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


Examination of Witnesses (Questions 440 - 459)

TUESDAY 14 JULY 2009

MR MICHAEL WILLS MP, IAN LUCAS MP, LORD MALLOCH-BROWN AND MS CARMEL POWER

  Q440  Chairman: I am informed that DFID is a member of the Ethical Trading Initiative, which is good; but I am not sure about the other government departments, so perhaps we could have a checklist of which government departments subscribe to ETI.

  Mr Wills: As I have said, I have given an undertaking and once I have seen the evidence we will match up government procurement standards to private sector procurement standards and I have given a commitment that it is right that we should lead by example in this area.

  Chairman: That is very good. ETI is the standards we are talking about.

  Q441  John Austin: Going from procurement to investment we have had evidence that the Norwegian Government has withdrawn pension fund investments from projects with high human rights risks or ones where there is a suspicion of failure of human rights impacts. Is this an example of good practice and, if so, is it one that you would be prepared to take up with the Treasury?

  Ian Lucas: We have already talked about the OECD guidelines and the importance of those in underpinning the work that BIS is doing and the approach of the UK Government. Clearly the conduct of any particular individual investment organisation is something that we would need to consider closely if there were shown to be a breach of those guidelines. So it is something again that we would be very, very serious about.

  Q442  John Austin: Do you think that the Norwegian Government is on the right track?

  Ian Lucas: I could certainly look at the individual case and circumstance and, as I say, those guidelines are extremely important to the Department.

  Lord Malloch-Brown: If I may? You had given us notice that you would raise this issue and I understand that it was the Holy Hill Trust and London Mining Network that raised the actions of the Norwegian Government. So we did go to Treasury because they are the lead and they are the ones responsible for British state companies making investments. What we got back from Treasury was that the government's primary concern at having invested in private companies is to protect the value of taxpayers' shareholding while paying due regard to financial stability and competition. However, seeking to protect the value of taxpayers' shareholding may include pursuing responsible policies with regards to human rights where that is considered necessary to enhance the value of the company. It goes on to say that the institutional shareholders' committee statement of principles explains that many issues could give rise to concerns about shareholder value and that among them are the companies' approach to corporate social responsibility. So I think that means that we do take account of it but I suspect with less, if you like, of proselytisation on this than the Norwegian Government does.

  Q443  Lord Dubs: Can I move to company law and the Companies Act. Ian, may I turn to you on this one? We have had a number of submissions suggesting that the Companies Act 2006 reforms do not go far enough. What do you think about suggestions that the business review could be strengthened by providing for more detailed reporting on human rights impacts?

  Ian Lucas: I think as I mentioned in my opening statement, the 2006 Act does go further than government has done before in recognition of the importance of corporate responsibility and indeed human rights. That was quite a step that was taken forward and, as always, there is pressure to go further forward in a particular direction and clearly you have heard evidence to that effect. I think that the 2006 Act was a major step and is relatively recent and I think we need to see the impacts that that has, both in terms of encouraging good practice, how effective it has been and then look at the situation again.

  Q444  Lord Dubs: Are you intending to review these provisions? I think you are, are you not?

  Ian Lucas: I think it is always very important always, in my view—one of the things I am very keen on to do as a Minister—to review the impact of individual pieces of legislation and certainly as far as this particular item is concerned it is something that we will be reviewing as a department and considering.

  Q445  Lord Dubs: Have you not carried out some reviews, the 2009 business reviews? Have you not learnt any lessons already from those?

  Ian Lucas: I am afraid I am going to have to let you have a note on that particular investigation; but I am pleased to hear that it has been carried out.

  Q446  Lord Bowness: Can I turn to investment and listing arrangements? Some witnesses have given examples of how domestic rules for listing mechanisms can support or undermine human rights in the countries where those companies operate and they also say that governments miss the role that listing rules could play with an increase in transparency, protecting human rights and developing countries including conflict zones. Are you concerned that the Alternative Investment Market allows companies to seek investment from UK investors without adequate transparency about previous involvement in alleged human rights abuses? And is it something that you think the government could or should take action on? I guess that is for you, Mr Lucas.

  Ian Lucas: I am concerned that the suggestions are being made. I am not aware of the specific evidence to which you are referring or the individual cases that are involved but I would like to see individual cases and the suggestions because I think transparency is very important. I think it is an important driver of policy and we need transparency and if clouded investment is causing the difficulty that you are describing then I would be very anxious to hear about it.

  Q447  Lord Bowness: We have had evidence—and Lord Malloch-Brown has already referred to Holly Hill Trust in answer to a previous question, and they gave us some evidence. In your Corporate Responsibility Report you point out the benefits to business being responsible, including the potential to attract socially responsibility investment. Have you taken any steps to encourage socially responsible investment?

  Ian Lucas: We engage with business on an extremely regular basis. We have set up the type of structures that we referred to earlier, both within the UK and in our missions abroad to stress to business the importance of a corporate responsibility and a responsible approach. That does bring benefits both in perception domestically in the conduct of UK companies and also it brings benefits in terms of the positive impacts that good practice within companies can have in countries that have need of improving their governance abroad.

  Q448  Baroness Prashar: I just want to pursue a couple of points on the practicalities of unilateral action by the UK. This is really for Ian and Mark. The CBI told us that they would be cautious about any of the reforms and they were particularly concerned about the ease of identifying the standard that business should meet. Is this an argument in favour of agreeing an international minimum standard or standards for individual industries or circumstances?

  Lord Malloch-Brown: What it is an argument for is the difficulty of any of us, even the Foreign Office, monitoring corporate behaviours abroad. It is not that we have legal procedures which allow us to prove indisputably that a company has breached some standard, and therefore we are at one level reduced to those cases where a company has been found guilty of something in another jurisdiction that provides it, but I think provides one way. I think it does mean that international standards of a voluntary character are a critical tool and I think it is increasingly the case that if you are in the diamond business and you are not part of the Kimberley Process and not signed up for those standards your business would be contracted and would be narrow. So I think this patchwork of standards that are being developed is absolutely critical and must be combined with strong national actions in different jurisdictions. That is the way we are going in our own minds, rather than some international human rights treaty on business.

  Q449  Baroness Prashar: Do you have anything to add?

  Ian Lucas: I think that there are real problems in broadening the role of individual governments in extraterritorial activity, both in terms of capacity to actually enforce the rules and standards or laws that we individually create as a nation state, but also the enforcement of those rules or laws. So the approach that we are taking is very much based upon, as Lord Malloch-Brown said right at the beginning, the individual state and enhancing their capacity to deal with the problems and enhancing their capacity to deal with the problems and the pressures that exist within their own country. That is the operation that we prefer.

  Q450  Baroness Prashar: Do you think that in principle the UK could take any of these steps without joint action across the EU?

  Ian Lucas: Across the EU? We proceed on the basis of consensus—that really underpins the whole of our approach in international relations and we want to be working with other countries to ensure that the standards that you want to see are embedded in the cultures and the principles of other nation states. That is something that we can do only by consent and we are working towards that end and trying to improve the standards for individuals in other countries through what may be a longer process, but it is essentially what we regard as the more effective process.

  Q451  Chairman: Can I ask Mark some questions about the National Contact Point and in particular what happens when it issues a final statement. I am going to take the case of Afrimex because it was one that you referred to in the government memorandum about the UK National Contact Point. I remind you that in March 2009 Afrimex finally advised the UK National Contact Point that it had stopped trading in minerals from eastern Democratic Republic of Congo in September 2008, after the final statement was issued. So far so good. But Global Witness last week was critical in that there has been no attempt to verify that Afrimex has, as promised, stopped trading in tin from eastern DRC. So what steps have you taken to scrutinise Afrimex's response? Have you actually verified the Afrimex statement that they are no longer trading in DRC minerals?

  Lord Malloch-Brown: Let me, if I may, Chairman, in a moment refer to the general point of National Contact. But if I may just take the Afrimex case and let me first say that I am somewhat constrained because inquiries are still ongoing. We have spoken with Global Witness; I have spoken with Global Witness a number of times about this case but at a more formal level officials have also followed up. We are also working closely with a group of experts who the UN Security Council had mandated to look at the natural resource and conflict issues of the DRC, and it is their report which is the most recent report which is driving a lot of this. Obviously we feel a real obligation to make sure that UN sanctions are observed but our difficulty is again we have to make sure that we have sufficient evidence to act and that is what we are trying to establish before we move against Afrimex.

  Q452  Chairman: So have they been verified or not?

  Lord Malloch-Brown: That is my point about inquiries being underway. We are in the process of verifying it but I am reluctant, given the sensitive nature of it, to really confirm or deny that. It is actively being investigated.

  Q453  Chairman: Is that typical of the government's response to an NCP finding?

  Lord Malloch-Brown: This particular one of the DRC is actually far from being typical. We have been aggressive leaders on this issue of natural resource exploitation in the Congo and we consider it one of the main drivers of conflict in the area. Part of British Government strategy for dealing with the DRC is to crack down on companies that are party to this and are fuelling the insurgencies there. So far from this in our eyes being dilatory we are working on it very aggressively because it is for us embarrassing that there is a British company involved or a British registered company. But, again, we come up against this real issue of when we are trying to operate in a country which is not our jurisdiction, in trying to determine hard evidence which is usable against Afrimex.

  Q454  Chairman: I understand that Michael has to go. We have not very many questions left and if you have to go right now, fine.

  Mr Wills: Probably in about five minutes, I am afraid. I understood it was going to finish at half past.

  Q455  Chairman: We are not far short. We will just finish this question and then there is one question I will interpose that Usha is going to ask at the end, on which I think we need to hear your views, and then we will come back to the other questions which are mainly for BIS and FCO. So a question to Ian, while we are on the National Contact Point: we understand that you are looking into what could be done after an NCP finding against a UK company. Can you tell us what the government is thinking about on this?

  Ian Lucas: What we are looking for is to see what process the UN can take forward as a result of the finding of the National Contact Point and really we regard it as an issue that, given, again, the territorial difficulties in terms of jurisdiction to which we have referred, it is best dealt with if at all possible by international institutions. So the way that we see action being taken is through the international institution, the UN, and issues such as sanctions.

  Q456  Chairman: But in the end it is for the UK Government to take action on the National Contact Point findings, is it not?

  Ian Lucas: It is.

  Q457  Chairman: It is not for the UN, it is for the British Government in one way or another. The NCPs have been around for nine years now so there is nothing particularly new about it, even if you take Michael's assessment of the glacial "soon"—something might have made some progress?

  Ian Lucas: The action that would be taken would be that when a finding is made clearly that informs all of the dealings that the UK Government has with the individual organisation or company that the finding is made against, in the way that I described earlier. That it would be something that would cause real concern; that we would want to know what action if any the individual company had taken before further dealings were undertaken with that company. But in addition to that we would want to consider whether it would be appropriate for action to be taken at a national level. So I am not talking about there being no effect following on from the NCP finding; I am talking about there certainly being an effect because it would inform the dealings that the government had with that organisation, and it would also mean that we would be looking to try to take forward international effective action against that individual company, if that was appropriate.

  Q458  Chairman: In your memo you said that the government explains that it is "currently considering what follow-up there should be after the UK NCP has closed an investigation under the guidelines". So either you are or you are not.

  Ian Lucas: We are considering it.

  Q459  Chairman: So what are you considering doing?

  Ian Lucas: I have described the type of action as far as the UN is concerned.


 
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