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

Examination of Witnesses (Questions 420 - 439)



  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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Prepared 16 December 2009