Examination of Witnesses (Questions 340
TUESDAY 7 JULY 2009
Q340 Lord Dubs: Do the export credit
guarantee people pay any attention to human rights at all?
Mr Hayman: Not that I am really
aware of, no.
Q341 Lord Lester of Herne Hill: I
ought to declare two interests. One is I am on the board of the
Open Society Institute Justice Initiative which has similar aims
about corruption and human rights to your own. Secondly, I did
the Corner House case about the Export Credit Guarantee
Department and the watering down of the anti-bribery standards
that you just mentioned, Mr Hayman. In the light of what happened
in that case, which indicates strong lobbying by the CBI, by British
Aerospace, and by a number of other powerful bodies, to the Secretary
of State for Trade and Industry to weaken the anti-bribery standards
operated by the Export Credit Guarantee Department, is it really
realistic given that that was the view of the Government and these
large commercial organisations, to seek to use that Department
to go wider than anti-bribery when even the anti-bribery strategy
does not seem to be very strongly executed? If one extends it
to human rights generally, is that really realistic in the unpleasant
real world that we live in?
Mr Hayman: That is an excellent
question. If it did its job properly and enforced those standards
then it would have a clear signalling effect to business and that
would be something positive about this. I guess it would also
provide some sort of affirmative defence for business to say I
have attempted to do the best I possibly can, I have done my due
diligence, and thus encouraging best practice. In many cases,
such as for example Afrimex, it is not an ECGD recipient and it
is not the only thing that drives business for the UK, so it is
only going to have an impact where there are large mega-projects
that need credits and guarantees. They tend to shop around for
them anyway. I agree with you that its overall impact would be
limited. It does have a small positive signalling effect. I have
seen that in action a little bit from the World Bank and some
of its work, particularly through the IFC, about standards in
relation to disclosure and transparency of revenues from projects
where they actually put a standard in that to receive funding
from the IFC you had to be transparent about where you are paying
the money and to whom it goes, effectively so the companies had
to publish what they had paid to governments to enable them to
track that money into the exchequers rather than into offshore
bank accounts. It has some positive effects if you can engineer
business processes to back up good practice and good governance.
Ultimately I would say it would make those businesses more sustainable
which may not necessarily be a bad thing.
Q342 Lord Lester of Herne Hill: Can
we look at the experience since the Corner House case.
In your experience, has the Export Credit Guarantee Department
now become more effective in operating the anti-bribery standards
so that we have got that as a piece of evidence to show that what
you are saying could be extended to human rights?
Mr Hayman: No, I could not say
there is any proof that it has become more effective, sorry.
Q343 Lord Bowness: You called for
better training and guidance for FCO and UKTI staff currently
providing support to UK businesses including in conflict zones.
Coming back to what is feasible, if you are going to ask the UK
Government to conduct an assessment of the companies' human rights
performance before it gives assistance, is it really feasible
in a conflict zone for somebody in post with the FCO to conduct
an effective assessment of the human rights compliance of a company
before they give consular or other assistance? If they came to
the wrong answer and decided they would not give assistance, is
there not a grave danger that you might possibly be infringing
the human rights of the individual employees of the company?
Ms Joshi: I would suggest that
this actually builds on the question about the government needing
to have a joined-up approach. If we take the example of Norway,
they have a Council of Ethics. Everyone is nodding their head
so I think everyone is aware of the Council of Ethics. There is
an assessment that that Council makes with respect to human rights
and if money is given to certain companies, whether or not the
Norwegian government would be complicit in supporting those companies.
An investigation is carried out by the Council of Ethics, a decision
is made, and I would suggest with the UK Government a similar
type of approach could be useful where there is an investigation
and assessment made and that feeds into the other departments
such as the FCO. That could centralise where the actual investigation
is occurring, how the assessment is being made, the expertise
that is being used in coming to those conclusions, and then ensuring
that the finding then feeds into the FCO as well as DFID as well
Q344 Lord Bowness: I am very sympathetic
to what you are trying to achieve but if you take a real situation
of a company that is operating in a foreign jurisdiction in a
conflict zone where it has not had the approval and ticked all
the boxes down the line, and consular assistance is then needed
for British citizens working for that company in that country
in that conflict zone, are you actually saying that consular assistance
should not be rendered to those individuals because we do not
actually approve of the policies or have not approved of their
employer's policies? Is that what we are saying: get out of jail
yourself, in other words?
Ms Joshi: No, we are not saying
Q345 Lord Bowness: Good.
Ms Joshi: We are not saying that
consular assistance should be denied to UK citizens, but what
we are saying is that the embassies can play a key role in terms
of providing information and adviser support to companies operating
in those conflict areas.
Mr Hayman: Perhaps I could give
an example of where the FCO could improve and smarten up its act
as a helpful real world case study . A certain country in South
East Asia (which will remain nameless so that I do not want to
embarrass the UK ambassador concerned) was taking a British biofuels
company to a plantation to encourage them to invest with inward
investment, but effectively that plantation was completely illegal
under the laws of the land. It was effectively expropriated by
a member of the ruling elite because it is an entirely kleptocratic
government run for its own business interests. It is a UK company
which is being encouraged by them to invest and take that plantation
over. That is deeply concerning and that is a real world case.
That is the kind of thing where a sensitivity to, not simply promoting
business but helping business to manage risks could be a very
sensible approach. If you go to the FCO website you can get this
great travel advice for private individuals. Can one conceive
of something similar providing some form of sensible, practicable,
implementable guidance for companies about where to invest and
how to begin to manage those risks? Certainly we are saying in
conflict zones like the DRC that would be a very simple thing
to do and to take some measurable steps to saying hold on, this
is a conflict zone, you need to be extremely careful about who
you are dealing with given that practically the entire mineral
extraction from this region is militarised.
Q346 Earl of Onslow: You have joined
the criticism of the operation of the current OECD Guidelines.
What do you think is going wrong and what needs to change?
Ms Joshi: With respect to the
OECD Guidelines, since the revisions to the Guidelines were made
in 2006 and based on our experience in filing the Afrimex complaint,
we were actually very pleased with the process when the complaint
went to the UK NCP. What we have seen of the problem is what has
happened after the final statement. There has been no monitoring
of whether or not the company actually complied with or responded
to any of the recommendations made by the UK NCP. After the decision
was made by the UK NCP in September 2008, Global Witness contacted
the company in February of 2009 to ask whether or not the company
had taken the recommendations into account and we also asked that
the company to respond to information that we had that Afrimex
was continuing to purchase from comptoirs associated with
rebel groups. To make the long story short, up until that point
there had been no follow-up activity done by the UK Government.
We see that as a shortfall. In March 2009 Afrimex responded to
the UK NCP, not to us, stating that they had stopped trading in
minerals from Eastern DRC. To this date we have asked that the
UK Government verify whether or not that is actually the case
and there has been no verification that we are aware of.
Q347 Earl of Onslow: Right. The CBI
told us last week that they thought that review of the OECD Guidelines
might be a positive thing, in other words more or less what you
are saying. Do you think that you could keep the CBI on board
if the UK Government accept your recommendation for increased
powers of enforcement ?
Mr Hayman: It is an excellent
Q348 Earl of Onslow: Flattery will
get you everywhere!
Mr Hayman: One of the interesting
things that has emerged is that it is not always helpful to businesses
to operate in a legal void. This is one of the things that particularly
pertains to conflict zones because companies can very easily get
into trouble and end up having for example, an Alien Tort Claims
Act case filed against them in the US, so perhaps clearer guidance
in those sort of circumstance might actually be helpful. I know
of some large international mining companies who have said, mostly
off the record when you talk to them, that clearer guidance could
be helpful. Going back to the issue about the rise of China, those
mining companies see their ability perhaps to compete and win
in future being based upon reputational excellence and providing
a whole development package, so not just simply digging the stuff
out of the ground and running away with it but providing and building
roads and everything else, which is something that China does
quite well at the moment. They see clearer guidance and the ability
to show themselves to be accountable and good partners for development
as potentially a part of that. This is an interesting area where
actually there may be a more progressive coalition of change coming
out of some of the more forward-thinking companies on this topic
Q349 Earl of Onslow: I seem to remember
seeing some Panorama or Dispatches programme on
a Chinese company's investment. I think it was in the cutely named
Democratic Republic of the Congo where basically they put in everything
themselves, everything was provided by the Chinese, from the laundryman
upwards, and there seemed to be very little benefit to the local
people, although there may have been some benefit to the government.
Does that fit with your experience?
Mr Hayman: Yes, that is a common
image and in some cases that is the case and Chinese projects
do very much come with an army of labourers who will then simply
build everything themselves. That said, Chinese companies do build
infrastructure very well, so in some countries you can point to
clear infrastructural developments that China has been able to
bring about as part of a package deal for natural resources, so
I would not completely dismiss the entire model of not just digging
mines but building infrastructure as well, but there is probably
a better and more transparent way of doing this, and I think that
is where international companies might be able to compete in future.
Earl of Onslow: Finally, almost as an
afterthought you have told us that you agree with CORE's call
for a UK Commission for Business, the Environment and Human Rights.
If the UK Government were to make the policy changes which you
think are necessary what practical difference would the Commission
make? I think it is reasonable to say that it is most unlikely
to happen because (a) I suspect there is no room in this legislative
session and (b) we are going to have a general election and I
do not think anybody will be into building new quangos after the
Chairman: We would still like to hear
what difference it might make.
Q350 Earl of Onslow: That is completely
Ms Joshi: Answering your question
and linking it to your question about the OECD, we do support
revisions to the OECD but the OECD does have its limitations.
It does not provide a remedy and also sanctioning powers do not
rest with the UK NCP. We support the early stages and the principle
of the CORE submission and we support further development and
the ideas being fleshed out more.
Mr Hayman: Just to say there are
nonetheless short-term practical steps while we discuss the exact
parameters of how that could go forward that can be taken now
and which would have a measurable impact.
Q351 Earl of Onslow: It does seem
to me from reading this paper that there is a real and genuine
problem. It is not just people empire building but seems to be
a real problem.
Mr Hayman: There is an absolute
vacuum. If you look at the statistics of how many people have
died in the civil war in the Congo, it is absolutely mind-bending.
It is over three million people and you can see child slave labour
directly: you can go there and witness children as young as eight
digging almost with their bare hands out of the ground, and that
stuff being bought and eventually traded by UK companies. That
is a real fundamental problem.
Q352 Earl of Onslow: And some of
the UN forces have been shown to have not been behaving in a very
Mr Hayman: There has been a problem
with the accountability of UN peacekeepers too, that is absolutely
Earl of Onslow: Rape and getting involved
in things. Right, okay.
Q353 Chairman: Thank you very much
indeed for your time. I think you have answered the questions
Mr Hayman: Thank you very much.