether we could
simplify it somehow because essentially what we are talking about
is a pattern of behaviour, how corporate Britain, corporate US
and corporate France behave. In my house we have a simple approach
to behaviour: we penalise breaches and we reward compliance. Taking
it at a simple level, could that approach work?
Professor Ruggie: Sure, I would
add a third element though and that is prevention.
Q31 Lord Morris of Handsworth: Yes,
I take that point, absolutely.
Professor Ruggie: So we have a
Q32 Chairman: Could I ask you this
oneand it is drawing on something that you have said before
about a distinction between the social responsibility of businesses
to respect human rights and, your words I think, "worthy
endeavours that may contribute to the enjoyment of human rights"
but which do not go far enough. Going back to what you said earlier
on, is that a realistic distinction and, if it is, can you give
us an example of a company doing something desirable but failing
to do what is required?
Professor Ruggie: Sure, you can
have companies that have wonderful philanthropic programmes and
yet do not go through the steps required to demonstrate respect
for human rights.
Q33 Chairman: Can you give us an
Professor Ruggie: Again, let me
not identify the country, it was a country I visited not long
ago, where a huge, huge company in that country claims to have
a very active CSR programme. To some extent they provide housing
for workers and all sorts of things. And I asked, "Do you
have any mechanism to actually allow people in the communities
in which you operate to bring complaints against you?" and
the answer was, "No, we don't need to do that. We know what
they need and want." That to me is a classic example of a
company that is doing wonderful things by providing housing but
is disrespectful of the community by not taking seriously the
need to engage with the community to find out what exactly are
the issues that they may have with the company.
Q34 Lord Dubs: In answer to an earlier
question you have partly answered this one, but can I just to
tie up any loose ends on this. If a state contracted out a public
service and failed to provide the right for service users to go
to court to claim that the private provider had acted in breach
of human rights standards, would that, in your view, be a breach
on the duty of the state to protect human rights? In other words,
it may not always happen automatically, which is what I think
we agreed a little while ago, but this would be a serious breach
by the state, would it not, if they failed to make that provision?
Professor Ruggie: Lord Dubs, this
is so heavily dependent on the particular case, what the statutes
are, what the treaty obligations are, what reservations were lodged
when the treaty was ratified, but, in principle, I would say yes.
Lord Dubs: Okay, fine, thank you very
Q35 Mr Sharma: In your latest report
you discuss the role that national human rights institutions can
play. Human rights institutions in the UK do not generally hear
complaints about human rights breaches. Do you have any examples
of good practice which our relatively new European Human Rights
Commission and their colleagues in Northern Ireland and Scotland
should learn from?
Professor Ruggie: What we are
encouraging is for national human rights institutions to be permitted
to take complaints and also to be permitted to address business
issues. In many cases they are not. We have collected information
on the performance of national human rights institutions, and
many of them do both, and would certainly qualify for the category
of good practice, and they range from Denmark to Kenya. You have
them in a variety of countries, not only in Europe. I think the
issue again is that they need to be permitted to accept complaints,
not in a judicial sense necessarily, but in a mediation capacity
and, secondly, they need to be allowed to address business-related
issues. It is not simply state abuses that they should be concerned
Q36 Mr Sharma: Can in-house remedies
alone satisfy the need for an effective remedy for alleged breaches
of human rights?
Professor Ruggie: In-house meaning
in the company?
Q37 Mr Sharma: Yes?
Professor Ruggie: No, I do not
think so. I think at a minimum, to go back to a point I made before,
you need public signalling as to what is expected of the company.
Even if the government advocates voluntary corporate responsibility
in a programme or policy, it needs to signal what that means,
it needs to signal what the expectations are, otherwise it is
not a policy. A policy at a minimum provides, if you will, a focal
point around which expectations can converge, or on which expectations
can focus, and if it does not do that it is a gesture, it is not
a policy, so at a minimum a policy needs to signal what is expected
and then you go up from there, if you will, on a regulatory ladder.
If that does not work you move on to something else.
Q38 Chairman: Could I explore with
you the issue of extraterritorial jurisdiction, which is something
we are also looking at it in a different context in relation to
the law on compensation for torture and war crimes and crimes
against humanity and all that sort of thing. I would like to raise
it in this particular context. We have got the US Alien Torts
Claims Act. Is the Shell case being brought in New York
under those provisions?
Professor Ruggie: Yes.
Q39 Chairman: Presumably we could
have heard the case in the UK courts anyway theoretically, it
being a UK-based company, but, presumably, they decided to go
to the US because compensation is higher in the US than it is
in the UK, the old rule that you will go where you are going to
get the best money. Is there an argument in favour of extraterritorial
jurisdiction, and what is it?
Professor Ruggie: It is an issue
that needs to be handled with care. Let me make a couple of points,
if I may, about it. Firstly, in my judgment, and I get whipped
for this in some quarters, states are not legally required to
exercise extraterritorial jurisdiction over their companies, although
if the issue is crimes against humanity obviously they should
do so. At the same time, states are generally permitted to do
more than they are currently doing. One of the things that states
are permitted to do, which relatively few do, is what we call
parent-based regulation, where, let us say, the Canadian Government
requires the Canadian parent company to exercise oversight of
its own subsidiaries, and it holds the parent company responsible,
as opposed to directly reaching out into another country and legislating
directly for the subsidiary. Developing countries in particular
get all huffed up when confronted with extraterritorial jurisdiction
by Western countries in particular. If you propose a major intervention
in their jurisdiction you would not get very far in most UN bodies,
for example, but parent-based regulation or requirements are perfectly
acceptable under current international law.