Any of our business? Human Rights and the UK private sector - Human Rights Joint Committee Contents

Examination of Witnesses (Questions 20 - 39)



  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 today—and I think it is today literally—the 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 owned.

  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 company.

  Q24  Chairman: Can I ask you a question relating to the different types of this? Are the things we are talking about here—corporate 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 diligence—this is I suppose getting into the voluntary/compulsory debate which you thought was probably a false debate—but 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 trilogy.

  Q32  Chairman: Could I ask you this one—and 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 example?

  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 much.

  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 with.

  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.

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Prepared 16 December 2009