Examination of Witnesses (Questions 327
TUESDAY 7 JULY 2009
Q327 Chairman: I would like to welcome
both of you this afternoon and say thank you for your time. We
need to finish by about 20 past three and it would be very helpful
if we could start. I want to look at the question of the relevance
of the Ruggie Framework in conflict zones. Why do you think the
UK should take unilateral steps in respect of UK companies operating
in conflict zones before Professor Ruggie comes up with his proposals
for a global response?
Ms Joshi: We think the Ruggie
Framework is quite relevant. We support the three pillars that
have been developed in Professor Ruggie's Framework. In the section
in his report specific to conflict zones we support his finding
that these were the places where the worst human rights violations
are occurring and therefore companies are at highest risk of being
complicit in these violations. We support the finding that conflict
zones are unique places with unique circumstances where there
is violence, absence of law and an absence of governance and that
in this context the human rights regime cannot function as it
is intended to function when looking at international human rights.
We support Professor Ruggie's findings specifically that states
should take more assertive policy action, we would actually go
even a step further and like to see Professor Ruggie suggest that
in these contexts voluntary mechanisms are not enough and that
in conflict zones there should be hard law that is used and there
should also be direction given by the home state, in this situation
the UK Government, that compels UK companies to comply with human
rights standards, and if they do not these companies should be
Mr Hayman: As for why the UK Government
should go further, I would say there are a number of cases where
UK companies have been found to be guilty of violations of the
OECD Guidelines on multinational enterprises, which is a source
of considerable national embarrassment for the UK, where the UK
has done nothing about addressing that effectively. One of the
examples we cited in our paper is that of Afrimex which is a company
trading in coltan and cassiterite, which is tin ore coming out
of the East of the Democratic Republic of Congo. It was found
in violation of two main elements of the Guidelines: one was paying
rebel groups and the other one was failing to exercise due diligence
over the supply chain to weed out the use of child forced labour.
The UK National Contact Point has ruled that there is a UK company
actively in violation of the Guidelines and yet nothing has happened
as a result of that. That is a source of embarrassment. I think
if the UK wants to be a credible international actorand
we have DFID publishing the White Paper talking about trying to
do this more in conflict zonesthe UK faces a number of
particular challenges. It will not be a credible intercessor in
the DRC unless they address the human rights impacts of those
companies operating in that particular conflict zone. So, I would
say it is a particularly poignant challenge for the UK at the
moment and the UK should develop and advance its thinking on this
Q328 Mr Sharma: A number of witnesses
have told us that the Government lacks a joined-up strategy on
human rights and business. Do you agree?
Mr Hayman: I can answer that really
simply: yes, I would agree with that completely.
Q329 Mr Sharma: If so, can you give
us any examples of the implications of this lack of coherence
in respect of businesses operating in conflict zones?
Mr Hayman: A perfect example being
the one I have just cited of course, that of Afrimex and the whole
issue of its being found in violation of OECD Guidelines. Another
example might be a UK company AMC, Amalgamated Metals Corporation,
a subsidiary of which has been named in UN Expert Panel reports
looking at the Eastern DRC and arms violations in the region.
It was found to be working with a particular comptoir,
(which is the Congolese word for a trading company) which was
prefinancing intermediaries who are called négociants,
who are the people buying the minerals on the ground, and who
were buying from particular rebels. The UK Government has not
done anything about that. It was invited through a Security Council
resolution to actually propose what it was going to do about tackling
companies' roles in funding conflict in the DRC. We had a recent
meeting with the Minister for Africa, Lord Malloch-Brown, and
he could not give us a straight answer. He said, "I cannot
get a straight answer from my people." So perfectthere
you goan absolutely prima facie case of lack of
joined-upness. I could carry on if you like to also incorporate
the UK Department for International Development's role in all
this. It has a whole programme called Trading for Peace which
is meant to be working with companies trading minerals from the
Eastern DRC and trying to get them to use their powers for good
but which in fact that has turned out to be a big block on dealing
with rogue companies that only seem to want to operate in a predatory
manner because DFID are saying that they cannot frighten the companies,
they cannot get out in front, `let us talk to them first'. There
has been a real problem of actually addressing the hardcore of
malfeasants who are not actually interested in doing good work;
they are simply there to make money and they want to make money
as fast as possible and get out.
Q330 John Austin: You said quite
clearly that Afrimex and the AMC should have been reported by
the UK Government to the UN Sanctions Committee for their activities
in the DRC. Can you give any examples of other companies that
have been reported to the UN Sanctions Committee by their home
Mr Hayman: It is a good question.
The standardised practice is normally a UN expert panel will go
away, investigate and recommend that companies are sanctioned
and that is the way it has normally happened. I know of discussions
between governments behind closed doors about who goes on sanctions
lists. The example would be Victor Bout, the person who was named
by Peter Hain as the "merchant of death" involved in
arms sanctions violations from Liberia, Sierra Leone and elsewhere.
He was taken off a recent sanctions list. There was considerable
embarrassment and a suggestion that the UK and US were stopping
him going back on the sanctions list. He was put back on shortly
after the exposé in the press so that was pressure on the
UK/US governments to put him back on. It was not necessarily a
UK company but certainly it is a subject of much negotiation at
the Security Council which companies get sanctioned.
Earl of Onslow: Can you tell me what
is this stuff we are talking about, cassiterite and something
else? Does anybody else know round the table?
Q331 Chairman: Let him explain.
Mr Hayman: Cassiterite is effectively
tin ore so it is a kind of rock that is dug out of the earth and
it is turned into tin in smelters mostly in the Far East, although
one of these smelters is owned by a subsidiary of a major British
company called AMC. Tin ore is used in a huge number of products.
It is a solder in the electronics industry so it is used for things
like mobile phones and iPods. Coltan is a particular commodity
that is used to make chips and everything else in mobile telephone
Q332 Earl of Onslow: And that is
the only place it comes from, is it?
Mr Hayman: It comes from other
places but a lot of its production is tied into long-term mining
contracts elsewhere. The DRC production effectively is sold on
the spot marketthe open marketand as these smelters
have excess capacity so they tend to hoover up what is available
internationally and melt down as much as possible. There is a
problem tracing it back to sources as a lot of it can get mixed
together from different sources but there is also an issue of
there are only a few choke points in the global supply chain,
only a few major international smelters where the stuff goes to,
so there is a way of looking at the trade there and seeing where
they are buying it from.
Earl of Onslow: That is very helpful.
Q333 John Austin: On the Afrimex
and AMC issues, both of these companies have been publicly named
by the UN Panel of Experts in relation to their activities in
the DRC. Afrimex has also been found in breach of the OECD Guidelines
by the UK National Contact Point, as I think you told us. What
practical difference would it make if a report were to be made
to the UN Sanctions Committee? They have already been named and
Ms Joshi: I think it would make
quite a big practical difference because, first of all, as we
have seen with the final statement from the UK NCP, nothing has
actually happened with that final statement. We were quite happy
with the decision made and the final statement itself and the
text is quite good. The disappointment is that no other department
in government or in no other way has the Government picked it
up within its policy in terms of its relationship with Afrimex,
so the practical significance is that it would give a signal to
companies that do not comply with final statements that the UK
Government takes these instances very seriously.
Q334 Lord Dubs: You recommend that
the UK should take steps to develop sanctions for UK companies
which fall below a certain standard in respect of the human rights
impact of their business. Do you think the UK can determine that
standard without some internationally agreed benchmarks?
Mr Hayman: I would give an example
perhaps of the Anti-Bribery Convention, if I may, in terms of
extraterritoriality and bribery by UK companies and everything
else. Looking at the history of anti-bribery legislation in the
US, the US discovered that there was a major problem with American
corporations bribing. There was a particularly big scandal around
Boeing in the 1970s. They unilaterally passed legislation that
outlawed US companies doing it and they used that as a platform
then to launch an international programme which led to the OECD
Anti-Bribery Convention, so I would say there is a role for unilateral
action leading in due course to a multilateral convention on understanding
these things. That is a good model for extraterritoriality about
human rights abuses. There is room for national governments to
act still with their own particular companies and there is a role
for international co-ordination and a level playing field. I think
it is a two-step process. I do not think you have to necessarily
go straight towards international and multilateral action.
Q335 Lord Dubs: Before we get to
international and multinational action do you think that unilateral
action by the UK would really improve human rights in conflict
zones? In other words, is this not just a policy for enabling
UK companies to keep their noses clean?
Mr Hayman: In terms of the DRC
I think it would make a major difference. You have two major companies
there who have been involved effectively in funding rebel groups.
I will give you an anecdote, if I may, from looking at the issue
of conflict diamonds, which is one of the things our organisation
has done in the past and we were nominated for a Nobel Peace Prize
for our work on that. It is not like it stops the whole problem
overnight but it can help address and diminish the intensity of
the abuses that take place and it sends a clear signal to other
international actors that perhaps the game is up. I think there
is a need for a strategy of headhunting perhaps the worst malfeasants
in these kinds of areas to show everybody else that the rules
have changed. There is a standardised rule that there are always
15 per cent of people who obey the rules, 15 per cent who always
break them, and there are 70 per cent who wait and see what is
going to happen in the middle. I would say in this case what you
are helping to doand perhaps the UK, Norway and others
who seem already to be putting some practices in place, and you
heard about Denmark earlier onis signalling that there
is a general sort of change in business ethics in conflict zones.
Lord Dubs: Let me put an argument to
you. I do not know whether you would call Burma a conflict zone
but let us say there is enough going on there for it to be within
the terms of what you are saying. What about the argument that
if Western companies (not necessarily British) pull out of Burma
it will make not the slightest difference in Burma because they
will immediately be replaced by Chinese companies who do not care
about human rights in Burma?
Q336 John Austin: Or Indian?
Mr Hayman: It is an omnipresent
challenge, I would say. What is interesting is that we have actually
done some work on Chinese companies in Burma. We looked at them
and we showed how they were effectively engaged in illegal logging.
It was sufficiently embarrassing to the Chinese pre the Olympics
that they actually shut the border and pulled their companies
out of Burma. They were illegally logging in the Karen areas where
there is a series of minor civil wars along Burma's borders. We
are not advocating that only the UK does this. I think there has
to be a role for governments to provide guidance to their companies.
I would also says there is a role beyond just pure legislation
to actually providing guidance to prevent companies getting into
trouble in the first place. That is where, to my mind, there is
a huge fertile area of what the UK should be doing, particularly
the FCO, and it simply is not at the moment. For example, there
should be clear guidance about what the UK Government would like
you to do if you are operating in Eastern DRC, or how you should
be considering the risks of operating in a conflict zone. Why
can't that be done?
Q337 Lord Dubs: One tool, as it were,
and I think in this you agree with Professor Ruggie, is to use
export credit guarantees. I think John Ruggie said they could
perform a useful tool to improve the human rights impacts of companies
operating overseas. What standards do you think the ECG Department
should apply when judging whether the risk associated with a project
is too high?
Ms Joshi: To me the standard that
should be applied is the UK Government's obligations to international
human rights standards, so when you are looking at the ECGD when
they are providing credits or insurance for companies they should
be ensuring that the companies that they are supporting comply
with those international human rights standards. The risk would
be too high if the company could not show that it could comply
with those standards and, as we have heard in other sessions before,
there should be a due diligence requirement that the company must
be required to put forward in order to show that they can comply
with those standards.
Q338 Lord Dubs: Have you raised the
issue with the Government or the CBI that export credit guarantees
should be used in this way?
Mr Hayman: We have had some very
early preliminary discussions but I have to say dialogue with
the ECGD has never been easy at the best of times. I know from
engaging with them on anti-bribery provisions that there is a
clear box in there that says "thou shalt not bribe and if
you do you will not be covered by an export credit guarantee".
That has been problematic in practice, as perhaps many people
in the Committee know, and the ECGD has not always done particularly
well in taking soundings from people. We have spoken to them a
little bit about this but I would not say it has any traction
at the moment.
Q339 Lord Dubs: And with the CBI?
Mr Hayman: Not with the CBI.