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

Examination of Witnesses (Questions 327 - 339)



  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 sanctioned.

  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 actor—and we have DFID publishing the White Paper talking about trying to do this more in conflict zones—the 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 topic.

  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 perfect—there you go—an 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 governments?

  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 devices.

  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 market—the open market—and 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 shamed.

  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 do—and perhaps the UK, Norway and others who seem already to be putting some practices in place, and you heard about Denmark earlier on—is 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.

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Prepared 16 December 2009