Examination of Witnesses (Questions 420
- 439)
TUESDAY 14 JULY 2009
MR MICHAEL
WILLS MP, IAN
LUCAS MP, LORD
MALLOCH-BROWN
AND MS
CARMEL POWER
Q420 Chairman: We have been told
that the Business Principles Unit, which advises the Export Credit
Guarantee Department, states that it does not consider it is associated
with conflict—which is probably the very sharpest end of
human rights—when assessing projects proposed for export
credit guarantees; is that right? I find that rather surprising
if it is correct?
Ian Lucas: Where is that evidence
from? I find that surprising as well.
Q421 Chairman: I will quote it to
you. There was a hearing last week, the Information Commissioner,
where Corner House were seeking publication of information relating
to the Baku pipeline project and the question to the witness from
the Information Commissioner: "Does that include assessment
of political security on conflict related risk?—No."
Ian Lucas: I would expect conflict
risk to be taken into consideration by the underwriting team as
part of the process.
Q422 Chairman: That is a pretty clear
answer, is it not—not qualified but just "No.?"
Ian Lucas: I hope I gave you a
pretty clear answer.
Q423 Chairman: It is pretty important
at the very least. We will move on to the recommendation that
they came out with but my own view at the very least is that if
you have an area which is potentially subject to conflict, civil
war and some of the horrible things we see in Sub-Saharan atmosphere
and we are not taking that into account when we are considering
whether a company gets an export credit guarantee then I find
that extremely surprising, not just from the human rights' perspective
but the very fact that we are gambling with taxpayers' money as
well, which we might get back, using a much more hard headed approach.
Ian Lucas: As I have indicated,
my understanding is that conflict risks are assessed by the underwriting
team; that is my understanding of the position.
Chairman: Perhaps you might like to go
back and check it as against the evidence that was given to the
Information Commission and give us a memorandum on that.
Q424 Lord Bowness: Gentlemen, I apologise
that I was late for the beginning of the session. Can I just go
back to what you were saying, Mr Lucas? I did not really understand
it. You say that an assessment of human rights was not a fair
burden to impose on individual businesses when they are submitting
their project and that the ECGD only has to consider human rights.
What does that actually really mean in terms of a project which
is there before the Export Guarantee Department in considering
it? We all know cases, do we not, that have gone to court on Judicial
Review where perhaps the government—any government, not
this particular one—has lost because the court said that
due consideration has not been given to certain factors, so the
appropriate Department reconsiders it and comes to the same conclusion
and said, "I have considered it." Who is looking at
the human rights aspect of these projects if it is an unfair burden
on the applicant and the Department only considers it? And really
as a follow-up, if it is not the ECGD's business to do it who
decides what is their business? Cannot your Department tell them
what is their business and what they ought to be doing?
Ian Lucas: Yes, I can. The suggestion
as I understand it—and perhaps I misunderstood the suggestion—was
that in the case of each individual application an individual
human rights assessment should be undertaken by each individual
company and then lodged with the ECGD before any decision was
made on the application, and that was what I was describing as
being something that I thought would be unfair to impose on an
individual business. What I want to be clear about is that there
are responsibilities on the Export Guarantee Department to take
into consideration the issues of human rights in determining their
applications and specifically that there are obligations to consider
issues such as—and I have a least here of land resettlement,
labour, indigenous people, lost of culture and culture heritage.
So those are issues that are there for the consideration of the
application, but it would not in my view be reasonable to expect
individual companies to make assessments relating to those individual
matters when lodging an application.
Lord Bowness: Are they not the people
who will know the answer to these questions?
Q425 Chairman: If you take what Mark
was saying earlier on about how business is now starting to get
human rights in the overseas developing countries in which we
are investing—and we have had a plethora evidence from business
both formal and informal that now this is part of the due diligence
process to check out what is going to happen in the developing
world and they are producing these reports for their own board
before they actually decide to invest. They then come to you and
say, "Can we have an export credit guarantee for this?"
and have already done that work, so why are you not asking them
to produce that work which nine times out of ten they have already
done and on the tenth occasion they ought to have done? If we
are going to be gambling with taxpayers' money because effectively
what you are asking the taxpayer to do is to underwrite these
businesses—that is what the Credit Guarantee Department
is all about—and they are prepared to gamble with taxpayers'
money on businesses investing overseas that have not done the
appropriate due diligence if they do not produce these reports.
Ian Lucas: What we are expecting
business to do is to adopt principles in the work that they are
carrying out in a particular part of the world. We are not expecting
business in every individual case to carry out a detailed assessment
of the type that you seem to be suggesting every time they make
an application to the Department. I am surprised that you are
suggesting that, frankly.
Q426 Chairman: I am suggesting it
because it is actually happening. As Lord Malloch-Brown said earlier
on—and that chimes exactly with the evidence we have had
throughout this inquiry—businesses are doing this anyway;
they are producing these reports for their boards. We have had
a huge amount of information from BP and on behalf of BP about
the work that they are doing to clean up their act when they do
this sort of work and whether they decide to invest or they do
not. We have heard of companies that have done this work, done
the due diligence and decided not to invest on the basis of what
they have found, or indeed to dis-invest when circumstances have
changed. So they do this work anyway on these big contracts. Of
course if you are investing in somewhere that is 100 per cent
it is not an issue but if we are talking about investing in large
parts of Africa or parts of Asia or indeed in parts of Central
America it is a big issue, and I would have thought that if we
are going to gamble with taxpayers' money to the tunes of tens
of millions of pounds in some of these cases and we are not expecting
the proper due diligence to be done to protect that investment
at the very least because the human rights considerations are
part of protecting that investment. I am amazed.
Ian Lucas: These are issues that
the Export Credit Guarantee Department does take into consideration.
Q427 Chairman: Did they take them
into consideration when they exported Hawk jets to Indonesia;
the BP-Baku pipeline; the Lesotho Wala Damn the power plant in
Dabhol in India. I do not think so.
Ian Lucas: You do not think so?
Q428 Chairman: If it did it did not
weigh very much, did it?
Ian Lucas: In each of those individual
cases—
Q429 Chairman: Arms exports to Saudi
Arabia—not the most benign regimes?
Ian Lucas: The principles that
the Department adhere to are the principles I have outlined. They
are taken into consideration by the Export Credit Guarantee Department
when the applications are made and they underpin the work of the
Department.
Q430 Lord Dubs: Could I just pursue
one further aspect of this, if I may? What about instances where
a company has been the subject of a negative final statement by
the UK National Contact Point? Should the ECGD decline to support
projects proposed by such companies?
Ian Lucas: It is clearly a serious
matter when that occurs and there have been examples of that occurring.
We think that each individual application would need to take into
account such a finding when it was considering whether a further
application should be granted. I think it would be appropriate
for such a company to find out what steps that company has taken
to change its behaviour before determining whether any future
application by the same company could be successful. So it will
be something that will need to be looked at extremely closely.
I do not think that you could operate a blanket system of absolute
refusal whenever such a decision has been made in the past because
it may be that a company has good display evidence of changing
its behaviour. I think that a decision simply to have a blanket
rule that they could not secure any support at any time in the
future may be difficult in terms of a Judicial Review. But it
would be a very serious matter.
Q431 Lord Dubs: So am I right in
saying that your argument is that the general conduct of an individual
company seeking support would not be an issue for the ECGD or
should not be an issue for at the ECGD?
Ian Lucas: The ECGD has to take
into account all the relevant factors relating to an individual
company, so general conduct is a very vague description. But if
a specific finding of the UK contact point has been made then
that would be something that would be considered within the context
of the application. But also what the Department would need to
do would be to investigate what had happened so far as the work
that we would expect that company to take forward following such
a finding.
Q432 John Austin: To Michael Wills,
in your formal evidence you have said that public authorities
are free to withhold public contracts from companies with poor
human rights records, and when asked an earlier question you reminded
us that public authorities are able to include human rights issues
as specifications in the contracts. Is this now standard practice
across government departments?
Mr Wills: I will have to write
to you about that; I cannot answer for the whole of government.
I can try and get you a comprehensive answer but I should warn
you that these things take time to compile.
Q433 John Austin: Does your department
lead on this issue?
Mr Wills: I am not sure that we
lead on government procurement; that is a matter for the Office
of Government Commerce, but what we can do is to coordinate a
response.
Q434 John Austin: Does your department
lead by example in terms of good practice?
Mr Wills: I would certainly hope
so but let me find out what the practice is elsewhere before I
give a definitive answer to that. We certainly intend to do so.
Q435 John Austin: And if you have
any examples of good practice.
Mr Wills: I will give you some
examples as well. But before I say we are leading we may find
that some other department has actually excelled itself in this
area. But I will write as comprehensive an answer as I can to
both questions.
Q436 John Austin: The Equality Bill
which is currently before the House does have provision in it
for a requirement of statutory duty on public authorities to include
equality issues in public procurement contracts. Would you consider
extending that to include human rights?
Mr Wills: Not immediately, clearly,
but I certainly think that there is a case to be explored there
certainly and I think we have to be careful, in the end law is
important, regulations are important and duties are important
but crucially in relation to business what we are trying to do
is promote a human rights culture. That is the most important
thing. We do not want people always looking to the courts to enforce
this; what we want to generate is that there is an understanding
of what human rights mean. Some public sector bodies are getting
very good at this and the police, for example, are genuinely engaged
with this process and we see it in examples such as the Health
Service, and the Equality and Human Rights Commission have produced
a very good report on this recently. We have done a report which
we published a year or so ago showing how applying human rights
principles to the delivery of public services can categorically
improve the delivery of public services. But the best way is to
find different ways to promote a human rights culture. We are
trying to do it at the Whitehall end by every department having
a human rights champion; we are trying to drive this through the
front end of public service delivery. But certainly we would never
rule out considering this because we have to do better—we
know that. We know the advantages that can come from the creation
of the human rights culture. We do have to be careful about putting
extra burdens on business at the moment and that is clearly particularly
sensitive at the moment. We do not think that regulation is necessarily
the best way of doing it, but that is one of the things that we
are exploring in the Private Sector and Human Rights Project in
which we are currently engaged, and it is certainly something
that we will be exploring.
Q437 Chairman: Can I come back on
this point about procurement because we had evidence from business
two or three weeks ago—and this also again chimes with the
informal evidence we had from business before—which is that
bigger businesses are driving the human rights agenda by their
own procurement processes through their supply chain, and this
is how it is starting to trickle down into SMEs. Big businesses
are saying, "You want to sell us stuff, you have to comply
with basic human rights principles, whether it be both in the
UK or overseas"—and that was from Primark, for example.
The Primark guy, who sat where Carla is now, was absolutely surprised
that whilst they were doing this the public sector was not and
they were saying, "What we are effectively doing is when
we are contracting for public services we are expecting our contractors
to comply even though we are not required to by the procurement
contractor." What they were effectively saying was, "We
are ahead of the game than the public sector" and I find
it amazing that the private sector is now developing procurement
work to ensure that it complies with human right principles down
the food chain and yet we are not. I certainly accept the point
about the human rights culture, that approach, as you know from
the other reports we have done on this stuff, but why are we not
doing it in this way?
Mr Wills: I have not had the advantage
of hearing the evidence from Primark. Perhaps you could just help
me a little and tell me what are they actually doing? What are
the human rights principles that they are adopting in their domestic
procurement?
Q438 Chairman: For example in relation
to labour standards is one of the examples that they gave, but
also when sourcing materials.
Mr Wills: I am not quite sure
why they think that government does not procure in accordance
with these standards anyway, domestically. We have to be careful
how we badge these things. Of course the government procures in
accordance with basic standards—labour standards and all
the rest of it. I have not, as I say, had the benefit of seeing
the evidence from Primark but in terms of their domestic procurement
I would be interested to see what exactly they are badging as
human rights principals in their procurement policies. Without
having seen it I cannot say definitively, but I doubt whether
government procurement processes are any less compliant with,
as it were, something as fundamental as human rights.
Q439 Chairman: Could the government
sign up to the Ethical Trading Initiative? Public procurement
done in accordance with the principles of that initiative? Because
Primark and Tesco, despite all their faults, are working within
the Ethical Trading Initiative and why cannot government?
Mr Wills: As I say, I think we
have to be very careful about our definitions here. What I am
very happy to do again is once I have seen the evidence from Primark
or any other of the businesses that have given evidence to you
I am happy to go to the Office of Government Commerce and indeed
every relevant department and find out how our procurement processes
match up to theirs and are therefore compliant with what they
have obviously described to you as human rights principles. That
I am happy to do. And I am certainly happy to accept that government
has an important role to play in leading by example in this area.
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