Regulating Transnational Corporations in Domestic and International Regimes : An African Case Study 9780802099402

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REGULATING TRANSNATIONAL CORPORATIONS IN DOMESTIC AND INTERNATIONAL REGIMES: AN AFRICAN CASE STUDY

Africa’s natural resources have been of interest to other areas of the world for centuries. During the nineteenth-century European colonization of Africa, raw materials such as rubber and diamonds were often extracted and exported by foreign businessmen and colonial governments. Today’s transnational corporations (TNCs) continue the practice. This study explores the range of strategies for regulating the social and environmental practices of TNCs in Africa’s extractive industries. While acknowledging the partial success of conventional regulatory strategies, Evaristus Oshionebo argues that the current power imbalance between TNCs and African host governments makes them impossible to enforce effectively. Rather than simply critiquing the existing systems, Oshionebo proposes that a pluralistic approach, involving government agencies, corporations, non-governmental organizations, and local community associations in the regulatory process, might provide better results in Africa. Innovative and daring, Regulating Transnational Corporations in Domestic and International Regimes offers new and practical solutions to old, entrenched problems. evaristus oshionebo is an assistant professor in the Faculty of Law at the University of Manitoba.

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EVARISTUS OSHIONEBO

Regulating Transnational Corporations in Domestic and International Regimes An African Case Study

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press Incorporated 2009 Toronto Buffalo London www.utppublishing.com Printed in Canada ISBN 978-0-8020-9940-2

Printed on acid-free, 100% post-consumer recycled paper with vegetable-based inks. Library and Archives Canada Cataloguing in Publication Oshionebo, Evaristus, 1967– Regulating transnational corporations in domestic and international regimes : an African case study / Evaristus Oshionebo. Includes bibliographical references and index. ISBN 978-0-8020-9940-2 1. International business enterprises – Law and legislation – Africa. 2. International business enterprises – Law and legislation. 3. Social responsibility of business – Africa. 4. Mineral industries – Africa. 5. Mining law – Africa. 6. Environmental law – Africa. 7. Environmental law, International. 8. International business enterprises – Social aspects – Africa. 9. International business enterprises – Africa – Case studies. 10. Social responsibility of business –Africa – Case studies. I. Title. K1322.084 2009

343⬘.077096

C2009-903768-8

This book has been published with the help of a grant from the Canadian Federation for the Humanities and Social Sciences, through the Aid to Scholarly Publications Program, using funds provided by the Social Sciences and Humanities Research Council of Canada. University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council.

University of Toronto Press acknowledges the financial support for its publishing activities of the Government of Canada through the Book Publishing Industry Development Program (BPIDP).

To the beloved memory of my father, Lawrence Omozuafo Oshionebo, and to my mother, Christiana Oshionebo

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Contents

Preface ix Acknowledgments xi Abbreviations xiii Introduction and Overview 3 1 The Social Irresponsibility of Transnational Corporations in Africa’s Extractive Industries 13 2 Regulation of Corporations: Competing Models 31 3 Environmental Regulation in Nigeria and Ghana: Two Case Studies of Regulatory Failure in the African Extractive Sector 50 4 Complementary Regulatory Strategies: Self-Regulation and the Role of Civil Society Organizations in Nigeria and Ghana 80 5 Multilateral African Regulatory Mechanisms 107 6 The Regulation of Transnational Corporations under International Law 115 7 International Financial Institutions as Regulatory Mechanisms: The World Bank Group and the African Extractive Sector 152 8 Extraterritorial Regulation of Transnational Corporations in Their Home Countries 181 9 Towards Effective Regulation of Transnational Corporations 210

viii

Contents

Notes 227 Bibliography 349 Index 399

Preface

In the recent past, transnational corporations (TNCs) engaged in the exploitation of Africa’s natural resources – oil, gas, gold, diamonds, etc. – have been implicated in human rights violations and environmental degradation and pollution. More significantly, some of these TNCs appear, perhaps unwittingly, to fuel and exacerbate human insecurity in Africa by providing warring factions and insurgent groups with material and financial support in countries such as Angola, the Democratic Republic of Congo, Liberia, Sierra Leone, and Sudan. This book explores the range of regulatory strategies for regulating the social and environmental practices of TNCs in Africa’s extractive industries. Adopting both critical and sociolegal perspectives, it argues that current debate about corporate regulation – conceptualized along ideological lines – is defective to the extent that it does not address the issue of how power is distributed among business, states, and civil society. It attempts to deconstruct the regulation of extractive TNCs within the context of the power imbalance between TNCs and host African states. In doing so, it examines public regulatory schemes, international and multilateral regulatory initiatives, self-regulation, and the impact of civil society groups on corporate behaviour. It makes the case for the pluralization of regulation in Africa in terms of both strategies and actors in the regulatory process. This is informed by stark economic and social realities in Africa, including lack of capacity of many African countries to regulate TNCs effectively given the perilous nature of their national economies, coupled with structural deficiencies and corruption inherent across the continent. More significantly, the power and influence of certain non-state actors such as civil society groups – non-governmental organizations and local community

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Preface

associations – can and do in fact restrain the irresponsible behaviour of TNCs in extractive industries. Although the book advances a pluralist view of corporate regulation, it does not disregard the pivotal role of the state and its institutions in regulation. While the state appears to have been severely enfeebled by modern economic realities, and while African states are particularly incapacitated, the state remains the best option for curtailing the excesses of extractive TNCs. But Africa need not rely exclusively on the state to regulate TNCs. Africa should harness both state and non-state resources and deploy them for regulatory purposes.

Acknowledgments

I owe a debt of gratitude to several persons and institutions without whom this book would not have been written. I am especially grateful to my wife, Elizabeth; my children, Omozuafo, Omegie, and Ainosi; and my parents, Lawrence and Christiana, for their undying love, inspiration, and support. I am equally grateful to my brothers and sisters (and their spouses), Basil (Margaret), Anthony (Elizabeth), Caroline (Edward), Dr Bartholomew (Marietta), Felicia (Mike), Dr Bruno (Roseline), Mary-Ann (Basil), Dorothy (Adedayo), and Edith (Cyprian) for their support. Special thanks to Professor Harry Arthurs of Osgoode Hall Law School, York University, Toronto, for his critical, insightful, and very helpful comments on earlier drafts of the book. I should also like to thank Professor Poonam Puri, of Osgoode Hall Law School, and Professor Richard Saunders, of York University, for their guidance, support and encouragement. To my colleagues at the Faculty of Law, University of Manitoba, particularly Professors DeLloyd Guth, Lorna Turnbull, Trevor Anderson, John Irvine, Bryan Schwartz, David Deutscher, Darcy MacPherson, Debra Parkes, and Michelle Gallant, I say thank you for your intellectual support. Professor Guth has been a constant source of support and his ‘infectious’ enthusiasm for this project is invaluable. My gratitude also goes to Professor Shannon O’Byrne of the Faculty of Law, University of Alberta, for her unwavering intellectual support and inspiration. I am immensely grateful to the estate of the Honourable Willard Z. Estey for awarding me the Honourable Willard Z. Estey Doctoral Fellowship (2002–5). I thank both York University and the Legal Research Institute (LRI), Faculty of Law, University of Manitoba for their finan-

xii Acknowledgments

cial support. York University provided financial support for my fieldwork, while the LRI awarded me a research grant that enabled me to hire a research assistant. I am indebted to Osgoode Hall Law School’s administrative staff, especially Lea Dooley, Roberta Castellarin, Lynn Fonseca, and the library staff, particularly Deodath Singh, Harrinarine Saugh, and John A. Thomas, for their assistance. I would also like to thank Rosa Muller, Thayalan Karthigesu, and Brian Monteiro. Rosa and Thayalan provided technical support while I was editing this work and Brian served as my research assistant. I thank Joseph Uloko, Andrew Dirisu, Marie Dirisu, David Akhamie, Dr Jerome Imonigie, Oboh Imonigie, Chief Tunde Olojo, Ahmed Raji, the late Dr Ahmed Kusamotu, and Felix Oshionebo (my nephew, who passed away while he was in the prime of his life) for their help over the years. In addition, I thank my friends and colleagues Dr Felix Asekome, Dr Solomon Ukuegbe, Dr Virtus Igbokwe, Dr Pius Okoronkwo, and Dr Elizabeth Archampong. In many ways, you all contributed to this book. Finally, I would like to thank Virgil Duff, Executive Editor, University of Toronto Press, for his enthusiastic support.

Abbreviations

ANWR API ATS CAO CBCA DPR DRC EC EGASPIN EIAA EIA EPA EU FME FNI GATT GC GCO GNPOC GRI IAG IBRD IDA IFC ILM ILO

Arctic National Wildlife Refuge American Petroleum Institute Alien Tort Statute Compliance Advisor/Ombudsman Canada Business Corporations Act Department of Petroleum Resources (Nigeria) Democratic Republic of Congo European Community Environmental Guidelines and Standards for the Petroleum Industry in Nigeria Environmental Impact Assessment Act (Nigeria) Environmental Impact Assessment Environmental Protection Agency (Ghana) European Union Federal Ministry of Environment (Nigeria) Nationalist and Integrationist Front General Agreement on Tariffs and Trade Global Compact Global Compact Office Greater Nile Petroleum Operating Company Global Reporting Initiative International Advisory Group (World Bank) International Bank for Reconstruction and Development International Development Association International Finance Corporation International Legal Materials International Labour Organization

xiv Abbreviations

IPIECA IPP LFN MDF MIGA MOSOP NDDC NEPAD NESREA NGO NNPC NOSDRA NWLR OECD PDPR PRR RUF SHARE SPR TNC UDHR UN UNCTAD UNDP UNITA UNTS WACAM WBG WTO

International Petroleum Industry Environmental Conservation Association Indigenous Peoples Plan Laws of the Federation of Nigeria Mineral Development Fund (Ghana) Multilateral Investment Guarantee Agency Movement for the Survival of Ogoni Peoples Niger Delta Development Commission New Partnership for Africa’s Development National Environmental Standards and Regulations Enforcement Agency (Nigeria) Non-Governmental Organization Nigerian National Petroleum Corporation National Oil Spill Detection and Response Agency (Nigeria) Nigerian Weekly Law Reports Organization for Economic Cooperation and Development Petroleum (Drilling and Production) Regulations (Nigeria) Petroleum Refining Regulations (Nigeria) Revolutionary United Front Shareholder Association for Research and Education Shareholder Proposals Rule Transnational Corporation Universal Declaration of Human Rights United Nations United Nations Conference on Trade and Development United Nations Development Programme National Union for the Total Independence of Angola United Nations Treaty Series Wassa Association of Communities Affected by Mining World Bank Group World Trade Organization

REGULATING TRANSNATIONAL CORPORATIONS IN DOMESTIC AND INTERNATIONAL REGIMES: AN AFRICAN CASE STUDY

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Introduction and Overview

Aim, Scope, and Framework of the Book The Research Problem Transnational corporations (TNCs)1 are hardly recent arrivals in Africa. Much of the trade of Africa’s colonizers was carried out through corporations from the colonizing metropoles. TNCs such as the United Africa Company, the Royal Niger Company, the Compagnie Francaise de l’Afrique Occidentale, and Lever Brothers, to mention a few, were actively involved in colonial Africa.2 The strategy of TNCs in Africa is largely the same today as it was in colonial times. Their profitability is based on control over sources of raw materials, the availability of cheap and exploitable labour in the host country and enormous investment incentives (such as low tariffs and lax controls over the repatriation of capital) offered by host states. Today, TNCs have become core players in African economic and business arenas. This is particularly so in the exploration for, and exploitation of, natural resources. TNCs exploit oil and gas in a number of African countries including Angola, Algeria, Cameroon, Chad, Gabon, Nigeria, and Sudan. They also mine gold, diamonds, and other resources in the Democratic Republic of Congo (DRC), Ghana, Sierra Leone, South Africa, and other countries. In the process, TNCs have contributed, and may still be contributing, to whatever development Africa has achieved.3 However, the intense competition between these companies coupled with the lack of good and responsible government in Africa has brought to the fore serious issues and challenges for the continent. At the forefront of these challenges is the recurring involvement

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of TNCs in the social disequilibrium and human insecurity that has for too long plagued Africa. Extractive TNCs4 are increasingly complicit in human rights, environmental rights, and labour rights violations in Africa. At a more devastating level, there are indications that some of Africa’s seemingly endless wars and armed conflicts are exacerbated and in some cases facilitated by TNCs, which give support to the continent’s dictatorial governments and local warlords. By the same token, local African companies, apparently in an attempt to be competitive, are also increasingly engaged in unethical, antisocial, and sometimes illegal practices. Simply put, Africa’s extractive industries are increasingly characterized by an unending spectacle of corporate complicity in, and perhaps penchant for, antisocial behaviour. In view of the rapidity with which corporations are globalizing their operations, the negative impact of corporate activities on social issues in the continent will likely grow in the absence of regulatory structures dictating otherwise. This book explores the range of regulatory strategies available to African states confronted with the negative social and environmental effects of extractive industries owned by TNCs. It seeks to provide answers to a number of questions. For example, how have African governments responded to the often irresponsible behaviour of extractive TNCs? What accounts for the failure of regulation in Africa? Are there regulatory strategies that could produce desired results in Africa? What roles have international law and multilateral institutions played in the regulation of extractive TNCs? In seeking answers to these questions, I recognize that, like other social problems such as crime and corruption, the problem of corporate irresponsibility in Africa and elsewhere can never be completely eradicated. Any claim to the contrary flies in the face of history. Even in developed and democratic economies, incidents of corporate irresponsibility exist, albeit to a lesser extent than in Africa. At best, one can realistically hope that corporate irresponsibility may be ameliorated, perhaps to a tolerable level, through sustained and coordinated regulatory efforts. Therefore, I do not pretend to offer total solutions. Rather, I prescribe ameliorative strategies and suggest a series of improvements in existing domestic and international regulatory regimes. Substantively, this book argues that neither of the two conventional strategies of state command-and-control regulation and market or self-regulation has proven effective in the African context, and that a more pluralistic approach to regulation – complementing but not

Introduction and Overview

5

excluding these two – might produce better results in Africa. This pluralistic approach might involve government agencies, corporations, non-governmental organizations (NGOs), and local community associations. The emphasis on the mobilization of a broad range of actors in the regulatory process is justifiable for several reasons, including the incapacity of regulatory agencies in Africa and the structural deficiencies – corruption, lack of technological know-how, inadequate personnel and infrastructure – inherent across the continent. For reasons explored in the book, this approach has reasonable prospects of fostering cooperation between industry, regulators, and host communities. It could also enhance the capacity and expertise of regulatory agencies. Regulation of Extractive Transnational Corporations in Africa: Issues and Challenges The analysis in this book will be undertaken with three key factors in mind – factors which inhibit the regulation of extractive TNCs in Africa. These include the enormity of the power and influence of TNCs vis-à-vis the poverty of Africa countries, Africa’s exclusive dependence on extractive industries for revenue generation, and the peculiar nature of these industries. Together, these factors provide the context for this book. power and influence of transnational corporations Over the past few decades, there has been a meteoric rise in the financial strength of TNCs. With this has come the tremendous amount of political influence that is today wielded by TNCs. Indeed, TNCs are now at the forefront of the global economy, a fact underscored by startling global economic statistics. According to Sarah Anderson and John Cavanagh, 51 of the 100 largest economies in the world are corporations, whereas only 49 are countries.5 The combined sales of the top 200 corporations in the world are bigger than the combined economies of all countries minus the biggest 10 economies,6 and the combined sales of these top 200 corporations are eighteen times the size of the combined annual income of 24 per cent of the world’s population (1.2 billion people) living in abject poverty.7 The global dominance of TNCs is particularly apparent in the extractive sector. Exxon (now ExxonMobil), Royal Dutch Shell, British Petroleum, TotalFinaElf, and Chevron are among the largest and most

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profitable corporations in the world.8 In 2002, for example, ExxonMobil’s revenues were US$182 billion, from which it made a profit of US$11 billion, the highest for any TNC that year.9 Also in 2002, Shell’s gross revenues were US$179 billion and it returned a profit of US$ 9 billion; British Petroleum earned revenues of US$179 billion with a profit of US$7 billion; TotalFinaElf made US$97 billion as revenues and turned in a profit of US$6 billion; and Chevron had revenues of US$92 while making US$1 billion as profits.10 Other studies confirm that TNCs are leaders in global exports11 and that they account for a large percentage of foreign direct investment.12 The enormity of the financial power of extractive TNCs has significant implications for their regulation in Africa. It allows the TNCs a considerable degree of leverage over host African countries, most of which are poverty stricken, ill governed, and economically dependent on the TNCs. Thus, TNCs often use their power and influence to prevail on host countries to relax their regulation of natural resources exploitation.13 In some cases, TNCs make threats to compel weak African countries to abandon regulation altogether. What has particularly emboldened TNCs is the persistent need for revenue and jobs in Africa, as well as the continent’s lack of technological know-how to exploit its own natural resources. Hence, individual African countries compete among themselves in an effort to attract foreign direct investment by TNCs. Africa’s economic problems have also perpetuated the conviction that stringent regulation will discourage foreign investment.14 In sum, African governments are today either unwilling or unable (for lack of capacity) to regulate TNCs. Even the very few governments in Africa – such as that of South Africa – which could be said to be fairly capable of regulating TNCs are reluctant to do so because of the economic importance of TNCs to their national economies. This situation is exacerbated, of course, by the tendency of foreign TNCs to patronize and reward African political leaders and elites, many of whom are corrupt.15 Also, the power and influence of the TNCs effectively prevent their developed home countries from regulating their foreign activities. Because TNCs are highly integrated with their home country’s economy, and are major economic players in the developed economies more generally, governments of the developed countries have done little to regulate them for fear that it could hurt their own economies.16 These governments have consistently used their influence to divert attempts to devise an internationally binding regulatory regime for TNCs.17 Rather than regulate the TNCs, they have consciously promoted the adoption of voluntary or self-regulation by industry.

Introduction and Overview

7

Given this reality, the regulation of TNCs in Africa must necessarily be examined within the context of the power disparity between the TNCs and African countries. Doing so serves useful diagnostic purposes. It partly explains the prevalence of incidents of corporate irresponsibility in Africa. More importantly, it sheds light on why regulation has been ineffective in Africa. This is itself important because a proper diagnosis of the problem could help in devising appropriate ameliorative strategies. africa’s dependence on extractive industries for sustenance African economies rely largely on extractive industries – dominated by TNCs – for their sustenance, especially in Nigeria and Ghana, where extractive industries account for a large percentage of government revenues.18 For example, Ghana’s mining sector contributes ‘an average of 42% of the country’s gross export earnings.’19 In fact, between 1989 and 2000 royalties from mining operations accounted for between 6 per cent and 15 per cent of total internal revenue accruing to the government of Ghana.20 Perhaps nowhere is the dependence on revenues from extractive industries more pronounced than in Nigeria, where about 95 per cent of export earnings and 76 per cent of government revenues are generated by the oil and gas industry.21 In addition to their role as revenue generators, TNCs provide much-needed jobs. It is estimated, for example, that up to 2 per cent of the total labour force in Ghana’s formal sector are employed by mining corporations alone22 while additional spin-off jobs are created in other sectors. These observations are equally true of many other African countries with extractive industries. Africa’s reliance on TNCs is unlikely to abate anytime soon because mineral extraction is both capital intensive and technology driven, two essential ingredients possessed in abundance by the TNCs but, for the most part, lacking in Africa. Thus, African countries such as Nigeria and Ghana are obliged, at least for now, to continue to rely on foreign TNCs for resource extraction rather than on domestic entrepreneurs. While it is true that Nigerian entrepreneurs have in the recent past ventured into the oil and gas industry, the few that have done so have relied on foreign technology, foreign expertise, and, to some degree, foreign capital.23 nature and character of extractive industries Extractive industries have certain features and characteristics that not only make them susceptible to particular problems – such as conflict

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with host African communities – but also, and perhaps more importantly, may explain the success or failure of attempts at regulation. As mentioned earlier, natural resource extraction is highly capital intensive and technology driven. Thus, extractive TNCs generally tend to be highly capitalized and largely domiciled in developed countries. However, because industry capitalization is sometimes achieved through project financing by the World Bank and other global financial institutions, these institutions have some leverage on the TNCs. Extractive industries also have significant effects on local land tenure, the environment, and infrastructure. Because ‘natural resources are where they are, not where one might ideally prefer to have them,’24 it is sometimes the case that they are located in areas inhabited or farmed by local communities, or in environmentally sensitive forests, rivers, and oceans. Thus, quite often, human beings are displaced and the environment violated to make way for resource extraction. Indeed, host African governments often confiscate land from individual and collective landowners to make way for mineral resource extraction, much to the anger and distress of local communities.25 As a result, extractive industries are often involved in conflict with disenchanted host communities. Resource extraction projects are also susceptible to acts of sabotage by disgruntled elements within these communities. Extractive industries often enter into peculiar contractual relationships with host African governments. More often than not, TNCs develop a web of intricate and often clandestine dealings with host governments – some of them autocratic and despotic – in order not only to obtain necessary concessions and favours but also to ensure the physical protection of their interests and investments.26 These relationships may take various forms, including joint ventures, partnerships, and sharing or service contracts.27 While the legal nature of these relationships may differ from country to country, they often produce the close integration of interests between TNCs, governments, and local elites. This explains why host African governments are wont to treat community protests against TNCs as protests against the governments themselves, and to be so heavy-handed in repressing them. It also explains why TNCs often become complicit in rights violations in communities in and around extractive projects. Extractive industries, moreover, enjoy near total insulation from local consumer pressures in Africa because they mostly sell their products overseas. Furthermore, because they deal in fungible products, they can usually obtain raw materials from a number of countries. This com-

Introduction and Overview

9

plicates the organization of boycotts or bans of commodities obtained under exploitative conditions. In addition, the market for extractive natural resources is largely anonymous in the sense that many of the TNCs have direct contact not with the ultimate consumers of their products,28 but with a complex web of brokers, intermediaries, and retailers. And quite unlike manufacturing TNCs, TNCs in the extractive industries do not need to rely on the strength of their brand names for success and profitability.29 In fact, extractive products often find their way unlabelled to international markets, thus making it impossible for consumers to determine their producers and source of origin. Besides, some of these products may be non-negotiable essentials for human activity – for example, oil and gas – and the prices are usually fixed on world markets by cartels, whether they be producer nations, TNCs themselves, or retailers. In effect, then, extractive industries are significantly insulated from social and market pressures.30 Significance and Outline of the Book The regulation of TNCs in Africa has yet to be tackled in a comprehensive and integrated way. The very few works on the issue take the form of law review articles,31 which can only identify and tackle limited aspects of it, even though the issue of corporate irresponsibility in Africa’s extractive industries is manifestly large and complex. My hope in writing this book is to contribute to knowledge by filling the obvious void in the African corporate law jurisprudential debate. However, two limitations are inherent in this book. First, it relates only to extractive industries. Therefore, its findings and conclusions are not necessarily applicable to the activities of TNCs in other sectors of the African economy. Further enquiry would be needed before extending the findings and conclusions to other types of TNCs. Secondly, it examines regulation in Africa by way of two case studies: environmental regulation of Nigeria’s oil and gas industry, and Ghana’s mining industry. Because there are important cultural, social, and legal differences between African states, the conclusions drawn from the examination of the situation in Nigeria and Ghana are not necessarily applicable to other African countries. Despite these differences, however, many of the conclusions in the book may have resonance for other African countries, particularly those faced with similar challenges in regulating TNCs. Chapter 1 provides a background and insight into the crisis of cor-

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porate accountability in Africa’s extractive industries. It provides an account of the involvement of TNCs in the widespread violation of rights in Africa. In particular, it examines the complicity of extractive TNCs in human rights violations and environmental degradation in several African countries including Nigeria, Ghana, Sierra Leone, Liberia, the DRC, Sudan, and South Africa. The chapter also alludes to the complicity of TNCs in armed conflicts and wars in Africa, which often result in the most violent infractions of human rights. It situates these accounts within the broader context of the crisis of development in Africa. Chapter 2 undertakes a critical review of the literature on models of corporate regulation: ‘command-and-control’ rules and market mechanisms. While noting the significance of these models, I take issue with, and depart from, much of the literature by suggesting that the debate about corporate regulation insufficiently addresses questions of power. I argue that any model of regulation, to be effective, must take cognizance of and mobilize countervailing forces to those of the industry being regulated. In addition, I argue that the debate about corporate regulation – currently conceptualized along ideological lines – is defective to the extent that it does not acknowledge the potential of non-traditional regulatory techniques, other than public regulation and market/self-regulation. While these latter approaches may be considered the ‘heart and soul’ of regulation, corporate regulation need not be limited to them. Reliance on informal normative orders such as community associations and NGOs is a potentially effective strategy for the regulation of corporate conduct. Moreover, I offer two significant propositions in this chapter. First, given the numerous deficiencies in command-and-control rules and market mechanisms (identified in the chapter), I propose that no one model is sufficient in and of itself for effective regulation. Secondly, because the models are complementary rather than alternative, I propose that a plural regulatory platform which utilizes appropriate elements of the regulatory models, as well as a broad range of regulatory actors, both formal and informal, is to be preferred to any single regulatory mechanism. Chapter 3 provides two case studies of attempts by African countries to regulate TNCs: the oil and gas industry in Nigeria and the mining industry in Ghana. This chapter has five sections. The first and second sections examine public regulation of the environmental practices of oil and gas companies in Nigeria and mining companies in Ghana, respectively. The third section explores statutory financial incentives for envi-

Introduction and Overview

11

ronmental compliance in Nigeria and Ghana, while the fourth section considers the enforcement and compliance mechanisms available to regulatory agencies in these countries. In addition, this section identifies factors inhibiting enforcement of regulation, including the incapacity and inefficiency of regulatory agencies, governmental interference with regulators, corruption, and general deficiencies in judicial processes. Finally, the fifth section appraises regulation in both countries and concludes that despite their overwhelming reliance on public regulation, the factors identified in the fourth section have made regulation largely ineffectual. Given the failure of conventional regulation, chapter 4 examines complementary non-state forms of regulation in Nigeria and Ghana. In particular, it analyses the self-regulatory practices of TNCs, including codes of conduct. It also considers the impact of civil society organizations – community associations as well as environmental and human rights NGOs – on regulation in Nigeria and Ghana. Because regulation in both countries is set within the larger milieu of Africa’s political dispensation, chapter 5 considers multilateral African regulatory instruments such as the African Charter on Human and Peoples’ Rights and its adjudicating body, the African Commission on Human and Peoples’ Rights. More specifically, the chapter examines the significance of the epoch-making decision of the African Commission in the Social and Economic Rights Action Center & Center for Economic and Social Rights v. Nigeria for the regulation of extractive TNCs in Africa. Chapters 6 and 7 discuss substantive attempts at regulating TNCs under international law. In Chapter 6, I examine regulatory initiatives by multilateral organizations, including the United Nations’ Global Compact, the (proposed) Norms on the Responsibilities of Transnational Corporations, the International Labour Organization’s (ILO’s) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, the Declaration on Fundamental Principles and Rights at Work and its Follow-up, and the Organization for Economic Cooperation and Development’s (OECD) Guidelines for Multinational Enterprises. In Chapter 7, I focus on the World Bank’s involvement in extractive projects in Africa, as well as its attempts to influence the social and environmental practices of its corporate clients. In particular, I examine the social safeguard policies of the International Finance Corporation and the Multilateral Investment Guarantee Agency, two affiliates of the World Bank with enormous investments in the African extractive sector. Overall, my analysis in chapters 6 and 7 exposes the inadequacies inherent in extant

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Regulating Transnational Corporations

multilateral regulatory initiatives, inadequacies which are exacerbated by their voluntary nature. Chapter 8 considers the extraterritorial regulation of TNCs in their home countries. Because there is a lack of public schemes in the developed countries regulating the practices of TNCs in foreign developing countries, the chapter lays emphasis on informal extraterritorial regulatory strategies. I analyse the utility of self-regulatory instruments such as social reporting and discuss the important regulatory roles played by NGOs, consumers, and shareholders in developed countries. As well, I explore transnational tort litigation in the context of foreign direct liability suits under the United States’ Alien Tort Statute. Finally, because the ineffectiveness of regulation in Africa (and indeed under international law in general) is caused in part by the power imbalance between business and society, and recognizing that regulation may not become effective unless society is able to restrain the power of TNCs, I argue in chapter 9 that society should consciously nurture forces that can counterbalance the power of TNCs. I also identify potential counterbalancing forces, including governments, markets, and civil society groups. More significantly, I argue that the power and influence of certain non-state actors such as NGOs may counterbalance the power of TNCs as well as restrain their irresponsible behaviour. Finally, I attempt to flesh out strategies for nurturing and sustaining civil society groups in Africa. Overall, this book acknowledges the mutual interdependence of business and society but proceeds on the premise that the amelioration of ongoing abuses must be at once bilateral and cultural. That is, both TNCs and host African state governments must reject the status quo and work to forge a sustainable future for Africa. Respect for human and environmental rights must become core values in the African business arena and in African states. A rejection of the status quo should start with the adoption of new attitudes geared towards positive outcomes. New attitudes might involve the pluralization of regulation, in terms of mechanisms, strategies, and actors. Individual members of society, whether shareholders, investors, workers, consumers, communities, organizations, if organized and informed, have the capacity to influence corporate behaviour.

1 The Social Irresponsibility of Transnational Corporations in Africa’s Extractive Industries

As noted in the introduction, the question of whether TNCs’ operations are economically useful and beneficial to Africa remains a matter for heated debate. However, two things appear certain. The first is that African leaders view TNCs as useful partners in the quest for Africa’s economic development.1 This is especially so given Africa’s poverty and acute lack of technological know-how. Secondly, TNCs have a capacity to affect the social equilibrium of the host countries negatively as well as positively.2 TNCs, Michael Todaro reminds us, ‘engage in a range of activities, many of which have little to do with the development aspirations of the country in which they operate.’3 In some extreme cases, the negative social impact of TNC operations may outweigh derivable economic benefits for the host countries. As the United Nations has long warned, the effects of TNCs ‘on the social institutions and cultural values of host countries may be especially striking if the tenor, tradition and stage of development of these countries differ considerably from those of the home countries.’4 The negative impact of TNCs’ activities is particularly pronounced in Africa’s extractive industries. But TNCs in extractive industries are not the only TNCs engaged in corporate irresponsibility in Africa, nor do they bear sole responsibility for the prevalence of such irresponsibility. TNCs in other sectors of the African economy have equally been alleged to be engaged in socially irresponsible conduct.5 However, this chapter draws exclusively on incidents in the extractive industries. It provides an insight into the growing involvement of extractive TNCs in social transgressions in Africa, transgressions that have significantly hampered human security in the continent. While the chapter does not constitute a comprehensive account of the negative impacts of TNCs,

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it presents a series of case studies, in different extractive sectors, and in different countries. In particular, it examines the impact of TNCs on human rights and the environment in Nigeria, Sudan, and Ghana. It also analyses the complicity of TNCs in some of Africa’s seemingly endless wars. Human Rights Violations For the most part the complicity of extractive TNCs in human rights infractions in Africa, as elsewhere, is difficult to detect or document. Indeed, TNCs rarely engage in direct human rights violation. Their involvement is largely indirect, and by way of conspicuous association with governments and warlords. For example, TNCs connive with or provide material support for state actors in human rights infractions by entering into arrangements for the protection of their physical assets and for easy and unhindered access to mineral deposit sites. In the course of providing such security protection, it is common for overzealous state security personnel to infringe human rights, often with the knowledge of the TNC, sometimes with its tacit support, and almost always without protest from it. TNCs may also become complicit in rights violations by providing facilities for Africa’s dictators and their agents for use as a launch pad for repressive attacks on local populations. The oil industry in Nigeria and Sudan provides an excellent case study in this respect. Nigeria The complicity of TNCs in human rights infractions in Nigeria’s oiland gas-producing communities in the Niger Delta6 arose in the context of attempts by the government and the TNCs to suppress protests against the socially destructive activities of the TNCs.7 While repressive measures may have peaked between 1984 and 1999, when Nigeria was ruled by a succession of military dictators, they continue today (although admittedly on a lesser scale), despite the present democratic dispensation in the country.8 Evidence indicates that TNCs, advertently or otherwise, played a supportive role in these human rights violations. Complicity is often grounded in the contractual relations between the TNCs and the Nigerian government, under which the TNCs provide finance or transportation to repressive government agencies such as the Nigeria Police Force, which in turn undertake to protect their installa-

Social Irresponsibility of TNCs

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tion.9 Chevron has admitted, for example, that it transported Nigerian security personnel in company helicopters flown by company pilots to its Parabe oil platform in May 1998. Two protesters were then shot dead by the security personnel. As Chevron stated, [b]ecause Nigerian law enforcement officials lacked helicopter transportation and the expertise to land on offshore platforms, law enforcement officials required that the Joint Venture provide helicopters to transport officers to the facility. When they arrived on the platform, the law officers announced their intention to evacuate the platform without arresting anyone. A protester attempted to seize a weapon of one of the officers, leading to a scuffle, during which two of the kidnappers died of gunshot wounds and another was injured.10

The 1999 killings and destruction of property at the villages of Opia and Ikenyan were similarly carried out by Nigerian soldiers with the aid of boats, helicopters, pilots, and crew allegedly provided by Chevron to transport the security personnel to the villages.11 TNCs may also be complicit in rights infractions when they secure arms for government security forces notorious for their tendency to infringe human rights. Indeed, some TNCs in Nigeria have actively imported weapons for use by the Nigeria Police Force. Shell Petroleum Development Company Limited, a subsidiary of Royal Dutch Shell, appears to be the biggest culprit in this regard. It admits that in 1995 it conducted negotiations for the importation of weapons such as Berretta semi-automatic rifles, pump-action shotguns, and tear gas into Nigeria on behalf of the Nigeria Police Force.12 More recently, Shell again admitted that it ‘did finance the purchase of 107 Berretta pistols in 1983 for the exclusive use of the members of the Nigeria Police Force, assigned to [Shell Petroleum Development Company], who were duly authorised to bear arms.’13 Shell’s practice of providing weapons for the Nigeria Police Force is unlikely to end soon. It has in fact stated that ‘due to the deteriorating security situation in Nigeria,’ it ‘cannot give an undertaking not to provide weapons in the future.’14 Evidence also exists to suggest that some of the TNCs funded, at least in part, the activities of brutal military security task forces (such as Rivers State Internal Security Task Force) created by the then military government in Nigeria, supposedly to protect oil installations.15 Made up of a combination of personnel from the army, the navy, and the police force, the security units were in reality meant to quell anti-oil protests

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in the Niger Delta. In the process, they were involved in a number of human rights violations. Much of the destruction and rights infractions that occurred in Ogoniland were carried out by these security forces. Shell has in fact admitted that in one instance it ‘made direct payments to the Nigerian security forces’ guarding its facilities and personnel.16 Evidence, however, points to a much closer collaboration between the TNCs and the security forces. For example, Human Rights Watch reports that the military commander of Rivers State Internal Security Task Force submitted a memorandum to the governor of Rivers State requesting, among other things, an ‘initial disbursement of 50 million naira’ and ‘pressure on oil companies for prompt regular inputs.’17 This memorandum, in and of itself, laid bare the fact that TNCs collaborated with and indeed funded the activities of these military task forces, which, in the main, engaged in the violation of human rights of Nigerians. Corporate complicity in rights infractions may also occur where TNCs invite state security outfits to quell peaceful anti-oil protests without first ensuring that the rights of the protesters are respected and observed by the security forces. Oil TNCs in Nigeria have a penchant for inviting the state’s brutal security forces at the slightest hint of protest against their activities. The result of such an invitation is often the repressive suppression of protesters in the course of which lives and property are lost.18 Events leading to the massacres at Umuechen in 1990 represent a classic example. Umuechen, an oil-producing community, is located in Rivers State, Nigeria. On 30–1 October 1990, the community organized a protest against the corporate activities of Shell. The community demanded that the government and oil companies operating in their land provide them with water, electricity, roads, and compensation for the contamination and pollution of their crops, creeks, streams, and rivers. In response, Shell invited the police to quell the protest. Through a letter dated 29 October 1990, written by Shell’s divisional manager to the Rivers State Police Commissioner, Shell allegedly requested ‘security protection’ and specifically demanded that paramilitary Mobile Police officers (notorious for brutality and rights abuses) be sent to protect its installations and equipment against the protesters.19 Mobile Police officers attacked the peaceful protesters on 31 October 1990. In the end, no fewer than 80 unarmed protesters were killed by the police and an estimated 495 houses either destroyed or damaged.20 Although Shell did promise never to call for Mobile Police protection in the future, a keen observer of events in the Niger Delta has noted that Shell did not keep to its promise.21

Social Irresponsibility of TNCs

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the ogoni crisis The prelude to the Ogoni crisis was the formation of the Movement for the Survival of Ogoni Peoples (MOSOP) in 1990 by Ogoni elites. MOSOP sought redress, through what it called the ‘Ogoni Bill of Rights,’ for social, political, environmental, and human rights violations by both the Nigerian government and the TNCs operating in their land.22 It specifically accused Shell of being responsible ‘for the genocide of the Ogoni’ based on the devastating consequences of its corporate activities.23 In response to MOSOP’s agitations, the then military government embarked on a military crackdown in Ogoniland. Its Rivers State Internal Security Task Force, specifically created to deal with Ogoni agitations, is alleged to have violated the rights of the Ogonis to the extent of causing death, rape, torture, and arson.24 Events deteriorated in May 1994 when Ogoni youths allegedly murdered four Ogoni leaders whom they suspected of collaborating with the government and the TNCs. In response, the government arrested the MOSOP leaders and consequently embarked on a military occupation of Ogoniland. Sixteen Ogoni leaders were thereafter tried before a military-style tribunal in a widely criticized proceeding. Nine of those leaders, including the writer and environmental rights activist Ken Saro-Wiwa, were convicted and hanged.25 Shell’s attitude towards the arrest, trial, and execution of the ‘Ogoni Nine’ lends credence to a major criticism of oil TNCs in Nigeria: their failure to protest against rights infractions committed during the suppression of oil-related protests.26 Shell failed to protest to the Nigerian government, even when it was apparent that the trial was based on trumped-up charges and violated the rule of law.27 Rather, Shell’s response was that ‘a commercial organisation like Shell cannot and must never interfere with legal processes of any sovereign state.’28 However, Shell actively participated in the trial of the Ogoni leaders by retaining a top Nigerian lawyer on a ‘watching brief’ to attend the proceedings, but failed to protest to the government about the numerous irregularities that its lawyer witnessed at first hand. Indeed, Shell’s role in that trial raises serious legal questions considering that it had been accused by MOSOP of complicity in the Ogoni crisis.29 As one human rights group has asked: ‘What interest was Shell watching and protecting’ in the trial?30 The military occupation of Ogoniland, and indeed much of the Niger Delta, lasted until very recently, leaving in its wake numerous instances of human rights violations ranging from extrajudicial killings, rape, torture, and destruction of property.31

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Although the complicity of the TNCs in rights infractions may have predominantly occurred at an indirect level, evidence exists to demonstrate their direct participation in rights infractions in some instances. The major oil and gas TNCs in Nigeria have ‘supernumerary police’ in their employ.32 While they are recruited and trained by the Nigeria Police Force, the supernumerary police receive their salaries from the TNCs.33 Some of the human rights violations in Ogoni were allegedly carried out by these police officers, who, to all intents and purposes, are employees of the TNCs.34 Sudan Sudan has witnessed a bloody and ruthless civil war for much of the last three decades. In the process, property has been destroyed on a massive scale, millions of lives lost, and millions more forcefully displaced.35 As the situation in Sudan shows, armed conflicts in Africa’s trouble spots are partly fuelled or facilitated by companies, either by doing business with dictatorial governments and local warlords or through the direct provision of arms to warring factions.36 Armed conflicts in Africa are often the result of the economic, political, and social marginalization of ordinary people by ruling elites. The exploitation of the continent’s vast array of natural resources and competition for revenues among elites often lead to armed conflict, especially when resource exploitation is unaccompanied by general economic prosperity, as is the case in much of Africa.37 Frequently, corporate exploiters of the continent’s natural resources become allied to either or both warring factions: the government or local warlords. Resource exploitation thus provides the economic fuel for many of Africa’s armed conflicts and the human rights abuses associated with these conflicts.38 For example, in the recent past TNCs operating under the auspices of the Greater Nile Petroleum Operating Company [GNPOC consortium] have, perhaps unwittingly, fuelled and exacerbated the crisis in Sudan and the untold human suffering associated with it.39 The GNPOC consortium reportedly allows its airstrip to be used as a launch pad for the Sudanese military’s repressive incursions against insurgents and innocent villagers.40 A Canadian Assessment Mission to the Sudan reports that [w]e also learned, and have reported, that flights clearly linked to the oil war have been a regular feature of life at the Heglig airstrip, which is

Social Irresponsibility of TNCs

19

adjacent to the oil workers’ compound. It is operated by the consortium, and the Canadian chartered helicopters and fixed wing aircraft which use the strip have shared the facilities with helicopter gunships and Antonov bombers of the GOS [government of Sudan]. These have armed and refuelled at Heglig and from there attacked civilians.41

Indeed, it could be said that the TNCs are directly aligned with the Sudanese government as regards oil security policy in the country.42 Oil companies have ‘become part of a counter-insurgency operation’ in the Sudan.43 Reciprocal services are exchanged between TNCs and the Sudanese government. TNCs provide medical services, electricity, and water to the Sudanese military in addition to repair services for military trucks.44 In other instances, roads built by the GNPOC consortium for easy access to oilfields are used by the Sudanese military to launch attacks on the local population.45 The Sudanese military, which is noted for its penchant for brutality and rights infractions, in turn provides the TNCs with security and protection for their facilities and concessions.46 In sum, both the Sudanese government and the TNCs have a hand in Sudan’s long-running civil war and its attendant human insecurity and rights infractions.47 As the Canadian Assessment Mission eloquently attests, ‘Sudan is a place of extraordinary suffering and continuing human rights violations … and the oil operations in which a Canadian company is involved add more suffering.’48 Rest of Africa Like their counterparts in the oil business, mining TNCs have over the years been implicated directly and indirectly in human rights infractions in several African countries, including Ghana, the DRC, and Sierra Leone, to mention but a few. In Ghana, for example, mining TNCs have been accused of complicity in the burning of villages, illegal detention and intimidation, dog attacks on villagers opposed to their mining activities,49 and forced evictions and displacement of villagers to make way for mining.50 The growing use of private security and mercenary outfits by mining TNCs in Africa51 highlights the complicity of these TNCs in human rights infractions.52 These security outfits often adopt a ‘militaristic’ attitude towards local communities, and locals who encroach on mining concessions are said to be ‘frequently treated with maximum cruelty.’53 More worrisome is the complicity of some TNCs in the use of forced

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labour in certain African countries. For example, a report by United Nations experts indicates that a subsidiary of a U.S. TNC in Kigali, Rwanda, used ‘captive labour’ in its coltan mining sites with the collaboration of the Rwandan army.54 The complicity of extractive TNCs in rights violations has also occurred in the context of wars and armed conflicts in Angola, the DRC, Sierra Leone, and Liberia. As in Sudan, some TNCs appear to have a cosy relationship with warring factions in these African countries. In the course of this relationship, TNCs provide the factions with financial and material support, which enables them to prosecute their brutal campaigns. It is said, for example, that as much as 20 per cent of diamonds in the global diamond market is supplied by Africa’s numerous rebel groups.55 In Sierra Leone, diamonds represented ‘a major and primary source of income to the RUF [Revolutionary United Front], and [was] more than enough to sustain its military effort’ during its brutal war with the government.56 The UN reports that Foday Sankoh, the recently deceased leader of the RUF, ‘signed numerous agreements with international business firms’ for the prospecting, mining, buying, and selling of diamonds.57 According to the UN, ‘[i]n March 2000, Damian Gagnon of the U.S. company, Lazare Kaplan International (LKI), visited Foday Sankoh, and in a subsequent letter to Sankoh, LKI Chairman Maurice Tempelsman said that Gagnon had reported “a commonality of views between you and this company on the possibilities of LKI re-entering the Sierra Leone diamond business in a manner beneficial to all the people of that country as well as our company.”’58 The UN has also reported that some TNCs worked ‘in partnership with’ Angola’s rebel group – National Union for the Total Independence of Angola [UNITA] – ‘whether on the mining or sales side.’59 They provided UNITA with, and helped it maintain, diamond mining equipment.60 It is estimated that between 1992 and 1998, UNITA earned a minimum of US$3.72 billion from diamond sales.61 It thus comes as no surprise that before the UN imposed sanctions on UNITA diamonds, ‘UNITA had the equipment to produce significant volumes of diamonds.’62 Likewise, the civil war in Liberia was fuelled by the timber industry, which, to a large extent, funded erstwhile president Charles Taylor’s security forces, which were notorious for human rights abuses.63 A similar situation obtains in the DRC, where corporate patronage of warring factions is ‘the major, if not the sole, source of finance with which armed groups acquire weapons … used to commit human rights abuses and violations against civilians in the region.’64 For example, a mining TNC

Social Irresponsibility of TNCs

21

based in Vancouver, Canada, is alleged not only to have made a cash payment of about US$80 million to the late Laurent Kabila and his then rebel forces, but also to have lent a jet for Kabila’s use apparently in return for a mining concession.65 Besides, it allegedly signed an $885 million contract with Kabila’s rebel group, the Alliance of Democratic Forces for the Liberation of the Congo, to rehabilitate copper, zinc, and cobalt mines in Shaba province captured by the rebel forces.66 A United Kingdom Parliamentary Report confirms the link between extractive TNCs, wars, and human rights violations in Africa’s great lakes region when it states that [i]n many instances, multinational companies which have decided to operate in the country have forged relationships with those who lack legitimacy and accountability to the population and who systematically engage in human rights abuses. These may be governments or armed groups, all of whom have battled for control of resource rich areas. It is often these business relationships that provide them with some form of legitimacy. In the absence of a transparent and effective international regulation system, many foreign commercial operations have been able to conduct business with a near total disregard for human rights, long-term development or ecological sustainability in the DRC.67

Worse yet, some TNCs have been implicated in the direct provision of arms to Africa’s warring factions in return for economic favours. Joint venture partners in the DRC are sometimes said to supply equipment for the DRC army, the cost of which is then deducted from profits in the joint ventures.68 The situation in the DRC is likely to persist, a UN Report says, because ‘several joint venture mining companies have strong links with the military supply companies who facilitate their operations’ in that country.69 In the neighbouring Republic of Congo, one TNC is alleged to have provided funding to one of the warring factions to purchase arms in exchange for access to oil, which it is currently exploiting.70 Oil TNCs are also said to have ‘actively’ helped ‘to finance arms purchases’ in Angola, both ‘through extra-budgetary channels’ and by facilitating oil-for-arms deals.71 In the course of the Liberian civil war of the 1990s, some TNCs were alleged to have delivered weapons to the warring groups, in exchange for concessions to exploit gold, diamonds, and roundwood.72 In fact, according to the UN Panel of Experts on the crisis in Sierra Leone, ‘roads built and maintained for timber extraction are also conveniently used for weapons movement within

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Liberia, and for the onward shipment of weapons to Sierra Leone.’73 The UN experts indicate further that ‘the principals in Liberia’s timber industry are involved in a variety of illicit activities, and large amounts of the proceeds are used to pay for extra-budgetary activities, including the acquisition of weapons.’74 In sum, it cannot seriously be disputed that the alliances between TNCs and warring factions in Africa invariably help to initiate or prolong conflicts and human rights violations.75 They ensure a steady flow of cash and arms to combatant parties. While alliances are sometimes disguised, they clearly exist. Their existence is often implicit where governments grant oil exploration concessions to companies whose usual business is arms dealing.76 Such concessions are sometimes granted in lieu of ‘payment for weapons delivered.’77 Regrettably, TNCs have ‘so far remained largely impervious to the ambiguity of their role’ in African conflicts,78 and may even gain increased access to natural resources during conflicts, because of their support for warring factions. Environmental Pollution and Human Health Impacts The environmental impact of the activities of TNCs in Africa’s extractive industries equally portends serious danger for the attainment of social stability and sustainable development. Not only do TNCs negatively impact the African environment, but they also, and perhaps more fundamentally, put at risk the health, agriculture, and economic wellbeing of Africans. Extractive industries in Nigeria and Ghana provide apposite case studies. Nigeria The negative environmental impact of oil and gas exploration and exploitation in the Niger Delta is an open secret that has generated an enormous amount of literature.79 The environment has been consistently polluted as a result of oil exploration, spills, and gas flaring.80 Worst still, only a small fraction of spilled oil is recovered in Nigeria. In 2001, for example, there were 412 spills involving 120,976 barrels of crude oil.81 Of this, only 76.9 barrels were recovered, while the remainder were permanently lost.82 The devastating impact of oil pollution in the Niger Delta is captured vividly by Human Rights Watch: ‘[i]n many villages near oil installations,

Social Irresponsibility of TNCs

23

even when there has been no recent spill, an oily sheen can be seen on the water, which in fresh water areas is usually the same water that the people living there use for drinking and washing.’83 Oil-related pollution has had a number of disastrous consequences, including outbreaks of illnesses,84 and in some cases human fatalities. In December 2000, twenty persons, including eight children aged between five and seven, were reported to have died in Akassa, Brass Local Government Area of Bayelsa State, after drinking contaminated water following a spill from an oil pipeline at Funiwa (V) platform.85 In fact, studies have shown conclusively that the drinking water in much of the Niger Delta contains dangerously high levels of hydrocarbons as a result of oil-related pollution. For example, an analysis of a sample of drinking water from Ukpeleide, Ikwerre, showed that the water contained 34 ppm of hydrocarbons, 680 times the permissible level in the European Union.86 Oil-related pollution in the Niger Delta is caused by a number of factors. These include equipment failure, sabotage by elements within the local host communities, and the deliberate and unethical disposal of industry waste by TNCs.87 In particular, these companies have been found to discharge oil waste and ‘formation water’ or ‘produce water’ from their flow stations and terminals into the environment.88 They also frequently dispose of drilling muds containing ‘a mixture of complex organic and inorganic chemicals, water and clay’ and refinery effluents containing chemicals such as phenol, hydrogen sulphide, ammonia, cyanide, and toxic metals into the Niger Delta’s rivers, streams, and creeks.89 Finally, spill sites are sometimes not promptly or properly rehabilitated by the TNCs.90 Oil TNCs in Nigeria engage in intense dredging and in gas flaring. Indeed, the flaring of gas is so rampant in Nigeria that the country is ranked top among gas-flaring nations.91 In 1997, for example, 71 per cent of all gas produced in Nigeria was flared.92 The percentage of flared gas has since improved: 68 per cent was flared in 1998, 63 per cent in 1999, 54 per cent in 2000, 52 per cent in 2001,93 45.05 per cent in 2002,94 42.54 per cent in 2004,95 and 38.80 per cent in 2005.96 However, the improvement is a far cry from the ideal. Gas flaring has been shown to have caused an increase in air, leaf, and soil temperatures, thereby adversely affecting vegetation and crop yield in the Niger Delta.97 In fact, as the United Nations Development Programme (UNDP) points out, gas flaring in the Niger Delta causes heat that ‘kills vegetation, suppresses the growth and flowering of some plants, and diminishes

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Regulating Transnational Corporations

agricultural production.’98 This is particularly devastating because the people of the Niger Delta depend mainly on subsistence farming and fishing for their livelihood. There is also a strong suspicion that respiratory problems commonly reported in the area, particularly among children, may be linked to gas flaring.99 The adverse effects of gas flaring are exacerbated by the habit of TNCs that flare gas in and around inhabited areas ‘directly on to the shoulders of the community,’ thereby ‘totally banishing the night’ and causing discomfort and dehydration among other ill effects.100 Gas flaring causes acid rain, which is suspected by locals to be responsible for the destruction of rooftops in some homes. In addition, it pollutes the stream water on which the people rely for domestic use, including drinking.101 Ghana There are reportedly nineteen large mining corporations operating sixteen gold mines, one bauxite, one diamond, and one manganese mine in Ghana.102 Foreign corporations are said to hold an average of 70 per cent ownership shares in these mines.103 In particular, the exploration sector of Ghana’s mining industry is controlled by corporations from Canada, Australia, South Africa, and the United States, among others.104 These TNCs are alleged to have consistently polluted the Ghanaian environment, including rivers and streams.105 For example, mining operations have led to abnormally high amounts of chemical substances such as chloride and manganese in stream water in Tarkwa region.106 The contamination of rivers and streams is particularly devastating because, like elsewhere in Africa, they are the major source of drinking water in rural Ghana. Consumption of contaminated water has led to serious health problems in Ghana. There is reportedly a prevalence of environmentally caused diseases such as malaria, respiratory tract diseases, skin diseases, and diarrhoea, among others, in communities where gold is mined in Ghana.107 This is hardly surprising since ‘mining activities in the area promote environmental modifications,’ such as the creation of open pits and diversion of watercourses, which in turn create ‘bodies of stagnant water’ favourable for mosquitos.108 Aside from these human hazards, agricultural land in Ghana has been degraded by mining activities, thereby reducing vegetation in the mining communities ‘to levels that are destructive [of] biological diversity.’109

Social Irresponsibility of TNCs

25

Rest of Africa Other African countries have equally been subjected to environmental pollution emanating from the activities of TNCs in extractive industries. For example, the South African city of Durban is reported to be heavily polluted by oil refineries.110 In the Cabinda region of Angola, sub-Saharan Africa’s second largest oil producer, the tropical rainforests have been ‘largely deforested, and the fragile topsoil poisoned by five decades of oil exploitation.’111 The high volume of sulphur dioxide emitted by copper mines in Zambia has reportedly resulted in the killing of vegetation and high levels of lead in the soil, leading to the fear that the health of tens of thousands of residents may be adversely affected.112 Transnational logging companies have also subjected Africa’s tropical forests to indiscriminate logging, thereby causing deforestation, degradation, widespread contamination of the ecosystem, poisoning of soil and water, decimation of local fauna, and the destruction of biodiversity.113 Why Is Africa Prone to Corporate Irresponsibility? It seems clear that some TNCs adhere to lower business, human rights, and environmental standards in Africa than they do in their home countries. It is impossible to imagine that a TNC based in the developed countries of the OECD would do business with local militias engaged in armed conflict with the federal or state governments of such countries. Yet, as we saw earlier, some TNCs in Africa, including those based in the developed OECD countries, readily do business with and indeed partly fund the activities of Africa’s numerous militia groups. This is in no way an isolated observation. Fifty-seven of the eighty-five TNCs implicated in the conflict and in the illegal exploitation of mineral resources in the DRC by UN experts are based in OECD countries.114 Some of these TNCs apparently see nothing wrong in doing business with dictators and warlords. The alleged payment of a staggering sum of money to Kabila and his forces in the DRC and the lending of a private jet to him by a Canadian mining TNC;115 the involvement of oil TNCs in the importation of arms on behalf of Nigeria’s notoriously brutal police force;116 the shipment of arms by logging TNCs to Liberia’s former dictator president,117 the use of TNCs’ facilities as launch pad for attacks on local populations by Sudan’s military forces and

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the provision of essential services by TNCs to the military despite its known appetite for human rights infractions;118 and the cosy relationship between oil TNCs and Angola’s dictators119 are all cases in point. These incidents raise a pertinent question. Why is Africa so prone to fall victim to corporate misbehaviour? The answer, it seems, is not unconnected with the African crisis of development. Indeed, corporate misbehaviour in Africa is an important symptom of the general crisis of development on the continent, which provides an environment conducive to corporate misbehaviour. Organized Disorder and the African Crisis of Development Africa is today faced with a myriad of social, economic, and political problems. It is afflicted with poverty, disease, ignorance, war, and political instability.120 Consequently, a great majority of its citizens live below the poverty line.121 Indeed, all of the ‘low human development’ countries at the bottom of the United Nations’ Human Development Index 2007/2008 are in Africa,122 while life expectancy in Sub-Saharan Africa today is lower than it was three decades ago.123 Social infrastructure is either lacking or, where it exists, is generally unreliable, of poor quality, or dilapidated due to long periods of neglect.124 In the political sphere, Africa is characterized by politically unstable states whose affairs are, in the main, presided over by despotic, irresponsible, and unresponsive governments.125 Although many African states now operate under some semblance of democracy, their governments are still largely autocratic and are scarcely accountable to the people. Such governments breed corruption in all its manifestations to the point that corruption has become endemic and institutionalized in most African countries. Indeed, it is the modus operandi of many governments and bureaucrats in Africa.126 Corruption threatens and impedes Africa’s growth and development as it leads to a plundering of the continent’s resources and discourages investment and entrepreneurship.127 More importantly for our purpose, it also hinders the growth of a ‘professional, reliable, modern administrative apparatus’ that is ‘capable of efficiently serving the long-term interests’ of Africans,128 including their protection from corporate harm. Indeed, corruption strips African governments of ‘any semblance of serving the public interest, exposing it instead as a crude instrument of class domination and advancement.’129 The near impossibility of detection and the consequent sense of impunity give added impetus to widespread corruption.130

Social Irresponsibility of TNCs

27

These deeply entrenched features of the African sociopolitical system create optimal conditions for corporate irresponsibility. Kleptocratic and irresponsible governments are hardly likely to take the interests and aspirations of citizens into consideration in fashioning public policies and principles. Government officials and agencies charged with enforcing state laws and regulating corporate conduct often look the other way when faced with antisocial corporate behaviour. Recently, for example, Haliburton, a leading U.S.-based TNC, admitted that it bribed Nigerian tax officials to influence the reduction of the company’s tax liabilities to Nigeria.131 In addition, many African states are structurally and institutionally weak and politically unstable.132 Their weakness impedes their capacity to fulfil one of the crucial roles of the modern state: that of unifying and galvanizing the forces of social transformation and development. The African state, to paraphrase Joel Migdal, simply lacks the capacity to penetrate society, to regulate social relations, or to extract, appropriate, or use resources in determined ways to achieve social change or development.133 Rather than being a force for public good, therefore, the African state is privatized and appropriated to the service of private interests by ruling elites.134 The African crisis of development and the structural and institutional weaknesses of the African state have an adverse impact on the regulation of corporations, especially TNCs. As will be discussed in chapter 3, regulatory agencies in Africa often lack the requisite expertise and proper instruments to monitor and regulate corporate conduct. They are also often underfunded. In fact, because TNCs often enter into ‘comfortable symbiosis with the locally dominant political-bureaucratic bourgeoisie,’135 they often influence government regulatory laws and policies towards an essentially non-regulatory regime, which, in turn, encourages corporate irresponsibility in host African states. Implications of Corporate Irresponsibility in Africa The unmistakable and overarching consequence of the social irresponsibility exhibited by TNCs in Africa’s extractive industries is the promotion of human insecurity. This is apparent at several levels including but not limited to the perpetuation of hunger resulting from environmental pollution; human displacement to make way for resource exploitation; and human abuse, suffering, and killing resulting from resource-fuelled wars.

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A great majority of Africans depend on subsistence farming and fishing for their livelihood. The environment plays a crucial role in the success or failure of such endeavours. A polluted environment likely translates into poor crop yields or fish harvests. The survival of the people may thus be jeopardized by a polluted environment. Besides, the deliberate displacement of peasants to make way for resource exploitation, or their flight from war and armed conflict, interrupts agricultural cycles and reduces livestock numbers.136 In the process, displaced people are exposed to starvation, as in Sudan’s Upper Nile region.137 Admittedly, African countries have derived enormous revenues from natural resources exploitation. However, a large proportion of Africans have been adversely ‘affected by the conditions under which these resources are [exploited], by the impact that [resource exploitation] has on the environment, on communities and on the workers themselves.’138 The trade alliance forged between TNCs and warring factions in Africa is in fact inimical to peace building, not only because of the finance it generates for these factions but also because it props up dictators and insurgent groups alike. By buying the ‘spoils of war’ – diamonds, gold, oil, and gas – from warring groups, TNCs embolden the protagonists and thus reduce incentives for negotiation. For example, UNITA was not amenable to a peaceful resolution of the Angolan conflict because it profited from it by selling ‘captured’ diamonds to TNCs and other entities. Indeed, UNITA had the capacity to wage war in Angola for decades because some TNCs were actively engaged in buying diamonds from it.139 In sum, although TNCs cannot be held solely responsible for the human suffering in Africa, their insensitivity negatively impacts democracy, development,140 peace building, and conflict prevention and resolution in Africa.141 The Hypotheses The analysis above leads me to propose a series of underlying hypotheses that will hopefully inform the discourse in the succeeding chapters of the book. First, the extent and intensity of abuse make instability inevitable; regulation and remedial action are therefore a necessary precondition for restoring stability (building infrastructure, developing human capital, etc.), which will help make investment successful. However, investment in the extractive industries has some unusual fea-

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tures that make regulation difficult. These include (i) its time-limited character, i.e., the investment is liquidated when the resource is used; (ii) its exclusive dependence on world demand for the resource; and (iii) the technological and technical complexities involved in resource extraction. Secondly, even stable and democratic African states would have great difficulty in accommodating resource extraction, which is inherently disruptive, and in exerting the political, economic, and legal pressure on TNCs to accept and comply with regulatory restraints (even developed countries have these problems). And given the desperate need of African countries for jobs, revenues, and development coupled with the acute lack of capital, technological know-how, and market access, it is almost certain that (i) they will continue to depend to a large degree on foreign TNCs for resource exploitation, rather than undertake their own resource exploitation projects; (ii) they lack the institutional capacity to regulate the TNCs; and thus (iii) outside help that complements African efforts is required if African society is to be realistically protected from excesses of the TNCs. Finally, policy-makers must carefully undertake a balancing of the competing interests of TNCs and the African society in striving to achieve optimal levels of corporate regulation. Regulatory policy will have to draw on critical diagnoses about harm but at the same time accommodate aspects of the conventional prescription about non-state regulatory strategies. How to create this synthesis, which is not only analytical but practical, is the question in this book. The next chapter attempts to explicate a theoretical platform upon which such synthesis can hopefully be created. Conclusion TNCs may be important in the quest for Africa’s development. Although the scale of such importance remains a matter for intense ideological debate, the financial and technological strength of TNCs may, if properly channelled, provide some impetus and stimulus for Africa’s development. However, just as they are capable of enriching Africa, TNCs are equally capable of wreaking havoc on the continent’s social fabric. As discussed in this chapter, TNCs have been implicated in numerous and continuous abuses relating to human rights and the environment

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in Africa. Equally and perhaps more devastatingly, by doing business with the continent’s dictators and warlords, TNCs exacerbate bad governance, wars, and armed conflicts therein. This scenario underscores the need for better regulation of extractive TNCs in Africa. Questions, however, remain as to how best to regulate the TNCs. What regulatory framework would be most appropriate for Africa, given the peculiarities of Africa’s experiences with extractive TNCs? Is law – state law – an effective mechanism for the regulation of corporations? If not, are there complementary mechanisms for regulation? Chapter 2 aims to provide an insight into possible answers to these questions, laying a theoretical foundation for the rest of this book.

2 Regulation of Corporations: Competing Models

In this chapter I propose a theoretical perspective for examining the regulation of the conduct of TNCs. More specifically, I propose that the regulation of corporations ought not to be a uniaxial undertaking, and that no one model or mechanism of regulation is sufficient in and of itself for effective regulation of corporate conduct. I argue that a plural regulatory platform is to be preferred to any one model or mechanism of regulation. A plural platform is particularly attractive because government regulation of corporate conduct cannot be effectively enforced in isolation from social realities, the divergent and complex nature of which may in fact prevent enforcement of regulation. Government regulation, like other governmental endeavours, may be better enforced through both formal and informal private networks and structures as well as public ones.1 Effective government regulation is as dependent on how it is ‘received, transformed and refracted through’ the normative structural spaces sought to be regulated ‘as it is on the intentions,’ expertise, and resources of the regulators.2 Besides, there are potentially serious risks, including that of regulatory failure and its attendant social consequences in reliance upon a single regulatory strategy. These risks are enhanced in the context of a constantly evolving corporate globalization, with its capacity to reinvent itself in new locales and institutional forms.3 Conversely, the virtues of a plural regulatory platform are potentially enormous including, of course, the diversification of regulatory sites, strategies, and actors.4 These virtues are especially pronounced in societies such as Africa where state institutions are so often inefficient and ineffective. Models of Corporate Regulation In the recent past, a heated debate has raged among academics, cor-

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porate practitioners, and civil society organizations concerning the most appropriate mechanism by which corporations should be regulated. Two positions dominate the literature: command-and-control regulation and market regulation. However, these dominant schools by no means represent an exhaustive account of the issues and options involved in corporate regulation. As noted below, compliance with social norms can equally be secured through creative use of subtle compliance techniques such as incentives and rewards, inspections, and social reports and audits, to mention but a few. Thus, the appropriate focus of corporate regulation ought not be which regulatory model or mechanism is ‘best’ but on striking the right regulatory balance among the various models and mechanisms and devising ways through which they can be improved to mediate, to some appreciable degree, the interests of corporations and of broader public constituencies. Command-and-Control Regulation The public-law approach to regulation, often referred to as ‘command and control’ regulation, involves statutory prescription of uniform permissible standards of behaviour or of specific standards for individual sectors of the economy. Violation of these standards will lead to legal sanctions. Advocates argue that command-and-control regulation is highly effective for the protection of public interests from corporate assault. Neil Gunningham has argued, for example, that commandand-control regulation ‘is the only technique of accident prevention capable of effectively compelling employers to observe prescribed safety practices and of punishing specific wrongful behaviour.’5 Advocates recommend that law be deployed in the regulation of corporate conduct – whether relating to environmental practices, treatment of labour, human rights practices, or criminal conduct – in the belief that fear of legal sanctions will act as a deterrent to corporate misbehaviour.6 According to some, ‘[i]t is only the fear of effective legal sanctions that will make [corporate] management genuinely safety-conscious.’7 Command-and-control rules are said to mobilize other motives for compliance, such as the desire to avoid shame or moral condemnation, the fear of bad publicity, and the threat of personal prosecution of corporate managers.8 Moreover, advocates argue, because corporations almost always act rationally on the basis of cost-benefit analysis, the certainty of imposition of sanctions for breach of regulatory legislation increases the cost and decreases the benefit of wilful breaches of

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the law, thus inclining the rational corporation to comply with the law rather than to breach it.9 Uniform regulatory standards, though by no means exclusive to public regulation, are equally said to decrease information collection and evaluation costs, create more consistency and predictability of results, and enhance public scrutiny of, and participation in, regulatory decisions.10 In addition, they offer clear and non-discriminatory rules of social conduct, and, when enforced impartially and objectively, they ensure that all corporations are treated equally.11 They may thus protect, promote, and enhance social justice and equilibrium12 without necessarily leading to a loss in an industry’s ability to compete.13 a critique of command-and-control regulation Advocates of public regulation assume that legal sanctions alone can induce compliance with social standards. While it may be true that command-and-control rules have some deterrent effect on corporate misbehaviour, the immediate problem with this reasoning, however, is that the imposition of sanctions by regulators is anything but certain. Indeed, not all violations are detected. Thus, in actual practice, fear of sanctions may not be as profound as it is made out to be by proponents of command-and-control regulation. Moreover, sanctions are neither the only nor the most important method of securing compliance. As Roderick Macdonald so convincingly argued in his allegory of the ‘fridge-door statute book,’ legal rules that ‘speak to,’ or converse with, their addressees may induce compliance as much as, if not better than, those that ‘speak at,’ or command, their addressees.14 So it is that modern public regulation is seldom limited to legislated sanctions. Rather, public regulatory statutes increasingly assume an interactive character. They now frequently mandate other potent enforcement strategies such as inspections, social audits, self-reporting, implicit and explicit bargains between business and regulators, education, training, remedial orders, incentives and rewards through government contracts, reduced taxes, preferred insurance rates, loan guarantees, and the provision of export credits to compliant corporations.15 The realization that subtle compliance techniques are useful regulatory tools has prompted some to urge a more selective approach to the enforcement of legal rules in a manner that allows regulatory agencies ample room for flexibility rather than the strict enforcement of rules.16

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The argument in favour of what has been termed ‘responsive regulation’17 is that compliance with regulatory rules can be promoted by giving corporations the ‘space to be virtuous.’18 Such ‘space’ entails dialogue between regulators and the regulated industry, forebearance on the part of regulators,19 and persuasion ‘when there is reason to suspect that cooperation with attempting to secure compliance will be forthcoming.’20 The high rate of regulatory violations and the scarcity of enforcement resources in Africa make the case for ‘responsive regulation.’ However, it is potentially difficult to accomplish responsive regulation in African countries, where regulatory institutions are renowned for their incapacity and ineffectiveness. Also, state law can secure compliance through its ‘reflexive’ character21 by shaping or enhancing ‘procedures of internal discourse’ within the corporate normative order.22 Indeed, by ‘providing the structural premises for self-regulation within other social sub-systems,’23 state law affords participants in those subsystems further incentives for compliance. This approach to compliance is used in environmental legislation, which often requires corporations to initiate and implement an environmental management plan. Properly executed environmental plans may achieve the objectives of the legislation itself, thus obviating the need for direct enforcement.24 The command-and-control approach appears attractive on the surface, but it is in reality fraught with practical difficulties and legal constraints. At the practical level, regulatory laws can hardly be enforced to the letter considering the interwoven, conflicting, and often contradictory dynamics involved in social relations. For example, the state’s concern not to hinder economic growth routinely constrains and limits the ambit, application, and effectiveness of regulatory laws against important enterprises.25 The enforcement of regulatory laws not only involves complicated processes of interpretation,26 but it may also be influenced by moral and political ambivalence prevailing within regulatory agencies and within the society in which they work.27 As Keith Hawkins points out, regulatory agencies are sometimes influenced by their moral and political ambivalence in determining ‘the level of use of prosecution and the kinds of cases that are selected for prosecution.’28 The extent to which such ambivalence affects the imposition of civil and administrative sanctions, as opposed to criminal sanctions, is unclear. However, ambivalence may become debilitating when regulatory agencies are ‘captured’ by those they are supposed to be regulating, to the point where compliance is seriously compromised.29

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Legal constraints – for instance, the observance of due process – imposed on regulatory agencies may also impede enforcement initiatives and prevent the achievement of regulatory goals.30 Moreover, law in the books is often different from law in the field. The fact that a piece of legislation mandates a particular conduct does not in and of itself mean that it will be complied with in practice or that it can be effectively enforced. To a large degree, compliance is driven by effectiveness of enforcement of regulation. Effectiveness of regulation is itself dependent on the quality and depth of human and material resources available to regulatory agencies.31 Another problem with regulatory statutes is that they often impose uniform standards of expected behaviour on the regulated industry. The legal prescription of uniform standards may be counterproductive because neither the scope of harmful corporate activity nor knowledge about the risk posed by a particular corporate activity is static.32 Moreover, ‘one model fits all’ regulatory standards are by definition neither industry specific nor enterprise specific. Thus, they ignore variations in the cost of compliance among participants in the regulated industry33 and their capacity to comply with regulation.34 They may therefore place disproportionate burdens on small new firms while failing to deter larger, established firms.35 In turn, this could lead to the weakening of competition and ‘the strengthening of the dominant sector of large corporations.’36 Given such a differential in the ability of industry participants to comply, uniform standards may induce compliance in one industry or sector while producing the opposite effect in others. Market-Based Regulation Market-based regulation consists of various mechanisms, including self-regulatory instruments such as codes of conduct, that are voluntary policies and principles guiding the conduct of business.37 It also entails economic instruments and incentive schemes,38 which in the environmental context have been described as ‘any program that provides an economic benefit for pollution reductions or an economic penalty for pollution.’39 To market advocates, unlike command-and-control regulation, which is costly and inefficient,40 market mechanisms are effective and economically efficient. That is, they achieve regulatory outcomes at lower costs than conventional public strategies.41 In the context of environmental protection, for example, economic instruments such as taxes and tradeable emissions quotas42 are not

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only said to be cost effective,43 but they offer ‘formidable administrative advantages,’ including relieving regulatory agencies of technical tasks such as information processing.44 Market-driven tax regimes, it has been argued, have the ‘ability to provide incentives to direct [corporate] behavior in a socially desirable direction – without freezing current technology or eliminating a degree of individual choice.’45 To market advocates, the incentive systems of the market create pressures that induce compliance with social standards. For example, because a polluter ‘must pay an additional price for each additional unit of pollution emitted’ under an emissions trading regime, the polluter has ‘strong incentives to reduce pollution in the most cost-efficient way possible, and to develop environmentally superior technologies to reduce future payments.’46 Government can thus enlist private-market energies in furtherance of social regulatory objectives by creating ‘conditions which permit the operation of market forces.’47 In sum, the freemarket approach essentially urges the government to be a facilitator rather than a commander in the regulatory process.48 Besides, market advocates argue, the influence of commercial forces on corporate behaviour can, in some settings, exceed that wielded by government regulatory agencies.49 Corporate behaviour is, in Gunningham’s words, ordered far more by the immediate constraints brought on by peer group pressure, by fear of being ostracized for breaking tacit business norms, and by pressures exerted by large institutional clients and investors ‘than by the more remote apparatus of the formal system of policing’ and enforcement.50 Thus, paradoxically speaking, the same profit motive that is often the driving force behind corporate infractions of social rights may also provide the impetus for corporate compliance with social norms.51 Socially conscious corporations may find it easier to attract investors and consumers and thus, as P.N. Grabosky puts it, are likely to ‘be ahead of the market.’52 The reverse could also be true. Corporations that show disrespect for social values are likely to dissuade the patronage of consumers, investors, and financiers. But the extent to which this is so remains unproven. It is not altogether certain that investors would refuse to invest in a profitable company, even if it were a social deviant. Return on investment remains the golden rule in the financial market. Market-based regulatory techniques are increasingly being advocated and indeed implemented in developed countries.53 This is particularly so in the United States where the preponderance of scholarly opinion is said to agree that ‘incentive-based regulatory systems are often the

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superior approach’ to regulation.54 Attempts to implant market-based regulatory mechanisms also appear to be gaining momentum at the international level.55 As one author puts it, international ‘environmental protection is too important to leave out of markets.’56 The Kyoto Protocol, for example, imbibes the free-market spirit through its adoption of an emissions trading scheme.57 The internationalization of market instruments as regulatory mechanisms is aided largely by the global ideological shift to economic deregulation and liberalization, which in turn is engendered by the rapid pace of economic globalization. a critique of market-based regulation The first noticeable weakness of market mechanisms is that they are not suitable for every aspect of human life. Some issues such as human rights are so profoundly fundamental to the existence and survival of society that they cannot be left to the dictates of private interests and markets. Indeed, it would border on extreme governmental irresponsibility not to have a legal framework for society’s regulation of private conduct in order to protect human rights. Aside from their limited application, market-based mechanisms are seldom concerned about justice, equity, and fairness, if at all. The market, as some critics point out, ‘necessarily overemphasizes the preferences of the wealthy and underemphasizes the preferences of the poor.’58 Therefore, market mechanisms not only impose the will and desires of business and the few wealthy individuals that control them on the poor who constitute a great majority of the population, but they may also be inimical to public participation in the regulatory process because of the inequalities in power and influence between business and civil society.59 In other words, market mechanisms may promote a ‘democratic deficit’ in the regulatory process. The free-market approach to corporate regulation relies heavily on cost-benefit analysis. It holds that regulatory policy must be designed on the basis of an analysis of costs of compliance weighed against the benefits society derives from compliance with regulation.60 Therefore, regulators must evaluate all factors and circumstances including harm emanating from corporate activity, impact of the harm on society, and the costs and benefits involved in preventing the harm so as to determine optimal levels of social protection.61 For example, it has been argued that economic efficiency in workplace health and safety is achieved when ‘the value of the reduced risk … exceed[s] the value

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of the resources used to obtain it,’62 and that when the economic costs of preventing a particular workplace hazard outweigh the costs of the resultant harm, the hazard is better allowed to occur because, at such point, prevention of the hazard would in economic terms ‘simply not be worth the costs.’63 No doubt, cost-benefit analysis is a useful tool in devising and implementing strategies for economic development. However, it is by nature rife with implicit biases and uncertainties that makes it largely unsuitable for the regulation of the social conduct of corporations. Cost-benefit analysis favours the private sector by assuming ‘the primacy of private production.’64 Cost data are to a large extent produced and controlled by the regulated industry with a vested interest in exaggerating the cost of regulation.65 There is thus the likelihood that benefits will be underassessed relative to costs.66 And unlike costs, which are easy to determine,67 benefits may not be easily amenable to calculation or assessment.68 How do we, for example, measure the benefits society derives from the preservation of biodiversity or the aesthetics of the ecosystem? Indeed, in some societies – such as much of sub-Saharan Africa – environmental resources, be they forests, trees, plants, rivers, or streams, may have fundamental cultural, communal, or religious values. In such societies, the protection and preservation of these resources is a sacred and non-negotiable duty. Forest plants may have medicinal value and in some societies, provide the only available medicine, but it is difficult to quantify their value in monetary terms. Moreover, cost-benefit analysis is usually based on models, not empirical data, and necessarily involves components that are highly uncertain. Consequently, it ‘may not yield clear answers as to the costeffectiveness of regulations in all, or even most, cases.’69 Also, because cost-benefit analysis often involves the translation of human values into monetary worth, it runs the danger of transforming social ills into permissible ventures.70 The effect of pollution trading schemes, for example, is the removal of the social stigma normally associated with environmental pollution.71 It transforms pollution from a social ‘wrong’ to a ‘right.’72 Finally, it may be unduly expensive both in terms of time and resources and may cause delays in the regulatory process.73 Market proponents rely heavily on efficiency as an organizing principle. However, they fail to produce convincing empirical evidence that market schemes are more efficient than command-and-control rules.74

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Quite to the contrary, market mechanisms have not generated the ‘substantial cost savings’ predicted by its advocates.75 Moreover, a recent OECD survey of economic instruments for pollution control finds that evidence of their effectiveness is uncertain and ‘limited.’76 According to the OECD, ‘[t]he main uncertainty about the real value of economic instruments seems to be the lack of knowledge about how to disentangle the impacts of these instruments’ from the impacts of commandand-control rules, ‘many of which were already in place at the time of introduction of the economic instrument[s].’77 Also, market mechanisms have apparently yet to generate much corporate virtue.78 In fact, in some instances, the market may be unable to provide sufficient incentives for corporate virtue, either because of the unsuitability of particular market mechanisms as regulatory tools,79 or because of the lack of adequate information. Take the issue of corporate complicity in human rights violations, for example. Despite the acknowledged involvement of some TNCs in wars and human rights infractions in Africa, conflict diamonds from Africa are still being bought and sold in the international market.80 The reason in part is that most retail buyers of diamonds are unaware of the link between the diamonds they purchase and the untold death, human suffering, and misery that the diamond trade has visited on hapless Africans. The market’s failure to curb the diamond trade is not unusual; indeed, it may be the norm.81 This may explain why countries such as Canada and the United States have, pursuant to the Kimberley Process, adopted a command-and-control approach by enacting statutes to control the import and export of conflict diamonds.82 Overall, market instruments may be far less dependable than portrayed by market advocates.83 Putting the Models in Context The analysis thus far has shown that although proponents of the two main models of regulation avidly proclaim their utility, each displays conceptual and practical shortcomings. At first glance, both models appear to share the view that corporate conduct should be regulated. Sadly, however, in many instances market advocates are simply attempting to delegitimize the state, with a view to providing greater scope for corporate policy-making and, possibly, greater profits. This perhaps explains why some market advocates regard market instruments as ‘alternatives’ to public regulatory schemes.84 However, as

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argued below, a better approach is to view market mechanisms as ‘complements’ to public schemes. Indispensability of Command-and-Control Regulation Although command-and-control regulation has come under increased scrutiny and attack, some even labelling it ‘outmoded,’85 it remains the dominant model of corporate regulation.86 Its dominance is not at all surprising. Like democracy, in Winston Churchill’s famous aphorism, it may be the worst system there is except for all the others. Undoubtedly, the command-and-control approach, like all human endeavours, has its measure of imperfections, but it has recorded significant successes in checkmating adverse corporate conduct.87 In the United States, for example, air and water are said to be ‘much cleaner than they would be but for these [command-and-control regulatory] rules.’88 Similarly, others have concluded ‘that the development of clean air regulation [a command-and-control approach] since 1970 has actually been the best possible approach’ in that country.89 Command-and-control regulation also largely explains the success of other models or mechanisms of regulation. For example, a finding that a corporation has violated legally prescribed standards may trigger the negative reaction of consumers and investors to its products and shares. In this sense, legally prescribed standards become the yardstick with which the market measures corporate conduct. While some consumers and investors may consider moral standards in making their purchase and investment decisions, many would not react negatively on the basis of morals alone. Investors place a premium on returns on investment. Some may, therefore, be inclined to disregard the moral shortcomings of a company and invest in it as long as it remains profitable. Besides, morality is relative. What may violate the moral beliefs of one set of consumers or investors may not be offensive to others. However, public regulation does not discountenance moral standards. In fact, public regulation enhances moral standards because it promotes social justice.90 Although governmental objectives encompass economic efficiency and wealth creation, they also include no less important objectives of maintaining social justice and equity.91 In the absence of command-and-control regulation, these social values are likely to be sidelined, to the detriment of a great many in the society.92 Admittedly, command-and-control regulatory schemes may, for a variety of reasons, also introduce inefficiencies. However, the inef-

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ficiency of command-and-control rules, infrequent as it is, does not prove that competing regulatory approaches ‘would necessarily perform better.’93 It follows that such inefficiency does not alone justify the abandonment of state command-and-control regulation in favour of market instruments or schemes. Policy-makers must therefore both isolate the specific characteristics of command-and-control rules that conduce to their inefficiency and determine whether in the context of particular regulated activities, regulated industries, and prevailing social conditions, market instruments would perform better.94 Contextualized in that manner, to demonstrate the inefficiency of commandand-control regulation may be to argue for the strengthening of state regulatory mechanisms rather than to replace them with market-based mechanisms.95 Complementarity and Interdependence of Public and Market-Based Regulation Although, as noted above, the public model is an indispensable technique of regulation, acting alone the public model cannot accomplish all regulatory tasks. Thus, non-state mechanisms are needed to complement public strategies. The reality is that command-and-control regulation and market instruments are highly interdependent. In the environmental context, for example, the parameters of economic instruments such as tradeable emissions rights and pollution taxes, often characterized as market schemes, are in actual fact set by public regulatory bodies.96 Hence, Daniel Cole and Peter Grossman conclude that ‘[i]n a real sense, a pollution permit trading regime is a system of command-without-control.’97 Many market-based approaches do not abandon the traditional public regulatory approach but simply add flexibility to it.98 Government-imposed regulatory standards are not only consistent with private enterprise solutions, but they sometimes create significant commercial opportunities. For example, stricter environmental standards may create markets for new industries whose products or services help business conform to regulatory standards,99 through enhanced pollution abatement100 or production efficiency.101 Relevance of the Regulatory Models in Africa As indicated above, advocates of public regulation argue that the

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threat of legal sanctions is necessary to mobilize compliance with social standards102 and ‘to keep good apples good.’103 However, whether such a threat mobilizes compliance depends upon the existence of an efficient enforcement agency.104 Since such agencies are lacking in much of Africa, the effectiveness of public regulation becomes questionable. In fact, as will be apparent in chapter 3, public regulation, the dominant model of regulation in Nigeria, Ghana, and other African countries, has proved to be an ineffective regulatory strategy in these countries because of their weak institutional base. Unfortunately, the market model of regulation is also largely unsuitable for the regulation of corporate conduct in Africa due to the same structural and institutional deficiencies that undermine conventional state regulation. Market efficiency – the foundation upon which the effectiveness of market instruments invariably depend – is lacking in much of the continent, and even market-oriented states often feature public enterprise as their primary economic actors. Besides, Africa lacks the requisite institutions for the implementation of economic incentive schemes, a position that is not likely to change anytime soon given the perilous nature of African economies. For efficient use of markets, the state and its institutions are vital. Indeed, state institutions not only set the parameters for market operations, but also, and perhaps more importantly, sometimes act to correct and remedy market imperfections, manipulations, and distortions. However, because African states and state institutions are often weak and inefficient, market imperfections and manipulation tend to increase. Given these circumstances, caution must be observed in relying on economic incentives or instruments to solve Africa’s social ills.105 As Ruth Bell rightly points out, while regulatory policy should aim at efficiency, regulators must ensure that their policy choices are ‘supportable by existing institutions, notably the legal system, the human capital and infrastructure, and by the dominant culture, traditions and habits of each country.’106 Moreover, the viability of market schemes may depend on the number and resources of industry participants. Corporate entities in Africa are generally few when compared with the advanced countries. They are also largely illiquid.107 Given the paucity of resources, it is very doubtful whether African corporations have the capacity to participate in market regulatory schemes such as emissions trading. Admittedly, given the high number of industry participants in the developed countries and the associated high costs involved in public regulation of these numerous participants, it makes economic sense

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for these countries to seek complementary but cost-effective methods of corporate regulation. Even if these complementary market-based instruments prove successful in the advanced countries, Africans ought to be wary about their wholesale importation and implantation. As Cole and Grossman rightly note, ‘[a] regime that is nominally or relatively efficient in a given set of historical, technological, and institutional contexts may be nominally or relatively inefficient in another context.’108 The Question of Power The corporate regulatory debate, currently conceptualized in the dichotomy between command-and-control regulation and marketbased schemes, paints an incomplete picture of the realities of the regulatory process, especially in Africa. Both models exhibit some elements of self-centredness in the sense that they regard themselves as possessing a monopoly of regulatory wisdom. Hence, they treat themselves ‘as alternatives to one another rather than as potentially complementary mechanisms.’109 More significantly, the models ignore, to a large degree, the question of the power balance among corporations, states, and civil society, which lies very much in favour of the former. This inadequacy provides me with a point of departure from the literature. I take the position that what is really at the heart of the corporate regulation debate is not the appropriateness or superiority of any particular model or mechanism of regulation but rather an ideological battle between two fundamentally different and diametrically opposed visions of society. On the one hand is the vision – which finds expression in market regulation – that private corporate actors ought to be able to pursue their own self-interest unencumbered by governmental intervention, in the expectation that the invisible hand of the market will somehow protect the common good. On the other hand is the vision – encapsulated in public regulation – that sees government as a repository of the collective will and purpose of society, with responsibility to intervene to curtail private conduct in order to protect the common good. What is thus at stake is not the model or mechanism of regulation so much as the ideology driving it. Central to the regulation of corporate conduct is the question of power or the lack of it. This is particularly so in regard to TNCs. In the context of African extractive industries, for example, what counts is the TNCs’ wealth, technological know-how, and economic importance to both their home countries and host African countries. This has enabled

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the TNCs to dominate and control the poverty-stricken and economically deficient host African states. Where, as in Africa, TNCs are dealing with governments or societies lacking financial and technological acumen, their powers become significantly magnified. This scenario presents the TNC with ample opportunity to influence both the content of the host country’s regulatory laws and the machinery of their enforcement. The power of TNCs is not felt at the level of the host developing countries alone. Depending on the extent of their integration with their home (and usually developed) economies, TNCs are also able to deter both their home countries and the international community – the latter through the agency of the powerful home governments of the TNCs – from developing effective national or international regulatory regimes. As one notable author points out, ‘there is considerable evidence to suggest that home states are increasingly prepared to formulate both domestic and international economic policy with the interests of their home-based [TNCs] in mind.’110 This explains the attitude of the developed countries in protecting the investment of their TNCs in foreign countries through binding and enforceable international rules, while simultaneously opposing the imposition of binding international social duties on the TNCs. TNCs’ power, and their influence on national and international regulatory policy, is likely to increase given the current pace of globalization of the world economy, which is itself driven and dominated by TNCs. Peter Muchlinski alluded to this possibility when he stated that [w]hether such a position [to influence regulatory policy in favour of TNCs] is taken by a home state depends largely on the degree to which [TNCs] are ‘embedded’ in the economic policy-making system of that state. The closer the relationship between [TNCs] and the major economic policymakers of their home states … the greater the likelihood that [TNCs] will be able to influence, if not to set, the economic policy agenda of the home state. This power becomes increasingly important as national economies become more internationalized as a result of the activities of [TNCs]. The policy-maker’s priority may then become one of ensuring that regulatory conditions in the internationalizing economy are favourable to its home-based firms. The result may be an increased incidence of home state lobbying on behalf of, and in association with, home-based [TNCs] for changes in host state and international regulatory environments.111

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Thus, a more realistic view of corporate regulation is one that addresses the issue of how power is distributed among business, states, and civil society.112 An understanding of the nature and source of the power imbalance is essential to devising ameliorative strategies for corporate irresponsibility. More specifically, it may be helpful in determining what strategies, if any, are available to address the problem of corporate irresponsibility in Africa. For example, if we examine the rapidly expanding activities of solidaristic communities and organizations such as NGOs, we quickly discover that an essential if not dominant impetus for their steadfast insistence on corporate accountability is the perceived need to curtail the power and influence of business. To the extent that the society continues to feel the negative impact of the power of business, these communities and organizations will find a stimulant to protect the public interest from corporate intrusion. In effect, and while it may appear paradoxical, the power of business may well be both a cause of corporate irresponsibility as well as part of the solution to the problem. Corporate Regulation in Light of Social Theory The analysis thus far has highlighted loopholes in the dominant models of regulation. In particular, I have argued that market-based regulatory techniques are suspect because the market is not as efficient as its proponents make it out to be. It is equally prone to manipulation and fraud. For its part, public regulation assumes and relies on the utility of state law. But law and its regulatory apparatuses are seldom sufficient to achieve an optimal level of social compliance. Thus, regulatory strategies need not be limited to the precinct of the state and its laws. As discussed next, corporate behaviour may be influenced one way or another by informal normative orders within which corporations operate and with which, in practice, the regulatory models and mechanisms must necessarily come in contact.113 While the key role in the quest to prevent corporate harm must remain with legally mandated regulatory or enforcement agencies,114 exclusive reliance on these agencies – for the reasons cited above – may result in regulatory failure. The intrinsic limitation of state law argues for a broad approach to regulation. This is imperative because, as social-legal studies show, coercive powers, and indeed conduct-influencing norms, are not produced or generated exclusively by the state. Every society has certain

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non-state orders that, like the state, may be capable of influencing the behaviour of corporations. State law, moreover, does not act in a vacuum. It acts within and among a cluster of non-state normative orders that significantly affects its efficacy. In fact, there is an interdependent relationship between state law and the informal normative legal orders in society. Thus, the efficacy and penetration of one normative order necessarily impacts on that of the other. Indeed, the encounter between these normative orders oftentimes produces ricocheting effects one way or another. The result is that the penetration and efficacy of state law may be positively or negatively influenced by its interaction with other normative orders, and vice versa.115 For example, public regulatory schemes sometimes fail to achieve desired results when there is a normative conflict between them and the normative order of corporations, or when they are implemented in the midst of opposition from the latter. This observation is not, of course, meant to suggest that the mere fact of conflict with, or opposition from, the corporate normative order renders public regulation ineffectual. Several other key factors, such as the competence of regulatory agencies, are equally at play in determining the effectiveness of public regulation. However, the fact is that the effectiveness of public regulation sometimes hinges on how well it interacts with the normative self-regulatory orders of the corporation.116 Thus, obligations existing in the corporate social order – for example, codes of conduct – may, even though voluntarily assumed by individual corporations, affect the effectiveness of public regulation, particularly where it is perceived by industry participants as running counter to their interests as encapsulated in the self-imposed obligations. Conversely, public regulation may shape voluntary regulatory practices of corporations due principally to the fear among industry participants that the failure of self-regulation may trigger state intervention. In much the same manner, the fear of adverse public reaction may induce governments and corporations to initiate or enhance regulation. Thus, the models and mechanisms of regulation may either mutually strengthen each other by making up for each other’s weaknesses117 or amplify the weaknesses. This is particularly apparent in the international arena, where globalization has thrust non-state law to the forefront in the regulation of the global economy.118 The ‘law’ regulating much of the global economy is now predominantly non-state and customary, generated in the main by TNCs and global financial institutions and the powerful, albeit few,

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states where they originate.119 For example, the lex mercatoria, described by Gunther Teubner as ‘an autonomous non-national body of law,’120 is now a prime mechanism for conducting international business. And in the specific context of corporate regulation, ‘soft law’ such as codes of corporate conduct and social reporting initiatives are being increasingly adopted and utilized. The influence and reach of the emerging, albeit ‘soft,’ global legal order is likely to grow because of what has been described as ‘globalization of the mind,’121 that is, ‘the embrace by strategic, knowledge-based elites in business, government, the professions, academe, and the media of a new set of values, processes, institutions and practices, of a new paradigm of governance.’122 An interesting attribute of global law is its ability to transform the character and norms of institutions. In the process of interaction, institutional practices and customs within global law sometimes complement, conflict, and shape one another. We see this in the relationship between international NGOs and TNCs. It is the norm today for TNCs to adopt corporate codes of conduct. However, they do so not necessarily because they are convinced that that is the right thing to do but because of the international pressures exerted on them by NGOs.123 Admittedly, the pressures aren’t so enormous that TNCs actually adhere to these codes. But, as will be noted in chapter 8, these ‘outside’ pressures are compelling TNCs to review the implementation of their codes such that today independent monitors and social reporting of compliance are being increasingly adopted. Viewed in this way, the interaction between NGOs and TNCs has shaped, at least on paper, the normative order of TNCs. But more significantly, global law also shapes state law. Obligations in the global legal order – particularly those assumed by TNCs – sometimes affect the efficacy, and indeed the character, of host state regulatory laws and practices. This is often the case in relationships between financially powerful TNCs and weak states. States may amend or enact laws to conform to international practices generated by non-state actors such as TNCs and NGOs.124 The reverse may also be true. State law may interact with the global legal order in such a way as to shape or influence it. Regrettably, part of the resultant effect of the interaction between the global legal order and state law is that the power – indeed, the sovereignty – of the state is weakened to a considerable extent.125 Hence, the capacity and ability of the state to influence or regulate social and economic behaviour through the instrumentality of its law is seriously compromised.126

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To summarize, because we now know that coercive powers and influences are not generated exclusively by state law; because the effectiveness of state law itself depends on how well it interacts with the informal normative orders found in society; and because globalization has considerably weakened the powers of the state, it is doubtful whether the state and its laws can be exclusively relied upon for regulation of the conduct of extractive TNCs, in Africa or elsewhere. The Propositions Chapter 1 ended with a statement of the general hypotheses upon which this work proceeds. The discussion in the present chapter establishes the basis upon which I now offer some propositions that not only build on those hypotheses, but will guide subsequent analysis. The propositions reflect my subjective judgment of the relative strength of the competing models and mechanisms of corporate regulation, particularly as regards their practicability, weaknesses, and how well they strike a balance between corporate interests and the public interest. The propositions are as follows: 1. No one model or mechanism, and indeed no single institution whether public or private, is sufficient, in and of itself, to regulate corporate conduct, given the dynamics and intricacies that such conduct necessarily involves. Although some may be more appropriate than others, depending on the nature and context of the social problem in question, these models and mechanisms are complementary rather than alternative.127 As such, they all have their place in corporate regulation.128 2. Rather than look exclusively to one model, multiple means of regulation are likely to accomplish more than any one strategy. In the specific context of the regulation of extractive TNCs in Africa, a multifaceted platform that utilizes appropriate elements of the various regulatory models and mechanisms, and a broad range of regulatory actors formal and informal, is to be preferred to any single regulatory mechanism. Conclusion The pluralistic regulatory approach advocated in this book is both rational and practical. Public regulation, though sometimes inefficient

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or ineffective, occupies a central role in the corporate regulatory process. The fear of government regulation may lead to the cultivation of corporate virtue. Business may be more inclined to rigorous self-regulation knowing that failure to curb abuses may lead to more direct and stringent government regulation.129 Market mechanisms such as economic pressures exerted by consumers, investors, and financiers may induce compliance with social standards.130 Equally, legal and social pressures mounted by NGOs, employees, labour unions, and local communities through private lawsuits, community agitation, and protests may help to activate corporate virtue.131 The choice of a plural regulatory platform is thus informed not by what is most efficient in theory but by what is most likely to be effective in practice. As Howard Latin admonishes us, the critical determinant ‘is not which regulatory system aspires to ideal “efficiency” but which is most likely to prove effective,’132 particularly in terms of its ability to achieve desired social outcomes.133 The particular political, legal, and economic conditions of Africa argue strongly in favour of a pluralistic approach. As we saw in chapter 1, Africa is facing a monumental crisis of development. Its states and institutions, including regulatory agencies, are weak, dysfunctional, ineffective, and inefficient. In these circumstances, a regulatory regime that focuses exclusively on state legal sanctions is almost certain to be met with failure. Besides, focus on a single regulatory apparatus is likely to result in ‘a limited perspective on the [corporate] regulatory process,’134 a perspective that, given the dynamics of the current pace of economic and corporate globalization, is unlikely to keep pace adequately with new and emerging intricacies in global corporate activities.135

3 Environmental Regulation in Nigeria and Ghana: Two Case Studies of Regulatory Failure in the African Extractive Sector

This chapter compares the regulatory structures and experiences of two similarly situated African countries, Nigeria and Ghana. Their economies cover the spectrum of extractive industries. Nigeria is an oil-producing nation; Ghana has a large mining sector. They have a common British colonial heritage and have both been engaged in post-colonial struggles for democracy. Their judicial and parliamentary institutions and structures are similar. They both comprise a complex mix of ethnic nationalities, although Nigeria more so than Ghana. And both operate a federal system in which the central government has exclusive ownership of, and control over, natural resources.1 Although these characteristics set them apart from many other African states, in certain respects the problems they face are widespread in Africa. Corruption, democratic deficit, lack of capital and technical expertise, limited institutional capacity, widespread poverty, and dependency on foreign investment are as much a fact of life in Nigeria and Ghana as they are in other African countries. Moreover, to an extent developments in the two countries are embedded in wider pan-African developments, particularly the New Partnership for Africa’s Development (NEPAD)2 and the African Charter on Human and Peoples’ Rights.3 In this sense, lessons drawn from the regulation of extractive industries in Nigeria and Ghana may, with appropriate adaptation, become relevant for other African countries. The regulation of environmental practices of TNCs in Nigeria and Ghana is in the main effected through public ‘command-and-control’ mechanisms. However, public regulation in both countries, as in much of the developing world, has far less impact than one might expect given the complex and extensive administrative structures needed to

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enforce an equally complex and extensive body of laws and regulations. The purpose of this chapter is to try to determine whether technical or procedural deficiencies in regulatory technology explain the absence of positive regulatory outcomes, or whether the explanation lies in external factors such as corruption or, more generally, extreme asymmetries of wealth and power. Public Regulation of the Environmental Practices of the Oil and Gas Industry in Nigeria Several statutes and regulations govern the environmental practices of oil and gas corporations in Nigeria. Some of these statutes and regulations are specific to the oil and gas industry,4 while others are generic in the sense that they apply to all sectors of the Nigerian economy.5 Oil- and Gas-Specific Statutes and Regulations the the act]

[including subsidiary regulations made under

The Petroleum Act6 empowers the Minister of Petroleum Resources (Minister) to make regulations, among others, for the prevention of pollution of watercourses and the atmosphere.7 Pursuant to that power, the Minister has enacted the Petroleum (Drilling and Production) Regulations 1969 (PDPR);8 and the Petroleum Refining Regulations 1974 (PRR).9 Under the PDPR, oil licensees/lessees (oil corporations) are to ‘adopt all practicable precautions including the provision of up-to-date equipment approved by the Director of Petroleum Resources, to prevent the pollution of inland waters, rivers, water courses, the territorial waters of Nigeria or the high seas by oil, mud or other fluids or substances which might contaminate the water, banks or shore line or which might cause harm or destruction to fresh water or marine life, and where any such pollution occurs or has occurred, shall take prompt steps to control, and if possible, end it.’10 The PDPR also requires oil corporations to undertake their ‘operations in a proper and workmanlike manner’ and in accordance with ‘good oilfield practice’ so as to prevent the escape of oil into any water, and to minimize damage to property.11 The PDPR further obliges oil corporations to keep their apparatus in good repair and condition;12 and to ensure that oil residue from storage vessels and wells are drained into proper receptacles.13

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The PDPR also places a duty on oil corporations to properly decommission their oil facilities when they are no longer in use, and to reclaim and restore damaged land. Thus, upon termination of a licence or lease, oil corporations are to fill up all excavations to the satisfaction of the Director of Petroleum Resources (Director); restore the surface of the relevant area as far as possible to their original condition and plug every borehole as required by the Director.14 Likewise, the PDPR prohibits the abandonment of oil boreholes and wells except as permitted in writing by the Director,15 and abandoned boreholes and wells must be securely plugged.16 For its part, the PRR17 requires the drainage and disposal of refinery effluent in accordance with ‘good refining practices.’18 As well, it obliges the adoption of all practicable precautions to prevent environmental pollution, and where such pollution occurs, the taking of prompt steps to control and, if possible, end it.19 The effect of both sets of Regulations is that, while oil corporations in Nigeria possess a general right to alter the natural environment within the area covered by their licences or leases,20 they are not to exercise this right unreasonably so as to cause environmental degradation and pollution. On the contrary, they are enjoined to take specific preventive measures to avert environmental pollution. But while the regulations contain detailed provisions on environmental standards and practices, some of their terms and phrases appear vague. For example, the PDPR does not specify what constitutes ‘all practicable precautions’ or ‘prompt steps’ required of oil corporations under Regulation 25, nor does it explain what ‘good oilfield practice’ means.21 Rather, it leaves the determination of ‘good oilfield practice’ to the Director.22 Similarly, the PRR urges the disposal of refinery effluent in accordance with ‘good refining practices’ without any indication as to what it means by that phrase.23 Although the imprecision of these regulations has attracted criticism from some Nigerian academics,24 it does have the merit of creating flexibility, which enables them to better adjust to new and emerging exploration and production practices. For example, if ‘all practicable precautions’ or ‘prompt steps’ had been defined in 1969 when the PDPR was first written, some of the undesirable practices in the industry today might have been deemed acceptable. The broad, open-ended language of the regulations also permits regulatory discretion. In this context, however, the exercise of discretion may be influenced by bribery or by the Director’s desire to pacify or punish local populations

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or to accommodate an important business concern. Discretion may be checked by subjecting it to public scrutiny through establishment and publication of guidelines, and of particular rulings involving its exercise. It could also be subjected to judicial review or approval by an independent body such as a legislative committee.25 That said, it remains unclear whether the PDPR has in practice adjusted to post-1969 oil exploration and production practices. Perhaps regulatory authorities in Nigeria need to establish a register of best environmental practices and precautions, which can be revised regularly to accommodate new and emergent realities. The revisions can be enhanced by holding periodic public hearings concerning ‘good oil field practice.’

Gas flaring became a massive environmental problem in Nigeria in the 1970s when oil TNCs intensified the flaring of oil-associated gas into the atmosphere. In response, Nigeria enacted the Associated Gas Re-Injection Act,26 which prohibits the practice of gas flaring except as expressly permitted by the Minister.27 At inception, it fixed the terminal date for gas flaring at 1 January 1984.28 However, this date has had to be extended a number of times because of the refusal or inability of oil TNCs to comply with the deadline.29 It also required oil corporations to submit, no later than 1 October 1980, detailed programs for gas reinjection as well as plans for the viable utilization of all gas produced in association with oil.30 Again, this date went by without any of the oil TNCs complying with the deadline.31 Although the Associated Gas Re-Injection Act prohibits the flaring of gas, it nonetheless grants the Minister wide discretion to permit this procedure if he is satisfied that gas utilization or reinjection is not appropriate or feasible in a particular oilfield.32 The Minister’s permit may either specify terms and conditions or prescribe a monetary fine for the gas flared.33 However, it does appear that the criteria for the Minister’s permit are skewed in favour of oil TNCs. Among other factors, the permit is issued if more than 75 per cent of the produced gas is effectively utilized or conserved; the produced gas contains more that 15 per cent impurities, which renders it unsuitable for industrial purposes; and an ongoing utilization program is interrupted by equipment failure.34 The Minister’s permit attaches to oilfields and not to the operator

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corporation. Thus, it is possible that a corporation operating more than one oilfield is penalized for flaring gas in respect of some fields while it is granted permission to flare gas in respect of some other oilfields that satisfy the criteria for exemption. The Minister’s permit is by practice granted upfront for a period of six months, usually from January to June or July to December. A review of the performance of oilfields is undertaken every six months by the Department of Petroleum Resources (DPR),35 with a view to determining fields that qualify for permits and those to be penalized for violation of the Associated Gas Re-Injection Act.36 No doubt, the Associated Gas Re-Injection Act is intended to prevent gas flaring by encouraging oil corporations to adopt gas reinjection technologies. However, despite its existence for over two decades now, gas flaring has continued unabated in Nigeria. In the first half of 2005, for example, 116 oilfields were penalized for gas flaring while 75 oilfields were granted permission to flare gas.37 Statistics for previous years confirm the blatant disregard for the Act by oil TNCs in Nigeria. In 2001, a total of 264 oilfields were penalized for gas flaring as against 116 that were exempted.38 In 2002, 165 oilfields were fined for violation while 115 obtained the Minister’s exemption.39 In 2003, 177 fields were fined while 115 were exempted; and in 2004, 191 fields were fined and 81 fields were exempted.40 The question then is, why do oil TNCs disregard the Associated Gas Re-Injection Act? The reasons are as connected with the economic interests of the TNCs as they are with the permissive nature of the Associated Gas Re-Injection Act itself. The penalty for gas flaring without the Minister’s permission – fixed at 10 Naira (about US$0.075) per 1000scf of gas flared41 – is at best meager. Thus, it is more economically prudent and advantageous for oil TNCs to flare gas and pay the fines than to undertake huge expenses in constructing gas re-injection facilities.42 Moreover, the government has never been steadfast in enforcing the Act. For example, oil TNCs often fail to meet compliance deadlines set under the Act without the government punishing or sanctioning the TNCs.43 Indeed, the government seems all too willing to permit oil corporations to flare gas by prescribing generous rules for the granting of permission to flare gas. environmental guidelines and standards for the petroleum industry in nigeria In an attempt to enhance environmental regulation of Nigeria’s oil and

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gas industry, and perhaps also to aid oil corporations in the sustainable conduct of their activities, the DPR has since 1981 issued the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN).44 Updated and revised in 2002, the EGASPIN sets out detailed guidelines and standards for the exploration, production,45 storage,46 refining,47 transportation,48 and marketing49 of petroleum products in Nigeria. In specific terms, it establishes industry-wide standards and guidelines for pollution prevention,50 abatement,51 and remediation;52 management, treatment, and control of oil-related wastes;53 compliance monitoring;54 and sustainable decommissioning of oil and gas facilities.55 The EGASPIN also restates the various environmental obligations placed on oil corporations by law, including prohibition of discharges of oil-related wastes (such as drilling muds and fluids, produced formation water, and produced sand and sludge) into inland, coastal, or offshore waters, swamp, and pits.56 The primary responsibility for enforcing the EGASPIN is vested in the DPR.57 However, the EGASPIN also encourages self-enforcement by industry. In the latter regard, it requires oil corporations to do certain things at every stage of their operations. First, they are to institute an environmental management system that defines, documents, and communicates specific environmental protection roles, responsibilities, and authorities to their staff.58 More specifically, oil corporations are to appoint a management representative whose duty is to ensure the establishment and proper implementation of the entity’s environmental policies.59 The environmental policy of each oil corporation must, however, meet stipulated substantive conditions. It must be appropriate to the nature, scale, and environmental impact of its activities, products, and services; commit the corporation both to the continual improvement and prevention of pollution, and to comply with Nigeria’s environmental laws and regulations; and provide a framework for setting and reviewing the corporation’s environmental objectives and targets.60 It must also be communicated to the corporation’s employees and made available to the public.61 The overarching aim of the environmental management system is to ensure that ‘unforseen, identified and unidentified environmental issues are contained and brought to an acceptable minimum.’62 Secondly, oil corporations must assess compliance with their environmental management systems and other regulatory requirements by conducting periodic environmental audits and reviews.63 Environmental audits are to be undertaken, on behalf of oil corporations, by professionally competent and certified auditors who must be both independent of the activities to be audited and registered with the DPR.64

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However, self-audit as mandated by the EGASPIN is not a social report on the environmental compliance of the corporation. Neither the oil corporations nor the DPR are obliged to publish the audits. Thirdly, oil corporations are to undertake self-monitoring of compliance with some of the EGASPIN’s standards including, among others, monitoring of the discharge of oil-related wastes from drilling and production operations to ensure compliance with requisite standards;65 biological monitoring of soil, sediment, or water on which oil effluent is discharged;66 monitoring of gaseous point source emissions;67 and monitoring of radioactive substances.68 Records and results of monitoring activities are to be submitted to the Director of Petroleum Resources at prescribed regular intervals.69 Likewise, oil corporations are to patrol and inspect their oil pipelines and flowlines once every month or at such interval as may be directed by the Director of Petroleum Resources.70 Details of the patrol and inspection are to be recorded in a log book,71 while results of inspections are to be submitted to the Director of Petroleum Resources every month.72 It remains unclear, however, whether the public has access to the records and inspection results. While the EGASPIN does not expressly prohibit public access to such data, the DPR does not appear to have cultivated the habit of making them available to the public. It is perhaps not surprising that the EGASPIN requires industry self-monitoring of compliance. Oil-related pollution often involves the release or discharge of a number of complex chemicals and toxic substances. Detecting the presence of these chemicals and substances requires some depth of scientific knowledge, as well as requisite laboratory equipment, two vital ingredients that are obviously in short supply at the DPR. Generic Environmental Statutes and Regulations national environmental standards and regulations enforcement agency (establishment) act Aside from the oil-related laws and regulations discussed above, other enactments aimed at general environmental protection in Nigeria are applicable to the oil and gas industry. One such enactment is the National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007 (NESREA Act), which establishes the National Environmental Standards and Regulations Enforcement Agency (NESREA).73 The NESREA Act charges the NESREA with responsibility for

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enforcing ‘environmental standards, regulations, rules, laws, policies and guidelines’ in Nigeria, as well as ‘responsibility for the protection and development of the environment, biodiversity conservation and sustainable development of Nigeria’s natural resources in general.’74 The NESREA Act prohibits the discharge of ‘harmful quantities’ of any hazardous substances into the air or upon the land and waters of Nigeria or at the adjoining shorelines, except when permitted under any law.75 Oil-related wastes qualify as hazardous substances in this context because the NESREA Act defines hazardous substances in broad terms as ‘any chemical, physical or biological and radioactive material that poses a threat to human health and the environment.’76 Prohibitions on the discharge of hazardous substances by the NESREA Act appear to have been considerably undermined by the Act itself. The NESREA Act prohibits the discharge of hazardous substances only if they are of ‘harmful quantities.’ Conceivably, therefore, ‘unharmful’ quantities of hazardous substances can be discharged. While Nigeria has supposedly established limits on discharge of effluents,77 it is doubtful whether the NESREA has the capacity to determine accurately at all times the quantities of hazardous substances that qualify as ‘harmful’ given its institutional deficiencies, including its lack of expertise and equipment.78 The danger then is that public health could be jeopardized if, as a result of these deficiencies, the NESREA incorrectly determines a particular discharge as being unharmful, when the opposite is the case. Even the prohibition of discharge of harmful quantities is not absolute but rather made subject to ‘any law in force in Nigeria’ that permits such discharge.79 The prohibition under the NESREA Act is thus inoperative where the discharge of harmful quantities of hazardous substances is permitted by another law in force in Nigeria. Finally, violation of the prohibition whether by individuals, corporate bodies, or their officers is a criminal offence that attracts, in the case of corporate bodies, a fine not exceeding 1,000,000 Naira (approximately US$8,572).80 In addition, corporate violators are liable to a fine of 50,000 Naira (approximately US$429) for every day the offence subsists.81 While the fine appears substantial, it could become derisory in the future given the high rate of depreciation of the Naira against international currencies. Thus the fine for discharging harmful quantities of hazardous substances could become more of a licence than a penalty. The Minister responsible for the environment may impose certain obligations on violators of the NESREA Act, including owners or operators of any vessel or facility (whether onshore or offshore) from which harmful quantities of hazardous substances are discharged.82 The Min-

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ister may order violators to adopt specific methods for the removal and disposal of hazardous substances and impose both financial responsibilities and reporting requirements on violators.83 Although the NESREA has general responsibility for environmental protection in Nigeria, its powers are severely limited in relation to environmental pollution arising from the oil and gas industry. For example, the NESREA cannot conduct environmental audits relating to the oil and gas sector.84 In addition, it has no power to conduct investigations on oil spillages or other oil-related pollution.85 The exclusion of certain oil and gas issues from the ambit of the NESREA may have been aimed at preventing role conflict between the NESREA and the National Oil Spill Detection and Response Agency (NOSDRA), which has ‘responsibility for preparedness, detection and response to all oil spillages in Nigeria.’86 environmental impact assessment act In 1992, Nigeria’s environmental protection received a much-needed boost with enactment of the Environmental Impact Assessment Act (EIAA). The EIAA requires oil TNCs (and project developers in other sectors) to consider the environmental impact of their activities at the early stages of project development, except exempted by law.87 In particular, ‘where the extent, nature or location of a proposed project or activity is such that is likely to significantly affect the environment,’ oil TNCs are required to undertake an environmental impact assessment (EIA) of the project before embarking on it.88 The EIA is to include an assessment of the likely or potential environmental impact of the proposed project, and the measures available to mitigate its adverse environmental impacts.89 The EIAA also requires projects (particularly projects designated as Mandatory Study Activities) to undertake an environmental audit that is to be vetted and approved by the Federal Ministry of Environment (FME).90 The FME may refuse to approve a project if it is of the opinion that ‘the project is likely to cause significant adverse environmental effects that cannot be mitigated and cannot be justified in the circumstances.’91 Although it punishes non-compliance with fines or imprisonment,92 to its credit the EIAA adopts the pluralist approach to regulation. Its overarching aim is the promotion and encouragement of consultation and information exchange between public agencies, private project sponsors, and individual Nigerians.93 Hence, it enjoins the FME to give an opportunity to government agencies, members of the public, experts in any relevant disciplines and interested groups to make comments on any EIA submitted to it for approval.94 Also, activities designated under the

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EIAA as Mandatory Study Activities (which include oil and gas projects) are required to make copies of their mandatory study reports available to the public at a designated place;95 and, in turn, ‘any person may file comments with the [FME] relating to the conclusions and recommendations of the … report.’96 Thus, individuals and host communities of oil TNCs and indeed NGOs could, as ‘members of the public’ or ‘interested groups,’ file comments on any EIA or Mandatory Study Report pending before the FME.97 In addition, the EIAA obliges the FME to establish a ‘public registry’of information and records relating to EIA so as to facilitate public participation and access to relevant information.98 Although it is unclear what weight the FME attaches to comments filed by private parties, it takes such comments into consideration at various stages, including the screening or mandatory study stage, and at the stage of mediation or assessment by the review panel.99 Indeed, public concerns about the environmental effects of a project may prompt the FME to refer it to mediation or to a review panel.100 Public participation in the environmental assessment is, however, likely to be attenuated by rampant illiteracy in rural Nigeria, where much of Nigeria’s oil and gas operations exist. EIAs often contain technical details about potential environmental impacts and mitigating measures. Illiterate rural host communities are thus unlikely to appreciate some of the issues covered by EIAs, much less coherently comment on them. But even literate urban communities lack technical expertise. No doubt, the EIAA represents an improvement in Nigeria’s environmental regulation, because it encourages public participation. However, its impacts are significantly weakened by the exceptions it creates. It does not require an environmental assessment where (i) the President of Nigeria or the Federal Environmental Protection Council determines that the environmental effects of a project are likely to be minimal; (ii) the project is to be carried out during a national emergency, for which temporary measures have been taken by the government; and (iii) the FME is of the opinion that, given the circumstances, the project is in the interest of public health or safety.101 The first exception is particularly troubling because it could be utilized by private enterprises with political connections to the president or the council to bypass the requirement for an EIA. While the exception appears to have been meant to afford the president personal discretion to approve projects, both public and private, where he considers that they are in the overall interest of Nigeria,102 the discretion must at all times be exercised reasonably. In fact, the discretion may be exercised in favour of industry only if a project poses ‘minimal’ adverse effects to the environment or health.

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Appraisal of Environmental Regulation of the Oil and Gas Industry in Nigeria An important feature of Nigerian environmental laws and regulations is that they are meant to both prevent and remedy environmental pollution.103 Also noticeable is the fact that aspects of these laws and regulations encourage public participation in environmental regulation, albeit to a limited degree. These are no doubt desirable attributes. However, areas of concern remain in environmental protection in Nigeria. For example, as noted below, the preventive approach adopted by Nigerian statutes appears compromised by the very easy loopholes and excuses that some of the statutes afford corporations for non-compliance.104 A further concern is that since the enactment of some of the statutes and regulations, little (if any) attempt has been made to revise or update them to keep pace with technological advances in oil and gas exploration and production.105 The obvious exception is the Mineral Oils (Safety) Regulations 1997, which itself has yet to receive governmental approval.106 The non-revision of laws is unacceptable because it hurts pollution prevention in Nigeria. Modern oil exploration and production facilities are more sophisticated than those in use in the 1960s and 1970s when many of the laws were passed, and thus, could now violate the environment in more ways than was the case previously. One would thus be stating the obvious by suggesting that environmental aspects of Nigerian oil and gas laws and regulations need overhauling. These and other shortcomings have led some to the conclusion that Nigerian oil and gas law and policy are unnecessarily skewed in favour of economic development,107 rather than championing ‘the cause of environmental well-being.’108 These criticisms may be well founded. However, the crisis of environmental protection in Nigeria’s oil and gas industry lies not so much with defects in Nigerian laws as with their non-enforcement.109 As shall be discussed below, there is a deficit in the enforcement of regulations in Nigeria, a deficit that has encouraged oil TNCs to flout its regulatory laws. Environmental Regulation of the Mining Industry in Ghana As noted in chapter 1, mining-related environmental degradation and pollution is widespread and has had a devastating impact on host communities in Ghana. Among other ill effects, mining activities pollute rivers and streams, which are the primary sources of drinking water in rural Ghana; they spread diseases, such as malaria and pulmonary tuberculosis; and they reduce vegetation and agricultural outputs.

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Environmental Protection under Mining Laws and Regulations The principal statutory instruments for environmental regulation of mining in Ghana are the Mining Regulations 1970;110 the Mining and Environmental Guidelines;111 and to a lesser degree, the Minerals and Mining Act 2006.112 These instruments generally require mining corporations to adopt sustainable environmental practices and to take proactive steps to prevent environmental pollution. In addition, they require remediation and clean-up of pollution whenever it occurs. For example, the Mining and Environmental Guidelines (the Guidelines), a collaborative effort between the Ghana Minerals Commission and the Environmental Protection Agency (EPA), prescribes sustainable environmental standards and practices to be adopted and observed in all aspects of mining operations, including exploration, exploitation, and decommissioning of mining equipment and sites.113 A distinctive feature of the Guidelines is the promotion of environmental stewardship. They require mining corporations to prepare and submit annual environmental audit reports to appropriate government agencies.114 The Guidelines have been criticized for placing excessively onerous compliance burdens on mining corporations.115 Strict enforcement of the Guidelines, it is argued, may lead to unintended consequences, including the termination of some mining operations and deterrence to new mines coming onstream.116 This may well be so. However, the greater risk seems to lie in the opposite direction. The reporting requirements of the Guidelines do not specify the contents of environmental audit reports to be prepared and submitted by mining TNCs. Rather, they are to be mutually agreed upon between individual corporations and the government. This makes the reports susceptible to manipulation. Even more problematically, the Guidelines require environmental audit reports submitted by mining TNCs to be kept confidential.117 Since they are not disclosed to the public, the government is largely insulated from pressure to enhance its reporting and compliance standards. In addition, non-disclosure may encourage TNCs to exaggerate the extent of their compliance or to under-report their non-compliance. For its part, the Minerals and Mining Act 2006 requires holders of mineral rights to ‘obtain the necessary approvals and permits’ and to ‘comply with the applicable Regulations made under this Act and any other enactment for the protection of the environment.’118 It also encourages efficient reclamation of land damaged during mining prospecting. It

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obliges holders of mining prospecting licences to ‘fill back or otherwise make safe to the satisfaction of the [Minerals] Commission a borehole or excavation made during the course of prospecting operations.’119 Overall, however, the Minerals and Mining Act 2006 appears to backtrack on Ghana’s environmental commitments, if not weaken mining-related environmental protection in the country. The specific environmental provisions contained in the predecessor statute, that is, the Minerals and Mining Law 1986, have been clearly omitted from the Minerals and Mining Act 2006. For example, the Minerals and Mining Law 1986 required mining licence holders to ‘have due regard to the effect of the mineral operations on the environment’ and to ‘take such steps as may be necessary to prevent pollution of the environment as a result of such mineral operations.’120 The Minerals and Mining Act 2006 contain no such provisions. Also, under the Minerals and Mining Law 1986 it was a criminal offence to pollute the environment,121 an offence for which corporate directors and officers were personally liable.122 By contrast, the Minerals and Mining Act 2006 does not specifically designate environmental pollution as a criminal offence.123 However, it is arguable that contravention of the environment provision in s. 18 of the Minerals and Mining Act 2006 is an offence. This is so because the Act provides that ‘a person who contravenes a provision of this Act or Regulations made under this Act, commits an offence and is liable on summary conviction to a fine not more than the cedi equivalent of US$ five thousand.’124 Even if contravention of s. 18 is an offence, the likelihood of a conviction for this offence is at best remote. Like its Nigerian counterparts, the Minerals and Mining Act 2006 affords an important defence for company directors and officers even for the few offences it creates: proof that the offence was committed without the knowledge or connivance of the accused, and that they exercised due care and diligence to prevent its commission.125 Perhaps the omission of specific environmental provisions in the Minerals and Mining Act 2006 was intended to give the minister responsible for mines unfettered discretion to make regulations for the purpose of giving effect to the Act.126 The envisaged regulations include regulation restricting mining operations in or near rivers, dams, lakes, streams, and forests;127 regulation governing the cutting down of timber for the purpose of carrying on prospecting and mining operations;128 and regulation concerning environmental protection, health, and safety.129 It is to be hoped that these regulations, when made, will prescribe specific environmental standards for the mining industry in Ghana. While, as argued earlier, the Minerals and Mining Act 2006 is soft on

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environmental protection, its provisions on ‘stability agreement’ and ‘development agreement’ portend significant dangers for, and may in fact stifle, environmental protection in Ghana, as conveyed in sections 48 and 49 of the Act: 48. (1) The Minister may as a part of a mining lease enter into a stability agreement with the holder of the mining lease to ensure that the holder of the mining lease will not, for a period not exceeding fifteen years from the date of the agreement, (a) be adversely affected by a new enactment, order, instrument or other action made under a new enactment or changes to an enactment, order, instrument that existed at the time of the stability agreement, or other action taken under these that have the effect or purport to have the effect of imposing obligations upon the holder or applicant of the mining lease, … 49. (1) The Minister on the advice of the Commission may enter into a development agreement under a mining lease with a person where the proposed investment by the person will exceed US$ five hundred million. (2) A development agreement may contain provisions, … (d) relating to environmental issues and obligations of the holder to safeguard the environment in accordance with this Act or another enactment, …

The cumulative effect of these provisions is that they limit the ambit and reach of Ghana’s environmental laws. They not only suspend the application of environmental laws to mining companies who are signatories to ‘stability’ and ‘development’ agreements, they also confer on the Minister the powers to exempt mining TNCs from compliance with extant and future environmental laws and regulations. A more telling commentary is that while a ‘stability agreement’ has a lifespan ‘not exceeding fifteen years,’130 no timeline is attached to a ‘development agreement.’ Conceivably, therefore, a ‘development agreement’ may relieve a mining TNC from complying with environmental standards throughout the entire duration of a mining project. Finally, it has been said that these provisions are discriminatory towards non-mining companies.131 A greater danger, however, is that they are susceptible to abuse, given the spectre of corruption and administrative inefficiency in Ghana’s public service. Oversight of the

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exercise of the Minister’s powers and discretion is therefore required. This is perhaps why the Act requires any agreement under both sections to be ratified by the parliament.132 Generic Environmental Statutes with Implications for Mining in Ghana Ghana’s generic environmental laws and regulations such as the Environmental Protection Agency Act133 and the Environmental Assessment Regulations 1999 apply to and affect the mining industry. While the former (not discussed here) affects the industry to the extent that it generally empowers the EPA to set guidelines and enforce environmental protection in Ghana, the latter has direct significance for the industry because it requires mining corporations to obtain an environmental permit before commencing mining operations.134 Environmental permits are usually issued by the EPA upon the approval of an environmental impact assessment.135 In granting permits, the EPA takes into consideration a host of factors, including the concerns of the general public and immediate residents of the project’s host communities.136 The EPA has several options upon the screening of an application for an environmental permit. It may approve it, or reject it, or require the applicant to submit a preliminary environmental report, or require an environmental impact statement.137 A preliminary environmental report contains detailed particulars of the environmental effects of a proposed project. If the EPA is satisfied with the report, it issues an environmental permit for the project.138 However, where the opinion is that a significantly adverse environmental impact is likely to result from the proposed activity, the EPA may require the applicant to submit an environmental impact statement.139 An environmental impact statement contains an assessment of the potential environmental impact of the proposed activity, including the possible direct and indirect environmental impact at the preconstruction, construction, operation, decommissioning, and postcommissioning phases of the project.140 It must also identify possible adverse effects on the health of persons in the vicinity of mining and other extractive projects.141 Finally, it must set out plans for remediation and reclamation of the site following completion of the project.142 Where an application is rejected by the EPA for failure to meet stipulated conditions, the undertaking or project for which the application is made ‘shall not be commenced or where it is in existence, [it shall] be discontinued.’143 However, the permit, if granted, imposes certain obligations

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on the recipient corporation. For example, it is obliged to submit an annual environmental report in respect of the project.144 Regrettably, as noted below, the particulars of such reports are not specified but are to be directed by the EPA.145 The Environmental Assessment Regulations 1999 encourage public participation in the EPA approval process. They require applicants to advertise the fact that they are submitting an environmental impact statement in at least one national newspaper and a newspaper circulating in the locality where the proposed project is to be situated.146 In addition, upon receipt of an environmental impact statement, the EPA publishes (at the expense of the applicant) a notice of the statement.147 Where a proposed project attracts adverse public reaction, or involves the dislocation, relocation, or resettlement of communities, or where the EPA considers that it could have extensive and far-reaching environmental effects, the EPA may constitute a Panel of three to five members, including representatives of residents of the geographical area of the proposed location of the project, to hold a public hearing on the project.148 The Panel’s procedures are designed to give both proponents and opponents an opportunity to make their case in the same forum. In practice, a project proponent makes a presentation (in the local language) to the Panel, affected communities and other concerned parties voice their opinions and concerns, and the proponent responds to the concerns.149 Thus, the Panel’s process not only ensures that information is disseminated to local communities, but, perhaps more significantly, it offers an opportunity for public challenge to or verification of the assertions made in an applicant’s statement.150 Although the Panel is not a decision-making body, its recommendations are said to have considerable influence on EPA’s review of environmental impact statements.151 It needs to be said, however, that as in Nigeria, participation of local communities in Ghana’s environmental assessment process may be hampered by the intricate and technical nature of environmental assessments. Local communities whose members are largely illiterate may not be able to respond appropriately to proposed projects because of their lack of technical knowledge. Indeed, in Ghana there is an ‘extremely limited number of community leaders [who have] a reasonable understanding of the consequences of mining’ on the environment.152 Nonetheless, it is commendable to allow public participation in the environmental impact assessment process in Ghana. Public participation can, however, be made more meaningful if

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environmental NGOs and other experts, both foreign and domestic, provide technical assistance to local communities in the assessment process. Assistance can take the form of enlightening communities on the potential environmental hazards of projects, and articulating and presenting the communities’ views to the EPA Panel. Also, public participation in the environmental assessment process can be enhanced by involving indigenous social institutions in the process.153 These institutions embody the ‘beliefs, norms, ecological knowledge, and practices’ of local communities, and could ‘provide an effective response to specific challenges posed by the local environment.’154 Ghana’s Environmental Assessment Regulations 1999 also require mining corporations to submit to the EPA an annual environmental report relating to their operations.155 However, the form, particulars, and content of these reports are not specified by the regulations. Rather, they are to be determined by the EPA.156 Thus, reports can vary among corporations depending on the EPA’s directive. More significantly, the EPA is neither obliged to verify the accuracy of the reports nor to publish them. As with the Guidelines, the veil of secrecy surrounding environmental reports under the Environmental Assessment Regulations affords an opportunity to mining TNCs to exaggerate their environmental compliance. It also potentially insulates the EPA and the TNCs from civil society pressures because NGOs, being unaware of the content of the reports, may be unable to counter or seriously challenge them. Financial Incentives for Environmental Compliance in Nigeria and Ghana I observed in chapter 2 that market mechanisms may not be suitable for Africa because of the lack of requisite institutional, market, and economic conditions. It should come as no surprise then that market mechanisms have not been adopted by Nigeria and Ghana.157 However, both countries have established financial incentive regimes for their extractive industries, which may encourage compliance with environmental standards. Nigeria has established certain tax incentives for gas utilization, including tax-free dividends, accelerated capital allowances, and tax holidays.158 More specifically, oil TNCs in Nigeria are entitled to tax savings and capital investment allowances on expenses incurred in developing natural gas into usable products.159 In fact, TNCs enjoy tax savings on expenses incurred in separating natural gas and crude

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oil from the reservoir, as well as tax allowances on capital investment on facilities for delivering gas in a usable form.160 In Ghana, holders of mining leases are entitled to the capitalization of expenditures on reconnaissance and prospecting where they start development of a commercial find.161 This would conceivably include expenditures on environmental compliance measures.162 These schemes are no doubt necessary. But as couched they are unlikely to improve the environmental practices of TNCs. For example, expenses incurred by oil TNCs in developing natural gas into usable products and, in the case of Ghana, expenditure on environmental compliance measures could be manipulated, if not exaggerated, unless the government is somehow able to ascertain actual expenditures. Enforcement of Public Regulation in Nigeria and Ghana Enforcement and Compliance Mechanisms Regulatory agencies in both Nigeria and Ghana have wide regulatory powers and, in principle, access to a variety of enforcement and compliance mechanisms.163 Regulatory agencies may at ‘reasonable times’164 enter, inspect, and search corporate premises for compliance purposes.165 Although it is unclear what is meant by ‘reasonable times’ and who it is that determines what amounts to ‘reasonable times,’ this restriction may have been meant to ensure that natural resources production activities are not unduly circumscribed by regulatory inspections. In addition to inspections and searches, regulatory agencies may request production of documents and materials in order to ascertain the compliance status of extractive corporations.166 They may even exercise police powers such as the power to arrest and seize offending persons, materials, and premises.167 Some agencies possess magisterial powers, including the powers to ‘request any person to attend at a time and place specified to give’ requisite information,168 and to summon and examine witnesses on oath.169 Regulatory institutions and officials in Nigeria and Ghana also have wide-ranging remedial powers. Some agencies may issue administrative orders requiring polluters to restore damaged environments.170 They may also issue compliance or warning notices, cease and desist orders, and directives that particular defaults be rectified within a specified time frame.171 Ghana’s EPA, for example, is empowered to issue enforcement notices specifying the offending activity, the steps

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required to be taken to achieve compliance, and the time within which the steps are to be taken.172 It can also ‘use such force as may be necessary’ to ensure compliance with its compliance notices.173 To ensure compliance with regulatory rules and administrative orders, regulatory agencies in Nigeria and Ghana have powers to impose a number of sanctions on defaulters. Some agencies, such as Nigeria’s DPR, may withhold approval of proposed projects – even if unrelated to the subject matter of the breach – pending remediation of previous breaches by the corporate entity concerned. However, in both countries the imposition of fines appears to be the dominant sanction for non-compliance with mandated environmental standards. Regrettably, fines have not had much impact on compliance because the prescribed fines for violation of regulatory laws in these countries are so low.174 There is thus an economic incentive for extractive TNCs to flout regulations because the cost of violation is cheaper than the cost of compliance. Nigeria’s DPR obviously appreciates this problem. It has stated that it is ‘currently in the process of reviewing penalties and sanctions for violators so as to attract severe fines.’175 While the severity of fines does not necessarily correlate with the extent of compliance, as noted the current penalties offer no deterrent to non-compliance. Parenthetically, since the quanta of fines were first set in Nigeria and Ghana, the national currencies of both countries have declined radically against international currencies. The problem of depreciation in the monetary value of fines may be avoided by the adoption of either of two options. The first is to embark upon periodic reviews of fines so as to adjust them in accordance with the prevailing value of the local currencies. This option may prove difficult to adopt because the monetary value of some of the fines is specified in statutes, which are not amenable to quick amendment.176 The second option would be to denominate the fines in internationally convertible currency such as the U.S. dollar or the Euro. Another sanctioning device is suspension or revocation of licences and leases. For example, in Nigeria the Minister of Petroleum Resources may suspend any oil project that does not meet safety standards;177 that does not operate in accordance with good oilfield practice;178 or that in his or her opinion contravenes, or is likely to contravene, any provision of the Petroleum Act or regulations made under it.179 In Ghana, the EPA has powers to order ‘immediate cessation’ of mining operations that are not in compliance with environmental standards.180 In fact, the EPA recently suspended the operations of Bogoso Gold Limited, a Canadian

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mining company, in Prestea, Wassa West District, for non-compliance with environmental standards.181 Also, the EPA could suspend, cancel, or revoke an environmental permit issued under the Environmental Assessment regulations 1999 if the holder acts in breach of the regulations or the conditions of the permit.182 Regulatory agencies may also revoke or terminate a licence/lease to explore or exploit natural resources where the licensee/lessee fails to comply with, or fails to observe, their obligations as stipulated in the licence/lease.183 For example, under the terms of the standard lease agreement between mining corporations and the government of Ghana, a mining lease may be terminated where the holder fails to comply with their environmental obligations.184 Also, failure to comply with compliance orders issued by regulatory agencies within the stipulated time may attract penalties that, in appropriate cases, may include revocation of licences/leases.185 However, unlike fines, which are too trivial to command the respect of extractive TNCs, the penalty of licence/ lease revocation may be too harsh. In principle, it can be visited on erring corporations, even for minor offences. Under Nigeria’s Oil Pipelines Act, for example, ‘breach of any of the terms or conditions upon which a licence’ is granted is enough to trigger revocation.186 Thus, failure to commence and complete oil pipeline construction within a stipulated time; refusal to grant free access to authorized public officials for inspection purposes; non-indemnification of the Minister against third-party claims; parting with a pipeline licence or interest therein without the Minister’s permission – these could all trigger revocation.187 The Minister’s unfettered discretion to revoke licences is perhaps understandable because it may have an important deterrent effect on TNCs. Licence/lease revocation as a regulatory strategy ought to be utilized sparingly, if at all. It is unrealistic, if not imprudent, to prescribe licence revocation for minor infractions of rules.188 Rather, licence revocation should be reserved for egregious or consistent breaches.189 That said, although as noted above regulators sometimes ‘suspend’ the operations of extractive projects for non-compliance, it appears unlikely that the licences/leases of erring extractive TNCs would actually be ‘revoked’ by authorities in Nigeria and Ghana. In fact, the power of revocation has never been invoked by these countries against any extractive TNC on account of even the most serious breach of environmental standards.190 This position is unlikely to change anytime soon. Because of the economic importance of extractive TNCs to Nigeria and Ghana, and other African countries, revocation is likely to hurt their economies as

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much as it would punish the TNCs or frighten foreign investors. And given that their governments often enter into joint-venture partnership and equity participation with extractive TNCs, licence revocation could also mean a loss of investment for the government, although in principle it could reassign the lease to another company on more favourable terms. Aside from civil sanctions, a number of statutes in Nigeria and Ghana create substantive environmental offences for which corporate bodies as well as their officers can be prosecuted and sanctioned.191 For example, under Nigeria’s Oil in Navigable Waters Act, owners and masters of vessels, occupiers of land, and owners and persons in charge of any apparatus used for transferring oil from or to a vessel are deemed to have committed an offence if oil or any mixture containing oil is discharged into any part of the sea from any such vessel, place, or apparatus.192 The penalty upon conviction for such an offence is, however, limited to fines.193 Oil and mining TNCs could be charged with other offences that may arise in the course of enforcement of statutory standards. For example, in both countries, it is an offence to hinder or obstruct the discharge of the duties of regulatory officials.194 In particular, failure, neglect, or refusal to comply with any directive or order lawfully given by regulators; failure, neglect, or refusal to allow or provide all reasonable facilities and assistance to regulatory officials; and delay of an authorized officer in the performance of their duties are all offences.195 It is equally an offence in Nigeria for any person to knowingly or recklessly make, in response to a regulatory agency’s request for information, any statement that is false in a material particular.196 Under Nigerian law, where these offences are committed by a corporation, every director and management staff member of the corporation is liable.197 Although the concept of corporate criminal liability is recognized under Nigerian and Ghanaian laws,198 no TNC has yet been prosecuted in either country for environmental crimes199 even though evidence abounds that they often commit such crimes. This may be due to the fact that the governments are often complicit in environmental offences committed by the TNCs. Moreover, criminal prosecution of TNCs may not augur well, at least in an economic sense, for both countries because it could lead to threats of divestment – if not actual divestment – by foreign corporate entities. Even if there were actual prosecutions, the chances of these TNCs or their directors being found guilty is at best remote because regulatory statutes in both countries often afford gen-

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erous defences for environmental offences.200 For example, under Ghana’s Environmental Protection Agency Act, corporations and their officers are not liable if they prove that the offences were committed without their knowledge or connivance and that they exercised due diligence.201 Also, under Nigeria’s Oil in Navigable Waters Act and Oil Terminal Dues Act, corporate owners of vessels are absolved of the offence of discharge of oil or any mixture containing oil into the sea and waters of Nigeria if they ‘prove that the oil or mixture in question was discharged for the purpose of securing the safety of any vessel, or of preventing damage to any vessel or cargo or of saving life.’202 Although the requirements that defendants establish the necessity and reasonableness of the discharge,203 or that they show that the escape of oil into waters ‘was not due to any want of reasonable care’ on their part204 may dissuade frivolous reliance on some of these defences, the fact of the matter is that, taken as a whole, they provide an incredibly wide latitude for corporate defendants to escape criminal liability. In fact, by excluding liability for discharge of oil where it is done in order to secure the safety of a vessel or to prevent damage to the vessel, these laws effectively sacrifice the environmental well-being of Nigerians for the economic interests of oil TNCs. The wide ambit of these defences has prompted Oluwole Akanle to argue that ‘it is hardly feasible to convict anybody under the provisions of the enactment.’205 To some degree, Nigerian lawmakers have yet to realize the negative impact of generous defences on the regulation of corporate conduct. Hence, some of the laws that were recently enacted by the lawmakers continue to shield corporate entities and their directors for environmental crimes.206 Factors Inhibiting Enforcement of Regulation Nigeria and Ghana continue to experience widespread environmental damage as the result of corporate irresponsibility in their extractive industries. This is perhaps to be expected given that both countries rely almost exclusively on conventional public regulation, which is never sufficient in and of itself to regulate corporate conduct. However, nonenforcement of regulatory laws in Nigeria and Ghana accounts in large part for the persistent irresponsibility of TNCs in both countries.207 Although regulatory laws in Nigeria and Ghana are defective in some respects, if legislation in the two countries were enforced it ‘would significantly reduce environmental degradation’ and other social ills

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caused by corporate misconduct.208 The non-enforcement of regulations is itself induced by a number of factors, including the incapacity of regulatory agencies. incapacity and inefficiency of regulatory agencies A plethora of public agencies are charged with regulating, supervising, and monitoring extractive industries in Nigeria and Ghana.209 Regrettably, these agencies are, for the most part, poorly financed and lack requisite regulatory expertise.210 In the case of Nigeria, ‘[m]ost state and local government institutions involved in environmental resource management lack funding, trained staff, technical expertise, adequate information, analytical capability and other pre-requisites for implementing comprehensive policies and programmes.’211 The World Bank has also reported that regulatory agencies in Nigeria are constrained by limited funding, lack of monitoring equipment, lack of expertise, and inadequacy of appropriately trained staff.212 Other studies have reached similar conclusions in regard to Ghana, where it is reported that ‘mine inspectors do not have the necessary equipment and accessories to undertake proper scientific measurements and do calculations during inspections.’213 In fact, Ghana’s EPA and Mines Department (of the Ministry of Lands, Forestry and Mines) each has only one laboratory, thus limiting their ability to conduct adequate scientific assessment of violations and compliance.214 Given these deficiencies, it is little surprising that the broad enforcement powers and sanctions available to regulators are seldom, if ever, invoked. Inspections are rarely undertaken and compliance is not consistently monitored. Even where inspections are undertaken (as in the case of Ghana’s Mines Department, which reportedly conducted nineteen and twenty-one inspections on one mining company in 1999 and 2000, respectively),215 the inspectors are severely handicapped because of a lack of equipment and laboratories. In these dire circumstances, inspectors in Nigeria and Ghana do little more than ‘obtain’ spill or pollution reports from TNCs.216 Hence, violations almost always go undetected and unpunished. The enforcement incapacity of regulatory agencies in Nigeria and Ghana is reflected in their staff composition. For example, as of 2004, Nigeria’s DPR had a total staff strength of 1,154 made up of 62 management staff, 864 senior staff, and 228 junior staff (including 403 senior technical staff and 63 junior technical staff) located in field offices in at

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least 18 locations (including its head office in Lagos).217 At first glance, the DPR’s staff composition appears impressive. However, most of its staff are not involved in regulation because the DPR has other statutory roles, including the processing and licensing of oil operations. The reality then is that the technical staff complement falls short of what is required to regulate effectively Nigeria’s vast oil and gas industry. Currently, the DPR supervises 145 operational oil concessions, 143 open oil concessions, 43 operating companies, 21 producing companies, 254 oil production fields (out of a total of 1,183 oilfields discovered so far), 19 oil terminals, and numerous oil-drilling rigs.218 In addition, the DPR has responsibility for regulating the downstream sector of Nigeria’s oil industry, which includes 4 refineries, 3 petrochemical plants, 41 storage depots, 4 jetties, over 5,000 retail outlets, and 3,000 kilometres of pipelines spread across Nigeria.219 In Ghana, the EPA has one officer, a mining engineer, responsible for enforcing regulations and monitoring compliance in Tarkwa mining region.220 Likewise, the Minerals Commission has only one environmental officer in its Environmental Audit Department.221 The structural weakness of these regulatory agencies has been compounded by their constant restructuring and lack of independence. For example, prior to its dissolution Nigeria’s Federal Environmental Protection Agency (FEPA) has had the misfortune of being tossed from one supervising federal ministry to another. Originally placed under the supervision of ‘the Minister charged with responsibility for the environment,’222 in 1992, it was transferred to the office of the president of Nigeria.223 Subsequently, it was dissolved and its personnel and statutory duties were transferred back to the Federal Ministry of Environment. However, the problem extends far beyond organizational structures. The endemic corruption described in chapter 1 permeates even the administration of regulatory agencies in Nigeria and Ghana.224 For example, the director of Nigeria’s DPR was recently dismissed for alleged corruption involving the allocation of an oil prospecting licence to an unknown company.225 These are serious problems that may prove intractable. However, they might be ameliorated somewhat by new strategies. For example, regulatory capacity and expertise might be enhanced if regulatory agencies entered into strategic liaison and cooperation with universities, whose researchers could then be funded to undertake evaluation of scientific aspects of regulation.226 But there remain other problems – funding; mobilization of technical expertise by compliance staff, which,

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as noted previously, are inadequate; and corruption. The problem of funding might be ameliorated if other African countries followed the example of Ghana, where the Mineral Development Fund (MDF) receives 20 per cent of all mining royalties.227 Some MDF funds are allocated to regulatory agencies while the rest are allocated for development of infrastructure and other projects in communities where mines are situated.228 Even then, the use of these funds has to be monitored to ensure that they are not siphoned off for illicit purposes. duplication of regulatory functions and lack of cooperation among regulatory agencies Environmental agencies in Nigeria and Ghana are often assigned overlapping and confusing regulatory mandates. In Nigeria, for example, the DPR, the FME, the NOSDRA, the NESREA, the Nigerian Maritime Authority, the Niger Delta Development Commission,229 and the Environmental Protection Agencies established by some of the federated states all have jurisdiction over aspects of environmental regulation of the oil and gas industry. A similar situation is found in Ghana, where the Ghana Minerals Commission, the Ministry of Lands, Forestry and Mines, and the Environmental Protection Agency have overlapping responsibilities for regulating the mining industry. The multiplicity of regulatory agencies in these countries leads to duplication of efforts and in some cases role conflicts and inaction on the part of the agencies.230 It also creates financial waste and sends confusing signals to those whose conduct the agencies are to regulate.231 To worsen matters, there is a lack of coordination and cooperation between the agencies although some regulatory statutes encourage such cooperation.232 This problem is by no means trivial because the lack of coordination dissipates scarce resources, creates unnecessary competition between agencies, and breeds inefficiency. To streamline regulation and enhance regulatory effectiveness, regulatory agencies in Nigeria and Ghana may need to be merged. If merger is impossible for some reason, appropriate linkages and cooperative channels, both formal and informal, must be created so as to avoid conflicts, confusion, and unhealthy rivalries.233 government as entrepreneur, government as regulator As mentioned earlier, Nigeria, like other African governments, has entered into joint-venture agreements with all major oil TNCs in the

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country. As of 2007, the Nigerian government was involved in six jointventures with Shell, Chevron, Mobil, Agip, Elf, and Texaco.234 Perhaps more significantly, the government holds a majority stake in each of these joint-ventures.235 For its part, the Ghanaian government holds interests in mining operations undertaken under all mining licences or leases. For example, it holds 10 per cent of the shares of Ghana Manganese Company Limited.236 Also, Ghana’s policy of allocating 20 per cent of mining royalties to the MDF effectively makes its government a stakeholder in all mining developments. These contractual and other arrangements make regulatory agencies vulnerable to interference from government, particularly where the government perceives that regulation may adversely affect its economic interests. They also ensure that the economic interests of the host governments are inextricably linked with, if not tied to, the interests of extractive TNCs. In turn, the relationship affects the manner in which public regulatory agencies deal with the TNCs. In fact, agencies treat TNCs with the utmost leniency and sometimes simply ignore their violations. That is not all. As with many bureaucracies, there is a principal-agent relationship between Nigerian and Ghanaian governments and regulatory agencies that promotes regulatory ineffectiveness.237 For the most part, regulatory bodies in Nigeria and Ghana are subordinate agencies of government ministries and departments. For example, Nigeria’s DPR is by law an arm of the Nigerian National Petroleum Corporation (NNPC), a state-owned oil company.238 Thus, regulatory agencies in both countries act for, and on behalf of, the government. Moreover, they lack independence from, and are subservient to, the executive branch of government. They are thus susceptible to intimidation and interference from government officials and powerful individuals.239 The enforcement of regulatory laws in Nigeria and Ghana is also influenced by political ambivalence prevailing within regulatory agencies and within the governments themselves. These agencies are run by career civil servants who, like the agencies, serve at the pleasure of the governments. Because, as noted earlier, both governments are in jointventure partnerships with extractive TNCs, enforcement of regulations is sometimes viewed by the governments as detrimental to their investment in extractive projects. Thus, in order to safeguard their position, regulatory officials have to be careful not to step on government toes. The reality, then, is that there is often a trade-off between the ‘self-goals’ of regulators (to preserve their jobs) and protection of public interests (by way of enforcement of regulations) in both countries.240 In sum, because regulatory agencies and officials in both countries serve at the

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pleasure of the government, they are unlikely to enforce the law against TNCs, and by extension the government, for fear that they will incur the wrath of government officials. Finally, there is a ‘dependent relationship’ between the governments and TNCs, which creates serious regulatory problems. This relationship is fostered by a combination of factors. Both Nigeria and Ghana lack the technology to exploit their oil and gold reserves and rely largely on the extractive sector for revenue generation. For example, about 95 per cent of Nigeria’s export earnings and 76 per cent of government revenues are generated by the oil and gas industry.241 The dependent relationship promotes the ‘capture’ of regulatory agencies, if not the government, by extractive TNCs, the very same entities they are supposed to be regulating. It not only encourages non-enforcement of regulations, it also generates pressures which compel regulators to adopt regulatory choices that suit the interests of the TNCs.242 In fact, it allows the TNCs a considerable degree of leverage over the government and regulatory agencies, a leverage which in the past has been utilized by TNCs to prevail on the government to relax regulation. For example, despite various laws and administrative orders setting a terminal date for gas flaring,243 oil TNCs continue to flare gas in Nigeria. And rather than comply, the TNCs have insisted on a continuation of gas flaring well beyond the date stipulated by government. In the end, the government has accepted 2008 as the terminal date for gas flaring, a date that, curiously enough, was first proposed by Shell as far back as 1996.244 deficiencies in judicial processes Regulatory regimes in Nigeria and Ghana are, in addition to the problems discussed above, hampered by apparent deficiencies in their judicial systems. Courts in these countries lack infrastructure such as computers, transcribers, recorders, and, in some cases, even stationery.245 This explains why judicial officials in both countries often resort to taking notes of daily proceedings in longhand, an exercise that is itself a tedious undertaking.246 As a result of these deficiencies, litigation in both countries is painfully slow and the courts chaotically congested.247 For example, it is not unusual for trial courts in Nigeria to have as many as twenty to thirty cases slated for hearing daily. Indeed, in commercial cities such as Lagos, Kano, and Port Harcourt, the number could be considerably higher. Because of the lack of infrastructure, and because judges record proceedings in longhand, they are often unable to try

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many cases on the list. The result is that cases are often adjourned and left un-tried for an inordinately long period of time. A similar situation obtains in Ghana, where it has been suggested that ‘specialized’ courts be established to ease congestion.248 The rampant poverty in both countries adds to the problems of litigation. The costs of ordinary litigation are high and often beyond the reach of ordinary citizens. Costs are even higher in pollution cases involving extractive industries because of the expense and time involved in sourcing technical evidence necessary to fix extractive industries with environmental liability.249 This is the more so in Nigeria, where there is no doctrine imposing statutory strict liability for environmental pollution; and proof is required in each case that injury suffered is the result of the negligence of the defendant.250 It thus comes as no surprise that there is a paucity of private litigation for environmental damage in Nigeria.251 The dearth of private environmental litigation is, according to a former Chief Justice of Nigeria, compounded by the fact that a great proportion of the citizenry is ‘oblivious of the environmental damage surrounding them especially when the damage is caused by “intangible” process.’252 Further, he notes, courts and other institutions for redress are physically inaccessible to many potential litigants.253 Courts in Nigeria are usually situated in towns and cities far removed from the rural areas that bear the bulk of the negative environmental practices of oil and gas TNCs. Moreover, prospective plaintiffs may be deterred from instituting environmental pollution cases against TNCs because of threats of reprisal by the Nigerian government, the co-owner of many offending enterprises.254 Litigation is also an unattractive option because, even where plaintiffs successfully litigate claims against extractive TNCs, the damages awarded by Nigerian courts are generally meagre. It is to be noted, however, that considerably higher damages were recently awarded against oil TNCs for injury resulting from oil-related pollution.255 According to some observers, this represents evidence of a changing judicial attitude towards such litigation.256 However, the trend has not yet firmed up litigation, and torts-based remedies remain of limited help to victims of oil-related pollution.257 Failure of Regulation: An Appraisal I now return to the question posed at the beginning of this chapter. To reiterate, what explains the failure of regulation in Nigeria and Ghana?

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No one factor can adequately explain the absence of positive regulatory results in both countries. Rather, a combination of factors, internal and external, account for this state of affairs. There is the problem of incapacity and inefficiency that bedevils public institutions in both countries. There is widespread corruption within and without their regulatory agencies. Regulatory functions are duplicated and there is a noticeable absence of cooperation among various regulatory institutions. Besides, their judicial systems do not provide much succour to victims because of a number of factors including poverty, high and prohibitive cost of litigation, and lack of infrastructure resulting in inordinate delays in the litigation process. To compound the situation, TNCs are often too powerful and too important to the economies of both countries, so much so that the prevailing, albeit ill-informed, wisdom in these countries (and indeed in other African countries) is that regulation will dissuade foreign investment by TNCs.258 The NEPAD gives a collective stamp of approval to this line of thinking by prescribing a largely unregulated regime for natural resource extraction.259 Although the fear of divestment often leads Nigeria and Ghana to retreat from regulation, they need to realize that divestment by extractive TNCs is unlikely. In fact, because natural mineral resources (such as oil, gas, diamonds, and gold) abound in commercial quantity in a few countries, extractive TNCs do not have a wide spectrum of forum choices. As well, because extractive industries use largely standardized technologies for their operations irrespective of location, it is sometimes possible that their social performance – say in the environmental context – exceeds the legal requirement in individual host African countries. Thus, there is an economic disincentive for extractive TNCs to divest from one country and move to another on the ground of stringency or laxity of regulatory laws. As Cynthia Williams has rightly noted, ‘[w]here companies have developed stringent environmental management systems, they are financially better off using those systems in all of their production facilities, notwithstanding the [laxity of] local laws’ in the host country.260 Besides, it may not be feasible for TNCs to divest from Nigeria and Ghana, given their huge financial investments in extant projects. Thus, rather than succumb to the fear of divestment, Nigeria and Ghana should give priority attention to regulation, not only because of the enormity of the destruction that extractive TNCs have imposed on Nigerians and Ghanaians, but also because a precondition for achieving development is the attainment of social stability.

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Conclusion As noted in this chapter, the regulation of extractive industries in Nigeria and Ghana is undertaken primarily by way of public command-andcontrol rules. While both countries have instituted financial incentives schemes, they are yet to be successfully implemented, and thus, have not positively impacted on the environmental practices of TNCs. Also, recourse to more subtle compliance strategies – cease and desist orders, social audits, self-reporting, etc. – is largely ignored. Regrettably, public command-and-control regulation has been ineffective in controlling the excesses of TNCs in Nigeria and Ghana because of the political, legal, and technical shortcomings of regulatory agencies in both countries. However, there are certain non-state models of regulation that may complement public regulatory schemes. These include voluntary selfregulation and the influence of civil society groups. The extent to which both Nigeria and Ghana currently utilize these non-state models is considered in the next chapter.

4 Complementary Regulatory Strategies: Self-Regulation and the Role of Civil Society Organizations in Nigeria and Ghana

The previous chapter analysed public regulation of the environmental practices of TNCs in Nigeria and Ghana, underscoring the failure of public regulation in both countries. Because of this failure of conventional regulatory strategies it is necessary to explore some of the complementary strategies that are beginning to emerge in Nigeria and Ghana. The aim of this chapter is thus to consider non-state regulatory strategies, including market-based self-regulation and the influence of civil society in the regulatory processes. But it begins with a general analysis of the substantive contents of codes of conduct in extractive industries. This is intended to serve as a prelude to two case-studies on compliance with codes in Nigeria and Ghana. Self-Regulation Self-regulation by industry has gained immense traction because of the belief – a belief that is relentlessly projected by business and market advocates alike – that ‘government regulation is excessively disruptive to corporate enterprise.’1 There are several techniques of self-regulation. As identified by Margot Priest, they include voluntary corporate codes of conduct (codes), statutory self-regulation, firm-defined regulation, supervised self-regulation, and regulatory self-management.2 Of these, only codes can truly be said to be voluntary because all others have some element of legal compulsion and are, indeed, mandated by government.3 This perhaps explains why codes are the best known (and arguably the most used) technique of self-regulation today.4 As a matter of fact, codes have become the rule rather than the exception in global business.

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Corporate Codes of Conduct Corporate codes of conduct are policy statements issued by individual corporations or industry associations spelling out standards and principles guiding the conduct of their business. Simply put, a code of conduct expresses the commitment of an entity to particular values, standards, and principles of behaviour by which it expects to carry on its activities. But that is not all. Some codes go beyond the confines of the issuing entity by setting ethical guidelines for its contractors, suppliers, and other business partners.5 Thus, properly implemented, codes could potentially influence the ethical conduct of business both within and without the issuing corporation.6 However, as noted below, the problem is that voluntary codes are hardly ever followed or effectively implemented by corporations. Rather, they may have become public relations mechanisms that are often cleverly orchestrated by corporations with a view to impressing the public.7 To be sure, voluntary codes can be useful regulatory tools. They serve to highlight and probably enhance the social consciousness of corporations and their employees. Codes may, where they express commitment of the issuing corporation to certain standards, equally constitute part of the yardstick by which the public judges or measures a corporation’s social compliance. Sustained implementation of codes may thus enhance public perception of the corporation as a responsible entity. This may, in turn, increase its patronage and profitability. Codes can also provide the basis upon which some large corporations influence the conduct of their suppliers, contractors, and other service providers. As well, when consistently observed, principles enshrined in codes may potentially crystalize into national and international norms of corporate behaviour. In the case of TNCs, their observance of code commitments in foreign host countries may even induce an ethical race to the top among local corporations.8 Besides, the flexibility inherent in codes permits their easy review and fine-tuning to cater to changing circumstances, as opposed to the rigidity of legal rules. And to the issuing corporation, a code may potentially serve to mitigate or limit its liability in circumstances where it is adjudged to have violated the law, because the fact that it has adopted a code may be considered by the court as evidence of good intent.9 These potential benefits notwithstanding, and irrespective of the fact that most TNCs have adopted or issued their own codes, incidents of corporate irresponsibility involving TNCs remain a common feature

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of their behaviour in developing countries. Indeed, codes have proved largely ineffectual in regulating corporate behaviour.10 The ineffectiveness of codes is hardly surprising given the numerous (if not fatal) deficiencies inherent in them. This is particularly so in the extractive industries. codes of conduct in extractive industries Given the divergent nature of extractive industries, and because codes are often designed to reflect particular interests and concerns of the entities issuing them, the substantive features of codes in extractive industries differ.11 Some may be specifically tailored to the area of business of the corporation. Others may be generic or broad in nature, having been designed to be applicable to a wide range of extractive activities. However, some common features are apparent in extractive industries codes. They usually contain provisions on labour standards, environmental stewardship, bribery, competition, and information disclosure.12 Three variants of codes dominate the extractive industries: codes initiated and issued by individual corporations (internal codes); codes issued by industry associations; and multi-stakeholder codes, usually a collaborative effort between civil society groups, TNCs, and governments. Internal Codes. Many extractive TNCs have adopted voluntary codes of conduct. This section will briefly consider a few of these codes (particularly codes by TNCs doing business in Africa) as they relate to human rights, treatment of labour, the environment, host communities, and the general public. In the oil and gas sector, ExxonMobil’s code – Standards of Business Conduct13 – commits the corporation ‘to maintaining a safe work environment enriched by diversity and characterized by open communication, trust, and fair treatment.’14 To the host communities, ExxonMobil pledges itself to be a good corporate citizen and to maintain high ethical standards, obey all applicable laws, rules, and regulations, and respect local and national cultures.15 It also promises to conduct business in a safe and environmentally responsible manner.16 Chevron, meanwhile, expresses its commitment to conduct its business in a socially responsible and ethical manner; comply with laws prohibiting discrimination in employment practices; and protect the health and safety of the people and the environment.17 For its part, Royal Dutch Shell pledges responsi-

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bility to five constituencies: its shareholders; its customers; its employees; those with whom it does business; and society.18 In particular, Shell promises to respect the human rights of its employees and to provide them with good and safe conditions of work.19 To society, Shell pledges ‘[t]o conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business, and to give proper regard to health, safety, security and the environment.’20 In the mining sector, Rio Tinto commits itself to respect and support the dignity, well-being, and rights of its employees and host communities.21 It declares that it will not only strive to ‘prevent, or otherwise minimise, mitigate and remediate, harmful effects of the Group’s operations on the environment’22 but also to support human rights in the conduct of its worldwide operations.23 Similarly, AngloGold Asanti expresses ‘support’ for human rights and pledges ‘to have a positive impact on the people, cultures and communities in which it operates.’24 Not to be outdone, De Beers recognizes that its ‘employees have the right to work in an environment that is free from any form of unlawful discrimination or harassment,’25 including the right to participate in the political process.26 In addition, it declares that it is ‘committed to ethical standards and an appreciation of the social, environmental and economic impact of its activities on the communities in which it operates,’ and to have ‘due regard to social, environmental and public health considerations.’27 An Assessment of Internal Extractive Industries Codes. Internal codes in extractive industries have some common features that perhaps explain their ineffectiveness.28 First, as is perhaps apparent in the brief discussion above, these codes are in the main worded in general or vague terms. For example, ExxonMobil’s code declares quite broadly that the company is ‘dedicated to running safe and environmentally responsible operations.’29 However, it fails to define its terms and specify what amounts to ‘safe and environmentally responsible operations.’ Likewise, Shell’s code makes a broad declaration that the company shall ‘support fundamental human rights’30 (as opposed to a commitment to ‘respect’ or ‘observe’ human rights). While the vague wordings of these codes may have been necessitated by the need for flexibility, so as to enable their ‘application in diverse economic, socio-cultural and legal contexts,’31 the effect is that the line between permitted and prohibited conduct is blurred. It is therefore difficult to determine whether or not internal codes are being violated.32

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Secondly, the codes are voluntary, legally unenforceable, and often do not provide sanctions for non-compliance.33 Thirdly, like other voluntary codes, codes in extractive industries are usually administered and implemented by the issuing corporations themselves.34 Selfimplementation of codes is not in itself a bad thing. Where a corporation intends in good faith to abide by its code, self-implementation may serve to enrich its compliance experiences. In turn, such experiences may reflexively reshape the governance culture of the corporation towards better social performance. The problem, however, is that internal codes are often designed in a manner that makes the likelihood of successful self-implementation remote. This is so because ‘responsibility for code administration is seldom fixed on any specific corporate officer, nor are procedures mandated whereby adherence is promoted or compliance monitored.’35 There are, of course, codes that place direct responsibility for implementation on a specific corporate office(r) or committee.36 But codes of this genre are the exception rather than the rule. Fourthly, while other sectors are increasingly utilizing independent professional monitors and auditors to monitor compliance,37 extractive TNCs seem generally content with self-monitoring and auditing of their codes.38 This is a regrettable development because the lack of enforcement mechanisms, particularly independent compliance verification and monitoring mechanisms, can render the codes of extractive industries untrustworthy regulatory tools.39 Fifthly, and more significantly for our purposes, codes issued by extractive TNCs often make little or no reference to core human rights and labour rights standards.40 Indeed, these codes often do not contain provisions (whether general or specific) on human rights standards and principles to which the TNCs are committed,41 although some TNCs do express support for human rights through various press releases and documents lavishly posted on their web sites. A case in point is ExxonMobil, whose code does not express any specific commitment to observe human rights, whether they be those of its employees or the communities where it operates.42 Rather, ExxonMobil has argued, through press releases, that the standards embodied in its code ‘are consistent with the spirit and intent of the principles set forth in the Universal Declaration of Human Rights, to the extent that the provisions are relevant to private entities.’43 While some TNCs do make reference to human rights in their codes, the few codes that do so contain at best vague and general references to such rights. For example, Shell’s code pledges ‘[t]o respect the human

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rights of [its] employees,’44 and ‘to support fundamental human rights [of society] in line with the legitimate role of business.’45 Shell omits to specify what the ‘human rights of [its] employees’ and ‘fundamental human rights’ of society are. Indeed, Shell’s commitment to ‘support’ (rather than observe) the human rights of society is conveniently circumscribed and watered down by the phrase ‘in line with the legitimate role of business,’ which role, in any event, it does not elaborate. Similarly, both Chevron’s Business Conduct and Ethics Code46 and ConocoPhillips’ Code of Business Ethics and Conduct47 contain passing references to their ‘support’ and ‘respect’ for human rights without specifying what these rights are. The foregoing critique is in no way intended to cast all extractive TNCs in the same light. Some have, in fact, committed themselves to observe provisions of specific international human rights instruments. For example, Talisman Energy Inc. (which until recently was the subject of a major international campaign due to its perceived complicity in human rights abuses in Sudan) pledges to conduct its business activities with integrity and respect for human dignity and the rights of the individual, within the context of the Universal Declaration of Human Rights (UDHR).48 It also pledges to review the human rights climate of countries and regions when proposing, planning, and implementing projects, and to address human rights concerns within its sphere of influence.49 Similarly, both Rio Tinto and AngloGold Ashanti’s codes express ‘support’ for human rights as enshrined in the UDHR.50 While the specific commitment to the UDHR by Talisman Energy, Rio Tinto, and AngloGold Ashanti represents a commendable departure from the rather broad nature of peer codes in extractive industries, it must be said that these code declarations are, nonetheless, no more than mere statements of intent. It remains to be seen whether these TNCs do, in practice, comply with their stated human rights commitments. Extractive industries codes also fall short in terms of labour rights. While they generally contain provisions on labour issues, these issues are often limited to the provision of a safe work environment, which the codes mostly link to ‘compliance with occupational safety laws’ of the host country.51 The fundamental labour rights specified in ILO conventions and declarations are seldom, if at all, inscribed in voluntary codes issued by the TNCs in the extractive industries.52 For example, few of the major players in Africa’s extractive industries specifically recognize the right of employees to organize and bargain collectively.53 Indeed, only two of the twenty-three extractive industries codes examined

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recently by the OECD express any concern for forced labour and child labour, while discrimination and freedom of association are mentioned by six and four codes, respectively.54 The strategic omission of, or vague references to, core human rights and labour rights standards in these codes is a telling commentary on the commitment of extractive industries as a whole to observe the rights of host communities and employees in developing countries. The omission is all the more glaring, given the complicity of extractive TNCs in human rights infractions. Finally, codes in the extractive industries, like private voluntary codes in other industries, portray a narrow and one-sided view of the corporations issuing them. Civil society and, in particular, host communities and governments were not consulted in the process leading up to the issuance of these codes,55 nor are they engaged in implementing or monitoring them. Industry Association Codes. Certain industry associations in the extractive sector have issued codes aimed at improving the social practices of their members. For example, the International Council on Mining and Metals (ICMM), an association consisting of some of the largest companies in the mining and metals subsector, including companies doing business in Africa, has adopted the Sustainable Development Framework, which prescribes substantive performance standards for its members.56 It requires member companies to comply with ten principles.57 ICMM members are to implement and maintain ethical business practices; integrate sustainable development considerations within their decision-making process; uphold the fundamental human rights of their employees and respect the cultures, customs, and values of their host communities; implement science-based risk-management strategies, including consultation with host communities about potential risks from mining, minerals and metals operations; seek continual improvement of their health and safety performance; seek continual improvement of their environmental performance; contribute to conservation of biodiversity; encourage responsible product design, recycling, and disposal of their products; contribute to the social, economic, and institutional development of the communities in which they operate; and implement effective and transparent engagement with stakeholders, including the provision of timely, accurate, and relevant reports on their economic, social, and environmental performance.58

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Similarly, the Minerals Council of Australia has recently adopted a code – Enduring Value: The Australian Minerals Industry Framework for Sustainable Development – which borrows largely from the ICMM code.59 In fact, this code adopts the ten principles of the ICMM code. Designed with the belief that ‘unless a company earns [a ‘social licence to operate’], and maintains it on the basis of good performance on the ground, and on community trust, there will undoubtedly be negative implications,’60 this code places, in its words, ‘a number of obligations’ on companies that are signatories to it.61 Signatories must progressively implement the ICMM principles; publicly report on their performance at least annually; and assess their systems used to manage key operational risks.62 In several significant respects, these industry association codes differ from internal codes issued by individual companies. Industry association codes include clear implementation guidelines, as well as measures for improving the substantive performance of their members.63 They require member companies to make a public report on their economic, environmental, human rights, and social performance.64 In addition, members are to ensure independent third-party verification and assurance of their reports.65 The coverage of industry association codes is largely universal. They not only apply to members ‘wherever they operate,’ but in some cases, they apply to the activities of contractors engaged by signatory companies, and to operations in which a signatory holds a non-controlling interest.66 Thus, by virtue of their universal reach these codes apply to the foreign operations of member companies. For example, the Minerals Council of Australia’s code is applicable to the mining operations of its member companies in Ghana. Finally, some industry association codes have compliance mechanisms, including provisions for securing the withdrawal of members if they are persistently non-compliant with the codes.67 However, like internal codes, industry association codes suffer many defects. They are not binding on members; there are no sanctions for breach of their provisions; and some codes do not make specific references to some core human rights and labour standards. For example, while the two industry association codes discussed above urge members to ‘uphold fundamental human rights,’ they appear to limit these rights to fair compensation, prohibition of forced labour or child labour, and elimination of harassment and unfair discrimination.68 In fact, the codes do not have provisions on employees’ right to collective bargain-

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ing, a core labour right under the ILO Declaration on Fundamental Principles and Rights at Work.69 Multi-stakeholder or Collaborative Codes. Multi-stakeholder codes have certain features that not only distinguish them from internal codes but also make them more attractive than internal codes. They are a product of deliberations among a varied number of collaborators usually including corporations, governments, civil society (NGOs, unions, etc.), and, in some cases, academic experts. They cover a wider range of issues than internal codes and are often couched in more specific terms. Civil society organizations are sometimes given a role in their administration and monitoring. They embrace and promote the use of professional independent monitors and auditors; and they may require annual preparation and publication of a social report on compliance by participating corporations.70 Regrettably, while these features are common in multi-stakeholder codes, the one example of such codes in the extractive industries – the Voluntary Principles on Security and Human Rights71 – appears to lack a number (if not most) of these vital elements. The Voluntary Principles on Security and Human Rights. The complicity of extractive TNCs in human rights violations in developing host countries often stems from the security apparatuses of both the TNCs and host governments. Natural resource exploitation in these countries often breeds controversy, dispute, and conflict among local host communities, TNCs themselves, and host governments. As sometimes turns out, as exemplified by the Ogoni debacle in Nigeria, communities may become agitated. Protests and demonstrations against the TNCs may ensue. In extreme cases, disgruntled elements within these communities may resort to acts of vandalism or sabotage against the property of the TNCs. This underscores the need by extractive TNCs for protective security. However, enfeebled host governments are sometimes unable to provide TNCs with adequate security to protect their facilities. Quite understandably, this inadequacy prompts these TNCs to engage the services of private security outfits.72 Sadly, security personnel (both public and private) employed by some of the TNCs become complicit in rights violations in developing host countries.73 Given this history, in order to promote a business environment devoid of conflicts and human rights violations,74 the governments of the United Kingdom and the United States, in collaboration with

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NGOs, labour unions, business organizations, and some extractive TNCs, developed in 2000 the Voluntary Principles on Security and Human Rights75 (Voluntary Principles), aimed at guiding extractive TNCs on the maintenance of safety and security at their project sites, while respecting the fundamental human rights of host communities. The Voluntary Principles express the commitment of extractive TNCs to promote ‘respect for human rights, particularly those set forth in the [UDHR] … to act in a manner consistent with the laws of the countries within which they are present, to be mindful of the highest applicable international standards, and to promote the observance of applicable international law enforcement principles … particularly with regard to the use of force.’76 To achieve these objectives, the Voluntary Principles recommend consistent engagement between TNCs, civil society, and host and home governments, as well as the sharing of experiences on best security practices and procedures on country human rights situations, and (subject to confidentiality constraints) on public and private security experiences. In addition, TNCs are to include the Voluntary Principles as contractual provisions in agreements with private security providers and ensure that such agreements contain provisions requiring investigation of unlawful or abusive behaviour on the part of security providers. Security agreements between TNCs and private firms should also have provisions permitting termination of the agreements ‘where there is credible evidence of unlawful or abusive behaviour by private security personnel.’77 These provisions are significant because, to some degree, they address a principal weakness of the Voluntary Principles, that is, their non-binding status. By enshrining the Voluntary Principles in contractual agreements, they become binding on parties to the agreements. The effect is that in appropriate cases, TNCs can sue private security firms for breach of the Voluntary Principles if those principles are included as contractual provisions. No doubt, the Voluntary Principles represent a modest effort designed to respond to the worsening human rights situation in and around extractive projects in developing countries. Adherence to the Voluntary Principles may well produce positive outcomes. For example, consistent application of the Voluntary Principles may produce best security practices for the extractive industries.78 This is the more so because they are operational in nature in the sense that they provide practical guidance on how TNCs might avoid complicity in rights abuses.79 But achievement of the lofty ideals of the Voluntary Principles may be

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undermined by a factor that their initiators appear not to have taken into consideration. Extractive TNCs often enter into concessions or operations agreements with host developing states that impose certain security obligations on them. These security arrangements, which for the most part are kept secret,80 may in fact oblige the TNCs to undertake a course of action different from – even contrary to – those recommended by the Voluntary Principles. For example, the agreements may oblige TNCs to report incidents of community agitation or protests to the host governments (some of which are dictatorial regimes)81 rather than engage in direct consultation or dialogue with the community, as urged by the Voluntary Principles. Once informed of such protests, overzealous state security personnel may use force to disperse the protesters and violate their rights. Some TNCs appear to have recognized this problem. Accordingly, they now incorporate ‘the Principles into their contracts with host governments so that they become legally binding obligations.’82 Moreover, the Voluntary Principles lack substantive implementation safeguards that would have enhanced the compliance of signatories, although signatories are required to communicate publicly on their implementation of the principles at least annually.83 The Voluntary Principles are process oriented rather than standards oriented. They neither prescribe substantive performance standards nor provide a platform for monitoring or evaluating performance. There is therefore no way of knowing whether, and to what extent, signatory TNCs are complying with them. Above all, the Voluntary Principles rely solely on self-implementation by the TNCs, although they rightly promote the sharing of experiences. Even the U.S. and UK governments, principal initiators of the Voluntary Principles, are accorded no role in the implementation process apart from consultation and information sharing. While it is not suggested that the implementation of the Voluntary Principles would be any different today had the two governments been entrusted with their implementation,84 the failure to accord them implementation roles unnecessarily circumscribes the compliance process. Finally, the Voluntary Principles provide no recourse for those whose rights are infringed by private security agents engaged by extractive TNCs; neither do they suggest or encourage compensation for victims of rights abuses. Perhaps, one option that may enhance the overall utility of the Voluntary Principles is to supplement them with monitoring and performance evaluation mechanisms. This could take the form of peer review, designed in a manner that would allow signatory TNCs and other par-

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ticipants (including civil society NGOs) to undertake periodic review and evaluation of compliance ‘on the ground.’ compliance with corporate codes: brief case studies of shell and anglogold ashanti Extractive TNCs have long maintained that they do business in host African countries as responsible members of society. Shell claims, for example, that it ‘observes the laws of Nigeria and respects the fundamental human rights of members of society.’85 In fact, Shell has announced that it has begun implementing its self-imposed ‘Minimum Health Management Standards,’ intended to enhance the health status of its staff and of host communities, reduce health hazards associated with its projects, and establish a management plan that defines roles, targets, and responsibilities.86 And as part of its commitment to sustainable development, Shell strives to minimize the impact of its operations on the environment.87 But while Shell often makes flamboyant public declarations about its commitment to self-regulate itself effectively, results on the ground do not support the rhetoric. In fact, there is little evidence that selfregulatory practices have significantly improved Shell’s social performance. For example, although Shell voluntarily committed itself in 1996 to eliminate gas flaring by 2008, it recently announced in 2005 that it ‘will not be able to meet the flares-down target of 2008.’88 Also, of the 915 polluted sites that Shell identified for remediation between 1999 and 2004, about 542 were remediated by 2004 while the outstanding 373 sites remain contaminated and unremediated.89 Perhaps Shell’s inability to remediate these contaminated sites may be due to its reported lack of ‘facilities to manage and clean oil spills from its aging facilities’ in Nigeria.90 Self-regulatory efforts by other oil TNCs in Nigeria are also largely unsuccessful. These TNCs have failed to comply with their voluntary human rights commitments and in particular the Voluntary Principles, which urge that ‘the rights of individuals should not be violated while exercising the right to … peaceful assembly.’91 For example, in 2005 Chevron failed to prevent state security personnel from attacking and injuring peaceful protesters at its Escravos terminal, apparently in violation of the Voluntary Principles.92 AngloGold Ashanti, a giant mining TNC created through the merger of AngloGold Limited and Ashanti Goldfields Limited in April 2004,

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prides itself on providing its African employees with a safe working environment.93 It reports that it has made ‘good progress’ towards its long-term objective of eliminating workplace accidents, although thirtytwo of its African employees lost their lives in work-related accidents in 2004.94 However, as borne out by two significant incidents in Ghana and the DRC, the company’s adherence to its code commitments is doubtful. AngloGold Ashanti reports that ‘on 3 May 2004, an eight-year old girl drowned while swimming in a defunct slurry trench’ at its Obuasi mine in Ghana.95 The trench was apparently abandoned unfilled and unrehabilitated by the company, contrary to its code commitment96 and contrary to the Environmental Policy of the Ghana Chamber of Mines, which enjoins proper decommissioning and rehabilitation of mine sites, among other things.97 The company has also recently developed close ties with the leaders of the Nationalist and Integrationist Front (FNI), a rebel group associated with gross violations of rights in the DRC, apparently in order ‘to gain access to the gold-rich area’ of that country.98 According to Human Rights Watch, AngloGold Ashanti provided FNI with financial and logistical support, thus emboldening its brutal campaign against innocent civilians.99 As expected, the company denied any link with FNI.100 However, the denial is undermined by its own admission that it had ‘unavoidable encounters with the FNI,’ and that on two separate occasions it paid $8,000 and $1,100 to the FNI.101 AngloGold Ashanti also acknowledged that FNI officials used the company’s chartered flights, and that it provided vehicle transport to FNI representatives ‘under duress.’102 It did all these even though its code of conduct commits it to observe the human rights enshrined in the UDHR.103 While it is admittedly the case that self-regulation may be appropriate in some settings,104 as anticipated by the earlier discussion in chapter 2, these examples strongly suggest that self-regulation has a number of manifest weaknesses. It lacks independent oversight; there are no sanctions for non-compliance; and it imposes additional compliance costs on the TNCs.105 These weaknesses are significant because they act as disincentives for compliance. More importantly, to the extent that these regulatory failures support any new generalization, it may be that selfregulation will work best when it is undertaken against the background of vigorous state regulation,106 or under compulsion of state law. In fact, because there is no credible threat of effective state regulation, self-regulation is unlikely to work in Nigeria and Ghana. For example, Shell would likely not have failed to remediate the 373 contaminated sites if

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there was a credible threat of enforcement by regulatory authorities in Nigeria. Also, AngloGold Ashanti would probably not have failed to fill and rehabilitate its trenches if it knew that such failure will attract state sanctions. Given the extent of regulatory failure in both countries, TNCs do not have much to fear from state regulation. Why then would they subject themselves to relatively rigorous self-regulation? At most they might feel they have to make a show of good behaviour in order to deflect criticisms and protests from consumers, NGOs, and politicians in the global North. an emerging trend in self-regulation: consultation with host communities The discussion thus far has established that TNCs in Nigeria and Ghana do not yet have the ‘need’ to effectively self-regulate their behaviour. Such a need would only arise if there were a credible and consistent threat of legal, economic, and social sanctions – boycott, protests, nonrenewal of licences and leases – and, of course, effective state regulation. Thus, there must be an improvement in state regulation, and the capacity and effectiveness of public regulatory agencies must be enhanced if self-regulation is to bear any appreciable fruit in Nigeria and Ghana. On their part, TNCs would have to demonstrate a practical commitment to improving and implementing their codes of conduct and other policy documents. This would require adoption of quality control measures such as designating a particular director, or a committee of directors, to implement and monitor compliance with code commitments, or, better still, to appoint independent auditors to monitor code implementation and compliance. In addition, TNCs should consult with local host communities in the implementation of self-regulatory practices, although there is a risk of co-option through such engagement. Some TNCs in Nigeria and Ghana seem lately to have realized the utility of constructive engagement with host communities. They are gradually beginning to engage these communities and civil society groups in mutual dialogue. In Ghana, for example, Goldenrae Mining Company Ltd is reported to consult with host communities on a regular basis about its mining activities.107 And in Nigeria, Shell organizes an annual ‘Stakeholders Workshop’ that draws participants from industry, host communities, civil society NGOs, labour unions, academia, and government.108 According to Shell, these workshops foster ‘partnerships with our stakeholders for

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sustainable growth and development in the Niger Delta region,’ as well as provide useful feedback that may help to improve the company’s overall social performance.109 Shell’s consultations or dialogue with stakeholders in Nigeria may, however, be faulted on one account. Quite often, Shell consults only with sympathetic NGOs and community leaders, who may be out to serve their own selfish or personal agenda.110 As a matter of fact, the list of NGOs and development agencies with which Shell has entered into partnerships for community development purposes does not include the major NGOs, such as the MOSOP and Environmental Rights Action, that are at the forefront of the quest for corporate accountability in Shell’s areas of operation.111 This is not surprising. Indeed, despite recent evidence of engagement with host communities, oil TNCs in Nigeria still have a general proclivity to disregard or ignore host communities. A study by the World Bank is as expressive of the attitude of TNCs towards host communities in Nigeria today as it was in 1995 when it was conducted. According to the World Bank, ‘[g]enerally, [oil companies] have preferred to ignore the local communities. When they have had to deal with villages, companies usually communicate with the most obvious leader, a local chief or politically powerful person, who may have very tenuous ties to the community, rather than making an effort to determine who represents the villages.’112 Statutory Self-Regulation Aside from voluntary self-regulation, elements of statutory self-regulation are embedded in certain public schemes in Nigeria and Ghana. For example, Nigeria’s EGASPIN places self-monitoring and reporting duties on oil corporations.113 It also requires each oil corporation to establish an environmental management system and to designate a specific management representative whose duty is to ensure that the environmental management system is effectively implemented.114 Likewise, Ghana’s Environmental Assessment Regulations require mining corporations to submit to the EPA an environmental management plan within eighteen months of commencement of a mining project, and thereafter every three years.115 The plan must set out the steps the corporation intends to take to manage any future ‘significant environmental impact that may result from the [project].’116 Failure to comply with the mitigation commitments in an environmental management plan is grounds for suspension, or revocation of environmental permits in

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Ghana.117 However, the extent to which TNCs comply with these duties has yet to be seen. Indeed, it is unlikely that TNCs will take these duties seriously because of the lack of a credible threat of enforcement by regulatory agencies in both countries. It is imperative for public regulatory schemes in Nigeria and Ghana to encourage self-regulation by industry, given the deficiencies identified previously as the bane of regulation in these countries. But rather than simply asking TNCs to regulate themselves, as both the EGASPIN and the Environmental Assessment Regulations do to a certain degree, an alternative strategy would be to require independent oversight of self-regulation. This could be achieved in either of two ways. First, ‘truly’ independent social auditors could be appointed to monitor compliance and to make periodic reports to the public. Although the EGASPIN requires TNCs to engage ‘competent and certified auditors’ to undertake environmental audits of their activities and to assess compliance with their environmental management systems,118 these auditors are far from being independent. They are chosen, appointed, and paid by the TNCs. Also, the auditors report to the TNCs rather than to the Department of Petroleum Resources (DPR). And while the auditors are required to ‘be registered by the [DPR],’119 it has no oversight powers over the auditors. In fact, except where the DPR reasonably believes that the audit contains information which is not otherwise available to it, or where the audit findings are relevant to a particular violation, the DPR does not have mandatory access to the audit reports.120 Rather, the EGASPIN requires TNCs to submit to the DPR ‘a list of the environmental audits’ they carried out each year.121 Nigeria’s EGASPIN, however, fares better than Ghana’s Environmental Assessment Regulations, which do not prescribe any mode of compliance monitoring. Secondly, independent oversight may be achieved by requiring corporations operating in strategic sectors of the economy (such as extractive industries) to engage the services of independent public directors whose exclusive duty would be the protection of public interests from corporate intrusion.122 These directors could protect public interests not only by overseeing the corporation’s compliance with public regulatory rules, but also by ensuring that they adopt and implement appropriate self-regulatory practices. The remuneration of such directors need not be paid by corporations alone. Rather, their salaries and other entitlements should be borne jointly by corporations and the state. That way, the independence of the directors is more assured. Of course, remunerating directors through public funds may constrain the public purse,

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which, in the case of Africa, is already lean. However, this is a minuscule cost. Besides, where effectively discharged, the duties of public directors may obviate the need for direct regulation by public agencies, thus saving funds and resources that would otherwise be spent on regulation. No doubt, such public directors would be faced with considerable obstacles in the discharge of their duties. They may not have access to the requisite information. They may even lack the technical capacity to analyse complex scientific information relating to corporate environmental practices. In addition, directors may not have any means of making or enforcing policies, except to the extent that other members of the board agree with them. Finally, many TNCs operate through local subsidiaries whose boards enjoy limited autonomy and whose members are nominees of the parent company. However, through careful design of legislation requiring their appointment, some of the problems associated with public directors may be overcome. Role of Civil Society Organizations in Regulation in Nigeria and Ghana In this section, I consider the important, albeit complementary, role played by civil society groups in regulating the behaviour of TNCs in Nigeria and Ghana. As will be amplified in chapter 8, civil society groups serve useful regulatory purposes.123 Indeed, the capacity of NGOs to make life difficult for TNCs through public campaigns, boycotts, and other pressures serves somewhat the same function as state regulation. If nothing else, the activities of NGOs remind TNCs that it is prudent for them to improve their behaviour rather than suffer unpleasant consequences, whether those take the form of legal sanctions, economic boycotts, or strikes. However, the analysis in this section draws more examples from Nigeria than Ghana for the simple reason that civil agitation is more intense in that country. The intensity of civil agitation in Nigeria is perhaps to be expected. It is more ethnically diverse than Ghana, and consequently, vast arrays of competing interests are always at play in oil and gas-related issues. Also, political events in Nigeria appear to have fostered an active civil society. That country had, in the recent past, been ruled by a seemingly endless number of military dictators. In response, a number of civil society groups were formed to provide opposition to the dictatorships. With the advent of democracy in Niger-

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ia in 1999, some of these groups have now channelled their energy and resources to other causes, including corporate accountability. Most significantly, civil agitation in Nigeria’s oil-producing communities is as much political as social. These communities are perhaps the least developed in Nigeria, even though they produce almost all of the country’s oil and gas wealth. This has led to their understandable struggle for development and for access to natural resources on their land. But my emphasis on the Nigerian situation is not to suggest that civil society groups are any less potent in Ghana. In fact, I will draw appropriate lessons from both countries, lessons which might point us in the right direction whether in terms of workable strategies or how civil society groups might better enhance their effectiveness. Civil Society Groups in Nigeria and Ghana: Their Interests and Regulatory Strategies Several variants of civil society groups – environmental, human rights, and labour NGOs (both national and international), community groups, and women associations – are involved in the struggle for corporate accountability in extractive industries in Nigeria and Ghana.124 Prominent Nigerian NGOs include the Civil Liberties Organization, Environmental Rights Action, Campaign for Democracy, Constitutional Rights Project, and Committee for the Defence of Human Rights. Also prominent are community associations such as MOSOP, the Ijaw National Congress, and the Movement for the Survival of Itsekiri Ethnic Nationality. Most recently, youth associations such as the Ijaw Youth Council and the Urhobo Youth Movement have been formed by oil-producing communities. In Ghana, the Wassa Association of Communities Affected by Mining (WACAM), Third World Network, Centre for Public Interest Law, GreenEarth, FoodFirst Information Action Network, and Abantu for Development have campaigned tirelessly for responsible behaviour by mining TNCs. In practice, Nigerian and Ghanaian NGOs cooperate and sometimes act in concert with international NGOs such as Human Rights Watch, Amnesty International, the Sierra Club, Friends of the Earth, and Oxfam, to mention but a few. There is considerable convergence in the interests of the various NGOs operating in both countries, although they differ somewhat in orientation. While some national and international NGOs are concerned in the main about civil rights issues such as human, labour, and environmental rights, community-based NGOs largely concern them-

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selves with the question of compensation for, access to, and control over the natural resources found on their land. Hence they are locked in a persistent struggle against both the state and TNCs for fair treatment, a struggle that sometimes turns violent. However, communitybased NGOs do address corporate accountability issues to the extent that these issues affect or relate to their immediate surroundings. For example, while the primary objectives of MOSOP are the actualization of their right to self-determination and control over natural resources in Ogoniland,125 MOSOP also fights for an end to environmental degradation of Ogoniland by oil TNCs.126 Similarly, in Ghana WACAM has not only been engaged in a battle with mining TNCs and the Ghanaian government over the environmental practices of TNCs, but it also advocates the rights of mining communities to compensation and resettlement.127 This difference in orientation notwithstanding, there is cooperation among NGOs. On the one hand, community-based NGOs provide firsthand information on the activities of TNCs to national and international NGOs, which in any event may not have personnel on-site in the local host communities. On the other, national and international NGOs often provide community-based NGOs with logistical support, such as education on corporate accountability issues, funds, expert advice, legal counsel, and, in some cases, representation in negotiations with the TNCs. Such cooperation may produce desired results. For example, the partnership between WACAM of Ghana and Oxfam International since 2003 has helped to educate local communities in Ghana about their rights.128 Also, the ‘measured’ effectiveness of Ogoni community’s agitations against Shell and other oil TNCs in Nigeria is due in large part to cooperation between MOSOP’s local officials and international NGOs. In appropriate cases, these NGOs form coalitions and jointly sponsor social campaigns against TNCs. In Ghana, for example, a coalition of various NGOs has formed the National Coalition of Civil Society Groups against Mining in Forest Reserves.129 While NGOs in Nigeria and Ghana adopt strategies such as mass mobilization and sensitization of the public through awareness campaigns and publications, lobbying of governments, legislators and regulatory agencies, dialogue and consultation with TNCs, and litigation to enforce human rights and environmental standards,130 more dramatic strategies have been adopted by some NGOs in the recent past. For example, at various times in 2002, some Nigerian women, acting under the umbrella of community organizations, took over the

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premises of Chevron and other oil TNCs in peaceful sit-in protests and threatened to strip themselves naked – a local shaming gesture and, in some communities, a way of placing a curse on the targeted individual or object.131 In the end, the women successfully exerted pressure on the TNCs to negotiate with them and to accede to their demands for community development assistance.132 Ghanaian communities have not resorted to such dramatic tactics yet, but mining TNCs in that country may do well to learn from the mistakes of their counterparts in Nigeria and begin constructive dialogue with their host communities. It is of course debatable whether such aggressive tactics have effected substantive changes in the behaviour of TNCs. However, as discussed below, there is no denying the overall positive impact that civil society groups have had on corporate accountability in Nigeria and Ghana. Regulatory Impacts of Civil Society Groups The analysis in this section must be tempered with a caveat. It is beyond the realm of possibility to measure with precision the impact of civil society groups on the regulation of corporations.133 And as Deborah Spar and James Dail have warned, we would be embarking on ‘a treacherous endeavour’ were we to attempt ‘to attribute any elements of societal change to the activities of a specific [NGO].’134 This is the more so because a particular regulatory outcome may be influenced simultaneously by a plethora of factors, including the enforcement capacity of regulators, consumer and other market pressures, and activism of shareholders. In other words, pressure exerted by NGOs is often one of the factors, but not the sole factor, that produces successful regulatory outcomes. Thus, the modest regulatory ‘successes’ identified here are not being held out as having been induced solely by NGOs. NGOs have consistently called into question the sincerity of purpose of state authorities and TNCs in Nigeria and Ghana. They have exposed instances of corporate irresponsibility in both countries and galvanized local and international public opinion against abuses by TNCs. More importantly, NGOs provide a formidable ‘platform of popular struggle against’ TNCs.135 Perhaps Augustine Ikelegbe best sums up the impacts of civil society groups in Nigeria when he states: Civil society … has constituted in the last few years, a solid formation of intense ethnic and regional resistance against perceived corporate and state abuses in respect of the costs and benefits of oil production and the

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distribution and utilization of oil revenues. Civil society has re-constructed the old agitation of oil producing communities by broadening the grievances and demands, raising mobilisation and participation, intensifying the conflict, redirecting it to political objectives, and turning it into a civil, environmental and human rights issue. As a result, the Niger Delta conflict has become a broad participatory, highly mobilised and coordinated platform of civil groups in a struggle for self-determination, equity and civil rights, and … social responsibility of [oil TNCs].136

In fact, NGOs have positively impacted on how governments and extractive TNCs deal with corporate accountability issues in Nigeria and Ghana. For example, in the wider context of human rights protection in Nigeria, the efforts of NGOs have influenced the government in a manner that has produced ‘pro-human rights alterations and reformations’ in the Nigerian polity.137 Such alterations have had profound implications for corporate accountability in the oil-producing communities. The Nigerian government has not only ‘become more sensitive to the environmental and social responsibilities of oil companies,’ but it has also enjoined oil TNCs ‘to negotiate and reach memoranda of understanding with host communities, honour agreements, and be more responsive to [their] problems.’138 NGOs have produced equally important normative changes in the governance of oil TNCs in Nigeria. For example, in the wake of the Ogoni crisis and in particular following the adverse and intense international publicity engineered by NGOs against Shell, Shell revised its code of conduct to include mention of human rights for the first time.139 Although Shell does not appear to have significantly altered its conduct, its explicit adoption of human rights principles at least indicates that it now realizes it is no longer ‘business as usual.’ It also provides a basis upon which the public may hold Shell to account in the future. In Ghana, the environmental activism of social groups, including chiefs and youth associations, has not only made mining companies more conscious of the need to protect the environment, it has in fact motivated some companies to comply with environmental standards.140 Furthermore, as a result of pressure from NGOs, some TNCs in Nigeria and Ghana now appear to recognize the need to deal with, and consult, local communities in the design, development, and implementation of projects.141 For example, the Ghana Manganese Company reportedly consults with communities prior to initiation of its projects, in addition to getting them involved in ‘identifying activities,

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programs and projects that catalyze growth and development.’142 A similar scenario is gradually playing out in Nigeria, where, as mentioned previously, Shell now regularly organizes annual workshops for stakeholders in the Nigerian oil industry, which serves as a consultative forum on issues relating to corporate accountability and community development.143 However, as commendable as these efforts are, the fact remains that only a few of the TNCs consult with communities,144 and even they do not appear to give much weight to the feelings and interests of local communities. Perhaps most significantly, civil agitation against oil TNCs in Nigeria appears to have positively impacted the Nigerian judiciary. Generally speaking, prior to the Ogoni crisis Nigerian courts were wont to take sides with oil TNCs and the government, apparently because of the perceived economic importance of oil and gas to the national economy. For example, injunctions ‘were virtually never granted’ against oil TNCs, despite widespread environmental damage done by the TNCs.145 In the few cases where plaintiffs successfully brought claims for environmental pollution against TNCs, damages awarded were for the most part meagre.146 However, the attitude of judges towards oil-related litigation appears to have changed since the Ogoni crisis. Nigerian judges now show more understanding for the plight of the oil-producing communities. They have also ‘become more critical of the behaviour of oil companies’147 and the Nigerian government. The ‘new’ judicial attitude is perhaps apparent in a number of recent cases where the courts awarded large monetary compensation for environmental damage against oil TNCs. In Shell v. Isaiah,148 the court awarded 22 million Naira (which was approximately US$1 million at the prevailing exchange rate in 1997) against Shell. In Edamkue & Others v. Shell,149 the trial court awarded about 245 million Naira (about US$2.1 million) in favour of the plaintiffs.150 More recently, in 2005 Shell was ordered to pay US$1.5 billion to affected communities.151 Also in 2005, a federal judge declared gas flaring, a common practice among oil companies, illegal.152 Although the cases may be too few to support a generalized conclusion, and while other factors, such as the growing professional expertise of Nigerian lawyers, may have contributed to the apparent change in judicial attitude,153 it is likely that civil society agitation, which has generated widespread interest and sympathy for the plight of oilproducing communities, has also had an impact on Nigerian judges. As a former Chief Judge of the Federal High Court has reportedly admit-

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ted, Nigerian judges ‘are more aware now of oil industry problems than thirty years ago’ and are not ‘isolated from what is currently going on in society.’154 Obstacles to Civil Society Participation in the Regulatory Process self-imposed obstacles Although NGOs have played a significant role in promoting corporate accountability in extractive industries in Nigeria and Ghana, the story has not been all rosy. The strategies – mass mobilization, protests, and litigation – adopted by NGOs in both countries against the irresponsible behaviour of TNCs are for the most part post-crisis strategies. The NGOs are more reactive than proactive. Thus far, NGOs have failed to articulate legal and policy alternatives to the failed regulatory regimes in these countries. They might have a better chance of formulating alternative or complementary legal and policy initiatives, lobbying for their adoption by lawmakers and building the capacity of regulatory agencies, were they to pool their expertise and deepen their cooperation. It must also be acknowledged that some worrisome developments have been associated with certain NGOs. For example, youth armies and ethnic militia outfits with little or no patience for peaceful means of protest or agitation have recently emerged in Nigeria’s oil-producing areas.155 These groups sometimes resort to extreme and illegal measures, including kidnapping of TNC staff, issuing of ultimatums and withdrawal notices to TNCs, physical disruption of production activities, and vandalizing installations and other property.156 While one identifies with the grievances of the oil-producing communities against the government and oil TNCs, the violent and illegal path taken by some of these ethnic militia groups is inexcusable. There is also a lack of coordination and cooperation – if not an unhealthy rivalry – among ethnic community associations. While they have common objectives – access to resources, fair treatment, and corporate accountability – and while they are faced with similar problems – environmental and human rights abuses – ethnic communities such as the Ijaws, the Itsekiris, the Urhobos, and the Ogonis have each waged their own struggles against oil TNCs in Nigeria, rather than uniting against their common adversary. The TNCs have exploited these divisions to their advantage. Indeed, ethnic communities have engaged in unnecessary and occasionally violent conflicts in Nigeria. The Urhobos

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and the Itsekiris have been engaged in perennial armed conflicts resulting in the destruction of lives and property.157 Not all of these conflicts are oil related. They sometimes revolve around boundary issues or other political differences, reflecting a history of ancient communal animosity.158 But historical animosity should not be allowed to stand in the way of common objectives. Rather, local host communities should look past their differences and forge a common and coordinated platform against the TNCs and their backers, the Nigerian government. In fact, because of similarities in their experiences with TNCs, host communities in Nigeria, Ghana, and similarly situated African countries need to consult with one another and share stories about failures and successes in their agitations against the TNCs. Some host communities may, for example, learn appropriate lessons from the Ogonis of Nigeria, given the experience of their struggle against Shell and other oil TNCs. Such lessons may be better learned through direct contact between these communities. That said, it is worthwhile to note that civil society in Nigeria and Ghana is by no means a unified or monolithic entity. In fact, civil society in both countries consists of different elements with sometimes conflicting interests. This subtlety is significant because different elements within each civil group may have conflicting interests, the pursuit of which can create shifting alliances within the group. Thus, there is a potential for what has been termed ‘collective action problem’ in NGO activism in both countries.159 I have previously noted that although the interests of NGOs converge to a considerable degree, there are substantive differences in their interests, priorities, and orientation. These differences may act as barriers to cooperation among NGOs and community associations. Collective action problem also arises from differences in strategies for achieving corporate accountability objectives.160 While most NGOs and ethnic community associations in Nigeria and Ghana adopt peaceful strategies in the pursuit of their goals, some ethnic associations in Nigeria have formed militia outfits, which in the recent past have adopted unethical and illegal strategies, such as kidnaping of TNC staff. In these circumstances, it is difficult for law-abiding NGOs to cooperate with these community groups. Such cooperation will likely erode NGOs’ public goodwill, thus threatening their viability if not their existence. These problems notwithstanding, it is the very conflictual and volatile nature of civil society that makes cooperation necessary, if change

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is to occur in the domains of corporate accountability and regulatory effectiveness in Nigeria and Ghana. While as noted earlier there is evidence of cooperation among certain NGOs, cooperation needs to be enhanced. But cooperation among these groups may not be enhanced unless there is an enabling social environment.161 Such an environment may be fostered by direct interaction between NGOs and ethnic community associations.162 Sustained interaction will likely create trust among these groups, thus increasing the likelihood of cooperation. An overlap in membership of NGOs may also promote cooperation.163 Cooperation is imperative given that most NGOs in Nigeria and Ghana do not have the requisite funds and human resources to sustain their individual campaigns.164 A further concern is that there has recently been an unnecessary proliferation and duplication of NGOs in Nigeria and Ghana, especially in the resource-rich areas of both countries. Perhaps Nigerians and Ghanaians have suddenly discovered the need to be involved in public interest advocacy; however, the proliferation of NGOs may instead be explained by the fact that public interest advocacy is gradually emerging as a money-making venture. Nowhere is this more apparent than Nigeria, where some NGOs have few members, lack the ability to generate funds internally, are supported largely by foreign donors, and appear to have been set up by their ‘proprietors’ and ‘sponsors’ as vehicles for personal enrichment.165 It also appears that some Nigerians now establish NGOs in the hope of enjoying the patronage of oil TNCs, particularly as recipients of contracts to execute various projects on their behalf. Hence today it is not uncommon to find ‘mushroom’ NGOs that have little or no real intention to pursue social goals in the oil-producing areas of Nigeria. Indeed, because NGOs are not required to account publicly for their funds, it is easy for funds to be diverted into the private pockets of their organizers and sponsors. The deeply entrenched features of corruption, economic marginalization, and general insecurity of life and property in Nigeria create optimal conditions for rent-seeking by certain civil groups. To use Ruben Eberlein’s words, ‘[f]or many marginalised Niger Delta dwellers, especially young men, the business of war constitutes an alternative way of making a living in an environment where other roads to a decent and respected life are blocked.’166 The government’s inability to provide security has in some instances compelled oil TNCs to ‘buy’ protection from ethnic militia groups. Protection may involve simple assurances that the facilities of TNCs will not be attacked or forcibly occupied

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by the groups.167 In return, oil TNCs pay a premium or compensation to these groups. Rent-seeking groups may also have emerged partly as a result of the increasing corporate philanthropy of oil TNCs.168 As noted earlier, TNCs sometimes engage the services of NGOs to undertake community development projects on their behalf.169 Because such engagement is ‘one of the most important material foundations of power’ and wealth in the oil-producing communities,170 it provides an incentive for rent-seekers to establish their own NGOs. Nonetheless, the proliferation of NGOs in these countries is on balance positive. Proliferation generates competition and thus creates pressure for greater accountability and efficiency.171 On the other hand, consolidation among NGOs might conserve resources. As well, many NGOs have limited reach as they are based in the major cities and are hardly visible in the rural areas.172 Besides, they often have undemocratic and personalized leadership. Reflecting the democratic deficit in Africa more generally, it is becoming the norm in the African NGO community for founding leaders of some NGOs to retain office for inordinate periods, which breeds internecine conflict and often prompts the emergence of splinter groups.173 Finally, internal conflict and maladministration in some NGOs undermines the credibility and effectiveness of all, a fact TNCs and governments may well exploit. legal obstacles Notwithstanding the positive impact that civil society has had on corporate regulation, Nigerian and Ghanaian laws have failed, in varying degrees, to empower civil society groups adequately to participate in regulation. For example, except to the limited extent that civil society is allowed to participate in environmental impact assessment processes in both countries,174 citizens are accorded little or no opportunity to participate in the design or formulation of regulatory law and policy. There is no right of private enforcement of regulatory laws in these countries. However, given the nature of the victim communities and the defects of the justice system, the prospects for private enforcement are so poor they hardly seem worth worrying about. This position is to be contrasted with what obtains in some developed countries such as the United States, where private citizens are in some instances empowered to enforce environmental laws.175 Perhaps more devastatingly, both countries retain laws and policies

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that obstruct civil society participation. For example, in Ghana, environmental audit reports by mining TNCs are confidential.176 Without access to these reports, NGOs are effectively denied the opportunity to scrutinize, and if need be challenge, them. Civil society fares worse in Nigeria, where specific statutes criminalize civil campaigns against oil TNCs or interference with their activities.177 It is also a crime to ‘aid’ or ‘incite’ others in obstructing or preventing oil production or distribution.178 Appallingly, the offence is punishable either by death or imprisonment for up to twenty-one years.179 What is particularly troubling about the Nigerian provisions is that civil protest tactics such as picketing can easily be construed as ‘interference’ or ‘obstruction’ and thus be held to constitute an offence. While these and other statutory provisions have not yet been invoked against civil society groups by the Nigerian government, their mere existence may well have a chilling effect on anti-TNC activities. The 1995 judicial murder of Ken SaroWiwa attests to the risk that state coercion may be brought to bear even against relatively peaceful protests.180 Conclusion As underscored in this chapter, the extent to which Nigeria and Ghana currently involve non-state actors in the regulatory process leaves much to be desired. While civil society groups in both countries have played, and are still playing, commendable roles in curbing the excesses of TNCs, they could be more effective given a conducive environment. The involvement of local communities and NGOs in the planning, design, implementation, and regulation of resource extraction projects in both countries may create a sense of self-confidence within those communities; foster dialogue and mutual respect among TNCs, regulators, and the communities; and potentially reduce friction and enhance positive outcomes.

5 Multilateral African Regulatory Mechanisms

As discussed in chapter 3, attempts by individual African countries such as Nigeria and Ghana to regulate extractive TNCs have proved ineffective. What then has been the response of continental bodies such as the African Union to the social irresponsibility of TNCs? The present chapter considers this question. In particular, it examines the regulatory impact of the African Charter on Human and Peoples’ Rights.1 The African Union’s (Non)response to Corporate Irresponsibility The African Union (and indeed its predecessor, the Organization of African Unity) has done little in terms of regulating TNCs, and Africa today lacks a coordinated or common regulatory framework. To be sure, treaties, conventions, declarations, and resolutions exist that speak to environmental protection and sustainable utilization of energy and natural resources. For example, the Treaty Establishing the African Economic Community,2 the Convention on the African Energy Commission,3 and the African Convention on the Conservation of Nature and Natural Resources4 enjoin African states to regulate all activities and processes affecting the environment by taking appropriate measures to prevent, mitigate, and eliminate detrimental effects on the environment,5 to foster conservation and sustainable use of natural resources,6 and to harmonize and coordinate their natural resources and environmental policies.7 Both conventions are relatively recent and so it is much too soon to measure their impact on environmental protection in Africa. Whether or not they prove effective in future will depend to a large degree on the way they are implemented. But if past experience is anything to go by, it is unlikely that the conventions will be effectively implemented.

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African treaties, like national laws, are bereft of actual implementation. In fact, African leaders have gained notoriety for making grandstanding formal commitments at elaborately orchestrated ceremonies, commitments that are almost always never put into practice. If Africa is to protect her environment effectively, she must build her collective institutional capacity for implementing environmental conventions. African ministerial declarations reinforce Africa’s treaties and conventions. The Bamako Commitment on Environment and Development, for example, expresses the desire of ministers of the environment of member-states of the African Union to ensure proper management of marine environment and coastal areas, control of desertification, protection of African tropical forests, the preservation of biological species, and protection of the atmosphere.8 Much the same sentiments had earlier been expressed in the Kampala Declaration, which pledged African countries to protect the environment by integrating environmental concerns into all existing and future economic and sectoral policies.9 At the regional level, West and Central African countries have individually and jointly pledged to take all appropriate measures to prevent, reduce, combat, and control pollution of marine and coastal environments10 caused by normal or accidental discharges from ships, or resulting from the exploration and exploitation of the seabed and its subsoil.11 In striving to achieve this objective, these countries are ‘to ensure sound environmental management of natural resources, using for this purpose the best practicable means at their disposal, and in accordance with their capabilities.’12 However, while African countries have rightly pledged their commitment to environmental protection, these commitments, like the conventions, have rarely been translated into reality. But beyond the non-implementation of treaties, a recent initiative – the NEPAD – adopted by African leaders as the framework for the development of the continent appears to put Africa’s previous commitments on environmental protection into serious question.13 The NEPAD’s major aim is to spur Africa’s economic development through increased foreign investment. Unsurprisingly, because of its neo-liberal bent,14 the NEPAD appears to sacrifice sustainable development on the altar of economic growth. For example, it proposes to encourage extractive industries by improving the quality of mineral resource information; to create a regulatory framework conducive to the development of the mining sector; to establish best practices that will ensure efficient extraction of natural resources and minerals of high quality; and to har-

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monize policies and regulations to ensure compliance with minimum levels of operational practices.15 However, it does not establish a clear platform for curtailing pervasive negative externalities, such as environmental degradation and human displacement, associated with extractive industries in Africa.16 Instead, the NEPAD assumes that extractive corporations will effectively regulate themselves, an assumption which flies in the face of past and current experiences.17 The African Charter on Human and Peoples’ Rights Although as noted previously there is no continent-wide framework for corporate regulation, certain multilateral instruments and institutions in the continent may serve useful regulatory purposes. One such instrument is the African Charter on Human and Peoples’ Rights (the Charter),18 including its adjudicatory body, the African Commission on Human and Peoples’ Rights (the Commission).19 The Charter guarantees rights to life and integrity of the human person,20 property,21 work under equitable and satisfactory conditions,22 enjoyment of the best attainable state of physical and mental health,23 as well as the right to a ‘general satisfactory environment favourable to their development.’24 These rights have formed the basis of petitions to the Commission against some African governments who connive with private actors to infringe rights, or condone the rights-infringing activities of private actors. One such petition – The Social and Economic Rights Action Center & Center for Economic and Social Rights v. Nigeria (SERAC & CESR v. Nigeria)25 – is particularly relevant to extractive industries. SERAC / CESR v. Nigeria: A Test Case for Multilateral African Regulation This petition was commenced by two NGOs – Social and Economic Rights Action Center, a Nigerian NGO, and the Center for Economic and Social Rights, a U.S.-based NGO. It alleged, among other things, that the Nigerian government violated the Ogonis’ right to health and a clean environment as guaranteed under Articles 16 and 24 of the African Charter because the state oil company, the NNPC, directly participated in oil-production activities with Shell, activities which ‘have caused environmental degradation and health problems resulting from the contamination of the environment among the Ogoni people.’26 The petition also claimed that the government had violated the Charter by (1) allowing oil TNCs to exploit oil reserves without regard for life,

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health, and the environment of the Ogonis;27 (2) condoning and facilitating oil TNCs in violating the Charter rights of the Ogonis by placing the legal and military powers of the state at the disposal of the TNCs;28 (3) failing to monitor operations of oil TNCs or to require standard safety measures in the industry;29 (4) failing to require oil TNCs or its own agencies to produce basic health and environmental impact studies relating to oil operations;30 and (5) failing to require the TNCs to consult host communities prior to commencing oil operations.31 In a landmark decision, the Commission held that Nigeria is obliged to ‘refrain from interfering in the enjoyment of all fundamental rights’32 and ‘to protect right-holders against other subjects by legislation and provision of effective remedies.’33 According to the Commission, African ‘governments have a duty to protect their citizens, not only through appropriate legislation and effective enforcement but also by protecting them from damaging acts that may be perpetrated by private parties.’34 Such protection ‘entails the creation and maintenance of … an effective interplay of laws and regulations so that individuals will be able to freely realize their rights and freedoms.’35 The Commission consequently found the Nigerian government in violation of the Charter because it participated in rights abuses in Ogoniland; failed to take reasonable and other measures to prevent pollution and ecological degradation by oil TNCs; and, indeed, tolerated such conduct.36 Furthermore, it held that [t]he destructive and selfish role played by oil development in Ogoniland, closely tied with repressive tactics of the Nigerian Government, and the lack of material benefits accruing to the local population, may well be said to constitute a violation of Article 21. Despite its obligation to protect persons against interferences in the enjoyment of their rights, the Government of Nigeria facilitated the destruction of the Ogoniland. Contrary to its Charter obligations and despite such internationally established principles, the Nigerian Government has given the green light to private actors, and the oil Companies in particular, to devastatingly affect the well-being of the Ogonis. By any measure of standards, its practice falls short of the minimum conduct expected of governments, and therefore, is in violation of the African Charter.37

The Commission did not stop at that. It identified positive steps that African governments must take if they are to comply with Articles 16 (right to enjoyment of the best attainable state of physical and men-

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tal health) and 24 (right to a ‘satisfactory environment”). Government compliance with these articles, the Commission ruled, ‘must … include ordering or at least permitting independent scientific monitoring of threatened environments, requiring and publicising environmental and social impact studies prior to any major industrial development, undertaking appropriate monitoring and providing information to those communities exposed to hazardous materials and activities and providing meaningful opportunities for individuals to be heard and to participate in the development decisions affecting their communities.’38 More fundamentally, the Commission found that ‘widespread violations’ of the ‘most fundamental of all human rights, the right to life’ were ‘perpetrated by the Government of Nigeria and by private actors.’39 Clearly, the ‘private actors’ referred to by the Commission were the NNPC, Shell, and other oil TNCs operating in Ogoniland.40 However, the Commission did not hold these TNCs liable or accountable for their violation of the Charter rights of Ogonis. Rather, it placed the responsibility for the violations solely on the Nigerian government.41 The Commission’s decision is a bold step towards establishing governmental and corporate accountability in Africa. However, the Commission has been faulted on the ground that, while it identified legal wrongs committed by oil TNCs – ‘widespread violations’ of the rights of Ogonis42 – it failed to provide a remedy.43 J. Oloka-Onyango argues that the Commission would have been justified in sanctioning the TNCs because, although many of the Charter’s duties ‘can only refer to natural persons,’ some of the duties ought to be ascribed to corporate bodies, given that they ‘are not denied the exercise of rights that are recognized in international and domestic law.’44 Oloka-Onyango’s position, though desirable, is problematic on at least two counts. First, the Charter consistently refers to ‘individual’ and ‘human being’ as opposed to ‘person,’ which suggests that the framers of the Charter had natural persons in mind when they drafted it. Secondly, the Commission has no power to impose sanctions.45 In fact, its decisions are not binding on states but, rather, are recommendations that states are at liberty to accept or reject.46 That said, it is highly desirable that private actors be made to account for their violations of the African Charter. But such accountability may be better accomplished through an amendment of the Charter rather than by a strained interpretation of existing provisions. The extension of African Charter obligations to private persons (including corporations) is particularly necessary if Africa is to be taken as seriously interested

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in the protection and promotion of all aspects of human rights.47 Nonstate actors (rebel groups, TNCs, etc.) have demonstrated an alarming tendency to infringe rights, a tendency which may be intensified unless Africa’s human rights instruments, including the Charter, are amended in a manner that explicitly imposes human rights duties on non-state actors.48 Significance of SERAC & CESR v. Nigeria for the Regulation of Extractive Industries As noted above, SERAC & CESR v. Nigeria neither directly held oil TNCs in Nigeria accountable for their involvement in the violation of the Charter rights of Ogonis, nor is it binding on Nigeria.49 However, the case is instructive as regards corporate accountability in Africa’s extractive industries in many ways. It illustrates that African governments can be held in violation of the Charter where they fail to regulate the conduct of private corporate entities that violate the Charter rights of others. Through this decision the Commission has positioned itself as a mechanism through which victims of rights violations and indeed civil society can exert pressure on African governments to regulate the activities of corporate entities so that they do not violate rights guaranteed under the Charter. Host communities, civil society groups, and other interested parties may thus achieve corporate accountability objectives through petitions filed before the Commission. Furthermore, the decision recognizes that private non-state actors, whether acting alone or in concert with state officials, are capable of violating the Charter rights of others.50 This is significant because it raises the possibility that private entities may one day be held liable for rights violations under the Charter. Perhaps most importantly, it sets parameters and standards for regulating extractive industries. African governments, according to the Commission, must among other things make appropriate laws to protect the rights of their citizens from violations by corporate entities and other private actors and ensure effective enforcement of these laws, including independent scientific monitoring of the industries.51 Also, the decision is a valuable precedent, albeit only persuasive, for domestic courts in individual African countries faced with assessing the culpability of governments for the rights-infringing activities of non-state actors.52 Indeed, following this decision, domestic courts – which of course have jurisdiction to enforce the Charter in their respec-

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tive states – may now feel emboldened to hold corporate entities liable for violating the Charter rights of Africans. If, as found by the Commission, the NNPC and Shell violated the Charter rights of Ogonis, the argument could be made that, because there ought not to be a wrong without a remedy, domestic courts would be justified in holding corporate entities directly accountable for Charter violations. This is a real possibility in countries such as Nigeria where private persons (including corporations) could be held liable for violating constitutionally guaranteed human rights.53 The day may still be far away when such outcomes become a reality. However, it is an interesting possibility, one which victims of human rights violations and corporate accountability advocates should pursue in domestic courts. Finally, although as noted earlier the Commission’s findings, including the findings in SERAC & CESR v. Nigeria, are not binding, they are useful campaign weapons for NGOs engaged in the struggle for corporate accountability. While conventional wisdom holds that governments have the primary responsibility for regulating corporate entities, as discussed in chapter 4, civil society groups can and do often play a significant role in regulating corporate conduct. The findings of the Commission may form the basis of international campaigns by NGOs against governments and corporations adjudged to have violated the African Charter. NGOs may, for example, exert pressures on donor countries, lending institutions such as the International Monetary Fund and World Bank, and multilateral organizations such as the United Nations to bring their influence to bear on violating corporations and states. These pressures may ultimately induce African countries to abide by the Commission’s findings and recommendations that they regulate the activities of corporate entities so that they do not violate rights guaranteed under the African Charter. In this context then, the decision in SERAC & CESR v. Nigeria strengthens and further empowers NGOs. Conclusion This chapter has highlighted the significance and implications of the Commission’s decision in SERAC & CESR v. Nigeria for the regulation of Africa’s extractive industries. It has also attempted to draw attention to two major weaknesses in the African Charter: its apparent inapplicability to the rights-infringing activities of private actors, and the inability of the Commission to sanction rights violators by way of legal

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remedies. If, as envisaged by the African Charter, the human and peoples’ rights of Africans are to be protected in the true sense of the word; and if, as the Commission envisions, all rights under the Charter are to ‘be made effective,’54 the Charter ought to be strengthened by amending it in such a manner that private actors can be held accountable for violation of the Charter. Africa will also be demonstrating her commitment to human rights protection by empowering the Commission to sanction or punish rights violators.

6 The Regulation of Transnational Corporations under International Law

This chapter examines various substantive attempts by multilateral and international organizations to regulate, or at least influence, the conduct of TNCs. As argued below, these attempts are seriously flawed both in concept and practice. Little wonder they have failed to rein in TNCs. In fact, as will be suggested in this chapter, international law is unlikely to effectively regulate TNCs in the future because of the glaring power imbalance in the international system. The chapter begins with a brief examination of a preliminary threshold issue: the status of TNCs in international law. This is intended to provide a backdrop for our examination of the various international regulatory initiatives. The issue will be revisited and discussed in detail later in the chapter. Status of Transnational Corporations in International Law Conventional international law holds that only subjects of international law have the capacity to be bearers of its rights and duties.1 Thus, in customary international human rights discourse, the state, as the principal subject of international law, is the primary bearer of international human rights duties. This position is entirely in keeping with the traditional theory of public international law whose dominant, and some might say sole, concern is the regulation of inter-state relations.2 Public international law traditionally relies on a set of criteria to determine its ‘subjects.’ These are the capacity to (1) make claims for breach of international law; (2) enter into valid international agreements; and (3) enjoy privileges and immunities from national jurisdic-

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tions.3 Because it has some but not all of these capacities, international law regards the corporation as lacking in international personality.4 Consequently, it has been argued, by what Craig Scott describes as the ‘restrained conservative’ school,5 that international human rights (and environmental) duties, being matters of public law, are inapplicable to corporations because they are not subjects of international law.6 Antonio Cassese tacitly supports this view when he argues that states have not upgraded TNCs to international subjects and thus that ‘multinational corporations possess no international rights and duties’ under international law.7 Cassese seems to suggest that TNCs require the conferment of international status or personality on them by states,8 a view explicitly projected by other writers.9 Under this positivistic postulation, the fact that corporations enjoy the benefits and burdens of international law is not sufficient to qualify them as subjects of international law.10 To the contrary, such benefits and burdens merely indicate that corporations are ‘objects’ under international law. Rather than conferring status on TNCs, international law takes the position that the doctrine of state responsibility which imposes an obligation on state parties to international covenants and treaties to regulate private conduct so as to ensure respect for, and observance of, the rights guaranteed under them is the appropriate mechanism through which international law is to influence, albeit indirectly, private corporate conduct.11 Although as noted below the conventional perspective is gradually being assaulted and perhaps theoretically demystified, it remains the dominant norm in international law and practice. Hence, the reality today is that corporations ‘bear almost no obligations under public international law.’12 Indeed, to the degree that international law touches on the corporation, it is largely concerned with the protection of the rights and interests of the corporation as opposed to the imposition of duties on it.13 This position is unlikely to be altered any time soon because it suits the interests of both TNCs and their developed home countries, which, in any event, are the effective makers of international law.14 It immunizes TNCs ‘from direct accountability to international legal norms,’15 thus ensuring the protection of their economic interests and, by extension, those of the home countries of the TNCs. It also explains why extant international regulatory initiatives have so far failed to rein in TNCs as regards their social misbehaviour in developing countries.

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Regulatory Initiatives by Multilateral Organizations: International Codes of Corporate Conduct This section sketches out a series of case studies on international mechanisms – largely in the nature of codes of conduct – aimed at regulating TNCs. In particular, it examines the regulatory attempts and mechanisms of the United Nations (UN) and some of its organs, including the International Labour Organization (ILO) and the Sub-Commission on the Promotion and Protection of Human Rights, as well as the regulatory initiative of the OECD.16 The United Nations the draft code of conduct on transnational corporations Following the sustained pressure exerted on it by developing countries, and apparently stung into consciousness by the political events in Chile that revealed the treachery and political destabilization visited on that country in the 1970s by International Telephone and Telegraph, a TNC based in the United States, the UN established, sometime in 1974, the Commission on Transnational Corporations and charged it with the duty of fashioning an international code of conduct for TNCs.17 The commission subsequently produced a draft Code of Conduct (draft code), which, though revised, was never adopted by the international community.18 The draft code was primarily aimed at two objectives: the limitation of the adverse effects of TNCs on the national economies and political affairs of the host countries, and the protection of TNCs’ investments in the host countries. Social concerns were addressed under the rubric of the former objective. TNCs, the draft code recommended, ‘should/shall respect human rights and fundamental freedoms in the countries in which they operate.’19 They were also enjoined to carry out their activities in accordance with the national environmental laws, regulations, administrative practices, and policies of the host countries and with due regard to relevant international standards.20 TNCs were thus to take steps to protect the environment and where damaged to rehabilitate or ‘restore it to the extent appropriate and feasible.’21 From the onset, deep divisions existed within the international community, not only about the legal status of the draft code22 but also about a plethora of other issues, such as the extent of the obligations of TNCs.23 While some countries favoured a binding code with specific

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enforceable obligations on TNCs, others preferred and advocated a voluntary code.24 These divisions, coupled with the waning opposition by developing countries to TNCs’ activities,25 ultimately led to the fizzling out of the UN’s attempt to develop a comprehensive international code of conduct for TNCs.26 the global compact In a speech delivered at the World Economic Forum in Davos, Switzerland, on 31 January 1999, Kofi Annan, former secretary-general of the UN, challenged world business leaders to embrace and contribute to the achievement of an inclusive and sustainable global market.27 According to Annan, the business community can uphold human rights and decent labour and environmental standards directly, by your own conduct of your own business. You can make sure that in your own corporate practices you uphold and respect human rights; and that you are not yourselves complicit in human rights abuses. Don’t wait for every country to introduce laws protecting freedom of association and the right to collective bargaining. You can at least make sure your own employees, and those of your subcontractors, enjoy those rights. You can at least make sure that you yourselves are not employing under-age children or forced labour, either directly or indirectly. And you can make sure that, in your own hiring and firing policies, you do not discriminate on grounds of race, creed, gender or ethnic origin. You can also support a precautionary approach to environmental challenges. You can undertake initiatives to promote greater environmental responsibility. And you can encourage the development and diffusion of environmentally friendly technologies.28

The idea was to devise a governance compact that underpins and puts a human face on the new global economy.29 Thus, with this speech the Global Compact (GC)30 was born, although its operational phase was formally launched on 26 July 2000.31 It initially consisted of nine principles deduced largely from core international legal instruments. However, it has most recently been revamped to include a tenth principle dealing with corruption.32 The GC invites business (that is, firms that sign on to it) to embrace, support, and enact, within their sphere of influence, a core set of fundamental social values in the areas of human rights, labour standards, environmental practices, and anti-corruption policies.33 It attempts to

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galvanize TNCs and other corporations into compliance with international social standards through its ten principles. It exhorts business to (1) observe, support, and respect the protection of internationally proclaimed human rights; (2) make sure that they are not complicit in human rights abuses; (3) uphold the freedom of association and the effective recognition of the right to collective bargaining; (4) uphold the elimination of all forms of forced and compulsory labour; (5) uphold the effective abolition of child labour; (6) uphold the elimination of discrimination in respect of employment and occupation; (7) support a precautionary approach to environmental challenges; (8) undertake initiatives to promote greater environmental responsibility; (9) encourage the development and diffusion of environmentally friendly technologies; and (10) work against all forms of corruption, including extortion and bribery.34 As couched, these principles are sufficiently broad to encompass most areas of international social concerns. However, there are serious questions as to whether the GC, by its very nature, can induce positive substantive change in corporate behaviour. I will return to this issue soon; for the moment, I briefly put the GC in context by reflecting on its goals. The Goals and Structure of the Global Compact. The GC is aimed at achieving two complementary goals. The first is to persuade business to internalize the GC’s principles by making them an integral part of the business culture, strategy, and operations of participating corporations. The second goal is the facilitation of collective problem solving through stakeholder cooperation.35 It is thus designed both to influence the behaviour of participants and to instigate normative changes in their governance and policy-making processes.36 The GC operates through several engagement mechanisms: leadership, dialogue, learning, partnership projects, and network/outreach.37 The mechanism of ‘leadership’ demands commitment and transparency from participating corporations.38 It asks that those who manage the affairs of corporations specifically commit to the GC’s principles and that corporations publicly report on actions undertaken in support of the principles.39 ‘Dialogue’ is intended ‘both to influence policy-making and the behaviour’ of participants.40 It also enables participants to work together, isolate problems, and devise common solutions.41 The ‘learning’ mechanism, which is ‘at the centre of the web of relationships’ in the GC, is aimed at three goals: the identification and dissemination of critical knowledge gaps; the sourcing and communication of good

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governance practices; and the fostering of accountability and transparency by way of public disclosure of relevant information through the GC’s web portal.42 With the aid of the ‘Learning Forums,’ the GC puts principles – some of which may be obtained through dialogue – into practice.43 The learning forums develop case studies of good corporate practices and how they are put into practice.44 Experience gained from the case studies is then shared with other participants.45 Through ‘Partnership Projects,’ participants attempt to contribute to the UN’s developmental goals and, in particular, achieve the GC’s ‘goal of providing more opportunities for the poor.’46 Finally, there is the ‘networks/outreach’ mechanism, which is the primary medium of engagement with stakeholders. Organized along regional, country, or industrial lines, the networks enable participants to discuss global corporate responsibility issues ‘in a specific local and regional context,’ thus deepening the reach and impact of the GC.47 With the aid of these engagement mechanisms, the GC not only provides an avenue for dialogue between business and civil society,48 it also hopes to ‘weave a web of values around the global marketplace,’49 foster cooperation between business and civil society, and identify and promote the adoption and dissemination of best practices.50 However, the GC is not a prescriptive or conduct-regulating instrument.51 It is neither a code of conduct nor a legally binding standard.52 Rather, it offers a coordinated platform for institutional learning. It seeks the cultivation and dissemination of best governance practices among its participants with a view to fostering normative change in corporate governance towards responsible behaviour in the conduct of business. Interactive Character of the Global Compact. The GC identifies and disseminates critical knowledge gaps in corporate governance, sources and communicates good governance practices, and fosters accountability and transparency by way of public disclosure of relevant information through its web portal.53 In practice, GC’s participants undertake case studies of good corporate practices.54 They then share their experience with other participants through the ‘learning forums.’55 In effect, the GC receives, distills, refines, and disseminates corporate governance information through dialogue and responds to stimuli from its participants and other stakeholders.56 The GC is thus essentially reflexive, interactive, and self-referential in character.57 The expectation is that good corporate practices that would be distilled from its dialogues

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and disseminated to a wide spectrum of stakeholders ‘will help drive out bad ones.’58 In this sense, the GC could be likened to a ‘clearing house’ for best corporate governance information and practices. The GC’s strength and indeed its potential lie in its reflexive or selfreferential character. By promoting dialogue between business and civil society the GC may foster cooperation, partnership, and solidarity among them. Such dialogue could also provide an opportunity for civil society organizations to influence corporate conduct towards ethical behaviour. Equally, its self-referential character has the potential to enhance its utility, particularly in regards to its execution and implementation. As Georg Kell, the executive head of the GC and one of its most outspoken proponents, has argued, the sharing of good corporate practices among participating corporations will likely ‘promote action.’59 Its self-referentiality could also promote accountability and transparency among participants.60 For example, although the GC does not verify a participating corporation’s Communication on Progress,61 the requirement that they publish such a Communication describing how they supported the GC and its principles during the previous fiscal year in their annual report or other prominent public documents62 and in the GC’s web site63 serves to afford the civil society access to, and the opportunity to challenge, the Communication. The possibility of a participant’s Communication being demonstrated to be false through rebuttal, and the public opprobrium and shame64 that this is likely to generate against the corporation, may help drive home the need for corporations to ensure the accuracy of their Communication and thus limit corporate image laundering through association with the GC. It is thus quite possible that effective rebuttals may ultimately weed out unfaithful participants from the GC’s process. This observation must however be qualified. It is not at all certain that all or most corporations have a ‘soul’ or conscience that can be publicly shamed. Corporations are not monolithic entities; they can exhibit varying behavioural images65 and control public relations. Thus, whether or not the ‘shaming’ device affects the behaviour of a corporation would depend on the character of the corporation. Corporations motivated entirely by profit-seeking motives to disobey regulatory rules – described by some as ‘worst apples’66 and by others as ‘keen-eyed amoral calculators’67 – are unlikely to be ‘shamed’ by public knowledge of the falsehood of their Communication on Progress. In addition, the effectiveness of the shaming strategy may depend on the corporation’s product line. Where the corporation’s products are neces-

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sities as opposed to luxuries, the shaming device may not have much effect because consumers may purchase the products irrespective of the falsity of the corporation’s claims. The same may also be true of extractive products such as diamonds whose origin or producers cannot be immediately determined by consumers, probably because the products are unlabelled or mixed up with similar products before being sold to the public. But dialogue and the possibility of promoting ethical behaviour through publication of a participant’s Communication on Progress are not all there is to the GC. Corporations may also benefit from adherence to the GC’s principles and, in particular, the Communication on Progress. For example, a corporation whose Communication on Progress demonstrates its compliance with the GC may ultimately be perceived by the public as a socially responsible entity. In turn, such perception may translate into commercial reward for the corporation in the form of increased public patronage of the corporation’s products and services.68 This may itself serve to entice other corporations to be socially responsible. Substantively, the GC has recorded measured success since its formal inauguration in 2000.69 It has reportedly ‘accelerated policy change in companies,’ and its mere existence is said to exert a ‘powerful influence’ on corporate participants to behave responsibly.70 This is probably why its proponents believe that it is ‘a very good vehicle to retrieve the moral purpose of business.’71 Properly implemented, the GC may well produce more positive results in future. While we await full realization of its potential, the GC is regrettably at the moment beset with operational challenges and legitimacy problems. Problems Inherent in, and Confronting, the Global Compact. Critics, including many NGOs and business groups, regard the GC with suspicion.72 Some NGOs charge that by entering into a partnership with corporations, the UN, through the GC, affords corporate wrongdoers an opportunity to launder their image.73 The GC, critics further allege, creates ‘undue corporate influence’ at the UN that weakens the work of intergovernmental agencies, while it ‘distracts Governments and the UN from the necessary steps to establish an effective intergovernmental framework for corporate accountability.’74 But beyond these valid criticisms, several substantive deficiencies afflict the GC. (In)Appropriateness of the Focus on Governance. As mentioned earlier,

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the GC believes that there are ‘critical knowledge gaps’ in corporate governance.75 Hence, its conveners envision ‘an incremental process of learning and improvement’ of governance practices.76 However, the GC’s focus on learning and governance, rather than regulation of corporate conduct, appears to miss the point, at least in relation to TNCs. It assumes that the social irresponsibility of TNCs in the developing world stems from lack of proper governance or from lack of knowledge about good business practices. This is not always the case. Rather, it stems largely from the selective and discriminatory observance of good practices by TNCs. Indeed, TNCs’ choice of where to apply good business ethics and where to disregard them appears curiously to depend on the geographical location of their operations. TNCs generally behave well, or at least better, when operating in the developed countries. This does not mean that incidences of bad behaviour by TNCs have not occurred, or are not occurring, in the developed countries. But such bad behaviour, it appears, is the exception, not the rule. Quite the contrary, these same TNCs, aided and abetted by host governments, often resort to irresponsible practices in the execution of their business activities in the developing world, and in particular Africa. How else do we explain Shell’s apparent observance of good corporate governance practices in its operations in the developed world, while it wilfully disregards such practices in places like Nigeria. This is indeed a worrisome trend. Of course, the argument can be made that TNCs are involved in social irresponsibility because the corporate governance culture of their subsidiaries in the developing countries may be different from that of the parent corporations, which are often based in the developed countries. The simple reply to this argument is that the management of the subsidiary is often in the hands of its parent corporation. Indeed, more often than not, personnel from the parent corporation make up the management team of the subsidiary. This is particularly so in technologydriven sectors, such as the extractive industries, in which developing countries often lack the necessary personnel and expertise. For example, the major oil TNCs in Nigeria are headed by foreign expatriate staff seconded from, and appointed by, the parent corporations overseas.77 Therefore, the question of differences in corporate governance culture between parent corporations and their subsidiaries seldom arises in extractive industries. The GC’s focus on governance highlights another substantive problem: its erroneous assumption about the universality of corporate governance practices. To some extent, the GC adopts a universal but

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mythical approach to corporate governance in the sense that it assumes that dialogue between its elite participants would produce best governance practices that are universally applicable to all industries and countries irrespective of differences in the nature of business and national cultures. This approach, as well as the assumption underlying it, is inaccurate. It is of course the case that some governance practices, particularly those relating to the relationship between directors and shareholders, may have universal resonance. However, the reality is that corporate governance practices differ not only between industries, given the divergent nature of global business, but also between countries. What would amount to good governance practices in one industry may not necessarily be so in another. Thus, it may be difficult, if not impossible, for the GC to distil appropriate best governance practices for all industries, given its current approach to corporate governance. Happily, the GC appears to recognize the danger in adopting a universalist position. As noted below, it encourages networks of participants along both geographical – country or region – and industrial lines.78 Such specialized networks are particularly necessary because, as mentioned previously, some corporate governance or accountability issues, and indeed the solutions to them, may be relative.79 What may amount to best practices that can resolve a problem in the Tarkwa mining region of Ghana may not be so in the rainforests of Colombia. By the same token, what a Western businessperson or NGO may take as the solution to the Ogoni crisis in Nigeria may not be viewed as such by the Ogonis. Regrettably, at this moment, all of the GC’s existing networks are country and regional networks, while sectoral or industrial networks have yet to be created.80 Non-Regulatory Nature of the Global Compact. Operationally, the utility of the GC appears to be compromised because, as mentioned previously, the GC is neither a regulatory instrument nor a code of conduct. It is equally not intended to provide a platform for verification of the social compliance of corporations that sign on to it.81 It does not therefore set any parameters for compliance. Neither does it have specific standards to be met by its participants. Rather, it consists of broadly couched criteria and benchmarks, the fine print of which is left to the good faith of participating corporations. In addition, some of its aspects, notably the criteria for participation, are fluid. The submission of a letter (endorsed by the board of directors where possible) expressing support for and commitment to the GC by

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a chief executive officer of the corporation suffices for participation.82 Once such a letter is submitted, the corporation is then expected to do three things: set in motion changes to its business operations so that the GC principles become part of its strategy, culture, and day-to-day operations; publicly advocate the GC; and publish an annual report or Communication on Progress indicating ways in which it is supporting the GC and its principles.83 However, applications for participation are not vetted, and it does not appear to matter to the GC that an applicant corporation may be involved in rights violations even as it is applying to join the GC. Moreover, probably because it is not a regulatory instrument, the GC has no enforcement or monitoring mechanisms. On the contrary, it relies on self-enforcement by participating corporations. While the GC has developed a performance framework for the purpose of assessing its impact,84 it does not provide standards or criteria for determining whether a particular corporation is adhering to its principles. It is equally unclear what the threshold is that a corporation must cross before it can be said to be in violation of its commitments under the GC.85 Although, as will be discussed below, these defects also haunt other international regulatory initiatives, they leave the door open for corporations to violate the GC’s principles and yet simultaneously launder or ‘bluewash’ their public image through participation in the GC.86 However, the GC is not oblivious to these deficiencies. In fact, it has recently announced some measures aimed at ‘assuring’ its integrity ‘at all times.’87 Under its ‘integrity measures,’ failure to submit a Communication on Progress for two consecutive years may lead to the labelling of a corporation as ‘inactive’ on the GC web site.88 This may have serious implications for the corporation, including the denial of two core privileges: participation in the GC, and use of the GC name and logo.89 In addition to the ‘integrity measures,’ participants’ use of the GC logo is permitted ‘only in the context of their activities promoting the Global Compact and its goals, but not in any manner that suggests or implies that the Global Compact Office has endorsed or approved of the activities, products, and/or services of the organization.’90 The policy is apparently meant to preserve the GC’s independence. The GC has also introduced a complaint mechanism to address allegations of systematic or egregious abuse of its principles.91 The mechanism works this way: upon the receipt of a written complaint, the Global Compact Office (GCO) uses its judgment to determine if

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the complaint is prima facie frivolous. If so, no further action is to be taken and the complainant is informed accordingly.92 However, if the complaint is found not to be prima facie frivolous, the GCO forwards it to the corporation concerned with a request that it submit written comments directly to the complainant, while forwarding a copy to the GCO.93 The complaint mechanism does not compel compliance. Rather, it is meant to facilitate mutual resolution of problems.94 Hence, the GCO does not judge or determine the merits of a complaint, although it may provide ‘guidance and assistance’ to the corporation in resolving the complaint.95 However, a corporation’s disregard for the mechanism is not without repercussion. A refusal to engage in dialogue on the subject matter of a complaint within three months of being notified by the GCO is grounds for declaring and identifying a corporation as ‘inactive’ on the GC web site.96 More ominously, if, on the basis of its review of a complaint, the GCO determines that the continued listing of the corporation as a participant is detrimental to the GC’s reputation and integrity, it may ‘remove’ the corporation from the list of participants and indicate so on the GC web site.97 Taken together, these measures address, and could potentially eliminate, a principal criticism of the GC: the opportunity it affords corporations to launder or ‘bluewash’ their public image through participation in the GC even though they may be simultaneously violating human rights or degrading the environment.98 Legitimacy Questions. The GC’s legitimacy problems stem from two fronts: (a) its inability thus far to gain the explicit support of the governments of the developed countries; and (b) the exclusion of at least one relevant constituency – host communities – from direct participation in its process. Since its formal launch in July 2000, the GC has attracted the support of about ‘5600 participants, including over 4300 businesses.’99 While this number is impressive, its composition reveals some disturbing trends. Only a few are North American corporations,100 and most major U.S. corporations, including Chevron and ExxonMobil,101 have so far failed to join the GC.102 This is not likely to change soon. U.S. corporations, some observers report, are afraid that joining the GC could expose them to potential legal liabilities, particularly in relation to the GC’s labour rights provisions.103 They also do not think they have much to gain by being associated with the UN under whose auspices the GC is being implemented.104 Also, the geographical spread of the nations actively supporting the GC points, unfortunately, in a disturbing direc-

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tion. Most of the countries that have officially embraced the GC are in the developing world.105 By contrast, some developed countries have yet to formally endorse the GC although they have, through the G8, offered ‘encouragement’ to the GC.106 The irony of this situation should not be lost on anyone. The less than enthusiastic embrace of the GC by governments of the developed countries reflects their continuing desire to shield their TNCs from international regulation, even though, ironically, the GC does not regard itself as a regulatory instrument. This same attitude torpedoed the UN’s efforts to fashion a code of conduct for TNCs in decades past, and it may well undermine the GC. For the GC to make an appreciable impact, it must enjoy the support of the international community, particularly that of the developed countries, which, as we all know, are predominantly the domicile of global corporations.107 The GC’s legitimacy problems can also be found in its participatory process.108 The GC is made up of agencies of the UN, representatives of business, labour, NGOs, and academia.109 However, save to the limited extent that aggrieved communities may file complaints against egregious violations of the GC’s principles,110 the GC excludes host communities – towns and villages in which the GC’s participating corporations carry out their business activities – from its dialogic and learning processes.111 For example, the GC’s policy dialogues on Africa have been held without the participation of host communities – who bear the brunt of the antisocial behaviour of TNCs – even when the dialogues relate to issues directly affecting these African communities.112 By adopting a top-top dialogic approach to the exclusion of host communities, the GC seems not to appreciate that corporations and host communities may perceive corporate responsibility and accountability issues in fundamentally different ways. Some might argue that host communities’ interests are ably represented by NGOs, thus obviating the need for their direct participation in the GC’s processes. There may well be some merit to this argument since the interests of NGOs are similar to those of host communities. However, these interests are not necessarily synonymous. It would be naive then to assume that the interests of host communities are better represented by NGOs than by the communities themselves. Besides, NGOs (and, in particular, international NGOs) are sometimes too distant from host communities in the developing world, and they generally come into the picture only after a catastrophic event has already occurred. Indeed, to the extent that international NGOs have in the

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past represented the interests of host communities, the representation largely occurred after a conflict or rights infraction rather than before. It is difficult to see how the GC dialogues can ‘identify problems and find solutions’113 if those who bear the negative externalities of corporate activities, that is host communities, are not directly brought into the dialogic process. Even if the dialogues result in potential solutions, some of the solutions may not be implementable in a vacuum or in isolation from the host communities. This is precisely the reason that the GC ought to have included host communities in its process. Happily, the GC is at its infancy, and it is to be hoped that it would be revamped in the future so as to include and engage host communities in its participatory process. Of course, the GC would face a number of difficulties were it to allow direct participation of host communities. How do we determine which communities qualify for participation? If the Ogonis were to participate, who would speak for them? Should they participate in every aspect of the GC? If not, what is the appropriate level of participation? These questions assume greater significance because host communities do not necessarily have homogenous interests. But these potential obstacles ought not to stand in the way of at least some limited level of direct participation by host communities. Otherwise, the GC would remain distant from host communities whose vulnerabilities it hopes to alleviate. One way to achieve such participation is to decentralize the implementation of the GC by designing specialized regional or country workshops and dialogues, to suit the needs of particular regions or countries. This could be achieved by enlarging the range of participants at the GC’s various regional workshops114 to include representatives of host communities. Just as its dialogues may foster the dissemination of best practices, the direct involvement of host communities in the GC’s process may engender trust between corporations, the communities, and the GC. Aside from the above, the GC might be spreading itself too thin by pushing its boundaries dangerously close to the murky waters of aid and development. Poverty alleviation and corporate philanthropy are already becoming part and parcel of the GC.115 In fact, a number of the GC’s participants are implementing ‘access to medicines’ initiatives as part of their commitments to the GC.116 However, the ‘philanthropization’ of the GC may be counterproductive because it could potential-

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ly dilute, or distract attention from, the GC’s articulated main goals: the protection of human rights, labour rights, and the environment. Besides, it makes little sense to philanthropize the GC because the UN already has within its fold a number of agencies under whose auspices corporate philanthropy can be, and is, undertaken. Apart from diluting its mandate, the GC’s venture into philanthropy poses another problem. It increases the risk of the GC being hijacked, if not captured, by business because it affords a unique opportunity for corporations to pass themselves off as socially responsible entities while they may, in fact, be socially deviant. It would certainly make for good public relations for a corporation to be seen providing HIV/AIDS drugs to poor victims in Africa and other places under the auspices of the GC while profiting elsewhere at the expense of other, equally vulnerable victims. I should add, in conclusion, that many of these legitimacy problems, though substantial, are transient and perhaps to be expected as part of the GC’s teething problems. Despite its recent recast, the GC remains no more than a moral adjuration to the business community to commit to, and observe, the ten principles in the conduct of their internal business affairs.117 But mere moral adjuration is hardly enough to ensure compliance with social standards. Thus, the GC must look beyond the moral consciousness of business – if indeed it has any- and insist on substantive changes in corporate behaviour. The GC ought at the very least to stipulate a minimum social compliance threshold for participation. Equally, it ought to broaden the scope of its participants to include host communities in appropriate cases because the direct participation of all constituencies at the epicentre of the social concerns that informed the GC is crucial to its viability and utility. Such normative changes become the more important because the utility of the GC may ultimately depend on the universality of its appeal and acceptance. If the GC’s principles are continuously accepted and relied upon by the international community, including governments, business, and civil society organizations, they may well in future coalesce into hard law in the form of an international regime of corporate accountability.118 Even if this hope does not materialize, general acceptance and continuous use of the principles may effect changes in corporate conduct in much the same way as a formal or binding code of conduct.119 Overall Significance of the Global Compact. As noted above, the GC is faced with various problems, but it does have potential to be

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effective, particularly if implemented in good faith by its participants. Beyond that, a greater significance of the GC lies in four areas. First, the GC’s establishment is a subtle acknowledgment that previous international regulatory efforts such as the OECD Guidelines for Multinational Enterprises,120 ILO Declarations and Convention,121 and indeed corporate self-regulation itself are inadequate (if not ineffective) to address the crisis of corporate accountability. If these prior initiatives had been effective, there would be no need for the GC. Thus, the GC provides confirmation for the view that corporate irresponsibility has defied past regulatory approaches. Secondly, the GC reflects the ‘unwillingness’ of the UN and the international community ‘to pursue compulsory corporate regulation.’122 It also indicates the growing preference for voluntary regulation or ‘moral persuasion,’ as opposed to regulation through legal norms.123 Thirdly, the GC allows participation of local and international NGOs in its processes, thus in a way empowering them in the governance of TNCs. Membership of the GC affords organized civil society, and in particular NGOs, an opportunity to liaise and consult with, and in fact influence the governance of, TNCs. It also affords them an avenue to scrutinize the Communication on Progress filed by participating corporations. As mentioned earlier, the fear that inaccuracies in a Communication on Progress would be exposed by civil society groups may encourage corporations to file accurate reports and thus discourage corporate image laundering through association with the GC. Fourthly, the GC is akin to a ‘contract’ between the UN and corporations. Why is this significant? As mentioned above, the corporation has traditionally been regarded as not being a subject of international law. Thus, TNCs have no formal legal status under that realm of law.124 However, by entering into a ‘compact’ with corporations and assigning them roles relating to human rights, labour rights, environmental protection, and the eradication of corruption, the GC appears to have unwittingly elevated the status of corporations within the context of the UN, if not international law itself. Admittedly, Kofi Annan may not have had this in mind when he enunciated the GC; but it is an inference that can be drawn from the GC. On this score, the GC is in the right direction because, as argued below, the notion that TNCs are not subjects of international law appears unsupportable in this day and age, when global economic realities have thrust TNCs to the forefront in the design of international economic rules.

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united nations human rights sub-commission’s norms on the responsibilities of transnational corporations Substance and Uniqueness of the Norms. The Norms on the Responsibilities of TNCs and Other Business Enterprises with Regard to Human Rights (Norms) was unanimously approved by the UN Sub-Commission on the Promotion and Protection of Human Rights (the UN SubCommission) on 13 August 2003.125 While recognizing that the state bears primary responsibility for human rights promotion and protection, the Norms seek to place binding obligations on TNCs and other business enterprises ‘within their respective spheres of activity and influence’ to promote, secure the fulfilment of, respect, ensure respect for, and protect nationally and internationally recognized human rights, including the rights and interests of indigenous peoples and other vulnerable groups.126 The Norms enjoin TNCs to ‘ensure equality of opportunity and treatment’ in accordance with national and international laws so as to eliminate discrimination.127 Thus, they shall not engage in, nor benefit from, war crimes, crimes against humanity, genocide, torture, forced disappearance, forced or compulsory labour, hostage-taking, extrajudicial, summary or arbitrary executions, other violations of humanitarian law, and other international crimes against the human person.128 They are also to ensure that their security operatives observe international human rights principles as well as the laws and professional standards of their host countries.129 In relation to the rights of workers, the Norms stipulate that TNCs and other business enterprises shall (i) not use forced or compulsory labour; (ii) respect the rights of children to be protected from economic exploitation; (iii) provide a safe and healthy working environment for their workers; (iv) provide their workers with remuneration that ensures an adequate standard of living for them and their families; and (v) ensure freedom of association and effective recognition of the right to collective bargaining.130 The Norms further urge TNCs to respect human rights not only by refraining from any activity that supports, solicits, or encourages states or any other entities to abuse human rights but also by ensuring that the goods and services they provide are not used to abuse human rights.131 The Norms do not, however, restrict TNCs’ human rights obligations to first-generation rights, that is, civil and political rights. Those obligations extend equally to secondgeneration economic, social, and cultural rights.132

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On environmental protection, the Norms prescribe that TNCs shall carry out their activities in accordance with both the national laws, regulations, and administrative practices of their host countries, and international law encompassed in relevant international agreements, principles, objectives, responsibilities, and standards relating to the environment, human rights, public health and safety, bioethics, and the precautionary principle.133 In a variety of ways, the Norms set themselves apart from previous international regulatory efforts, whether by the UN or other multilateral organizations. Although the Norms are as yet inchoate in the sense of having not been formally adopted by the UN, they represent the first comprehensive attempt to place directly and explicitly binding social obligations on corporations under international law.134 They are thus the first non-voluntary regulatory initiatives accepted by an international body, the UN Sub-Commission.135 The Norms attempt to influence the corporate governance culture of TNCs by requiring, as an initial implementation step, each TNC to adopt, disseminate, and implement its internal rules of operation in compliance with the Norms.136 To accomplish this, TNCs are required to report periodically on, and to take measures aimed at, implementing the Norms, including the application and incorporation of the Norms in their contracts or other arrangements with contractors, subcontractors, suppliers, licensees, distributors, and all natural or legal persons with whom they enter into contract or agreement.137 Perhaps more importantly, the Norms provide a clear platform for monitoring and evaluating compliance. TNCs’ compliance with, and application of, the Norms is to be subjected to periodic monitoring and verification by the UN and other international and national mechanisms.138 The monitoring, which shall be transparent and independent, is required to take into account input from a variety of stakeholders including NGOs.139 The Norms also expect TNCs to conduct their own internal periodic evaluations concerning the impact of their activities on human rights.140 As well, the Norms cover a wider spectrum of addressees than previous international regulatory instruments. They are addressed not only to TNCs but equally to ‘other business enterprises’ irrespective of the nature of their domestic or international activities.141 Thus, the security firms or mercenaries often employed by extractive TNCs, to provide security for their operations in Africa and other parts of the developing world, fall within the ambit of the Norms. And unlike some previous

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multilateral regulatory efforts, the Norms were arrived at after extensive consultations with, and participation of, a wide range of stakeholders including governments, NGOs, business, labour, and academia.142 NGOs and other interested parties were allowed to make representations at the Working Group sessions of the UN Sub-Commission and had their views taken into account.143 Finally, the Norms formulate a platform for their interpretation and enforcement.144 They prescribe a regime of sanctions such as the award of reparation and other judicial remedies to those whose rights are breached by business.145 Under the Norms, TNCs are to provide prompt, effective, and adequate reparation to persons, entities, and communities adversely affected by their failures to comply with the Norms, through such means as restitution, compensation, and rehabilitation for damage done or property taken.146 It is, however, unclear which body has responsibility for determining what is adequate reparation. This uncertainty stems from the Norms’ failure to create or prescribe a civil adjudicatory body to resolve disputes arising from or related to it. Through deductive reasoning and interpretation, however, it is arguable that both national courts and international tribunals have that responsibility. Paragraph 18 of the Norms provides that ‘[i]n connection with determining damages, in regard to criminal sanctions, and in all other respects, these Norms shall be applied by national courts and/or international tribunals, pursuant to national and international law.’147 The phrase ‘all other respects’ includes the determination of civil damages, reparation, compensation, and sanctions. This uncertainty could easily have been cured by better draftsmanship of paragraph 18 to include explicit mention of civil sanctions.148 Legal Status of the Norms. The Norms are couched in an obligatory language. However, they currently have no legal status under international law because they have yet to be adopted by the UN General Assembly. The UN Sub-Commission is not a lawmaking body under international law. Viewed in the purely legalistic sense, therefore, the Norms are proposals or a wish list by the UN Sub-Commission with no binding force of law.149 They could thus be properly characterized at the moment as ‘soft law,’ albeit a lot more comprehensive than previous attempts at international regulation.150 That said, the Norms are not completely devoid of legal authority or status under international law because, as is made clear in the preamble, they are derived largely from, and restate the legal principles in, existing international instru-

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ments. They also acknowledge the principles established in previous multilateral regulatory mechanisms such as the ILO Declarations, the OECD Guidelines, and the Global Compact. Too much, however, should not be made of the Norms’ current lack of binding force. Legal obligations, though significant, are not the only means to secure corporate compliance with social standards. This perhaps explains the Norms’ attempt to persuade corporations to internalize their provisions into their decision-making process and culture.151 It is equally unclear as yet how the power dynamics – the protection of strategic interests, and influence-peddling – apparent in the international system would impact on the adoption and enforcement of the Norms. If previous attitudes are anything to go by, there is reason to suspect that the economically advanced countries and TNCs themselves might not be enthusiastic about the Norms.152 Neither would the developing countries given the strategic economic importance of TNCs to these countries. Indeed, TNCs are likely to use their enormous financial and technological power to dissuade developing countries from giving their blessing to the Norms. It is thus unlikely that the Norms would be adopted in their present form by the UN, if at all.153 Future Utility of the Norms. In one significant respect, the Norms (when adopted by the UN) have the potential to make a substantial contribution to corporate accountability. Their integrated and multifaceted implementation strategies – the Norms envisage a plethora of implementation bodies154 – may conduce to the coalescing of the Norms into universal standards of social accountability for business. This would be especially so if, as envisaged, extant national and international regulatory regimes including the ILO, OECD, the World Bank, and the World Trade Organization begin to use the Norms as the yardstick for setting standards and for judging social compliance.155 Indeed, apart from the obligations they impose on TNCs, the Norms have a reflexive function; they are expected to provide standards upon which business may regulate itself,156 and by which NGOs can monitor and evaluate corporate compliance.157 They are also intended to be used as a basis for trade union negotiations with corporate employers and to serve as benchmarks for ethical investment, patronage, and purchase decisions by investors, lenders, and consumers.158 In addition, the Norms are to be used by governments across the globe as a model for legislation or administrative provisions relating to the regulation of business by labour inspectorates, ombudspersons, national human rights com-

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missions, or other national human rights mechanisms.159 The Norms may thus grow through widespread usage to become a global reference point for corporate accountability. Perhaps most importantly, the Norms may, despite their soft law status, conduce in some ways to the future empowerment of the civil society. As mentioned previously, the implementation of the Norms envisages the participation of a variety of stakeholders160 including NGOs, workers, customers, governments, host and neighbouring communities, indigenous peoples, and other individuals or groups that are affected by the activities of TNCs, whether directly or indirectly.161 These stakeholders are authorized to file complaints of violation against TNCs and other business enterprises.162 Indeed, by empowering a variety of stakeholders the Norms could potentially provide the impetus for a reshaping of the power inequities apparent in the international system. Normative Conflict between the Global Compact and the Norms. As we have seen, the GC and the Norms sprout from the UN system. However, while they both aim at enhancing corporate accountability, they appear to differ on the ways and means to that end. Although the GC declares that it is not a regulatory instrument, it essentially adopts a self-reflexive stance and looks to the corporation to cultivate and disseminate good business practices. In contrast, the Norms adopt a public regulatory platform and prescribe a binding international legal regime of corporate accountability. It is of course impossible to know at the moment what impact, if any, the apparent conflict in regulatory philosophy will have on either or both normative orders. However, it is reasonable to speculate that the conflict may impact either or both mechanisms one way or another. For example, the Norms may eventually not be adopted by the UN because some of its powerful memberstates are likely to prefer the self-regulatory stance of the GC in order to protect the interests of their TNCs. The GC may, in effect, be the pretext on which some nations may refuse to adopt the Norms at the UN. On the other hand, if the Norms are adopted by the UN, this would most likely signal the demise of the GC. The adoption of the Norms could render the GC irrelevant if not meaningless, because corporations would be hard-pressed to accord the GC any consideration or respect, knowing full well that if they are to avoid liability what really counts is their observance of the Norms, rather than participation in the GC. Although the potential for such negative impact and conflict exists,

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it is possible for the GC and the Norms to complement and enhance each other. This is probably why the conveners of the GC argue that, although it is not a substitute for regulation, it complements regulatory initiatives because, when combined, both the GC and other regulatory mechanisms could ‘provide powerful impetus in encouraging the wide adoption of responsible corporate citizenship.’163 Adherence to the GC may thus ultimately conduce to the observance of the Norms because the dialogic process of the GC could afford corporations opportunities to discuss, learn and disseminate how best to observe the Norms. international labour organization The ILO has two specific instruments touching on the relationship between TNCs and their employees. The first, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy164 (ILO Tripartite Declaration), aims at encouraging TNCs to minimize and resolve the adverse social effects to which their activities may give rise particularly in regard to their employees.165 It enumerates general and specific policies on employment and conditions at work with which TNCs are urged to comply.166 Specifically, the ILO Tripartite Declaration urges TNCs to maintain the highest standards of safety and health in conformity with national requirements of their host countries and to make available to their employees information on the safety and health hazards associated with their operations, products, and processes.167 The second, the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up,168 urges ILO member-states (including those that have yet to ratify the relevant ILO conventions) to respect, promote, and realize, in good faith and in accordance with the ILO constitution, the fundamental rights to freedom of association and to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour; and the elimination of discrimination in respect of employment and occupation.169 The principles contained in these instruments have been characterized as a reference point for best practices.170 However, the downside is that they are unenforceable. In fact, although both instruments have a procedure for the examination of disputes and a follow-up process,171 they do not have enforcement mechanisms and sanctions.172 The Declaration on Fundamental Principles and Rights at Work is voluntary and promotional rather than regulatory.173 Furthermore, it is not specifically addressed to TNCs but rather ILO member-states. The effectiveness of

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both instruments is essentially dependent on the good-faith commitment of member-states. Now, because of the strategic economic importance of TNCs to states, ILO member-states may not be enthusiastic about ensuring that TNCs comply with ILO principles, particularly where they are perceived as encumbrances on business. The unenforceability of both declarations and the lack of sanctions for non-compliance render them ineffective even as against parties that have ratified the ILO Convention.174 However, a silver lining may be found in the ‘Follow-Up’ procedure under the Declaration on Fundamental Principles and Rights at Work. Because it allows for annual review of compliance efforts by ILO member countries (not a review of compliance by TNCs) that have yet to ratify all of the ILO’s fundamental conventions – for example, the United States – it may serve to highlight a country’s non-compliance and thus bring global shame upon it.175 But at best, such a shaming exercise would amount to mere barking, as opposed to biting, at non-complying countries and, by extension, TNCs based in these countries. Be that as it may, the ILO mechanisms could be strengthened by placing enforceable remedies such as fines at the ILO’s disposal and giving it the legal teeth to bite at non-complying nations.176 The OECD Guidelines for Multinational Enterprises The OECD Guidelines for Multinational Enterprises (Guidelines), first established in 1976177 and substantially revised in 2000,178 represent a multilateral effort by OECD-adhering countries to influence TNCs to develop responsible business culture. Meant to apply to the conduct of business both inside and outside the OECD,179 the Guidelines are recommendations that TNCs should respect the human rights of those affected by their activities, in tandem with the host government’s international obligations and commitments.180 The Guidelines urge TNCs to contribute to the effective abolition of child labour and the elimination of all forms of forced or compulsory labour; respect the right of their employees to form and participate in trade unions; refrain from discriminating against employees on grounds of race, colour, sex, religion, political opinion, national extraction, or social origin; and to take adequate steps to ensure occupational health and safety in their operations.181 In relation to the environment, the Guidelines recommend that TNCs take due account of the need to protect the environment and public

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health and safety and thus should generally conduct their business in a manner conducive to the wider goal of sustainable development.182 Towards this end, TNCs should establish and maintain a system of environmental management appropriate to the enterprise, including collection and evaluation of adequate and timely information regarding the environmental, health, and safety impacts of their activities; the establishment of measurable environmental performance objectives; and the regular monitoring and verification of progress in regard to these objectives.183 TNCs are also to provide the public and their employees with adequate and timely information on potential environmental, health, and safety impacts of their activities including reporting on progress in improving environmental performance, and to engage in adequate and timely communication and consultation with the communities directly affected by their environmental, health, and safety policies.184 In addition, TNCs are to maintain contingency plans for preventing, mitigating, and controlling serious environmental and health damage that may result from their operations and to continually seek to improve their environmental performance by encouraging, where appropriate, the adoption of suitable technologies and operating procedures.185 Although the Guidelines represent a commendable effort on the part of the OECD to promote responsible corporate conduct, fundamental questions exist as to the appropriateness of the OECD as a mechanism for regulating corporate conduct in non-member countries. Some of these questions revolve around issues of sovereignty. But more importantly, the OECD’s aims do not entirely support regulation of the social conduct of TNCs. The avowed aim of the OECD is to serve the economic interests of it member-states. Thus, as would be expected, its members’ interests prevail over the interests of non-members. Now, because the effective regulation of TNCs (predominantly OECD entities) in non-member countries would materially affect the economic interests of the TNCs (at least in the short term), and by extension those of OECD member-states, the OECD cannot in all honesty be said to be a conducive or ideal platform for international regulation.186 Besides, the very same TNCs whose conduct the Guidelines seek to influence are known to be influential in OECD policy-making process.187 It is not surprising then that the Guidelines are ‘remarkably weak’ in comparison with the OECD financial instruments, particularly those on trade and investment liberalization, which appear to have been designed with a view to promoting the economic interests of TNCs.188 The Guidelines must thus be seen for what they truly are. They are

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a pre-emptive attempt by the developed countries to undercut the clamour by developing countries (which has waned considerably in recent years), organized labour, and NGOs for the international regulation of TNCs and thus to prevent stringent international regulation.189 The Guidelines are not regulatory instruments but rather mere recommendations whose observation is voluntary and not legally enforceable.190 Hence they do not have substantive mechanisms for enforcing or monitoring compliance,191 although there are internal mechanisms for handling enquiries and clarifying matters covered by the Guidelines.192 The language of the Guidelines is also largely precatory.193 Thus, for the most part, the Guidelines are broad, vague, and lack specificity and substance. Their ambit is equally effectively limited by the use of clawback phrases such as the exhortation to TNCs to establish ‘a system of environmental management appropriate to the enterprise.’194 The Guidelines also seem to advocate relativism in the observation of the principles they espouse. They urge compliance not within the OECD framework but rather within the framework of applicable laws, practices, and standards in the host countries.195 This is significant because applicable laws, practices, and standards in host developing countries are often lower than those in OECD countries. Perhaps this approach may have been adopted in deference to the sovereignty of individual countries, a point that I will briefly touch on shortly. Be that as it may, the implication of the Guidelines’ relativist posture is that TNCs are not obligated to observe the principles beyond the standards obtainable in the host countries. This is counterproductive because host developing states often have lax laws, a position which TNCs themselves often vigorously promote. There is, however, a downside to criticism of the OECD’s relativist position. The adoption of a universalist approach would equally have attracted problems, particularly in regard to sovereignty. A universalist approach would have meant the OECD is prescribing standards for conduct in non-member countries over which it has no jurisdiction. It would equally have made the OECD susceptible to the charge of attempting to export Western cultural ideologies or hegemony to the developing host countries. But much as the universalist position is susceptible to criticism, there are issues or concerns that call for a universal approach because they command universal acceptance. Breach of such universally accepted concerns often attracts universal condemnation. Arguably, workplace health and safety is a matter of universal concern that ought to require a universal approach. An unsafe work environ-

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ment would remain so, irrespective of the lex situs of the corporation. The fact that the laws of the host developing country – which the OECD Guidelines rely on – permit some practices in the workplace does not necessarily mean they are safe. Thus, the OECD ought to have adopted a universal approach at least in respect to its principles on workplace health and safety. In certain significant respects, however, the Guidelines are worthy of close attention. The Guidelines have a formidable political force behind them because they constitute a declaration of public policy by OECD governments.196 Moreover, the spirit of public consultation and participation embodied in them197 may, where effectively observed, conduce to the nurturing of cooperation and trust between enterprises and civil society, cooperation without which the attainment of many of the objectives of the Guidelines is questionable. That said, there is little evidence that the Guidelines have had any positive impact on the corporate culture of OECD-based TNCs. This is evident in the reluctance of TNCs to report compliance with the Guidelines in their annual reports.198 An Appraisal of the Initiatives As should be evident from the foregoing discussion, some common threads run through the plethora of regulatory mechanisms in the international arena. They are voluntary in nature, precatory to a large degree, and lack enforcement mechanisms and sanctions. They also adopt a one-model-fits-all approach in the sense that they assume that their prescriptions are universally applicable to, and appropriate for, all forms of industry. It comes as no surprise therefore that the initiatives have largely failed to control the excesses of TNCs. At best, they leave no more than an ephemeral ripple on the rapidly expanding sea of corporate irresponsibility, and thus provide confirmation for the proposition in chapter 2 that, while market mechanisms such as self-regulation are important, they alone are not enough to regulate TNCs. Given their deficiencies and ineffectiveness, why does the international community seem content with these initiatives? The answer might be multifaceted, but a great deal of it is connected with the power imbalance that pervades the international system. TNCs and their home (developed) state governments have used their power and influence to thwart attempts to place binding international law duties on TNCs.199 This position is unlikely to change any time soon. As one commentator has noted, the ‘developed countries, whose nationals control

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a large majority of the world’s TNCs, are unlikely to advance support for [a binding international] code because it would run contrary to their short-term economic interests.’200 It goes without saying that, unless proponents of an international code for corporate behaviour gain the support of governments of the developed countries, such a code may never come on stream. To make matters worse, even the developing countries that were once avid proponents of a binding international code of conduct for TNCs have long lost interest in such a code, in part because of their fear that it could discourage foreign direct investment by TNCs.201 Given that these countries are in dire need of investment, it is doubtful that they will resurrect their clamour for a binding code in the future. For now, the international system, which is dominated and controlled by governments of the developed countries, seem content with a regime of self-regulation. The current proliferation of self-regulation in international law, which finds expression in the extant multilateral regulatory initiatives analysed above, reveals a fundamentally important point. It gives credence to the notion that a sufficiently empowered civil society has the potential to redress and probably reduce the power imbalance between business and society to a level that may conduce to corporate virtue. These international regulatory mechanisms, though voluntarily initiated by the respective multilateral organizations, are in actual fact the indirect product of pressures from civil society. They were initiated not because these bodies were necessarily concerned about corporate social accountability, but rather as responses to public pressure and in order to undercut civil society demands for mandatory regulation. In other words, most of the mechanisms are aimed at forestalling mandatory social standards at the international level. Perhaps more importantly, an emerging but yet inchoate corporate governance paradigm shift lurks beneath these regulatory initiatives. To some extent, it now seems to be accepted, though for differing reasons and reluctantly by neo-liberal ideologues, that some form of corporate social accountability is desirable. The question is no longer whether corporations should be socially accountable, but rather which is the most appropriate mode for achieving social accountability: public regulation or self-regulation. Here again, the fact that the intensive campaigns waged by civil society have played a dominant part in the emerging shift in the corporate governance paradigm is a strong pointer to the possibility that an empowered civil society may effectively checkmate or at least reduce incidents of corporate irresponsibility.

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Finally, although current international regulatory initiatives blow a muted trumpet as regards corporate accountability for international social deviance, they may, in other respects, serve a useful social purpose. While not binding on TNCs, social standards prescribed by multilateral regulatory initiatives may serve as the yardstick with which the social performance of corporations is measured by the buying and investing public. In this sense, internationally prescribed standards may act as catalysts for corporate accountability. Can International Criminal Law Curb Corporate Complicity in Armed Conflicts, Wars, and Gross Human Rights Violations in Africa? As mentioned in the introduction to this book, the regulation of social conduct – human rights and environmental practices – of extractive TNCs in Africa is its focus. Thus, the criminal conduct of TNCs is, in the technical sense, outside its mandate. That said, aspects of social conduct, be it that of the individual or corporation, may border on criminality. For example, conduct amounting to gross violation of human rights, especially if carried out in a systematic manner in a war or conflict setting, is itself regarded as a crime against humanity under international law. Therefore, my effort in this chapter would be incomplete without a brief consideration of the culpability – or perhaps, more appropriately, the lack of culpability – of corporate entities for such international crimes. As is evident from the preceding section, international law is unsatisfactory in regard to the regulation of the social conduct of TNCs. In fact, ‘the absence of a transparent and effective international regulation system’ enables ‘many foreign commercial operations ... to conduct business with a near total disregard for human rights, long-term development or ecological sustainability in’ many African countries.202 As bad as this position is, international law, quite regrettably, takes a turn for the worse in regard to corporate complicity in international crimes. International law treats natural persons differently than corporations, insomuch as responsibility for international crimes is concerned, even though both have a capacity to be complicit in such crimes. While it rightly holds natural persons responsible for genocide, war crimes, and crimes against humanity, crimes that in themselves amount to gross or serious violations of human rights, corporations that commit, or are complicit in, these crimes are excluded from the ambit and reach of criminal sanctions under international law.

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Although some have argued that an international regime of corporate criminal responsibility can be inferred from the emerging body of ‘international treaties concerned with the criminalization of the acts of legal persons,’ and thus that corporations that commit international crimes ‘may be tried, in some circumstances, outside the jurisdiction where the crime took place,’203 the fact remains that there is no explicit international law regime for corporate criminal responsibility for crimes against humanity. This position has most recently been reaffirmed by the international community through instruments such as the Rome Statute of the International Criminal Court (Article 25(1));204 the Statute of the International Tribunal for Former Yugoslavia (Article 6);205 and the Statute of the International Tribunal for Rwanda (Article 5).206 These international statutes specify that the respective tribunals ‘shall have jurisdiction over natural persons,’207 thus effectively excluding corporate entities from prosecution for the crimes specified in the statutes. The unfortunate implication is that, where a corporation, whether overtly or by surreptitious means, participates in armed conflicts and commits crimes against humanity in the process, or provides arms, financial, or other material backing to an insurgent group known to it to be involved in the commission of war crimes or crimes against humanity in return for concessions to exploit resources (as is sometimes the case in Africa),208 the corporation cannot be held liable under these statutes. This is an unacceptable position, not only because it cuts back on the modest progress hitherto recorded in the area of corporate criminal responsibility at the international level,209 but also because, like individual human beings or groups of individuals, corporations (particularly TNCs) have the capacity to commit, or to become complicit in, international crimes as accomplices, whether before or after the acts constituting the crimes. As we saw in chapter 1, some extractive TNCs have in the past provided funding and arms to insurgent groups in Africa in return for economic concessions and favours. And as often happens, these groups are almost always engaged in concerted acts of gross violence and brutality against local populations. In the heyday of Charles Taylor’s dictatorship in Liberia, for example, some logging TNCs were known to supply and facilitate the importation and delivery of arms to him and his ruthless militia, who were alleged to have perpetuated gross violence against the local population.210 Yet, while Taylor has rightly been indicted for crimes against humanity before the UN Special Court for Sierra Leone,211 corporate bodies that financed both his brutal rebellion and dictatorship are conspicuously let off the

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hook by the international community. Thus today, Liberians remain traumatized by Taylor’s brutality while his corporate comrades-inarms are quietly enjoying the ‘blood money’ they scooped from Liberia. While corporations can be prosecuted under domestic criminal law for these same acts, African countries seldom, if at all, prosecute corporations. Even then there are practical problems in domestically prosecuting TNCs in Africa. The parent corporations are often based abroad, and individual countries may not have the means to compel their attendance at trial. Besides, the ‘war economies’ in which these acts are perpetuated are often dysfunctional and lack the very essentials of statehood, including a viable judicial system. This is probably why some observers have concluded that an international regulatory framework is essential to dissuade corporations ‘involved in illicit and unscrupulous business activities in’ Africa’s ‘war economies’ from ‘causing further conflict’ and preventing Africa’s ‘economic and political development.’212 Although these international criminal statutes leave much to be desired, they possess a silver lining that may deter corporate involvement in war crimes and crimes against humanity. Corporate officers as ‘natural persons’are individually responsible under these statutes if they commit, or are complicit in, such crimes.213 Indeed, it may conceptually be possible to prosecute corporate officers even where they committed the crimes in the course of the corporation’s business. The prosecution of corporate officers for such crimes would certainly attract adverse publicity for the corporation. In turn, this may radically hurt the corporation’s profitability if not its viability. Rethinking the Status of Transnational Corporations in International Law The discussion in the preceding sections has highlighted the inadequacies of current international and multilateral efforts at regulating the conduct of TNCs. We have seen how the voluntary nature of extant international regulatory initiatives translates into their non-observance by TNCs. All in all, therefore, it is safe to conclude that voluntary regulatory mechanisms are insufficient and ineffective in regulating the global conduct of TNCs.214 Yet, remarkably, international law has remained adamant in its refusal to formally recognize the need for binding international rules for corporate conduct. That attitude best finds support (if not expression) in the dominant notion in international law that TNCs

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lack international personality and are thus not subjects of international law.215 This notion is revisited and challenged in this section. I argue that given the dynamics of current global economic and human relations, a fixed and unalterable regime of international law subjects – which the rules of subject determination under that realm of law have perpetuated – is inadequate to cater to the changing needs of society. Thus, it has become imperative not only to devise alternative approaches to the conventional rules for subject determination in international law, but also to place appropriate international law duties on TNCs. Transnational Corporations Ought to Be Subjects of International Law The argument that TNCs are not international personalities or subjects of international law has held sway in international practice till this moment, largely because of the widespread and uncritical acceptance of the theoretical validity of its foundation: the positivist’s postulation that international law, as a legal system, comprises only ‘subjects’ and ‘objects.’216 But emergent global realities are gradually chipping away at both the soul and normative foundation of this position. Human rights scholars, activists, and NGOs alike believe and argue passionately that, given modern global economic realities that have seen corporate intrusion into spheres traditionally thought to be the exclusive preserve of the state, for example, prison services and water supply, international law ought properly to be applicable to private corporate actors. In other words, the relevant domain of international law should no longer be the community of nations, but rather ‘the community of individuals in the human family.’217 Hence, some have argued that the corporation is a subject of international law and thus ought to bear duties under international law to observe international social standards.218 This argument is supportable on several grounds. international law routinely applies to private actors The positivistic argument that private actors (and, in our case, corporations) cannot bear duties under international law for lack of status as ‘subjects’ is directly contradicted by certain historical international praxis and precedents. Indeed, international law has historically reached beyond the confines of the state to impute duties and liability on non-state actors. For example, there are certain established customary norms of international law – jus cogens – designed to apply to state

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and non-state actors. The crimes of genocide,219 slavery,220 and piracy221 are prime examples. In fact, in the case of piracy, the individual pirate – a non-state actor – is the major focus of liability and is generally considered hostis humani generis – an enemy of humankind.222 In similar manner, some international treaties on environmental pollution impose direct liability on individuals and corporate entities.223 Treaties and covenants sometimes confer legal rights on non-state entities that they can enforce before the appropriate international tribunal without intercession by their home states.224 Individuals and corporations often enjoy such rights under specific international human rights covenants such as the African Charter on Human and Peoples’ Rights225 and the European Convention on Human Rights.226 Thus, individuals and corporations may be regarded as subjects of international law for the limited purposes of these covenants.227 As one author puts it, the recognition of the ‘individual’ as a subject of international law ‘not only refers to individual human beings but also to juridical persons, that is, to entities endowed with legal personality under national or international law.’228 Admittedly, these covenants do not specifically confer the status of ‘subjects’ on corporations. However, by granting them specific rights the covenants ‘clearly and necessarily’ imply that corporations are liable for breach of the covenants as ‘subjects.’229 In sum, if individuals and corporations are subjects of international law for the purpose of enjoyment of rights under specific human rights covenants, it stands to reason that they ought also to be subjects for the purpose of discharging some of the duties – such as the duty to observe the human rights of others – under those covenants. To hold otherwise would not only be theoretically perverse but would defy logic. An alternative, and some might say harsh, response is to strip corporations of their ‘human rights’ that represent an obstacle to regulation. Finally, the various, albeit largely futile, efforts made by the UN, OECD, and other multilateral bodies to regulate the conduct of TNCs along some international or regional standards demonstrate that, to some degree, the international community implicitly recognizes that international law is applicable to TNCs, even though, strictly speaking, TNCs are not regarded as its subjects. growing international power and influence of transnational corporations Aside from the above, the steady growth in the influence and power

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of TNCs in modern international relations and commerce directly calls into question the relevance of both the positivist criteria for subject determination under international law and the notion that TNCs are not subjects of international law.230 It will be argued here that, viewed against the backdrop of the de facto decline in the powers of states over TNCs, the monumental changes in the global economy that have thrust TNCs to the forefront in international relations, coupled with the enormous financial power of TNCs, the relevance of international law to the global behaviour of TNCs cannot seriously be disputed.231 Thus, rather than determine the status of TNCs in contemporary international law on the basis of criteria designed ages ago, it is more appropriate that the status be based on current realities, such as the capacity of TNCs to be effective players on the international plane, among other factors.232 In the context of current global economic and political realities, TNCs are, to all intents and purposes, ‘effective’ international personalities. Short of the enjoyment of sovereignty and diplomatic immunity, TNCs stand on much the same pedestal with governments, particularly those of the developing countries.233 As Andrew Clapham argues, TNCs have emerged as ‘new fragmented centres of power’ possessing and capable of exercising some unique powers akin to those of the state.234 Like states, TNCs have the practical capacity to exercise authority over, repress, or alienate individuals be they employees or members of host communities.235 They negotiate and enter into concession contracts and agreements with states,236 sometimes with greater bargaining powers than those states.237 They have status in international economic forums and exert tremendous influence over global economic policies, especially by participating directly or indirectly in the negotiation of trade agreements and international patent protections.238 They enjoy the benefits of international human rights as well as rights and privileges accruing from international financial and commercial adjudicatory mechanisms, such as those on arbitration.239 Under chapter 11 of the North American Free Trade Agreement, for example, corporations can pursue treaty claims against states in arbitration tribunals.240 In sum, TNCs have become lawmaking, or at the very least lawinfluencing, bodies on the international plane.241 TNCs are, for example, some of the driving forces behind what Gunther Teubner call the ‘global bukowina,’ that is, the law of the global economy.242 The international influence of TNCs is likely to increase in the foreseeable future because of a combination of factors: the universal triumph of capitalism; the ever-increasing economic power of TNCs; and the waning glo-

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bal opposition to TNCs’ operations on the part of governments all over the world. Indeed, the deplorable economic conditions in the developing world have transformed TNCs from despised entities to pretty brides whose courtship is heavily sought by these countries.243 Given these realities, it is only appropriate that TNCs be regarded as subjects of international law and that their conduct be governed in relevant circumstances by international law rules. inappropriateness of constricted or fixed rules of subject determination As mentioned previously, the formal denial of subject status to TNCs under international law is based on the notion that they do not satisfy the criteria conventionally employed to identify the subjects of international law. These criteria are fixed and have remained essentially the same throughout three centuries. This raises the question as to whether rules intentionally designed for periods in human development substantially and fundamentally different from current and emerging international realities are appropriate in today’s circumstances. Given modern international realities – e.g., the shrinking power of the state, the intrusion of private actors into areas hitherto exclusively preserved for the state – there is a grave danger in basing international legal personality on a fixed set of criteria. The rigidity inherent in extant rules perhaps explains the weakness and incapacity of international law to respond to the ever-changing nature of, and increasingly complex dynamics in, international relations, particularly in the social sphere. International law has progressed far beyond the confines of states. It has not only ‘come to involve virtually every aspect of human conduct, every kind of business transaction, and every type of social and cultural relationship that crosses national frontiers,’ it has equally ‘permeated every facet of international life.’244 Yet its rules remain fixed for the most part. A flexible regime of subject determination is a more attractive option if international law is to keep pace realistically with human development. While it is conceded that international law is largely governed and shaped by normative rules, these rules ought not to be, and indeed are not, unalterable.245 Another way of tackling the issue is to argue, as Rosalyn Higgins does persuasively, that contrary to positivistic postulations, international law may be more appropriately regarded as a decision-making process involving participants rather than subjects and objects.246 In this

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process, numerous (but not exclusive) participants such as individuals, groups, NGOs, governments, international organizations, TNCs, and so on, are continuously engaged in international decision-making through the assertion of value-based claims, whether they relate to power, wealth, prestige, or justice.247 Unlike fixed rules that hamper the participation of these groups in the international decision-making process, a flexible regime of subject determination is likely to enhance their participation. ‘Subject’ Paradigm in International Law: An Appraisal The discussion in the preceding pages can be summed up in these words: the needs of the international community at any given time ought to play a pivotal role in determining the proper subjects and bearers of duties in international law.248 And because ‘[a]n international legal process that fails to allow non-state actors to participate fully in the process cannot develop legal norms that are fully responsive to the needs of the international community,’249 a static normative order that is likely to be fostered by an unalterable regime of international law subjects is unsuitable for modern realities and exigencies that have seen the invasion of the public domain by private actors, particularly corporations. If international law is to cater adequately to the modern needs of the international community, then its state-centredness, justified as it was at the early stages of the Westphalian legal culture, must now be regarded as obsolete. Therefore, international law’s obsession with states as its primary subjects ought not be translated into a denial of international legal personality to TNCs.250 As Andrew Clapham suggests, there is a need for re-definition and adaptation of the public sphere to include power-wielding entities such as TNCs in view of the far-reaching international nature of their power, capabilities, and activities.251 In order to meet the current needs of the international community, TNCs ought to be seen as having ‘acquired some degree of international legal personality,’252 a status on which rights as well as duties – including human rights duties – can be predicated. International Law and the Impunity of Extractive Transnational Corporations in Africa The previous section noted the need to impose international law

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duties on TNCs. Stephen Ratner has argued that such duties should be imposed on business ‘both insofar as they cooperate with those actors whom international law already sees as the prime sources of abuses – states – and insofar as their activities infringe upon the human dignity of those with whom they have special ties.’253 However, much as one would wish for such a state of affairs, it is unlikely to be attained in the foreseeable future, given the global power inequalities between the developed North, whose governments are usually unflinching supporters and protectors of TNCs, on the one hand, and the impoverished South, which suffers the excesses of TNCs, on the other. While organized civil society, and indeed the general public in the developed countries, have tirelessly campaigned for responsible behaviour by TNCs, particularly as regards their operations in the developing world, none of the governments of the developed countries, home to the extractive TNCs that are ravaging Africa, has consciously sought, whether by way of legislation or executive policies, to prevent these TNCs from decimating Africa’s social stability. To the contrary, and as will be discussed in chapter 8, governments of these countries often actively promote self-regulation by TNCs, a regulatory model that has proved fundamentally unfruitful in the quest for corporate accountability. Besides, as noted earlier, the developing countries (and, in particular, African states) that were once advocates of international regulation of TNCs seem to have lost interest in that undertaking. Rather, African states now vigorously solicit and blindly compete for TNCs’ investment in the hope that foreign capital inflow will alleviate the acute poverty and unemployment pervading much of the African continent.254 Worse still, African governments quite often bend over backwards to accommodate, and indeed partake in, the social excesses and deviances of extractive TNCs, apparently because of their perceived importance to the economy. Overall, because international law prioritizes the interests of the dominant industrialized countries over the interests of others,255 it is doubtful that international law, controlled as it is by these powerful nations, can be of much help in regulating the socially destructive activities of extractive TNCs in Africa. It is not my intention here to sit in judgment of the international community or governments of the developed countries. Quite obviously, that is not the focus of this book. I draw attention to the failure of the international community to make the point that, while international law has a part to play in the regulation of Africa’s extractive industries, much should not be expected from it for now because TNCs (and, vicar-

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iously, the developed countries) derive tangible economic benefits from the current international regime. It leaves TNCs largely unregulated and governments of the developed countries are therefore unlikely to support any alteration of the status quo.256 Conclusion International law, as it currently stands, is woefully inadequate for the regulation of TNCs. For one thing, it places enormous faith in voluntary regulatory initiatives. For another, these initiatives have met with little, if any, success. And then there is the question of power imbalance in the international system, which has so far favoured TNCs. Notwithstanding these realities, a new, albeit unwitting, international order of corporate regulation is beginning to emerge. Spurred largely by pressure from the increasingly vocal civil society, discernible patterns of regulation are becoming noticeable at international fora. Voluntary regulation has become the vogue, and the cultivation and dissemination of best practices is being urged. The paradigm is shifting from the position that corporations ought to be free to do as they please to a regime that recognizes the need for responsible behaviour in the conduct of business. Encouraging as the signs are, they are far from a consensus. Serious impediments that are directly traceable to the increasing power of TNCs still lie in the way of international regulation. Perhaps a mandatory and binding international regime of corporate accountability, such as that envisaged by the UN Sub-Commission’s Norms, would help in curbing or limiting the social irresponsibility of TNCs in the developing world. But more than binding norms would be required to offset the irresponsibility of TNCs. As elaborated in chapter 9, civil society has to be empowered and enfranchised to meaningfully participate in the implementation of regulatory initiatives, particularly as regards their supervision and monitoring.

7 International Financial Institutions as Regulatory Mechanisms: The World Bank Group and the African Extractive Sector

As mentioned in chapter 2, global financial institutions constitute essential market institutions that may become influential in corporate regulation.1 In recognition of this fact, the international community has long affirmed that ‘[f]inancial institutions and development agencies, be they international or domestic, must coordinate their activities in order to promote sustainable development.’2 To this end, civil society (particularly in the North) has consistently exerted pressure on global financial institutions and governments to include social clauses in trade and investment agreements. The idea is that global trade and social development are neither mutually exclusive nor contradictory and, thus, both must be linked and enhanced simultaneously. Three global institutions – the World Bank Group (WBG), the International Monetary Fund, and the World Trade Organization – have particularly been looked upon to project and promote such an inclusive praxis of global trade and development.3 Unfortunately, these institutions are by design biased in favour of economic growth and development. Although it would have been necessary in some other setting to consider what role, if any, all of these institutions have played in the regulation of TNCs, I have restricted my analysis in this chapter to the WBG because it is actively engaged in the financing of extractive TNCs in Africa. Apart from its visible involvement in public-sector project financing through the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the WBG provides financial backing for private-sector projects and investments in the developing world through its affiliates, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee

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Agency (MIGA). Specifically, while the IFC provides financial support for private investment in the African extractive sector through loans, equity participation, and other financial instruments, MIGA provides insurance guarantees for private investors in the sector. Both institutions have supported extractive projects in at least eighteen African countries.4 As financiers and insurers, the IFC and MIGA undoubtedly have some influence and leverage over the TNCs to whom they provide financial support, a leverage that can be utilized to promote corporate accountability.5 In this sense, these institutions represent aspects of what I referred to in chapter 2 as plural forms of regulation, and, in particular, they constitute a potential part of global legal pluralism. The general picture that will hopefully be conveyed in this chapter is that, although the WBG has made strenuous efforts to promote corporate accountability in the African extractive sector, these efforts have failed substantially because of its institutional limitations. The chapter begins with a brief analysis of the relevant social safeguard policies of the WBG, highlighting both their substance and deficiencies. It suggests that, aside from those deficiencies, the WBG’s institutional limitations have translated into the non-enforcement of its safeguard policies in Africa. The result is the prevalence of human rights violations and environmental degradation in and around many of the extractive projects financed by the WBG in the continent. The Social Safeguard Policies of the World Bank Group Generally speaking, the social safeguard policies and benchmarks of the IFC and MIGA are harmonized with those of other entities in the WBG – the IBRD and the IDA – although adapted to suit the private-sector nature of their business.6 In particular, the IFC’s and MIGA’s policies on environmental assessment, indigenous peoples, and involuntary resettlement7 are adaptations of the World Bank Operational Manual.8 Both entities also apply the WBG’s Pollution Prevention and Abatement Handbook.9 Environmental Guidelines The general policy of both the IFC and MIGA is that projects in which they are involved must be executed in an environmentally and socially responsible manner and in accordance with their environmental, social,

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and disclosure policies.10 Prospective IFC/MIGA borrowers and clients are required to submit an assessment of the environmental impact of the intended project, taking into account issues such as biodiversity conservation, human health and safety, social aspects including involuntary resettlement, indigenous peoples, and cultural heritage.11 Borrowers and clients must also put in place a social and environmental management system commensurate with the project’s risks and impacts, including monitoring and reporting of implementation.12 In addition, they are to avoid or minimize pollution from project activities, and where it occurs, to abate it.13 Both the IFC and MIGA have sector-specific guidelines that prescribe environmental best practices for oil and gas development, including flaring, emissions, effluents, and hazardous wastes.14 As well, they require the mining sector to comply with a set of rules relating to the disposal of tailings, liquid effluents, ambient air quality, erosion and sediment control, mine reclamation, and disposal of hazardous waste.15 To ensure compliance with these requirements, both the IFC and MIGA pledge to conduct social and environmental review of proposed projects diligently, and to monitor their clients’ social and environmental performance.16 The IFC and MIGA may decline to support an extractive project if, upon their due diligence assessment of the project, ‘the balance of benefits and risks is not acceptable.’17 And in the case of the MIGA, non-compliance with its environmental guidelines may lead to cancellation of the insurance guarantee.18 Human Displacement and Involuntary Resettlement The WBG acknowledges that human displacement may cause severe long-term economic, social, and environmental hardship.19 Hence, it urges its clients to avoid or minimize human displacement wherever feasible by exploring all viable alternative approaches to project designs.20 Where human displacement is unavoidable, borrowers are urged to prepare a resettlement plan that spells out measures they intend to take to ensure that displaced persons are informed of their options and rights pertaining to the resettlement, and are consulted, offered choices, and provided with technically and economically feasible resettlement alternatives as well as prompt, effective, and full compensation for losses of assets attributable directly to the project.21 The WBG’s involuntary resettlement policy appears to condone the involuntary or forced displacement and resettlement of local communi-

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ties.22 In fact, while it strives to cushion and mitigate the adverse effects of involuntary human displacement, the WBG funds extractive projects even where host communities are involuntarily displaced. Moreover, the policies are not always implemented in a manner that actually improves the lot of displaced persons. To the contrary, and as acknowledged by the WBG’s Environment Department, sometimes ‘actual resettlement operations and outcomes are not consistent with the standards defined and demanded by the Bank’s policy.’23 Hence, a number of involuntarily resettled persons have ‘ended up worse off.’24 However, in spite of this acknowledgment, the WBG has failed to ameliorate the hardship caused to displaced persons by its financially backed projects and tends, instead, to turn a blind eye to their sufferings.25 The WBG declares that the development process must foster full respect for the dignity, human rights, and cultural uniqueness of indigenous peoples.26 Borrowers must therefore engage in free, prior, and informed consultation with indigenous peoples, and provide them with all relevant information about the project, including its potential adverse effects.27 To this end, borrowers are required to prepare an Indigenous Peoples Plan (IPP), which, among several other prerequisites, must provide culturally appropriate social and economic benefits for the indigenous people concerned.28 The borrower’s obligation to faithfully implement the IPP and to resettle displaced persons in accordance with the resettlement plan is incorporated into, and reflected in, the project or loan agreement between the Bank and the borrower.29 Thus, the obligation is contractually binding on the borrower. However, because the indigenous peoples and displaced persons are not parties to the contract, only the WBG can legally enforce, or seek remedies for breach of, the obligation against the borrower. Workplace Health and Safety The IFC and MIGA evaluate occupational health and safety on the basis of internationally recognized practices.30 The IFC and MIGA have general benchmarks31 and sector-specific rules32 relating to the planning, implementation, and monitoring of workplace safety. They require borrowers and other clients in the extractive industries to be proactive by taking preventive measures to identify, eliminate, or control workrelated risks and hazards.33 Borrowers and clients are to observe all four core ILO labour rights: freedom of association and collective bargaining; freedom from forced labour; freedom from child labour; and freedom

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from discrimination.34 They must also ensure that their service providers, contractors, and subcontractors have workplace systems that meet the labour obligations and occupational health and safety obligations of the borrowers themselves.35 However, although the IFC and MIGA prohibit their clients from employing forced labour, they permit the employment of children provided it is not economically exploitative, or hazardous, or harmful to the child’s overall development.36 Understandably, the IFC and MIGA’s position on child labour may have been informed by the social risk of forcing child labourers to turn from organized employment to more harmful situations such as prostitution and crime.37 However, caution must be exercised in implementing the policy because it runs the risk of encouraging the employment of children in the developing world, and by extension their economic exploitation. Even where child labour is not harmful in the physical sense, it may well be emotionally and psychologically so, a fact which the IFC and MIGA admit.38 To compound the problem, harm done by child labour may not be apparent until later stages of the child’s development, by which time it may be too late to undertake remedial measures. Some Pertinent Observations on the Policies Given their considerable improvement in recent years, aspects of the WBG’s social safeguard policies, if successfully implemented, may conduce to the protection of the environment, and the promotion of human rights and human dignity. For example, while the WBG did not hitherto ‘systematically consider the broader human rights and labor rights issues associated with extractive projects,’39 the IFC and MIGA now require clients to comply with specific human and labour rights standards.40 Although the policy shift is commendable, the WBG can hardly be said to be worker friendly, given its neo-liberal economic policy stance, which, as discussed below, it stoutly and uncompromisingly promotes. It often undermines labour rights in the developing countries by encouraging them to liberalize employment laws, reduce minimum wages, and replace collective bargaining with individual employment contracts.41 Implementation of the World Bank’s Social Safeguard Policies in Africa As mentioned previously, the IFC and MIGA are major financiers and

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insurers of extractive projects in Africa. As of June 2006, 41 per cent and 23 per cent of the MIGA’s insurance guarantees for the oil and gas sector and mining sector, respectively, were for projects in sub-Saharan Africa.42 In fact, at this moment the MIGA is supporting thirteen extractive projects in Africa.43 For its part, more than 30 per cent of the IFC’s overall investment in the extractive industries since its inception has been in Africa.44 A recurring theme in many of these projects is the non-compliance with the WBG’s social safeguard policies, both by the WBG itself and by its corporate borrowers and clients. Nowhere is this more evident than the Chad-Cameroon Petroleum Development and Pipeline Project (Chad-Cameroon Project), which is briefly examined here. The Chad-Cameroon Petroleum Development and Pipeline Project: A Case Study in Non-Compliance The Chad-Cameroon Project is jointly financed by the IFC, IBRD, IDA, and the European Investment Bank acting in partnership with ExxonMobil (Esso), Chevron, and Petronas Corporation of Malaysia.45 While the three private project sponsors self-financed their participation in the project, the IFC invested a US$100 million ‘loan for its own account and a $100 million loan syndicated to over 15 commercial banks.’46 Interestingly, the IBRD granted loans to Chad and Cameroon not only on the basis of an agreement between it and the two countries, but also on the terms and conditions set forth in the ‘Project Performance Agreements’ between the bank and the private sponsors of the project.47 These agreements oblige ExxonMobil, Chevron, and Petronas to observe the WBG social safeguard policies in the execution and implementation of the project.48 The Chad-Cameroon Project has recently developed oilfields in the southern parts of Chad, a poverty stricken country held hostage for much of its modern existence by despotic regimes. The project is regarded as the largest energy infrastructure development in Africa (at an estimated cost of US$3.7 billion), and it aims to drill three hundred oil wells in the Doba region of southern Chad.49 Because Chad is a landlocked country, the project has also ambitiously constructed more than 1,100 kilometres of pipelines to transport oil from the oilfields in Chad to the coast of Cameroon for export.50 The potential economic benefits of the project to Chad and Cameroon have been touted as the major reason for the WBG’s involvement in

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it.51 The economic benefits to Chad and Cameroon are expected to be US$1.677 billion and US$505 million, respectively, over a twenty-eightyear period.52 But some observers suspect that Chad may have been shortchanged in the revenue sharing by the oil consortium considering ‘the magnitude of the project.’53 The potential economic benefits notwithstanding, Chad is poised to reap a net loss from the project, given the magnitude of adverse social and environmental effects on local host communities. This is especially so in view of the wide geographical spread of the project. The inadequacies of the WBG’s social safeguard policies and their implementation, which have been a recurring theme in the project right from its inception, appear to have exacerbated these adverse effects. Thus, despite the often stated (but seldom observed) commitments of the WBG to human rights and environmental protection and its assurances that the Chad-Cameroon Project promoters have put in place adequate social and environmental protection measures,54 incidents of rights violations and environmental degradation by both the host governments and the private corporate promoters of the project have continued to occur. There are reports of environmental pollution and, in particular, pollution of streams and rivers on which the locals depend for drinking and domestic uses.55 A field report indicates also that the project has led to continuous gas flaring in and around some of the oil-producing communities in Chad.56 Displaced communities were resettled in ‘poor quality’ houses.57 Low- or inferior-quality materials were knowingly distributed to local communities as compensation by the oil TNCs and the governments of Chad and Cameroon.58 Indeed, as Korinna Horta reports, ‘there was no proper evaluation of the value of the fruit trees, leaves, and roots that are critical to the survival of local households in order to assess adequate compensation.’59 Worse still, affected local communities were sometimes intimidated and coerced into accepting grossly undervalued compensation and signing away their rights to make any further claims to compensation.60 All of these have happened even though the WBG has declared that it will ‘provide effective support for implementation’ of the project and that it is ‘reinforcing its project management team significantly and establishing full-time presence in the field.’61 The World Bank Inspection Panel, an independent compliance verification panel established by the WBG (discussed below), has also found the WBG and the consortium of TNCs substantially not in compliance with aspects of the safeguard policies, especially as they relate to the

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environment. The WBG did not specifically consider the spatio-temporal context of the project; hence the environmental assessment neither discussed how the boundary of the study was defined nor mentioned the potential area that could be affected by project development.62 It failed to require from the project sponsors a cumulative effects assessment and thus, unsurprisingly, ‘oil and other economic development activities are already taking place outside of the scope addressed in the approved [Environmental Management Plan].’63 As well, it failed to require the project sponsors to prepare a Regional Environmental Assessment with a view to addressing the nature and extent of broader environmental and social concerns resulting from the project, especially given that the scale of the project ‘will impact on the lives of all the people living in the Region as a whole.’64 More significantly, the WBG failed to follow up and monitor the environmental assessment process.65 And while the consortium of oil TNCs made significant efforts to collect baseline data and information about the project, the data were not properly utilized to support the environmental assessment process; hence, uncertainty exists on how each specific management action is related to specific impacts or how these impacts relate to relevant data in management’s action.66 Finally, although the WBG has made significant efforts since 1999 to encourage frequent consultations with local communities and civil society, in an environment more conducive to an open exchange, ‘at least prior to 1997, the consultations were conducted in the presence of security forces, which is incompatible with Bank’s policy requirements.’67 The extent to which these deficiencies have been remedied remains unclear, although the WBG did promise, in reply to the Inspection Panel’s report to continue to intensify its project supervision efforts in the future.68 The Inspection Panel’s findings are particularly alarming because, prior to its investigation, the WBG established two independent bodies – the International Advisory Group (IAG) and the External Compliance and Monitoring Group – to advise, assess, and monitor the implementation of its safeguard policies in the execution of the project.69 This was apparently done in recognition of its project supervision deficiencies and in response to public pressures. While the establishment of these two bodies is a commendable move on the part of the WBG, they have been of limited practical benefit to the local host communities. As is evident in the Inspection Panel’s investigation conducted after these bodies were established, non-compliance with WBG’s policies continues despite the monitoring activities

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of the two bodies. In any event, it is doubtful that these bodies can effectively monitor compliance with the WBG’s safeguard policies because they do not have a permanent presence in Chad and Cameroon.70 In fact, because members of these bodies are drawn from across the globe, they are limited to occasional visits to the project site. And flowing from the above, they have little or no means to independently investigate and gather information on the project sponsors’ compliance with the policies. They have to rely largely on information supplied to them by the project sponsors and host governments, although they can verify some of this information through on-site visitation and interviews with local communities. It therefore comes as no surprise that, despite the best efforts of the two bodies, some social issues – particularly health and compensation – emanating from the project have yet to be resolved, even though the project is already up and running.71 And quite ominously, the IAG warns that permanent environmental and social risks and challenges will confront the project throughout its duration.72 The implication is that, unless there is proper monitoring and supervision of the project, the rights of the local host communities in both Chad and Cameroon will continue to be violated by the project sponsors. Why the World Bank’s Social Safeguard Policies Are Ineffective WBG-supported extractive projects in Africa often generate widespread dissatisfaction in local host communities and civil society at large.73 But how do we explain this development? There are two ways to look at it. Either these local communities and civil society are insatiable and unnecessarily belligerent towards WBG projects or, as argued below, the implementation of the WBG’s safeguard policies leaves much to be desired. While the former possibility cannot be discounted completely, the latter is demonstrably the case in many of the WBG-supported extractive projects in Africa. This, in turn, explains why the WBG’s safeguard policies have not succeeded in reining in the TNCs to which it provides support in the African extractive sector. And given the economic ideology of the WBG, which is reinforced by the power imbalance in the international system, this position is unlikely to change anytime soon. The WBG is often quick to allude to its mandate on poverty alleviation when confronted with allegations of rights violations or environmental pollution stemming from the extractive projects it supports in the developing world. Indeed, poverty alleviation is often offered as

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its justification for doing business with dictatorial African regimes and extractive TNCs engaged in social irresponsibility in the continent.74 The standard response of the WBG to its critics is that, without its funding, the economic situation in Africa, and indeed the whole developing world, would deteriorate further.75 The WBG’s participation in the African extractive sector may have enhanced revenues accruable to resource-rich countries such as Ghana and Nigeria. However, the WBG’s support for extractive projects may also be exacerbating environmental degradation, social conflicts, and human rights abuses in the local host communities.76 This result is due largely to inherent defects in the WBG’s safeguard policies, including weakness of its project supervision, unenforceability of the safeguard policies, and the WBG’s institutional limitations. weak compliance supervision and monitoring It is conceptually and practically difficult, if not impossible, for the WBG to monitor and supervise the implementation of its numerous social safeguard policies by corporate clients and project owners in all circumstances. Neither can the WBG do so to the satisfaction of all stakeholders. Therefore, some degree of non-compliance with these policies is to be expected. However, a large gap does exist between the WBG’s commitments embedded in its social safeguard policies and the on-site implementation of these policies.77 The WBG, generally speaking, remains at arm’s length from its own social policy implementation process, and thus its project supervision and monitoring is weak.78 It places much of the responsibility for implementing and complying with its policies on the borrower.79 For example, although the WBG undertakes environmental screening of projects to determine the appropriate extent and type of environmental assessment required,80 the borrower is responsible for carrying out the actual environmental assessment, the accuracy of which the WBG does not verify.81 Rather, it merely ‘reviews the findings and recommendations’ of the environmental assessment ‘to determine whether they provide an adequate basis for processing the project for Bank financing.’82 Equally, in relation to resettlement of displaced persons, while the WBG provides the borrower with assistance if requested,83 the borrower is responsible for preparing, implementing, and monitoring the resettlement plan.84 As if this is not bad enough, some entities in the WBG do not systematically evaluate the borrowers’ or

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project owners’ capacity for environmental and social management,85 and, by implication, their capacity to comply with the policies. 86 The weakness of supervision and monitoring creates an incentive for widespread violations. Project sponsors can violate the WBG policies with little if any fear of detection. In fact, the aloofness of the WBG in the implementation of its safeguard policies has led to a number of adverse consequences, including the frequent violation of its policies by project owners,87 poor and inappropriate screening of projects resulting in the assignment of low-risk status to projects that are in fact high-risk projects,88 and the payment of inadequate compensation to displaced persons. For example, as a result of the WBG’s failure to supervise the compensation process, displaced persons were paid onetenth of the compensation due to them under the Resettlement Action Plan approved for the West African Gas Pipeline Project.89 It is erroneous for the WBG to rely almost exclusively on the good faith of its corporate borrowers for implementation and monitoring of its own safeguard policies. The fact of the matter is that the lack of onsite verification by the WBG could be exploited by borrowers to the disadvantage of host communities. Surely, what matters is not that the WBG establishes social policies but that they are implemented and applied on the ground. In addition, on-site visitation by the WBG is not a prerequisite for compliance certification. Thus, there are instances where compliance verifications tendered by project proponents are confirmed by the WBG without an actual on-site visit, as in the Bulyanhulu Gold Mine project in Tanzania.90 And although the IFC and MIGA sometimes carry out on-site supervision of projects to determine compliance,91 their supervision is infrequent. In fact, the IFC makes annual supervision visits to projects with ‘high environmental and social risks,’ while projects with low environmental and social risks are visited once every two to three years.92 Given the long interval between visits, irreparable harm may already have been done to the host communities before the IFC visits a project. To make matters worse, there are neither established criteria for determining compliance93 nor independent or participatory monitoring and supervision agencies for IFC/MIGA-supported projects.94 The lack of adequate monitoring and supervision also affects the utility of the WBG’s public consultation policy and process,95 which requires borrowers to undertake a free, prior, and informed consultation with groups affected by the project as well as local NGOs, and to take

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their views into account.96 The WBG has not only failed to adequately monitor the consultation process,97 but also to ensure that consultations are properly announced and held with all relevant communities and groups, or that affected communities are informed of their rights to comment on the various project documents prepared by project owners.98 As is evident from many of the WBG-financed extractive projects in Africa, consultation-monitoring deficiencies have ensured manipulative practices by both TNCs (borrowers) and host African governments. For example, the IPP developed under the Chad-Cameroon Project was reported to have been developed without consultation with the local Bakola communities in contravention of the WBG/IFC/MIGA’s consultation policy.99 This incident is by no means isolated because both the IFC and MIGA ‘have no explicit commitment to ongoing consultation after a project has been approved.’100 In all likelihood, therefore, implementation of the WBG’s consultation policy in Africa will remain defective for the foreseeable future. Aside from the deficiencies inherent in the WBG’s consultation process, it should also be said that the consultation policy itself is of little utility to host African communities, because it does not recognize the right of host communities to reject projects that they perceive to be inimical to their interests. Neither does it afford them any right to participate in, influence, or control the execution of projects.101 Thus, as epitomized by the Chad-Cameroon Project, the WBG might conceivably invest in projects even though the consent of the communities is coerced or fraudulently obtained, and even though its own consultation process does not reveal the necessary consent of the local communities that the project should proceed.102 However, this need not be so. A better approach would be for the WBG to insist on the right of host communities to participate actively in project implementation, specifying their entitlement ‘to give their free prior and informed consent throughout each phase of a project cycle.’103And as the WBG’s panel of experts on extractive industries has stated, ‘[t]his consent should be seen as the principal determinant of whether there is a “social license to operate” and hence is a major tool for deciding whether [the World Bank should] support an operation.’104 unenforceability of the policies The WBG’s social safeguard policies do not accord persons or commu-

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nities adversely affected by WBG-supported projects any rights against the WBG or its borrowers and clients.105 Thus, the policies are not legally enforceable by project-affected communities against the WBG or its clients. However, to the limited extent that the policies are incorporated into contractual agreements between the WBG and its clients, the WBG can legally enforce them. The implication of their unenforceability then is that the WBG cannot be legally compelled by affected communities to observe its own policies. And while it has been argued that parts of the World Bank Operational Manual bind the WBG’s staff,106 the manual is, strictly speaking, not a contract between the WBG and its employees. Rather, it spells out the social criteria and procedures to be followed by the staff in approving and administering projects, in addition to specifying the commitments and actions expected by the WBG from its customers. Thus, it could only properly be said to be binding on the staff in relation to the reasonable discharge of their duties to their employer, the WBG. Therefore, the Bank can impose administrative punishment on its non-complying staff. But the fact of the matter is that the WBG does not hold its staff accountable for the non-compliance of projects under their supervision, a position that has prompted a recommendation that it do so.107 Although the policies are not enforceable, the WBG can, in principle, impose certain ‘sanctions’ on non-compliant clients. For example, the MIGA can cancel a client’s insurance if its non-compliance with either the host country’s regulations or the MIGA’s environmental guidelines ‘is not corrected within a period set forth in the Contract of Guarantee.’108 The WBG can suspend the disbursement of loans or accelerate loan repayment for non-compliance with its policies.109 In fact, in 2006 it suspended disbursement of loans for the Chad-Cameroon Project because of Chad’s apparent breach of its agreement with the Bank.110 It could also refuse further or future loans to punish non-complying corporate borrowers. However, it is doubtful that the WBG would adopt the latter strategy against non-complying TNCs, given the enormous influence of both TNCs and their home governments over the Bank. In fact, while the WBG has routinely reprimanded and debarred corporations from access to its contracts for violating its policies against fraud and corruption, particularly its procurement guidelines,111 it is not known to have debarred any corporation from access to its loans for violating its social safeguard policies. Indeed, because the WBG itself depends for its economic survival on returns on its investments such as

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those in the extractive sector, it is strategically not in its interest to mete out such punishment. Doing so could lead to a reduction of its profitability, if not outright loss of investments. the world bank’s institutional limitations Perhaps a greater impediment to the WBG’s realization of the ideals embedded in its social safeguard policies is its institutional limitations, which are apparent at three levels. First, the WBG’s undisguised neoliberal ideology, which is embedded in its enabling instruments, places economic interests above social interests, including human rights, labour rights, and environmental protection.112 For example, the WBG has relentlessly promoted structural adjustment programs, including economic deregulation in developing countries, even though these policies have adverse impacts on the poor.113 In actual fact, only economic factors are taken into account by the WBG in making loan and investment decisions, apparently in keeping with the charter mandates of its entities.114 The WBG does not, as a matter of policy, ‘recognize any nexus between its mission and human rights per se,’115 although it recognizes, through its social safeguard policies, that its economic development policies have social and environmental implications. This is precisely the reason that the WBG ‘does not require countries [and corporations] to guarantee observance of internationally recognized human rights as a precondition to receiving assistance’ and loans.116 The WBG’s enabling instruments appear to prohibit the WBG from considering non-economic matters in making credit decisions.117 However, some authors have argued that they should be interpreted in a manner that permits consideration of ‘all matters governed by international law,’ including environmental protection and human rights.118 For example, Robert Kneller has argued that the WBG ought to take human rights into account not only because international law ‘places an affirmative obligation on the banks and their members to act to improve human rights conditions,’ but also because violations of human rights ‘have direct economic consequences.’119 The WBG itself appears to have imbibed this reasoning. In fact, it has recently shifted ground (if only cosmetically) on the question of human rights.120 As its former senior vice president and general counsel has noted, despite its limited mandate the WBG ‘has promoted a broad array of economic, social and cultural human rights.’121 Also, the IFC and MIGA have recently declared that in deciding whether to invest in a project, they consider its finan-

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cial, political, and reputational risks, as well as its potential benefits to ‘relevant constituencies in economic, social, or environmental terms.’122 While the apparent shift in policy is commendable, it has yet to be translated into action on the ground. Thus, at this moment the WBG largely retains its neo-liberal economic ideology, which puts it squarely in the camp of those who envisage an unregulated business environment. At the behest of its largest investors – the powerful and economically advanced countries123 – the WBG has championed that vision for much of its existence.124 Because African countries have little, if any, influence on the WBG, and because it is unaccountable to African peoples,125 it can hardly be expected to promote corporate accountability to a degree that would meaningfully enhance observance of social rights in Africa and other parts of the developing world.126 Indeed, while the WBG has exercised its unequalled ability to impose and successfully implement loan conditions – such as structural adjustment, fiscal discipline, economic liberalization, deregulation, and privatization – on state borrowers,127 it has refused to mete out similar treatment to TNCs. Secondly, entities within the WBG may not have the requisite inhouse expertise to deal with various social issues. For example, the MIGA carried out an environmental and social assessment of the Dikulushi mining project without the involvement of a ‘social specialist’ because it ‘had no in-house social expertise when the project was initially dealt with.’128 In fact, because of its institutional shortfall, the MIGA incorrectly evaluated the Dikulushi mining project in the DRC as having ‘a low risk for significant adverse social and environmental impacts,’ and thus failed to identify fully both the potential impacts and the measures required to ameliorate them.129 Thirdly, the WBG’s organizational culture promotes the approval of projects irrespective of their compliance with policy guidelines.130 According to some observers, the Bank’s policies are more concerned with a project’s pre-approval phase – planning, design, and financial management – than with its post-approval or operational phase.131 While the Bank has attempted to address this problem by revising its policies towards results and outcomes,132 not much has changed by way of actual results. To the contrary, it continues to experience significant evaluation and monitoring problems.133 And as its self-assessment report points outs, ‘it will take some time before the Bank is able to effectively manage for results.’134 The extent to which this ‘approval culture’135 prevails in the IFC and

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MIGA is uncertain, although they are not immune to the problem. For example, the MIGA does not proactively engage in project implementation and supervision.136 It is not surprising then that the IFC/MIGA sometimes approves extractive projects without on-site visitation and in utter disregard for their due diligence policies, as in the Bulyanhulu project.137 However, the IFC has recently sought to shed its ‘approval culture’ by adopting what it describes as ‘new outcomes-based’ policies.138 Regrettably, as its own ombudsman has pointed out, the ‘new’ policies do not fully support ‘the transition to development outcomes’ because there is no ‘firm commitment (by IFC or its clients) to reporting on development impact [and] effectiveness at the project level.’139 The approval culture is in part fostered by the political pressures on the WBG for quick approval of projects. For example, it has been reported that in at least two instances the IFC rushed its pre-approval due diligence assessment by cutting corners and hurrying sponsors of projects because of the ‘political importance’ of the projects.140 In doing so, it compromised the projects’ effectiveness and impact.141 Other entities in the WBG have similarly been known to succumb to political pressures and interests.142 Limitations of the World Bank’s Leverage over Extractive Transnational Corporations While the WBG has considerable leverage over the African extractive sector, that leverage or influence does have its limits. The WBG’s influence is largely related to TNCs and countries that are beneficiaries of loans from the Bank. Given that some of the TNCs that dominate Africa’s extractive sector – such as Shell, ExxonMobil, Chevron, Agip, TotalFinaElf, Rio Tinto, De Beers, and other oil and diamond TNCs – are highly capitalized, self-financed, and monumentally profitable, the WBG’s influence over corporate investors in that sector is limited. For example, while the IBRD and IFC provided loans to Chad and Cameroon and to their state oil companies for the Chad-Cameroon Project, ExxonMobil, Petronas, and Chevron self-financed their participation in the project.143 However, as in the Chad-Cameroon Project, the WBG’s leverage over self-financing TNCs may be preserved where (1) the loan agreement between the WBG and the host government is predicated on a ‘project performance agreement’ between the WBG and the TNCs;144 and (2) TNCs require the WBG’s participation in an extractive project in order to insulate themselves from certain investment risks in particular

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host countries.145 In fact, self-financing TNCs sometimes invite WBG’s participation in projects in order to deflect criticisms of their social and environmental practices or to portray themselves as ‘good corporate citizens willing to abide by [the WBG’s] high social and environmental standards.’146 Besides, even wealthy TNCs require the MIGA’s political risk insurance and guarantees against wars and civil disturbances, currency transfer restrictions, expropriations, and breaches of contract by host governments. As well, the WBG’s leverage over project owners is directly proportional to the level of its involvement in the project. Some of the loans it grants to private investors may represent a small fraction of the entire costs of the project, in which case its leverage over them is likely negligible. And whatever influence or leverage it has over its borrowers diminishes as the loan is gradually disbursed.147 Once completely disbursed, the WBG’s leverage virtually disappears. At that stage, the WBG is stuck with the project irrespective of the corporate borrower’s compliance with the Bank’s social safeguard policies. It is equally worth mentioning that the WBG sometimes gets involved in projects long after they have started, by which time a lot of social harm may already have been done to host communities. But late involvement should not exonerate the WBG from its responsibility to ensure that project owners remedy whatever harm they already have done. Indeed, in such a case the Bank should refuse to become involved unless it is satisfied that project owners have first remedied the harm. In a nutshell, it is incumbent upon the Bank to make certain that project owners adhere to and comply with its safeguard policies upon getting involved in a project midway through its cycle.148 Compliance Mechanisms The IFC/MIGA’s Compliance Advisor/Ombudsman The inadequacy of the WBG’s enforcement, supervision, and monitoring efforts, coupled with the sustained outcry it has generated from civil society representatives, led the IFC and MIGA to establish in 1999 the office of the Compliance Advisor/Ombudsman (CAO).149 The CAO, in theory independent of the IFC and MIGA, and which reports directly to the president of the WBG, has three principal functions: ombudsman, advisor, and compliance auditor.150 In these roles, it responds to and resolves complaints by those affected by IFC or MIGA projects; advis-

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es the IFC and MIGA as well as the president of the WBG on broader environmental and social issues related to policies and standards; and oversees the IFC and MIGA’s compliance with their social safeguard policies by acting as a social auditor.151 Any individual, group, community, entity, or other party adversely affected or likely to be adversely affected by the social or environmental impacts of any project financed by the IFC or MIGA may make a complaint to the CAO.152 Complaints may equally be made on behalf of affected parties by their duly authorized representatives.153 However, as noted below, the CAO is not a judge. In fact, the CAO does not ‘make a judgment on the merits of the complaint.’154 Rather than finding fault and apportioning blame, the CAO is a problem-solving and settlementfacilitating body. It identifies problems, recommends practical remedial actions to the IFC/MIGA and their corporate clients, and addresses systemic issues that may have contributed to the problems.155 the cao’s review of african projects: a brief case history The CAO has, since its inception, assessed several complaints including five from Africa. Of these, four complaints – the Dikulushi copper-silver mining project in the DRC, the Bulyanhulu gold mine in Tanzania, the Nigeria Delta credit facility, and the Konkola copper mine project in Zambia – relate to extractive industries, while the fifth relates to the Bujagali hydropower project in Uganda.156 The complaint from the Nigeria Delta alleged, among other things, environmental damage by Shell and its contractors, lack of consultation with host communities, and the non-enforcement of IFC guidelines.157 The CAO found merit in some of these allegations. It concluded that, prior to approval of the project, the IFC failed to undertake a ‘systematic’ analysis of Shell’s activities in the Delta, in violation of its due diligence commitment.158 The IFC, the CAO also found, failed to canvass opinion leaders in the host communities, including civil society groups.159 The Bulyanhulu complaint relates to Barrick Gold Corporation’s concession in Tanzania, for which the MIGA provided political risk insurance.160 The complaint alleged the involuntary displacement of local communities by the project sponsors with the help of the government of Tanzania, failure to properly implement a resettlement plan, inaccurate environmental and social impacts assessment, and the MIGA’s failure to undertake a pre-approval due diligence assessment.161 While

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dismissing many of the allegations, the CAO concluded that the MIGA failed to observe due diligence in approving the project.162 It neither carried out on-site verification nor sought independent verification of Barrick Gold’s environmental impact assessment.163 Rather, it relied on, and ‘was comfortable with Barrick’s assurances’ about, its assessment.164 Finally, it found that the MIGA failed to supervise the project and, in fact, did not send any environmental or social specialist to visit the project.165 However, the MIGA’s failures did not adversely affect the social performance of the project, which the CAO concluded was in line with the WBG’s standards.166 Unlike the complaints discussed above, the CAO’s audit of the Dikulushi mining project was instigated by the erstwhile president of the WBG, Paul Wolfowitz, acting in response to allegations made by NGOs that Anvil Mining Corporation (a Canadian TNC) provided logistical support to the DRC army – including air transport, vehicles, and drivers – resulting in the killing of innocent civilians.167 The MIGA had approved political risk insurance worth US$13.3 million in favour of Anvil and another company in relation to the project.168 Although the audit found that the MIGA complied substantially with its environmental and social policies, it revealed the inadequacy of MIGA policies in conflict zones. Given the nature of its business, ‘conflict and security are core business concerns for MIGA.’169 Ironically, its policies do not mandate the MIGA to address these issues.170 Thus, ‘[n]either the underwriting nor risk management processes for the Dikulushi project explicitly considered the risks that Anvil’s presence might either have an impact on the dynamics of conflict, or that security provision for the project could indirectly lead to adverse impacts on the local community.’171 Overall, the CAO’s review of these projects reveals a continuing spectre of non-compliance by the IFC, MIGA, corporate project sponsors, and host African states. More significantly, the three assessment reports discussed above indicate that the IFC/MIGA did not observe their preapproval due diligence commitments. In fact, they point to the existence of an ‘approval culture’ within the IFC/MIGA. The CAO’s review of projects is significant for another reason: it is often taken seriously by the parties concerned. As noted below, CAO recommendations have prompted the fine-tuning of policies as well as enhancement of implementation strategies by the IFC, MIGA and their corporate clients. an appraisal of the cao and its processes Given its relative infancy, not much can be said at the moment of the

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efficacy or otherwise of the CAO. Rather, the best one can do at this early stage is to speculate on likely outcomes. That is exactly what I do here. The CAO’s potential impact on the social practices of extractive TNCs who are clients of the IFC/MIGA lies in the fact that its recommendations, whether resulting from an investigation or a compliance audit, may spur better implementation of the safeguard policies and, in particular, improve the monitoring of projects. Although as noted below the CAO’s recommendations are not binding, its audits of IFC and MIGA policies and compliance may already be producing positive results. The CAO’s recommendations have in some cases prompted the IFC/MIGA and their clients to take steps to implement effectively the safeguard policies.172 In response to the CAO’s audit report on the Dikulushi project, for example, the MIGA pledged to strengthen its monitoring and in fact conducted a field assessment of the project.173 Also, Anvil Corporation has reportedly contracted the services of international security experts, including lawyers, in its attempt to comply with the Voluntary Principles on Security and Human Rights, a principal recommendation of the CAO.174 Whether or not these steps will lead to a change in attitude remains to be seen, but they are encouraging signs of the potential for better implementation of WBG policies. It would be interesting to see whether, as recommended by the CAO, the MIGA will incorporate specific provisions of the Voluntary Principles into contractual agreements with its clients.175 In addition, effective discharge of the CAO’s advisory duties may in future serve to enhance the design and review of the IFC/MIGA’s social safeguard policies. Infact, the CAO’s reports have prompted the review and finetuning of IFC/MIGA policies. For example, the IFC and MIGA’s recently announced performance standards, which substantially improve on previous standards, are based partly on CAO recommendations.176 Moreover, its future experiences in investigating and resolving disputes have the potential of transforming the CAO into a useful information bank and thus a rich reservoir of knowledge for IFC and MIGA staff, particularly those charged with on-site implementation of policies. That said, it is to be noted that the CAO’s influence over private owners of IFC/MIGA-supported projects and, thus, its capacity to make them change their behaviour directly depends on the leverage of the IFC and MIGA over them. Such leverage, as noted earlier, is itself limited.177 In effect, therefore, the CAO has a limited capacity to influence the conduct of corporate owners of IFC/MIGA-supported extractive projects. Certain deficiencies are already apparent in the CAO process. For

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example, the CAO’s powers are severely limited. The CAO is neither a judge nor a policy-policing agency,178 although it can critique the WBG. This limitation can have a significant impact on the outcome of complaints. In the Bulyanhulu complaint, for example, the CAO ‘did not undertake a full scale inquiry, nor did it engage in the techniques of human rights investigation’ that, it conceded, would be necessary to assess many of the allegations made in the complaint.179 Also, the CAO has no power to impose sanctions. Rather, the best it can do with a complaint is to ‘make creative and practical proposals for settling an issue, and encourage the parties to engage in constructive dialogue.’180 Thus, the CAO does not by itself provide remedies or redress for the grievances of affected communities. Its word is not final because its proposals and recommendations for settling a complaint are not binding on the IFC or MIGA. In fact, they may be rejected by the president or management of the WBG. However, the CAO’s powers have recently been enhanced to permit it to initiate a compliance audit of its own volition.181 Prior to the fine-tuning of its Operational Guidelines in 2007, the CAO could only undertake compliance audits on the basis of a complaint by affected communities or if requested to do so by the IFC or MIGA.182 But these two triggering avenues proved insufficient to cater to all possible scenarios where adverse social impacts may arise from IFC/MIGA-supported extractive projects. For example, the local communities may not be aware of the adverse effects of a project, either because of a lack of information or their inability to comprehend the complex and intricate issues involved.183 They may not even be aware that the IFC or MIGA is involved in the project, much less that avenues are open to them to seek resolution of their grievances.184 They may equally be intimidated, harassed, or coerced by their governments into not making a request for an audit. Thus, to enhance the impact of the CAO’s compliance auditing role, it was necessary to enlarge its invocatory process to permit the CAO to initiate compliance audits where it suspects non-compliance.185 The recent fine-tuning of the CAO’s Operational Guidelines has equally addressed another concern of critics: the hitherto contradictory nature of the CAO’s functions and their likelihood to generate conflict of interest problems. Before now, the CAO could give project-specific advice to the IFC and MIGA. However, this advisory function was at odds with its ombudsman and compliance-auditing functions. Actions taken by the IFC or MIGA pursuant to a project-specific advice of the CAO may form the subject of a future complaint by host communities

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or project owners and borrowers. The CAO’s interest in the protection of the validity of its advice would be in conflict with its ombudsman role in such complaints. This position could conceivably create a perception of partiality in the minds of those suffering the adverse social impacts of IFC/MIGA-supported projects, thus undermining the credibility of the CAO. This is why the CAO’s revised Operational Guidelines now provide that the ‘CAO advisory role, unlike the CAO ombudsman and CAO compliance roles, is not project-specific’ and that ‘the CAO will not give project-specific advice.’186 Finally, although the CAO has recently established a formal mechanism for monitoring implementation of its recommendations by the IFC/MIGA and their corporate clients,187 it has no means of enforcing compliance with its recommendations. All it does is submit its annual compliance-monitoring reports to the WBG president and publish the reports on its web site.188 The World Bank Inspection Panel In the strict sense, the World Bank Inspection Panel (Panel) does not have jurisdiction over matters arising exclusively from private-sector projects financed by the IFC and MIGA, the subject of this chapter.189 However, the Panel has coordinate jurisdiction with the CAO over complaints arising from or related to projects jointly financed by the IBRD/ IDA and the IFC/MIGA.190 Complaints arising from such projects may thus be lodged with the Panel or the CAO or both. For example, the complaint relating to the Chad-Cameroon Project – a project jointly financed by the IBRD, IDA, and IFC in partnership with three TNCs – was investigated by the Panel.191 However, in regard to such jointly financed projects, the Panel handles aspects of the complaint touching on its areas of jurisdiction. Notwithstanding its limited application to IFC and MIGA projects, the Panel may have some impact on these projects and, by implication, on the social and environmental practices of the IFC/MIGA’s corporate clients, where its recommendations on a jointly financed project are accepted and implemented by the WBG. For example, the Panel’s investigation and recommendations may prod the WBG into a reappraisal or revision of its project implementation techniques. It may lead to enhancement of project supervision by the WBG or the appointment of local monitors. Enhanced on-site supervision by the WBG or its local monitors would likely exert some pressure on the private corporate

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sponsors of projects, which may, in turn, galvanize them into better social and environmental performance. the inspection panel’s processes The Inspection Panel was established by IBRD and IDA in 1993192 as a result of pressure from civil society representatives and NGOs.193 It is a three-member independent panel whose purpose is to provide ‘people directly and adversely affected by a Bank-financed project with an independent forum through which they can request the Bank to act in accordance with its own policies and procedures.’194 The Panel’s mandate relates to ‘actual or threatened material adverse effect on the affected party’s rights or interests [arising] directly out of an action or omission of the Bank to follow its own operational policies and procedures during the design, appraisal and/or implementation of a Bankfinanced project.’195 There are, however, several limitations to the mandate of the Panel. Among others, the Panel cannot entertain a request for inspection or investigation from ‘a single individual.’196 It cannot deal with ‘complaints with respect to actions which are the responsibility of other parties, such as the borrower, or potential borrower, and which do not involve any action or omission on the part of the [IBRD and IDA].’197 It is precisely because of this that the Panel does not have jurisdiction over matters relating to non-compliance with the safeguard policies by the IFC, MIGA, and their private corporate borrowers. It is, however, the case that matters arising from or relating to the IBRD and/or IDA’s omission to provide sufficient guidance or supervision to project sponsors would properly fall within the Panel’s jurisdiction. The Panel’s investigatory process can be invoked by a number of persons or entities. These are (a) any group of two or more people (whether an organization, association, society, or other grouping of individuals) in the country where the WBG-financed project is located, who believe that as a result of the WBG’s violation (of its policies) their rights or interests have been, or are likely to be, adversely affected in a direct and material way; or (b) a duly appointed local representative acting on explicit instructions as an agent of adversely affected people; or (c) where there is clear evidence that there is no adequate or appropriate representation in the country where the project is located, a foreign representative acting as an agent of adversely affected people; or (d) an executive director of the WBG in special cases involving serious allegation of violations of the WBG’s policies and procedures.198

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Although the permissible range of persons that can invoke the Panel’s investigatory powers are appropriately expansive, there is an obvious limitation embedded in the process. The Panel can only properly be invoked ‘when adversely affected people believe the Bank itself has failed, or has failed to require others, to comply with its policies and procedures, and only after efforts have been made to ask Bank Management itself to deal with the problem.’199 In effect, a requester of the Panel’s investigation must first have brought the matter to the attention of the management of the WBG itself ‘with a result unsatisfactory to the Requester.’200 Moreover, the powers of the Panel are limited to the carrying out of enquiries and the making of recommendations to the board of the WBG.201 utility of the inspection panel The Panel has made modest strides in enhancing the WBG’s accountability to the long-suffering peoples of the developing countries. Whereas prior to the Panel’s establishment the WBG ‘was notorious for not listening to local concerns,’ complaints before the Panel now reportedly trigger immediate ‘attention from the highest levels of the Bank.’202 Its investigations have led to the reappraisal and revision of projects to make them compliant and, in extreme cases, to the WBG’s withdrawal of funding from non-complying projects.203 For example, the WBG withdrew financing for the Nepal/Arun III hydroelectric project as a result of the Panel’s report that found substantial non-compliance with the Bank’s policies.204 The Bangladesh/Jamuna bridge project has also had to be revised as a result of the Panel’s finding that the Resettlement Action Plan did not specifically identify or provide assistance for the Char community as project-affected people.205 In some other cases, the WBG has, in direct response to the Panel’s recommendations, had to appoint local independent monitors for non-complying projects in addition to allowing community participation in the project implementation.206 Given the nonchalant attitude of the WBG to protests from local host communities during the period preceding establishment of the Panel, it is unlikely that some of these successes would have been recorded had the Panel not been established. The Panel’s utility is perhaps to be more appropriately situated within the context of what it represents or stands for in international law. The Panel can be said to have heralded a new and important epoch in the annals of the governance and accountability of international organizations and how they relate with civil society, individuals, and groups.

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It is a trail-blazing development because ‘it is a substantial departure from traditional public international law,’ in the sense that it is one of only a few international mechanisms that allow citizens direct access to their process without recourse to their national governments.207 If nothing else, establishment of the Panel is an acknowledgment by the WBG that private individuals, civil organizations, and groups are important in, and relevant to, international decision-making and dispute resolution.208 The Panel’s establishment has also influenced establishment of similar mechanisms by other international financial institutions. The IFC/MIGA’s CAO, the Accountability Mechanism of the Asian Development Bank,209 and the Independent Investigation Mechanism of the Inter-American Development Bank210 are cases in point. The Panel’s best moments may be yet to come. Its continued existence has the potential of influencing further developments in international law, especially in the areas of international human rights, international environmental law, and the governance of international institutions.211 Experience and information gathered by the Panel in the course of its duties may also potentially help the WBG to develop more effective social safeguard policies and procedures as well as to implement them efficiently.212 However, although establishment of the Panel is no doubt a step in the right direction, its utility and potential for success are seriously undermined by its enabling instruments – IBRD/IDA Resolution and the Operating Procedure – which contain debilitating and severe limitations on its powers. The Panel’s powers and procedure are unnecessarily weak and appear to have been deliberately skewed in favour of the WBG. It cannot investigate allegations of non-compliance against the WBG except with the blessing of the WBG board. The Panel can only recommend that a complaint should be investigated.213 The board of the WBG decides whether or not the recommended investigation should take place.214 Thus, where it deems fit, the WBG board may reject the Panel’s recommendation for investigation. It had done so as of 30 June 2007 on at least four occasions.215 As if this is not debilitating enough, the Panels’ reports and recommendations (where the board permits an investigation) are not binding on the WBG board. The board decides whether or not to accept the Panel’s final report and what action, if any, is to be taken on the recommendations therein.216 In other words, the Panel has no power to compel compliance with its recommendations, and it cannot enforce its own decisions against the WBG.217 Worse still, the Panel’s enabling instruments do not prescribe any

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standards or criteria upon which the WBG board is to determine whether to accept or reject the Panel’s recommendation for investigation and its final report where a matter is investigated. These instruments do not stipulate the basis upon which the board is to exercise its veto powers over the Panel. Conceivably, therefore, the WBG board can reject the Panel’s recommendations on the basis of untenable reasons or for no reasons at all. The Panel’s enabling instruments raise other concerns. The Panel’s independence is questionable because, by the terms of the IBRD/IDA Resolution, members of the Panel are ‘officials of the Bank enjoying the privileges and immunities accorded to Bank officials.’218 They are equally required to be exclusively loyal to the Bank since their conduct is governed by the Bank’s Principles of Staff Employment.219 And rather than seek independent legal advice from experts outside of the WBG, the Panel relies on the Legal Department of the WBG for advice.220 These concerns and limitations, among others, have led some to conclude that the WBG ‘whose actions are being considered directly maintains a strong grip on the [Panel’s] procedure itself and its outcome.’221 Indeed, given the limited powers of the Panel, the fact that the board of the WBG has the final say on its recommendations and the Panel’s staff are employees of the WBG, it could be said that the Panel’s justice system is such that the WBG is both prosecutor and judge of its own actions. Although, as noted earlier, establishment of the Panel represents a giant stride in the governance of international organizations, its overall utility to host communities remains to be developed. No doubt, the Panel serves as a useful avenue for dialogue on compliance issues between the WBG and host communities of development projects.222 But it is essentially a post-rights infraction mechanism. Although it has powers to entertain complaints about ‘threatened material adverse effect,’223 the fact of the matter is that most complaints before the Panel relate to allegations of violations of WBG’s policies and procedures. That this is so is not surprising because ‘threatened material adverse effect’ may only be ascertained through scientific enquiry and knowledge, which may be unavailable to local communities. In effect, therefore, the rights of host communities may often have been violated before the Panel comes into the picture. To compound the situation, the Panel is a non-remedial accountability mechanism.224 It has no power to award compensation to, or order restitution for, communities and persons adversely affected by WBG’s actions or omissions.225

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Broadening the Safeguard Policies and Their Implementation Process The deficiencies inherent in the WBG’s social safeguard policies have led to calls for their overhaul. According to some observers, the WBG should ‘periodically adjust its policy framework for extractive industries to ensure that it remains up-to-date with evolving industry practice.’226 Such adjustments are particularly needed to cater to human rights and labour rights concerns. The WBG’s Extractive Industries Review experts have, for example, recommended that the WBG should adopt core labour standards, recognize the rights of indigenous peoples to their lands, and integrate explicit human rights into the safeguard policies.227 In addition to such normative changes, the IFC and MIGA have been urged to require prospective corporate clients to demonstrate compliance with, and commitment to observe, human rights principles as a prerequisite to getting involved in extractive projects.228 They should thus ‘assess the human rights record of companies they work with and ensure that [the projects they fund] are designed and implemented in a manner consistent with applicable international human rights standards,’ including all four of the core labour standards of the ILO.229 While it has yet to adopt a specifically rights-based approach to development, the WBG has stated in response to the Extractive Industries Review that it ‘fully support[s] the importance of protecting the rights of those who are affected by [extractive] projects.’230 Hence, ‘it has major reviews under way to consider how to engage with human rights issues.’231 In fact, as noted earlier, the IFC and MIGA have recently incorporated all four core ILO labour rights into their safeguard policies.232 It is to be hoped that other entities in the WBG, that is, the IBRD and IDA, will follow the IFC and MIGA and explicitly integrate human rights into their policies. A further concern is the question of ‘punishment or ‘sanction’ for violation of the WBG’s social safeguard policies. As noted earlier, the WBG can impose certain sanctions on non-compliant borrowers, but the problem is that these sanctions are seldom if at all imposed on corporate borrowers. This then is an incentive for non-compliance.233 However, while sanctions are desirable, they must be appropriate for the circumstances. For example, rather than invoke MIGA’s power to cancel a Contract of Guarantee, where the client violates host country regulations or its safeguard policies,234 it may be more appropriate to

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impose financial sanctions such as fines. Besides, the revocation of a Guarantee may be counterproductive given that the MIGA’s mission is ‘to promote foreign direct investment into emerging economies to improve people’s lives and reduce poverty.’235 These adjustments are of course necessary if the WBG is to be taken as seriously committed to the pursuit of social justice. But the matter does not end there. There are policy implementation issues that the WBG may need to address. For example, civil society, including host communities, has not been adequately empowered in the WBG’s policyimplementation process, particularly as regards project approval, monitoring, and supervision. At the project-approval stage, for example, the prior consent of host communities, freely and knowingly given, is not regarded as a crucial factor upon which the WBG’s decision to fund a project is based.236 Neither does the WBG meaningfully engage local host communities in oversight functions as the project progresses.237 In the African setting there exist community structures and institutions – such as local chiefs and councils – that can be co-opted into projectimplementation committees, provided of course these local institutions are genuinely independent and honest, and have not themselves been unduly influenced by corporate project sponsors or host African governments. The participation of NGOs in the WBG’s review of the Inspection Panel’s processes has led to streamlining of the Panel’s operating procedures, and hence its utility as an accountability mechanism.238 Such participation could equally bear fruit in the area of securing compliance with WBG policies by corporate project owners.239 Besides, NGOs could ‘provide early warning of any previously unforeseen social or environmental impacts’ of WBG-funded projects.240 They could also help prevent some of the deficiencies and distortions that have so consistently plagued the WBG’s policy-implementation process. For example, the involvement of NGOs in the implementation of the Chad-Cameroon Project would have prevented or at least limited the coercion of the consent of local communities. It would certainly not be out of place to contend that, had organized civil society been involved in the implementation of WBG-financed extractive ventures in Africa, the feature of forced displacement prior to consultation that characterizes some of these ventures would not have been so easily accomplished by the governments and TNCs. Aside from the above, local host communities are more likely to be convinced about the genuineness of the intentions of the WBG if NGOs,

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particularly local NGOs, are brought into the policy-implementation process right from the inception of the project. The active and meaningful engagement of NGOs could also help both the WBG and project owners in building the capacity of host communities so that they can meaningfully dialogue with project owners and participate in project implementation.241 Conclusion Although in recent times the WBG has, at least in theory, committed itself to social accountability, it remains overly fixated on economic considerations. As we have seen, rather than being actively engaged in the implementation of its social safeguard policies, the WBG relies on the good faith of its corporate borrowers to adhere to, and comply with, the policies. But this approach remains fundamentally defective. Indeed, because compliance with the policies necessarily involves some costs on the part of corporate borrowers, the self-preserving instincts of these corporations invariably lead them, in the absence of independent supervision and monitoring, to disregard the policies so as to save costs and enhance profits. However, as argued in this chapter, the implementation of the WBG’s social safeguard policies may be enhanced by engaging civil society representatives, NGOs, and other experts – both local and international – in on-site supervision and monitoring of compliance.

8 Extraterritorial Regulation of Transnational Corporations in Their Home Countries

State laws in the developed countries (home of TNCs) do not specifically prohibit TNCs from engaging in social deviance or rights infractions overseas except, of course, to the limited extent of prohibitions of corrupt practices in foreign lands.1 Although, as discussed below, aspects of state laws in some of these countries are being ingeniously utilized by lawyers and rights activists in an attempt to impute to TNCs liability for rights violations abroad, governments of the developed countries seem to have taken the position that corporate self-regulation is to be preferred to public extraterritorial regulation. This is manifested in the Voluntary Principles on Security and Human Rights, which, as noted in chapter 4, was established under the auspices of the governments of the United Kingdom and the United States, in collaboration with TNCs and civil society organizations. In addition, the United States government has established the Model Business Principles,2 which prescribes voluntary labour standards for business. For its part, the Canadian government has rejected a recommendation by the House of Commons’ Standing Committee on Foreign Affairs and International Trade that Canada should ‘establish clear legal norms’ for holding Canadian mining companies accountable for environmental and human rights violations associated with their operations in foreign countries.3 Rather than enacting such binding norms, the government officially encourages Canadian TNCs to adopt the International Code of Ethics for Canadian Business.4 While the European Union (EU) appears to be leaning towards some form of public regulation of European TNCs operating in developing countries,5 it has yet to put such regulation in place. Perhaps domestic constitutional law6 and international law rules on state sovereignty7 constrain the extraterritorial regulation of the foreign

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activities of TNCs by their home countries. However, while these rules significantly limit extraterritorial legislation, they have not prevented these countries from enacting extraterritorial laws when it suits them to do so.8 Neither have they prevented the extraterritorial application of commercial and antitrust laws.9 Why then should they be obstacles to the emergence of extraterritorial rules for corporate conduct? The lack of extraterritorial regulation in developed countries may be explained by something else: the perception (in official quarters) in these countries ‘that such regulation puts their corporations at a competitive disadvantage with other countries’ corporations.’10 Indeed, the economic prosperity of TNCs is thought to be better enhanced through the permissive and voluntary regime of self-regulation, a regime that is sure to thrive in the foreseeable future given the enormous influence that corporations wield over the political class.11 However, civil society even in these countries remains sceptical about self-regulation. As noted in chapter 4, the scepticism is well founded in view of the fundamental flaws in self-regulation. Given the lack of public regulation of the overseas conduct of TNCs by their home countries, this chapter will understandably concentrate on other models of regulation. In particular, it examines social reporting and auditing, an increasingly popular self-regulatory mechanism. It also analyses the role of civil society NGOs, consumers, and shareholders in the regulatory process. Finally, it takes a look at transnational tort litigation in the form of foreign direct liability suits. Promoting Corporate Accountability through Social Reporting The ineffectiveness of voluntary codes has refocused attention on mechanisms for enhancing corporate compliance with social standards. One mechanism that has gained increased acceptance as a regulatory tool in the recent past is the concept of social reporting.12 It is premised on the conviction that public disclosure of information could enhance corporate transparency by galvanizing market forces, particularly in developed countries, to react appropriately to the information disclosed. In the words of a business ethicist, ‘[i]f corporations were required to disclose information about their actions affecting [stakeholders such as consumers, employees, and the general public], then pressure would mount to justify those acts; and justifying one’s acts … is the first step toward improving one’s behavior.’13 Disclosure of misbehaviour can lead to the public ‘shaming’ of the

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corporation,14 assuming of course that the corporation possesses a ‘soul’ or ‘conscience’ that can be shamed. Indeed, as Archon Fung, Dara O’Rourke, and Charles Sabel have rightly observed, ‘publicizing workplace conditions and practices … enables society to sort out the abhorrent from the acceptable and shift its production methods from the former to the latter.’15 But social reporting is not all about ‘shaming’ or ‘punishing’ corporations for their misbehaviour. If society requires corporations to render an account of their activities by way of social reports, they are likely to be more conscious of the potential impact of their activities, thus inducing them to more carefully consider their actions.16 Voluntary Reporting by Extractive Transnational Corporations TNCs are increasingly adopting voluntary reporting if only to ward off further regulation by government. A 2002 survey by the consulting firm KPMG reveal that 45 per cent of ‘Global Fortune Top 250’ corporations issue environmental and other social reports annually, in addition to their annual financial statements.17 A subsequent survey indicates that in 2005, 64 per cent of the ‘Global Fortune Top 250’ corporations published social reports, either separately or as part of their annual financial report, and that 52 per cent of these corporations published a separate social report.18 Extractive TNCs are not left out in this regard.19 In 2002, for example, 38 per cent of oil and gas corporations and 33 per cent of mining corporations were said to have produced social reports.20 Social reports by extractive TNCs are limited in scope. They focus primarily on the companies’ compliance with host country laws and regulations, and their adherence to their codes and other governance policies.21 Although the reports often depict TNCs as socially responsible entities, most extractive TNCs do not report on the adverse impacts of their activities.22 For example, while Shell and Chevron acknowledge that they flare gas and emit greenhouse gases in Nigeria, their reports do not indicate how this has impacted host communities.23 Also, many TNCs do not report on every aspect of their social and environmental performance, and only a few report on all of their global operations.24 Talisman Energy declares, for example, that its report ‘is not intended to be an exhaustive review of all activity that Talisman has undertaken or supported.’25 Most significantly, many extractive TNCs do not independently verify their reports.26 Some of the TNCs – such as StatoilHydro – which do so engage the services of their financial auditors to

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verify the reports.27 This arrangement not only calls into question the ‘independence’ of the auditors, but it may also lead to conflict-of-interest problems.28 Shell appears to have realized this conflict-of-interest problem, hence it no longer engages its financial auditors to verify its social reports. Rather, Shell engages an external review committee of independent experts for that purpose.29 Besides, the audit is weak because it is intended to be a ‘limited assurance that the report as a whole is free of material misstatements;’30 the information and data reviewed are selected by the TNCs;31 and the auditor’s task is simply ‘to express a conclusion as to whether anything has come to our attention to suggest that the selected performance indicators are not presented fairly in accordance with relevant criteria.’32 In sum, social reports by extractive TNCs are anything but consistent: disclosure is voluntary, verification is difficult, and thus the scope and content of the reports differ widely among companies. However, substantive attempts have been made to standardize extractive industries reports. The oil and gas industry has recently prescribed common reporting guidelines, which urge TNCs to ensure that their reports are relevant, transparent, consistent, complete, and accurate.33 Likewise, the ICMM requires member companies to make their reports in accordance with the Global Reporting Initiative (GRI) guidelines, particularly the Mining and Metal Sector Supplement of the guidelines.34 However, while the oil and gas industry guidelines acknowledge the utility of independent verification of reports, they do not specifically recommend or encourage it.35 This is in contrast with other reporting initiatives, such as AccountAbility1000 and the GRI Guidelines, which encourage companies to engage the services of independent auditors to verify their reports.36 The increasing popularity of voluntary reporting notwithstanding, it is not altogether certain that it will produce desired results in the future. Like voluntary codes, voluntary reporting lacks independent oversight, and there is an absence of a dominant authority to ensure that reports are accurate. Save to the limited extent that some corporations are adhering to extant reporting guidelines, the substantive content of reports is set by corporations themselves. Corporations choose what and what not to report. These deficiencies weaken the regulatory impact of voluntary reporting. In fact, they are incentives for corporations to under-report the impact of their activities37 and to make ‘a report only when they are proud of their conduct.’38 Thus, voluntary social reports run the risk of being transformed into mere instruments

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for corporate image-laundering. It is probably to avoid this problem that Fung, O’Rourke, and Sabel recommend a ‘super monitor,’ consisting of various international organizations, whose duty is not only to monitor the monitors employed by corporations, but also to ‘conduct inspections to verify their integrity.’39 Other factors may ultimately adversely affect voluntary social reporting in extractive industries. Because extractive products are fungible and because their producers are not easily identifiable, extractive TNCs may be insulated from the regulatory effects of information disclosure. In addition, structural shortage of products such as gasoline on the market may buffer non-disclosure against adverse consequences. Moreover, the fear of adverse public reaction may limit the extent to which corporations are willing to disclose their non-compliance. Finally, the possibility of a corporation being sued (at least in the United States) for making false or misleading statements in its social reports could entrench a culture of non-disclosure.40 Mandatory Social Reporting Schemes The deficiencies and limitations of voluntary reporting have prompted the clamour for mandatory reporting.41 Some proponents have called for social reporting legislation under which corporations would be mandatorily required to make a report on compliance with stipulated social standards.42 Others look rather to disclosure within the context of regulatory bodies, such as the Securities and Exchange Commission. They suggest that public corporations should be required to file a social disclosure statement in relation to their domestic and foreign operations before the appropriate securities agencies, along the lines of financial disclosures currently required of them.43 Cynthia Williams rationalizes, for example, that a ‘[c]onsistent, periodic disclosure of such information in a standard format [with the Securities and Exchange Commission] would help to create “social transparency” in the capital markets comparable to the financial transparency that now exists.’44 Mandatory reporting has in the recent past been legislated, albeit to varying degrees, by some countries in Europe, particularly France,45 Denmark, and The Netherlands.46 This development has been encouraged by the EU Parliament, which has called on the European Commission to consider requiring ‘social and environmental reporting to be included alongside financial reporting requirements.’47 Europe is hardly alone in the movement towards social reporting. Canada’s Bank Act

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requires all banks with equity of $1 billion or more to ‘annually publish a statement describing the contribution of the bank and its prescribed affiliates to the Canadian economy and society.’48 Although mandatory reporting regimes in the developed countries are laudable, they fall short because they do not require independent auditing or verification.49 They are largely limited to environmental compliance, and, more significantly, they do not cover the foreign activities of corporations based in these countries. However, France’s Nouvelles Regulations Economiques [or New Economic Regulations] appears to be more expansive than similar reporting initiatives in other countries. It requires publicly quoted companies in France to disclose in their annual reports the social and environmental impacts of their activities on three key social areas: human resources including employees’ health and safety, community involvement, and the environment.50 But the French statute is itself not without flaws. It does not address human rights issues, and it lacks a defined process for auditing or validating the information and data contained in the reports it mandates.51 In fact, it neither prescribes reporting standards nor suggests a ‘format to be utilized by affected companies in the reporting of information.’52 It also does not require independent verification of reports. Moreover, it does not prescribe sanctions for non-compliance with its reporting requirements. Perhaps more importantly, except to the limited extent that it requires disclosure of activities of foreign subsidiaries as they relate to the environment,53 it does not appear to cover the international operations of French corporations.54 In effect, parent corporations are obliged to report neither on their activities abroad nor on activities of their foreign subsidiaries relating to community interests, human rights, and labour rights.55 Given these severe limitations, social reporting requirements in France and other developed countries are of little help to Africans who suffer the negative consequences of the activities of extractive TNCs. In fact, non-applicability of their reporting requirements to the foreign operations of TNCs leaves the developed countries susceptible to the charge that they encourage double standards by industry. This charge can be legitimately made because these countries require reports in respect of operations within their territory, while turning a blind eye to the foreign activities of the same corporations that they expect to be socially compliant within their territories. The non-extension of reporting requirements to the foreign operations of TNCs may send a wrong signal that it is acceptable for these corporations to engage in social deviance, so long as it takes place abroad.

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While extractive TNCs report voluntarily on their operations, some TNCs may be reluctant to voluntarily publish aspects of their foreign operations for fear that such publication may ruffle feathers within host governments, and thus lead to the loss of future contracts or concessions.56 However, if the home countries of the TNCs mandatorily require them to make full and complete social disclosure about their foreign activities, the host government’s ability to discriminate against TNCs on the basis of their disclosure practices would be severely restricted, because many of the TNCs would then be subject to similar disclosure rules.57 This would, however, be the case only if most (or all) developed countries require TNCs to report on their foreign operations. Otherwise the international competitiveness of TNCs based in countries with mandatory reporting rules may be adversely affected, because some host governments may choose to do business with TNCs that do not make such disclosures. Of course, a plausible counter-argument is that it is the duty of developing countries to prescribe conditions (including social reporting) for the operations of foreign entities on their soil. But such an argument ignores a fundamental point, that the quest for global corporate accountability ought properly to be multidimensional and is to be simultaneously pursued at several levels, including host and home countries of TNCs. The Role of Northern Civil Society in Regulation Non-Governmental Organizations It is a truism that NGOs (including the media and religious organizations58) in the developed countries of the North have been at the forefront of the campaign for global corporate accountability. Northern NGOs have consistently been the most vocal critics of the corporate irresponsibility of TNCs in the developing world. However, NGOs do much more than heap criticisms on TNCs. They exert pressure on corporations, governments, and international institutions alike to establish, improve upon, or comply with social standards.59 The World Bank Inspection Panel, for example, was (as noted in chapter 7) established primarily in response to NGO pressures on the World Bank.60 NGOs also mobilize domestic and international public opinion by disseminating information about social atrocities committed by corporations. In addition, they organize campaigns and product boycotts,61 and they liaise and collaborate with regulators,62 legislative bodies, governments,

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international institutions, and willing corporations to find solutions to corporate irresponsibility.63 In some cases, NGOs make use of formal legal processes in the quest for corporate accountability. Perhaps more significantly, NGOs have been actively engaged in establishing and disseminating principles on the ethical conduct of business.64 The crucial role played by northern NGOs in spotlighting corporate social deviance in Africa, mobilizing public support for corporate accountability, and encouraging responsible business practices cannot, in fact, be overemphasized. The impact of international NGOs such as Human Rights Watch, Greenpeace, the Sierra Club, Friends of the Earth, and Oxfam (to mention but a few) has been particularly pronounced in the extractive sector. They have, through public campaigns and publications, helped to bring to the attention of the international community the extent to which the activities of extractive TNCs adversely affect Africa and other parts of the developing world.65 The advent of the Internet has enhanced the reach and effectiveness of NGOs, and it will surely continue to be a primary mechanism for information dissemination by them. NGO campaigns against corporate irresponsibility may already have started yielding some dividends in Africa and elsewhere.66 Two events bear out this assertion, at least in the context of Africa. The first relates to the apparent capitulation by Royal Dutch Shell in the manner it deals with Nigeria’s oil-producing communities, following adverse international publicity generated by international NGOs (acting in concert with local Nigerian NGOs) against Shell for its perceived role in the Ogoni crisis. As noted in chapter 4, Shell has revised its code of conduct to include specific mention of human rights commitments for the first time.67 The other event is Talisman Energy’s divestment of its shares in the GNPOC, an oil-prospecting and exploiting consortium widely reported to be complicit in human rights abuses in the Sudan.68 The divestment may have been induced by the negative publicity generated by public campaigns against Talisman (particularly by religious groups in North America), which resulted from its perceived complicity in, and indifference to, human rights violations in the Sudan.69 While these two events may not have been influenced by Northern NGOs alone, it seems unlikely that they would have occurred without the adverse publicity generated by them against the TNCs.70 These successes notwithstanding, Northern NGOs are susceptible to a number of criticisms. Critics charge NGOs with setting ‘unreachable standards’ of social behaviour for business.71 NGOs have also been

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accused of arbitrarily and selectively targeting TNCs as subjects of their social campaigns because TNCs are easy and convenient targets;72 acting, albeit inadvertently, as agents of their home (developed) countries and governments;73 and speaking for people they never consult.74 Some of these charges appear to be justifiable. For example, by being overly preoccupied with TNCs as detractors allege, NGOs sometimes seem to ignore the irresponsible conduct of smaller corporations. This attitude may be counterproductive because some small corporations may, in fact, be more culpable than major TNCs. That said, it would be naive to expect NGOs to target all corporations engaged in social irresponsibility, because it is practically impossible for them to do so. In fact, given the limited finances and resources of NGOs, it is rational for them to seek to optimize the effects of their social campaigns by selecting corporate targets with appropriate name or product recognition. The concentration of NGOs in the developed countries raises other kinds of legitimacy problems. It may lead them to view social concerns purely from a Western perspective. Western moral standards may thus be used to judge social behaviour in the developing world, criteria that may not necessarily be appropriate, given the differences in world view and social standards between these geographic regions. This concern is, however, diminished by the fact that international NGOs often work in close collaboration with local NGOs in developing countries. Another criticism leveled against NGOs is that they are accountable neither to the public nor to the local communities they often claim to represent.75 While we expect them to do so, NGOs are not legally required to answer to the public.76 The problem of accountability is exacerbated by the fact that members and leaders of NGOs are not democratically elected.77 In fact, local communities in developing countries are, for the most part, not members of the NGOs. What is more, save to the limited extent that NGOs are regulated by domestic law, they are largely free from oversight.78 Thus, while NGOs can and often ‘bring others to task,’ they ‘themselves remain immune’ under international law.79 The apparent lack of accountability is, however, countered by the fact that the relevance of NGOs may not be sustained unless they earn the thrust and confidence of the public.80 They must, therefore, remain ‘true to the normative principles [and objectives] that they articulate’ before the public, as indeed many of them do.81 In addition, competition from other NGOs induces accountability82 because the ineptitude of an NGO may translate into the loss of public support, membership, and, most importantly, funds.83 Finally, the mass media upon which

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NGOs depend for information dissemination to the public84 equally act as NGO watchdogs and may thus promote NGO accountability. Indeed, except in the unlikely event of a conspiracy to hide the unsavoury, the media is likely to expose any irresponsible NGO. The proliferation of NGOs and the multiplicity of regulatory initiatives they put forth even on the same social issue is also problematic. Indeed, NGOs compete among themselves on a broad range of issues rather than pooling resources and concentrating on a few global regulatory initiatives broad and sensitive enough to be applicable to various industries and that could then be promoted within nations by local chapters. In the process of competition, valuable energy is dissipated at several levels. However, the multiplicity of NGOs has its own advantages. One noted earlier is that fierce competition between NGOs promotes accountability. Another is that it may encourage collaboration and cooperation between NGOs, an exercise that may itself enhance their effectiveness and performance. Collaborating NGOs may, for example, share the burden of a particular campaign in such a manner that different aspects of the campaign are handled by NGOs with expertise in specific areas or subjects. Conceivably, this may lead to greater efficiency and better results. Citizen Action: Boycotts and Social Campaigns Private citizens, as consumers, sometimes exercise their purchasing power in furtherance of social objectives. This phenomenon has given rise to what has been termed ‘green consumers,’ that is, ‘consumers who include environmentally oriented considerations in their buying decisions.’85 Consumers may condition their patronage of a corporation’s products and services on its social compliance, or vice versa. Where they are dissatisfied with the social performance of a corporation, consumers can resort to a boycott of its products and services.86 In fact, some consumers in the developed countries spontaneously boycott corporations they perceive to be socially irresponsible.87 But are citizen actions such as boycotts and other civil campaigns effective regulatory instruments? One view is that they are effective where they adversely affect the financial health of the target corporation. For example, a consumer boycott of Shell following the announcement of its intention to dump the Brent Spar oil platform into the sea was said to have caused its sales to plunge by as much as 50 per cent.88 Similarly, consumer boycotts in developed countries of soccer balls

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manufactured by TNCs with the aid of child labourers in Asia reportedly led to a slump in their sale and subsequently forced the TNCs to change their contentious labour practices.89 A contrary view is that the ‘traditional thinking’ that a corporation’s business performance can be damaged by civil campaigns ‘is not true, at least not in the obvious way it is presented.’90 Simon Zadek and Maya Forstater have argued that ‘[e] ven the very high profile civil campaigns against Shell, Nestle, Monsanto, and Nike did not have any demonstrable effect on share prices and dividends,’ and that corporations sometimes claim significant financial damage from social campaigns as ‘part of a carefully planned responsive strategy.’91 Others have argued that consumer boycotts and other social campaigns should be measured not so much by whether they are effective but rather by whether they are successful.92 According to Craig Smith, such a distinction is necessary because differences exist between the achievement of an economic impact of a particular action and the realization of its intended objective.93 Smith’s expansive view of boycotts is at once problematic because ‘success’ implies that the boycott has induced a change in conduct by the target firm. If this is so, one would be hard-pressed to justify the ascription of ‘success’ to a boycott that does not lead to a change in corporate behaviour. But the argument is worthy of a second look. Consumer boycotts are often intended to achieve either or both of two ends: to hurt the finances of the target entity, or to express the indignation of consumers and cause the target some embarrassment by drawing public attention to its misbehaviour. Consumer boycotts intended for the latter purposes are useful expressive instruments, even if they do not hurt the finances of the corporation or induce a change in behaviour in the short term. Ultimately, the expression of public indignation through consumer boycotts contributes ‘to the aggregate of pressure for change and discourages other firms from’ engaging in similar conduct as those being protested by the consumers.94 Whatever their utility, consumer boycotts of extractive products may be muted because these products may not readily be attached or traceable to a particular corporation. Thus, consumers may not be aware that the products they purchase are those of a socially irresponsible corporation. Take the question of ‘conflict diamonds’ from Africa, for example. Notwithstanding the worldwide publicity that the Kimberley Process95 and other initiatives have generated, conflict diamonds are today still being sold in the shops of the developed countries.96 The reason for

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this is not unconnected with the difficulty of tracing the origin of these diamonds and labelling them accordingly, a task further complicated by the ease with which diamonds are smuggled out of their war-torn country of origin.97 The above is not to suggest that all extractive products pose the same degree of identification problems for consumers. Different extractive products represent different challenges for consumer boycotts depending, among others, on the nature of the products and how they are produced and marketed. Thus, it is sometimes possible for consumers to identify producers of particular extractive products. For example, major oil TNCs both extract, process, and sell gasoline at retail. But the story does not end there. Major oil TNCs equally sell unrefined crude oil to middle-men who then refine and sell to the public. In the latter scenario, difficulties persist in determining the involvement of irresponsible TNCs in the production of the gasoline in question. In addition, we also have to remember that extractive products such as liquified natural gas, diamonds, gold (and indeed gasoline) are often mixed up and unlabelled in the international market. It is almost impossible under these circumstances for consumers and buyers to know the corporation that actually produced them. And because some of these products are essential to our enjoyment of certain necessities – for example, we rely on gasoline for transportation – consumers may purchase them anyway and may be less concerned about the social compliance of the producing corporation. Although consumer boycotts in the developed countries, where purchasing power is high and widespread, may be potent weapons for corporate regulation, their effects on extractive industries may be attenuated by another factor. Because these industries have a high rate of corporate irresponsibility, at least in the developing countries, persistent calls for a boycott may lead to consumer fatigue, if not apathy. The desire to avoid this problem perhaps explains why NGOs selectively choose the corporate targets of their civil campaigns. As well, effects of boycotts may be short-lived because boycotts themselves may not be sustainable over a long period of time, given the enormity of resources, time, and expense they entail. In fact, unless public attention and support is sustained, consumer boycotts may wear off quickly. Overall, citizen action is dependent upon public disclosure and dissemination of information about corporate activities. The public can only react to what it knows. While corporations have been known to conceal information about their social irresponsibility, three relatively

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recent developments should promote public awareness: the advent of the Internet, which has made information gathering and dissemination a lot easier, faster, and less expensive; corporate social reporting, to the extent that corporate reports accurately represent the extent of compliance; and social and eco-labelling schemes. Product labelling or certification, usually implemented by civil society groups, government agencies, and corporations, is a representation to investors, consumers, and the public that a product was produced in a socially responsible manner. Labelling has recently become more extensive, particularly in regard to the protection of the environment, human rights, and labour rights. In the context of environmental protection, for example, the Forest Stewardship Council, a joint industry-NGO initiative, has not only devised what it calls ‘Principles and Criteria for Forest Stewardship,’98 but it routinely certifies logging corporations (through designated independent certification bodies) that comply with the principles.99 Also, under the Kimberly Process Certification Scheme each participating country issues a certificate certifying every shipment of rough diamonds exported from its territory as free from conflict diamonds.100 But while they are no doubt useful, social labelling has a number of disadvantages. Many schemes lack transparency and independent verification; their effectiveness is seriously compromised by their lack of clarity arising from the ‘conflicting diversity of criteria’ they employ;101 and they seem less apposite for extractive industries because their products – gold, diamonds, etc. – are often impossible to label. This is perhaps why the Kimberley Process has not attempted to label individual diamonds for sale in international markets. Rather, as noted earlier, it certifies entire shipment of rough diamonds, usually consisting of a number of parcels packaged in tamper-resistant containers.102 Shareholder Activism Under Anglo-American corporate law, shareholders of a corporation do not have direct management control over the corporation, a task specifically assigned to the board of directors.103 However, shareholders can utilize certain strategies to register their displeasure about the social performance of the corporation and influence corporate management towards social accountability. These include shareholder proposals at the corporation’s annual shareholders’ meeting, and ethical investment and divestment.

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Shareholder Proposals Corporate statutes allow shareholders to submit proposals on some issues affecting the corporation to management under a rule commonly referred to as the Shareholder Proposals Rule (SPR). The SPR obliges public corporations to distribute to all shareholders (along with the annual proxy material, and at the corporation’s expense) any shareholder proposals that meet substantive and procedural criteria.104 Issues raised in the proposals must be debated and voted on at the annual general meeting of the shareholders. Through the SPR, shareholders may challenge corporate management decisions and may in fact hold management accountable for its actions.105 The SPR, for example, has been utilized to force corporate management to adopt ethical codes of conduct.106 shareholder proposals in the oil and gas industry Extractive TNCs attract a number of shareholder proposals on social accountability issues each year. This is particularly true in the United States where certain institutional investors such as the AFL-CIO, Teachers’ Retirement System of New York City, and several religious organizations have been relentless in submitting proposals for consideration at annual meetings of oil and gas TNCs. Generally, the proposals seek the adoption of environmental protection measures and human rights and labour rights policies on the basis of international instruments. They also seek to make companies report on their social and environmental liabilities, including the adverse impact of their activities and measures taken to ameliorate them. In the recent past, however, environmental concerns have dominated shareholder proposals in the oil and gas sector, apparently because of growing concerns about climate change and global warming. For example, between 2000 and 2003, ExxonMobil was the target of thirty-five shareholder proposals, about half of which were environment related.107 Overall, shareholder proposals submitted to oil and gas TNCs attract little support among shareholders. Proxy votes at ExxonMobil, a company which receives more proposals than any other in the extractive industries, attest to this fact. In 2000, proposals on renewable energy sources, on drilling at the Arctic National Wildlife Refuge (ANWR), and the Chad-Cameroon Project received 6.2 per cent, 5.4 per cent and 4.9 per cent support, respectively.108 In 2001, a similar proposal on ANWR

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drilling received 9.6 per cent support, while a proposal on renewable energy sources received 8.9 per cent support.109 In 2002, a proposal on human rights policy was supported by 6.8 per cent of ExxonMobil shareholders.110 In 2005, three proposals dealing with ExxonMobil’s relationship with the Indonesian military, the incorporation of human rights principles into its code of conduct, and the reduction of global warming received 7.6 per cent, 6 per cent, and 8.8 per cent support, respectively.111 Finally, a proposal requesting ExxonMobil to report on health in Africa received 7.9 per cent support, while another calling on it to report on its human rights practices attracted 8.0 per cent support.112 Proposals at other TNCs also attract low support. For example, a proposal on Shell’s activities in Nigeria received 10.5 per cent support in 1997,113 while in 1996 Chevron’s shareholders overwhelmingly rejected a proposal requiring it to report on operating risks in Nigeria.114 Other proposals requiring Chevron to report on greenhouse gas emissions,115 and the environmental and safety hazards associated with its activities,116 suffered a similar fate. The low support for shareholder proposals is encouraged by the management of oil and gas TNCs, which, in the proxy statements usually circulated with the proposals, almost always advise shareholders to vote against the proposals. However, proposals on climate change appear to attract considerably higher support than proposals on human rights and labour practices.117 According to Robert Monks, Anthony Miller, and Jacqueline Cook, two proposals on the subject received 20.2 per cent and 21.3 per cent support among ExxonMobil shareholders in 2003, while a proposal on renewable energy sources received 25.1 per cent support from Chevron shareholders the same year.118 Prior to this, a 2002 proposal on renewable energy sources attracted 20.2 per cent support among ExxonMobil shareholders.119 The low level of support for proposals among shareholders of oil and gas TNCs is not in any way peculiar. In fact, in Canada shareholder proposals garner little support from shareholders at general meetings and are seldom adopted. For example, only seven of the ninety-seven proposals submitted in 2003 garnered more than 50 per cent support and none of the seven proposals related to social accountability issues.120 Indeed, shareholder proposals in Canada attracted an average of 15 per cent support in 2001121 and 14.2 per cent support in 2002.122 This situation is unlikely to change soon given that Canadian mutual funds often vote against shareholder proposals.123 Whether or not shareholder proposals have effected changes in the

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behaviour of oil and gas TNCs is unclear. What is clear is that, given the low support they attract, shareholder proposals may not generate sufficient pressure on corporate management to conduct business in a socially responsible manner. However, in at least one instance, there is evidence that a proposal influenced fundamental changes in Shell’s governance policies. Several institutional and private shareholders filed a proposal with Shell on 14 February 1997 that Shell designate a specific director with responsibility for implementation of its environmental and corporate responsibility policies; establish effective internal procedures for their implementation and monitoring; establish an independent external review and audit procedure for the policies; report to shareholders regularly on their implementation; and publish a report on its implementation of policies in relation to its operations in Nigeria.124 Although Shell opposed the proposal, it nonetheless received 10.5 per cent support from the shareholders.125 But more significantly, before the vote was cast, Shell acceded to many of the recommendations in the proposal. It designated a specific director for corporate accountability issues; revised its code of conduct to include specific human rights commitments; published a report on its activities in Nigeria; and agreed in principle to externally verify its environmental reports.126 In fact, the agreement in principle has been translated into action as Shell now engages independent auditors to verify its social reports.127 Although other factors, such as NGO campaigns against Shell for its perceived role in the Ogoni crisis, may have played a part in inducing these changes, the primary catalyst for the changes appears to be shareholders’ pressure on Shell management.128 Shareholder proposals may lead to successful outcomes in another way. Proposals can stimulate dialogue between management and shareholders. For example, a proposal requesting ExxonMobil to adopt a workplace policy on the basis of the ILO Declaration on Fundamental Principles and Rights at Work prompted the company to negotiate with the proponents.129 The proposal was subsequently withdrawn after ExxonMobil assured the shareholders that it was committed to a productive dialogue on the issue.130 Also, the Shareholder Association for Research and Education (SHARE) reported that in 2005 a number of Canadian companies entered into dialogue with shareholders on the basis of shareholder proposals filed with the companies.131 According to SHARE, at least twenty-six of the forty-one shareholder proposals it tracked that year resulted in ‘successful negotiations’ between shareholders and company management.132 In some cases, negotiations

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stimulated by shareholder proposals have resulted in management acceding to some or all of the shareholders’ demands.133 limitations of the shareholder proposals rule (spr) Although the SPR has the potential to promote shareholder activism and perhaps corporate accountability, shareholders face debilitating hurdles in utilizing it. Rule 14a-8 of the United States, s.137 of the Canada Business Corporations Act (CBCA),134 and equivalent sections in provincial corporate statutes135 place severe limitations and restrictions on the utilization of that mechanism. In the United States, for example, there are thirteen different circumstances under which corporate management could refuse to include a shareholder proposal in the corporation’s proxy solicitation materials.136 While the CBCA contains generally less stringent restrictions, it nonetheless permits exclusion of proposals under seven circumstances.137 These restrictions relate to the status of shareholders, timing, content, and purpose of the proposal.138 Two restrictions under the U.S. rule are particularly detrimental to proposals touching on foreign operations of U.S.-based TNCs. A shareholder proposal need not be considered if it (1) ‘relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business;’139 or it (2) ‘deals with a matter relating to the company’s ordinary business operations.’140 Extractive TNCs’ assets, earnings, and gross sales often run into billions of dollars. They also often do business in many countries across the globe. As a result, foreign operations in any given developing country may not account for up to 5 per cent of the total assets, or net annual earnings, or gross annual sales of individual TNCs. Consequently, even if foreign operations cause environmental degradation, or human rights violations in the host developing country, the corporation’s shareholders are effectively precluded from having proposals on these issues included in the corporation’s proxy solicitation materials.141 The second highlighted restriction is equally problematic. Corporate social accountability issues, including human rights violations, ill-treatment of labour, and environmental degradation, often relate to, or result from the conduct of, the ordinary business operations of the corporation.

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For its part, the CBCA sets a high threshold for qualification to submit a proposal.142 Besides, the CBCA provision permitting exclusion of proposals ‘if the rights conferred by this section are being abused to secure publicity’143 could potentially be used to bar shareholder proposals touching on social issues that, by their nature, tend to attract wide publicity and public debate. While these restrictions may have been intended to ensure that the SPR is ‘a vehicle for corporate democracy rather than an all-purpose forum for malcontented shareholders to vent their spleen about irrelevant matters,’144 the fact is that they reduce the utility of the rule. Indeed, it has been said that the numerous restraints on the exercise of the SPR ‘frustrate collective shareholder action and genuine corporate democracy’ in the United States.145 At the moment, however, Canadian shareholders appear to fare better than their United States counterparts because recent amendments to the CBCA have, to some degree, liberalized the SPR.146 As a matter of fact, these amendments have led to a significant improvement in the number of shareholder proposals in the country. In 2003, for example, a total of ninety-seven proposals were submitted to thirty-nine corporations in Canada.147 Encouraging as this trend is, as noted earlier, the disturbing reality is that shareholder proposals attract little support in Canada. Besides, the utility of shareholder proposals is weakened because, even if adopted by shareholders at general meetings, they may not be binding on corporate management whether in Canada148 or the United States.149 However, it has to be said that management is unlikely to disregard a proposal adopted by shareholders for fear that shareholders may retaliate by voting them out.150 Beyond that, the potential impact of the SPR may be limited in countries such as Canada where federal and provincial or state corporate statutes differ significantly in relation to the SPR, thus offering an opportunity for corporations to incorporate in provinces without the SPR or with stringent restrictions.151 Ethical Investment and Divestment Shareholders, particularly those who are socially conscious, may invest in socially responsible corporations or divest from corporations they know to be socially irresponsible.152 For example, the pension fund TIAA-CREF and California Public Employees’ Retirement System were reported to have divested their holdings in Talisman Energy Inc.

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and refrained from purchasing PetroChina shares in response to their alleged complicity in oil-related human rights violations in the Sudan.153 Divestment by institutional shareholders could have adverse financial repercussions for the corporation given the enormity of the volume of their investments.154 Share value may fall, and prospective investors may be scared to invest in the corporation. Thus, the threat of divestment by institutional investors may ‘make management more [responsive] to the needs of shareholders and other corporate constituencies, such as, employees, customers, suppliers, and local communities.’155 Aside from ethical considerations, global institutional investors have an economic incentive to influence corporate governance towards social accountability: the need to enhance the competitiveness of their corporations by maintaining a level playing field in the international market. According to Robert Monks, ‘[i]nstitutions having investments in all countries have virtually no incentive to permit environmental and hiring practices in the poorest countries that can only have the impact of competing with their own investments elsewhere.’156 Investors are increasingly aware of the unique position they occupy in corporate governance. Hence today ‘there is a blossoming retail investment market in environmental and social investment funds and growing commitments to ethical investment among institutional investors.’157 There has equally been an increase in assets held by socially responsible investors. In Canada, for example, socially responsible investments were estimated at $51.4 billion in assets as of June 2002,158 an amount which increased to $65.45 billion in 2004.159 As of 30 June 2006, these investments stood at $503.61 billion.160 Although these figures represent a small proportion of total shareholdings in Canada, the steady growth in social investment assets in Canada is indicative of the fact that Canadian investors, particularly pension funds, are increasingly adopting social considerations in making investment decisions.161 Ethical investment is likely to grow in the future particularly in countries such as the United Kingdom, France, Germany, and Sweden that have laws and regulations requiring institutional investors, and in particular pension fund trustees, to take into account social and ethical issues in making investment decisions and to report on compliance with this requirement.162 Thus, institutional investors in those countries may now have greater incentives to invest in a socially responsible manner. Also, some stock exchanges now maintain indexes of ethically responsible public corporations.163 These indexes may potentially act as

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sources of information for ethical investors, and as corporate membership of the indexes grows, socially conscious investors will be provided with many more options to diversify their investment portfolio. A final point on ethical investment is worth noting. Investors will not necessarily choose to avoid profitable but socially deviant corporations. After all, the overarching wisdom in capital markets is the ‘optimization of returns on investments,’ which itself dictates investment in profitable corporations. It is possible that investors’ quest for high returns on investment may becloud their sense of social justice, where a corporation engaged in social irresponsibility is at the same time highly profitable.164 Besides, because ‘investors are not a coherent group,’ and because ‘they invest for different purposes and with different obligations,’165 social accountability may not be high on the priority list of many investors. Obstacles to Shareholder Activism The potential for shareholders to hold management accountable or to influence them towards corporate accountability is circumscribed by several factors. As noted above, shareholders face inhibiting obstacles in utilizing the SPR. In addition, the strict distinction between corporate control (vested in management) and ownership of the corporation (vested in shareholders) drawn in most corporate law statutes not only severely limits the capacity of shareholders to influence corporate management, but also circumscribes the areas or subjects on which they can do so. For example, under most Anglo-American corporate statutes, shareholders are precluded from interfering with management on matters relating to the ordinary business or affairs of the corporation, including those touching on corporate social accountability.166 Also, the extent to which institutional investors can influence the social performance of the corporation depends on the expertise (or lack thereof) of their managers ‘to effectively take account of environmental and other ethical issues in their portfolio companies.’167 Where their managers lack such expertise, institutional investors may not be able to bring appropriate pressure to bear on corporate management. Moreover, investors may not have the necessary information about the social performance of the corporation,168 since corporations are not legally obliged to disclose such information except, of course, in a few countries where mandatory disclosure has been legislated. While it

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may be possible for investors to independently obtain such information, the costs of doing so may dissuade even well-meaning investors. However, this problem may be lessened by the instrumental role both NGOs and the media often play in publicizing incidents of corporate irresponsibility. Finally, in countries such as Canada where ownership of corporations is concentrated in a few hands, or where dual-class shareholding is practised, the influence of shareholders over management is severely limited.169 For example, dual class shareholding allows ‘a relatively small number of shareholders to wield control even though they own only a small percentage of the firm.’170 Transnational Tort Litigation The absence of binding and enforceable international norms of corporate behaviour has, quite regrettably, attenuated the protection of international human rights, labour rights, and the environment from corporate abuses. Human rights activists and, in particular, victims of corporate abuse of rights in foreign developing countries have thus had to rely on two options: the reporting of abuses with the hope that somehow public pressure would be brought to bear on erring corporations to change their culture of abuse; and the enforcement of international human rights through domestic courts, particularly in the developed countries. The latter option is gradually becoming the weapon of choice in the fight against corporate impunity.171 In Canada, Cambior Inc., a mining TNC, was sued before the Quebec Superior Court for damages in relation to an environmental disaster at its gold mine in Guyana.172 Similarly, Cape Plc, Thor Chemicals Holdings Ltd, and RTZ Corp. Plc, all British TNCs, faced civil suits in British courts alleging that their employees in South Africa and Namibia suffered from terminal diseases as a result of exposure to dangerous chemicals and substances.173 The suits against Cape Plc were settled out of court after it agreed to pay more than a million dollars to the victims.174 Recourse to transnational litigation is more pronounced in the United States because of the existence of a specific statute – the Alien Tort Statute (ATS)175 – enabling suits against non-state actors for rights violations overseas. Alien Tort Statute The ATS provides that ‘(t)he District Courts shall have original jurisdic-

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tion of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.’176 Actionable conduct under the ATS is, therefore, conduct that violates ‘well-established, universally recognized norms of international law,’177 otherwise jus cogens. For ATS purposes, the ‘law of nations’ is not meant to be static or fixed. Rather, it is fluid in the sense that it ‘is an evolving concept that reflects international law and norms’178 which exist ‘among the nations of the world today.’179 Therefore, it is possible that as human rights crystallize and develop at the international arena, new jurisdiction-conferring norms would be added to the list of international norms recognized under the ATS.180 A norm could be so added if it is definable, universal, obligatory, and the object of concerted international attention.181 For the moment, however, ATS is applicable to ‘a very limited category [of claims] defined by the law of nations and recognized at common law.’182 The significance of the ATS lies in the fact that its reach is not confined or restricted to the actions of states, the conventional focus of international law. It applies equally to the actions of private persons and corporations that violate jus cogens or universally recognized norms of international law.183 As Judge Allen G. Schwartz of the U.S. District Court for the Southern District of New York has held, ‘there is no logical reason why corporations should not be held liable, at least in cases of jus cogens violations.’184 In fact, relying on the ATS, a number of Africans have filed suits against extractive TNCs in U.S. courts for alleged rights violations in Nigeria185 and Sudan.186 While the ATS applies to corporations, it does not appear to have been specifically meant by the legislature to address the problem of complicity of U.S-based corporations in rights violations in the developing world.187 However, the ATS may potentially enhance the accountability of U.S-based corporations for illegal and antisocial conduct in developing countries. Monetary damages awarded under ATS against corporations (if it ever happens) and the bad publicity likely to be generated by such awards could serve to deter other corporations from engaging in or becoming complicit in rights violations overseas. The potential positive effects of the ATS on corporate accountability may, regrettably, be muted by the enormity of its substantive requirements for liability, as well as the procedural obstacles that plaintiffs face in litigating claims under that statute. These requirements and obstacles will not be analysed in detail here. Rather, they shall be briefly discussed to indicate how they impede litigation under the ATS.

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substantive requirements and hurdles Plaintiffs face challenging substantive hurdles under the ATS, especially if they are pursuing claims against non-state defendants. A plaintiff must establish that the torts or rights violations alleged against the defendant were committed in violation of the ‘law of nations;’ and that the defendant acted under the ‘color of law.’ To establish the first ingredient, the plaintiff needs to show that the alleged tort or the violated right is, or forms part of, a norm that commands the general assent of civilized nations, violation of which is prohibited in clear and unambiguous terms.188 The second ingredient, otherwise referred to as the ‘state action’ requirement, is established by demonstrating that the defendant engaged in, or participated with a foreign government or its agent in committing, the alleged violation.189 The state action requirement places a significant limitation not only on the potency of the ATS but also on the chances of successful litigation against non-state actors. Indeed, ATS jurisprudence is replete with cases dismissed for lack of state action in the commission of an alleged tort, even when the tort is found to be a violation of the law of nations.190 What is particularly troubling is that rights violations committed by private security personnel engaged by TNCs in developing countries are not actionable under the ATS, if they do not involve state action. This remains so even if such acts patently violate the law of nations. The dichotomy between torts directly committed by non-state actors and those committed in concert with state agents sends a wrong signal to TNCs that it is acceptable for them to violate rights in developing countries so long as they act alone.191 Aside from establishing the two substantive requirements mentioned above, ATS plaintiffs in cases alleging TNC liability for rights violations could confront a further threshold question as to whether the parent corporation is liable for the actions of its foreign subsidiary alleged to be involved with state officials, or to have aided or abetted them, in rights violations abroad. Parent corporations faced with ATS litigation are wont to argue that they are, in law, separate and distinct from their subsidiaries, and as a result, deny liability for the actions of these subsidiaries. This argument may not hold where the plaintiff proves that the parent corporation is not only the effective controller and alter ego of the subsidiary, but also that it derives some benefits from the business activities of the subsidiary, especially the activity from which the alleged violation occurred. The parent corporation ought to be liable

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for the action or inaction of the subsidiary where it is demonstrated that it is directly involved in the conduct of the business affairs of the subsidiary;192 or that it invested in, or provided some capital for the business of, the subsidiary; or shared in the subsidiary’s profits or losses.193 procedural obstacles One of the difficulties that confront victims of torture under color of a nation’s law is the enormous difficulty of bringing suits to vindicate such abuses. Most likely, the victims cannot sue in the place where the torture occurred. Indeed, in many instances, the victim would be endangered merely by returning to that place. It is not easy to bring such suits in the courts of another nation. Courts are often inhospitable. Such suits are generally time consuming, burdensome and difficult to administer. In addition, because they assert outrageous conduct on the part of another nation, such suits may embarrass the government of the nation in whose courts they are brought.194

A plaintiff who claims against private defendants, particularly non-U.S. defendants, under the ATS may, if raised by the defendant, face one or several jurisdictional issues that may defeat the suit at the outset. Although the general rule is that U.S. courts have jurisdiction over foreign defendants if they have minimum contact with the U.S. forum,195 jurisdiction-denying doctrines are so pervading that all but a few cases brought under the ATS against non-state defendants have, for a variety of procedural reasons, been dismissed at the preliminary stage.196 A prominent jurisdiction-denying doctrine is the doctrine of forum non conveniens, which permits a court, in appropriate cases, to dismiss a suit even though the court has jurisdiction over the claim,197 if a consideration of the relevant factors tilts strongly in favour of trial in a foreign forum. Thus, where an adequate alternative forum exists, and the consideration of a series of factors – such as the private interests of the parties, the dictates of public interests, and the place where the cause of action arose – leads the count to believe that a trial in a foreign forum would better serve the interest of justice than a trial in the United States, the U.S. court would dismiss the action.198 The dismissal of ATS suits on the basis of forum non conveniens may, however, be tempered by unsavoury political events in the developing countries from which a majority of ATS cases originate. Thus, today,

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even where an appropriate alternative forum exists, U.S. courts are likely to assume jurisdiction if there is a real likelihood of reprisals against the plaintiff(s) by his or her country’s government, if the action were instituted in their home country.199 It is also expedient for U.S. courts to assume jurisdiction irrespective of the existence of an alternative foreign forum, because victims of rights violations who are bold enough to institute suits against TNCs and host governments in their domestic courts may face bias arbiters in court, given the lack of judicial independence in some developing countries. As Judge Schwartz has rightly observed, ‘[i]t would be rather surprising if the government of Sudan conducted a war of “ethnic cleansing” against plaintiffs and at the same time granted them a fair judicial process to remedy those injuries.’200 In addition to denying jurisdiction on the grounds of forum non conveniens, U.S. courts may also deny jurisdiction to adjudicate ATS claims because, by their peculiar nature, these claims may trigger other jurisdiction-denying doctrines. As we have seen, in order to satisfy the requirement of state action, ATS suits almost always allege collusion between TNCs and host state governments in rights violations. In essence, ATS suits call into question the acts of sovereign states within their own territories. ATS defendants can therefore question the jurisdiction of U.S. courts on both the ‘act of state’ doctrine, which precludes the courts of one state from enquiring into the validity of the public acts of a foreign sovereign state carried out within its own territory,201 and the doctrine of ‘international comity,’ which preaches respect by one state for the legislative, executive, and judicial acts of another.202 Finally, jurisdiction may also be declined because the case raises a ‘political question’ that the courts believe should be resolved by the administrative branch of government.203 Indeed, the peculiar nature of ATS claims has led to calls for U.S. courts to exercise utmost restraint in adopting an expansive view of the ATS, because doing so not only ‘amounts to US courts making foreign policy on the basis of very thin statutory authorization,’204 but ultimately leads the courts to enquire into whether foreign governments acted wrongfully within their own territories.205 Logistical Problems and Other Limitations of ATS/Foreign Direct Liability Statutes Aside from the obstacles discussed above, the practical significance

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of the ATS to the people of developing African countries who suffer rights violations in which TNCs are complicit would appear to be compromised by other problems. For example, the twin problems of costs of litigation and difficulties of transporting victims from developing countries to the United States for litigation purposes diminish the significance of the ATS. Due largely to poverty and illiteracy, the chances of victims from Africa or elsewhere travelling to the United States to seek redress under the ATS are slim. Indeed, but for the tenacity and, most importantly, pro bono assistance of U.S-based NGOs and lawyers who have provided rights violations victims with time, expertise, and material resources, a great many of the cases currently litigated under the ATS in U.S. courts would not have seen the light of day.206 Added to that are cultural and language differences, which undoubtedly increase the costs of litigation in the United States. Costs are also compounded by the long period of time it takes to completely litigate a suit. To take but one example, the Wiwa case filed in a U.S. court on 8 November 1996 was not heard on the merits until thirteen years later. The case was settled in 2009 when Shell agreed to pay monetary compensation to the plaintiffs. It comes as no surprise, therefore, that since 1997, when U.S. courts first sanctioned the application of the ATS to corporations,207 no corporation has yet been held accountable under the ATS.208 Indeed, corporate opposition to the ATS,209 and the deep financial pockets of defendant TNCs which enables them to challenge, by way of appeal, virtually all judicial decisions that go against their interests, are sure to make lengthy and expensive litigation the rule rather than the exception, in foreign direct liability suits in the United States and elsewhere. There is finally the problem of securing visas and U.S. residency permits for foreign plaintiffs. Residency is particularly important for litigation under the ATS. Cases instituted by foreign plaintiffs not legally resident in the United States are more likely to be dismissed on grounds of forum non conveniens than those instituted by resident U.S. aliens because U.S. courts accord little or no deference to a foreign plaintiff’s choice of a U.S. forum.210 In Re Union Carbide Corporation,211 for example, the plaintiffs, all but a few of whom were Indian citizens resident in India, were denied access to U.S. courts on the grounds of forum non conveniens, despite the enormity of the harm they suffered. Is ATS Litigation the Way Forward? The ATS potentially represents a giant leap forward in the struggle

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for corporate accountability. It may deter corporations from violating human rights in the developing world if significant damages are awarded under it against erring corporations. But despite its potential, we must resist the temptation to think that the ATS is an alternative to binding international norms of corporate accountability. This is so because apart from the numerous hurdles that ATS plaintiffs face, the potential effects of ATS would most likely be attenuated by several limitations. The ATS does not, by itself, seek to prevent the commission of tortious acts by TNCs abroad. It does not prohibit U.S. individuals and corporations from committing, engaging in, or participating in the violation of human rights beyond the shores of the United States. Rather, it merely affords alien victims of torts committed against the law of nations an opportunity to seek redress in U.S. federal courts. It is therefore at best reactive. Even in circumstances where the ATS applies, economic considerations and the perceived need to protect the United States’ economic interests may dissuade U.S. judges from assuming jurisdiction or awarding substantial damages against U.S. corporations. Put differently, the economic interests of U.S.-based TNCs, and by extension that of the United States, may be used surreptitiously as a basis for intentionally curtailing the ATS.212 The extent to which economic considerations have permeated ATS jurisprudence is as yet unclear. However, there are unmistakable signs and echoes of such considerations, at least within the U.S. government. The Bush administration’s vehement opposition to ATS litigation, though premised on the argument that it threatens the national interests of the United States,213 may not be unconnected with the desire to protect U.S. TNCs from exposure to large damage claims for rights violations abroad.214 But opposition to the ATS is hardly limited to corporations and the U.S. government. Some academics have charged that the ATS promotes ‘judicial imperialism,’215 a view reportedly shared by Thabo Mbeki, the former President of South Africa.216 In a sense, this charge is on solid grounds, because the ATS does have the appearance of promoting U.S. courts ‘as de facto judges of world history.’217 Given the formidable opposition mounted against it by TNCs and others, one may not be surprised to see the ATS considerably weakened in the future, whether by legislative amendments or restrictive judicial interpretation. In fact, in Sosa v. Alvarez-Machain, the Supreme Court of the United States confined the ATS to ‘a very limited category’ of claims.218 According to the court, the ATS furnishes ‘jurisdiction for a relatively modest set of actions alleging violations of the law of

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nations.’219 More significantly, the court urged caution in applying the ATS. While it recognized that ‘the door is still ajar’ to claims alleging violations of the law of nations under the ATS, the court held that ATS claims must be ‘subject to vigilant doorkeeping.’220 This ‘doorkeeping’ approach is likely to ‘filter out all but the most extreme cases of alleged abuse.’221 However, as held by the U.S. District Court for the Southern District of New York, the Supreme Court decision in Sosa v. AlvarezMachain does not prohibit ATS claims against corporations for violation of the law of nations.222 Moreover, the ATS does not cover some social issues and concerns, for example, environmental pollution and degradation caused by corporate entities. A cause of action for environmental pollution or degradation may not lie under the ATS because environmental rights are neither jus cogens nor internationally recognized as part of human rights. Indeed, it has been held that a corporation’s environmental practices ‘however destructive, do not constitute torts in violation of the law of nations.’223 An anthropocentric argument has, however, been made that the immutable link between a clean environment and the right to life makes the case for the recognition of a cause of action under the ATS for environmental pollution, since a polluted environment has lethal effects on the right to life.224 This argument appears to find support in cases such as Amlon Metals, Inc. v. F.M.C.225 and Aguinda v. Texaco, Inc.,226 both of which tacitly recognized the possibility of the ATS’s application to international environmental torts. But that is as far as the two cases go because neither of them found a cause of action for violation of international environmental law. Thus, the fact remains that corporate damage to the environment has yet to be recognized as a cause of action under the ATS.227 Finally, while there are increasing numbers of foreign direct liability suits in the home countries of TNCs, these suits are of limited utility because, even if they succeed, they may not provide community-wide redress in host African (and other) communities. All in all, tort litigation in countries of domicile of TNCs, though commendable, merely scratches the surface of the problem of TNCs’ involvement in rights violations in the developing world and is thus, at best, palliative. Conclusion Governments of the developed countries have an undisguised preference for self-regulation by TNCs. Hence, binding extraterritorial rules

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are virtually lacking in these countries. The implication seems to be that self-regulation and mandatory rules cannot coexist, and that it is either one or the other. But that position is flawed. Indeed, as the European Union Parliament has rightly noted, ‘voluntary and binding approaches to corporate regulation are not mutually exclusive.’228 Both regulatory models can, in fact, coexist. We see such coexistence, for example, in environmental regulation within individual countries. The fact that corporations have adopted codes of conduct has not precluded legislated environmental standards in most countries. Such a plural regulatory approach can equally be adopted in relation to the foreign operations of corporate entities domiciled in the developed countries.

9 Towards Effective Regulation of Transnational Corporations

The discussion in previous chapters indicates that the regulation of extractive TNCs has been ineffective in terms of results, insufficient in terms of the mechanisms adopted by regulatory agencies, and deficient in terms of the expertise and capacity of regulators. It thus underscores the need for a reappraisal of existing frameworks for the regulation of TNCs both within individual African countries and at the international level. As suggested in chapter 3, part of that reappraisal must involve the enhancement of the capacity and effectiveness of regulatory agencies in Nigeria, Ghana, and other African countries. Serious thought must also be given to the formulation of binding international rules for corporate conduct.1 Binding international rules (if they ever come on stream) would have to be carefully crafted and implemented in a manner that takes into consideration the competing (but not mutually exclusive) interests of business and society. Binding rules may enunciate a ratcheted compliance structure such that a minimum standard is made binding while corporations are given incentives to improve upon the minimum standard. However, compliance strategies need not be rigid. As theorists of the ‘responsive regulation’ school have noted, compliance strategies such as cooperation, dialogue, and persuasion may be as effective as punitive and adversarial strategies.2 Thus, violations of binding rules need not necessarily attract punitive sanctions. Rather, they could be enforced through incentives and reward schemes, although punitive sanctions may be applied in case of egregious or persistent breaches. Awards of contracts, concessions, grants, loans, and other financial aid packages could be tied to the social compliance of corporations at both domestic and international levels. For example, governments, the UN

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and its agencies, and the World Bank could give preference to socially compliant corporations in the awarding of contracts and granting of loans. They could also debar persistently errant corporations from access to contracts and loans. As I observed in chapter 7, the World Bank already has in place some mechanisms for barring corporations engaged in corrupt practices from receiving contracts. It might do well to devise similar sanctioning mechanisms for non-compliance with its social safeguard policies. It need be said, though, that while binding international rules are desirable, it is not by any means certain that they would, without more, effect significant change in corporate behaviour. After all, there are binding laws in host African countries such as Nigeria and Ghana that have yet to rein in extractive TNCs. Neither is it certain that binding rules would necessarily engineer a shift in the balance of power between business and society. What appears certain is that the impact of binding rules would depend on how the rules are enforced, who enforces them, and when they are enforced. In other words, the success of binding rules depends on the effectiveness of their enforcement. Effective enforcement is itself dependent on a variety of factors, including the expertise and capacity of regulatory agencies. The how, who, and when involved in corporate regulation may pose difficult problems for domestic enforcement of international rules in Nigeria, Ghana, and other African countries that, as discussed in chapter 3, are on the wrong side of history in terms of their capacity to regulate TNCs. That said, the international community may achieve better results in regulating TNCs not by limiting enforcement of compliance to public agencies alone but by empowering a variety of formal and informal actors to participate in the enforcement of international rules. But beyond the enhancement of regulatory capacity and establishment of binding international standards, the overarching lesson to be drawn from this book is that the regulation of TNCs must address the question of the power imbalance between business and society. This is a crucial issue because the question of regulation, or the lack of it, its effectiveness, and the disposition and attitude of regulators to the enforcement of compliance is driven primarily by power. Power is deployed in at least three arenas of regulation: host country, home country, and the international domain. The more politically and economically significant the TNC is to the host country, and the more impoverished the host country is, the greater the likelihood that regulation will fail. This is exactly the case in Nigeria and Ghana, where, as noted in chapter

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3, regulatory agencies treat extractive TNCs with kid gloves and have thus far failed to effectively enforce their compliance with legally prescribed standards. At the home country level, the powerful influence TNCs wield on the political leadership of the developed countries ensures that attempts in these countries to regulate the foreign activities of TNCs are at best cosmetic.3 As a matter of fact, aside from the United States’ ATS, most developed countries where extractive TNCs originate have yet to enact legislation with extraterritorial reach to control the antisocial conduct of TNCs in developing countries. The power inequality also permeates the international arena, where, as argued in chapter 6, the developed countries have, perhaps at the prodding of TNCs, effectively used their economic clout and influence to forestall any regime of international regulation. Thus, given the influence of corporate power on regulation, society is unlikely to restrain corporate abuses effectively if it does not devise means to counterbalance corporate power. In the analysis that follows, I argue that although the state is the primary means for curtailing and counterbalancing corporate power and abuses, other strategies such as enhanced participation of civil society groups in the regulatory process may well aid the curtailment of these power and abuses. Addressing the Power Imbalance between Business and Society Counterbalancing Forces: Governments, Markets, and Civil Society Groups There are at least three related and interconnected strategies and counterbalancing forces that may restrain corporate power and perhaps enhance corporate accountability. Two of these counterbalancing forces – the state/government and market forces – are intrinsic parts of the models of regulation discussed in chapter 2. Simply put, the government is the most viable ‘counter force’ to corporate power.4 As participants at the African Corporate Citizenship Convention have noted, in societies where ‘power inequalities exist, the government has an integral role to play in facilitating responsible corporate practices.’5 In fact, almost every government wields power. In principle, most governments enjoy the constitutional or democratic legitimacy to act to protect society from corporate and other abuses.6 Similarly, the market has certain forces that may counterbalance corporate power. As Robert Monks has suggested, activist shareholders,

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particularly institutional shareholders such as pension funds, have the potential to evolve into a competent ‘counter force’ to corporate management powers and thus may be better suited to constrain the conduct of corporations.7 However, the problem with both governments and market forces is that they are susceptible to corporate influence and manipulation. For example, many states are less able or willing to control the excesses of corporations than they once were. This may be because corporations have, ‘through lobbying, political contributions, and sophisticated public relations campaigns … turned the political system and much public opinion against regulation.’8 The state’s reluctance and inability to regulate corporations may also be due to the fact that the state – the traditional repository of regulatory powers – has been considerably weakened (or, as some put it, ‘decentered’9) by the globalizing tendencies of business. It is unrealistic then to expect that the state can exercise its powers at all times to protect public interests from corporate abuses. Also, counterbalancing forces of the market may not realize their full potential because of market imperfections. For example, shareholders are sometimes unable to counter management decisions because they lack necessary information about those decisions. We know that corporations have a penchant to hide the unsavoury. Enron, Worldcom, and Adelphia Inc. recently reminded us all of this. While mandatory social reporting schemes could enhance information disclosure, we are yet to have such disclosure rules in most countries. For the moment, then, shareholder power does not provide enough leverage on corporate power and thus is unlikely to effect significant substantive change in corporate behaviour. A more promising, albeit complementary, ‘counter force’ is the civil society at large.10 The restraining influence of civil society groups, particularly public-interest advocacy groups, may counterbalance corporate power and hopefully, assist society in regulating corporations more effectively. Much has been said in this book about the ‘social activism’ of civil society groups and about how they have achieved measured success in regulating corporate conduct. Social activism is especially apparent in the international arena where networks of advocacy groups have emerged as something approximating a ‘global civil society.’11 The result of their efforts is the shift away from what was in the past a total denial of corporate responsibility by business to the current – albeit somewhat reluctant – acceptance that corporate responsibility is an integral part of business. The influence of civil society is also vis-

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ible in the rise of ‘soft law’ and self-regulation by industry.12 As argued in chapter 2, codes of conduct have become the norm in international business largely due to pressures exerted on corporations by NGOs. In fact, although corporate codes of conduct are often described as voluntary, they are, empirically speaking, non-voluntary in the sense that they are often induced by civil society pressures on corporations, governments, and international institutions.13 These successes have come about because of the unique character of civil society and its unquestionable interest in the attainment of the common good. Civil society is independent of both government and business and is in fact too diverse to be susceptible to capture by business. While corporate campaigns and lobbying influence regulatory laws and policies, they are less likely to dissuade civil society groups from the pursuit of the common good. In fact, because civil society itself suffers the ill effects of corporate irresponsibility, it is likely to continue to have the impetus to protect itself from corporate excesses as well as seek the effective enforcement of laws and regulatory policies. Beyond these attributes, civil society is perhaps more suited to counterbalance corporate power and indeed restrain corporate abuse because of its status as a repository of societal power, including the conferment of legitimacy on other societal institutions.14 For example, civil society confers legitimacy on the corporation by granting it – through the government – legal personality and the power to conduct its affairs. Moreover, the purchasing power and patronage of civil society sustains the corporation. Now, because the source of corporate power is society itself, the corporation is more likely to feel the impact of adverse reaction by civil society to its practices. Therefore, where effectively mobilized, civil society groups, to paraphrase Ernest Gellner, can prevent social concerns from being dominated and atomized by institutions such as the state,15 and, I might add, the corporation. The conduct-restraining potential of civil society is manifest in the remarkable ability of civil society groups to transform the character of social problems. Matters within the private sphere are recharacterized as matters of public interest through NGO campaigns. NGOs transform domestic issues into international problems. The issue-transforming capacity of NGOs is particularly apparent in the Ogoni crisis in Nigeria. The involvement of NGOs (both local and international) in Ogoni agitations effectively recast the conflict between oil TNCs and host Ogoni communities, hitherto a purely domestic legal problem, into an international socio-political issue. The transformation in turn broadened the

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avenues for redressing the problem, including the exertion of international pressure on both the oil TNCs and the Nigerian government. The interesting thing to note here is that once the character of a social issue is transformed, contending parties often become more amenable to the resolution of problems. Overall, the Ogoni issue signifies the utility of creative linkages between different strata of civil society, linkages that can effect subtle changes in the character of conflicts and, by necessary implication, the solutions to them. It is the transformative potential of civil society that has effectively forced Shell and other oil TNCs operating in Nigeria to review and improve their operational practices, particularly in relation to dialogue and consultation with host communities. In effect, therefore, the power and influence of civil society has served to restrain corporate conduct, albeit to a limited degree. This is not to suggest that the influence and conduct-restraining potential of civil society groups have reached a crescendo. Obviously, that is not the case. NGOs and other civil society groups are currently faced with many difficulties in their attempts to contribute to corporate regulation. There is, to give but one example, the question of obstacles to access to corporate information, which would have to be removed if civil society groups are to make the fullest possible regulatory contribution. Moreover, the impact of civil society groups could be enhanced through the nurturing of mutually supportive networks of solidaristic communities at both the domestic and the international level. Happily, as noted by David Trubek, Jim Mosher, and Jeffrey Rothstein, such networks have already begun to emerge ‘at many levels and across borders.’16 But beyond that, civil society groups may need to be empowered if they are to effectively counterbalance corporate power and restrain corporate abuses.17 However, the focus of empowerment efforts ought not to be exclusively on international NGOs or on advocacy groups based in the developed countries, as appears to be the case today. Rather, we also need to focus attention on how to strengthen local struggles and grassroots movements in developing countries.18 Empowering Civil Society Groups If civil society groups are to act as a restraint on corporate abuses, and if they are to ‘check and oppose’ the corporation in an effective manner, civil society groups must be viable and ‘strong.’19 In the context of corporate regulation the pertinent question to be addressed then is

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how to ensure ‘strong’ civil society groups. I suggest below that the empowerment of civil society groups in the corporate regulatory process could make them strong enough to effectively counterbalance corporate power, which, as argued in this book, is the central issue in the regulation of extractive TNCs. I also suggest that the duty to strengthen civil society groups rests both with governments and civil society itself. empowerment through public and multilateral regulatory schemes Civil society groups could be empowered to partake in corporate regulation through the inclusion of empowerment provisions in public regulatory instruments and policies. Domestic and international rules for corporate conduct may, for example, permit civil society groups and individuals to partake in their formulation, enforcement, and monitoring. Empowerment could also take the form of access to corporate and governmental information. Although we have already begun to witness a slow shift in the direction of civil society empowerment under international and domestic laws, the shift is lacking in depth and substance. At the international level, for example, the UN Global Compact, the ILO Declarations, the OECD Guidelines, and the World Bank/IFC/ MIGA’s social safeguard policies all have varying degrees of civil society participation in their processes. But the role they accord civil society groups is too limited and too shallow. Much more can be done. Aside from prior consultation with organized civil society in the making of international rules for corporate conduct, international regulatory initiatives ought to grant certain civil society groups the right to participate in the monitoring, implementation, and enforcement of rules. However, the call for civil society empowerment through public regulatory schemes or through governmental decrees raises an intriguing paradox, one that makes its realization unlikely. As noted previously, civil society is capable of creating norms and values that are independent of, and insulated from, both the state and the corporation.20 These norms and values could constrain not only corporate power but also governmental power. Is it reasonable to expect that governments, knowing the constraining influence of civil society groups on state action, would empower them to a degree that they can effectively counterbalance the power of corporations?21 This question is significant because, unfortunately, the interests of governments and business seem to be coalescing with every passing day. This being so, it is unlikely that

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governments would empower civil society groups to a degree that they can meaningfully influence or restrain corporate power and conduct. But it would be myopic for governments to shy away from empowering civil groups simply because such empowerment may whittle down corporate and governmental power in certain respects. The extent and intensity of public debate would be enhanced by the empowerment of civil society; this would ultimately improve the democratic character of government decision-making. Moreover, an empowered civil society may enhance the capacity, responsiveness, and effectiveness of public regulatory agencies, and, by extension, that of the government itself. This may be so where public agencies act in close collaboration with civil society groups, particularly those with expertise in specific areas of regulation. Also, by empowering these groups, regulatory burdens placed on public agencies may be lessened. This in turn could free up scarce resources, which may then be devoted to other pressing needs. It is to be hoped that African governments and regulatory agencies would realize (and exploit) the potential benefits of involving civil society groups in regulating TNCs. self-empowerment Civil society groups await formal empowerment through public regulatory instruments. However, for the reasons mentioned earlier, it would be unrealistic to expect the full realization of formal empowerment in the near future, if at all. Thus, NGOs and other civil society groups would need to empower themselves through informal means. In fact, human rights and environmental NGOs have devised several selfempowerment schemes that collectively account for and drive what is now commonly referred to as social activism. These schemes include civil campaigns, boycotts, product certification, social reporting initiatives, and monitoring devices. The significance of these schemes lies not only in the perception that they may induce the adoption of selfrestraining measures by corporate entities, but also, and more importantly, in the fact that they create, and vest in civil society groups, some degree of conduct-restraining and counterbalancing powers. Regrettably, the empowerment of civil society through these schemes has in the main focused on international NGOs and NGOs based in the developed countries. This is problematic because although there is a considerable degree of cooperation between them, the interests of international NGOs and other NGOs based in the global North are not neces-

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sarily synonymous with those of NGOs and local groups in the South. Thus, as one observer puts it, ‘the empowerment of one does not necessarily imply the empowerment of the other.’22 Therefore, rather than focus all attention on international NGOs, power-conferring schemes initiated by civil society groups ought to be revamped so that they can better empower and aid local groups in Africa and other parts of the developing world against TNCs. For example, product certification schemes should not be implemented in isolation from local communities where the products are manufactured. The same goes for the verification of social reports. By allowing the participation of local groups and communities in these schemes, power is devolved to them, and they may be better able to confront and restrain TNCs operating in their locality. TNCs may become reluctant to falsify or exaggerate their compliance status in their social reports if they know that their host African communities would ultimately participate in verification of the reports. Finally, a caveat bears stating. While I have emphasized the need to empower civil society groups, I am by no means suggesting that other complementary models and strategies be relegated to the background or that civil society groups replace governments as primary regulators of corporate conduct. All I am asking for is that the role accorded civil society groups such as human rights and environmental NGOs should be enhanced through their formal and informal empowerment. Such empowerment may enable NGOs to exert pressure on corporations to change their ways. Perhaps more significantly, it could also enable them to exert pressure on governments and public regulatory institutions to make appropriate laws and to see to their effective and prompt enforcement. The Question of Accountability of NGOs This book has advocated a formal, albeit quasi-public, role for NGOs in the regulatory process. However, if NGOs are to be entrusted with such quasi-public duty, society must require them to become more accountable and transparent in their operations. The question then is, how do we ensure that NGOs are accountable to the public? I have highlighted in chapter 8 a number of factors that may promote accountability among civil society groups, including peer accountability instruments, such as competition between NGOs. Also, the mass media can promote NGO accountability by acting as watchdogs and by reporting bad behaviour amongst NGOs.

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Perhaps more importantly, a dose of the same medicine that NGOs usually prescribe for corporations may promote NGO accountability. NGOs should be obliged to render an account of their activities to the public. They should present ‘their results for public scrutiny.’23 This could take the form of annual reports, to be verified and certified by independent auditors.24 The reports should be prepared in accordance with reporting guidelines devised by multilateral stakeholders, including NGOs, governments, and international institutions. While many NGOs have formed the habit of issuing such reports, the problem is that there are no standardized guidelines for the reports. Thus, at this moment, NGOs pick and choose what to report. Finally, on the issue of NGO participation in the enforcement of legal rules, accountability can be enhanced by subjecting NGO enforcement of legal rules to judicial oversight. For example, NGOs should be required to obtain leave of court before they are allowed to seek legal enforcement of rules against corporations. Nurturing ‘Activist’ Communities in Africa I suggested above that, apart from enhancing the capacity of regulatory agencies, civil society groups should be empowered to play supportive and complementary roles in regulating the conduct of TNCs in Africa. This suggestion is anchored in African realities, including the lack of governmental and institutional capacity. However, the emphasis on empowerment of civil society groups raises pertinent issues in relation to Africa. For example, there are inherent dangers involved in social or community activism in Africa. African governments often regard civil protests against TNCs as an affront to their authority to govern. As a result, they are wont to employ repressive measures to quell these protests. Events in Nigeria’s oil-producing communities that culminated in the judicial murder of Ken Saro-Wiwa and eight others should warn us of these dangers. But should Africans, as a result of these dangers, resign themselves to fate and allow their governments and the TNCs free reign to destroy social rights across the continent? Not by any stretch of the imagination. Africans should rise above these fears and dangers and seek to exert influence on governments and TNCs to behave responsibly. Indeed, if the dangers are the price to be paid for ensuring corporate observance of social rights and concerns in Africa, then so be it. Otherwise Africans are left with no choice but to hope that somehow TNCs and the governments – both home and host –that

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blindly support them will change for the better of their own volition. Moreover, generally speaking there are questions as to whether a viable civil society does exist in Africa. If not, how does Africa create, nurture, and sustain ‘activist’ civil society groups and communities? These questions arise because of the perilous nature of civil society groups in certain African countries. For example, as discussed in chapter 4, some NGOs in Nigeria and Ghana appear unsophisticated and uncoordinated, and they often lack requisite expertise to maximize their efforts and impact. Worse, some appear to have been set up to serve the greed of their initiators and sponsors. Worse still, there is often conflict among ethnic community associations, not cooperation. My view is that the overall strategy for nurturing civil society groups in Africa should be the promotion of democracy and the rule of law. Democracy and responsible governance are fundamental conditions that must be attained before we can expect civil society groups to flourish and thrive in Africa. A democratic Africa would most likely provide the most favourable conditions for the growth of civil society groups, an environment conducive to building solidaristic communities, and a guarantee of the empowerment of civil society. In an environment that facilitates public participation in policy-making and sensitizes TNCs in Africa’s extractive industries to the need to play by the rules (as they do to a large degree in the developed countries), surely many of the familiar harms would be reduced or eliminated. Perhaps the day is not too distant when democracy will reign supreme in Africa. Indeed, we are already beginning to see signs of movement towards democracy, at least in the form of formal commitments on the part of African leaders and elites. But much remains to be done in terms of actual practice of democracy in Africa. Pending the advent of an entrenched democratic dispensation, those interested in establishing and nurturing ‘activist’ communities and civil society groups in Africa would have to give priority to the education and mobilization of host communities. To maximize the impact of civil society on the regulation of TNCs, a concerted effort has to be made to educate local communities and groups not just about their rights, but, more importantly, about how they may protect those rights from corporate intrusion. The education and mobilization of host communities may in fact be aided by the prevalence of established and revered traditional institutions in Africa, including chiefs, age groups, and kinship associations, to mention but a few. Information can be disseminated through the medium of these traditional institutions. While some of

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these institutions are themselves complicit in anti-democratic tendencies, exploitation, and corruption,25 and although they are threatened by globalization and development, they can play a useful role in regulating TNCs because many Africans repose trust and confidence in them. However, to ensure effective use of traditional African institutions, local NGOs within host African communities have to learn to work with traditional institutions, and vice versa. Local NGOs also need to be trained and brought up to speed about civil agitation techniques and tactics. International NGOs acting in concert with domestic African NGOs have a lot to do in this regard. They could hold regular workshops and training sessions for designated officials of local NGOs, who would then train the general masses of host communities about how to organize to protect their rights from being violated by TNCs.26 Also, as suggested in chapter 4, because host communities are almost always faced with similar if not identical problems and thus have much to share with, and learn from, one another, the effectiveness of their agitations against TNCs may be enhanced by sharing their experiences among themselves, and by better coordination of their efforts. Thus, African NGOs and other civil society groups should facilitate contact and consultation among host communities within individual African countries as well as between host communities in different African countries. Beyond democratizing Africa and educating the public, the sustenance of civil society groups in Africa, and indeed their impact and success, may be enhanced through the building of civil society networks across the continent and beyond.27 Public-interest advocacy groups in individual African countries need to create workable linkages with, and cooperative channels to, their peers within Africa and without. They should develop mutually beneficial networks and partnerships and harmonize their advocacy and policy strategies. An Appraisal of the Discussion A number of important observations are apparent in this book. The key observation is that regulation of TNCs is a difficult undertaking because of the interplay between the desire of business to conduct its affairs with minimal governmental intervention and the interest of society to protect the common good. Regulation is particularly difficult in Africa because of the deep-rooted failures of African states, the incapacity of regulatory agencies, and the mal-distribution of wealth and

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power. Thus, the deeply entrenched problem of corporate irresponsibility in Africa’s extractive industries may not be ameliorated unless African states acquire greater capacity, become more democratic and less corrupt. This book has analysed two models of corporate regulation, that is, public regulation and market or self-regulation. I have observed that although both models have, in some limited respects, forced corporations to act in a more socially responsible manner, they remain unable to effect long-lasting normative change in corporate behaviour. This is perhaps to be expected because, as discussed in chapter 2, both models have intrinsic limitations and weaknesses. Public regulation has, for example, been ineffectual in Nigeria and Ghana not only because of loopholes in regulatory laws, but also because of the incapacity and deficiencies of regulatory agencies. The weakness of state regulation in Nigeria and Ghana also has a significant negative impact on non-state regulation, including self-regulation. There are no ‘pressures’ on TNCs to comply with their self-regulatory rules, pressures which would likely have been generated by a credible threat of enforcement of state laws.28 My assertion that both models of regulation are ineffectual in Nigeria and Ghana must, however, be tempered and qualified at least in relation to market regulation. Markets are global, not domestic, where extractive industries are concerned. As well, there is an absence of market regulatory schemes in Nigeria and Ghana. While, as noted in chapter 3, both countries have instituted financial incentive schemes, these schemes are not market-based because they are set up, implemented, and monitored by public agencies. Given that market schemes have not been adopted or implemented in Nigeria and Ghana, it is somewhat unfair to conclude that market regulation is ineffectual in both countries. What could be said, however, is that market regulatory instruments are unlikely to succeed in Nigeria and Ghana (and other African countries) because they lack the requisite expertise and resources to implement and monitor these instruments. A closely related observation is that regulatory agencies and initiatives have been unable to provide a satisfactory platform for regulating TNCs.29 This assertion finds support in the fact that none of the various institutions and initiatives for regulation (both domestic and international) examined in this book has in fact effectively regulated corporate conduct. Although they may each have achieved some success, they are constrained both in terms of their capacity to regulate and by the legal platform on which they regulate. In chapters 6 and 7,

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I highlighted the deficiencies in international regulatory mechanisms such as the UN Global Compact, OECD Guidelines, ILO Conventions and Declarations, and the World Bank/IFC/MIGA’s social safeguard policies. In particular, I noted the voluntary nature of these international mechanisms as well as how poorly some of them are implemented and monitored. Many of the same ills (albeit to a deeper extent) afflict domestic initiatives in Nigeria, Ghana, and other African countries. But aside from their individual limitations, there are no institutional linkages and cooperative channels among the various regulatory initiatives. For example, the OECD Guidelines are not in any meaningful way linked with the ILO Conventions and Declarations or the GC, and vice versa. While they are intended to attain the same end and while they do not diverge substantially, each of these initiatives is autonomously implemented with little or no recourse to the other. Similarly, regulatory agencies in Nigeria and Ghana do not appear to cooperate with one another. This problem is magnified by the overlapping mandates bestowed on a plethora of agencies in these countries. Regulatory effectiveness could be enhanced by developing avenues of cooperation among regulatory initiatives and agencies at both the national and international levels. Such cooperation may in fact strengthen regulatory mechanisms as well as the agencies charged with enforcing those mechanisms. For example, cooperative linkages may promote the sharing of experiences in a manner that may ensure that mistakes and failures of one initiative are not repeated by others. It could also enhance the chances of replicating success. Although the book is critical of international law and governments of the developed countries for their failure to regulate the foreign activities of extractive TNCs, I recognize that a greater part of the blame for the continued irresponsibility of TNCs in Nigeria, Ghana, and other African countries must be placed squarely on the doorsteps of African governments. This is the more so because the primary responsibility for regulating TNCs in these African countries lies with governments. While no doubt important, international mechanisms and regulatory initiatives by the developed countries can only complement domestic African efforts. If this problem is to be ameliorated, therefore, individual African countries must first and foremost accept responsibility for what is happening in their extractive industries and then begin to devise strategies for addressing the problem. Once they have done so, they could then call on the international community and, in particular, governments of the developed countries to complement domestic African efforts.

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To that end, a number of ameliorative strategies, which may prove useful in these African countries, are apparent in this book. These include enhancement of the capacity and expertise of regulatory agencies; adequate funding of regulatory agencies; coordination of regulatory efforts; and mobilization of a broad range of regulatory mechanisms and actors. Capacity can be enhanced by recruitment of appropriately trained personnel, provision of on-the-job training for existing staff, and provision of requisite regulatory equipment and laboratories. Academic researchers and scientific laboratories at African universities should be engaged by regulatory authorities to complement the efforts of regulatory officials. For example, researchers may be engaged to evaluate scientific aspects of regulation. Funding may be achieved by setting aside and dedicating a certain percentage of royalties paid to host governments by extractive TNCs (and other corporate entities involved in natural resource extraction) for regulatory purposes. Coordination of regulatory efforts should include the sharing of information and experiences between different regulatory agencies. In appropriate cases, regulation should be streamlined by merging regulatory agencies. Such mergers will avoid duplication of efforts, minimize role conflicts between agencies, and reduce regulatory confusion and financial waste. The regulatory process should be transparent, and regulatory agencies should be accountable to the public. Regulatory agencies should be independent and autonomous so as to insulate them from governmental interference. Regulatory independence may be achieved by statutorily guaranteeing security of tenure for regulatory officials. Also, statutory safeguards should be put in place to protect regulatory officials. These safeguards may include a statutory provision that these officials cannot be removed from office through ministerial or presidential fiat. Rather, they may be removed from office with the approval of a two-thirds majority of members of the national parliament. Furthermore, accountability can be achieved by subjecting the exercise of regulatory discretion to some form of external oversight, including judicial review and parliamentary oversight. The self-regulatory practices of TNCs and other corporate entities in the extractive industries should be subjected to an independent oversight. This can be achieved by engaging the services of truly independent social auditors or by the appointment of independent public directors to the boards of local subsidiaries of extractive TNCs. As indicated in chapter 4, the auditors are to monitor and make annual reports

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to the public on the company’s compliance with its code commitments. Disclosure of non-compliance in such reports may lead to the ‘shaming’ of the company, thus adding to pressure on the company to behave ethically. To enhance public disclosure of information, TNCs should be required by legislation to disclose information regarding the impact of their activities on the environment and human rights, as well as measures they have taken to cushion the adverse effects of their activities. For their part, public directors should be entrusted with implementation of codes of conduct and overseeing the company’s compliance with voluntary codes. African states should adopt complementary non-state mechanisms and actors for regulatory purposes. For example, NGOs and community associations should be empowered to participate in regulation. Empowerment may take the form of access to corporate and governmental information, participation in the design and implementation of natural resource projects, and allowing private citizen enforcement of regulation through the courts. In addition, African NGOs and hostcommunity associations must enhance their advocacy and policy strategies against corporate abuses by TNCs. In particular, they should act proactively against corporate abuses by articulating legal and policy alternatives to the failed regulatory regimes in Africa and lobby for their adoption by the legislature. They should also pool resources and deepen their cooperation. Financial and other incentives for social compliance should be implemented by resource-rich African countries. For example, the granting of prospecting licences and leases should be tied, in part, to the environmental and social performance of the applicant company. In particular, companies with a demonstrated and documented track record for environmental and social compliance should be given preference in the granting of licences and leases by host African governments. However, given the deplorable state of institutional capacity in Africa, Africa requires help from the ‘outside’ if she is to restrain current abuses by TNCs. One obvious way to help Africa is for the developed countries to enact extraterritorial laws regulating the conduct of their TNCs in foreign developing countries. However, such laws are unlikely at this time. But the developed countries can at least make it unattractive for TNCs to misbehave in foreign countries by requiring them to make social disclosures along with their financial disclosures to designated public agencies such as the Securities Commission. For its part, the international community can help by developing and adopting a

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binding international regime of corporate accountability, including clear implementation mechanisms. Perhaps movement towards such a regime is evidenced in the UN Sub-Commission on the Promotion and Protection of Human Rights’ proposed Norms on the Responsibilities of TNCs. In sum, while I have acknowledged the primacy of governments in the regulation of TNCs, I have nonetheless argued that a plural normative regulatory platform, one that makes use of formal and informal mechanisms and actors, is a better regulatory model. For reasons advanced in the book, a plural regulatory model may in fact level the playing field, a field on which TNCs literally play with their own rules and referees.

Notes

Introduction and Overview 1 ‘Transnational corporations’ (TNCs) refers to corporations ‘extending or operating across national boundaries’: Concise Oxford English Dictionary, 10th ed. (Revised), s.v. ‘Transnational.’ Apart from their cross-border operations, TNCs have other characteristics. They operate ‘under a system of decision-making’ that permits ‘coherent policies and a common strategy through one or more decision-making centres.’ In addition, entities within the TNC are linked by a common ownership in such a manner that one or more of the entities ‘may be able to exercise a significant influence over the activities’ of other entities in the group and ‘to share knowledge, resources and responsibilities’ with them. See United Nations Commission on Transnational Corporations: Report of the Secretariat on the Outstanding Issues in the Draft Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1984/S/5, 29 May 1984, para. 9, reproduced in 23 I. L. M. 602 (1984) at 607. 2 See, generally, Carl Widstrand, ed., Multinational Firms in Africa (Dakar & Uppsala: African Institute for Economic Development and Planning & Scandinavian Institute of African Studies, 1975). 3 Whether or not TNCs are economically beneficial to Africa remains a matter for heated and passionate ideological and empirical debate. On the one hand, free-market advocates relying on neoclassical economic paradigms regard TNCs as agents of, and catalysts for, development in their host countries. See Jack N. Behrman, National Interests and the Multinational Enterprise: Tensions among the North Atlantic Countries (Englewood Cliffs, NJ: PrenticeHall, 1970) at 13–28; Raymond Vernon, Sovereignty at Bay: The Multinational Spread of U.S. Enterprises (New York & London: Basic Books, 1971) at 151–91.

228

4 5

6 7 8

9 10

Notes to pages 4–6 On the other hand, critical economic theorists (largely of the dependency school) allege that TNCs are inimical to Africa’s development because they are agents of economic imperialism and underdevelopment. More specifically, critics accuse TNCs of massive wrongdoing in Africa, including the pillaging of natural resources, the superexploitation of labour, unethical transfer pricing practices, and the displacement of local entrepreneurs and businesses through dubious trade practices. TNCs, critics further charge, cause other problems such as negative balance of payments, technological dependency and retardation, structural and economic distortions, and political instability and destabilization in host African states. See Bade Onimode, A Political Economy of the African Crisis (London: Zed Books, 1988) at 45–68; Thomas Biersteker, Distortion or Development? Contending Perspectives on the Multinational Corporation (Cambridge, MA & London: MIT Press, 1981) at 69–162; Steven Langdon, ‘The Multinational Corporation in the Kenya Political Economy,’ in Raphael Kaplinsky, ed., Readings on the Multinational Corporation in Kenya (Nairobi: Oxford University Press, 1978) 134 at 198–200; S. K. B. Asante, ‘The New International Economic Order and the Problem of Controlling Multinational Corporations in Africa,’ in Ralph I. Onwuka & Olajide Aluko, eds., The Future of Africa and the New International Economic Order (London & Basingstoke: Macmillan Publishers, 1986) 17 at 18; Raphael Kaplinsky, ‘Technical Change and the Multinational Corporation: Some British Multinationals in Kenya,’ in Kaplinsky, ed., Readings on the Multinational Corporation in Kenya, ibid. at 201 [particularly at 260]; Ali A. Mazrui, ‘The Impact of Transnational Corporations on Educational Processes and Cultural Change: An African Perspective,’ in Krishna Kumar, ed., Transnational Enterprises: Their Impact on Third World Societies and Cultures (Boulder, Colorado: Westview Press, 1980) 207. The term ‘extractive TNCs’ refers to TNCs engaged in the extraction of natural resources. Sarah Anderson & John Cavanagh, Top 200: The Rise of Corporate Global Power (Institute for Policy Studies, 2000), available at http://www.ips-dc. org/downloads/Tops_200.pdf (accessed 11 November 2004). Ibid. Ibid. Global Policy Forum, ‘Major Oil Companies among Largest Transnational Corporations,’ available at http://www.globalpolicy.org/socecon/tables/ tncs/2003/oiltncs2002.htm (accessed 16 December 2005). Ibid. Ibid. Oil and gas TNCs have consistently earned high revenues and profits. See Global Policy Forum, ‘Major Oil Companies among Largest

Notes to page 6

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12

13

14

15 16

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Transnational Corporations,’ available at http://www.globalpolicy.org/ socecon/tncs/oiltable.htm (accessed 16 December 2005); Global Policy Forum, ‘The World’s 100 Largest Public Companies,’ available at http:// www.globalpolicy.org/socecon/tncs/2004/biggestcorp.pdf (accessed 16 December 2005); ‘Exxon Mobil Sets Profit Record,’ CNN MONEY.com, 30 January 2006, available at http://money.cnn.com/2006/01/30/news/ companies/exxon_earns/index.htm?cnn=yes (accessed 30 January 2006); John Holusha, ‘Exxon Mobil Posts Largest Annual Profit for U.S. Company,’ New York Times, 30 January 2006, available at http://www.nytimes. com/2006/01/30/business/30cnd-exxon.html (accessed 30 January 2006). See UNCTAD, World Investment Report 2002: Transnational Corporations and Export Competitiveness (New York & Geneva: United Nations, 2002), available at http://www.unctad.org/en/docs/wir2002_en.pdf (accessed 4 November 2005). See UNCTAD, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D (New York & Geneva: United Nations, 2005), available at http://www.unctad.org/ (accessed 4 November 2005). See also UNCTAD, Prospects for Foreign Direct Investment and the Strategies of Transnational Corporations, 2004–2007 (New York & Geneva: United Nations, 2004), available at http://www.unctad.org/ (accessed 4 November 2005). In Nigeria, for example, oil and gas TNCs have often succeeded in pressurizing the government to extend the terminal date for gas flaring. In fact, Shell prevailed on the government to adopt 2008 as the terminal date for gas flaring in Nigeria. See Shell Petroleum Development Company of Nigeria, 2004 People and the Environment Annual Report at 14, available at http://www.shell.com/static/nigeria/downloads/pdfs/2004_rpt.pdf (accessed 26 July 2005). See also John Lungu & Chomba Mulenga, Corporate Social Responsibility Practices in the Extractive Industry in Zambia, 2nd ed. (Ndola, Zambia: Mission Press, 2005) at 46–7. In fact, African leaders have pledged to deregulate the African economy, including extractive industries. See The New Partnership for Africa’s Development, available at http://www.nepad.org/2005/files/documents/inbrief. pdf (accessed 3 June 2008). See Olakunle O. Olagoke, ‘The Extra-Territorial Scope of the Anti-Corruption Legislation in Nigeria’ (2004) 38 Int’l Lawyer 71 at 76. See Ronald B. Davis, ‘Investor Control of Multinational Enterprises: A Market for Corporate Governance Based on Justice and Fairness?,’ in Janis Sarra, ed., Corporate Governance in Global Capital Markets (Vancouver & Toronto: UBC Press, 2003) 131 at 133.

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17 See Ellen Paine, ‘The Road to the Global Compact: Corporate Power and the Battle Over Global Public Policy at the United Nations,’ available at http://www.globalpolicy.org/reform/papers/2000/road.htm (accessed 9 December 2005). 18 See Ghana Minerals Commission, Statistical Overview of the Mineral Industry (1st and 2nd Quarters 2003 Report), August 2003. See also Benjamin N. A. Aryee, ‘Ghana’s Mining Sector: Its Contribution to the National Economy’ (2001) 27 Resources Policy 61. 19 Paul A. Acquah, ‘The Role of Mining in the Economy’ (paper presented by the Governor of the Bank of Ghana at the Ghana Chamber of Mines Luncheon, Accra, Ghana, 29 November 2002), available at http://www. bog.gov.gh/gspeeches/mining.htm (accessed 10 May 2005). 20 Ibid. 21 World Bank, ‘Nigeria: Country Brief,’ available at http://web.worldbank. org (accessed 3 June 2005). See also US Energy Information Administration, ‘OPEC Revenues: Country Details’ (January 2005), available at http://www.eia.doe.gov/emeu/cabs/orevcoun.html (accessed 3 June 2005). 22 Acquah, supra note 19. 23 Domestic oil and gas firms in Nigeria include Consolidated Oil Limited, Summit Oil International, and Yinka Folawiyo Petroleum Limited. See Department of Petroleum Resources, Nigerian Oil Industry Statistical Bulletin 2001 (Lagos: Department of Petroleum Resources) at 4–8. 24 Malcolm Keay, ‘Oil and Governance: Focus on West Africa’ (Briefing Paper of the Royal Institute of International Affairs, July 2002) at 3, available at http://www.riia.org/pdf/briefing-paper/Oil%20Keay%20briefing%20 paper.pdf (accessed 30 June 2003). See also Saman Zia-Zarifi, ‘Suing Multinational Corporations in the U.S. for Violating International Law’ (1999) 4 UCLA J. Int’l L. & Foreign Aff. 81 at 82. 25 In Nigeria, for example, the Land Use Act, Cap. L5, Laws of the Federation of Nigeria 2004, vests all land in the government, thereby depriving previous local landowners ownership and use of land. One underlying reason for the Land Use Act was to make it easy for the government to access mineral-rich land in the country. The Laws of the Federation of Nigeria 2004 are hereafter referred to as ‘LFN 2004.’ 26 Menno T. Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC,’ in Philip Alston, ed., The EU and Human Rights (Oxford & New York: Oxford University Press, 1999) 553 at 555. 27 See M.M. Olisa, Nigerian Petroleum Law and Practice (Ibadan: Fountain

Notes to pages 9–13

28 29 30

31

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Books, 1987) at 67; Adila Abusharaf, ‘The Legal Relationship Between Multinational Oil Companies and the Sudan: Problems and Prospects’ (1999) 43 J. African Law 18 at 22–4. Keay, supra note 24 at 3. Ibid. Civil campaigns against Shell for its perceived social irresponsibility have, for example, been reported not to have had ‘any demonstrable effect on [its] share prices or dividends.’ See Simon Zadek & Maya Forstater, ‘Making Civil Regulation Work,’ in Michael K. Addo, ed., Human Rights Standards and the Responsibility of Transnational Corporations (The Hague: Kluwer Law International, 1999) 69 at 70. See, for example, Ameze Guobadia, ‘Defining Corporate Social Responsibility for Nigeria’s Oil and Gas Sector’ (1991) 3 African J. Int. & Compt. Law 472.

1. The Social Irresponsibility of Transnational Corporations in Africa’s Extractive Industries 1 African leaders recently reiterated the importance of, and renewed their call for, foreign direct investment by TNCs. See the New Partnership for Africa’s Development, available at http://www.nepad.org/2005/files/documents/inbrief.pdf (accessed 3 June 2008). 2 For a detailed discussion of the social and cultural ramification of TNCs’ activities in the developing world, see the collection of essays in Krishna Kumar, ed., Transnational Enterprises: Their Impact on Third World Societies and Cultures (Boulder, CO: Westview Press, 1980). 3 Michael P. Todaro, Economic Development in the Third World, 4th ed. (New York & London: Longman, 1989) at 469. 4 United Nations Department of Economic and Social Affairs, The Impact of Multinational Corporations on Development and on International Relations (New York: United Nations, 1974) at 34, available at http://unctc.unctad. org/data/e74iia5a.pdf (accessed 14 July 2008). 5 In 1996, for example, the pharmaceutical giant Pfizer experimented and tested the antibiotic Trovan on unsuspecting children in Kano, Nigeria, without the knowledge and consent of their families. Trovan had never, before the Nigerian experiment, been tested on children anywhere else in the world. In the end, eleven children were said to have died while several others suffered a variety of injuries and diseases including brain damage, paralysis, and deafness. See Tamar Lewin, ‘Families Sue Pfizer on Test of Antibiotic,’ New York Times (30 August 2001), reproduced at http://www.

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Notes to pages 14–15 mindfully.org/Industry/Pfizer-Trovan-Nigerian-Suit.htm (accessed 21 July 2004); Joe Stephens, ‘The Body Hunters: As Drug Testing Spreads, Profits and Lives Hang in Balance,’ Washington Post, Sunday, 17 December 2000, available at http://www.washingtonpost.com/ac2/wp-dyn/A119392000Dec15 (accessed 21 July 2004). See Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (New York: Human Rights Watch, 1999) [hereafter Price of Oil]; Constitutional Rights Project, Land, Oil and Human Rights in Nigeria’s Delta Region (Lagos: Constitutional Rights Project, 1999); Ike Okonta & Oronto Douglas, Where Vultures Feast: Shell, Human Rights, and Oil in the Niger Delta (San Francisco: Sierra Club Books, 2001); Kenneth Omeje, High Stakes and Stakeholders: Oil Conflict and Security in Nigeria (Aldershot, UK: Ashgate, 2006); Jedrzej G. Frynas, ‘Corporate and State Responses to Anti-Oil Protests in the Niger Delta’ (2001) 100:398 African Affairs 27; Daniel Litvin, Empires of Profit: Commerce, Conquest and Corporate Responsibility (New York & London: Texere, 2003) at 249–73. See Human Rights Watch, Price of Oil, Ibid; Frynas, ibid. Soon after the restoration of civil rule in the country in 1999, the Niger Delta village of Odi in Bayelsa State was almost completely destroyed by the Nigerian army. The Federal Government had apparently deployed soldiers to the community in an attempt to arrest alleged murder suspects. In the process, several people, including women and children, were allegedly killed. See Human Rights Watch, The Destruction of Odi and Rape in Chioba (22 December 1999), available at http://www.hrw.org/press/1999/ dec/nibg1299.htm (accessed 14 July 2008); Human Rights Watch, The Niger Delta: No Democratic Dividend (October 2002) at 21–3, available at http:// www.hrw.org/reports/2002/nigeria3/nigerdelta.pdf (accessed 14 July 2008); Ibiba Don Pedro, ‘Mass Burial as Odi Marks Destruction’, The Guardian [Nigeria], 21 November 2000, available at http://www.ngrguardiannews.com/news2/nn804013.html (accessed 21 November 2000). Onshore exploration and production of oil by the major oil companies in Nigeria are undertaken as joint-ventures with the Nigerian National Petroleum Corporation, a wholly owned government corporation. See Human Rights Watch, Price of Oil, supra note 6 at 28–30. Chevron, ‘Chevron’s Statement Regarding Seizure of Nigerian Parabe Offshore Platform,’ available at http://www.chevrontexaco.com/news/ current_issues/nigeria_statement.asp (accessed 26 September 2004). California Global Corporate Accountability Project, Beyond Good Deeds: Case Studies and a New Policy Agenda for Corporate Accountability (July 2002)

Notes to pages 15–17

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13

14 15 16 17 18

19 20 21 22 23

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at 36, available at http://www.corporate-accountability.org/eng/documents/2002/beyond_good_deeds.pdf (accessed 27 August 2008); Human Rights Watch, Nigeria: Crackdown in the Niger Delta (May 1999), available at http://www.hrw.org/reports/1999/nigeria2/ (accessed 14 July 2008). Polly Ghazi & Cameron Duodu, ‘How Shell Tried to Buy Berrettas for Nigerians,’ The [London] Observer, 11 February 1996, cited in Human Rights Watch, Price of Oil, supra note 6 at 174–5. Shell Petroleum Development Company of Nigeria, SPDC’s Submission (to the Human Rights Violations Investigation Commission of Nigeria, 23 January 2001), available at http://www.shellnigeria.com/flame. asp?Page=news (accessed 2 June 2005) [hereafter SPDC’s Submission]. See also Joseph Ollor-Obari & Mustapha Ogunsakin, ‘Peace at Last in Ogoniland,’ Guardian [Nigeria], 4 February 2001, available at http://www. ngrguardiannews.com/magazine/mz811505.html (accessed 4 February 2001). Shell’s letter to Human Rights Watch, 6 November 1996, cited in Human Rights Watch, Price of Oil, supra note 6 at 175. These Special Military Task Forces have now been disbanded as a result of the return to civil rule in the country on 29 May 1999. Human Rights Watch, Price of Oil, supra note 6 at 170. Ibid. at 169. For example, the death of two protesters at Chevron’s Parabe Platform in 1998 was triggered by Chevron’s admitted invitation of security forces. See Human Rights Watch, Price of Oil, supra note 6 at 151. Prior to that incident, Chevron had in 1994 allegedly invited the Nigeria Police Force to disperse protesters at its facility at Opuekebo, Delta State, resulting in the drowning of three protesters. See Scott Pegg, ‘The Cost of Doing Business: Transnational Corporations and Violence in Nigeria’ (1999) 30:4 Security Dialogue 473 at 477; California Global Corporate Accountability Project, Oil Development in Nigeria: A Critical Investigation of Chevron Corporation’s Performance in the Niger River Delta at 3, available at www.n-h-i.org/Publications/Pubs_pdf/Nigeria_CorpAccount.pdf (accessed 26 January 2006). Human Rights Watch, Price of Oil, supra note 6 at 123. Ibid. Bronwen Manby, ‘The Role and Responsibility of Oil Multinationals in Nigeria’ (1999) 53:1 J. Int’l Affairs 281 at 293n21. See Ogoni Bill of Rights, available at http://www.waado.org/nigerdelta/ RightsDeclaration/Ogoni.html (accessed 26 July 2005). Ken Saro-Wiwa, Genocide in Nigeria: The Ogoni Tragedy (Port Harcourt: Saros, 1992) at 81.

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24 See Human Rights Watch, Price of Oil, supra note 6 at 125; Civil Liberties Organization, Ogoni: Trials and Travails (Lagos: Civil Liberties Organization, 1996); S. Nolen, ‘Nigeria Starts to Reveal Dictators’ Dirty Secrets,’ The Globe & Mail [Toronto], (24 January 2001), Front page/A9. 25 For a detailed account of the trial and conviction of Ken Saro-Wiwa and other Ogoni leaders, see Civil Liberties Organization, Ogoni: Trials and Travails, ibid. 26 Human Rights Watch, Price of Oil, supra note 6 at 179–82. 27 Ibid. at 171–2. 28 Shell Petroleum Development Company Ltd, ‘Clear Thinking in Troubled Times,’ SPDC Press Statement, 31 October 1995, cited in Human Rights Watch, Price of Oil, ibid. at 171n478. 29 See, for example, Civil Liberties Organization, Ogoni: Trials and Travails, supra note 24 at 41–100. Indeed, upon his resignation from the Steering Committee of the Niger Delta Environmental Survey, a prominent Nigerian scholar, Professor Claude Ake, accused Shell of complicity in the Ogoni crisis. See Claude Ake, ‘Shelling Nigeria Ablaze,’ Tell Magazine (29 January 1996) at 34. 30 Civil Liberties Organization, Ogoni: Trials and Travails, supra note 24 at 104. 31 For insight, see Civil Liberties Organization, ibid. at 17–26; Nolen, supra note 24; Human Rights Watch, Price of Oil, supra note 6 at 123–56; Constitutional Rights Project, Land, Oil and Human Rights in Nigeria’s Delta Region, supra note 6 at 31–40. 32 See SPDC’s Submission, supra note 13; Human Rights Watch, Price of Oil, supra note 6 at 115. 33 Human Rights Watch, Price of Oil, ibid. at 115. 34 See Stephen Kretzmann & Shannon Wright, Human Rights and Environmental Information on the Royal Dutch/Shell Group of Companies 1996-1997: An Independent Annual Report (San Francisco, CA: Rainforest Action Network and Project Underground, May 1997) at 11. 35 See Department of Foreign Affairs and International Trade (Canada), Human Security in Sudan: The Report of a Canadian Assessment Mission (Ottawa: Department of Foreign Affairs and International Trade, 2000), available at http://dsp-psd.communication.gc.ca/Collection/E2-198-2000E.pdf (accessed 1 August 2005) [hereafter Harker Report]. See also Christian Aid, The Scorched Earth: Oil and War in Sudan (March 2001), available at http:// www.christian-aid.org.uk.PDF (accessed 6 August 2003) [hereafter The Scorched Earth]; Georgette Gagnon & John Ryle, Report of an Investigation into Oil Development, Conflict and Displacement in Western Upper Nile, Sudan (October 2001) at 4, available at http://www.pacweb.org/e/pdf/SudanReportfinal101601.pdf (accessed 7 August 2003).

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36 For insight, see Global Witness, The Logs of War: The Timber Trade and Armed Conflict, available at http://www.globalwitness.org/reports/show.php/ en.00011.html (accessed 6 August 2003); Christian Dietrich, Hard Currency: The Criminalized Diamond Economy of the Democratic Republic of the Congo and Its Neighbours, available at http://www.pacweb.org/e/pdf/ hc_report_e.pdf (accessed 7 August 2003); Global Witness, All the Presidents’ Men: The Devastating Story of Oil and Banking in Angola’s Privatised War, available at http://www.globalwitness.org/reports/download. php/00027.pdf (accessed 6 August 2003) [hereafter All the Presidents’ Men]; Dominic Johnson, Shifting Sands: Oil Exploration in the Rift Valley and the Congo Conflict, available at http://www.pole-institute.org/documents/ heritage05.pdf (accessed 7 August 2003). 37 A direct relationship exists between resource exploitation and many of the conflicts in Africa. See, for example, Mary Kaldor et al, eds., Oil Wars (London: Pluto Press, 2007); United Kingdom All Party Parliamentary Group on the Great Lakes Region and Genocide Prevention, Cursed by Riches: Who Benefits from Resource Exploitation in the Democratic Republic of Congo? (November 2002), available at http://www.appggreatlakes. org/downloads/riches/pdf (accessed 6 August 2003) [hereafter Cursed by Riches]; Paul Collier, ‘The Market for Civil War’ (May/June 2003) 136 Foreign Policy 38 at 41–3; Philip Swanson, Fueling Conflict: The Oil Industry and Armed Conflict, available at http://www.fafo.no/pub/rapp/378/378. pdf (accessed 6 August 2003). 38 Ian Gary & Terry Lynn Karl, Bottom of the Barrel: Africa’s Oil Boom and the Poor (Catholic Relief Services, 2003) at 23, available at http://www. catholicrelief.org/g.PDF (accessed 30 June 2003). 39 See Human Rights Watch, Sudan, Oil, and Human Rights (New York: Human Rights Watch, 2003). Before the sale of Talisman’s interest in the GNPOC consortium, interest in the consortium was divided as follows: China National Petroleum Company held 40 per cent, Petronas Carigali (Malaysia’s national petroleum company) held 30 per cent, Talisman Energy Incorporated held 25 per cent, and Sudapet (Sudan’s state petroleum company) held 5 per cent. See Georgette Gagnon, Audrey Macklin, & Penelope Simons, Deconstructing Engagement: Corporate Self-Regulation in Conflict Zones – Implications for Human Rights and Canadian Public Policy (January 2003) at 17, available at http://www.law.utoronto.ca/docu.PDF (accessed 6 August 2003). 40 Christian Aid, The Scorched Earth, supra note 35 at 25; Gagnon & Ryle, supra note 35 at 33. 41 Harker Report, supra note 35 at 15.

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42 Gagnon & Ryle, supra note 35 at 30. 43 Ibid. 44 M.R. Cohn, ‘Oiling the Wheels of Revolution,’ The Toronto Star, [20 April 1997], F5. 45 Harker Report, supra note 35 at 11; Christian Aid, The Scorched Earth, supra note 35 at 26. 46 M.R. Cohn, ‘Oil Gushes Amid Slavery, Hunger,’ The Toronto Star, [17 June 1998], A22. See also Harker Report, ibid. at 62. 47 Gagnon & Ryle, supra note 35 at 35; Christian Aid, The Scorched Earth, supra note 35 at 22–6. 48 Harker Report, supra note 35 at 15. 49 See Project Underground, ‘What You Can Do: Protect Forest Reserves; Keep Mining Companies Out of Ghana’ (17 May 2003) 8, no. 4 Drillbits & Tailings, available at http://www.moles.org/ProjectUnderground/drillbits/8_04/do.html (accessed 24 July 2003). 50 Project Underground, ‘What You Can Do: Support the Human Rights of Ghanaians Against Abusive Gold Mining Practices’ (September 2002) 7, no. 7 Drillbits & Tailings, available at http://www.moles.org/ProjectUnderground/drillbits/7_07/do.html (accessed 24 July 2003). 51 For a general insight on these security outfits, see William Reno, ‘African Weak States and Commercial Alliances’ (1997) 96 African Affairs 165; Herbert M. Howe, ‘Private Security Forces and African Stability: The Case of Executive Outcomes’ (1998) 36:2 J. Modern African Studies 307; Francois Misser & Anver Versi, ‘Soldier of Fortune: The Mercenary as Corporate Executive’ (December 1997) 227 African Business 8. 52 See Elizabeth Rubin, ‘An Army of One’s Own: In Africa, Nations Hire a Corporation to Wage War’ (February 1997) Vol. 294 Number 1761 Harper’s Magazine 44. 53 C. Abugre & T. Akabzaa, ‘Mining Boom: Harnessing the Gain for Africa’ (1997) 15 African Agenda 7 at 9. See also Global Witness, Logging Off: How the Liberian Timber Industry Fuels Liberia’s Humanitarian Disaster and Threatens Sierra Leone at 9-10, available at http://www.globalwitness.org/ reports/index.php?section=Liberia (accessed 5 August 2003) [hereafter Logging Off]. 54 UN, Final Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo, U.N. Doc. Number S/2002/1146, at 16 para.79, available at http://www. un.dk/doc/S20021146.pdf (accessed 20 August 2003) [hereafter Final Report DRC]. 55 Christine Gordon, ‘Rebels’ Best Friend,’ BBC Focus On Africa magazine

Notes to pages 20–1

56

57 58 59

60 61

62 63

64

65 66 67 68 69 70

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(October–December 1999), cited in Ian Smillie, Lansana Gberie & Ralph Hazleton, The Heart of the Matter: Sierra Leone, Diamonds & Human Security at 10, available at http://www.pacweb.org/e/pdf/heart%20of%20the%20 matter.doc (accessed 6 August 2003). UN, Report of the Panel of Experts Appointed Pursuant to Security Council Resolution 1306 (2000), Paragraph 19, in Relation to Sierra Leone, U.N. Doc. Number S/2000/1195, at 18 para. 80, available at http://www.un.org/ Docs/sc/committees/SierraLeone/sclet11951e.pdf (accessed 6 August 2003) [hereafter Report of U.N. Experts on Sierra Leone]. Ibid. at 19 para. 92. Ibid. at 19–20 para. 94. United Nations, Additional Report of the Monitoring Mechanism on Sanctions Against UNITA, U.N. Doc. S/2002/486, at 17 para.116 and at 18 para. 121, available at http://www.un.org/Docs/sc/committees/Angola/486e.pdf (accessed 12 August 2003) [hereafter Additional Report on UNITA]. Ibid. at 18 para. 121. Global Witness, A Rough Trade: The Role of Companies and Governments in the Angolan Conflict (London: Global Witness, 1998), available at http://www. globalwitness.org/reports/download.php/00046.doc (accessed 4 August 2003) [hereafter A Rough Trade]. Additional Report on UNITA, supra note 59 at 18 para. 122. Global Witness & International Transport Workers Federation, Taylor-Made: The Pivotal Role of Liberia’s Forests and Flag of Convenience in Regional Conflict (2nd ed. 2001) at 3, available at http://www.globalwitness.org/reports/ download.php/00057.pdf (accessed 5 August 2003) [hereafter TaylorMade]. Amnesty International, Democratic Republic of Congo: ‘Our Brothers Who Help Kill Us’ – Economic Exploitation and Human Rights Abuses in the East (Amnesty International, April 2003, AI Index: AFR 62/010/2003) at 37, available at http://web.amnesty.org/aidoc/aidoc_pdf.nsf/Index/ AFR620102003ENGLISH/$File/AFR6201003.pdf (accessed 9 August 2003) [hereafter Our Brothers Who Help Kill Us]. Carole J.L. Collins, ‘Reconstructing the Congo’ (1997) 24:74 Review of African Political Economy 591 at 594. Ibid. Cursed by Riches, supra note 37 at 22. See also Amnesty International, Our Brothers Who Help Kill Us, supra note 64 at 37. Final Report DRC, supra note 54 at 11 para. 46. Ibid. at 12 para. 54. Collier, supra note 37 at 42.

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71 Philippe Le Billon, ‘Angola’s Political Economy of War: The Role of Oil and Diamonds, 1975-2000’ (2001) 100 African Affairs 55 at 78. 72 World Rainforest Movement, Africa: Forests Under Threat (Montevideo, Uruguay: World Rainforest Movement, 2002) at 59. See also Global Witness & International Transport Workers Federation, Taylor-Made, supra note 63 at 3-5; Global Witness, Logging Off, supra note 53 at 5–8. 73 Report of U.N. Experts on Sierra Leone, supra note 56 at 37 para. 215. 74 Ibid. at 44 para. 272. 75 See Final Report DRC, supra note 54 at 32 para.175. 76 The government of Angola, for example, is known to have granted participation rights in some of Angola’s oil blocks to several companies that are ‘normally associated with arms dealing [rather] than oil exploration.’ See Global Witness, A Crude Awakening: The Role of the Oil and Banking Industries in Angola’s Civil War and the Plunder of State Assets (London: Global Witness Ltd, 1999) at 11–12, available at http://www.globalwitness.org/ reports/download.php/00048.pdf (accessed 4 August 2003) [hereafter A Crude Awakening]. 77 Global Witness, A Crude Awakening, ibid. at 11. 78 Le Billon, supra note 71 at 75. 79 See Human Rights Watch, Price of Oil, supra note 6; Constitutional Rights Project, Land, Oil and Human Rights in Nigeria’s Delta Region, supra note 6; Okonta & Douglas, supra note 6; Jedrzej G. Frynas, Oil in Nigeria: Conflict and Litigation Between Oil Companies and Village Communities (Hamburg: LIT Verlag Munster, 2000) [hereafter Oil in Nigeria]. 80 Relying on official figures from the Department of Petroleum Resources, Human Rights Watch reports that between 1976 and 1996, a total of 4,835 incidents of oil spills occurred in Nigeria, resulting ‘in the spillage of at least 2,446,322 barrels (102.7 million U.S. gallons)’ of crude oil. Of these, ‘an estimated 1,896,930 barrels (79.7 million U.S. gallons; 77 per cent) were lost to the environment.’ See Human Rights Watch, Price of Oil, ibid. at 59. See also A.E. Ogbuigwe, ‘Compensation and Liability for Oil Pollution in Nigeria’ (1985) 3 J. Private & Property L. 23. 81 Department of Petroleum Resources, Nigerian Oil Industry Statistical Bulletin 2001 (Lagos: Department of Petroleum Resources) at 76. 82 Ibid. 83 Human Rights Watch, Price of Oil, supra note 6 at 67. See also Kretzmann & Wright, supra note 34 at 6. 84 Eboe Hutchful, ‘Oil Companies and Environmental Pollution in Nigeria,’ in Claude Ake, ed., Political Economy of Nigeria (London & Lagos: Longman, 1985) 113 at 115. See also J.F. Fekumoh, ‘Civil Liability for Damage

Notes to page 23

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86 87

88 89 90 91

92 93 94

95

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Caused by Oil Pollution,’ in J.A. Omotola, ed., Environmental Laws in Nigeria (Lagos: University of Lagos Press, 1987) at 256. See ‘Polluted Water Kills 20 in Bayelsa Oil Spill,’ The Guardian [Nigeria], 8 December 2000, available at http://ngrguardiannews.com/news2/ nn805711.html (accessed 8 December 2000); H. Oliomogbe & P. Achowue, ‘Toxic Chemicals Kill Eight Children in Bayelsa,’ The Guardian [Nigeria], 15 December 2000, available at http://ngrguardiannews.com/news2/ nn806410.html (accessed 15 December 2000); S. Oyadongha, ‘Eight Children Die of Contaminated Water in Brass Local Government,’ Vanguard [Nigeria], 7 December 2000, available at http://www.vanguardngr. com/04122000/nd507120.htm (accessed 7 December 2000). Kretzmann & Wright, supra note 34 at 6; Human Rights Watch, Price of Oil, supra note 6 at 67. See World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. II (Washington, DC: World Bank, 1995) at 74 (Annex M), available at http://www-wds.worldbank.org/servlet/WDS_IBANK_ Servlet?pcont=details&eid=000094946_00082605382642 (accessed 13 June 2003). Human Rights Watch, Price of Oil, supra note 6 at 63–4. Hutchful, supra note 84 at 116. See Human Rights Watch, Price of Oil, supra note 6 at 62. Ibid. at 72 (‘Nigeria flares more gas than any other country in the world’). See also Sarah A. Khan, Nigeria: The Political Economy of Oil (Oxford: Oxford University Press, 1994) at 162; The Climate Justice Programme & Environmental Rights Action, Gas Flaring in Nigeria: A Human Rights, Environmental and Economic Monstrosity (June 2005) at 10–13, available at http://www.eraction.org/files/gas.flaring.in.nigeria.pdf (accessed 7 April 2008). Department of Petroleum Resources, Nigerian Oil Industry Statistical Bulletin 2001, supra note 81 at 33. Ibid. Nigerian National Petroleum Corporation, Annual Statistical Bulletin (January – December 2002) at x, available at http://nnpcgroup.com/performance/index.php (accessed 4 May 2007). Nigerian National Petroleum Corporation, Annual Statistical Bulletin (January – December 2004) at xi, available at http://nnpcgroup.com/performance/index.php (accessed 4 May 2007). Nigerian National Petroleum Corporation, 2005 Annual Statistical Bulletin at xiv, available at http://nnpcgroup.com/performance/index.php (accessed 4 May 2007).

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97 Augustine O. Isichei & William W. Sanford, ‘The Effects of Waste Gas Flares on the Surrounding Vegetation in South-Eastern Nigeria’ (1976) 13 Journal of Applied Ecology 177 at 185. 98 United Nations Development Programme, Niger Delta Human Development Report (Abuja: UNDP 2006) at 79. 99 Human Rights Watch, Price of Oil, supra note 6 at 74; Civil Liberties Organization, Ogoni: Trials & Travails, supra note 24 at xiii. 100 Civil Liberties Organization, ibid. at xiii. 101 Henry Clark, et al., Oil For Nothing: Multinational Corporations, Environmental Destruction, Death and Impunity in the Niger Delta at 5, available at http://www.essentialaction.org/shell/report/index.html (accessed 30 July 2003). 102 Thomas Akabzaa & Abdulai Darimani, Impact of Mining Sector Investment in Ghana: A Study of the Tarkwa Mining Region at 23, available at http:// www.saprin.org/ghana/research/gha_mining.pdf (accessed 10 August 2003). 103 Ibid. at 25. 104 Ibid. 105 Project Underground, ‘Hotspots’ (31 October 2001) 6, no. 8, Drillbits & Tailings, available at http://www.moles.org/ProjectUnderground/drillbits/6_08/hotspots.html (accessed 24 July 2003). See also Linus Atarah, ‘Toxic Waste: Ghanaian River Awash with Dead Fish Stock,’ Afrol News, 1 November 2001, available at http://www.afrol.com/News2001/gha008_ cyanide_river.htm (accessed 31 January 2004). 106 Akabzaa & Darimani, supra note 102 at 48–54. 107 Ibid. at 60–3. 108 Ibid. at 61. 109 Ibid. at 47. 110 Friends of the Earth International, Failing the Challenge: The Other Shell Report 2002 (London: Friends of the Earth, 2003) at 6. 111 Douglas A. Yates, ‘The Scramble for African Oil,’ West Africa [Magazine], no. 4323 (29 April–5 May 2000) at 28. 112 Scott Pegg, Poverty Reduction or Poverty Exacerbation? World Bank Group Support for Extractive Industries in Africa (Environmental Defense, 2003) at 14, available at http://www.foe.org/res/pubs/pdf/pegg.pdf (accessed 9 April 2008). See also John Lungu & Chomba Mulenga, Corporate Social Responsibility Practices in the Extractive Industry in Zambia, 2nd ed. (Ndola, Zambia: Mission Press, 2005) at 65 & 86–8. 113 World Rainforest Movement, Africa: Forests Under Threat, supra note 72 at 9.

Notes to pages 25–6 114 115 116 117 118 119 120

121

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See Final Report DRC, supra note 54 at Appendix III. Collins, ‘Reconstructing the Congo,’ supra note 65 at 594. Ghazi & Duodu, supra note 12. Global Witness & International Transport Workers Federation, Taylor Made, supra note 63; Global Witness, Logging Off, supra note 53. Harker Report, supra note 35 at 15; Gagnon & Ryle, supra note 35 at 33. Global Witness, A Crude Awakening, supra note 76. The HIV/AIDS pandemic is presently wreaking havoc of unimaginable proportions on the African continent, particularly in the sub-Saharan region. The United Nations estimates that 70 per cent of the 3 million people who died of HIV/AIDS in 2004 are Africans and about 25 million sub-Saharan Africans are infected with HIV. See United Nations Development Programme (UNDP), Human Development Report 2005 – International Cooperation at a Crossroads: Aid, Trade and Security in an Unequal World (New York: UNDP, 2005) at 26. In addition, over 80 per cent people of the 350-500 million people afflicted yearly with malaria worldwide are African children, while Africa accounts for 90 per cent of the 1 million deaths caused by malaria every year. See UNDP, Human Development Report 2007/2008 – Fighting Climate Change: Human Solidarity in a Divided World (New York: UNDP & Palgrave Macmillan, 2007) at 25. UNCTAD, Economic Development in Africa – From Adjustments to Poverty Reduction: What is New? (New York & Geneva: United Nations, 2002) at 2. See also UNDP, Human Development Report 2007/2008, ibid. at 25. UNDP, Human Development Report 2007/2008, ibid. at 231–2. See also UNDP, Human Development Report 2003 – Millennium Development Goals: A Compact Among Nations to End Human Poverty (New York: UNDP & Oxford University Press, 2003) at 237–44. UNDP, Human Development Report 2006 – Beyond Scarcity: Power, Poverty and the Global Water Crisis (New York: UNDP & Palgrave Macmillan, 2006) at 265. World Bank, Africa Development Indicators 2007 (Washington, DC: World Bank, 2008) at 6; Kenneth Button, ‘Effective Infrastructure Policies to Foster Integrated Economic Development’ (presented at the Third African Development Forum, Addis Ababa, March 2002), available at http:// www.uneca.org/adfiii/docs/Effective_infrastructure_Policies_edited2. htm (accessed 16 July 2007). See Arthur A. Goldsmith, ‘Donors, Dictators and Democrats in Africa’ (2001) 39:3 J. Modern African Studies 411. John Mukum Mbaku, ‘Bureaucratic Corruption in Africa: The Futility of Cleanups’ (1996) 16:1 CATO Journal 99 at 99–100; J.P. Olivier de Sardan,

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136 137 138

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Notes to pages 26–8 ‘A Moral Economy of Corruption in Africa?’ (1999) 37:1 J. Modern African Studies 25 at 28. See, generally, Kempe R. Hope Sr. & Bornwell C. Chikulo, eds., Corruption and Development in Africa: Lessons from Country Case-Studies (London: Palgrave, 1999); Susan Rose-Ackerman, Corruption and Government: Causes, Consequences, and Reform (Cambridge: Cambridge University Press, 1999). Ernest Harsch, ‘Accumulators and Democrats: Challenging State Corruption in Africa’ (1993) 31:1 J. Modern African Studies 31 at 43. Ibid. at 39. In fact, unless there is an effective detection and punishment mechanism, corruption is likely to continue, if not multiply, in Africa. See Kenneth Good, ‘Corruption and Mismanagement in Botswana: A Best-Case Example?’ (1994) 32:3 J. Modern African Studies 499 at 519. See Jim Cason, ‘Nigeria: U.S. Firm Halliburton Acknowledges Bribe to Nigerian Official,’ available at http://allafrica.com/stories/200305090511.html (accessed 26 July 2005). See also Kunle Aderinokun, ‘Haliburton: Crime Commission Declares Two Wanted,’ ThisDay News [Nigeria] (24 July 2003), available at http://www.thisdayonline. com/news/20030724news06.html (accessed 24 July 2003). See Obiora C. Okafor, Re-Defining Legitimate Statehood: International Law and State Fragmentation in Africa (The Hague: Martinus Nijhoff Publishers, 2000); Makau wa Mutua, ‘Book Review: Putting Humpty Dumpty Back Together Again: The Dilemmas of the Post-Colonial African State’ (1995) 21 Brooklyn J. Int’l L. 505. Joel S. Migdal, Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World (Princeton, NJ: Princeton University Press, 1988) at 4. Claude Ake, Democracy and Development in Africa (Washington, DC: Brookings Institution, 1996) at 42. Steven W. Langdon, ‘Export-Oriented Industrialization Through the Multinational Corporation: Evidence from Kenya,’ in Ahamed Idris-Soven, Elizabeth Idris-Soven & Mary K. Vaughan, eds., The World as a Company Town: Multinational Corporations and Social Change (The Hague & Paris: Mouton Publishers, 1978) 295 at 296. Gagnon & Ryle, supra note 35 at 39. Ibid. Bonnie Campbell, Canadian Mining Interests and Human Rights in Africa in the Context of Globalization (Montreal: International Centre for Human Rights and Democratic Development, 1999) at 7. See Global Witness, A Rough Trade, supra note 61.

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140 Gary & Karl, supra note 38 at 23. 141 See Smillie, Gberie, & Hazleton, supra note 55 at 9; Gagnon & Ryle, supra note 35 at 39–41. 2. Regulation of Corporations: Competing Models 1

2 3

4 5

6

7 8

9

Neil Gunningham, ‘Private Ordering, Self-Regulation and Futures Markets: A Comparative Study of Informal Social Control’ (1991) 13:4 Law and Policy 297 at 300 [hereafter ‘Private Ordering’]. Ibid. See Adelle Blackett, ‘Global Governance, Legal Pluralism and the Decentered State: A Labor Law Critique of Codes of Corporate Conduct’ (2001) 8 Indiana J. Global Leg. Stud. 401 at 403–4. Gunningham, ‘Private Ordering,’ supra note 1 at 300. Neil Gunningham, Safeguarding the Worker: Job Hazards and the Role of the Law (Melbourne: Law Book Company, 1984) at 314 [emphasis in original; hereafter Safeguarding the Worker]. See also Jeremy Lehrer, ‘Trading Profits for Change’ (1998) 25 Hum. Rts. 21 at 23 (‘government-enforced regulations are the best means of preventing industry abuses’ of human rights). See Frank Pearce & Steve Tombs, ‘Ideology, Hegemony and Empiricism: Compliance Theories of Regulation’ (1990) 30:4 Brit. J. Criminol. 423; Brent Fisse & John Braithwaite, Corporations, Crime and Accountability (Cambridge: Cambridge University Press, 1993) at 15; Celia Wells, Corporations and Criminal Responsibility (Oxford: Oxford University Press, 2001) at 17. Pearce & Tombs, ibid. at 439. See also Gunningham, Safeguarding the Worker, supra note 5 at 284 & 313. Andrew Hopkins, Making Safety Work: Getting Management Commitment to Occupational Health and Safety (St Leonards, Australia: Allen & Unwin Pty Ltd, 1995) at 27 & 94–114 [hereafter Making Safety Work]. See also Gunningham, Safeguarding the Worker, supra note 5 at 314; Harry J. Glasbeek & Susan Rowland, ‘Are Injuring and Killing at Work Crimes?’ (1979) 17 Osgoode Hall L.J. 506 at 590–1. See Pearce & Tombs, supra note 6. The notion that corporations act rationally on the basis of cost-benefit analysis is disputed by some writers. See, for example, Keith Hawkins, ‘Compliance Strategy, Prosecution Policy, and Aunt Sally: A Comment on Pearce and Tombs’ (1990) 30:4 Brit. J. Criminol. 444 at 454–5 [hereafter ‘Compliance Strategy’]; Robert A. Kagan & John T. Scholz, ‘The Criminology of the Corporation and Regulatory Enforcement Strategies,’ in Keith Hawkins & John M. Thomas,

244

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11 12 13

14 15

16

17

18

19

20 21

Notes to pages 33–4 eds., Enforcing Regulation (Boston: Kluwer-Nijhoff, 1984) 67 at 71–2 [hereafter ‘Criminology of the Corporation’]; Eugene Bardach & Robert Kagan, Going by the Book: The Problem of Regulatory Unreasonableness (Philadelphia: Temple University Press, 1982) at 61–5 [hereafter Going by the Book]. Howard Latin, ‘Ideal Versus Real Regulatory Efficiency: Implementation of Uniform Standards and ‘Fine-Tuning’ Regulatory Reforms’ (1985) 37 Stan. L. Rev. 1267 at 1271. Bardach & Kagan, Going By the Book, supra note 9 at 67–8. See Gunningham, Safeguarding the Worker, supra note 5 at 295–6. Sandra B. Zellmer, ‘The Virtues of “Command and Control” Regulation: Barring Exotic Species From Aquatic Ecosystems’ (2000) U. Ill. L. Rev. 1233 at 1259–60. Roderick A. Macdonald, ‘The Fridge-door Statute’ (2001–2) 47 McGill L. J. 11 at 34. See, generally, Eric W. Orts, ‘Reflexive Environmental Law’ (1995) 89 NorthWestern Univesity Law Review 1227; Robert Howse, ‘Retrenchment, Reform or Revolution? The Shift to Incentives and the Future of the Regulatory State’ (1993) 31 Alta. L. Rev. 455. See Hawkins, ‘Compliance Strategy,’ supra note 9 at 461; Robert A. Kagan, ‘On Regulatory Inspectorates and Police,’ in Hawkins & Thomas, eds., supra note 9 at 55. See Ian Ayres & John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (New York: Oxford University Press, 1992); Neil Gunningham & Richard Johnstone, Regulating Workplace Safety: System and Sanctions (Oxford: Oxford University Press, 1999). John Braithwaite, ‘Responsive Business Regulatory Institutions,’ in C. A. J. Coady & C. J. G. Sampford, eds., Business, Ethics and the Law (Leichardt, Australia: The Federation Press, 1993) 83 at 85. Bardach & Kagan, Going By the Book, supra note 9 at 130–1. By forebearance, Bardach & Kagan [at 134] mean: (a) ‘overlooking violations that pose no serious risk;’ (b) non-enforcement of ‘regulatory requirements that would be especially costly or disruptive in relation to the additional degree of protection they would provide;’ (c) granting corporations ‘reasonable time’ to comply with legal standards and acceptance of ‘measures that would provide substantial if not literal compliance;’ and (d) making allowance for, and taking into consideration, ‘good faith efforts on the part of the regulated enterprise.’ John Braithwaite, Restorative Justice & Responsive Regulation (Oxford: Oxford University Press, 2002) at 30. See Gunther Teubner, Law as an Autopoietic System (Oxford, UK/Cam-

Notes to pages 34–5

22 23

24

25 26 27

28 29

30 31 32 33 34 35 36 37 38

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bridge, MA: Blackwell, 1993); Gunther Teubner, ed., Autopoietic Law: A New Approach to Law and Society (Berlin & New York: Walter de Gruyter, 1988). Gunther Teubner, ‘Substantive and Reflexive Elements in Modern Law’ (1983) 17 Law & Soc’y Rev. 239 at 255. Ibid. at 274. See also David Sugarman, ‘Law, Economy and the State in England 1750–1914: Some Major Issues,’ in David Sugarman, ed., Legality, Ideology and the State (London: Academic Press, 1983) 213 at 216. See generally Marius Aalders & Ton Wilthagen, ‘Moving Beyond Command-and-Control: Reflexivity in the Regulation of Occupational Safety and Health and the Environment’ (1997) 19 Law & Policy 415. Peter C. Yeager, The Limits of Law: The Public Regulation of Private Pollution (Cambridge: Cambridge University Press, 1991) at 32–4. See Bridget M. Hutter, Compliance: Regulation and Environment (Oxford & New York: Clarendon Press/Oxford University Press, 1997) at 3. Hawkins, ‘Compliance Strategy,’ supra note 9 at 448; Marc J. Roberts & Jeremy S. Bluhm, The Choices of Power: Utilities Face the Environmental Challenge (Cambridge, MA: Harvard University Press, 1981) at 380. Hawkins, ‘Compliance Strategy,’ ibid. On the problem of regulatory ‘capture,’ see Marver H. Bernstein, Regulating Business by Independent Commission (Princeton, NJ: Princeton University Press, 1955). See also George J. Stigler, ‘The Theory of Economic Regulation’ (1971) 2(1) Bell Journal of Economics and Management Science 3; Ian Ayres & John Braithwaite, ‘Tripartism: Regulatory Capture and Empowerment’ (1991) 16 Law & Soc. Inquiry 435. See Bardach & Kagan, Going By the Book, supra note 9 at 39–41. Hawkins, ‘Compliance Strategy,’ supra note 9 at 450. John A. Barrett, Jr, ‘The Global Environment and Free Trade: A Vexing Problem and a Taxing Solution’ (2001) 76 Indiana L. J. 829 at 836. Bruce A. Ackerman & Richard B. Stewart, ‘Reforming Environmental Law’ (1985) 37 Stan. L. Rev. 1333 at 1335. Bardach & Kagan, Going by the Book, supra note 9 at 62. Ackerman & Stewart, ‘Reforming Environmental Law,’ supra note 33 at 1335–40; Yeager, supra note 25 at 42 & 45. Yeager, ibid. at 45. See chapter 4 below for a discussion of codes of conduct in the extractive industries. For insight on economic instruments for environmental regulation, see Wallace E. Oates, The Economics of Environmental Regulation (Cheltenham, UK & Brookfield, VT: Edward Elgar Publishing, 1996). David M. Driesen, ‘Is Emissions Trading an Economic Incentive Program?:

246

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42

43

44 45

Notes to pages 35–6 Replacing the Command and Control/Economic Incentive Dichotomy’ (1998) 55 Wash. & Lee L. Rev. 289 at 323. T.H. Tietenberg, Emissions Trading: An Exercise in Reforming Pollution Policy (Washington, DC: Resources for the Future, Inc., 1985) at 38 (‘the traditional command-and-control approach is not and cannot become cost effective?’); William G. Tucker, ‘Environmentalism: Does It Require Regulation?,’ in Margaret N. Maxey & Robert L. Kuhn, eds., Regulatory Reform: New Vision or Old Curse? (New York: Praeger Publishers, 1985) 177 at 181 (‘government intervention in the marketplace has caused most of the environmental problems we have today’ [emphasis in original]); Richard B. Stewart, ‘Economics, Environment, and the Limits of Legal Control’ (1985) 9 Harv. Envtl. L. Rev. 1 at 7; Robert W. Hahn & Robert N. Stavins, ‘Incentive-Based Environmental Regulation: A New Era from an Old Idea?’ (1991) 18 Ecology L.Q. 1 at 6. Tietenberg, ibid. at 58 (‘emissions trading program can achieve air quality goals at substantially lower cost than the command-and-control policy’); Ackerman & Stewart, ‘Reforming Environmental Law,’ supra note 33 at 1341–2 (‘A system of tradeable rights will tend to bring about a least-cost allocation of control burdens, saving many millions of dollars annually’); Peter J. Morgan, ‘Alternative Policy Instruments Under Uncertainty: A Programming Model of Toxic Pollution Control’ (1983) 10 J. Envtl. Econ. & Mgmt. 248 at 249 (‘market policies perform much better than the nonmarket quantity policy’). Emissions trading schemes allocate and/or sell credits or allowances to polluters and permit them to buy and sell such credits or allowances from one another in order to meet their pollution abatement obligations under the law. For insight, see Jonathan R. Nash & Richard L. Revesz, ‘Markets and Geography: Designing Marketable Permit Schemes to Control Local and Regional Pollutants’ (2001) 28 Ecology L. Q. 569; Bruce A. Ackerman & Richard B. Stewart, ‘Reforming Environmental Law: The Democratic Case for Market Incentives’ (1988) 13 Colum. J. Envtl. L. 171; Richard B. Stewart, ‘Controlling Environmental Risks Through Economic Incentives’ (1988) 13 Colum. J. Envtl. L. 153; Cass R. Sunstein, ‘Democratizing America Through Law’ (1991) 25 Suffolk U. L. Rev. 949 at 964–6. Susan Rose-Ackerman, ‘Comment: Consensus Versus Incentives: A Skeptical Look at Regulatory Negotiation’ (1994) 43 Duke L.J. 1206 at 1220 [hereafter ‘Consensus Versus Incentives’]; Tietenberg, supra note 40 at 38–59. Ackerman & Stewart, ‘Reforming Environmental Law,’ supra note 33 at 1346. Stephen Breyer, ‘Analyzing Regulatory Failure: Mismatches, Less Restric-

Notes to pages 36–7

46 47 48

49 50 51 52 53

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tive Alternatives, and Reform’ (1979) 92 Harv. L. Rev. 547 at 596. See also Richard B. Stewart, ‘Regulation, Innovation, and Administrative Law: A Conceptual Framework’ (1981) 69 Calif. L. Rev. 1256 at 1373–74 [hereafter ‘Regulation, Innovation, and Administrative Law’]. Stewart, ‘Economics, Environment, and the Limits of Legal Control,’ supra note 40 at 12. P.N. Grabosky, ‘Beyond the Regulatory State’ (1994) 27:2 Australian and New Zealand J. of Criminology 192 at 194. For insightful analysis on the emerging facilitative role of government in social and economic regulation, see David Osborne &Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector (Reading, MA: Addison-Wesley Publishing, 1992). P.N. Grabosky, ‘Green Markets: Environmental Regulation by the Private Sector’ (1994) 16:4 Law and Policy 419 at 419 [hereafter ‘Green Markets’]. Gunningham, ‘Private Ordering,’ supra note 1 at 298–9 & 303. Grabosky ‘Green Markets,’ supra note 49 at 442. Ibid. at 434. See OECD, Environment Directorate/Environment Policy Committee, Economic Instruments for Pollution Control and Natural Resources Management in OECD Countries: A Survey, Doc. No. ENV/EPOC/GEEI(98)35/ REV1/FINAL (Paris: OECD, 1999), available at http://www.olis.oecd.org/ olis/1998doc.nsf/LinkTo/ENV-EPOC-GEEI{98}35-REV.1-FINAL (accessed 14 December 2003). Although Canada has not been as enthusiastic as the United States in implementing market-based regulatory techniques, the country appears to be ‘gradually implementing pollution markets and actively considering wider use of emissions trading’: Katrina M. Wyman, ‘Why Regulators Turn to Tradeable Permits: A Canadian Case Study’ (2002) 52 U. T. L. J. 419 at 422–3. Indeed, s. 322 of the Environmental Protection Act, 1999, Statutes of Canada 1999, c.33 permits the Minister to resort to economic instruments and market-based approaches to further the purpose of the Act. Jon D. Hanson & Kyle D. Logue, ‘The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation’ (1998) 107 Yale L. J. 1163 at 1174. For general insight, see Richard B. Stewart & Jonathan B. Wiener, ‘The Comprehensive Approach to Global Climate Policy: Issues of Design and Practicality’ (1992) 9 Ariz. J. Int’l & Comp. L. 83; Brett Frischmann, ‘Using the Multi-Layered Nature of International Emissions Trading and of International-Domestic Legal Systems to Escape a Multi-State Compliance Dilemma’ (2001) 13 Geo. Int’l Envtl. L. Rev. 463; Jonathan R. Nash, ‘Too

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62

63 64 65 66 67 68

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70

Notes to pages 37–8

Much Market?: Conflict Between Tradable Pollution Allowances and the ‘Pollution Pays’ Principle’ (2000) 24 Harv. Envtl. L. Rev. 465 at 532–5. See also Robert N. Stavins, ‘Policy Instruments for Climate Change: How Can National Governments Address a Global Problem?’ (1997) U. Chi. Legal F. 293 at 298 (‘some degree of aggregate cost-effectiveness could be achieved if market-based instruments were employed internationally’). Jonathan B. Wiener, ‘Global Environmental Regulation: Instrument Choice in Legal Context’ (1999) 108 Yale L. J. 677 at 724. Emphasis in original. See the Kyoto Protocol to the United Nations Framework Convention on Climate Change, 11 December 1997, Articles 3, 4, & 6. Robert R.M. Verchick, ‘Feathers or Gold?: A Civic Economics for Environmental Law’ (2001) 25 Harv. Envtl. L. Rev. 95 at 112. Richard T. Drury et al, ‘Pollution Trading and Environmental Injustice: Los Angeles’ Failed Experiment in Air Quality Policy’ (1999) 9 Duke Envtl. L. & Pol. 231 at 278–9. Peter H. Schuck, ‘A Tool for Assessing Social Legislation,’ in Timothy B. Clark, Marvin H. Kosters, & James C. Miller III, eds., Reforming Regulation (Washington, DC, & London: American Enterprise Institute for Public Policy Research, 1980) 117 at 119–20. See Robert S. Smith, ‘Protecting Workers’ Health and Safety,’ in Robert W. Poole, Jr., ed., Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington, Mass.: Lexington Books & D.C. Heath and Company, 1982) 311. Smith, ibid. at 319. See also James R. Chelius, ‘The Control of Industrial Accidents: Economic Theory and Empirical Evidence’ (1973) 38 Law & Contemporary Problems 700. Smith, ibid. at 315. Yeager, supra note 25 at 40–1. Mark J. Green, ‘Cost-Benefit Analysis as a Mirage,’ in Clark et al., eds., supra note 60 at 113. Yeager, supra note 25 at 41. Yeager, ibid. (arguing that ‘costs are typically much more easily determined than are benefits’). Green, supra note 65 at 113–14; Michael C. Blumm, ‘Symposium: The Fallacies of Free Market Environmentalism’ (1992) 15 Harv. J.L. Pub. Pol’y 371 at 376. John A. Haigh, David Harrison, Jr, & Albert L. Nichols, ‘Benefit-Cost Analysis of Environmental Regulation: Case Studies of Hazardous Air Pollutants’ (1984) 8 Harv. Envt’l L. Rev. 395 at 432. See Yeager, supra note 25 at 41.

Notes to pages 38–9 71 72 73 74

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76 77 78 79

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Drury, et al., supra note 59 at 270. Ibid. at 269. See Haigh, et al., supra note 69 at 433. Daniel H. Cole & Peter Z. Grossman, ‘When is Command-and-Control Efficient?: Institutions, Technology, and the Comparative Efficiency of Alternative Regulatory Regimes for Environmental Protection’ (1999) Wis. L. Rev. 887 at 892 (‘contrary to the prevailing view, the existing “empirical” studies do not demonstrate either that command-and-control regulations are inherently ineffective or that they are invariably less efficient than market-based alternatives’) [emphasis in original]; Wallace E. Oates, Paul R. Portney & Albert M. McGartland, ‘The Net Benefits of Incentive-Based Regulation: A Case Study of Environmental Standard Setting’ (1989) 79:5 American Economic Rev. 1233 at 1240 (arguing that in some cases ‘the “overcontrol” that makes CAC policies more expensive also makes them more efficacious’). See also Eugene P. Seskin, Robert J. Anderson, Jr, & Robert O. Reid, ‘An Empirical Analysis of Economic Strategies for Controlling Air Pollution’ (1983) 10 J. Envtl. Econ. & Mgmt. 112 at 119. Contra Tietenberg, supra note 40 at 95 (suggesting the superiority of market instruments). Stephen M. Johnson, ‘Economics v. Equity: Do Market-Based Environmental Reforms Exacerbate Environmental Injustice?’ (1999) 56 Wash. & Lee L. Rev. 111 at 116. OECD, Economic Instruments for Pollution Control and Natural Resources Management in OECD Countries: A Survey, supra note 53 at 96. Ibid. Drury et al., supra note 59 at 235 & 274–8; Driesen, supra note 39 at 313. Susan A. Austin, ‘Designing a Nonpoint Source Selenium Load Trading Program’ (2001) 25 Harv. Envtl. L. Rev. 337 at 390 (‘[e]nvironmental trading policies are not suitable to address all environmental problems’). See United Nations, Additional Report of the Monitoring Mechanism on Sanctions Against UNITA, U.N. Doc. S/2002/486, available at http://www. un.org/Docs.sc/committees/Angola/486e.pdf (accessed 12 August 2003); Christian Dietrich, Hard Currency: The Criminalized Diamond Economy of the Democratic Republic of the Congo and Its Neighbours, available at http:// www.pacweb.org/e/pdf/hc_report_e.pdf (accessed 7 August 2003). See Blumm, supra note 68 at 375. See Export and Import of Rough Diamonds Act, Statutes of Canada 2002, c.25; Clean Diamond Trade Act, 19 USC 3901. Neil Gunningham & Darren Sinclair, ‘Integrative Regulation: A PrincipleBased Approach to Environmental Policy’ (1999) 24 Law and Soc. Inquiry

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89 90 91 92 93 94 95 96 97 98

99 100 101 102

Notes to pages 39–42 853 at 859; Neil Gunningham & Mike D. Young, ‘Toward Optimal Environmental Policy: The Case of Biodiversity Conservation’ (1997) 24 Ecology L. Q. 243 at 276. This is depicted by catchy titles such as ‘alternatives to regulation’ and ‘instead of regulation.’ See Poole, Jr, ed., Instead of Regulation: Alternatives to Federal Regulatory Agencies, supra note 61; Michael S. Baram, Alternatives to Regulation: Managing Risks to Health, Safety and the Environment (Lexington, MA/Toronto: Lexington Books/D.C. Heath & Company, 1982). Grabosky, ‘Beyond the Regulatory State,’ supra note 47 at 192. See Paul L. Joskow & Richard Schmalensee, ‘The Political Economy of Market-Based Environmental Policy: The U.S. Acid Rain Program’ (1998) 41 J. Law & Econ. 37 at 37–8. Latin, supra note 10 at 1273. Barrett, Jr, supra note 32 at 835. See also Debra L. Donahue, ‘The Untapped Power of Clean Water Act Section 401’ (1996) 23 Ecology L. Q. 201 at 202–3; Sidney A. Shapiro & Thomas O. McGarity, ‘Comment: Not So Paradoxical: The Rationale for Technology-Based Regulation’ (1991) Duke L. J. 729 at 743; Zellmer, supra note 13 at 1250–1. Michael T. Maloney & Bruce Yandle, ‘Estimation of the Cost of Air Pollution Control Regulation’ (1984) 11 J. Envtl. Econ. & Mgmt. 244 at 246. See Gunningham, Safeguarding the Worker, supra note 5 at 295–6. Ibid. Zellmer, supra note 13 at 1253. Latin, supra note 10 at 1270. Howse, supra note 15 at 459. Hopkins, Making Safety Work, supra note 8 at 55. See Gunningham & Young, supra note 83 at 275–6; Cole & Grossman, supra note 74 at 895; Zellmer, supra note 13 at 1252. Cole & Grossman, ibid. at 895. See also Samuel P. Hays, ‘The Future of Environmental Regulation’ (1996) 15 J. L. & Com. 549 at 565–6. Tietenberg, supra note 40 at 38; OECD, Economic Instruments for Pollution Control and Natural Resources Management in OECD Countries: A Survey, supra note 53 at 96. Grabosky, ‘Green Markets,’ supra note 49 at 427. Ibid. at 432; Driesen, supra note 39 at 304. Grabosky, ‘Green Markets,’ supra note 49 at 434. Pearce & Tombs, supra note 6 at 439; Hopkins, Making Safety Work, supra note 8 at 94–114; Gunningham, Safeguarding the Worker, supra note 5 at 314.

Notes to pages 42–5

251

103 Bardach & Kagan, Going by the Book, supra note 9 at 123. 104 On what makes a competent regulator, see Bardach & Kagan, Going by the Books, ibid. at 123–83. 105 My position is informed by the fact that ‘the relative efficiency with which a particular regulatory regime maximizes a social welfare function depends on institutional and technological circumstances’ prevailing in the society. See Cole & Grossman, supra note 74 at 895. Therefore, marketbased solutions may not be well-suited for some societies where the available technology is defective or inadequate or the requisite institutions are ill-funded, corrupt, weak, or non-existent. Institutional and technological settings in Africa are not only poor but also inadequate for successful implementation of market schemes. See Jonathon Hanks, ‘Promoting Corporate Environmental Responsibility: What Role for “Self-Regulatory” and “Co-Regulatory” Policy Instruments in South Africa?’ in Peter Utting, ed., The Greening of Business in Developing Countries: Rhetoric, Reality and Prospects (London & New York: Zed Books/UNRISD, 2002) 187 at 195. 106 Ruth Greenspan Bell, ‘Choosing Environmental Policy Instruments in the Real World’ at 5 (paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading – Concerted Action on Tradeable Emissions Permit Country Forum, OECD Headquarters, Paris, 17–18 March 2003), available at http://www.oecd.org/dataoecd/11/9/2957706. pdf (accessed 14 December 2003). 107 For general insight on the nature, structure, and financial strength of corporate entities in Africa, see Boniface Ahunwan, Globalization and Corporate Governance in Developing Countries: A Micro Analysis of Global Corporate Interconnection between Developing African Countries and Developed Countries (New York: Transnational Publishers, 2003). 108 Cole & Grossman, supra note 74 at 888. 109 Gunningham & Sinclair, supra note 83 at 857. 110 Peter T. Muchlinski, ‘‘Global Bukowina’ Examined: Viewing the Multinational Enterprise as a Transnational Law-making Community,’ in Gunther Teubner, ed., Global Law Without a State (Aldershot, UK: Dartmouth, 1997) 79 at 91. 111 Muchlinski, ibid. at 91–2 [emphasis added]. 112 See Bob Hepple, ‘A Race to the Top?: International Investment Guidelines and Corporate Codes of Conduct’ (1999) 20 Comp. Lab. L. & Pol’y J. 347 at 362. 113 This assertion is situated within the context of social legal studies. See Harry Arthurs, Without the Law: Administrative Justice and Legal Pluralism in Nineteenth-Century England (Toronto: University of Toronto Press, 1985)

252

114 115 116

117 118

119

120 121 122

123 124

125

Notes to pages 45–7 at 86; Peter Fitzpatrick, ‘Law, Plurality and Underdevelopment,’ in David Sugarman, ed., Legality, Ideology and The State (London & New York: Academic Press, 1983) 159. Fiona Haines, Corporate Regulation: Beyond Punish and Persuade (Oxford: Clarendon Press, 1997) at 11. See Sugarman, ‘Law, Economy and the State in England 1750–1914: Some Major Issues,’ supra note 23 at 235. See Kernaghan Webb, ‘Government, Private Regulation, and the Role of the Market,’ in Michael M. Neil, Neil Sargent, & Peter Swan, eds., Law, Regulation, and Governance (Don Mills, ON: Oxford University Press, 2002) 240 at 242–3. Ibid. at 253. De Sousa Santos calls this phenomenon the ‘globalization of the legal field.’ See Boaventura De Sousa Santos, Toward a New Common Sense: Law, Science and Politics in the Paradigmatic Transition (New York: Routledge, 1995) at 251. In fact, much of the literature on economic and corporate globalization stresses this point. See, for example, the collection of articles in the following books: Teubner, ed., Global Law Without a State, supra note 110; Yves Dezaley & Bryant G. Garth, eds., Global Prescriptions: The Production, Exportation, and Importation of a New Legal Orthodoxy (Ann Arbor: University of Michigan Press, 2002). See De Sousa Santos, ibid. at 252. See also David M. Trubek et al, ‘Global Restructuring and the Law: Studies of the Internationalization of Legal Fields and the Creation of Transnational Arenas’ (1994) 44 Case Western Reserve L. Rev. 407; Martin Shapiro, ‘The Globalization of Law’ (1993) 1 Indiana J. Global Leg. Stud. 37. Gunther Teubner, ‘Global Bukowina: Legal Pluralism in the World Society,’ in Teubner, ed., supra note 110 at 9. Harry Arthurs, ‘Globalization of the Mind: Canadian Elites and the Restructuring of Legal Fields’ (1997) 12:2 Can. J. of Law & Society 219 at 222. Harry Arthurs, ‘The Role of Global Law Firms in Constructing or Obstructing a Transitional Regime of Labour Law,’ in Richard P. Appelbaum, et al., eds., Rules and Networks: The Legal Culture of Global Business Transactions (Oxford: Hart Publishing, 2001) 273 at 293. Hepple, supra note 112 at 355. See Dan Danielsen, ‘How Corporations Govern: Taking Corporate Power Seriously in Transnational Regulation and Governance’ (2005) 46 Harv. Int’l L. J. 411 at 414. See Kenichi Ohmae, The End of the Nation State: The Rise of Regional Economies (New York: Free Press, 1995).

Notes to pages 47–51

253

126 Harry W. Arthurs & Robert Kreklewich, ‘Law, Legal Institutions, and the Legal Profession in the New Economy’ (1996) 34 Osgoode Hall L. J. 1 at 8. 127 Webb, supra note 116 at 240; Gunningham & Sinclair, supra note 83 at 855. 128 Verchick, supra note 58 at 97. 129 Gunningham, ‘Private Ordering,’ supra note 1 at 315. 130 Bardach & Kagan, Going by the Book, supra note 9 at 60. 131 See Gunningham & Sinclair, supra note 83 at 859. 132 Latin, supra note 10 at 1271. 133 Ibid at 1284. 134 Grabosky, ‘Green Markets,’ supra note 49 at 423. 135 See Latin, supra note 10 at 1274. 3. Environmental Regulation in Nigeria and Ghana: Two Case Studies of Regulatory Failure in the African Extractive Sector 1 Section 44.(3) of the Constitution of the Federal Republic of Nigeria 1999 provides that ‘the entire property in and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation.’ See also the Petroleum Act, Cap. P10, LFN 2004, s. 1.(1), which provides that ‘the entire ownership and control of all petroleum in, under or upon any lands [in Nigeria] shall be vested in the State.’ For corresponding statutory provision in Ghana, see the Minerals and Mining Act 2006, s. 1 (‘Every mineral in its natural state in, under or upon land in Ghana … is the property of the Republic and is vested in the President in trust for the people of Ghana’). 2 Available at http://www.nepad.org/2005/files/documents/inbrief.pdf (accessed 3 June 2008). 3 O.A.U. Doc. CAB/LEG/67/3/Rev. 5 (1986), reprinted in 21 I.L.M. 58 (1982). 4 See Petroleum Act, Cap. P10, LFN 2004; Oil Pipelines Act, Cap. O7, LFN 2004; Oil in Navigable Waters Act, Cap. O6, LFN 2004; Associated Gas ReInjection Act, Cap. A25, LFN 2004; and Oil Terminal Dues Act, Cap. O8, LFN 2004. Subsidiary regulatory instruments specific to the industry include Petroleum Regulations 1967, Legal Notice 71 of 1967; Petroleum (Drilling & Production) Regulations 1969, Legal Notice 69 of 1969 (as amended by the Petroleum (Drilling & Production) (Amendment) Regulations 1979); Petroleum (Refining) Regulations 1974, Legal Notice 45 of 1974; Oil in Navigable Waters Regulations 1968, Legal Notice 101 of 1968; Associated Gas Re-Injection (Continued Flaring of Gas) Regulations,

254

5

6 7

8 9 10 11 12 13 14 15 16 17 18 19 20

21

Notes to pages 51–2 Statutory Instrument 43 of 1984; and Environmental Guidelines and Standards for the Petroleum Industry in Nigeria, rev. ed. 2002 (Lagos: Department of Petroleum Resources, 2002) [hereafter EGASPIN]. See National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007; the Environmental Impact Assessment Act, Cap. E12, LFN 2004; and the various regulations made by the defunct Federal Environmental Protection Agency. Cap. P10, LFN 2004. Petroleum Act, Cap. P10, LFN 2004, s. 9.(1). The regulatory functions conferred on the Minister of Petroleum Resources by the Petroleum Act, the Oil Pipelines Act, and ‘any other enactment’ are deemed to have been conferred upon and may be discharged by the Director of Petroleum Resources. See Nigerian National Petroleum Corporation Act, Cap. N123, LFN 2004, s. 10.(2). Legal Notice 69 of 1969. Legal Notice 45 of 1974. Petroleum (Drilling and Production) Regulations 1969, Legal Notice 69 of 1969, Reg. 25. Ibid. Reg. 36. Ibid. Reg. 36. Ibid. Reg. 40. Ibid. Reg. 45.(1)(b)(c) & (2). Ibid. Reg. 35.(1). Ibid. Reg. 35.(2). Petroleum Refining Regulations 1974, Legal Notice 45 of 1974. Ibid. Reg. 43.(1). Ibid. Reg. 43.(3). Petroleum (Drilling and Production) Regulations 1969, Legal Notice No. 69 of 1969, Reg. 15; Oil Pipelines Act, Cap. O7, LFN 2004, s. 11.(4). However, sacred and venerated land such as a burial ground, a cemetery, and land containing a grotto or tree held sacred by local population cannot be entered upon, taken possession of, or used by licence holders unless their owners or occupiers have given their prior consent. See Oil Pipelines Act, Cap. O7, LFN 2004, s. 15.(1). See also Petroleum (Drilling and Production) Regulations 1969, Regs. 17.(1)(a) & 22. Quite obviously, this is meant to safeguard the traditional customs and practices of host communities. Contra Mineral Oils (Safety) Regulations 1997, Reg. 6, which defines ‘good oilfield practice’ as practices that conform with the appropriate current Institute of Petroleum Safety Codes; or the American Petroleum Institute

Notes to pages 52–3

22 23 24

25 26 27

28 29

30 31

32 33

255

Codes; or the American Society of Mechanical Engineers Codes; or any other internationally recognized and accepted systems. Petroleum (Drilling and Production) Regulations 1969, Reg. 36. Petroleum Refining Regulations 1974, Reg. 43.(1). See Emeka A. Duruigbo, Multinational Corporations and International Law: Accountability and Compliance Issues in the Petroleum Industry (Ardsley, NY: Transnational Publishers, 2003) at 170; Ambrose O.O. Ekpu, ‘Environmental Impact of Oil on Water: A Comparative Overview of the Law and Policy in the United States and Nigeria’ (1995) 24 Denv. J. Int’l L. & Pol’y 55 at 79. See Kenneth C. Davis, ‘Discretionary Justice’ (1970) 23 J. Legal Educ. 56 at 58–9. Cap. A25, LFN 2004. Associated Gas Re-injection Act, ibid., s. 3.(1). Gas flaring without the minister’s permission is an offence for which the violator ‘shall forfeit the concessions granted to [them] in the particular field or fields in relation to which the offence was committed.’ Violation could equally attract the minister’s order withholding all or part of any entitlements – usually including crude oil, money, and other exploration and exploitation rights – of the violator under the concession. See Associated Gas Re-injection Act, ibid., s. 4.(1)&(2). Ibid. s. 3.(1). See M.M. Olisa, Nigerian Petroleum Law and Practice (Ibadan: Fountain Books, 1987) at 50; Yinka Omorogbe, ‘Law and Investor Protection in the Nigerian Natural Gas Industry’ (1996) 14 J. Energy Nat. Resources L. 179 at 181. Although the date was most recently extended to 2008, oil TNCs continue to flare gas in Nigeria. Associated Gas Re-injection Act, Cap. A25, LFN 2004, s. 2. M.T. Okorodudu-Fubara, ‘Statutory Scheme for Environmental Protection in the Nigerian Context: Some Reflections of Legal Significance for the Energy Sector’ (1996) Nigerian Current L. Rev. 1 at 23. Associated Gas Re-injection Act, Cap. A25, LFN 2004, s. 3.(1)&(2). Ibid. s. 3.(2)(a)&(b). The conditions usually are that gas to be flared must be pre-treated and burnt in such a manner that the flare is luminous and bright; heat radiation at ground level during maximum flaring should be 6.31 kw/m2 at a distance of 60 metres from the base of the flare; a maximum sterilized approach distance of 60 metre radius measured from the base of the flare stack is to be maintained; noise levels for unprotected ears at a 60 metre radius from the flare stack must be well within the threshold of pain, that is, 80-100dBA; purging of the flare headers is to be done in a manner that minimizes emissions to air; and relief valves, blowdown

256

34

35

36

37 38 39 40 41

42

43 44 45 46 47 48 49 50 51 52 53 54 55

Notes to pages 53–5

valves, and control valves are to be closed during service while gas leakages are to be minimized. See EGASPIN, supra note 4 at 53, Article 3.8.8.1. Associated Gas Re-injection (Continued Flaring of Gas) Regulations, Statutory Instrument 43 of 1984, Reg. 1. These regulations were made pursuant to ss. 3 & 5 of Associated Gas Re-injection Act, Cap. A25, LFN 2004. The Department of Petroleum Resources, formally known as the Petroleum Inspectorate Department, has general responsibility for the regulation of Nigeria’s oil and gas industry. It issues permits and licences for all activities connected with oil and gas exploration, exploitation, refining, storage, marketing, transportation, and distribution. See Nigerian National Petroleum Corporation Act, Cap. N123, LFN 2004, s. 10. Information provided to the author by the Department of Petroleum Resources (DPR) in January 2005. Copy of written correspondence from the DPR is on file with author. Ibid. Ibid. Ibid. Ibid. Ibid. Exchange rate used here – US$1 to 116.66 Naira – is based on official daily exchange rates as generated by the Central Bank of Nigeria for 23 May 2008, available at http://www.cenbank.org/Rates/rateshome.asp (accessed 23 May 2008). Jedrzej G. Frynas, Oil in Nigeria: Conflict and Litigation Between Oil Companies and Village Communities (Hamburg & London: LIT Verlag Munster, 2000) at 88 [hereafter Oil in Nigeria]; Omorogbe, ‘Law and Investor Protection in the Nigerian Natural Gas Industry,’ supra note 29 at 181. Okorodudu-Fubara, supra note 31 at 23. EGASPIN, supra note 4. Ibid. at 3–60. Ibid. at 61–70. Ibid. at 71–109. Ibid. at 110–19. Ibid. at 120–30. Ibid. at 145–67. Ibid. at 132–44. Ibid. at 269–85. Ibid. at 168–95. Ibid. at 196–268. Ibid. at 286–8.

Notes to pages 55–6

257

56 Ibid. at 11, Article 3.4.1; and at 48, Article 3.4.1. The Director of Petroleum Resources could permit the discharge of drilling muds and fluids in offshore areas 12 nautical miles away from the shoreline with a depth not less than 200 feet. See EGASPIN, ibid. at 11, Article 3.4.1.1. However, permitted discharges must be within the prescribed limits. See ibid. at 11, Article 3.4.1.1 read together with Article 3.5.6.1. Likewise, produced formation water or oily wastes may be discharged into areas designated as offshore discharge zones and deep water areas if (i) the prescribed oily water treatment system has been installed; (ii) the oil is separated from the produced/oily water; and (iii) the concentration of dispersed oil in the water to be discharged does not exceed, as a minimum, 40mg/l monthly average. See ibid. at 49, Article 3.6.2 (b). Equally, oily waste water may be disposed in inland/nearshore areas if it has been previously treated to meet the prescribed effluent limitations/standards. ibid. at 49, Article 3.6.3.1. For the prescribed effluent limitations for the disposal of oily wastes water into inland/nearshore areas, see EGASPIN ibid. at 51, Table III-1. 57 Ibid. at 294–304. 58 Ibid. at 289–93. See also EGASPIN, ibid. at 10, Article 1; at 47, Article 1; at 64, Article 1; at 78, Article 5.1; at 92, Article 5.1; at 102, Article 5.1; at 114, Article 1; at 121, Article 4.1. 59 Ibid. at 289, Article 3.1.1. 60 Ibid. at 289, Article 1.1.1. 61 Ibid. at 289, Article 1.1.1. 62 Ibid. at 10, Article 1.1; at 47, Article 1.1; at 64, Article 1.1; at 78, Article 5.1(i); at 92, Article 5.1(i); at 102, Article 5.1(i); at 114, Article 1.1; at 121, Article 4.1(i). 63 Ibid. at 292–3. See also ibid. at 26, Article 4.1 and at 58, Article 6.1. The minimum frequencies for conducting environmental audits are four years for a Management Audit; quarterly for Compliance Audits; and two years for site/facility/plant audit. See ibid. at 292, Article 1.2.3. 64 Ibid. at 292, Articles 1.1.1 & 1.2.2. 65 Ibid. at 23–5, Table II-8 and at 53–9 [particularly Table III-2]. 66 Ibid. at 56, Article 4.3. 67 Ibid. at 56–7, Article 4.4. 68 Ibid. at 58, Article 4.5. 69 Ibid. at 25, Article 3.8.1.2; at 57, Article 4.4.4.1; at 68, Article 4.1.2; at 87, Article 5.7.1.2; at 97, Article 5.7.1.2; and at 106, Article 5.7.1.2. 70 Ibid. at 115, Article 3.2.1. 71 Ibid. at 115, Article 3.2.2.

258

Notes to pages 56–8

72 Ibid. at 115, Article 3.2.3. 73 National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007, s. 1. (1) [hereafter the NESREA Act). 74 Ibid. ss. 1 & 2. 75 Ibid. s. 27. 76 Ibid. s. 37. The defunct Federal Environmental Protection Agency (FEPA) had previously determined that hazardous substances include any material that could pose a threat to human health or the environment. See Guidelines and Standards for Environmental Pollution Control in Nigeria (1991). Although the NESREA Act repeals the Federal Environmental Protection Agency Act under which the FEPA made these Guidelines, and while the FEPA has been dissolved, the Guidelines (and other regulations, directions, and decisions made by the FEPA) ‘continue to be in force and have effect as if made’ under the provisions of the NESREA Act. See the NESREA Act, ss. 35 & 36. In fact, the defunct FEPA made several regulations that are applicable to the oil and gas industry. See Guidelines and Standards for Environmental Pollution Control in Nigeria (1991); National Environmental Protection (Effluent Limitation) Regulations 1991; National Environmental Protection (Pollution Abatement in Industries and Facilities Generating Wastes) Regulations 1991; National Guidelines and Standards for Industrial Effluent, Gaseous Emissions and Hazardous Wastes Management in Nigeria (1991); and National Environmental Protection (Management of Hazardous Wastes) Regulations (1991). 77 See National Environmental Protection (Effluent Limitation) Regulations (1991). 78 See Frynas, Oil in Nigeria, supra note 42 at 86. 79 NESREA Act, s. 27. (1). 80 Ibid., s. 27. (3). Exchange rate is as stated in note 41, supra. 81 NESREA Act, s. 27. (3). The NESREA Act affords corporate officers some defences. They are not liable for the discharge of harmful hazardous materials if they prove that the offence was committed without their knowledge or that they exercised all due diligence to prevent the discharge. See ibid. s. 27. (4). Exchange rate is as stated in note 41, supra. 82 NESREA Act, s. 28. 83 Ibid. 84 Ibid. s. 7. (k). 85 Ibid. s. 8. (g). 86 See National Oil Spill Detection and Response Agency (Establishment) Act, 2006, s. 1. (1).

Notes to pages 58–9

259

87 Environmental Impact Assessment Act, Cap. E12, LFN 2004, s. 2.(1)&(4). 88 Ibid. s. 2. Between June 1999 and May 2002, seventy-three oil and gas projects were subjected to environmental impact assessments in Nigeria. See Federal Ministry of Environment, ‘Achievements of the Ministry of Environment’ (1 May 2002), available at http://www.nopa.net/Environment/messages/2.shtml (accessed 22 January 2005). 89 Environmental Impact Assessment Act, Cap. E12, LFN 2004, s. 4.(d)&(e). 90 Ibid. ss. 6, 22, 23 & 42. The schedule to the Environmental Impact Assessment Act mentions mining and petroleum industries as part of Mandatory Study Activities for which an environmental impact assessment (EIA) is required. Specifically, the following oil-related activities must prepare an EIA: oil and gas field development; construction of offshore pipelines in excess of 50 kilometres in length; construction of oil and gas separation, processing, handling, and storage facilities; construction of oil refineries; construction of product depots for the storage of petrol, gas, or diesel (excluding service stations), which are located within 3 kilometres of any commercial, industrial, or residential areas and which have a combined storage capacity of 60,000 barrels or more. 91 Ibid. s. 40.(1)(b). 92 Ibid. s. 62. 93 Ibid. s. 1.(c). 94 Ibid. s. 7. 95 Ibid. s. 25.(1). 96 Ibid. s. 25.(2). 97 See Yinka Omorogbe, ‘The Legal Framework for Public Participation in Decision-making on Mining and Energy Development in Nigeria: Giving Voices to the Voiceless,’ in Donald N. Zillman, Alastair R. Lucas & George R. Pring, eds., Human Rights in Natural Resource Development: Public Participation in the Sustainable Development of Mining and Energy Resources (Oxford: Oxford University Press, 2002) 549 at 565–77. 98 Environmental Impact Assessment Act, Cap. E12, LFN 2004, s. 57. 99 Ibid. ss. 17.(1)(c) & 22.(3). 100 Ibid. ss. 22.(1)(b)(ii), 26.(a)(ii) & 27.(b). The Review Panel also encourages public participation in its processes. It not only receives comments from the public but also, its proceedings are to be conducted in public ‘in a manner that offers the public an opportunity to participate in the assessment.’ See Ibid., ss. 37.(b)&(c)(ii) & 38.(3). 101 Environmental Impact Assessment Act, Cap. E12, LFN 2004, s.15(1). The Federal Environmental Protection Council was established under the

260

102

103

104

105 106

107 108 109 110

111 112

Notes to pages 59–61 repealed Federal Environmental Protection Agency Act, Cap. F13, LFN 2004, s. 2. See Omorogbe, ‘The Legal Framework for Public Participation in Decision-making on Mining and Energy Development in Nigeria: Giving Voices to the Voiceless,’ supra note 97 at 568. Nigerian environmental laws not only enjoin the adoption of precautionary measures to prevent environmental pollution, but they equally urge prompt clean-up of polluted cites. See Petroleum (Drilling and Production) Regulations 1969, Legal Notice 69 of 1969, Reg. 25; EGASPIN, supra note 4. See, for example, Associated Gas Re-Injection Act, Cap. A25, LFN 2004, s. 3.(2); and Associated Gas Re-injection (Continued Flaring of Gas) Regulations, Reg. 1 (which, though meant to prevent gas flaring, has instead encouraged the practice by the meagre fines it prescribes for gas flaring). See Duruigbo, Multinational Corporations and International Law, supra note 24 at 173–4. The Mineral Oils (Safety) Regulations 1997 are meant to replace the Mineral Oils (Safety) Regulations 1963, Legal Notice 45 of 1963 made under the repealed Mineral Oils Act 1962. However, although the Minerals Oils (Safety) Regulations 1997 have yet to be approved by government, they are in practice currently being applied and implemented by the DPR. Oluwole Akanle, Pollution Control Regulation in the Nigerian Oil Industry (Lagos: N.I.A.L.S. 1991) at 11. Duruigbo, Multinational Corporations and International Law, supra note 24 at 171. See Ekpu, supra note 24 at 98; Duruigbo, ibid. at 178. Mining Regulations 1970, Legal Instrument 665 (as amended by Legal Instrument 689). As well, standard mining leases/licenses issued by Ghanaian authorities contain clauses on environmental protection. See Peter C. Acquah, ‘Natural Resources Management and Sustainable Development: The Case of the Gold Sector in Ghana’ (UNCTAD/COM/41, 15 August 1995) at 31, available at http://www.natural-resources.org/ minerals/africa/docs/pdfs/claveracquah.pdf (accessed 17 May 2005) [hereafter ‘Gold Sector in Ghana’]. Mining and Environmental Guidelines (Accra: Ghana Minerals Commission & Environmental Protection Agency, 1994). Minerals and Mining Act 2006, Act 703. This Act replaces the Minerals and

Notes to pages 61–4

113 114 115

116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131

132 133 134 135 136 137 138 139 140 141 142 143

261

Mining Law 1986, PNDCL 153 (as amended by Minerals and Mining Law (Amendment) Act 475 of 1994). Mining and Environmental Guidelines, supra note 111. Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 33. K. Sraku-Lartey, ‘Environmental Education: Perspectives from the Minerals Industry of Ghana,’ available at http://www.mineralresourcesforum. org/workshops/education/docs/srakular.pdf (accessed 16 April 2005). Ibid. Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 33. Minerals and Mining Act 2006, Act 703, s.18. Ibid. s. 37.(2)(f). Minerals and Mining Law 1986, PNDCL 153, s. 72. Minerals and Mining Law 1986, PNDCL 153, s. 80.(1)(f). Ibid. s. 81.(1). See Minerals and Mining Act 2006, Act 703, s.106 for a list of offences under the Act. Minerals and Mining Act 2006, Act 703, s.106.(l). Ibid. s. 107. Ibid. s. 110.(1). Ibid. s. 110.(2)(n). Ibid. s. 110.(2)(p). Ibid. s. 110.(4). Minerals and Mining Act 2006, Act 703, s. 48.(1). See ‘Memorandum on the Minerals and Mining Bill 2005 Submitted by the National Coalition on Mining to the Select Parliamentary Committee on Mines and Minerals’ (13 June 2005), available at http://www.minesandcommunities.org/Action/press646.htm (accessed 1 June 2007). Minerals and Mining Act 2006, Act 703, ss. 48.(2) & 49.(3). Environmental Protection Agency Act No. 490 of 1994. Environmental Assessment Regulations 1999, Reg. 1.(1). Ibid. Regs. 1 & 3 (read together with Schedules 1 & 2). Ibid. Reg. 5.(1)(c). Ibid. Reg. 6. Ibid. Reg. 9.(1). Ibid. Reg. 9.(2). Ibid. Reg. 14. Ibid. Reg. 14. Ibid. Reg. 14. Ibid. Reg. 7.

262 144 145 146 147 148 149

150 151 152

153

154 155 156 157

158

159

160

Notes to pages 65–7 Ibid. Reg. 25. Ibid. Reg. 25.(2). Ibid. Reg. 15. Ibid. Reg. 16. Ibid. Reg. 17. Ebenezer Appah-Sampong, ‘Public Hearing Within the Environmental Impact Assessment Review Process’ (Case Studies from Developing Countries: Case Study 9), UNEP EIA Training Resource Manual 85 at 86, available at http://www.unep.ch/etu/publications/16}%2085%20to2091. pdf (accessed 11 January 2005). Ibid. at 87. Ibid. at 89. Joseph Yaw Boateng, ‘Enhancing Business-Community Relations: Ghana Mining Industry Case Study,’ at 10, available at http://www.worldvolunteerweb.org/fileadmin/docs/old/pdf/2003/031201_EBCR_GHA_miningindustry.pdf (accessed 29 May 2008). Seth Appiah-Opoku & George Mulamoottil, ‘Indigenous Institutions and Environmental Assessment: The Case of Ghana’ (1997) 21 Environmental Management 159 at 168–70. Ibid. at 168. Environmental Assessment Regulations 1999, Reg. 25.(1). Ibid. Reg. 25.(2). In the case of Nigeria, see World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 1 (Industry and Energy Operations Division, West Central Africa Department, 25 May 1995) at xiv, available at http://www-wds.worldbank.org/ (accessed 16 April 2005). See Companies Income Tax Act, Cap. C21, LFN 2004, s. 39; Petroleum Profits Tax Act, Cap. P13, LFN 2004, s.11; Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998; Finance (Miscellaneous Taxation Provisions) Decree No. 19, 1998. For a review of tax incentives for oil and gas companies in Nigeria, see George Nnona, ‘New Policy Regime for Gas in Nigeria: A Perspective on Tax and Related Incentives’ (2003) 21 J. Energy Nat. Resources L. 285. See Petroleum Profits Tax Act, Cap. P13, LFN 2004, s.11; Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998; Finance (Miscellaneous Taxation Provisions) Decree No. 19, 1998. See Petroleum Profits Tax Act, Cap. P13, LFN 2004, s.11; Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998; Finance (Miscellaneous Taxation Provisions) Decree No. 19, 1998.

Notes to pages 67–8

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161 Minerals and Mining Act 2006, Act 703, s. 28. 162 See Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 35–6 (noting that expenditure on environmental compliance can be recovered by mining companies under s. 26 of the repealed Minerals and Mining Law 1986, PNDCL 153, a comparable section to s. 28 of the Minerals and Mining Act 2006, Act 703). 163 For insight on the powers of regulatory agencies in Nigeria, see Okorodudu-Fubara, supra note 31 at 34–9. 164 See Nigeria’s Petroleum (Drilling and Production) Regulations 1969, Reg. 55; and Ghana’s Environmental Protection Agency Act, 1994 (Act No. 490), s. 15.(2). 165 See Oil Pipelines Act, Cap. O7, LFN 2004, s. 17.(5)(b); Petroleum (Drilling and Production) Regulations 1969, Reg. 55; Petroleum Act, Cap. P10, LFN 2004, s. 8.(1)(c); NESREA Act, s. 30. (1)(a); Ghana’s Environmental Protection Agency Act, No. 490, s. 15. 166 See EGASPIN, supra note 4 at 295, Article 4.1. 167 See Petroleum Act, Cap. P10, LFN 2004, s. 8(1)(d); EGASPIN, ibid. at 296, Article 4.2; NESREA Act, s. 30. (1)(f). 168 See Ghana’s Environmental Protection Agency Act No. 490, s. 27.(1). 169 Mineral Oils (Safety) Regulations 1963, Reg. 25.(1); Mineral Oils (Safety) Regulations 1997, Reg. 45.(1); Petroleum Refining Regulations 1974, Reg. 18. 170 See Petroleum Act, Cap. P10, LFN 2004, First Schedule, Para. 26. 171 See Ghana’s Environmental Protection Agency Act No. 490, s. 13. See also para. 26 of the First Schedule to Nigeria’s Petroleum Act, Cap. P10, LFN 2004, under which the Minister may, in lieu of revocation of the licence/ lease of erring corporations, order them to rectify the default within a specified period. 172 Environmental Protection Agency Act No. 490, s. 13.(1). 173 Environmental Protection Agency Act, ibid. s. 14.(2). 174 See Epku, supra note 24 at 98. 175 M.A. Ofurhie, ‘The Role of DPR as a National Regulatory Institution in Oil & Gas Dominated Economy’ (paper presented at 1st Annual Standard Organization of Nigeria Conference on Standards and Quality Management, Abuja, Nigeria, 18–20 August 2004), available at http://nigeria newsnow.com/News/August04/290804_dpr.htm (accessed 8 January 2005). Ofurhie was the Director of the Department of Petroleum Resources at the time of his presentation at the conference. 176 This difficulty could be avoided by prescribing fines in statutes without

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177 178 179 180 181

182 183

184 185

186 187 188 189

190

Notes to pages 68–9 specifying their monetary value. The statutes could then authorize appropriate authorities to fix the monetary value of the fines through a legal instrument. The advantage in this arrangement is that it allows for easy review of fines to cater to changing circumstances. Petroleum Act, Cap. P10, LFN 2004, s. 8.(1)(f). Ibid. s. 8.(1)(g). Ibid. s. 8.(1)(h). Environmental Protection Agency Act No. 490, s. 13.(3). E. Kojo Kwarteng, ‘Close Down Operations – EPA Orders Bogoso Gold,’ available at http://www.minesandcommunities.org/article.php?a=630 (accessed 4 June 2008). Environmental Assessment Regulations 1999, Reg. 26. For example, the Minister of Petroleum Resources has the power to revoke any oil prospecting licence or oil mining lease if he is of the opinion that the licensee or lessee is not conducting operations in accordance with good oilfield practice, or has failed to comply with any provisions of the Petroleum Act or any Regulation or direction made or given under it, or has failed to fulfil their obligations under the special conditions of their licence or lease. See para. 24(1) of the First Schedule to the Petroleum Act, Cap. P10, LFN 2004. See also Petroleum Regulations 1967, Reg. 104 (which authorizes revocation of oil licences for infringement of any of the conditions stipulated in the licence or any provision of the regulations). Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 31. See, for example, Oil Pipelines Act, Cap. O7, LFN 2004, s. 27. See also paras. 25–7 of the First Schedule to the Petroleum Act, Cap. P10, LFN 2004. Oil Pipelines Act, Cap. O7, LFN 2004, s. 27.(1) [emphasis added]. See also para. 24(1)(b), First Schedule to the Petroleum Act, Cap. P10, LFN 2004. Oil Pipelines Act, Cap. O7, LFN 2004, s. 17.(5). Ekpu, supra note 24 at 81. This much is recognized by Nigeria’s EGASPIN, which prescribes licence revocation for persistent violators of its provisions. See EGASPIN, supra note 4 at 297, Article 4.7.1. In relation to the situation in Ghana, see Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 31. However, the Nigerian government has in the past revoked oil-prospecting licences granted to indigenous Nigerian firms because of their inability to pay the requisite fee. See Abba Kolo, ‘Legal Issues Arising from the Termination of Oil Prospecting Licences by the Nigerian Government’ (2001) 19 J. Energy Nat. Resources L. 164 at 170.

Notes to pages 70–1

265

191 Environmental offences are created under the following statutes and regulations in Nigeria: Oil Pipelines Act, Cap. O7, LFN 2004; Oil in Navigable Waters Act, Cap. O6, LFN 2004; Oil Terminal Dues Act, Cap. O8, LFN 2004, and Criminal Code Act, Cap. C38, LFN 2004. Under s. 245 of the Criminal Code Act, for example, the corruption or fouling of water of any spring, stream, well, tank, reservoir, or place, in a manner that renders it less fit for the purpose for which it is ordinarily used, is a misdemeanour offence punishable with imprisonment for six months. 192 Oil in Navigable Waters Act, Cap. O6, LFN 2004, s. 3 (read together with Oil Terminal Dues Act, Cap. O8, LFN 2004, s. 6.(2)). ‘Owners,’ ‘masters,’ and ‘occupiers’ as used in these Acts include ‘all corporations, whether incorporated or carrying on business in Nigeria or not.’ See Oil Terminal Dues Act, Cap. O8, LFN 2004, s. 9. 193 Oil in Navigable Waters Act, ibid., s. 6 (read together with Oil Terminal Dues Act, Ibid, s. 6(3)). For insight on criminal responsibility of oil and gas TNCs for environmental pollution in Nigeria, see Akin Ibidapo-Obe, ‘Criminal Liability for Damages Caused by Oil Pollution,’ in J.A. Omotola, ed., Environmental Laws in Nigeria (Lagos: 1990) 231. 194 For Ghana, see Minerals and Mining Act 2006, Act 703, s.106.(k); Environmental Protection Agency Act No. 490, s. 15.(3). For Nigeria, see EGASPIN, supra note 4 at 296, Articles 4.3–4.5; NESREA Act, s. 31. 195 Minerals and Mining Act 2006, Act 703, s. 106.(i)(j)&(k); Environmental Protection Agency Act No. 490, ss. 13.(4), 14.(3), 15.(3) & 27.(2)(d). See also EGASPIN, supra note 4 at 296, Articles 4.3–4.5. 196 EGASPIN, ibid. at 296, Article 4.4. 197 EGASPIN, ibid. at 296, Article 4.5. 198 For insight on corporate criminal liability in Nigeria, see Chijioke Okoli, ‘Criminal Liability of Corporations in Nigeria: A Current Perspective’ (1994) 38 J. African Law 35. 199 See Omobolaji Adewale, ‘Nigeria,’ in Anna Alvazzi del Frate & Jennifer Norberry, eds., Environmental Crime, Sanctioning Strategies and Sustainable Development (Rome/Canberra: UNICRI, 1993) 339 at 367 (‘To date … the Federal Environmental Protection Agency has not prosecuted any person or company for pollution’). See also Okorodudu-Fubara, supra note 31 at 12–13. 200 See Ekpu, supra note 24 at 83. 201 Environmental Protection Agency Act No. 490, s. 27.(4). See also Minerals and Mining Act 2006, Act 703, s. 107. 202 Oil in Navigable Waters Act, Cap. O6, LFN 2004, s. 4.(1). By virtue of s. 6.(3)

266

203 204 205 206

207

208

209

210

Notes to pages 71–2 of the Oil Terminal Dues Act, Cap. O8, LFN 2004, the special defences created under s. 4.(1) of Oil in Navigable Waters Act apply for the purpose of the offence under s. 6.(2) of the Oil Terminal Dues Act. Oil in Navigable Waters Act, ibid., s. 4.(1). Ibid. s. 4.(2)(b)&(3). Akanle, supra note 107 at 9. For example, under s. 27. (4) of the NESREA Act, corporate directors and officers are not criminally liable for the corporation’s offences if (i) they prove that they exercised all due diligence to prevent the commission of the offences; or (ii) the offences were committed without their knowledge. World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 1, supra note 157 at xiv (‘The most important regulatory constraint [in Nigeria] is the lack of enforcement of existing regulations’); E.H. Shannon, ‘The Role of National and Transnational Corporations in the African Mining Sector and the Environment – The Case of Noncompliance and Enforcement,’ Fifth International Conference on Environmental Compliance and Enforcement, 679 at 682 (‘African developing countries often fail to enforce environmental regulations and in some cases exempt some national and transnational corporations from these regulations’), available at http://www.inece.org/5thvol1/shannon3.pdf (accessed 28 April 2005). World Bank, ibid. at xiv. See also Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (New York: Human Rights Watch, 1999) [hereafter Price of Oil] at 54 (stating that ‘[f]or the most part, the specific standards set [under Nigerian environmental laws and regulations] are comparable to those in force in Europe or the U.S.’). Regulatory agencies in Nigeria include the DPR, which has primary responsibility for regulating the oil and gas industry; the Nigerian Maritime Authority, which is responsible for overall protection of Nigeria’s coastal waters; and the NESREA, which has general powers of environmental protection. Corresponding agencies in Ghana include the Ghana Minerals Commission, a body charged with developing Ghana’s mining policy; the Environmental Protection Agency, which is responsible for general environmental protection; and the Ministry of Lands, Forestry and Mines, which has overall regulatory oversight over the mining industry. See Gavin Hilson, ‘The Environmental Impact of Small-scale Gold Mining

Notes to pages 72–3

211

212

213

214 215 216 217 218 219 220 221 222 223

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in Ghana: Identifying Problems and Possible Solutions’ (2002) 168:1 Geographical Journal 57 at 68; Philippa England, ‘Forest Protection and the Rights of Cocoa Farmers in Western Ghana’ (1993) 37 J. African Law 164 at 172; Emeka Duruigbo, ‘Multinational Corporations and Compliance with International Regulations Relating to the Petroleum Industry’ (2001) 7 Ann. Surv. Int’l & Comp. L. 101 at 139. Environmental Resource Managers Ltd., Niger Delta Environmental Survey Final Report Phase 1, Vol. 1 at 263 (cited in Human Rights Watch, Price of Oil, supra note 208 at 56). World Bank, Defining an Environmental Development Strategy for the Niger Delta, vol. 2 (Industry and Energy Operations Division, West Central Africa Department, 25 May 1995) at 52–61, available at http://www-wds. worldbank.org/ (accessed 16 April 2005). See also Frynas, Oil in Nigeria, supra note 42 at 86–7. Kwame Ameyaw Domfeh, ‘Compliance and Enforcement in Environmental Management: A Case of Mining in Ghana’ (2003) 5 Environmental Practice 154 at 160. See also Luc Hens & Emmanuel K. Boon, ‘Institutional, Legal, and Economic Instruments in Ghana’s Environmental Policy’ (1999) 24:3 Environmental Management 337 at 348; Hilson, supra note 210; England, supra note 210. The World Bank has also reported that the government has not provided ‘adequate funding for the Minerals Commission to operate effectively.’ See World Bank, ‘Project Performance Assessment Report: Ghana Mining Sector Rehabilitation Project (Credit 1921-GH), Mining Sector Development and Environment Project (Credit 2743-GH)’ (Report No. 26197, 1 July 2003) at x, available at http://www. worldbank.org (accessed 3 November 2005). Domfeh, ibid. at 159–60. Ibid. at 160. World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 2, supra note 212 at 55. Ofurhie, supra note 175. Ibid. Ibid. Domfeh, supra note 213 at 159. Ibid. at 160. Federal Environmental Protection Agency Act, Cap. F13, LFN 2004, s. 38 (repealed by the NESREA Act, s. 36). Federal Environmental Protection Agency (Amendment) Act No. 59, 1992, s. 2 (‘The Agency shall be an integral part of the Presidency’).

268

Notes to pages 73–4

224 See World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 2, supra note 212 at 46. In fact, Halliburton, a U.S-based TNC, recently admitted bribing Nigerian government officials so as to avoid payment of taxes. See CorpWatch, ‘Nigeria: Halliburton Pays Bribes to Lower Taxes,’ available at http://www.corpwatch.org/print_ article.php?id=6872 (accessed 18 November 2005). 225 Global Insight, ‘Director of Petroleum Resources in Nigeria Reportedly Dismissed over Oil License Allocation,’ available at http://www.globalinsight.com/SDA/SDADetail7544.htm (accessed 17 May 2007). 226 Hilson, supra note 210 at 68. 227 Acquah, ‘Gold Sector in Ghana,’ supra note 110 at 28–9. Ghana also has a National Environment Fund, which is managed by the governing Board of the Environmental Protection Agency. Part of the objectives of the fund is the promotion of environmental education in Ghana as well as the enhancement of the capacity and resources of the Environmental Protection Agency. See Environmental Protection Agency Act No.490, ss. 16–19. 228 Acquah, ibid. See also Colin N. Boocock, ‘Environmental Impacts of Foreign Direct Investment in the Mining Sector in Sub-Saharan Africa’ (January 2002) at 13, available at http://www.natural-resources.org/ minerals/docs/oecd (accessed 14 May 2005). A comparable initiative in Nigeria is the Niger Delta Development Commission (NDDC), which is funded partly from royalties paid to the Nigerian government by oil and gas TNCs. However, while it has some regulatory functions, the NDDC’s main duty is to ensure the general development of Nigeria’s oil- and gasproducing areas particularly in terms of infrastructure and social amenities. See the Niger Delta Development Commission (Establishment, etc.) Act, Cap. N86, LFN 2004, s. 7. The NDDC succeeded the Oil Mineral Producing Areas Development Commission, which was established by the now repealed Oil Mineral Producing Areas Development Commission Act (No. 41 of 1998). 229 See Niger Delta Development Commission (Establishment, etc.) Act, Cap. N86, LFN 2004, s. 7.(1)(h)&(i). 230 See World Bank, Environmental Strategy for the Niger Delta, Vol. 1, supra note 157 at xii; Adegoke Adegoroye, ‘The Challenges of Environmental Enforcement in Africa: The Nigerian Experience’ (Third International Conference on Environmental Enforcement) at 51–3, available at http:// www.inece.org/3rdvol1/pdf/adegoro.pdf (accessed 21 July 2006). 231 World Bank, ibid. at xiv; Environmental Resource Managers Ltd, Niger

Notes to pages 74–6

232 233

234

235 236 237

238

239

240 241

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Delta Environmental Survey Final Report Phase 1, Vol. 1 at 263 (cited in Human Rights Watch, Price of Oil, supra note 208 at 56). See, for example, National Oil Spill Detection and Response Agency (Establishment) Act, 2006, s. 19 (read together with the 2nd Schedule to the Act). Contra Duruigbo, Multinational Corporations and International Law, supra note 24 at 175 (suggesting ‘the creation of an additional agency on marine environmental issues’ with a view to ‘reducing the load on FEPA’). Nigerian National Petroleum Corporation, ‘Joint Venture Operations,’ available at http://www.nnpcgroup.com/jvoperation.htm (accessed 5 May 2007). Ibid. Ghana Manganese Company Limited, ‘Company Profile,’ available at http://www.ghanamanganese.com (accessed 22 October 2005). On the principal-agent problem as applied to regulatory agencies, see Barry M. Mitnick, ‘The Theory of Agency: The Policing “Paradox” and Regulatory Behavior’ (1975) 24(1) Public Choice 27. See Nigerian National Petroleum Corporation Act, Cap. N123, LFN 2004, s. 10.(1) (‘There shall be established a department to be known as the Petroleum Inspectorate which shall … be an integral part of the [Nigerian National Petroleum Corporation]’). The Petroleum Inspectorate is now known as the Department of Petroleum Resources. However, the Nigerian government has recently decided to dismantle the NNPC and create six new agencies in its stead. This decision has yet to be backed by legislation. As of this moment, this decision has no force of law because NNPC’s enabling statute, the Nigerian National Petroleum Corporation Act, has not been repealed or amended to reflect the government’s decision. In fact, the six agencies that the government proposed to create instead of the NNPC have yet to be created. See Adegoroye, supra note 230 at 49–50 (describing how ‘powerful individuals and groups,’ including the Manufacturers Association of Nigeria, prevailed on the government to prevent the defunct Federal Environmental Protection Agency from inspecting imported materials). See Mitnick, supra note 237 at 37. World Bank, Nigeria: Country Brief, available at http://web.worldbank. org (accessed 3 June 2005). See also U.S. Energy Information Administration, OPEC Revenues: Country Details (June 2005), available at http:// www.eia.doe.gov/emeu/cabs/orevcoun.html (accessed 23 August 2006).

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Notes to pages 76–7

242 See Gabriel Eweje, ‘Environmental Costs and Responsibilities Resulting from Oil Exploitation in Developing Countries: The Case of the Niger Delta of Nigeria’ (2006) 69 Journal of Business Ethics 27 at 49. 243 See, for example, Associated Gas Re-Injection Act, Cap. A25, LFN 2004, s. 3.(1). 244 Shell Petroleum Development Company, 2004 People and the Environment Annual Report, at 14, available at http://www.shell.com/static/nigeria/ downloads/pdfs/2004_rpt.pdf (accessed 29 April 2006). 245 Human Rights Watch, Price of Oil, supra note 208 at 156. 246 Ibid. 247 For analysis of some of the causes of delay in the litigation process in Nigeria, see T. Osipitan, ‘Problems and Causes of Delays in Criminal Justice Administration,’ in C.O. Okonkwo, ed., Contemporary Issues in Nigerian Law (Lagos: Taiwo Fakayede, 1992) 490. 248 United Nations Conference on Trade and Development, Investment Policy Review Ghana (New York & Geneva: United Nations, 2003) at 38, available at http://www.unctad.org/en/docs/iteipcmisc14rev1_en.pdf (accessed 20 November 2005). 249 See Omobolaji Adewale, ‘Oil Spill Compensation Claims in Nigeria: Principles, Guidelines and Criteria’ (1989) 33 J. African Law 91 at 101. 250 Patrick D. Okonmah, ‘Right to a Clean Environment: The Case for the People of Oil-Producing Communities in the Nigerian Delta’ (1997) 41 J. African Law 43 at 49. 251 M.L. Uwais, ‘Recent Development in Nigeria: Strengthening Legal and Institutional Framework for Promoting Environmental Management,’ (paper presented at the Global Judges Symposium on Sustainable Development and the Role of Law, Johannesburg, South Africa, 18–20 August 2002), available at http://www.unep.org/law/Symposium/ Documents/Country_papers/NIGERIA.doc (accessed 22 January 2005). 252 Ibid. 253 Ibid. 254 Ibid. 255 For example, in Shell v. Isaiah, [1997] 6 N.W.L.R. (Part 508) 236, the court awarded 22 million Naira against Shell. Also, in Edamkue & Others v. Shell, Suit Nos. FHC/PH/84&85/94 [unreported, judgment delivered on Monday 28 June 1999, copy on file with author], approximately 245 million Naira (about US$2.1 million) was awarded against Shell. Exchange rate used here – US$1 to 116.66 Naira – is as determined by the Central Bank

Notes to pages 77–81

256

257

258

259 260

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of Nigeria for 23 May 2008. See Central Bank of Nigeria at http://www. cenbank.org/Rates/rateshome.asp (accessed 23 May 2008). Frynas, Oil in Nigeria, supra note 42 at 216–22; Jedrzej G. Frynas, ‘Legal Change in Africa: Evidence from Oil-Related Litigation in Nigeria’ (1999) 43 J. African Law 121 at 143–8. Amos A. Idowu, ‘Human Rights, Environmental Degradation and Oil Multinational Companies in Nigeria: The Ogoniland Episode’ (1999) 17:2 Netherlands Quart. Hum. Rts 161 at 181–2. See Duruigbo, ‘Multinational Corporations and Compliance with International Regulations Relating to the Petroleum Industry,’ supra note 210 at 139. The New Partnership for Africa’s Development, available at http://www. nepad.org/2005/files/documents/inbrief.pdf (accessed 3 June 2008). Cynthia A. Williams, ‘Corporate Social Responsibility in an Era of Economic Globalization’ (2002) 35 U.C. Davis L. Rev. 705 at 729.

4. Complementary Regulatory Strategies: Self-Regulation and the Role of Civil Society Organizations in Nigeria and Ghana 1 Harvey L. Pitt & Karl A. Groskaufmanis, ‘Minimizing Corporate Civil and Criminal Liability: A Second Look at Corporate Codes of Conduct’ (1990) 78 Geo. L. J. 1559 at 1561. 2 Margot Priest, ‘The Privatization of Regulation: Five Models of SelfRegulation’ (1997–8) 29 Ottawa L. Rev. 233. 3 Ibid. at 242–4 (Table 1). 4 For assessment of corporate codes, see Wesley Cragg, ed., Ethics Codes, Corporations, and the Challenge of Globalization (Cheltenham, UK: Edward Elgar, 2005). 5 See OECD, Directorate for Financial, Fiscal and Enterprise Affairs, Codes of Corporate Conduct: Expanded Review of their Contents, Working Papers on International Investment Number 2001/6 (May 2001), at 5, available at http://www.oecd.org/dataoecd/57/24/1922656.pdf (accessed 17 September 2004). 6 See Mark B. Baker, ‘Private Codes of Corporate Conduct: Should the Fox Guard the Henhouse?’ (1993) 24 U. Miami Inter-Am. L. Rev. 399 at 430 (‘When private codes are followed, they improve the situation of all trading parties’). 7 Thomas Donaldson, Corporations and Morality (Englewood Cliffs, NJ: Prentice-Hall, 1982) at 204.

272

Notes to pages 81–3

8 See Jorge F. Perez-Lopez, ‘Promoting International Respect for Worker Rights through Business Codes of Conduct’ (1993) 17 Fordham Int’l L. J. 1 at 47. 9 Pitt & Groskaufmanis, supra note 1 at 1605–30. See also Charles J. Walsh & Alissa Pyrich, ‘Corporate Compliance Programs as a Defense to Criminal Liability: Can a Corporation Save its Soul?’ (1995) 47 Rutgers L. Rev. 605 at 676–90. 10 Harry Arthurs, ‘Corporate Self-Regulation: Political Economy, State Regulation and Reflexive Labour Law’ (unpublished paper on file with author). See also Philip M. Nichols, ‘Regulating Transnational Bribery in Times of Globalization and Fragmentation’ (1999) 24 Yale J. Int’l L. 257 at 284; Jane C. Hong, ‘Enforcement of Corporate Codes of Conduct: Finding a Private Right of Action for International Laborers against MNCs for Labor Rights Violations’ (2000–1) 19 Wis. Int’l L. J. 41 at 57. 11 See OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 2. 12 Ibid. at 21. 13 ExxonMobil, Standards of Business Conduct (January 2006), available at http://www2.exxonmobil.com/corporate/files/corporate/sbc.pdf (accessed 6 June 2008). 14 Ibid. at 2. 15 Ibid. 16 Ibid. 17 Chevron, Business Conduct and Ethics Code, at 1, 6, & 14, available at http:// www.chevron.com/documents/pdf/chevronbusinessconductethicscode. pdf (accessed 6 June 2008). 18 Royal Dutch Shell Plc, Shell General Business Principles, available at http:// www-static.shell.com/static/aboutshell/downloads/who_we_are/sgbp_ english.pdf (accessed 6 June 2008). 19 Ibid. 20 Ibid. 21 Rio Tinto, The Way We Work: Our Statement of Business Practice (January 2008) at 7–8, available at http://www.riotinto.com/documents/The_way_ we_work.pdf (accessed 6 June 2008). 22 Ibid. at 8. 23 Ibid. at 9. 24 AngloGold Ashanti, Values and Business Principles, available http:// www.anglogold.com/Values/Business+Principles.htm (accessed 18 May 2007). 25 De Beers, Code of Business Conduct and Ethics, at 6 para. 6.2, available at

Notes to pages 83–4

26 27 28 29 30 31 32 33

34

35 36 37

38 39

40

273

http:// www.debeersgroup.com/NR/rdonlyre/D954D062–4135–4857– 9B3B-8FEA91CE237A/212/CodeofBusCondEthics/.pdf (accessed 6 June 2008). Ibid. at 7 para. 8. Ibid. at 7 para. 7. For analysis of the characteristics of internal codes, see Arthurs, supra note 10. Supra note 13 at 2. Supra note 18. Arthurs, supra note 10. Ibid. This is also true of codes in other sectors. See Bob Hepple, ‘A Race to the Top? International Investment Guidelines and Corporate Codes of Conduct’ (1999) 20 Comp. Lab. L. & Pol’y J. 347 at 359; Meaghan Shaughnessy, ‘The United Nations Global Compact and the Continuing Debate about the Effectiveness of Corporate Voluntary Codes of Conduct’ (2001) 12 Colo. J. Int’l Envtl. L. & Pol’y (2000 Y.B.) 159 at 163. See OECD, Trade Directorate/Trade Committee, Codes of Corporate Conduct: An Inventory, Working Paper of the Trade Committee, TD/TC/WP(98)74/ FINAL, (1999) at 4, available at http://www.olis.oecd.org/olis/1998doc. nsf/LinkTo/td-tc-wp{98}74-final (accessed 21 November 2004). Arthurs, supra note 10. See OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 25. See David M. Schilling, ‘Making Codes of Conduct Credible: The Role of Independent Monitoring,’ in Oliver F. Williams, ed., Global Codes of Conduct: An Idea Whose Time Has Come (Notre Dame, IN: University of Notre Dame Press, 2000) 221. See OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 21. See James E. Post, ‘Global Codes of Conduct: Activists, Lawyers, and Managers in Search of a Solution,’ in Williams, ed., supra note 37, 103 at 111. See also EC, Commission of the European Communities, Promoting a European Framework for Corporate Social Responsibility: Green Paper (2001) at 15, available at http://ec.europa.eu/employment_social/soc-dial/csr/ greenpaper_en.pdf (accessed 11 June 2008). A survey in seven OECD countries reveals that while ‘codes of the extractive industry address a broad range of issues,’ human rights commitments are hardly expressed in these codes. See OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 21.

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Notes to pages 84–5

41 This problem is not peculiar to extractive industries, although it is more pronounced therein. For example, a recent survey reveals that only 10 per cent of the top three hundred public corporations in Canada ‘have a publicly stated commitment to internationally proclaimed human rights,’ and that the same per centage ‘publicly support the Universal Declaration of Human Rights.’ See Conference Board of Canada, The National Corporate Social Responsibility Report: Managing Risks, Leveraging Opportunities (June 2004) at 10, Chart 6, available at http://www.conferenceboard.ca/documents.asp?rnext=734 (accessed 11 June 2008). 42 See ExxonMobil, Standards of Business Conduct, supra note 13. 43 ExxonMobil, ‘Media Responses to Shareholder Proposals – Human Rights Policy,’ available at http://www2.exxonmobil.com/Corporate/Newsroom/Newsreleases/mediaresponses.asp (accessed 20 September 2004) [emphasis added]. 44 Royal Dutch Shell Plc., Shell General Business Principles, supra note 18. Aside from the Shell General Business Principles, which guides its worldwide operations, Royal Dutch Shell has country-specific codes of conduct. See, for example, Code of Conduct: Shell in the United States, available at http://www.countonshell.com/welcome/policies/Code%20of%20Conduct%20%202002.pdf (accessed 20 September 2004); Shell Canada’s Code of Ethics, available at http://www.shell.ca/code/values/commitments/ ethics.html (accessed 20 September 2004). 45 Shell General Business Principles, ibid. 46 Chevron, Business Conduct and Ethics Code, supra note 17 at 1. 47 ConocoPhillips, Code of Business Ethics and Conduct, at 3, available at http://www.conocophillips.com/NR/rdonlyres/1AD2CCD6–7C37– 4FB0–864B-8371C1FA0395/0/CodeofEthicsBooklet1107.pdf (accessed 6 June 2008). See also ConocoPhillips, Code of Business Ethics and Conduct for Directors and Employees (revised 9 February 2007), available at http:// www.conocoPhillips.com/NR/rdonlyres/147E8B57–9169–4FA7-BB23A41207B26D2D/0/13_CodeofEthics.pdf (accessed 6 June 2008). 48 Talisman Energy, Policy on Business Conduct and Ethics (October 2007) at 7, available at http://www.talisman-energy.com/upload/important_ links/11/05/october_2007_policy.pdf (accessed 7 June 2008). 49 Ibid. 50 See Rio Tinto, The Way We Work: Our Statement of Business Practice, supra note 21 at 9; AngloGold Ashanti, Values and Business Principles, supra note 24. 51 OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 22. 52 See ibid. 53 One of the few is ConocoPhillips. See ConocoPhillips, Code of Business Eth-

Notes to pages 86–7

54 55

56

57

58 59

60 61 62 63

64

65

66 67

275

ics and Conduct, supra note 47 at 3 (‘We believe in respecting human rights, providing safe and healthy working conditions, and respecting employees’ rights to bargain collectively’). OECD, Codes of Corporate Conduct: Expanded Review of their Contents, supra note 5 at 22. See Emeka A. Duruigbo, Multinational Corporations and International Law: Accountability and Compliance Issues in the Petroleum Industry (Ardsley, NY: Transnational Publishers, 2003) at 135. International Council on Mining and Metals, Sustainable Development Framework, available at http://www.icmm.com/page/200/our-work/sustainable-development-framework/sustainable-development-framework (accessed 8 May 2008). International Council on Mining and Metals, Sustainable Development Framework: 10 Principles, available at http://www.icmm.com/our-work/ sustainable-development-framework/10-principles (accessed 8 May 2008). Ibid. See Minerals Council of Australia, Enduring Value: The Australian Minerals Industry Framework for Sustainable Development, available at http://www. minerals.org.au/enduringvalue/enduring_value (accessed 8 May 2008) [hereafter Enduring Value]. Ibid. at 2. Ibid. at 6 & 12. Ibid. at 6 & 12. See Minerals Council of Australia, Enduring Value: The Australian Minerals Industry Framework for Sustainable Development – Guidance for Implementation, available at http://www.minerals.org.au/enduringvalue/resources/ implementation_guidance (accessed 8 May 2008) [hereafter Enduring Value: Guidance for Implementation]. International Council on Mining and Metals, Sustainable Development Framework: Public Reporting, available at http://www.icmm.com/ourwork/sustainable-development-framework/public-reporting (accessed 8 May 2008); Minerals Council of Australia, Enduring Value, supra note 59 at 6 & 12. See International Council on Mining and Metals, Sustainable Development Framework: Assurance, available at http://www.icmm.com/our-work/ sustainable-development-framework/assurance (accessed 8 May 2008); Minerals Council of Australia, Enduring Value: Guidance for Implementation, supra note 63 at 25 & 31. Minerals Council of Australia, Enduring Value, supra note 59 at 12. See ibid. at 13.

276

Notes to pages 87–90

68 International Council on Mining and Metals, Sustainable Development Framework: 10 Principles, supra note 57 at Principle 03; Minerals Council of Australia, Enduring Value, supra note 59 at 16. 69 See chapter 6 below for a discussion of the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted by the International Labour Conference, 86th Sess., 18 June 1998. 70 See Arthurs, supra note 10. 71 See Voluntary Principles on Security and Human Rights, available at http:// www.voluntaryprinciples.org/principles/index.php (accessed 7 June 2008). 72 On the relationship between extractive companies, governments and private security firms, see Elizabeth Rubin, ‘An Army of One’s Own: In Africa, Nations Hire a Corporation to Wage War’ (February 1997) Vol. 294 Number 1761 Harper’s Magazine 44; Juan Carlos Zarate, ‘The Emergence of a New Dog of War: Private International Security Companies, International Law, and the New World Disorder’ (1998) 34 Stan. J. Int’l L. 75; Jennifer L. Heil, ‘African Private Security Companies and the Alien Tort Claims Act: Could Multinational Oil and Mining Companies be Liable?’ (2002) 22 Northwestern J. Int’l L. & Bus. 291. 73 See Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (New York: Human Rights Watch, 1999) at 115–22 [hereafter Price of Oil] (noting the relationship between oil TNCs and state security agencies in Nigeria, a relationship that often results in violations of human rights of host communities). 74 See Harold H. Koh, ‘A United States Human Rights Policy for the 21st Century’ (2002) 46 St Louis U. L. J. 293 at 321. 75 Supra note 71. For analysis of the process leading to the development of the Voluntary Principles on Security and Human Rights, see Bennett Freeman, Maria B. Pica, & Christopher N. Camponovo, ‘A New Approach to Corporate Responsibility: The Voluntary Principles on Security and Human Rights’ (2001) 24 Hastings Int’l & Comp. L. Rev. 423. 76 Voluntary Principles on Security and Human Rights, supra note 71. 77 Ibid. 78 Cynthia A. Williams, ‘Civil Society Initiatives and “Soft Law” in the Oil and Gas Industry’ (2004) 36 N.Y.U. J. Int’l L. & Pol. 457 at 482. 79 Freeman, et al., supra note 75 at 438–9. 80 This is notably the case in Nigeria’s oil industry. See Human Rights Watch, Price of Oil, supra note 73 at 115. 81 Human Rights Watch, Price of Oil, ibid. at 116–17. 82 Williams, supra note 78 at 481. 83 See Voluntary Principles Participation Criteria, available at http://www.

Notes to pages 90–2

84 85

86

87

88 89

90

91 92

93

94 95 96

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98

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voluntaryprinciples.org/participants/participation-criteria.php (accessed 29 July 2008). See Williams, supra note 78 at 482. Shell Petroleum Development Company of Nigeria, SPDC’s Submission (to the Human Rights Violations Investigation of Nigeria, 23 January 2001), available at http://www.shellnigeria.com/frame.asp?Page=news (accessed 2 June 2005). Shell Petroleum Development Company of Nigeria, 2002 People and the Environment Annual Report, at 11, available at http://www.shell.com/static/ nigeria/downloads/pdfs/2002%20report_final.pdf (accessed 2 June 2005). Shell Petroleum Development Company of Nigeria, 2004 People and the Environment Annual Report, at 11, available at http://www.shell.com/ static/nigeria/downloads/pdfs/2004_rpt.pdf (accessed 29 April 2006). Ibid. at 15. Ibid. at 17. See also Shell Petroleum Development Company of Nigeria, Shell Nigeria Annual Report 2006: People and the Environment, at 15–16, available at http://www.shell.com/static/nigeria/downloads/pdfs/2006_ shell_nigeria_report.pdf (accessed 7 June 2008). Environmental Rights Action, The Shell Report: Continuing Abuses in Nigeria – 10 Years After Ken Saro Wiwa, at 14, available at http://wwweraction.org/ modules/Publications/docs/shellreport.pdf (accessed 1 May 2006). Voluntary Principles on Security and Human Rights, supra note 71. Amnesty International, Nigeria: Ten Years On: Injustice and Violence Haunt the Oil Delta (3 November 2005) at 6–12, available at http://www.amnesty. org/en/library/info/AFR44/022/2005 (accessed 29 April 2006). AngloGold Ashanti, 2004 Report to Society, at L1-L35, available at http:// www.anglogoldashanti.co.za/subwebs/InformationForInvestors/ReportToSociety04/default.htm (accessed 3 June 2005). Ibid. at SH6. Ibid. at SH8. AngloGold Ashanti, Values and Business Principles, supra note 24 (‘We are committed to establishing and maintaining management systems to identify, monitor and control the environmental aspects of our activities’). For a review of the Environmental Policy of the Ghana Chamber of Mines, see K. Sraku-Lartey, ‘Environmental Education: Perspectives from the Minerals Industry in Ghana,’ available at http://www.mineralresourcesforum. org/workshops/education/docs/srakular.pdf (accessed 16 April 2005). Lisa Misol/Human Rights Watch, ‘Private Companies and the Public Interest: Why Corporations Should Welcome Global Human Rights Rules,’ at 4, available at http://www.hrw.org/wr2k6/corporations/

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101 102 103 104 105

106

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108 109 110

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Notes to pages 92–4 corporations.pdf (accessed 2 May 2006). See also ESCR-NET Corporate Accountability Working Group, Joint NGO Submission: Consultation on Human Rights and the Extractive Industry (9 December 2005) at 15, available at http://www.escr-net.org/GeneralDocs/ESCR-NetonExtr.pdf (accessed 24 August 2006). Lisa Misol/Human Rights Watch, ibid. AngloGold Ashanti, ‘AngloGold Ashanti’s Activities in the Democratic Republic of the Congo,’ at 4, available at http://www.anglogold.com/ NR/rdonlyres/ECBCA20E-5B45–4625-B4E7-B8517F369043/0/AGA_ and_the_DRC.pdf (accessed 4 May 2006). Ibid. at 5. Ibid. at 6. AngloGold Ashanti, Values and Business Principles, supra note 24. Eric Bregman & Arthur Jacobson, ‘Environmental Performance Review: Self-Regulation in Environmental Law’ (1994) 16 Cardozo L. Rev. 465. Robert J. Liubicic, ‘Corporate Codes of Conduct and Product Labeling Schemes: The Limits and Possibilities of Promoting International Labor Rights through Private Initiatives’ (1998) Law & Pol’y Int’l Bus. 111 at 136. See Robert A. Kagan & John T. Scholz, ‘The Criminology of the Corporation and Regulatory Enforcement Strategies,’ in Keith Hawkins & John M. Thomas, eds., Enforcing Regulation (Boston: Kluwer-Nijhoff, 1984) 67 at 76; Jonathon Hanks, ‘Promoting Corporate Environmental Responsibility: What Role for “Self-Regulatory” and “Co-Regulatory” Policy Instruments in South Africa?’ in Peter Utting, ed., The Greening of Business in Developing Countries: Rhetoric, Reality and Prospects (London & New York: Zed Books/UNRISD, 2002) 187 at 195. E.H. Shannon, ‘The Role of National and Transnational Corporations in the African Mining Sector and the Environment – The Case of Noncompliance and Enforcement,’ Fifth International Conference on Environmental Compliance and Enforcement 679 at 683, available at http://www. inece.org/5thvol1/shannon3.pdf (accessed 28 April 2005). Shell Petroleum Development Company of Nigeria, 2002 People and the Environment Annual Report, supra note 86 at 15–17. Ibid. at 15. Human Rights Watch, ‘Observations on SPDC Integrated Environment and Community Development Stakeholders’ Workshop, Warri, 13–15 March 2001,’ in Environmental Rights Action, The Shell Report: Continuing Abuses in Nigeria – 10 Years After Ken Saro Wiwa, supra note 90 at 33. See Shell Petroleum Development Company of Nigeria, 2003 People and Environment: Annual Report, at 30, available at http://www.shell.com/ static/nigeria/downloads/pdfs/annualreport_2003.pdf (accessed 20

Notes to pages 94–8

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113

114 115 116 117 118 119 120 121 122

123

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125 126 127

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April 2005); Shell Petroleum Development Company of Nigeria, 2002 People and the Environment Annual Report, supra note 86 at 51. See also David Wheeler et al., ‘Paradoxes and Dilemmas for Stakeholder Responsive Firms in the Extractive Sector: Lessons from the Case of Shell and the Ogoni’ (2002) 39 J. Bus. Ethics 297 at 308. World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 1 (Industry and Energy Operations Division, West Central Africa Department, 25 May 1995) at 83, available at http://www-wds. worldbank.org (accessed 16 April 2005). Department of Petroleum Resources, Environmental Guidelines and Standards for the Petroleum Industry in Nigeria, Rev. Ed. 2002 (Lagos: Department of Petroleum Resources) at 24–7, 53–9, & 115 [hereafter EGASPIN]. Ibid. at 289, Articles 1 & 3.1.1. Environmental Assessment Regulations 1999, Reg. 24.(1). Ibid. Reg. 24.(4). Ibid. Reg. 26.(1)(e). EGASPIN, supra note 113 at 292. Ibid. at 292, Article 1.2.2. Ibid. at 292, Article 1.3.1. Ibid. at 292, Article 1.3.2. Evaristus Oshionebo, Enhancing Corporate Social Responsibility in Nigeria’s Oil and Gas Producing Communities: A Contextual Analysis, LL.M. Thesis, University of Alberta, 2001 at 149–50 (archived at the University of Alberta library). See Williams, supra note 78. See also Evaristus Oshionebo, ‘Transnational Corporations, Civil Society Organisations and Social Accountability in Nigeria’s Oil and Gas Industry’ (2007) 15:1 African J. Int’l and Comp. L. 107 at 115–18. For the various civil society groups operating in Nigeria’s oil-producing communities, see Augustine Ikelegbe, ‘Civil Society, Oil and Conflict in the Niger Delta Region of Nigeria: Ramifications of Civil Society for a Regional Resource Struggle’ (2001) 39:3 J. Modern African Studies 437 at 442–50. For the role of women in agitations against oil TNCs in Nigeria, see Terisa E. Turner & M.O. Oshare, Women’s Uprising against the Nigerian Oil Industry in the 1980s, available at http://www.uoguelph.ca/~terisatu/ Counterplanning/c9.htm (accessed 28 April 2005). Ogoni Bill of Rights, available at http://www.waado.org/nigerdelta/ RightsDeclaration/Ogoni.html (accessed 26 July 2005). Ibid. ‘Who and What is WACAM?,’ available at http://www.wacam.org/ whowhat.htm (accessed 20 October 2005).

280

Notes to pages 98–9

128 Oxfam International, ‘WACAM: A Powerful Voice for Mining Communities in Ghana,’ available at http://www.oxfam.org/en/programs/development/wafrica/ghana_mining.htm (accessed 9 June 2008). 129 See National Coalition of Civil Society Groups against Mining in Forest Reserves, ‘Campaign Against Mining in Ghana’s Forest Reserves,’ available at http://www.bicusa.org/africa/ghanamining_declaration.htm (accessed 22 April 2005). 130 NGO involvement in public interest litigation in Nigeria and Ghana is severely hindered by the doctrine of locus standi. Nigerian courts are wont to rule that NGOs have no standing to seek judicial enforcement of environmental laws because these laws do not vest a right of private enforcement on Nigerian citizens. See, for example, Douglas v. Shell Petroleum Development Company Ltd, Suit No. FHC/L/CS/573/96 [unreported], where the Federal High Court denied the plaintiff standing to sue Shell because of lack of evidence that his private rights were adversely affected by Shell’s failure to observe provisions of the Environmental Impact Assessment Act. An appeal against this decision was allowed by the Court of Appeal on the technical ground that the Federal High Court did not follow proper procedure in arriving at its decision. The Court of Appeal decision is reported in (1999) N.W.L.R. 466. 131 See ‘Nigerian Women Storm New Oil Plants,’ BBC NEWS, Wednesday, 17 July 2002, available at http://news.bbc.co.uk/2/low/africa/2134165.stm (accessed 21 April 2005). See also, Terisa E. Turner & Leigh S. Brownhill, ‘Why Women Are at War with Chevron: Nigerian Subsistence Struggles Against the International Oil Industry’ (2004) 39 J. Asian & African Studies 63. 132 ‘Nigerian Women Leave Oil Plant,’ BBC NEWS, Thursday 18 July 2002, available at http://news.bbc.co.uk/2/hi/africa/2136509.stm (accessed 21 April 2005); ‘Oil Company Appeases Nigerian Women,’ USA Today, 15 May 2002, available at http://www.usatoday.com/news/ world/2002/07/15/nigerian-women.htm (accessed 21 April 2004); ‘Peacefully, Nigerian Women Win Changes from Big Oil,’ Christian Science Monitor, 12 August 2002, available at http://www.csmonitor. com/2002/0812/p07s02-woaf.htm (accessed 9 June 2008). 133 See Obiora C. Okafor, ‘Modest Harvests: On the Significant (But Limited) Impact of Human Rights NGOs on Legislative and Executive Behaviour in Nigeria’ (2004) 48 J. African Law 23 at 24. 134 Deborah Spar & James Dail, ‘Of Measurement and Mission: Accounting for Performance in Non-Governmental Organizations’ (2002) 3 Chi. J. Int’l L. 171 at 176. 135 See Ikelegbe, supra note 124 at 438.

Notes to pages 100–1 136 137 138 139

140

141 142

143

144 145 146 147 148 149 150

151

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Ibid. at 464–5. Okafor, supra note 133 at 24. Ikelegbe, supra note 124 at 460. David F. Murphy & Jem Bendell, ‘New Partnerships for Sustainable Development: The Changing Nature of Business-NGO Relations,’ in Utting, ed., supra note 106, 216 at 227. See also Human Rights Watch, Price of Oil, supra note 73 at 182–5; Wheeler et al., supra note 111 at 301; David Weinraub, ‘Shell Defeats the Pirc Group Resolution’ (1998) 9 Colo. J. Int’l Envt’l L. & Pol’y 1997 Year Book 136 at 138. Kwame A. Domfeh, ‘Compliance and Enforcement in Environmental Management: A Case of Mining in Ghana’ (2003) 5 Environmental Practice 154 at 162–3. See Oxfam International, ‘WACAM: A Powerful Voice for Mining Communities in Ghana,’ supra note 128. Joseph Yaw Boateng, ‘Enhancing Business-Community Relations: Ghana Mining Industry Case Study’ (October 2003) at 10, available at http:// www.worldvolunteerweb.org/fileadmin/docs/old/pdf/2003/031201_ EBCR_GHA_miningindustry.pdf (accessed 29 May 2008). The author recognizes that these developments may not have been influenced solely by NGOs. However, the argument being made here is that changes in the behavioural patterns of Shell and other oil TNCs in Nigeria may not have occurred without the sustained pressures and efforts of civil society groups. See Boateng, supra note 142 at 10; World Bank, Defining an Environmental Development Strategy for the Niger Delta, Vol. 1, supra note 112 at 83. Jedrzej G. Frynas, ‘Legal Change in Africa: Evidence from Oil-Related Litigation in Nigeria’ (1999) 43 J. African Law 121 at 122. See ibid. at 138–43. Frynas, ibid. at 147. [1997] 6 N.W.L.R. (Part 508) 236. Suit No. FHC/PH/84 & 85/94, judgment dated 28 June 1999 [unreported, copy on file with author]. Exchange rate – 116.66 Naira to US$1 – used here is based on the daily exchange rates as advertised by the Central Bank of Nigeria for 23 May 2008. See Central Bank of Nigeria at http://www.cenbank.org/Rates/ rateshome.asp (accessed 23 May 2008). Emmanuel Goujon, ‘Shell Appeals Nigerian Fine for Polluting Delta,’ The Globe and Mail [Toronto], Monday, 27 February 2006, at B7; ‘Shell Ordered to Pay $1.5B for Nigerian Pollution,’ Toronto Star, 24 February 2006, available at http://www.thestar.com (accessed 24 February 2006).

282

Notes to pages 101–4

152 Jonah Gbemre v Shell & Others, Suit No. FHC/B/CS/153/2005. For a copy of the judgment, see Environmental Rights Action, ‘Court Declares Gas Flaring Illegal in Nigeria,’ available at http://www.eraction.org/modules.php?name=ERA_News&file=article&sid=41 (accessed 15 March 2006). 153 Frynas, supra note 145 at 146–7. 154 Ibid. at 147. 155 See Charles Ukeje, ‘Oil Communities and Political Violence: The Case of Ethnic Ijaws in Nigeria’s Delta Region’ (2001) 13 Terrorism and Political Violence 15 at 16. 156 See ‘Nigerians Seize Shell Gas Plant,’ BBC NEWS, Monday 13 March 2000, available at http://news.bbc.co.uk/2/hi/africa/67335.stm (accessed 21 April 2005); ‘Rig Hostages Freed in Nigeria,’ BBC NEWS, Monday 27 August 2001, available at http://news.bbc.co.uk/1/hi/ world/africa/1511857.stm (accessed 21 April 2005). 157 For insights on the conflict, see Donald L. Horowitz, Ethnic Groups in Conflict (Berkeley: University of California Press, 2000) at 129–32. See also Rotimi Suberu, ‘Integration and Disintegration in the Nigerian Federation,’ in Daniel C. Bach, ed., Regionalisation in Africa: Integration & Disintegration (Bloomington: Indiana University Press, 1999) 91 at 99. 158 Yinka Omorogbe, ‘The Legal Framework for Public Participation in Decision-making on Mining and Energy in Nigeria: Giving Voices to the Voiceless,’ in Donald N. Zillman, Alastair R. Lucas & George R. Pring, eds., Human Rights in Natural Resource Development: Public Participation in the Sustainable Development of Mining and Energy Resources (Oxford: Oxford University Press, 2002) 549 at 577. 159 Collective action problem relates to the difficulties in getting groups with diverse interests to cooperate with a view to the attainment of common goals. For insights on collective action problem, see Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Cambridge, MA: Harvard University Press, 1971). See also Eyal Benvenisti, ‘Collective Action in the Utilization of Shared Freshwater: The Challenges of International Water Resources Law’ (1996) 90 Am. J. Int’l L. 384. 160 See Robert V. Percival, ‘Environmental Legislation and the Problem of Collective Action’ (1998) 9 Duke Envt’l L. & Pol’y F. 9 at 18. 161 Simon Maxwell, ‘How to Help Reform Multilateral Institutions: An Eight-Step Program for More Effective Collective Action’ (2005) 11 Global Governance 415 at 417. 162 See Benvenisti, supra note 159 at 400–4. 163 Ukeje, supra note 155 at 29–30.

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164 Okafor, supra note 133 at 43. 165 See Vincent O. Orlu Nmehielle, The African Human Rights System: Its Laws, Practice, and Institutions (The Hague/London/New York: Martinus Nijhoff Publishers, 2001) at 323. 166 Ruben Eberlein, ‘On the Road to the State’s Perdition? Authority and Sovereignty in the Niger Delta, Nigeria’ (2006) 44:4 J. Modern African Studies 573 at 582. 167 Ibid. at 581–2. 168 See Jedrzej G. Frynas, ‘The False Developmental Promise of Corporate Social Responsibility: Evidence from Multinational Oil Companies’ (2005) 81:3 International Affairs 581. 169 See, for example, Shell Petroleum Development Company of Nigeria, 2004 People and the Environment Annual Report, supra note 87 at 44. 170 Eberlein, supra note 166 at 583. 171 Robert O. Keohane, ‘Commentary on the Democratic Accountability of Non-Governmental Organizations’ (2002) 3 Chi. J. Int’l L. 477 at 478; Peter J. Spiro, ‘Accounting for NGOs’ (2002) 3 Chi. J. Int’l L. 161 at 163. 172 See Nmehielle, supra note 165 at 324. 173 For example, disaffection within the Civil Liberties Organization, a Nigerian human rights NGO, led to the formation of Constitutional Rights Project in 1990 by erstwhile members of the former. 174 In Ghana, for example, Municipal and District Assemblies (comprising partly of representatives of host communities) partake in environmental impact assessment hearings and deliberations conducted by the Environmental Protection Agency. See Environmental Assessment Regulations 1999, Reg. 16.(3). In the case of Nigeria, see Environmental Impact Assessment Act, Cap. E12, LFN 2004, ss. 7 & 25. 175 See R.S. Belden & T.J. DiCintio, ‘The Role of Private Citizens in Enforcing US Environmental Law,’ in Marilise Swart, ed., International Environmental Law and Regulations, vol. 2 (Chichester: John Wiley & Sons, 1997) 61; Michael S. Greve, ‘The Private Enforcement of Environmental Law’ (1990) 65 Tulane L. R. 339. 176 Peter C. Acquah, ‘Natural Resources Management and Sustainable Development: The Case of the Gold Sector in Ghana’ (UNCTAD/COM/41, 15 August 1995) at 33, available at http://www.natural-resources.org/ minerals/africa/docs/pdfs/claveracquah.pdf (accessed 17 May 2005); Colin N. Boocock, ‘Environmental Impacts of Foreign Direct Investment in the Mining Sector in Sub-Saharan Africa’ (January 2002) at 13, available at http://www.natural-resources.org/minerals/docs/oecd (accessed 14 May 2005).

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177 See s. 13.(1) of the Nigerian Petroleum Act, Cap. P10, LFN 2004, which provides: ‘Any person who interferes with or obstructs the holder of a licence or lease granted under section 2 of this Act (or his servants or agents) in the exercise of any rights, power or liberty conferred by the licence or lease shall be guilty of an offence and on conviction shall be liable to a fine not exceeding two hundred naira or to imprisonment for a period not exceeding six months, or to both.’ 178 Petroleum Production and Distribution (Anti-Sabotage) Act, Cap. P12, LFN 2004, s. 1. 179 Ibid. s. 2. 180 For insight on the trial and conviction of Ken Saro-Wiwa and others, see Civil Liberties Organization, Ogoni: Trials and Travails (Lagos: Civil Liberties Organization, 1996). 5. Multilateral African Regulatory Mechanisms 1 O.A.U. Doc. CAB/LEG/67/3/Rev. 5 (1986), reprinted in 21 I.L.M. 58 (1982). The African Charter was adopted on 27 June 1981 and became effective on 21 October 1986. 2 Treaty Establishing the African Economic Community, [Done at Abuja, Nigeria, 3 June 1991], 30 I.L.M. 1241 (1991). The treaty is also available at http://www.africa-union.org/ (accessed 3 November 2007). 3 Convention of the African Energy Commission, [Done at Lusaka, Zambia, 11 July 2001], available at http://www.african-union.org/ (accessed 3 November 2007). 4 African Convention on the Conservation of Nature and Natural Resources, [Adopted by the Second Ordinary Session of the Assembly of the African Union in Maputo, Mozambique, 11 July 2003], available at http://www. african-union.org/ (accessed 3 November 2007). 5 Ibid. Article XIII(1). 6 Ibid. Article XIII(2)(c). 7 Treaty Establishing the African Economic Community, supra note 2, Articles 54–7; African Convention on the Conservation of Nature and Natural Resources, supra note 4 at Article XIX. See also Bamako Convention on the Ban of the Import into Africa and the Control of Transboundary Movement and Management of Hazardous Wastes within Africa, [Adopted by the Conference of Environment Ministers at Bamako, Mali, January 1991], available at http://www.african-union.org/ (accessed 3 November 2007). 8 Bamako Commitment on Environment and Development, OAU/CONF/ PANCOOR/ENV/EXP/(1)BKO COMMITMENT/Rev2 [adopted by the

Notes to pages 108–9

9

10

11 12 13 14

15 16

17

18 19

20 21 22 23 24 25

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Pan-African Conference on Environment and Sustainable Development in Africa, 30 January 1991], reprinted in W.E. Burhenne, ed., International Environmental Soft Law: Collection of Relevant Instruments (The Hague: Martinus Nijhoff Publishers, 1994) at 991:0806. Kampala Declaration, at para. 3, [Adopted by the First African Regional Conference on Economic and Sustainable Development, Kampala, Uganda, 12–16 June 1989], reprinted in Burhenne, ed., ibid. at 989:4505–6. Convention for Co-operation in the Protection and Development of the Marine and Coastal Environment of the West and Central African Region, 20 I.L.M. 746 (1981), Article 4(1). Ibid. Articles 5 & 8. Ibid. Article 4(1). The New Partnership for Africa’s Development, available at http://www. nepad.org/2005/files/documents/inbrief.pdf (accessed 3 June 2008). See James Gathii, ‘A Critical Appraisal of the NEPAD Agenda in Light of Africa’s Place in the World Trade Regime in an Era of Market Centered Development’ (2003) 13 Transnat’l L. & Contemp. Prob. 179. NEPAD, supra note 13 at paras. 156–7. See Statement of the Africa Initiative on Mining, Environment and Society (AIMES) (2 May 2004), available at http://www.bicusa.org/Legacy/ AIMES_Statement_May_2004.pdf (accessed 3 November 2007). The NEPAD’s preference for self-regulation by industry is reflected in the G8/Africa Kananaskis Summit where the advanced countries pledged to work with African governments and civil society to address the linkage between armed conflict and the exploitation of natural resources by ‘supporting voluntary control efforts’ in addition to ‘encouraging the adoption of voluntary principles of corporate social responsibility by those involved in developing Africa’s national resources.’ See G8 Africa Action Plan, at para. 1.5, available at http://www.g8.gc.ca/2002kananaskis/kananaskis/ afraction-en.asp (accessed 3 November 2007). Supra note 1. For insight on the African Commission on Human and Peoples’ Rights, see Rachel Murray, The African Commission on Human and Peoples’ Rights and International Law (Oxford & Portland, OR: Hart Publishing, 2000). Supra note 1, Article 4. Ibid. Article 14. Ibid. Article 15. Ibid. Article 16. Ibid. Article 24. Communication No. 155/96, African Commission on Human and Peo-

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26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

41

42 43

44

45

46 47

Notes to pages 109–12

ples’ Rights, available at http://www1.umn.edu/humanrts/africa/ comcases/155–96b.html (accessed 4 June 2007). SERAC & CESR v. Nigeria, ibid. at para. 1. Ibid. at para. 2. Ibid. at para. 3. Ibid. at para. 4. Ibid. at para. 5. Ibid. at para. 6. Ibid. at para. 46. Ibid. at para. 47. Ibid. at para. 59. Ibid. at para. 47. Ibid. at paras. 54–6. Ibid. at para. 60. Ibid. at para. 55. Ibid. at para. 70. See Dinah Shelton, ‘International Decisions: Decision Regarding Communication 155/96 (Social and Economic Rights Action Center/Center for Economic and Social Rights v. Nigeria)’ (2002) 96 Am. J. Int’l L. 937 at 940. J. Oloka-Onyango, ‘Reinforcing Marginalized Rights in an Age of Globalization: International Mechanisms, Non-State Actors, and the Struggle for Peoples’ Rights in Africa’ (2003) 18 Am. U. Int’l L. Rev. 851 at 901. SERAC & CESR v. Nigeria, supra note 25 at para. 70. See Oloka-Onyango, supra note 41 at 902–5. See also Justice C. Nwobike, ‘The African Commission on Human and Peoples’ Rights and the Demystification of Second and Third Generation Rights under the African Charter: Social and Economic Rights Action Center (SERAC) and the Center for Economic and Social Rights (CESR) v. Nigeria’ (2005) 1 Afr. J. Legal Stud. 129 at 141. Oloka-Onyango, ibid. at 910. On duties of individuals and non-state actors under the African Charter, see Articles 27–9; Murray, supra note 19 at 116–18. Nelson Enonchong, ‘The African Charter on Human and Peoples’ Rights: Effective Remedies in Domestic Law?’ (2002) 46 J. African L. 197 at 197. For a contrary view, see Frans Viljoen & Lirette Louw, ‘The Status of the Findings of the African Commission: From Moral Persuasion to Legal Obligation’ (2004) 48 J. African L. 1. See Article 45 of the African Charter on Human and Peoples Rights, supra note 1; Enonchong, ibid. at 197. See SERAC & CESR v. Nigeria, supra note 25 at para. 71.

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48 See Oloka-Onyango, supra note 41 at 911. 49 The Commission’s decisions are ‘recommendations to Governments.’ See Article 45 of the African Charter on Human and Peoples Rights, supra note 1. 50 SERAC & CESR v. Nigeria, supra note 25 at para. 70. 51 Ibid. at paras. 54–60. 52 The African Charter is enforceable both at the African Commission on Human and Peoples’ Rights, and in the domestic courts of individual African countries that have ratified the Charter. See, for example, Nigeria’s African Charter on Human and Peoples’ Rights (Ratification and Enforcement) Act, Cap. A9, LFN 2004. 53 See Constitution of the Federal Republic of Nigeria 1999, s. 1.(1): ‘This Constitution is supreme and its provisions shall have binding force on all authorities and persons throughout the Federal Republic of Nigeria.’ In Onwo v. Oko [1996] 6 N.W.L.R. (Part 456) 584 at 603, the Court of Appeal held that a person whose fundamental rights are infringed by another person can maintain an action in a court of law against that person ‘in the same way as an action he could maintain against the state for a similar infraction.’ See also Uzoukwu v. Ezeonu II [1991] 6 N.W.L.R. (Part 200) 708 at 764. 54 SERAC & CESR v. Nigeria, supra note 25 at para. 71. 6. The Regulation of Transnational Corporations under International Law 1 See Reparations for Injuries Suffered in the Service of the United Nations, ICJ Reports (1949) 174 at 179. 2 See Ian Brownlie, Principles of Public International Law, 6th ed., (Oxford & New York: Oxford University Press, 2003) at 58; Rosalyn Higgins, Problems and Process: International Law and How We Use it (Oxford: Clarendon Press, 1994) at 39 [hereafter Problems and Process]. 3 Brownlie, ibid. at 57. Other writers have employed a related set of criteria. See Bin Cheng, ‘Introduction to Subjects of International Law,’ in Mohammed Bedjaoui, ed., International Law: Achievements and Prospects (Paris/ Dordrecht: UNESCO/Martinus Nijhoff Publishers, 1991) 23 at 25–31 & 38. 4 Brownlie, ibid. at 65; Francois Rigaux, ‘Transnational Corporations,’ in Bedjaoui, ed., ibid., 121 at 129. 5 Craig Scott, ‘Translating Torture into Transnational Tort: Conceptual Divides in the Debate on Corporate Accountability for Human Rights Harms,’ in Craig Scott, ed., Torture as Tort: Comparative Perspectives on the Development of Transnational Human Rights Litigation (Oxford: Hart Publishing, 2001) 45 at 46.

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6 See, for example, Marina Ottaway, ‘Reluctant Missionaries’ (Jul./Aug. 2001) 125 Foreign Policy 44 at 53. 7 Antonio Cassese, International Law in a Divided World (Oxford: Clarendon Press, 1986) at 103. 8 Ibid. 9 Rigaux, supra note 4 at 129. 10 Cheng, supra note 3 at 28. 11 The United Nations has reiterated the primacy of state responsibility in the protection of international human rights by declaring that ‘each State has a prime responsibility and duty to protect, promote and implement all human rights and fundamental freedoms.’ See Declaration on the Right and Responsibility of Individuals, Groups and Organs of Society to Promote and Protect Universally Recognized Human Rights and Fundamental Freedoms, GA Res. 53/144, UN GAOR, 1998, Art.2(1). 12 Saman Zia-Zarifi, ‘Suing Multinational Corporations in the U.S. for Violating International Law’ (1999) 4 UCLA J. Int’l L. & For. Aff. 81 at 84. 13 Menno T. Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC,’ in Philip Alston, ed., The EU and Human Rights (Oxford & New York: Oxford University Press, 1999) 553 at 556. 14 See W. Michael Reisman, ‘International Lawmaking: A Process of Communication’ (1981) 75 Proc. of ASIL 101. 15 Jonathan I. Charney, ‘Transnational Corporations and Developing Public International Law’ (1983) Duke L.J. 748 at 767. 16 Although this chapter is limited to the regulatory efforts of the UN and OECD, the author is conscious of the role of international financial institutions in regulating corporate conduct. In fact, chapter 7 examines the role of the World Bank in the regulation of extractive TNCs in Africa. 17 United Nations, Resolution Establishing the Commission on Transnational Corporations, reprinted in George Modelski, ed., Transnational Corporations and World Order: Readings in International Political Economy (San Francisco: W.H. Freeman and Company, 1979) at 333. 18 Draft United Nations Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1982/6, 5 June 1982, reproduced in 22 I.L.M. 192 (1983). Subsequent revisions of the code include Draft United Nations Code of Conduct on Transnational Corporations, U.N. Doc. E/1983/17/Rev.1 (1983), reprinted in 23 I.L.M. 626 (1984); and Draft Code of Conduct on Transnational Corporations, 1990, UN Doc E/1990/94 of 12 June 1990, reproduced in Stephen Tully, ed., International Documents on Corporate Responsibility (Cheltenham, UK: Edward Elgar, 2005) at 5–14.

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19 Draft United Nations Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1982/6, 5 June 1982, para. 13, reproduced in 22 I.L.M. 192 (1983) at 195 (as revised by Draft United Nations Code of Conduct on Transnational Corporations, U.N. Doc. E/1983/17/Rev.1, para. 13, reproduced in 23 I.L.M. 626 (1984) at 628). 20 Ibid., para. 41. 21 Ibid. 22 United Nations Commission on Transnational Corporations: Information Paper on the Negotiations to Complete the Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1983/S/2, 4 January 1983, para. 26, reproduced in 22 I.L.M. 177 (1983) at 185. See also Isabella D. Bunn, ‘Global Advocacy for Corporate Accountability: Transatlantic Perspectives from the NGO Community’ (2004) 19 Am. U. Int’l L. Rev. 1265 at 1281. 23 In the environmental context, for example, dispute revolved around the extent to which TNCs were to restore a damaged environment. The bone of contention was whether TNCs were simply to ‘rehabilitate’ a damaged environment or to restore it ‘to the maximum extent feasible.’ See United Nations Commission on Transnational Corporations: Report of the Secretariat on the Outstanding Issues in the Draft Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1984/S/5, 29 May 1984, para. 70, reproduced in 23 I.L.M. 602 (1984) at 619. 24 United Nations Commission on Transnational Corporations: Report of the Secretariat on the Outstanding Issues in the Draft Code of Conduct on Transnational Corporations, U.N. Doc. E/C.10/1984/S/5, 29 May 1984, para. 91, reproduced in 23 I.L.M. 602 (1984) at 624. 25 Peter T. Muchlinski, Multinational Enterprises and the Law, 2nd ed. (Oxford: Oxford University Press, 2007) at 661–2. 26 In fact, the United Nations’ Center on Transnational Corporations was closed down in 1992 because of ‘heavy pressure from the United States and from lobby groups like the International Chamber of Commerce.’ See Ellen Paine, ‘The Road to the Global Compact: Corporate Power and the Battle Over Global Public Policy at the United Nations,’ available at http://www.globalpolicy.org/reform/papers/2000/road.htm (accessed 15 November 2006). 27 ‘Secretary-General Proposes Global Compact on Human Rights, Labour, Environment, in Address to World Economic Forum in Davos,’ U.N. Press Release SG/SM/6881, available at http://www0.un.org/News/Press/ docs/1999/19990201.sgsm6881.html (accessed 18 November 2006). 28 Ibid. 29 Ibid.

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30 See the United Nations Global Compact at http://www.unglobalcompact. org (accessed 18 November 2006). 31 Global Compact Office, Guide to the Global Compact: A Practical Understanding of the Vision and Nine Principles, at 4, available at http://www.unglobalcompact.org/content/AboutTheGC/EssentialReadings/essential.htm (accessed 5 December 2006) [hereafter Guide to the Global Compact]. 32 Global Compact, ‘The Ten Principles,’ available at http://www.unglobalcompact.org/content/AboutTheGC/TheNinePrinciples/thenine.htm (accessed 5 December 2006). 33 Ibid. 34 Global Compact Office, ‘The Ten Principles,’ supra note 32. For perspectives on the Global Compact, see Ambassador Betty King, ‘The UN Global Compact: Responsibility for Human Rights, Labor Relations, and the Environment in Developing Nations’ (2001) 34 Cornell Int’l L. J. 481; William H. Meyer & Boyka Stefanova, ‘Human Rights, the UN Global Compact, and Global Governance’ (2001) 34 Cornell Int’l L. J. 501; Lee A. Tavis, ‘Novartis and the U.N. Global Compact Initiative’ (2003) 36 Vand. J. Transnat’l L. 735; Georg Kell & John Gerard Ruggie, ‘Global Markets and Social Legitimacy: The Case for the “Global Compact”’ (Dec. 1999) Transnat’l Corp. 101; Adelle Blackett, ‘Global Governance, Legal Pluralism and the Decentered State: A Labor Law Critique of Codes of Corporate Conduct’ (2001) 8 Indiana J. Global Legal Studies 401 at 442–6. 35 Global Compact Office, How the Global Compact Works: Mission, Actors and Engagement Mechanisms, at 1, available at http://www.unglobalcompact. org/content/AboutTheGC/EssentialReadings/essential.htm (accessed 5 December 2006) [hereafter How the Global Compact Works]. 36 Global Compact Office, The Global Compact: Report on Progress and Activities July 2002 – July 2003, at 27, available at http://www.iccwbo.org/home/ global_compact/ProgressReport%20July%203pdf (accessed 5 December 2006) [hereafter Report on Progress]. 37 Ibid. at 23–52; The Global Compact, The Global Compact: A Network of Networks, at 1, available at http://www.unglobalcompact.org/docs/news_ events/8.1/network_paper.pdf (accessed 25 June 2008). For a discussion of these mechanisms, see Georg Kell, ‘The Global Compact: Origins, Operations, Progress, Challenges’ (2003) 11 J. Corporate Citizenship 35 at 39–41. 38 Report on Progress, supra note 36 at 23–6. 39 Ibid. 40 How the Global Compact Works, supra note 35 at 5. 41 Ibid. 42 Ibid.

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43 Report on Progress, supra note 36 at 33–9. 44 For these case studies, see Global Compact Office, From Principles to Practice, available at http://www.unglobalcompact.org/docs/news_ events/8.1/princ_prac.pdf (accessed 21 June 2008); Experiences in Management for Sustainability, available at http://www.unglobalcompact.org/ docs/news_events/8.1/exp_man.pdf (accessed 21 June 2008); HIV/AIDS: Everybody’s Business, available at http://www.unglobalcompact.org/docs/ news_events/8.1/HIV_AIDS.pdf (accessed 21 June 2008). 45 How the Global Compact Works, supra note 35 at 5. 46 Ibid. 47 Global Compact Office, The Global Compact: A Network of Networks, supra note 37 at 2. See also Report on Progress, supra note 36 at 41–51. For a discussion of these mechanisms, see Kell, ‘The Global Compact: Origins, Operations, Progress, Challenges,’ supra note 37 at 39–41. 48 See Report on Progress, supra note 36 at 7–9; Errol Mendes & Ozay Mehmet, Global Governance, Economy and Law: Waiting for Justice (London & New York: Routledge, 2003) at 143. 49 John Gerard Ruggie, ‘Keynote Address: Trade, Sustainability and Global Governance’ (2002) 27 Columbia J. Envt’l L. 297 at 301 [hereafter ‘Keynote Address’]. Ruggie is one of the brains behind the Global Compact. 50 See Guide to the Global Compact, supra note 31. 51 Ibid. at 10. 52 Ibid. 53 How the Global Compact Works, supra note 35 at 5. 54 For these case studies, see supra note 44. 55 How the Global Compact Works, supra note 35 at 5. 56 Harry Arthurs, ‘Corporate Self-Regulation: Political Economy, State Regulation and Reflexive Labour Law’ (unpublished, copy on file with author). 57 Ibid. 58 John Gerard Ruggie, ‘Global_governance.net: The Global Compact as Learning Network’ (2001) 7 Global Governance 371 at 373. 59 Kell, ‘The Global Compact: Origins, Operations, Progress, Challenges,’ supra note 37 at 40. 60 Ibid. 61 The GC’s Communication on Progress is akin to a social report. See chapter 8 infra for discussion of voluntary social reporting by extractive TNCs. 62 To ensure that the Communication on Progress is widely disseminated to a broad range of stakeholders, participating corporations are also required to electronically link the Communication to the database of the GC’s website. See Report on Progress, supra note 36 at 24–5.

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63 In fact, the Global Compact routinely publishes participants’ Communication on Progress. See http://www.unglobalcompact.org (accessed 7 June 2007). 64 See Emeka A. Duruigbo, Multinational Corporations and International Law: Accountability and Compliance Issues in the Petroleum Industry (Ardsley, NY: Transnational Publishers, 2003) at 152. On the impact of information disclosure on corporate behaviour, see Mary Graham, Democracy by Disclosure: The Rise of Technopopulism (Washington, DC: Governance Institute/Brookings Institution Press, 2002) at 21–61. 65 See, for example, Eugene Bardach & Robert Kagan, Going By the Book: The Problem of Regulatory Unreasonableness (Philadelphia: Temple University Press, 1982) at 64–5 (identifying four categories of corporations: those that are ‘good apples,’ ‘best apples,’ ‘reasonably good apples,’ and ‘worst apples’). 66 Ibid. at 65. 67 Robert A. Kagan & John T. Scholz, ‘The Criminology of the Corporation and Regulatory Enforcement Strategies,’ in Keith Hawkins & John M. Thomas, eds., Enforcing Regulation (Boston: Kluwer-Nijhoff, 1984) 67 at 68. 68 See Meyer & Stefanova, supra note 34 at 504. 69 Kell, ‘The Global Compact: Origins, Operations, Progress, Challenges,’ supra note 37 at 41–5. 70 McKinsey & Company, Assessing the Global Compact’s Impact (11 May 2004) at 2, available at http://www.unglobalcompact.org/docs/news_ events/9.1_news_archives/2004_06_09/imp_ass.pdf (accessed 30 November 2005). 71 Oliver F. Williams, ‘The UN Global Compact: The Challenge and the Promise’ (2004) 14 Bus. Ethics Quarterly 755 at 761. For a favourable view of the Global Compact, see Ruggie, ‘Keynote Address,’ supra note 49; John Gerard Ruggie, ‘The Theory and Practice of Learning Networks: Corporate Social Responsibility and the Global Compact’ (2002) 5 J. Corporate Citizenship 27; Kell & Ruggie, ‘Global Markets and Social Legitimacy: The Case for the Global Compact,’ supra note 34. 72 See Philipp Mimkes, ‘Bayer and the UN Global Compact: How and Why a Major Pharmaceutical and Chemical Company “Bluewashes” its Image,’ available at http://www.corpwatch.org/article.php?id=3129 (accessed 21 January 2006); Corporate Europe Observer, ‘Campaign for a CorporateFree UN,’ available at http://www.corporateeurope.org/observer7/ un.html (accessed 21 January 2006). 73 Transnational Resource and Action Center, ‘Tangled Up in Blue: Corporate Partnerships at the United Nations,’ available at http://www.earthrights.

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org/un/tangled.pdf (accessed 21 January 2006); Ralph Nader, ‘Corporations and the UN: Nike and Others “Bluewash” Their Images,’ available at www. commondreams.org/views/091900–103.htm (accessed 21 January 2006). ‘Joint Civil Society Statement on the Global Compact and Corporate Accountability’ (July 2004), available at http://www.globalpolicy.org/ reform/business/2004/07gcstatement.pdf (accessed 9 December 2005). See also ‘Coalition Says Global Compact Threatens UN Mission and Integrity,’ available at http://www.commondreams.org/news2000/0725–08.htm (accessed 9 December 2005); Kenny Bruno, ‘Perilous Partnerships: The UN’s Corporate Outreach Program’ (March 2000) 21:3 Multinational Monitor, available at http://multinationalmonitor.org/mm2000/00march/economics1.html (accessed 9 December 2005); Third World Network, ‘NGO Letter to UN Secretary General on Global Compact,’ available at http:// www.twnside.org.sg/title/compact.htm (accessed 9 December 2005). How the Global Compact Works, supra note 35 at 5. Williams, supra note 71 at 761. Indeed, more than forty years after it began oil exploration in Nigeria, the Royal Dutch Shell only recently appointed the first Nigerian to head its subsidiary in the country, effective 1 September 2004. See Yakubu Lawal, ‘Omiyi Becomes Shell’s First Nigerian Managing Director,’ The Guardian [Nigeria], Tuesday 20 July 2004, available at http://odili.net/news/ source/2004/jul/20/3.html (accessed 20 July 2004); Mike Oduniyi, ‘Shell Appoints First Nigerian MD,’ ThisDay News [Nigeria], Tuesday 20 July 2004, available at http://www.thisdayonline.com/news/20040720news04. html (accessed 20 July 2004). Global Compact Office, ‘Global Compact Networks,’ available at http:// www.unglobalcompact.org//NetworksAroundTheWorld/gc_networks. html (accessed 26 June 2008). See also The Global Compact: A Network of Networks, supra note 37 at 2; Report on Progress, supra note 36 at 41–51. See Claire Moore Dickerson, ‘Transnational Codes of Conduct through Dialogue: Leveling the Playing Field for Developing-Country Workers’ (2001) 53 Florida L. Rev. 611 at 629–30. The Global Compact’s networks are listed in The Global Compact: A Network of Networks, supra note 37 at 15–18. See also Global Compact Office, Networks Around the World, available at http://www.unglobalcompact.org/ NetworksAroundTheWorld/index.html (accessed 25 January 2006). See Guide to the Global Compact, supra note 31 at 4. Report on Progress, supra note 36 at 9. Global Compact Office, The Global Compact: Corporate Citizenship in the World Economy (July 2004), available at http://www.unglobalcompact.

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Notes to page 125 org/content/AboutTheGC/EssentialReadings/essential.htm (accessed 5 December 2006). Report on Progress, supra note 36 at 3. John Ruggie, one of the architects of the GC, offers reasons why the GC adopted the learning approach rather than proposing a code of conduct. First, the UN is unlikely to agree on or adopt a code. Second, the UN does not have the logistical and financial capacity to monitor global companies and their supply chains. Third, attempts to impose a code of conduct would be counterproductive. Fourth, it is impossible to define many of the GC’s principles with the precision required for a viable code; and fifth, the constantly changing character of corporate strategies, structures, and production processes renders it exceedingly difficult to specify ex ante the complete range of performance criteria and desired results that a code should include. See Ruggie, ‘Keynote Address,’ supra note 49 at 303–4. See also Ruggie, ‘Global_governance.net: The Global Compact as Learning Network,’ supra note 58 at 373–4. CorpWatch, ‘Greenwash + 10: The UN’s Global Compact, Corporate Accountability and the Johannesburg Earth Summit’ (January 2002), available at http://www.corpwatch.org/downloads/gw10.pdf (accessed 29 November 2006) [hereafter ‘Greenwash + 10’]; Minkes, supra note 72. See also Transnational Resource and Action Center, ‘Tangled Up in Blue: Corporate Partnerships at the United Nations,’ supra note 73. Indeed, the Global Compact ran into moral trouble soon after its official launch when it became known that a member of its Advisory Council had been the beneficiary of the payment of excessive retirement benefits from the company he previously headed. See Corpwatch, ‘UN: Swedish Businessman Loses Job,’ available at http://www.corpwatch.org/article.php?id=1928 (accessed 29 November 2006). Global Compact Office, Global Compact: Note on Integrity Measures (29 June 2005), at 1, available at http://www.unglobalcompact.com/docs/about_ the_gc/2.3/im_290605.pdf (accessed 8 January 2006) [hereafter Integrity Measures]. Ibid. at 2. As of 26 June 2008, a total of 316 corporations were listed on the GC web site as ‘inactive.’ See Inactive Participants, available at http:// www.unglobalcompact.org/COP/inactives.html (accessed 26 June 2008). However, the GC makes exceptions to its rules on Communication on Progress for ‘small and medium size enterprises and other enterprises that may lack the capacity to report or face other barriers to communicating fully.’ See Integrity Measures, ibid. at 2. Integrity Measures, ibid. at 2. In fact, the GC recently announced that it had removed 630 companies from its list of participants because they

Notes to pages 125–7

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91 92 93 94 95 96 97 98

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failed to submit a Communication on Progress. See Global Compact Office, ‘630 Companies Delisted as Part of Integrity Measures’ (25 June 2008), available at http://www.unglobalcompact.org/NewsAndEvents/ news_archives/2008_06_25.html (accessed 26 June 2008). Policy on the Use of the Global Compact Name and Logos (9 March 2005, updated 7 March 2008), available at http://www.unglobalcompact.org/ aboutthegc/gc_logo_policy.html (accessed 21 June 2008). Integrity Measures, supra note 87. Ibid. at 3. Ibid. Ibid. at 2. Ibid. at 3. Ibid. at 4. Ibid. See CorpWatch, ‘Greenwash + 10,’ supra note 86. On enhancement of the Global Compact, see Evaristus Oshionebo, ‘The U.N. Global Compact and Accountability of Transnational Corporations: Separating Myth from Realities’ (2007) 19 Florida J. Int’l L. 1 at 36–8. Global Compact Office, ‘Global Compact Participants,’ available at http://www.unglobalcompact.org/ParticipantsAndStakeholders/index. html (accessed 26 June 2008). McKinsey & Company, supra note 70 at 11. The Global Compact’s participants are available at http://www.unglobalcompact.org/ParticipantsAndStakeholders/search_participants.html? (accessed 26 June 2008). Williams, supra note 71 at 758. McKinsey & Company, supra note 70 at 11. Ibid. Report on Progress, supra note 36 at 1. See also McKinsey & Company, supra note 70 at 11. Report on Progress, ibid. at 1. See also Global Compact Office, ‘G8 Finance Ministers Support Global Compact,’ available at http://www.unglobalcompact.org/newsandevents/news_archives/2003_05_19.html (accessed 25 January 2006); ‘G8 Finance Ministers’ Meetings: Finance Ministers’ Statement, Deauville, May 17, 2003,’ available at http://www. g7.utoronto.ca/finance/fm030517_communique.htm (accessed 25 January 2006). However, some European countries such as Italy, Germany, and Greece have officially launched the Global Compact. See ‘Global Compact Launched in Italy,’ available at http://www.unglobalcompact.org/NewsAndEvents/news_archives/2004_05_05.html (accessed 27 January 2006); ‘The Global Compact in Germany,’ available at http://www.unglobal-

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Notes to pages 127–9 compact.org/NetworksAroundtheWorld/country_contact/germany. html (accessed 21 June 2008); ‘Global Compact Launched in Greece,’ available at http://www.unglobalcompact.org/NewsAndEvents/news_ archives/2008_05_27.html (accessed 21 June 2008). See How the Global Compact Works, supra note 35 at 2. See Blackett, supra note 34 at 445. For the GC’s Advisory Council, and its policy dialogue participants, see Report on Progress, supra note 36 at 60–8. Integrity Measures, supra note 87 at 2. The GC hinted at this problem when it stated that ‘it is necessary to expand the participation and input from all geographic regions’ and that ‘[i]n the future, the dialogues will rely increasingly on the local and national networks to achieve broader participation and input.’ See Report on Progress, supra note 36 at 28. For example, at its policy dialogue entitled ‘Regional Workshop on the Role of the Private Sector in Zones of Conflict’ held in Johannesburg, South Africa, in November 2002, participants were ‘country managers of international and domestic companies with NGOs, government and representatives from UNDP country offices.’ The African communities that have consistently suffered as a result of these conflicts were not invited to participate in the process that was supposedly meant to find solutions to their plight. See Report on Progress, ibid. at 28–9. Report on Progress, ibid. at 8. The Global Compact regularly conducts regional workshops for its various participants. See Report on Progress, ibid. at 28–9. Through its Least Developed Countries initiative, the GC solicits business proposals from participants ‘in line with the country’s priorities for poverty alleviation.’ See Report on Progress, ibid. at 30–1. See Tavis, supra note 34 at 752–7; Bernhard Seitz et al., ‘DaimlerChrysler South Africa – Dealing with the Effects of HIV/AIDS on Human and Social Capital,’ in HIV/AIDS: Everybody’s Business, supra note 44 at 41–61. Contra Karsten Nowrot, ‘The New Governance Structure of the Global Compact – Transforming a ‘Learning Network’ into a Federalized and Parliamentarized Transnational Regulatory Regime,’ at 37, available at http://www.corporate-accountability.org/docs/Heft47.pdf (accessed 8 January 2006). Indeed, the GC’s principles appear to enjoy widespread acceptance and are reportedly coalescing into ‘reference points’ for global corporate accountability. See Report on Progress, supra note 36 at 1. See Seymour J. Rubin, ‘Transnational Corporations and International

Notes to pages 130–1

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127 128 129 130 131 132

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Codes of Conduct: A Study of the Relationship Between International Legal Cooperation and Economic Development’ (1995) 10 Am. U. J. Int’l L. & Pol’y 1275 at 1286. The OECD Guidelines for Multinational Enterprises, Revision 2000, available at http://www.oecd.org/dataoecd/56/36/1922428.pdf (accessed 14 April 2004). See, for example, Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, ILO, 279th Sess., 17 November 2000, available at http://www.ilo.org (accessed 18 April 2004). Bunn, supra note 22 at 1283. Ibid. Cassese, supra note 7 at 103; Brownlie, supra note 2 at 65. UN Sub-Commission on the Promotion and Protection of Human Rights, Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, U.N. Doc. E/CN.4/ Sub.2/2003/12/Rev.2 (26 August 2003), available at http://www.unhchr. ch/huridocda/huridoca.nsf/(Symbol)/E.CN.4.Sub.2.2003.12.Rev.2En (accessed 26 April 2004) [hereafter Norms]. For analysis of the Norms, see Surya Deva, ‘UN’s Human Rights Norms for Transnational Corporations and Other Business Enterprises: An Imperfect Step in the Right Direction?’ (2004) 10 ILSA J. Int’l & Comp. L. 493. Norms, ibid. at para. 1. The Norms predicate the human rights duties of TNCs and other business enterprises on several grounds. First, they are organs of society as envisaged by the Universal Declaration of Human Rights. Second, business is obligated under extant UN treaties and other international instruments to respect generally recognized international human rights responsibilities and norms. Third, business enterprises have increased capacity to influence national economies and international economic relations resulting in economic activities beyond the actual capacities of any one national system. Fourth, business has the capacity to cause harmful impacts on human rights and lives of individuals. Fifth, business is often involved in human rights issues and concerns such that further standard setting and implementation is required. See the Preamble to the Norms, ibid. Ibid. at para. 2. Ibid. at para. 3. Ibid. at para. 4. Ibid. at paras. 5–9. Ibid. at para. 11. Ibid. at para. 12.

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133 Ibid. at para. 14. 134 See Carolin F. Hillemanns, ‘UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ (2003) 4:10 German L. J. 1065. 135 David Weissbrodt & Muria Kruger, ‘Current Developments: Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ (2003) 97 Am. J. Int’l L. 901 at 903. 136 Norms, supra note 125 at para. 15. 137 Ibid. at para. 15. 138 Ibid. at para. 16. 139 Ibid. at para. 16. 140 Ibid. at para. 16. 141 Ibid. at para. 21. The Norms define ‘other business enterprise’ as including contractors, subcontractors, suppliers, licensees, distributors; corporate, partnership, or other legal forms used to establish the business entity; and the nature of the ownership of the entity. 142 Weissbrodt & Kruger, supra note 135 at 904–5. 143 David Weissbrodt et al., ‘A Review of the Fifty-Fourth Session of the United Nations Sub-Commission on the Promotion and Protection of Human Rights’ (2003) 21 Netherlands Quarterly Hum. Rts. 291 at 319–22. 144 Norms, supra note 125 at Preamble. See also UN Sub-Commission on the Promotion and Protection of Human Rights, Commentary on the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, UN Doc. E/ CN.4/Sub.2/2003/38/Rev.1, 4 August 2003, preamble, available at http://www.unhchr.ch/Huridocda/Huridoca.nsf/(Symbol)/E. CN.4.Sub.2.2003.38.Rev.2.En?Opendocument (accessed 26 April 2004) [hereafter ‘Commentary’]. Under the preambles to both the Norms and the Commentary, the Commentary is declared ‘a useful interpretation and elaboration of the standards contained in the Norms.’ 145 Norms, ibid. at para. 18. 146 Ibid. at para. 18. 147 Emphasis added. 148 Para. 18 of the Norms could have been better drafted in the following terms: ‘In connection with determining damages, in regard to criminal [and civil] sanctions, [reparation, restitution, compensation, and rehabilitation] and in all other respects, these Norms shall be applied by national courts and/or international tribunals, pursuant to national and international law.’

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149 The Norms still have a tortuous road to travel in the UN system. They would first have to be adopted by the UN Human Rights Council before they are transmitted to the General Assembly for adoption. At the moment, the Norms have been transmitted to the UN Human Rights Council. See Weissbrodt & Kruger, supra note 135 at 906. 150 Hillemanns, supra note 134 at 1065. 151 Norms, supra note 125 at paras. 15 & 16. 152 This point is not lost on the UN Sub-Commission on Human Rights. See Weissbrodt & Kruger, supra note 135 at 914. 153 See Ruggie, ‘Keynote Address,’ supra note 49 at 303. See also Larry C. Backer, ‘Multinational Corporations, Transnational Law: The United Nations’ Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law’ (2006) 37 Colum. Hum. Rts. L. Rev. 287 at 331. 154 See the Norms, supra note 125 at para. 16. 155 On how the Norms might be put to use by international organizations, see Weissbrodt & Kruger, supra note 135 at 917–20. 156 Norms, supra note 125 at para. 16 157 Commentary, supra note 144 at para. 16c. 158 Ibid. at para. 16c. 159 Ibid. at para. 17. 160 Norms, supra note 125 at para. 16. 161 Norms, ibid. at para. 22. 162 See Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, Sub-Commission Res. 2003/16, UN Doc. E/CN.4/Sub.2/2003/L.11 at para. 5, available at http://www.unhchr.ch/html/menu2/2/55sub/document.htm (accessed 25 April 2004). 163 Guide to the Global Compact, supra note 31 at 4. 164 Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, adopted by the Governing Body of the International Labour Office, 204th Sess. (November 1977), as amended at its 279th Sess. (November 2000) and 295th Sess. (March 2006), available at http://www. ilo.org/public/english/employment/multi/download/declaration2006. pdf (accessed 23 June 2008) [hereafter ‘ILO Tripartite Declaration’]. The Tripartite Declaration is addressed not only to Transnational Corporations but also to governments, and employers’ and workers’ organizations. See ibid. at Principle 4. 165 Ibid. at Principle 2. 166 See ibid. at Principles 13–59. 167 Ibid. at Principle 38.

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168 International Labour Organization, ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted by the International Labour Conference, 86th Sess. (June 1998), available at http://www.ilo. org/public/english/employment/skills/hrdr/instr/cedla.htm (accessed 23 June 2008). 169 Ibid. at Principle 2. The ILO has also developed the Guidelines on Occupational Safety and Health Management Systems (2001), available at http:// www.ilo.org/public/english/protection/safework/cops/english/downloads/e000013.pdf (accessed 23 June 2008). 170 Michele Colucci, ‘Implementation and Monitoring of Codes of Conduct: How to Make Codes of Conduct Effective?’ in Roger Blanpain, ed., Multinational Enterprises and the Social Challenges of the XXIst Century: The ILO Declaration on Fundamental Principles at Work – Public and Private Corporate Codes of Conduct (The Hague: Kluwer Law International, 2000) 277 at 281. 171 See ‘Procedure for the Examination of Disputes Concerning the Application of the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy by Means of Interpretation of its Provisions,’ adopted by the Governing Body of the International Labour Office at its 232d Sess. (March 1986), annexed to ILO Tripartite Declaration, supra note 164 at 17–18; the Follow-Up to the ILO Declaration on Fundamental Principles and Rights at Work, supra note 168. 172 Lance Compa & Tashia Hinchliffe-Darricarrere, ‘Enforcing International Labor Rights through Corporate Codes of Conduct’ (1995) 33 Colum. J. Transnat’l L. 663 at 671; Surya Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where from Here?’ (2003) 19 Conn. J. Int’l L. 1 at 12. 173 Bob Hepple, ‘A Race to the Top?: International Investment Guidelines and Corporate Codes of Conduct’ (1999) 20 Comp. Lab. L. & Pol’y J. 347 at 355–6. 174 Hepple, ibid. at 354. See also Colucci, supra note 170 at 281; John C. Anderson, ‘Respecting Human Rights: Multinational Corporations Strike Out’ (2000) 2 U. Pa. J. Lab. & Emp. L. 463 at 475. 175 See Jagdish Bhagwati, Free Trade Today (Princeton, NJ: Princeton University Press, 2002) at 79. See also Jay M. Vogelson, ‘International Labor Organization,’ a Report to the House Delegates of the American Bar Association Section of International Law and Practice (1996) 30 Int’l L. 653 at 660; Michael J. Trebilcock & Robert Howse, ‘Trade Policy & Labor Standards’ (2005) 14 Minn. J. Global Trade 261 at 274. 176 See William B. Gould IV, ‘Labor Law for a Global Economy: The Uneasy Case for International Labor Standards’ (2001) 80 Neb. L. Rev. 715 at 750.

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177 The first version of the Guidelines annexed to the OECD Declaration on International Investment and Multinational Enterprises, OECD Press Release A (76) 20 of 21 June 1976 is reproduced in 15 I.L.M. 967 at 969 (1976). 178 The OECD Guidelines for Multinational Enterprises, Revision 2000, available at http://www.oecd.org/dataoecd/56/36/1922428.pdf (accessed 14 April 2004). 179 See ‘Statement by the Chair of the Ministerial, June 2000,’ in The OECD Guidelines for Multinational Enterprises, Revision 2000, ibid. at 5 (stating that the OECD Guidelines ‘apply to business operations world-wide’). 180 The OECD Guidelines for Multinational Enterprises, Revision 2000, ibid. at 19. 181 Ibid. at 21. 182 Ibid. at 22. 183 Ibid. at 22–3. 184 Ibid. at 23. 185 Ibid. at 23. 186 Hepple, supra note 173 at 356. 187 See William Crane, ‘Note: Corporations Swallowing Nations: The OECD and the Multilateral Agreement on Investment’ (1998) 9 Colo. J. Int’l Envt’l L & Pol’y 429 at 434. 188 Hepple, supra note 173 at 361. 189 Ibid. at 353. See also R. Allan Hedley, ‘Transnational Corporations and Their Regulation: Issues and Strategies’ (1999) 40:2 Int’l J. Comparative Sociology 215. 190 The OECD Guidelines for Multinational Enterprises, Revision 2000, supra note 178 at 17. 191 See Compa & Hinchliffe-Darricarrere, supra note 172 at 671; Hepple, supra note 173 at 354. Contra Duncan C. Campbell & Richard L. Rowan, Multinational Enterprises and the OECD Industrial Relations Guidelines (Philadelphia, PA: Wharton School, University of Pennsylvania, 1983) at 7. 192 See ‘Implementation Procedures of the OECD Guidelines for Multinational Enterprises,’ in The OECD Guidelines for Multinational Enterprises, Revision 2000, supra note 178 at 29. See also James Salzman, ‘Labor Rights, Globalization and Institutions: The Role and Influence of the Organization for Economic Cooperation and Development’ (2000) 21 Mich. J. Int’l L. 769 at 790–3. Workers and trade unions are reported to have occasionally succeeded in settling employment related disputes through recourse to the OECD mechanism. See Compa & Hinchliffe-Darricarrere, supra note 172 at 671; Lance Compa, ‘The Multilateral Agreement on Invest-

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193 194 195 196

197

198

199 200

201 202

203

204 205

206

Notes to pages 139–43 ment and International Labor Rights: A Failed Connection’ (1998) 31 Cornell Int’l L.J. 683 at 691. See OECD Guidelines for Multinational Enterprises, Revision 2000, supra note 178 at 22–3. Ibid. at 22 (Environment, Principle 1). See ibid. at 21. International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies (Versoix, Switzerland: International Council on Human Rights Policy, 2002) at 67. See The OECD Guidelines for Multinational Enterprises, Revision 2000, supra note 178 at 21–4, particularly the principles on Employment, Industrial Relations, and the Environment. Colucci, supra note 170 at 279. See also Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where from Here?’ supra note 172 at 11. Paine, supra note 26. Joshua P. Eaton, ‘Note: The Nigerian Tragedy, Environmental Regulation of Transnational Corporations, and the Human Right to a Healthy Environment’ (1997) 15 B. U. Int’l J. 261 at 277. See Muchlinski, Multinational Enterprises and the Law, supra note 25 at 661–2. United Kingdom All Party Parliamentary Group on the Great Lakes Region and Genocide Prevention, Cursed by Riches: Who Benefits from Resource Exploitation in the Democratic Republic of the Congo? (November 2002) at 22, available at http://www.appggreatlakes.org/content/pdf/ riches.pdf (accessed 17 December 2004) [hereinafter Cursed by Riches]. Andrew Clapham, ‘The Question of Jurisdiction Under International Criminal Law Over Legal Persons: Lessons from the Rome Conference on an International Criminal Court,’ in Menno T. Kamminga & Saman ZiaZarifi, eds., Liability of Multinational Corporations Under International Law (The Hague: Kluwer Law International, 2000) 139 at 141. Done at Rome, 17 July 1998, and entered into force on 1 July 2002. UN Security Council Res. 827, UN. SCOR, 3217th Mtg., UN. Doc. S/ RES/827 (1993) of 25 May 1993 as Amended by UN Security Council Resolutions 1166 (1998) of 13 May 1998; 1329 (2000) of 30 November 2000; 1411 (2002) of 17 May 2002; 1431 (2002) of 14 August 2002; 1481 (2003) of 19 May 2003; 1597 (2005) of 20 April 2005; and 1660 (2006) of 28 February 2006. UN Security Council Res. 955, UN. SCOR, 3453 Mtg., UN. Doc. S/ RES/955 (1994) of 8 November 1994, as amended by UN Security Council

Notes to pages 143–4

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208

209

210

211

212

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Resolutions 1165 (1998) of 30 April 1998; 1329 (2000) of 30 November 2000; 1411 (2002) of 17 May 2002; 1431 (2002) of 14 August 2002; 1503 (2003) of 28 August 2003; 1512 (2003) of 27 October 2003; and 1534 (2004) of 26 March 2004. See Rome Statute of the International Criminal Court, Article 25(1); the Statute of the International Tribunal for Former Yugoslavia, Article 6; the Statute of the International Tribunal for Rwanda, Article 5. The International Law Commission supports the position adopted by these statutes. See The Work of the International Law Commission, 5th ed. (New York: United Nations, 1996) at 39. See chapter 1, supra for analysis of the symbiotic relationship between some extractive TNCs and insurgent groups in Africa, a relationship that has in the main conduced to gross human rights violations and crimes against humanity. Although the jurisdiction of the Nuremberg Tribunals related only to natural persons, in at least one case, the Tribunals specifically raised the possibility of holding a corporation liable for breach of international criminal law. In a case involving I.G. Farben Corporation, the Tribunal stated: ‘[W]e find that the proof establishes beyond a reasonable doubt that offences against property as defined in Control Council Law No. 10 were committed by Farben, and that these offences were connected with, and an inextricable part of the German policy for occupied territories.’ See Case No. 57, The I. G. Farben Trial, U.S. Military Tribunal, Nuremberg, 14 August 1947 – 29 July, 1948, 8 Trials of War Criminals Before the Nuremberg Military Tribunals 1108 at 1140, (1948) Int’l L. Rep. 676. See Global Witness, Logging Off: How the Liberian Timber Industry Fuels Liberia’s Humanitarian Disaster and Threatens Sierra Leone (2002), available at http://www.globalwitness.org/reports/index.php?section=Liberia (accessed 17 May 2006); Report of the Panel of Experts Appointed Pursuant to Security Council Resolution 1306 (2000), Paragraph 19, in Relation to Sierra Leone, U.N. Doc. Number S/2000/1195 at 37 para.215, available at http://www.un.org/Docs/sc/committees/SierraLeone/sclet11951e.pdf (accessed 6 August 2003). Established by UN Security Council Res. 1315, UN. SCOR, 54th Sess., 4186th Mtg., UN. Doc. S/RES/1315 (2000) of 14 August 2000. The Statute of the UN Special Court for Sierra Leone is available at http://www.sc-sl. org/Documents/scsl-statute.html (accessed 24 June 2008). Cursed by Riches, supra note 202 at 23. See also Diane Marie Amann, ‘Capital Punishment: Corporate Criminal Liability for Gross Violations of Human Rights’ (2001) 24 Hastings Int’l & Comp. L. Rev. 327 at 336.

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Notes to pages 144–6

213 Andrew Clapham, Human Rights Obligations of Non-State Actors (Oxford: Oxford University Press, 2006) at 246. 214 See Hedley, supra note 189. 215 The terms ‘international personality’ and ‘subjects’ of international law are used interchangeably here, and within the context of this book they mean the same thing. 216 Higgins, Problems and Process, supra note 2 at 49. 217 Mendes & Mehmet, supra note 48 at 145. 218 See Nicola Jagers, ‘The Legal Status of the Multinational Corporation Under International Law,’ in Michael K. Addo, ed., Human Rights Standards and the Responsibility of Transnational Corporations (The Hague: Kluwer Law International, 1999) 259 at 263–7. For the view that international human rights duties are applicable to private bodies, see Andrew Clapham, Human Rights in the Private Sphere (Oxford: Clarendon Press, 1993) at 89–133. 219 Convention on the Prevention and Punishment of the Crime of Genocide, GA Res. 260A (III), UN GAOR, 9 Dec. 1948. 220 Slavery Convention 1926; Supplementary Convention on the Abolition of Slavery, the Slave Trade, and Institutions and Practices Similar to Slavery 1956. 221 Convention on the High Seas 1958, (450) U.N.T.S. 82, reprinted in United Nations Legislative Series, National Legislation and Treaties Relating to the Territorial Sea, the Contiguous Zone, the Continental Shelf, the High Seas and to Fishing and Conservation of the Living Resources of the Sea (New York: United Nations, 1970) at 800. 222 See Convention on the High Seas 1958, ibid. Article 15 (which defines piracy as ‘any illegal acts of violence, detention or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft’). For insight on international sea piracy, see Barry H. Dubner, The Law of International Sea Piracy (The Hague: Matinus Nijhoff Publishers, 1980). 223 See, for example, Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal 1989, (1673) U.N.T.S. 57, Article 4:(3)&(4) under which a person (defined in Article 2:(14) as ‘any natural or legal person’) engaged in illegal traffic in hazardous wastes commits an offence and may be punished by the appropriate state party. See also International Convention for the Prevention of Pollution from Ships 1973, (1340) U.N.T.S. 184. 224 Ignaz Seidl-Hohenveldern, International Economic Law, 3rd rev. ed. (The Hague: Kluwer Law International, 1999) at 10. 225 O.A.U. Doc. CAB/LEG/67/3/Rev.5 (1986); 21 I.L.M. 58 (1982). 226 The European Court of Human Rights has held, for example, that cor-

Notes to pages 146–7

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228 229 230 231 232

233

234 235 236 237 238 239

240 241

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porations have a right to freedom of expression as guaranteed under the European Convention on Human Rights. See Autronic v. Switzerland, Eur. Ct. H.R. Series A. No. 178 (1990)12 E.H.R.R. 485. See Albrecht Randelzhofer, ‘The Legal Position of the Individual under Present International Law,’ in Albrecht Randelzhofer & Christian Tomuschat, eds, State Responsibility and the Individual: Reparation in Instances of Grave Violations of Human Rights (The Hague: Martinus Nijhoff Publishers/Kluwer Law International, 1999) 231 at 234. Seidl-Hohenveldern, supra note 224 at 10. The Taff Vale Railway Company v. The Amalgamated Society of Railway Servants [1901] A.C. 426 at 441 (H.L.). See Charney, supra note 15 at 753–4. Ibid. This is perhaps why Professor Charney, ibid. at 754–6, has advocated direct participation of TNCs in the international lawmaking process, particularly as regards the development of international rules intended to be applicable to TNCs. See Frank R. Lopez, ‘Corporate Social Responsibility in a Global Economy After September 11: Profits, Freedom, and Human Rights’ (2004) 55 Mercer L. Rev. 739 at 749–55. Clapham, Human Rights in the Private Sphere, supra note 218 at 137. Ibid. See also Beth Stephens, ‘The Amorality of Profit: Transnational Corporations and Human Rights’ (2002) 20 Berk. J. Int’l L. 45 at 46. Wolfgang Friedman, The Changing Structure of International Law (New York: Columbia University Press, 1964) at 221–31. Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC,’ supra note 13 at 553. Stephens, supra note 235 at 58. For example, TNCs are invested with the right to initiate claims and recover remedies against states under the Convention on the Settlement of Investment Disputes Between States and Nationals of other States, Articles 36–55, reprinted in International Centre for Settlement of Investment Disputes, ICSID Convention, Regulations and Rules (Washington DC: ICSID, January 2003) at 11–33. North American Free Trade Agreement, 17 December, Can. T.S. 1994 No. 2, 32 I. L. M. 289 (entered into force 1 January 1994). See Peter T. Muchlinski, ‘“Global Bukowina” Examined: Viewing the Multinational Enterprise as a Transnational Law-making Community,’ in Gunther Teubner, ed., Global Law Without a State (Aldershot, UK: Dartmouth, 1997) 79.

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Notes to pages 147–50

242 Gunther Teubner, ‘“Global Bukowina”: Legal Pluralism in the World Society,’ in Teubner, ed., ibid. 3 at 4. 243 See Muchlinski, Multinational Enterprises and the Law, supra note 25 at 661–2. See also Barbara A. Frey, ‘The Legal and Ethical Responsibilities of Transnational Corporations in the Protection of International Human Rights’ (1997) 6 Minn. J. Global Trade 153 at 160. 244 David J. Bederman, The Spirit of International Law (Athens & London: University of Georgia Press, 2002) at 80. 245 Rosalyn Higgins, ‘Conceptual Thinking About the Individual in International Law,’ in Richard Falk et al., eds., International Law: A Contemporary Perspective (Boulder & London: Westview Press, 1985) 476 at 479 [hereafter ‘Conceptual Thinking’]. 246 Higgins, ‘Conceptual Thinking,’ ibid. at 480. See also Higgins, Problems and Process, supra note 2 at 48–55; Andrea Bianchi, ‘Globalization of Human Rights: The Role of Non-state Actors,’ in Teubner, ed., supra note 241, 179 at 200. 247 Higgins, ‘Conceptual Thinking,’ ibid. at 480; Higgins, Problems and Process, ibid. at 50. 248 See Reparations for Injuries Suffered in the Service of the United Nations, ICJ Rep. (1949) 174 at 178. 249 Claudio Grossman & Daniel D. Bradlow, ‘Are We Being Propelled Towards a People-Centered Transnational Legal Order?’ (1993) 9 Am. U. J. Int’l L. & Pol’y 1 at 22. 250 Menno T. Kamminga & Saman Zia-Zarifi, ‘Liability of Multinational Corporations Under International Law: An Introduction,’ in Kamminga & Zia-Zarifi, eds., supra note 203 at 6. 251 Clapham, Human Rights in the Private Sphere, supra note 218 at 137–8. 252 Peter Malanczuk, Akehurst’s Modern Introduction to International Law, 7th rev. ed. (London & New York: Routledge, 1997) at 91. See also Charney, supra note 15 at 762; Joel R. Paul, ‘Holding Multinational Corporations Responsible Under International Law’ (2000–1) 24 Hastings Int’l & Comp. L. Rev. 285 at 290; Math Noortmann, ‘Non-State Actors in International Law,’ in Bas Arts et al., eds., Non-State Actors in International Relations (Aldershot: Ashgate, 2001) 59 at 70–1. 253 Steven R. Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ (2001) Yale L. J. 443 at 449. 254 African leaders recently reiterated their clamour for foreign direct investment through the New Partnership for Africa’s Development, available at http://www.nepad.org/2005/files/documents/inbrief.pdf (accessed 3 June 2008).

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255 See Tony Evans, ‘International Environmental Law and the Challenge of Globalization,’ in Tim Jewell & Jenny Steele, eds., Law in Environmental Decision-Making: National, European, and International Perspectives (Oxford: Clarendon Press, 1998) 207 at 209. 256 See Eaton, supra note 200 at 277. 7. International Financial Institutions as Regulatory Mechanisms: The World Bank Group and the African Extractive Sector 1 See generally Benjamin J. Richardson, Environmental Regulation Through Financial Organisations: Comparative Perspectives on the Industrialized Nations (The Hague: Kluwer Law International, 2002) at 279–324. 2 Declaration of the Hague on the Environment, 11 March 1989; 28 I. L. M. 1308 (1989). 3 On the role of the World Bank and International Monetary Fund in the promotion and protection of human rights, see Sigrun I. Skogly, From Human Capital to Human Rights: The Human Rights Obligations of the World Bank and the International Monetary Fund (London: Cavendish Publishing, 2001); Daniel D. Bradlow, ‘The World Bank, the IMF, and Human Rights’ (1996) 6 Transnat’l Law & Contemp. Problems 47; Balakrishnan Rajagopal, ‘Crossing the Rubicon: Synthesizing the Soft International Law of the IMF and Human Rights’ (1993) 11 B.U. Int’l L. J. 81. Although the World Trade Organization (WTO) has been touted as a potential mechanism for ensuring corporate social accountability, particularly as it relates to labour rights [see Surya Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where From Here? (2003) 19 Conn. J. Int’l L. 1 at 21–49; Adelle Blackett, ‘Whither Social Clause? Human Rights, Trade Theory and Treaty Interpretation’ (1999) 31 Colum. Hum. Rts. L. Rev. 1], it is faced with serious limitations and drawbacks. For example, while the WTO’s dispute resolution apparatus has powers to impose sanctions for violations of the General Agreement on Tariffs and Trade (GATT), neither the WTO’s power nor the GATT extend or apply to labour-related matters except where they involve prison labour. See General Agreement on Tariffs and Trade, 30 October 1947, 61 Stat. A-11, T.I.A.S. 1700, 55 U.N.T.S. 194, Article XX(e). See also William B. Gould IV, ‘Labor Law for a Global Economy: The Uneasy Case for International Labor Standards’ (2001) 80 Neb. L. Rev. 715 at 742. Besides, developing countries are opposed to the adoption of core labour standards by the WTO because of the fear that the developed countries would use them as a guise for protectionism. For insightful analysis, see Clyde Summers,

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Notes to page 153

‘The Battle in Seattle: Free Trade, Labor Rights, and Societal Values’ (2001) 22 U. Pa. J. Int’l Econ. L. 61 at 68–80; Jagdish Bhagwati, ‘The Boundaries of the WTO: Afterword – The Question of Linkage’ (2002) 96 Am. J. Int’l L. 126 at 128–31; Andrew T. Guzman, ‘Trade, Labor, Legitimacy’ (2003) 91 Cal. L. Rev. 885 at 895. The IFC is involved in the financing of natural resources extraction in several African countries, including Burkina Faso, Cameroon, Chad, the Republic of the Congo, Côte d’Ivoire, Ghana, Mali, Mozambique, Nigeria, Sierra Leone, Uganda, and Zambia. See International Finance Corporation, ‘Extractive Industry Projects,’ available at http://www.ifc.org/ifcext/oeg. nsf/Content/EIE_ifcprojects (accessed 26 March 2006). The MIGA has provided insurance guarantees for extractive projects in Algeria, Equatorial Guinea, Ghana, Mali, Tanzania, Tunisia, and Uganda. See International Finance Corporation, ‘Extractive Industry Projects,’ available at http:// www.ifc.org/ifcext/oeg.nsf/Content/EIE_migaprojects (accessed 26 March 2006). Genoveva H. Uriz, ‘The Application of the World Bank Standards to the Oil Industry: Can the World Bank Group Promote Corporate Responsibility?’ (2002) 28 Brook. J. Int’l L. 77 at 80. See International Finance Corporation, Environmental & Social Review Procedure (31 July 2007), available at http://www.ifc.org/ifcext/enviro.nsf/ Content/ESRP (accessed 27 June 2008); International Finance Corporation’s Policy on Social and Environmental Sustainability (30 April 2006), available at http://www.ifc.org/ifcext/enviro.nsf/Content/SustainabilityPolicy (accessed 27 June 2008) [hereafter IFC’s Policy on Social and Environmental Sustainability]; MIGA, Multilateral Investment Guarantee Agency’s Policy on Social and Environmental Sustainability (1 October 2007), available at http:// www.miga.org/documents/environ_social_review_021507.pdf (accessed 27 June 2008) [hereafter MIGA’s Policy on Social and Environmental Sustainability]. See International Finance Corporation’s Performance Standards on Social and Environmental Sustainability (30 April 2006), available at http://www.ifc. org/ifcext/enviro.nsf/Content/PerformanceStandards (accessed 27 June 2008) [hereafter IFC’s Performance Standards]; Multilateral Investment Guarantee Agency’s Performance Standards on Social & Environmental Sustainability (1 October 2007), available at http://www.miga.org/documents/performance_standards_social_and_env_suatainability.pdf (accessed 27 June 2008) [hereafter MIGA’s Performance Standards]. World Bank Group, The World Bank Operational Manual, available at http://wbln0018.worldbank.org/institutional/manuals/opman-

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10

11

12 13 14

15

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309

ual.nsf/05TOCpages/The%20world%20Bank%20Operational%20 Manual?OpenDocument (accessed 27 June 2008). The World Bank Operational Manual consists of the Operational Policies (which sets out the parameters for the conduct of project operations); Bank Procedures and Good Practices (both of which provide guidelines for policy implementation); Operational Directives (containing a mixture of policies, procedures, and guidance); and Operational Memoranda (which are interim instructions designed to elaborate on the operational policies, bank procedures, and operational directives). See the World Bank’s Pollution Prevention and Abatement Handbook at http://lnweb18.worldbank.org/ESSD/envext.nsf/51ByDocName/PollutionPreventionAbatementHandbook (accessed 30 August 2004). See IFC, Environmental & Social Review Procedure, supra note 6; IFC’s Policy on Social and Environmental Sustainability, supra note 6; MIGA’s Policy on Social and Environmental Sustainability, supra note 6. IFC’s Performance Standards, supra note 7; MIGA’s Performance Standards, supra note 7. See also The World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, supra note 8 at paras. 1–3. IFC’s Performance Standards, ibid. at 1; MIGA’s Performance Standards, ibid. at 1. IFC’s Performance Standards, ibid. at 11–14; MIGA’s Performance Standards, ibid. at 11–14. See IFC, Environmental, Health, and Safety Guidelines for Offshore Oil and Gas Development (30 April 2007), available at http://www.ifc.org/ifcext/ enviro.nsf/Content/EnvironmentalGuidelines (accessed 27 June 2008); IFC, Environmental, Health, and Safety Guidelines for Onshore Oil and Gas Development (30 April 2007), available at http://www.ifc.org/ifcext/enviro.nsf/Content/EnvironmentalGuidelines (accessed 27 June 2008); MIGA, Environmental Guidelines, available at http://www.miga.org/news/index_ sv.cfm?aid=33 (accessed 27 June 2008). IFC, Environmental, Health, and Safety Guidelines for Mining (10 December 2007), available at http://www.ifc.org/ifcext/enviro.nsf/Content/EnvironmentalGuidelines (accessed 27 June 2008); MIGA, Environmental Guidelines, ibid. See also World Bank Environmental, Health and Safety Guidelines: Mining and Milling – Underground, available at http://www.miga.org/ documents/MiningandMillingUnderground.pdf (accessed 24 March 2006); World Bank Environmental, Health and Safety Guidelines: Mining and Milling – Open Pit, available at http://www.miga.org/documents/MiningandMillingOpenPit.pdf (accessed 24 March 2006). IFC’s Policy on Social and Environmental Sustainability, supra note 6 at 2 para.

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17 18

19 20

21

22

23

24 25 26

27

28

Notes to pages 154–5

11; MIGA’s Policy on Social and Environmental Sustainability, supra note 6 at 3 para. 12. IFC’s Policy on Social and Environmental Sustainability, ibid. at 4 para. 22; MIGA’s Policy on Social and Environmental Sustainability, ibid. at 5 para. 23. MIGA, Operational Regulations (as amended by the Board of Directors through 1 October 2007) at 32–3 para. 3.06, available at http://www.miga. org/documents/Operations-Regulations.pdf (accessed 27 June 2008). World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, supra note 8 at paras. 1 & 2. IFC’s Performance Standards, supra note 7 at 18; MIGA’s Performance Standards, supra note 7 at 18; World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, ibid. at para. 2(a). IFC’s Performance Standards, ibid. at 18–23; MIGA’s Performance Standards, ibid. at 18–23; World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, ibid. at para. 6(a). Extractive Industries Review, Striking a Better Balance: The World Bank Group and Extractive Industries – The Final Report of the Extractive Industries Review (December 2003, vol. 1) at 36, available at http://www.eireview.org/html/ EIRFinalReport.html [hereafter Striking a Better Balance]. The Extractive Industries Review was conducted by a panel of experts set up by the World Bank Group to examine its future role in the extractive sector and to make recommendations that will guide the World Bank’s involvement in that sector. World Bank Environment Department, Resettlement and Development: The Bankwide Review of Projects Involving Involuntary Resettlement 1986–1993 (Resettlement Series Paper No. 032, March 1996) at 6, available at http:// www-wds.worldbank.org/external/default/WDSContentServer/WDSP/ IB/1996/03/01/000009265_3980728143956/Rendered/PDF/multi_page. pdf (accessed 10 August 2004). Ibid. at 8. Dana L. Clark, ‘The World Bank and Human Rights: The Need for Greater Accountability’ (2002) 15 Harv. Hum. Rts. J. 205 at 215–16. IFC’s Performance Standards, supra note 7 at 28; MIGA’s Performance Standards, supra note 7 at 28; World Bank Operational Manual: Operational Policies 4.10 – Indigenous Peoples, supra note 8 at para. 1. IFC’s Performance Standards, ibid. at 28–31; MIGA’s Performance Standards, ibid. at 28–31; World Bank Operational Manual: Operational Policies 4.10 – Indigenous Peoples, ibid. at paras. 1, 10 & 11. IFC’s Performance Standards, ibid. at 29; MIGA’s Performance Standards, ibid. at 29; World Bank Operational Manual: Operational Policies 4.10 – Indigenous Peoples, ibid. at para. 12.

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29 See World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, supra note 8 at para. 23. Similarly, the MIGA routinely incorporates specific environmental requirements into its contractual agreements with corporate clients. See Compliance Advisor/Ombudsman, Insuring Responsible Investments?: A Review of the Application of MIGA’s Environmental and Social Review Procedures (Final Report, December 2002) at 12, available at http://www.cao-ombudsman.org/pdfs/MIGA%20report%20 of%20CAO-Web%20PDF%2003–05–03.pdf (accessed 4 August 2004) [hereafter Insuring Responsible Investments?]. 30 See IFC, Environmental, Health, and Safety: General Guidelines, available at http://www.ifc.org/ifcext/enviro.nsf/Content/EnvironmentalGuidelines (accessed 28 June 2008); MIGA, Environmental Guidelines, supra note 14. 31 IFC, Environmental, Health, and Safety: General Guidelines, ibid.; MIGA, Environmental Guidelines, ibid. 32 See IFC, Environmental, Health, and Safety Guidelines for Offshore Oil and Gas Development, supra note 14; IFC, Environmental, Health, and Safety Guidelines for Onshore Oil and Gas Development, supra note 14; IFC, Environmental, Health, and Safety Guidelines for Mining, supra note 15; MIGA, Environmental Guidelines, ibid. 33 See IFC, Environmental, Health, and Safety Guidelines for Offshore Oil and Gas Development, ibid. at 12–17; IFC, Environmental, Health, and Safety Guidelines for Onshore Oil and Gas Development, ibid. at 15–20; IFC, Environmental, Health, and Safety Guidelines for Mining, ibid. at 14–21; MIGA, Environmental Guidelines, ibid. 34 IFC’s Performance Standards, supra note 7 at 7–9; MIGA’s Performance Standards, supra note 7 at 7–9. 35 IFC’s Performance Standards, ibid. at 10; MIGA’s Performance Standards, ibid. 10. 36 IFC’s Performance Standards, ibid. at 9; MIGA’s Performance Standards, ibid. at 9. 37 See Hugh D. Hindman & Charles G. Smith, ‘Cross-Cultural Ethics and the Child Labor Problem’ (1999) 19 J. Bus. Ethics 21 at 29. 38 See IFC’s Performance Standards, supra note 7 at 9 para.14; MIGA’s Performance Standards, supra note 7 at 9 para. 14. 39 Compliance Advisor/Ombudsman, Extracting Sustainable Advantage? A Review of How Sustainability Issues Have Been Dealt with in Recent IFC & MIGA Extractive Industries Projects (Final Report, April 2003) at v, available at http://www.cao-ombudsman.org/html-english/archive.htm (accessed 22 June 2004) [hereafter Extracting Sustainable Advantage?]. 40 IFC’s Performance Standards, supra note 7; MIGA’s Performance Standards, supra note 7.

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Notes to pages 156–7

41 Extractive Industries Review, Striking a Better Balance, supra note 22 at 40. 42 MIGA, Mitigating Risks in Oil, Gas and Mining, at 6, available at http:// www.miga.org/documents/OGM.pdf (accessed 20 March 2006). 43 Ibid. at 14–19. 44 Andres Liebenthal, Roland Michelitsch, & Ethel Tarazona, Extractive Industries and Sustainable Development: An Evaluation of the World Bank Group Experience (Washington DC: World Bank, 2005) at 112. 45 For the corporate structure and financing plans of the Chad-Cameroon Project, see World Bank, Project Appraisal Document, Report No: 19343 AFR, (13 April 2000) at 132–35, available at http://www.worldbank.org/afr/ ccproj/project/pro_document.htm (accessed 15 June 2004). 46 IFC, ‘International Financial Corporation (IFC) Played a Leading Role in Facilitating the Oil Pipeline between Chad and Cameroon,’ available at http://www.ifc.org/ifcext/africa.nsf/AttachmentsByTitle/ ChadCamProjectOverview/$FILE/ChadCamProjectOverview.pdf (accessed 13 May 2006). See also IFC, ‘IFC Signs Loans for Chad-Cameroon Pipeline Project,’ available at http://www.ifc1n001.worldbank.org/ifcext/ pressroom/ifcpressroom.nsf/PressRelease?openform (accessed 12 May 2006). 47 World Bank, Loan Agreement (Petroleum Development and Pipeline Project) between Republic of Chad and International Bank for Reconstruction and Development (Loan No. 4558CD, 29 March 2001) at 2, available at http://www. worldbank.org (accessed 11 May 2006) [hereafter Loan Agreement between Chad and IBRD]; World Bank, Loan Agreement (Petroleum Development and Pipeline Project) between Republic of Cameroon and International Bank for Reconstruction and Development (Loan No. 7020CM, 29 March 2001) at 2, available at http://www.worldbank.org (accessed 11 May 2006) [hereafter Loan Agreement between Cameroon and IBRD]. 48 Loan Agreement between Chad and IBRD, ibid. at 9–10, 47–54; Loan Agreement between Cameroon and IBRD, ibid. at 9–10, 42–9. See also World Bank, Guidelines to Demonstrate Compliance with the EMP Principles for Oil Fields in Chad (November 2005), available at http://www.worldbank.org/ (accessed 11 May 2006). 49 World Bank Inspection Panel, Investigation Report: Chad-Cameroon Petroleum and Pipeline Project (Loan No. 4558-CD); Petroleum Sector Management Capacity Building Project (Credit No. 3373-CD); and Management of the Petroleum Economy (Credit No. 3316-CD) at 2, available at http://wbln0018.worldbank.org/ipnweb.nsf/WReport?openview&count=500000 (accessed 6 August 2004) [hereafter Investigation Report: Chad-Cameroon Petroleum and Pipeline Project].

Notes to pages 157–9

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50 Ibid. 51 World Bank Group, ‘The Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ at Question 1, available at http:// www.worldbank.org/afr/ccproj/questions/ (accessed 22 June 2004). 52 World Bank, Project Appraisal Document, supra note 45 at 67 para. 20 & at 71 para. 29. 53 World Bank Inspection Panel, Investigation Report: Chad-Cameroon Petroleum and Pipeline Project, supra note 49 at xvii para. 39. 54 See World Bank, Project Appraisal Document, supra note 45 at 38. 55 Friends of the Earth International, Traversing Peoples Lives: How the World Bank Finances Community Disruption in Cameroon, at 9, available at http:// www.foei.org/publications/pdfs/traversing.pdf (accessed 19 June 2004) [hereafter Traversing Peoples Lives]. 56 Bank Information Center, Chad-Cameroon Petroleum Development and Pipeline Project: Chad Trip Report August 2003, at 2, available at http://www. bicusa.org/bicusa/issues/Chad_Trip_Report.pdf (accessed 17 June 2004). 57 World Bank External Compliance Monitoring Group, Report of the External Compliance Monitoring Group (ECMG): Second Site Visit – Post-Project Completion (November 2005), at 10, available at http://web.worldbank.org/WEBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/ (accessed 11 May 2006). 58 Raphael Yimga & Steve Hilbert, ‘Environmental and Social Questions: Business as Usual?’ in The Chad-Cameroon Oil and Pipeline Project: A Call for Accountability, at 13, available at http://www.environmentaldefense.org/ documents/2134_Chad-Cameroon.pdf (accessed 17 June 2004). See also Friends of the Earth International, Traversing Peoples Lives, supra note 55 at 6. 59 Korinna Horta, ‘Rhetoric and Reality: Human Rights and the World Bank’ (2002) 15 Harv. Hum. Rts. J. 227 at 234. 60 Friends of the Earth International, Traversing Peoples Lives, supra note 55 at 6–7. 61 World Bank Group, ‘The Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ supra note 51 at Question 9. 62 World Bank Inspection Panel, Investigation Report: Chad-Cameroon Petroleum and Pipeline Project, supra note 49 at x para. 7. 63 Ibid. at x para. 8. 64 Ibid. at x para. 9. 65 Ibid. at x–xi para. 10. 66 Ibid. at xi para. 11. 67 Ibid. at xiv–xv para. 26. 68 World Bank, Management Report and Recommendation in Response to the Inspection Panel Investigation Report No. 23999 Chad: Chad-Cameroon Petro-

314

69 70

71

72 73

74 75 76

77 78

Notes to pages 159–61

leum Development and Pipeline Project, at 19, available at http://wbln0018. worldbank.org/ipnweb.nsf/WReport?openview&count=500000 (accessed 6 August 2004). See World Bank Group, ‘The Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ supra note 51 at Question 9. Friends of the Earth International, Broken Promises: The Chad Cameroon Oil and Pipeline Project; Profits at Any Costs?, at 12, available at http;//www. foe.org/camps/intl/worldbank/brokenpromises.pdf (accessed 17 June 2004) [hereafter Broken Promises]. The International Advisory Group (IAG) on the Chad-Cameroon project reported in January 2004 that health and compensation issues remain to be settled by project operators. See International Advisory Group, Chad-Cameroon Petroleum Development and Pipeline Project: Report of Visit to Cameroon December 1 to 5, 2003, at ii, available at http://www.worldbank.org/afr/ ccproj/project/IAG%20_Report_visit_CM_1.5_Dec.pdf (accessed 17 June 2004). However, the IAG came to a general conclusion that at the end of the construction phase of the project, the situation ‘is deemed to be generally satisfactory.’ See ibid. at iv. Ibid. at 1–2. See TWN Africa, ‘Mining Has Done Ghana No Good,’ available at http:// www.twnafrica.org/print.asp?twnID=324 (accessed 25 March 2006); African Civil Society Position on World Bank Group Investments in Mining, Oil and Gas at the African Consultation of the Extractive Industries Review (EIR) in Maputo, Mozambique, 13–17 January 2003, available at http://www.minesandcommunities.org/Charter/eirposit1.htm (accessed 16 June 2004); Mines and Communities, ‘World Bank Support for Extractives: Complicity in Human Rights Violations’ (12 September 2005), available at http://www.minesandcommunities.org/Action/press743.htm (accessed 25 March 2006). See World Bank Group, ‘The Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ supra note 51 at Questions 1 & 11. Horta, ‘Rhetoric and Reality: Human Rights and the World Bank,’ supra note 59 at 231. African Civil Society Position on World Bank Group Investments in Mining, Oil and Gas at the African Consultation of the Extractive Industries Review (EIR) in Maputo, Mozambique, 13–17 January 2003, supra note 73. See also Statement of the Africa Initiative on Mining, Environment and Society (AIMES) Meeting in Accra, Ghana, June 21, 2004, available at http://www.miningwatch.ca/index.php?Newsletter_16/AIMES_stmt_2004 (accessed 25 March 2006). Clark, supra note 25 at 206. Compliance Advisor/Ombudsman, A Review of IFC’s Safeguard Policies –

Notes to page 161

79 80

81

82

83 84

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Core Business: Achieving Consistent and Excellent Environmental and Social Outcomes (January 2003) at 7, available at http://www.cao-ombudsman. org/html-english/advisor-safeguard_091905.htm (accessed 26 March 2006) [hereafter A Review of IFC’s Safeguard Policies – Core Business]. Compliance Advisor/Ombudsman, Insuring Responsible Investments? supra note 29 at 12. World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, supra note 8 at para. 8; IFC’s Policy on Social and Environmental Sustainability, supra note 6 at para. 18; MIGA’s Policy on Social and Environmental Sustainability, supra note 6 at para. 19. Projects are classified into one of four categories – A, B, C, and FI – depending on the type, location, sensitivity, scale, and the nature and magnitude of its potential environmental impacts. Category A projects are those that are ‘likely to have significant adverse environmental impacts that are sensitive, diverse or unprecedented’ and ‘may affect an area broader than the sites or facilities subject to physical works.’ Category B projects are those that have ‘potential adverse environmental impacts on human populations or environmentally important areas – including wetlands, forests, grasslands, and other natural habitats,’ but which are less adverse than those of Category A projects. Category C are projects that are likely to have minimal or no adverse environmental impacts, while Category FI projects are those involving the investment of the WBG’s funds through a financial intermediary in sub-projects that may result in adverse environmental impacts. Of these categories, only Category FI is exempted from environmental assessment. See World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, ibid. at para. 8. See MIGA’s Performance Standards, supra note 7 at 1–3; IFC’s Performance Standards, supra note 7 at 1–3; World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, ibid. at para. 4. World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, ibid. at para. 5. See also IFC’s Policy on Social and Environmental Sustainability, supra note 6 at 2–3, paras. 11 & 13; MIGA’s Policy on Social and Environmental Sustainability, supra note 6 at 3, para. 12. World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, supra note 8 at para. 32. World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, ibid. at paras. 18 & 24; IFC’s Performance Standards, supra note 7 at 18–22; MIGA’s Performance Standards, supra note 7 at 18–22. The WBG may, however, supervise the implementation of resettlement to determine compliance with the resettlement plan. See World Bank Operational Manual: Operational Policies 4.12 – Involuntary Resettlement, ibid. at para. 24.

316

Notes to pages 162–3

85 Compliance Advisor/Ombudsman, Insuring Responsible Investments? supra note 29 at 12. 86 See Compliance Advisor/Ombudsman, CAO Audit of MIGA’s Due Diligence of the Dikulushi Copper-Silver Mining Project in the Democratic Republic of the Congo (Final Report, November 2005) at 21, available at http://www. cao-ombudsman.org/html-english/archive.htm (accessed 17 March 2006) [hereafter CAO Audit of Dikulushi Project]. See also Evaristus Oshionebo, ‘World Bank and Sustainable Development of Natural Resources in Developing Countires’ (2009) 27:2 J. Energy Nat. Resources L. 193 at 219–21. 87 Clark, supra note 25 at 206. 88 Extractive Industries Review, Striking a Better Balance, supra note 22 at 37. 89 World Bank Inspection Panel, Investigation Report-Ghana: West African Gas Pipeline Project (IDA Guarantee No. B-006-0-GH) (25 April 2008) at 48, available at http://siteresources.worldbank.org/EXTINSPECTIONPANEL/ Resources/InvRepApril25.pdf (accessed 7 December 2008). 90 Compliance Advisor/Ombudsman, Assessment Report Summary – Complaint Regarding MIGA’s Guarantee of the Bulyanhulu Gold Mine, Tanzania, at 10, available at http://www.cao-ombudsman.org/pdfs/buly%20final.doc (accessed 17 March 2006) [hereafter Bulyanhulu Assessment]. Allegations of human rights violations at this mine were dismissed by the MIGA without on-site visitation and inspection. See Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, at 8, available at http://www.cao-ombudsman.org/pdfs/Final%20English%20Report.pdf (accessed 3 May 2004). 91 See IFC, Environmental & Social Review Procedure, supra note 6 at 55–61; IFC’s Policy on Social and Environmental Sustainability, supra note 6 at 5, para. 26; MIGA’s Policy on Social and Environmental Sustainability, supra note 6 at 5–6, para. 27. 92 IFC, Environmental & Social Review Procedure, ibid. at 58. 93 Extractive Industries Review, Striking a Better Balance, supra note 22 at 37. 94 Ibid. at 17. 95 See World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, supra note 8 at para. 15–17; IFC’s Performance Standards, supra note 7 at 4–5, paras. 19–22; MIGA’s Performance Standards, supra note 7 at 4–5, paras. 19–22. 96 World Bank Operational Manual: Operational Policies 4.01 – Environmental Assessment, ibid.at paras. 15–17; IFC’s Performance Standards, ibid. at 4–5, paras. 19–22; MIGA’s Performance Standards, ibid. at 4–5, paras. 19–22. 97 The WBG takes a limited part in the consultation process. In the ChadCameroon Project, for example, the WBG participated in some but not all of the consultations with local communities. See World Bank Group, ‘The

Notes to pages 163–5

98 99 100 101 102 103 104 105

106 107 108 109 110

111

112

113

114

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Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ supra note 51 at Question 7. Extractive Industries Review, Striking a Better Balance, supra note 22 at 21–2. Friends of the Earth International, Broken Promises, supra note 70 at 15. Extractive Industries Review, Striking a Better Balance, supra note 22 at 18. Ibid. at 18. See Uriz, supra note 5 at 94. Extractive Industries Review, Striking a Better Balance, supra note 22 at 21. Ibid. at 21. Sabine Schlemmer-Schulte, ‘The World Bank Inspection Panel: A Record of the First International Accountability Mechanism and Its Role for Human Rights’ (1999) 6:2 Hum. Rts. Brief 1. Uriz, supra note 5 at 84; Schlemmer-Schulte, ibid. See Compliance Advisor/Ombudsman, A Review of IFC’s Safeguard Policies – Core Business, supra note 78 at 8. MIGA, Operational Regulations, supra note 18 at 33, para. 3.06. World Bank Group, ‘The Chad-Cameroon Petroleum Development and Pipeline Project: Questions and Answers,’ supra note 51 at Question 8. Bank Information Center, ‘Wolfowitz Suspends $124m in World Bank Loans to Chad,’ available at http://www.bicusa.org/bicusa/issues/ wolfowitz_watch/2569.php (accessed 25 March 2006); Celia W. Dugger, ‘World Bank Suspends Loans to Chad Over Use of Oil Money,’ New York Times (7 January 2006), available at http://www.nytimes.com/ glogin?URI=http://www.nytimes.com/2006/01/07/politics/07bank (accessed 25 March 2006). See, for example, World Bank Group, ‘World Bank Sanctions Acres International Limited,’ available at http://web.worldbank.org/WBSITE/ EXTERNAL/NEWS/ (accessed 11 August 2004). See James Thuo Gathii, ‘Good Governance as a Counter Insurgency Agenda to Oppositional and Transformative Social Projects in International Law’ (1999) 5 Buff. Hum. Rts. L. Rev. 107 at 162; Thomas Buergenthal, ‘The World Bank and Human Rights’ (1999) 31 Stud. Transnat’l Legal Pol’y 95. See Sayre P. Schatz, ‘Structural Adjustment in Africa: A Failing Grade So Far’ (1994) 32:4 J. Modern African Studies 679; William Easterly, ‘The Effect of IMF and World Bank Programs on Poverty,’ available at http:// www.imf.org/external/pubs/ft/staffp/2000/00–00/e.pdf (accessed 25 March 2006). See, for example, Articles of Agreement of the International Bank for Reconstruction and Development, 27 December 1945 (as Amended), Article IV Section 10; Articles of Agreement of the International Development Association,

318

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116 117 118

119

120

121 122

123

124

Notes to pages 165–6 26 January 1960, Article V Section 6; Articles of Agreement of the International Finance Corporation, 25 May 1955 (as Amended), Article III Section 9. Christiana Ochoa, ‘Advancing the Language of Human Rights in a Global Economic Order: An Analysis of a Discourse’ (2003) 23 B.C. Third World L.J. 57 at 82. See also Buergenthal, supra note 112 at 95. Ochoa, ibid. at 85. See Ibrahim F.I. Shihata, ‘The World Bank’s Protection and Promotion of Children’s Rights’ (1996) 4 Int’l J. Child. Rts. 383 at 387–8. See Daniel Bradlow & Claudio Grossman, ‘Limited Mandates and Intertwined Problems: A New Challenge for the World Bank and the IMF’ (1995) 17 Hum. Rts. Q. 411 at 439. On how such interpretation may be achieved, see John D. Ciorciari, ‘The Lawful Scope of Human Rights Criteria in World Bank Credit Decisions: An Interpretive Analysis of the IBRD and IDA Articles of Agreement’ (2000) 33 Cornell Int’l L.J. 331. Robert W. Kneller, ‘Human Rights, Politics, and the Multilateral Development Banks’ (1980) 6 Yale Stud. World Pub. Ord. 361 at 405–6. See also Buergenthal, supra note 112 at 100; Victoria E. Marmorstein, ‘World Bank Power to Consider Human Rights Factors in Loan Decisions’ (1978) 13 J. Int’l L. & Econ. 113 at 135. See International Bank for Reconstruction and Development/World Bank, Development and Human Rights: The Role of the World Bank (Washington DC: IBRD/World Bank, 1998). Shihata, ‘The World Bank’s Protection and Promotion of Children’s Rights,’ supra note 117 at 388. IFC’s Policy on Social and Environmental Sustainability, supra note 6 at 3, para. 16; MIGA’s Policy on Social and Environmental Sustainability, supra note 6 at 4, para. 17. The World Bank is dominated by the five largest shareholders – France, Germany, Japan, the United Kingdom, and the United States. Of the bank’s twenty-four executive directors, each of these countries appoints one director while all other member countries elect nineteen directors. See World Bank, ‘Executive Directors,’ available at http://web.worldbank. org (accessed 18 March 2006). See also Ngaire Woods, ‘The United States and the International Financial Institutions: Power and Influence Within the World Bank and the IMF,’ in Rosemary Foot, et al, eds., US Hegemony and International Organizations: The United States and Multilateral Institutions (Oxford: Oxford University Press, 2003) 92. For example, nine out of ten World Bank anti-poverty programs are said to require the recipient country to privatize social services. See World Development Movement, ‘9 Out of 10 World Bank Poverty Reduction

Notes to pages 166–7

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126

127

128

129 130 131

132

133

134 135 136 137 138

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Programmes Demand Privatisation’ (19 September 2005), available at http://www.wdm.org.uk/news/archive/2005/onesize.htm (accessed 25 March 2006). See Jonathan Cahn, ‘Challenging the New Imperial Authority: The World Bank and the Democratization of Development’ (1993) 6 Harv. Hum. Rts. J. 159 at 160–1. The WBG has a tendency to fund extractive projects even if they encroach on protected indigenous and biodiversity-rich areas. See Extractive Industries Review, Striking a Better Balance, supra note 22 at 30. See generally Schatz, supra note 113; J. Barry Riddell, ‘Things Fall Apart Again: Structural Adjustment Programmes in Sub-Saharan Africa’ (1992) 30:1 J. Modern African Studies 53; Peter Gibbon, ‘The World Bank and African Poverty, 1973–91’ (1992) 30:2 J. Modern African Studies 193. CAO Audit of Dikulushi Project, supra note 86 at 16 & 22. See also Independent Evaluation Group/World Bank Group, Environmental Sustainability: An Evaluation of the World Bank Group Support (Washington, DC: World Bank, 2008) at 56 and 161. CAO Audit of Dikulushi Project, supra note 86 at 15. Portfolio Management Task Force, Effective Implementation: Key to Development Impact (Washington, DC: World Bank, 1992). World Commission on Dams, Dams and Development: A New Framework for Decision-Making (16 November 2000) at 188, available at http://www.dams. org/report/ (accessed 26 March 2006) [hereafter Dams and Development]. See World Bank, The Strategic Compact: Renewing the Bank’s Effectiveness to Fight Poverty (Washington, DC: World Bank, 13 February 1997); James D. Wolfensohn, ‘The Challenges of Inclusion: 1997 Annual Meetings Address,’ available at http://web.worldbank.org/ (accessed 2 July 2008). See Independent Evaluation Group, 2005 Annual Report on Operations Evaluation (Washington, DC: World Bank, 2006) at 23–31; Liebenthal et al., supra note 44 at 7. These and other problems have prompted calls for the World Bank to be reformed. See Catherine Weaver & Ralf J. Leiteritz, ‘Our Poverty is a World Full of Dreams: Reforming the World Bank’ (2005) 11 Glob. Governance 369. 2005 Annual Report on Operations Evaluation, ibid. at 31. Portfolio Management Task Force, Effective Implementation: Key to Development Impact, supra note 130. Liebenthal et al., supra note 44 at 8. Bulyanhulu Assessment, supra note 90 at 10. IFC, ‘IFC Fact Sheet – IFC Policy and Performance Standards on Social & Environmental Sustainability and Policy on Disclosure of Information:

320

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140 141 142 143 144 145

146 147 148 149

150

151 152 153 154

Notes to pages 167–9 New, Better and Expanded Standards,’ available at http://www.ifc.org (accessed 26 March 2006). Compliance Advisor/Ombudsman, ‘IFC’s Review of Safeguard Policies & Policy on Disclosure of Information: CAO Comments on the January 25, 2006 Drafts of IFC’s Policy and Performance Standards on Social and Environmental Sustainability and Policy on Disclosure of Information,’ at 1, available at http://www.cao-ombudsman.org/html-english/documents/CAOcommentsonthefinalPPSdraftsFINAL-February22006.pdf (accessed 26 March 2006). Compliance Advisor/Ombudsman, A Review of IFC’s Safeguard Policies – Core Business, supra note 78 at 25. Ibid. See World Commission on Dams, Dams and Development, supra note 131 at 192. See World Bank, Project Appraisal Document, supra note 45 at 2 & 132. See Loan Agreement between Chad and IBRD, supra note 47; Loan Agreement between Cameroon and IBRD, supra note 47. For example, ExxonMobil, Petronas, and ChevronTexaco would not have invested in the Chad-Cameroon Project ‘without the Bank Group’s participation, given the significance they attach to the mitigation of political risks provided by the Bank Group’s involvement.’ See World Bank, Project Appraisal Document, supra note 45 at 22. Uriz, supra note 5 at 93. Compliance Advisor/Ombudsman, A Review of IFC’s Safeguard Policies – Core Business, supra note 78 at 29. Uriz, supra note 5 at 116. See Ben Dysart, Tim Murphy, & Antonia Chayes, Beyond Compliance?: An External Review Team Report on the Compliance Advisor/Ombudsman Office of IFC and MIGA (24 July 2003) at iii, available at http://www.cao-ombudsman.org/html-english/archive.htm (accessed 7 July 2006). Compliance Advisor/Ombudsman, Operational Guidelines at 5, available at http://www.cao-ombudsman.org/html-english/documents/ WEBEnglishCAO06.08.07Web.pdf (accessed 3 July 2008) [hereafter CAO Operational Guidelines ]; Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, supra note 90 at 3. CAO Operational Guidelines, ibid.; Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, ibid. at 3 & 7–17. CAO Operational Guidelines, ibid. at 12 para. 2.2.2. Ibid. Ibid. at 16.

Notes to pages 169–72

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155 Ibid. at 11 para. 2.1. 156 Compliance Advisor/Ombudsman, ‘CAO Archive,’ available at http:// www.cao-ombudsman.org/html-english/archive.htm (accessed 3 July 2008). It should be noted that in 2002, Anglo American Plc, IFC’s partner in the Konkola Copper Mine, pulled out of the project. In turn, IFC also divested from the project. See Compliance Advisor/Ombudsman, Assessment Report: Complaint Filed to the CAO Regarding the Zambia Konkola Copper Mine (KCM) Project, at 7, available at http://www.cao-ombudsman. org/html-english/archive.htm (accessed 17 March 2006). 157 Compliance Advisor/Ombudsman, Assessment Report: Complaint Filed to the CAO Regarding the Nigeria Delta Contractor Revolving Credit Facility, at 2, available at http://www.cao-ombudsman.org/html-english/archive. htm (accessed 17 March 2006). 158 Ibid. at 4. 159 Ibid. at 4. 160 See Bulyanhulu Assessment, supra note 90. 161 Ibid. at 2–3. 162 Ibid. at 8–9. 163 Ibid. at 9–10. 164 Ibid. at 9. 165 Ibid at 10. 166 Ibid. 167 See CAO Audit of Dikulushi Project, supra note 86 at 4–6. 168 Ibid. at 1. 169 Ibid. at 7. 170 Ibid. at 15. 171 Ibid. at 14. 172 See CAO, A Retrospective Analysis of CAO Interventions, Trends, Outcomes and Effectiveness (May 2006) at 26–8, available at http://www.caoombudsman.org/html-english/archive.htm (accessed 11 July 2007). 173 ‘MIGA Statement on CAO Audit Report on Dikulushi,’ available at http://www.miga.org/index.cfm?aid=415 (accessed 20 March 2006). 174 Ibid. 175 CAO Audit of Dikulushi Project, supra note 86 at 24. 176 For some of CAO’s recommendations, see Compliance Advisor/ Ombudsman, Extracting Sustainable Advantage? supra note 39. 177 See Compliance Advisor/Ombudsman, A Review of IFC’s Safeguard Policies – Core Business, supra note 78 at 29. 178 Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, supra note 90 at 4.

322

Notes to pages 172–4

179 Bulyanhulu Assessment, supra note 90 at 2. 180 Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, supra note 90 at 4. 181 CAO Operational Guidelines, supra note 150 at 22. 182 See Compliance Advisor/Ombudsman: ANNUAL REPORT 2002–03, supra note 90 at 15–16. 183 See Dysart et al., supra note 149 at 26. 184 See Extractive Industries Review, Striking a Better Balance, supra note 22 at 22. 185 In fact, in 2003 the CAO’s external review team recommended that the CAO be permitted to initiate compliance audits. See Dysart et al., supra note 149 at 27 (recommendation 13). 186 CAO Operational Guidelines, supra note 150 at 5. 187 Ibid. at 19, 26 & 33. 188 Ibid. 189 See World Bank Inspection Panel, Annual Report July 1, 2005 to June 30, 2006, at 126, available at http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/AnnualReport05–06.pdf (accessed 4 July 2008). 190 In fact, the COA’s defunct Operational Guidelines (2000) indicated that both the Inspection Panel and the CAO had coordinate jurisdiction over complaints arising from jointly financed projects. See Operational Guidelines for the Office of the IFC/MIGA Compliance Advisor/Ombudsman (2000) at 21 para. 5.4.1–5.4.2. 191 See World Bank Inspection Panel, Investigation Report: Chad-Cameroon Petroleum and Pipeline Project, supra note 49. 192 For the Resolution of the IBRD and IDA setting up the Inspection Panel, see Resolution Nos. IBRD 93–10 & IDA 93–6 (as clarified on 17 October 1996 and 20 April 1999), 34 I.L.M. 520 (1995) [hereafter IBRD/IDA Resolution]. For general insight on the operations of the Inspection Panel, see Ibrahim Shihata, The World Bank Inspection Panel: In Practice, 2nd ed. (Oxford & New York: Oxford University Press, 2000); Alvaro Umana, ed., The World Bank Inspection Panel: The First Four Years 1994–1998 (Washington DC: World Bank, 1998). 193 Edith B. Weiss et al., eds., International Environmental Law and Policy (Gaithersburg & New York: Aspen Law & Business, 1998) at 1118; Saladin Al-Jurf, ‘Participatory Development and NGOs: A Look at the World Bank’ (1999) 9 Transnat’l L. & Contemp. Probs. 175 at 179. See also Schlemmer-Schulte, ‘The World Bank Inspection Panel: A Record of the First International Accountability Mechanism and Its Role for Human Rights,’ supra note 105. 194 World Bank Group, The Inspection Panel: Operating Procedure, available at

Notes to pages 174–6

195 196

197 198 199 200 201 202 203

204

205 206 207 208

209

210 211

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http://wed.worldbank.org/ (accessed 4 July 2008) [hereafter Operating Procedure]. Ibid. at para. 1. IBRD/IDA Resolution, supra note 192 at para. 12. By way of contrast, ‘any individual’ can submit a complaint to the CAO. See CAO Operational Guidelines, supra note 150 at 12, para.2.2.2. Operating Procedure, supra note 194 at para. 2(a); IBRD/IDA Resolution, ibid. at para. 14(a). Operating Procedure, ibid. at para. 4. Ibid. [at Introduction: Purpose]. Ibid. at para. 1. Ibid. [at Introduction: Functions]. David Hunter, ‘Using the World Bank Inspection Panel to Defend the Interests of Project-Affected People’ (2003) 4 Chi. J. Int’l L. 201 at 209–10. World Bank Inspection Panel, Annual Report August 1, 2001 to June 30, 2002, at 37–9, available at http://wbln0018.worldbank.org/ipn/ipnweb. nsf/Wannual?openview&count=500000 (accessed 3 August 2004). Ibid. at 37. See also Richard E. Bissell, ‘Current Developments: Recent Practice of the Inspection Panel of the World Bank’ (1997) 91 Am. J. Int’l L. 741; Daniel D. Bradlow, ‘A Test Case for the World Bank’ (1996) 11 Am. U.J. Int’l L. & Pol’y 247 at 280. Inspection Panel, Annual Report August 1, 2001 to June 30, 2002, supra note 203 at 38. Ibid. at 40 & 43. Hunter, supra note 202 at 202. See Daniel D. Bradlow, ‘International Organizations and Private Complaints: The Case of the World Bank Inspection Panel’ (1993–4) 34 Va. J. Int’l L. 553 at 554; Ellen Hey, ‘The World Bank Inspection Panel: Towards the Recognition of a New Legally Relevant Relationship in International Law’ (1997) 2 Hofstra L. & Pol’y Symp. 61 at 70. See also Laurence B. de Chazournes, ‘Public Participation in Decision-Making: The World Bank Inspection Panel’ (1999) 31 Stud. Transnat’l Legal Pol’y 84 at 92–3; Bissell, supra note 204 at 741. See ADB Accountability Mechanism, available at http://www.adb. org/Documents/Policies/ADB_Accountability_Mechanism/default. asp?p=policies (accessed 4 July 2008). For details, see www.iadb.org/aboutus/III/independent_invest/independent_invest.cfm?language=English (accessed 4 July 2008). Bradlow, ‘International Organizations and Private Complaints: The Case of the World Bank Inspection Panel,’ supra note 208 at 601.

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225 226 227 228 229 230

231 232 233 234 235

Notes to pages 176–9 Bradlow, ‘A Test Case for the World Bank,’ supra note 204 at 285. Operating Procedure, supra note 194 at para. 37. Ibid. at para. 39; IBRD/IDA Resolution, supra note 192 at paras. 19 & 20. See World Bank Inspection Panel, Annual Report July 1, 2006 to June 30, 2007, at 125–9, available at http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/InspP_2007_Annual_Report.pdf (accessed 4 July 2008). Operating Procedure, supra note 194 at paras. 54–6; IBRD/IDA Resolution, supra note 192 at para. 23. See Kristine J. Dunkerton, ‘The World Bank Inspection Panel and its Effects on Lending Accountability to Citizens of Borrowing Nations’ (1997) 5 U. Balt. J. Envtl. L. 226 at 241–2. IBRD/IDA Resolution, supra note 192 at para. 10. Ibid. at para. 10. Ibid. at para. 15; Operating Procedure, supra note 194 at para. 62. Hey, supra note 208 at 72. de Chazournes, supra note 208 at 93. Operating Procedure, supra note 194 at para. 1. Sabine Schlemmer-Schulte, ‘The Impact of Civil Society on the World Bank, the International Monetary Fund and the World Trade Organization: The Case of the World Bank’ (2001) 7 ILSA J. Int’l & Comp. L. 399 at 408–9. Ibid. at 409. Liebenthal et al., supra note 44 at 15. Extractive Industries Review, Striking a Better Balance, supra note 22 at 59–61. Ibid. at xi. Ibid. at xi. World Bank Group, Striking a Better Balance – The World Bank Group and Extractive Industries: The Final Report of the Extractive Industries Review: Draft World Bank Group Management Response, at 9, available at http:// www.worldbank.org/ogmc/files/eirmanagementresponse.pdf (accessed 12 August 2004). Ibid. at 33. IFC’s Performance Standards, supra note 7 at 7–10; MIGA’s Performance Standards, supra note 7 at 7–10. See World Commission on Dams, Dams and Development, supra note 131 at 192. MIGA, Operational Regulations, supra note 18 at 32–3 para. 3.06. MIGA, MIGA in Conflict-Affected Countries (Washington, DC: MIGA, 2003)

Notes to pages 179–81

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at 1, available at http://www.miga.org/miga_documents/post_conflict. pdf (accessed 26 March 2006). See Extractive Industries Review, Striking a Better Balance, supra note 22 at 21. Ibid. at 18. See Daniel D. Bradlow, ‘Lessons from the NGO Campaign Against the Second Review of the World Bank Inspection Panel: A Participant’s Perspective’ (2001) 7 ILSA J. Int’l & Comp. L. 247; Daniel D. Bradlow, ‘Precedent-Setting NGO Campaign Saves the World Bank’s Inspection Panel’ (1999) 6:3 Hum. Rts. Brief 7. See Schlemmer-Schulte, ‘The Impact of Civil Society on the World Bank, the International Monetary Fund and the World Trade Organization: The Case of the World Bank,’ supra note 224 at 411. Extractive Industries Review, Striking a Better Balance, supra note 22 at 62. See also David A. Wirth, ‘Legitimacy, Accountability, and Partnership: A Model for Advocacy on Third World Environmental Issues’ (1991) 100 Yale L. J. 2645. Extractive Industries Review, Striking a Better Balance, ibid. at 52.

8. Extraterritorial Regulation of Transnational Corporations in Their Home Countries 1 See Foreign Corrupt Practices Act, 15 U.S.C. ss. 78a, 78dd-1, 78dd-2, 78dd3, 78ff. See also OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (adopted on 21 November 1997), available at http://www.oecd.org/document/21/0,2340, en_2649_201185_2017813_1_1_1_1,00.html (accessed 20 December 2004). 2 Available at http://www-old.itcilo.org/actrav-english/telearn/global/ ilo/guide/usmodel.htm (accessed 8 July 2008). 3 Department of Foreign Affairs and International Trade (Canada), Mining in Developing Countries – Corporate Social Responsibility: The Government’s Response to the Report of the Standing Committee on Foreign Affairs and International Trade (October 2005) at 8–10, available at http://www.dfaitmaeci.gc.ca/tna-nac/documents/scfait-response-en.pdf (accessed 27 June 2006) [hereafter Mining in Developing Countries]. 4 Available at http://www.cdp-hrc.uottawa.ca/globalization/busethics/ codeint.html (accessed 8 October 2004). 5 See EC, Commission of the European Communities, Promoting a European Framework for Corporate Social Responsibility: Green Paper (2001) at 14–15 [hereafter European Commission Green Paper]; Resolution on EU

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Notes to pages 181–2 Standards for European Enterprises Operating in Developing Countries: Towards a European Code of Conduct (Resolution A4–0508/98 of 15 January 1999), O.J. C. 104/180 at para. 27 [hereafter Resolution on EU Standards]. The Resolution is available at http://europa.eu.int/eur-lex/pri/en/oj/ dat/1999/c_104/c_10419990414en01800184.pdf (accessed 6 December 2004). See Lea Brilmayer & Charles Norchi, ‘Federal Extraterritoriality and Fifth Amendment Due Process’ (1992) 105 Harv. L. Rev. 1217. For a contrary view, see A. Mark Weisburd, ‘Due Process Limits on Federal Extraterritorial Legislation?’ (1997) 35 Colum. J. Transnat’l L. 379. See The Case of the S.S. Lotus (1927) P.C.I.J., Series A. No. 10 at 18, available at http://www.worldcourts.com/pcij/eng/decisions/1927.09.07_lotus/ (accessed 8 July 2008). In fact, the Canadian government has taken the position that extraterritorial application of Canadian legislation would be in ‘conflict with the sovereignty of foreign states.’ See Mining in Developing Countries, supra note 3 at 9. For example, the U.S. Congress enacted the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, 22 U.S.C. ss.6021–6091, which gives U.S. citizens the right to bring a civil action in U.S. courts against any person who trafficks in property confiscated by the Cuban government. Also, in the wake of the terrorist attacks of 11 September 2001, some countries enacted antiterror laws with extraterritorial reach. See Anthony J. Carroll, ‘The Extraterritorial Enforcement of U.S. Antitrust Laws and Retaliatory Legislation in the United Kingdom and Australia’ (1983–4) 13 Denv. J. Int’l L. & Pol’y 377; Tony A. Freyer, ‘Restrictive Trade Practices and Extraterritorial Application of Antitrust Legislation in Japanese-American Trade’ (1999) 16 Ariz. J. Int’l & Comp. L. 159; Deborah Senz & Hilary Charlesworth, ‘Building Blocks: Australia’s Response to Foreign Extraterritorial Legislation’ (2001) 2 Melb. J. Int’l L. 69. Sarah Joseph, ‘An Overview of the Human Rights Accountability of Multinational Enterprises,’ in Menno T. Kamminga & Saman Zia-Zarifi, eds., Liability of Multinational Corporations Under International Law (The Hague: Kluwer Law International, 2000) 75 at 80. Corporations have, over the years, developed close relationships with the political leadership of both developed and developing countries through political contributions and lobbying. The United Nations reports, for example, that corporations contributed US$1.2 billion in political donations during the 2000 elections in the United States., and that corporations provided an estimated 80 per cent of the financing for India’s major parties in 1996. See United Nations Development Programme, Human Develop-

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ment Report 2002: Deepening Democracy in a Fragmented World (New York & Oxford: Oxford University Press, 2002) at 68. The concept of social reporting is not a new phenomenon although it has shot to prominence in recent years. For early literature on social reporting, see Ralph Estes, Corporate Social Accounting (New York: Wiley, 1976); Harold L. Johnson, Disclosure of Corporate Social Performance: Survey, Evaluation, and Prospects (New York: Praeger Publishers, 1979). Thomas Donaldson, Corporations and Morality (Englewood Cliffs, NJ: Prentice-Hall, 1982) at 204. See, generally, Mary Graham, Democracy by Disclosure: The Rise of Technopopulism (Washington, DC: Governance Institute/Brookings Institution Press, 2002). Archon Fung, Dara O’Rourke, & Charles Sabel, ‘Realizing Labor Standards’ (2001) Boston Review, available at http://bostonreview.net/BR26.1/ fung.html (accessed 22 August 2005). Edward Iacobucci, ‘The Effects of Disclosure on Executive Compensation’ (1998) 48 U. T. L. J. 489 at 501. KPMG Consulting, Inc., KPMG International Survey of Corporate Sustainability Reporting 2002 (June 2002) at 9, available at http://www.wimm.nl/ publicaties/KPMG2002.pdf (accessed 9 December 2004). KPMG Consulting, Inc., KPMG International Survey of Corporate Responsibility Reporting 2005 (June 2005) at 9, available at http://www.kpmg.ca/en/ industries/enr/energy/documents/KPMGCRSurvey.pdf (accessed 8 July 2008). See The Oil Sector Report: A Review of Environmental Disclosure in the Oil Industry (London: SustainAbility Ltd., 1999) (hereafter The Oil Sector Report). See also OECD, Directorate for Financial, Fiscal and Enterprise Affairs, Codes of Corporate Conduct: Expanded Review of their Contents, Working Papers on International Investment Number 2001/6 (May 2001) at 21, available at http://www.oecd.org/dataoecd/57/24/1922656.pdf (accessed 17 September 2004). KPMG Consulting, Inc., KPMG International Survey of Corporate Sustainability Reporting 2002, supra note 17 at 13 Figure 7. See also KPMG, Global Mining Reporting Survey 2006 at 81, available at http://www.kpmg.ca/en/ industries/enr/mining/globalminingsurvey2006.html (accessed 8 July 2008). The Oil Sector Report, supra note 19 at 13. Ibid. at 20–2. See Royal Dutch Shell Plc, The Shell Report 2004: Meeting the Energy Challenge – Our Progress in Contributing to Sustainable Development at 16–17,

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27 28

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Notes to pages 183–4 available at http://www-static.shell.com/static/responsible_energy/ downloads/sustainability_reports/shell_report_2004.pdf (accessed 6 April 2006); Chevron Corporation 2004 Corporate Responsibility Report at 56, available at http://wwwchevron.com/globalissues/corporateresponsibility/2004/documents/cr_report_2004_complete.pdf (accessed 6 April 2006). The Oil Sector Report, supra note 19 at 15–19. Talisman Energy, Risky Business – Here’s How We’re Managing It: 2006 Corporate Responsibility Report at 1, available at http://www.talisman-energy. com/upload/ir_briefcase/94/01/tlmcrreport.pdf (accessed 8 July 2008); Talisman Energy, Responsibly Managing Impacts: 2005 Corporate Responsibility Report at 1, available at http://www.talisman-energy.com/upload/ ir_briefcase/49/02/05-cr-report.pdf (accessed 7 April 2006). See IPIECA & API, Compendium of Sustainability Reporting Practices and Trends for the Oil and Gas Industry (February 2003) at 26, available at http:// www.oilandgasreporting.com/compendium.html (accessed 7 April 2006) (reporting that of the twenty-five oil and gas companies which verify their reports, only ten utilize independent auditors); The Oil Sector Report, supra note 19 at 12 (‘One-third of survey company reports are independently verified’). See StatoilHydro, Going North: Sustainable Development 2007 at 40, available at http://www.statoil.com (accessed 8 July 2008). See Robert J. Liubicic, ‘Corporate Codes of Conduct and Product Labeling Schemes: The Limits and Possibilities of Promoting International Labor Rights through Private Initiatives’ (1998) Law & Pol’y Int’l Bus. 111 at 137. See Royal Dutch Shell Plc, The Shell Sustainability Report 2007 at 38–40, available at http://sustainabilityreport.shell.com/2007/servicepages/welcome.html (accessed 8 July 2008). StatoilHydro, Going North: Sustainable Development 2007, supra note 27 at 40. See also Talisman Energy, Going Further: Corporate Responsibility Report 2007 at 35, available at http://www.talisman-energy.com/upload/irbriefcase/102/02/2007crreport-final.pdf (accessed 8 July 2008); Chevron, Energy Partnership: 2007 Corporate Responsibility Report at 39, available at http://www.chevron.com/globalissues/corporateresponsibility/2007/ downloadreport/ (accessed 8 July 2008). See Talisman Energy, Going Further: Corporate Responsibility Report 2007, ibid. at 35; StatoilHydro, Going North: Sustainable Development 2007, ibid. at 40; Chevron, Energy Partnership: 2007 Corporate Responsibility Report, ibid. at 39. Talisman Energy, Going Further: Corporate Responsibility Report 2007, ibid. at 35. See also Chevron, Energy Partnership: 2007 Corporate Responsibility

Notes to pages 184–5

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Report, ibid. at 39 (‘The objective of the review was to validate the integrity of Chevron’s reporting processes’). See Oil and Gas Industry Guidance on Voluntary Sustainability Reporting (April 2005) at 9, available at http://www.ipieca.org/downloads/reporting/SustainabilityReporting.pdf (accessed 4 April 2006); Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions (December 2003) at chapter 2, available at http://www.ogp.org.uk/pubs/349.pdf (accessed 4 April 2006). See International Council on Mining and Metals, Sustainable Development Framework: Public Reporting, available at http://www.icmm.com/ourwork/sustainable-development-famework/public-reporting (accessed 8 May 2008). For the GRI Guidelines, see Global Reporting Initiative, Sustainability Reporting Guidelines 2002: Mining and Metal Sector Supplement, available at http://www.globalreporting.org/guidelines/2002.asp (accessed 7 April 2006). Oil and Gas Industry Guidance on Voluntary Sustainability Reporting, supra note 33 at 16; Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions, supra note 33 at chapter 8. See AccountAbility, AA1000: Assurance Standard at 25, available at http:// www.accountability.org.uk/uploadstore/cms/docs/Assurance%20Standard%20for%20Web.pdf (accessed 7 April 2006); Global Reporting Initiative, Sustainability Reporting Guidelines 2002, supra note 34 at Annex 4. A recent study of Canadian corporations found that ‘[p]ublic disclosures also consistently underreport what the 53 companies studied are actually doing,’ in addition to showing ‘a discrepancy between how the 53 companies assessed themselves and how they reported publicly.’ See Conference Board of Canada, The National Corporate Social Responsibility Report: Managing Risks, Leveraging Opportunities (June 2004) at 8, available at http:// www.conferenceboard.ca/documents.asp?rnext=734 (accessed 11 June 2008). David Hess, ‘Social Reporting: A Reflexive Law Approach to Corporate Social Responsiveness’ (1999) 25 Iowa J. Corp L. 41 at 67. Supra note 15. See Kasky v. Nike, Super. Ct. No. 994446. The plaintiff in this case filed an action against Nike and some of its officers alleging that in violation of California law, Nike made false statements and misrepresented facts in its public statements regarding labour conditions in Asian factories where its products are made. Following the filling of demurrers by Nike and individual defendants in the case, the Superior Court of the city of San Francisco dismissed the action, a decision that was affirmed on appeal by the

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Notes to page 185

California Court of Appeal. See Kasky v. Nike, 79 Cal. App. 4th 165; 2000 Cal. App. LEXIS 202 (Cal. App. 1st Dist. 2000). The California Supreme Court, upon further appeal, reversed the Court of Appeal holding that Nike may be liable because the alleged statements amounted to commercial speech which is not completely protected under the U.S. Constitution. See Kasky v. Nike, 27 Cal. 4th 939; 2002 Cal. LEXIS 2591(S. Ct. Cal. 2002). Upon Nike’s appeal, the U.S. Supreme Court granted Nike a writ of certiorari but subsequently dismissed the writ as improvidently granted. See Nike v. Kasky, 123 S. Ct. 2554; 2003 U.S. LEXIS 5015 (2003) cert. dismissed. The parties settled the case out of court. See Douglas M. Branson, ‘Progress in the Art of Social Accounting and other Arguments for Disclosure on Corporate Social Responsibility’ (1976) 29 Vand. L. Rev. 539 at 544–5. See Hess, supra note 38 at 63–73. See Frank R. Lopez, ‘Corporate Social Responsibility in a Global Economy After September 11: Profits, Freedom, and Human Rights’ (2004) 55 Mercer L. Rev. 739 at 768–771; Cynthia A. Williams, ‘The Security and Exchange Commission and Corporate Social Transparency’ (1999) 112 Harv. L. Rev. 1197 at 1299. See also Cyrus Mehri, Andrea Giampetro-Meyer & Michael B. Runnels, ‘One Nation, Indivisible: The Use of Diversity Report Cards to Promote Transparency, Accountability, and Workplace Fairness’ (2004) 9 Fordham J. Corp. & Fin. L. 395. Williams, ibid. at 1203. See Nouvelles Regulations Economiques (NRE), Decree No. 2002–221 of 20 February 2002. See Global Reporting Initiative, Government Initiatives to Promote Corporate Sustainability Reporting Roundtable, available at http://www.unepie.org/ Outreach/reporting/docs/GRI_govtmeeting.pdf (accessed May 30 2004). In Denmark, the Green Accounting Law of 1995 makes it mandatory for the most polluting companies to report on the environmental impacts of their activities. Corporate Social Responsibility – European Parliament Resolution on the Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility (COM [2001] 366-C5–0161/2002–2002/2069 [COS]), P5_TA(2002)0278 at para. 6, available at http://www2.europarl.eu.int/ omk/sipade2?SORT_ORDER=D&S_REF_P=%25&PROG=TA&L=EN&MI_ TITLE-European+framework (accessed 20 December 2004). In fact, the EU had in 1993 adopted The Community Eco-Management and Audit Scheme, under which corporations in the industrial sector voluntarily report on, and audit, their environmental performance at least once in three years.

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50 51

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See European Council Regulation No. 1836/93 of 29 June 1993 [1993] O.J. L 168. Similarly, the UN Intergovernmental Group of Experts on International Standards of Accounting and Reporting by Transnational Corporations recommended in 1991 that TNCs should make some environmental disclosures, including the policies and programs they have adopted with respect to environmental protection measures. See Report of the Secretary-General on Accounting for Environmental Protection Measures, UN Doc. E/C. 10/AC. 3/1991/5 (11 February 1991) para. 64, reprinted in UNCTC, International Accounting and Reporting Issues 1991 Review (UN Doc. ST/CTC/124) (New York: UN, 1992) at chapter 4. Bank Act, R.S.C. 1985 Chap. B-1, s. 459.3(1) (introduced by S.C. 2001, c. 9, s. 125). The European Parliament has recommended that voluntary corporate codes be monitored and verified by an independent and specialize public agency that works in close collaboration with other stakeholders – NGOs, business, and host communities. See Resolution on EU Standards, supra note 5 at paras. 14 & 15. See also Lopez, supra note 43 at 771–3. Nouvelles Regulations Economiques (NRE), Decree No. 2002–221 of 20 February 2002, Article 148–2. Arese, ‘Press Release: Mandatory Sustainability Reporting for French Corporations,’ available at http://www.asria.org/news/press/lib/NRE_ Press_Release.pdf (accessed 28 May 2004). For a detailed critique of social reporting regime in France, see Lucien J. Dhooge, ‘Beyond Voluntarism: Social Disclosure and France’s Nouvelles Regulations Economiques’ (2004) 21 Ariz. J. Int’l & Comp. L. 441. Dhooge, ibid. at 483–4. Ibid. at 476. See Areese, supra note 51; Dhooge, ibid. at 476–7. Dhooge, ibid. at 476. Pall A. Davidsson, ‘Note: Legal Enforcement of Corporate Social Responsibility within the EU’ (2002) 8 Colum. J. Euro. L. 529 at 553. Ibid. Notable religious organizations involved in the campaign for corporate accountability include the Canadian Ecumenical Justice Initiatives, formerly Taskforce on Churches and Corporate Responsibility; Interfaith Center on Corporate Responsibility; and Ecumenical Council for Corporate Responsibility. These three religious organizations, along with many others, have enunciated the Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance, 3rd ed. 2003, available at http://www. bench-marks.org/downloads.shtml (accessed 6 December 2004).

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59 See David Tolbert, ‘Global Climate Change and the Role of International Non-Governmental Organisations,’ in Robin Churchill & David Freestone, eds., International Law and Global Climate Change (London: Graham & Trotman/Martinus Nijhoff, 1991) 95; Alexandre Kiss & Dinah Shelton, International Environmental Law, 3rd ed. (Ardsley, NY: Transnational Publishers, 2004) at 91. See also David Reed, ‘The Global Environment Facility and Non-Governmental Organizations’ (1993) 9 Am. U. J. Int’l L. & Pol’y 191; Robin Broad & John Cavanagh, ‘The Corporate Accountability Movement: Lessons & Opportunities’ (1999) 23 Fletcher F. World Aff. 151; Debora Spar & James Dail, ‘Of Measurement and Mission: Accounting for Performance in Non-Governmental Organizations’ (2002) 3 Chi. J. Int’l L. 171 at 172. 60 For analysis of the relationship between the World Bank and NGOs, see Ibrahim F. I. Shihata, ‘The World Bank and Non-Governmental Organizations’ (1992) 25 Cornell Int’l L. J. 623. 61 David Kinley & Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ (2004) 44 Va. J. Int’l L. 931 at 934. For analysis of the methods and targets of NGO campaigns, see Broad & Cavanagh, supra note 59. 62 See Joseph F. DiMento, Environmental Law and American Business: Dilemmas of Compliance (New York & London: Plenum Press, 1986) at 148. 63 See Jane G. Covey, ‘Is Critical Cooperation Possible? Influencing the World Bank through Operational Collaboration and Policy Dialogue,’ in Jonathan A. Fox & L. David Brown, eds., The Struggle for Accountability: The World Bank, NGOs, and Grassroots Movements (Cambridge, MA: MIT Press, 1998) 81; David F. Murphy & Jem Bendell, ‘New Partnerships for Sustainable Development: The Changing Nature of Business-NGO Relations,’ in Peter Utting, ed., The Greening of Business in Developing Countries: Rhetoric, Reality and Prospects (London & New York: Zed Books/UNRISD, 2002) 216; Chiara Giorgetti, ‘From Rio to Kyoto: A Study of the Involvement of NonGovernmental Organizations in the Negotiations on Climate Change’ (1999) 7 N.Y.U. Envt’l L. J. 201. 64 See, for example, Amnesty International, Human Rights Principles for Companies (AI Index ACT 70/001/1998), available at http://web.amnesty.org./ en/library/info/ACT70/001/1998 (accessed 11 December 2004). 65 See, for example, Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (New York: Human Rights Watch, 1999). 66 See Cynthia A. Williams, ‘Civil Society Initiatives and “Soft Law” in the Oil and Gas Industry’ (2004) 36 N.Y.U. J. Int’l L. & Pol. 457 at 461. 67 Murphy & Bendell, supra note 63 at 227.

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68 Talisman Energy Inc., ‘Talisman Completes Sale of Sudan Assets’ (News Release dated 12 March 2003), available at http://www.prnewswire. co.uk/cgi/news/release?id=99308 (accessed 16 December, 2004). See also Stephen J. Kobrin, ‘Oil and Politics: Talisman Energy and Sudan’ (2004) 36 N.Y.U. J. Int’l L. & Pol. 425. 69 See Center for Religious Freedom, ‘Freedom House Urges Boycott of PetroChina & Talisman: Religious Genocide in Sudan is Directly Fueled by Greater Nile Pipeline Joint Venture,’ available at http://www.freedomhouse.org/religion/news/bn2000/bn-2000–04–05.hml (accessed 16 December 2004); Barrie Mckenna, ‘Report Urges U.S. Government to Bar Talisman from Issuing Stock,’ Globe & Mail [Toronto], 2 May 2000, reproduced online at http://www.vitrade.com/talisman/200502_report_urges_ bar_tlm_stock.htm (accessed 16 December 2004). 70 The view that adverse publicity negatively affects business is shared by the European Commission. See European Commission Green Paper, supra note 5 at 8. 71 Marina Ottaway, ‘Reluctant Missionaries’ (Jul./Aug. 2001) 125 Foreign Policy 44 at 53. 72 Speaking in the context of human rights violation by states, David Weissbrodt has observed that NGOs may ‘choose to investigate and pursue a particular violation only because the state concerned is an easy target’ and that ‘[t]he possibilities for abuse in the selection of test cases are legion.’ See David Weissbrodt, ‘The Contribution of International Nongovernmental Organizations to the Protection of Human Rights,’ in Theodor Meron, ed., Human Rights in International Law: Legal and Policy Issues, Vol. II (Oxford: Clarendon Press, 1984) 403 at 409. 73 Peter Malanczuk, Akehurst’s Modern Introduction to International Law, 7th rev. ed. (London & New York: Routledge, 1997) at 99. 74 Ottaway, supra note 71 at 54. 75 Spar & Dail, supra note 59 at 181. 76 On accountability of NGOs, see Robert C. Blitt, ‘Who Will Watch the Watchdogs?: Human Rights Nongovernmental Organizations and the Case for Regulation’ (2004) 10 Buff. Hum. Rts. L. Rev. 261. 77 Peter J. Spiro, ‘Accounting for NGOs’ (2002) 3 Chi. J. Int’l L. 161 at 163; Paul Wapner, ‘Introductory Essay: Paradise Lost? NGOs and Global Accountability’ (2002) 3 Chi. J. Int’l L. 155 at 157. See also Kenneth Anderson, ‘The Ottawa Convention Banning Landmines: The Role of International Non-Governmental Organisations and the Idea of International Civil Society’ (2000) 11 Eur. J. Int’l L. 91 at 112–19. 78 Spar & Dail, supra note 59 at 181.

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79 Spiro, ‘Accounting for NGOs,’ supra note 77 at 166. 80 See Wapner, ‘Introductory Essay: Paradise Lost? NGOs and Global Accountability,’ supra note 77 at 158–9. 81 Robert O. Keohane, ‘Commentary on the Democratic Accountability of Non-Governmental Organizations’ (2002) 3 Chi. J. Int’l L. 477. 82 See Spiro, ‘Accounting for NGOs,’ supra note 77 at 163; Keohane, ibid. at 478. 83 Paul Wapner, ‘Defending Accountability in NGOs’ (2002) 3 Chi. J. Int’l L. 197 at 201; Spiro, ‘Accounting for NGOs,’ ibid. at 163. 84 See Peter T. Muchlinski, ‘Human Rights and Multinationals: Is There a Problem?’ (2001) 77:1 Int’l Affairs 31 at 43–4. 85 Sigmund A. Wagner, Understanding Green Consumer Behaviour: A Qualitative Cognitive Approach (London & New York: Routledge, 1997) at 1. See also Joel Makower (with John Elkington & Julia Hailes), The Green Consumer, rev. ed. (New York, NY: Penguin Books, 1993). 86 See, generally, Monroe Friedman, Consumer Boycotts: Effecting Change through the Marketplace and the Media (New York & London: Routledge, 1999); Nancy E. Zelman, ‘The Nestle Infant Formula Controversy: Restricting the Marketing Practice of Multinational Corporations in the Third World’ (1990) 3 Transnat’l Lawyer 697. 87 See Saadia Toor, ‘Child Labor in Pakistan: Coming of Age in the New World Order’ (2001) 575 Annals 194 at 215–16. 88 John C. Anderson, ‘Respecting Human Rights: Multinational Corporations Strike Out’ (2000) 2 U. Pa. J. Lab. & Emp. L. 463 at 472. 89 Toor, supra note 87 at 215–16. 90 Simon Zadek & Maya Forstater, ‘Making Civil Regulation Work,’ in Michael K. Addo, ed., Human Rights Standards and the Responsibility of Transnational Corporations (The Hague: Kluwer Law International, 1999) 69 at 69–70. 91 Zadek & Forstater, ibid. at 70. 92 N. Craig Smith, Morality and the Market: Consumer Pressure for Corporate Accountability (London & New York: Routledge, 1990) at 257. 93 Ibid. 94 Ibid. at 258. 95 The Kimberley Process, a joint government, diamond industry, and civil society initiative, promotes a Certification Scheme for international trade in rough diamonds. It has been endorsed by numerous diamond mining TNCs. See the Kimberley Process at http://www.kimberleyprocess.com (accessed 5 November 2005). 96 The United Nations estimates that as much as 20 per cent of world-wide

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trade in diamonds involves illicit diamonds. See Report of the Panel of Experts Appointed Pursuant to Security Council Resolution 1306 (2000), Paragraph 19, in Relation to Sierra Leone, U.N. Doc. Number S/2000/1195 at 28 para. 147, available at http://www.un.org/Docs/sc/committees/SierraLeone/sclet11951e.pdf (accessed 6 November 2004). See Lucinda Saunders, ‘Note: Rich and Rare Are the Gems They War: Holding De Beers Accountable for Trading Conflict Diamonds’ (2001) 24 Fordham Int’l L. J. 1402 at 1412–4. Forest Stewardship Council, FSC Principles and Criteria for Forest Stewardship, available at http://www.fsc.org/pc.html (accessed 24 August 2005). Forest Stewardship Council, ‘Three Types of FSC Certifications,’ available at http://www.fsc.org/types-of-certification.html (accessed 24 August 2005). Kimberley Process Certification Scheme, available at http://www.kimberleyprocess.com/download/getlife/4 (accessed 24 August 2005). European Commission Green Paper, supra note 5 at 21. Kimberley Process Certification Scheme, supra note 100. See, for example, Canada Business Corporations Act, R.S.C. 1985, chap. 44, s. 102.(1) [hereafter CBCA]. See CBCA, s. 137.(1); 17 Code of Federal Regulations, s. 240.14a-8. Raymonde Crete, The Proxy System in Canadian Corporations: A Critical Analysis (Montreal: Wilson & Lafleur, 1986) at 193–4. See also Thomas A. Decapo, ‘Challenging Objectionable Animal Treatment with the Shareholder Proxy Proposal Rule’ (1988) U. Ill. L. Rev. 119 at 138. See Craig Forcese, Putting Conscience into Commerce: Strategies for Making Human Rights Business as Usual (Montreal: International Centre for Human Rights and Democratic Development, 1997) at 64. Robert Monks, Anthony Miller, & Jacqueline Cook, ‘Shareholder Activism on Environmental Issues: A Study of Proposals at Large US Corporations 2000–2003’ (2004) 28 Nat. Resources Forum 317 at 325. ExxonMobil PERSPECTIVES (June 2000), available at http://www.exxonmobileurope.com/Corporate/Newsroom/Publications/shareholder_ publication/ (accessed 9 April 2006). ExxonMobil PERSPECTIVES (June 2001), available at http://www.exxonmobileurope.com/Corporate/Newsroom/Publications/shareholder_ publication/ (accessed 9 April 2006). ExxonMobil PERSPECTIVES (June 2002) at 4, available at http://www2. exxonmobil.com/corporate/files/corporate/perspectives_060502.pdf (accessed 9 April 2006). ‘We Condemn Human Rights Violation: ExxonMobil,’ available at http://

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Notes to page 195 wwwlaborrights.org/press/ExxonMobil/HRviolations_acehtika_060805. htm (accessed 7 April 2006). ExxonMobil, ‘Summary of Proxy Proposal Votes,’ available at http:// www.exxonmobil.com/corporate/files/corporate/SUMMARY_OF_ PROXY_PROPOSAL_VOTES.pdf (accessed 12 April 2006). PIRC, ‘Sea Change at Shell: Shareholders Send a Message’ (May 1997), PIRC Intelligence, available at http://www.compulink.co.uk/~pirc/shellmay.htm (accessed 8 Apri, 2006). Chevron, ‘Chevron Stockholders Re-Elect 10 Directors; Reject Limits on Retirement Benefits’ (Press Release, 7 May 1996), available at http:// www.chevron.com/news/archive/chevron%5Fpress/1996/96%2D05%2 D07a.asp (accessed 10 April 2006). Chevron, ‘Chevron Updates Stockholder Annual Meeting Voting Results’ (Press Release, 4 May 1999), available at http://www.chevron.com/ news/archive/chevron%5Fpress/1999/99%2D05%2D04.asp (accessed 10 April 2006). Chevron, ‘Chevron Stockholders Re-Elect 12 Directors; Approve Stock Split’ (Press Release, 3 May 1994), available at http://www.chevron.com/ news/archive/chevron%5Fpress/1994/94%2D3b.asp (accessed 10 April 2006). See ExxonMobil, ‘ExxonMobil Sees Increased Votes for Shareholder Proposals,’ available at http://www2.exxonmobil.com/Corporate/Newsroom/Newsreleases/xom_nr_280502.asp (accessed 7 April 2006). Monks et al., supra note 107 at 325. ExxonMobil PERSPECTIVES (June 2002), supra note 110 at 4. See also ExxonMobil, ‘Summary of Proxy Proposal Votes,’ supra note 112 (indicating that proposals requiring ExxonMobil to report on climate change and on renewable energy received 22.2 per cent and 21.3 per cent support amongst shareholders, respectively). See Shareholder Association for Research and Education, ‘2003 Shareholder Proposals Submitted to Canadian Corporations,’ available at http://www.share.ca/files/pdfs/2003%20Shareholder%20Proposals%20 FINAL.pdf (accessed 23 December 2004). Michelle Tan, ‘Progress Will Be Evolutionary … Not Radical: How Canada’s Proxies Were Voted in 2001’ (2002) 14:1 Corp. Governance Rev. 1 at 3. Michelle Tan, ‘A Call to and for the Public: How Canada’s Proxies Were Voted in 2002’ (2003) 15:1 Corp. Governance Rev. 3 at 5. Laura O’Neill & Jackie Cook, Proxy Voting by Canadian Mutual Funds 2006–2007: A Survey of Management and Shareholder Resolutions, at 5 (Van-

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couver: SHARE/Fund Votes, 2008), available at http://www.share.ca/ files/MutualFund_Voting_Report_0607.pdf (accessed 10 July 2008). PIRC, Environmental and Corporate Responsibility at Shell: The Shareholder Role in Promoting Change (November 1998) at 8, available at http://www. compulink.co.uk/~pirc/shell.pdf (accessed 6 April 2006). See also PIRC, ‘The Shareholder Resolution Presented to the 1997 AGM,’ available at http://www.pirc.co.uk/shell4.htm (accessed 8 April 2006). PIRC, ‘Sea Change at Shell: Shareholders Send a Message,’ supra note 113. PIRC, ‘Sea Change at Shell: Shareholders Send a Message,’ ibid.; PIRC, Environmental and Corporate Responsibility at Shell: The Shareholder Role in Promoting Change, supra note 124 at 32–3. The Shell Sustainability Report 2007, supra note 29 at 38–40. See PIRC, ‘Sea Change at Shell: Shareholders Send a Message,’ supra note 113. ‘Statement of ExxonMobil and Shareholders Regarding Fundamental Human and Worker Rights,’ available at http://wwwexxonmobil.com/ corporate/newsroom/newsreleases/xom_nr_210404.asp (accessed 9 April 2006). Ibid. Shareholder Association for Research and Education, 2005 Key Proxy Vote Survey, at 9, available at http://www.share.ca/files/Proxy_Vote_Survey_2005_EN.pdf (accessed 10 July 2008). Ibid. at 9. See Social Investment Forum, ‘Shareholder Victories!: Victories for 2003,’ available at http://wwwsriadvocacy.org/victories_2003.cfm (accessed 7 April 2006). R.S.C. 1985, Chap. C-44. See, for example, Alberta Business Corporations Act, R.S.A. 2000, c. B-9, s. 131; Ontario Business Corporations Act, R.S.O. 1990, c. B-16, s. 99. 17 C.F.R. s. 240.14a-8, para. i. CBCA, s. 137.(5)&(5.1) read together with s. 49 of the Canada Business Corporations Regulations, S.O.R./2001–512. Re Varity Corporation and Jesuit Fathers of Upper Canada, et al. (1987), 59 O.R. (2d) 459 at 460 (H.C.); affirmed (1987), 60 O.R. (2d) 640 (C.A.). 17 C.F.R. s. 240.14a-8, para. i(5). 17 C.F.R. s. 240.14a-8, para. i(7). The second leg of the exception as embodied in the phrase ‘and is not otherwise significantly related to the company’s business’ is less problematic. Indeed, any difficulty surrounding that phrase would appear to have

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Notes to pages 198–9 been resolved by Lovenheim v. Iroquois Brands Limited, 618 F. Supp. 554 at 560 (D.D.C. 1985), where the court held that its meaning is not limited to economic significance. Thus, ‘companies may not exclude from their proxy materials ethical and social proposals that implicate the company’s business activities because the proposal lacks economic significance.’ See Decapo, supra note 105 at 144. See CBCA, s. 137.(1.1), read together with s. 46 of Canada Business Corporation Regulation, S.O.R./2001–512. However, the CBCA permits shareholders to pool their shareholdings together so as to meet the minimum requirements for the submission of a proposal. See CBCA, s. 137.(1.1)(b). CBCA, s. 137.(5)(e). Medical Committee for Human Rights v. SEC, 432 F.2d 659 at 678 (D.C. Cir. 1970) [emphasis in original]. Colleen D. Ball, ‘Comment: Regulations 14A and 13D: Impediments to Pension Fund Participation in Corporate Governance’ (1991) Wis. L. Rev. 175 at 176. See An Act to Amend the Canada Business Corporations Act and the Canada Cooperatives Act and to Amend other Acts in Consequence, S.C. 2001, c. 14 [assented to 14th June 2001; effective 24th November 2001]. Shareholder Association for Research and Education, ‘2003 Shareholder Proposals Submitted to Canadian Corporations,’ available at http:// www.share.ca/files/pdfs/2003%20Shareholder%20Proposals%20FINAL. pdf (accessed 23 December, 2004). Prior to the CBCA amendment, little resort was had to SPR in Canada due to the stringency and broad nature of the exceptions under the old CBCA. See Catherine McCall & Rejane Wilson, ‘Shareholder Proposals, Why Not in Canada? (1993) 5:1 Corp. Governance Rev. 12–13; Brian R. Cheffins, ‘Michaud v. National Bank of Canada and Canadian Corporate Governance: A “Victory” for Shareholder Rights?’ (1998) 30 C.B.L.J. 20 at 47–8; Crete, supra note 105 at 190–2. See Bruce Welling, Corporate Law in Canada: The Governing Principles, 3rd ed. (Mudgeeraba, Queensland, & London, Ontario: Scribblers Publishing, 2006) at 460; Cheffins, ibid. at 36–7. See 17 C.F.R. s. 240.14a-8 at para. i(1). Cheffins, supra note 147 at 37. Gil Yaron, ‘Canadian Institutional Shareholder Activism in an Era of Global Deregulation,’ in Janis Sarra, ed., Corporate Governance in Global Capital Markets (Vancouver/Toronto: UBC Press, 2003) 111 at 119. See Forcese, supra note 106 at 62. Center for Religious Freedom, ‘Freedom House Urges Boycott of PetroChina & Talisman: Religious Genocide in Sudan is Directly Fueled by

Notes to pages 199–200

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Greater Nile Pipeline Joint Venture,’ available online at http://www. freedomhouse.org/religion/news/bn2000/bn-2000–04–05.htm (accessed 16 December 2004). For insight on the assets and volume of investment held by institutional investors in OECD countries, see generally, OECD, Institutional Investors – Statistical Yearbook, 1992–2001, 2003 Edition (Paris: OECD, 2004). Thomas C. Paefgen, ‘Institutional Investors Ante Portas: A Comparative Analysis of an Emergent Force in Corporate America and Germany’ (1992) 26 Int’l Lawyer 327 at 331. For perspectives on how institutional investors may influence corporate governance, see Jeffrey Larsen, ‘Institutional Investors, Corporate Governance and Proxy Voting Disclosure,’ in Poonam Puri & Jeffrey Larsen, eds., Corporate Governance and Securities Regulation in the 21st Century (Markham, ON: LexisNexis/Butterworths, 2004) 181; Jayne W. Barnard, ‘Institutional Investors and the New Corporate Governance’ (1991) 69 N. C. L. Rev. 1135. Robert A.G. Monks, The New Global Investors: How Shareowners Can Unlock Sustainable Prosperity Worldwide (Oxford, UK: Capstone, 2001) at 105. Benjamin J. Richardson, ‘Enlisting Institutional Investors in Environmental Regulation: Some Comparative and Theoretical Perspectives’ (2002) 28 N. C. J. Int’l L & Com. Reg. 247 at 288 [hereafter ‘Enlisting Institutional Investors’]. Social Investment Organization, Canadian Social Investment Review 2002 (March 2003) at 5, available at http://www.socialinvestment.ca/CSIR.pdf (accessed 19 December 2004). Social Investment Organization, Canadian Social Investment Review 2004 (April 2004) at 5–6, available at http://www.socialinvestment.ca/SIReview04.pdf (accessed 21 August 2005). Social Investment Organization, Canadian Socially Responsible Investment Review 2006 (March 2007) at 5, available at http://www.socialinvestment. ca/documents/SRIReview.pdf (accessed 9 July 2008). See ibid. at 5. See Richardson, ‘Enlisting Institutional Investors,’ supra note 157 at 321–9. See Dow Jones Sustainability Indexes, available at http://www.sustainability-indexes.com/ (accessed 10 July 2008); FTSE4Good Index Series, available at http://www.ftse.com/Indices/FTSE4Good_Index_Series/index.jsp (accessed 10 July 2008); and South Africa’s JSE Socially Responsible Investment (SRI) Index, available at http://www.jse.co.za/sri/ (accessed 10 July 2008). Some studies indicate that there is a positive relationship between the financial performance of a corporation and its social responsibility. See

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Notes to pages 200–1 Joshua D. Margolis & James P. Walsh, People and Profits? The Search for a Link Between a Company’s Social and Financial Performance (Mahwah, NJ: Lawrence Erlbaum Associates, 2001) at 10–14; Moses L. Pava & Joshua Krausz, Corporate Responsibility and Financial Performance: The Paradox of Social Cost (Westport, CT: Quorum Books, 1995) at 15. Richardson, ‘Enlisting Institutional Investors,’ supra note 157 at 278. See CBCA, s. 102.(1). Benjamin J. Richardson, Environmental Regulation through Financial Organizations: Comparative Perspectives on the Industrialized Nations (The Hague: Kluwer Law International, 2002) at 240. See Ronald B. Davis, ‘Investor Control of Multinational Enterprises: A Market for Corporate Governance Based on Justice and Fairness?’ in Sarra, ed., supra note 151, 131 at 149. See Allan C. Hutchinson, The Companies We Keep: Corporate Governance for a Democratic Society (Toronto: Irwin Law, 2005) at 161–70. Yaron, supra note 151 at 122. The fact that there are no specific laws upon which foreign direct liability suits can be predicated in some developed home countries of TNCs such as Canada and the United Kingdom has not dampened academic enthusiasm about the possibility of holding TNCs liable in these countries for rights violations abroad. See, for example, Craig Forcese, ‘Deterring “Militarized Commerce”: The Prospect of Liability for “Privatized” Human Rights Abuses’ (1999–2000) 31 Ottawa L. Rev. 171; Michael Byers, ‘English Courts and Serious Human Rights Violations Abroad: A Preliminary Assessment,’ in Kamminga & Zia-Zarifi, eds., supra note 10 at 241. See Recherches Internationales Quebec v. Cambior Inc. (1998) CarswellQue 4511 (Que. Sup. Ct.). See Lubbe v. Cape Plc., [1999] Int’l Litigation Procedure 113 (CA); Sithole v. Thor Chemicals Holdings Ltd., [1999] TLR 110; Ngcobo v. Thor Chemicals Holdings Ltd., [1995] TLR 579; Connelly v. RTZ Corp. Plc., [1997] 3 WLR 373. For insightful discussion of these cases, see Richard Meeran, ‘Liability of Multinational Corporations: A Critical Stage in the UK,’ in Kamminga & Zia-Zarifi, eds., supra note 10 at 251–64; Halina Ward, ‘Securing Transnational Corporate Accountability through National Courts: Implications and Policy Options’ (2001) 24 Hastings Int’l & Comp. L. Rev. 451 at 454–62. Ward, ibid. at 458 (citing Richard Meeran, ‘Thor Workers Accept Offer of Settlement,’ available at http//:www.labournet.net/world/0010/thor2. html). 28 U.S.C. s. 1350. Much of the literature on this statute refers to it as the

Notes to pages 202–3

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Alien Tort Claims Act. However, I refer to the statute here as Alien Tort Statute in keeping with the U.S. Supreme Court’s designation of the statute in Sosa v. Alvarez-Machain, 124 S. Ct. 2739 at 2754 (2004). 28 U.S.C. s. 1350. Kadic v. Karadzic, 70 F. 3d 232 at 239 (2d Cir. 1995) (quoting Filartiga v. Pena-Irala, 630 F.2d 876 at 888 (2d Cir. 1980). Terry Collingsworth, ‘The Key Human Rights Challenge: Developing Enforcement Mechanisms’ (2002) 15 Harv. Hum. Rts. J. 183 at 196. Kadic v. Karadzic, 70 F. 3d 232 at 238 (2d Cir. 1995) (quoting Filartiga v. Pena-Irala, 630 F. 2d 876 at 881). For example, it has been held that ‘forced labor is so widely condemned that it has achieved the status of a jus cogens violation.’ See John Doe III v. Unocal Corp., 2002 U.S. App. LEXIS 19263 (9th Cir., 2002). Jeffrey M. Blum & Ralph G. Steinhardt, ‘Federal Jurisdiction Over International Human Rights Claims: The Alien Tort Claims Act After Filartiga v. Pena-Irala’ (1981) 22 Harv. Int’l. L.J. 53 at 87–90. Sosa v. Alvarez-Machain, 124 S. Ct. 2739 at 2754 (2004). Kadic v. Karadzic, 70 F. 3d 232 at 239 & 243–4 (2d Cir. 1995). See also Wiwa v. Royal Dutch Petroleum, 226 F. 3d 88 at 104 (2d Cir. 2000). Presbysterian Church of Sudan v. Talisman Energy, 244 F. Supp. 2d 289 at 319 (S.D.N.Y. 2003); 2003 U.S. Dist. LEXIS 4085. See also Beanal v. FreeportMcMoRan Inc., 969 F. Supp. 362 at 376 (E.D. La. 1997), affirmed, 197 F. 3d 161 (5th Cir. 1999). See Wiwa v. Royal Dutch Petroleum, 2002 U.S. Dist. LEXIS 3293, No. 96 Civ. 8386 (KMW) (S.D.N.Y 2002). See Presbysterian Church of Sudan v. Talisman Energy, 244 F. Supp. 2d 289 at 319 (S.D.N.Y. 2003); 2003 U.S. Dist. LEXIS 4085. The ATS was originally an aspect of the Judiciary Act passed by the U.S. Congress in 1789. However, the intention of the Congress in enacting the ATS is a matter for debate. See Presbyterian Church of Sudan v. Talisman Energy, 244 F. Supp. 2d 289 (S.D.N.Y. 2003). Some argue that the ATS was enacted to enhance U.S. national security. See Jeffrey Rabkin, ‘Universal Justice: The Role of Federal Courts in International Civil Litigation’ (1995) 95 Colum. L. Rev. 2120 at 2125. Others argue that the ATS was intended to ‘propagate and enforce’ international law through U.S. domestic courts. See Anne-Marie Burley, ‘The Alien Tort Statute and the Judiciary Act of 1789: A Badge of Honor’ (1989) 83 Am. J. Int’l L. 461 at 475. Filartiga v. Pena-Irala, 630 F. 2d 876, 881–8 (2d Cir. 1980) (citing Paquette Habana, 175 U.S. 677 (1900)). John Doe III v. Unocal Corp., 2002 U.S. App. LEXIS 19263 (9th Cir. 2002);

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Notes to pages 203–4 Kadic v. Karadzic, 70 F. 3d 232 at 245 (2d Cir. 1995); John Doe 1 v. Unocal Corp., 963 F. Supp. 880 at 891 (C.D. Cal. 1997). However, there are two exceptions to the ‘state action’ requirement. State action is not required in instances where (i) the violation alleged is one of a handful of crimes for which international law attributes individual or personal responsibility such as war crimes, piracy, genocide, and slavery, or (ii) the tort(s) or rights violation alleged does not fall within the category of crimes for which international law imposes individual responsibility but is/are committed in pursuit or furtherance of such crimes. See Kadic v. Karadzic, 70 F. 3d 232 at 239–44 (2d Cir. 1995); Tel-Oren v. Libyan Arab Republic, 726 F.2d 774 at 794–5 (D.C. Cir. 1984); John Doe III v. Unocal Corp., 2002 U.S. App. LEXIS 19263 (9th Cir., 2002). See, for example, Beanal v. Freeport – McMoran, Inc., 969 F. Supp. 362 at 380 (E.D. La., 1997). See Brad J. Kieserman, ‘Comment: Profits and Principles: Promoting Multinational Corporate Responsibility by Amending the Alien Tort Claims Act’ (1999) 48 Catholic Univ. L. Rev. 881 at 925. See Wiwa v. Royal Dutch Petroleum, 2002 U.S. Dist. LEXIS 3293, No. 96 Civ. 8386 (KMW) (S.D.N.Y. 2002); John Doe III v. Unocal Corp., 2002 U.S. App. LEXIS 19263 (9th Cir. 2002). Collingsworth, supra note 178 at 201. On problems of piercing the corporate veil and holding parent companies liable for the actions of their subsidiaries, see Phillip I. Blumberg, ‘Accountability of Multinational Corporations: The Barriers Presented by Concepts of the Corporate Juridical Entity’ (2001) 24 Hastings Int’l & Comp. L. Rev. 297. Wiwa v. Royal Dutch Petroleum, 226 F. 3d 88 at 106 (2d Cir. 2000). See Wiwa. v. Royal Dutch Petroleum, ibid. at 95–9 (where the court assumed general jurisdiction over Royal Dutch Petroleum, a foreign defendant, based in part on the fact that it maintained an Investor Relations Office in New York); Presbyterian Church of Sudan v. Talisman Energy, 244 F. Supp. 2d 289 at 330–1 (S.D.N.Y. 2003); 2003 U.S. Dist. LEXIS 4085 (where jurisdiction was found over Talisman Energy, a Canadian oil and gas TNC, on the basis of its U.S. subsidiary, whose officers, finances and address were essentially those of Talisman). See, generally, Helicopteros Nacionales De Colombia v. Hall, 466 U.S. 408, 80 L.Ed. 2d 404, 104 S. Ct. 1868 at 1873 (1984); Gordy v. Daily News, L.P., 95 F. 3d 829 at 831–2 (9th Cir. 1996); John Doe 1 v. Unocal Corp., 248 F. 3d 915 at 923 (9th Cir. 2001). In fact, ATS cases are more likely to be dismissed at the preliminary stage than to proceed to trial. See Beth Stephens, ‘Upsetting Checks and Balances: The Bush Administration’s Efforts to Limit Human Rights Litiga-

Notes to pages 204–6

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199 200 201 202

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205 206 207 208

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tion’ (2004) 17 Harv. Hum. Rts. J. 169 at 179–80. See also Kieserman, supra note 191 at 887–8. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 91 L.Ed 1055, 67 S.Ct. 839 at 842 (1947). For the tests applied by the courts in determining appropriate forum, see Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 506–9, 91 L.Ed 1055, 67 S. Ct. 839 at 842–3 (1947). Wiwa v. Royal Dutch Petroleum, 226 F. 3d 88 at 100–1, 106 (2d Cir. 2000). Presbyterian Church of Sudan v. Talisman Energy, 244 F. Supp. 2d 289 at 336 (S.D.N.Y. 2003); 2003 U.S. Dist. LEXIS 4085. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401, 11 L. Ed. 2d 804, 84 S. Ct. 923 at 926 (1964). See Stephens, supra note 196 at 191–202; Logan M. Breed, ‘Regulating Our 21st-Century Ambassadors: A New Approach to Corporate Liability for Human Rights Violations Abroad’ (2002) 42 Va. J. Int’l L. 1005 at 1020–23. See Baker v. Carr, 369 U.S. 186, 217, 82 S. Ct. 691 at 710 (1962). Michael D. Ramsey, ‘Multinational Corporate Liability Under the Alien Torts Claims Act: Some Structural Concerns’ (2001) 24 Hastings Int’l & Comp. L. Rev. 361 at 361. Ibid. at 364. For example, Wiwa v. Royal Dutch Petroleum was handled probono by lawyers of the Center for Constitutional Rights, New York, U.S.A. See John Doe I v. Unocal Corp., 963 F. Supp. 880 (C.D. Cal. 1997). See Stephens, supra note 196 at 179–80; Breed, supra note 202 at 1015–16. However, Unocal’s recent out-of-court settlement of the suit filed against it under the ATS by plaintiffs from Myanmar is, perhaps, indicative that the day is not far off when corporations will be held liable for human rights violations under the ATS. See William Baue, ‘Unocal Alien Tort Claims Act Case Settlement Boosts Corporate Accountability,’ available at http://www.socialfunds.com/news/article.cgi/article1591.html (accessed 18 December 2004). See Francisco Rivera, ‘A Response to the Corporate Campaign against the Alien Tort Claims Act’ (2003) 14 Ind. Int’l & Comp. L. Rev. 251. Corporate opposition to the ATS notwithstanding, the U.S. Supreme Court has recently affirmed that it applies to a ‘very limited category’ of claims, although the court did not specifically address its application to private corporate defendants. See Sosa v. Alvarez-Machain, 124 S. Ct. 2739 (2004). See In Re Union Carbide Corporation Gas Plant Disaster at Bhopal, India, 809 F. 2d 195 at 202 (2d Cir. 1987); Capital Currency Exchange, N. V. v. National

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Notes to pages 206–8 Westminster Bank P.L.C., 155 F.3d 603 at 611–12 (2d Cir. 1998), cert. denied, 526 U.S. 1067, 119 S. Ct. 1459, 143 L.Ed. 2d 545 (1995); Aguinda v. Texaco, Inc., 303 F. 3d 470 (2d Cir. 2002). 809 F. 2d 195 (2d Cir. 1987). United States judges have been known to use economic considerations as a basis for determining the extraterritorial application of U.S. statutes. See Mark Gibney & R. David Emerick, ‘The Extraterritorial Application of United States Law and the Protection of Human Rights: Holding Multinational Corporations to Domestic and International Standards’ (1996) 10 Temp. Int’l & Comp. L. J. 123 at 140–1; Jonathan Turley, ‘“When in Rome”: Multinational Misconduct and the Presumption Against Territoriality’ (1990) 84 Northwestern University Law Review 598 at 601. Stephens, supra note 196 at 196–200; Williams, ‘Civil Society Initiatives and “Soft Law” in the Oil and Gas Industry,’ supra note 66 at 483. See also Sarah Joseph, Corporations and Transnational Human Rights Litigation (Oxford: Hart Publishing, 2004) at 55–6. See Elliot J. Schrage, ‘Judging Corporate Accountability in the Global Economy’ (2003) 42 Colum. J. Transnat’l L. 153 at 161–2. Schrage, ibid. at 166. See also Ugo Mattei & Jeffrey Lena, ‘U.S. Jurisdiction Over Conflicts Arising Outside of the United States: Some Hegemonic Implications’ (2001) 24 Hastings Int’l & Comp. L. Rev. 381 at 382–3. Rivera, supra note 209 at 256 (citing Emonitors for the week ending 22 April 2003). Mattei & Lena, supra note 215 at 388. Sosa v. Alvarez-Machain, 124 S. Ct. 2739 at 2754 (2004). Ibid. at 2759. On the impact of this decision on ATS claims against corporate defendants, see Beth Stephens, ‘Sosa v. Alvarez-Machain: “The Door is Still Ajar” for Human Rights Litigation in U.S. Courts’ (2004) 70 Brooklyn L. Rev. 533. Sosa v. Alvarez-Machain, 124 S. Ct. 2739 at 2764 (2004). Peter T. Muchlinski, Multinational Enterprises and the Law, 2nd ed. (Oxford: Oxford University Press, 2007) at 530. Presbyterian Church of Sudan v. Talisman Energy, 374 F. Supp. 2d 331 (S.D.N.Y 2005); 2005 U.S. Dist. LEXIS 11368. Beanal v. Freeport-McMoRan, Inc., 969 F. Supp. 362 at 384 (E.D. La. 1997), affirmed, 197 F. 3d 161 (5th Cir. 1999). See Richard L. Herz, ‘Litigating Environmental Abuses Under the Alien Tort Claims Act: A Practical Assessment’ (2000) 40 Va. J. Int’l L. 545. 775 F. Supp. 668 at 670 (S.D.N.Y. 1991). 1994 U.S. Dist. LEXIS 4718; 1994 WL 142006 (S.D.N.Y. 1994).

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227 See Beanal v. Freeport-McMoRan, Inc., 969 F. Supp. 362 at 382–84 (E.D. La. 1997), affirmed, 197 F. 3d 161 (5th Cir. 1999). 228 EC, European Parliament, Resolution on EU Standards, supra note 5 at para. F. 9. Towards Effective Regulation of Transnational Corporations 1 See International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies (Versoix, Switzerland: International Council on Human Rights Policy, 2002) at 7–14; Menno T. Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC,’ in Philip Alston, ed., The EU and Human Rights (Oxford & New York: Oxford University Press, 1999) 553 at 568. 2 David Vogel, National Styles of Regulation: Environmental Policy in Great Britain and the United States (Ithaca & London: Cornell University Press, 1986) at 209. 3 On the political influence of corporations, see David C. Korten, When Corporations Rule the World, 2nd ed. (San Francisco/Bloomfield, CT: BerrettKoehler Publishers/Kumarian Press, 2001); Ed Finn, Under Corporate Rule: The Big Business Takeover of Canada (Ottawa: Canadian Centre for Policy Alternatives, 1996). 4 See Joel Bakan, The Corporation: The Pathological Pursuit of Profit and Power (Toronto: Viking Canada, 2004) at 148. 5 African Institute of Corporate Citizenship, Voices From Africa: Opportunities and Challenges for Corporate Citizenship on the Continent (September 2004) at 20, available at http://www.aiccafrica.org?PDF%20files/ CCC04%20Convention%20Report.pdf (accessed 4 May 2006). 6 Bakan, supra note 4 at 149. 7 Robert A.G. Monks, The Emperor’s Nightingale: Restoring the Integrity of the Corporation in the Age of Shareholder Activism (Reading, MA: AddisonWesley, 1998) at 156. 8 Bakan, supra note 4 at 85. 9 Adelle Blackett, ‘Global Governance, Legal Pluralism and the Decentered State: A Labor Law Critique of Codes of Corporate Conduct’ (2001) 8 Indiana J. Global Leg. Stud. 401. 10 Civil society is used here in the loose sense to mean civil society organizations such as NGOs, community associations, and the general public. 11 Mary H. Kaldor, ‘The Ideas of 1989: The Origins of the Concept of Global Civil Society’ (1999) 9 Transnat’l L. & Contemp. Probs. 475 at 487 (describ-

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Notes to pages 214–19 ing global civil society as meaning ‘a global peace and a global rule of law, underpinned by an active and alert transnational citizenry’). See Bob Hepple, ‘A Race to the Top? International Investment Guidelines and Corporate Codes of Conduct’ (1999) 20 Comp. Lab. L. & Pol’y J. 347 at 354–5. Harry Arthurs, ‘Corporate Self-Regulation: Political Economy, State Regulation and Reflexive Labour Law’ (unpublished paper on file with author). For insightful analysis of the powers of civil society, see Abner S. Greene, ‘Civil Society and Multiple Repositories of Power’ (2000) 75 Chi-Kent L. Rev. 477. Ernest Gellner, Conditions of Liberty: Civil Society and its Rivals (New York, NY: Allen Lane/Penguin Press, 1994) at 5 & 193. David M. Trubek, Jim Mosher, & Jeffrey S. Rothstein, ‘Transnationalism in the Regulation of Labor Relations: International Regimes and Transnational Advocacy Networks’ (2000) Law & Soc. Inquiry 1187 at 1193. See C. Raj Kumar, ‘National Human Rights Institutions: Good Governance Perspectives on Institutionalization of Human Rights’ (2004) 19 Am. U. Int’l L. Rev. 259 at 297. On the need to empower individuals and groups in international affairs, see Claudio Grossman & Daniel D. Bradlow, ‘Are We Being Propelled Towards a People Centered Transnational Legal Order?’ (1993) 9 Am. U. J. Int’l L & Pol’y 1; Dinah Shelton, ‘The Participation of Nongovernmental Organizations in International Judicial Proceedings’ (1994) 88 Am J. Int’l L. 611; David S. Rubinton, ‘Toward a Recognition of the Rights of Non-States in International Environmental Law’ (1992) 9 Pace Envt’l L. Rev. 475. Harry Arthurs, ‘Labour Law Without the State’ (1996) 46 U. Toronto L. J. 1 at 45. I am paraphrasing Ernest Gellner here. See Gellner, supra note 15 at 5 & 193. Mark Tushnet, ‘The Constitution of Civil Society’ (2000) 75 Chi-Kent L. Rev. 379 at 380. This paradox has been captured by Mark Tushnet, who, speaking in the context of civil society/government relationship, has asked: ‘How can civil society’s institutions constrain and be a source of appropriate influence on the very government that defines the boundaries within which they may operate and assists them with institutional guarantees?’ ibid. at 382. Emily Walter, ‘From Civil Disobedience to Obedient Consumerism? Influences of Market-Based Activism and Eco-Certification on Forest Governance’ (2003) 41 Osgoode Hall L. J. 531 at 563. Debora Spar & James Dail, ‘Of Measurement and Mission: Accounting for

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Index

Africa, 3–14, 18–22, 24–31, 34, 38–9, 41–5, 48–9, 66, 82, 85–6, 96, 105, 107–9, 111–14, 123, 127, 129, 132, 142–4, 149–50, 152–3, 156–7, 160–1, 163, 166–7, 169, 179, 188, 191, 195, 206, 218–22, 225 African Charter on Human and Peoples’ Rights, 11, 50, 107, 109–14, 146 African Commission on Human and Peoples’ Rights, 11, 109–14 African Convention on the Conservation of Nature and Natural Resources, 107 African Union, 107–8 Agip, 75, 167 Algeria, 3 Alien Tort Statute (ATS), 12, 201–8, 212 Alliance of Democratic Forces for the Liberation of the Congo, 21 Anderson, Sarah, 5 AngloGold Ashanti, 83, 85, 91–3 Angola, 3, 20–1, 26, 28; Cabinda, 25 Annan, Kofi, 118, 130 Anvil Mining Corporation, 170–1

Arctic National Wildlife Refuge (ANWR), 194 Asia, 191 Asian Development Bank, 176 Australia, 24 Bamako Commitment on Environment and Development, 108 Barrick Gold Corporation, 169–70 Bell, Ruth, 42 British Petroleum, 5–6 Bujagali hydropower project [Uganda], 169 Bulyanhulu gold mine project [Tanzania], 162, 167, 169, 172 Cameroon, 3, 157–8, 160, 167 Canada, 21, 24, 39, 185, 195, 198–9, 201; Bank Act, 185; Canada Business Corporations Act (CBCA), 197–8; House of Commons’ Standing Committee on Foreign Affairs and International Trade, 181 Cape Plc, 201 Cases: Aguinda v. Texaco, Inc, 208; Amlon Metals, Inc. v. F.M.C., 208;

400

Index

Douglas v. Shell Petroleum Development Company Ltd., 280n130; Edamkue & Others v. Shell, 101; Jonah Gbemre v. Shell & Others, 282n152; In Re Union Carbide Corporation, 206; Onwo v. Oko, 287n53; Presbysterian Church of Sudan v. Talisman Energy, 341n184; Shell v. Isaiah, 101; Social and Economic Rights Action Center & Center for Economic and Social Rights v. Nigeria, 11, 109, 112–13; Sosa v. AlvarezMachain, 207–8; Uzoukwu v. Ezeonu II, 287n53; Wiwa v. Royal Dutch Petroleum, 206 Cassese, Antonio, 116 Cavanagh, John, 5 Chad, 3, 157–8, 160, 164, 167; Bakola, 163; Doba, 157 Chad-Cameroon Petroleum Development and Pipeline Project, 157–8, 163–4, 167, 173, 179, 194 Chevron, 5–6, 15, 75, 82, 85, 91, 99, 126, 157, 167, 183, 195 Chile, 117 Churchill, Winston, 40 Clapham, Andrew, 147, 149 code of conduct, 11, 35, 46–7, 188, 194–6, 209 Cole, Daniel, 41, 43 Compliance Advisor/Ombudsman (CAO), 168–73, 176 ConocoPhillips, 85 Convention on the African Energy Commission, 107 Cook, Jacqueline, 195 corporate accountability, 10, 45, 97–104, 111–13, 122, 129–30, 134–5, 142, 150–1, 153, 166, 182, 187–8, 196–7, 200, 202, 206–7, 212, 226

corporate codes of conduct, 80–4, 88, 91–3, 100, 117, 127, 129, 141, 214, 225. See also code of conduct corporate governance, 120–1, 123–4, 132, 141, 199 corporate irresponsibility, 4, 7, 9, 13, 25, 27, 45, 71, 81, 107, 120, 130, 140–1, 187–8, 192, 201, 222. See also corporate responsibility corporate power, 212–17 corporate regulation, 10, 29, 32, 37, 40, 43, 45, 47–8, 109, 192 corporate responsibility, 127, 196, 213 Davos [Switzerland], 118 De Beers, 83, 167 Democratic Republic of Congo (DRC), 3, 10, 19–21, 25, 92, 166, 169–70 Denmark, 185 Dikulushi mining project [Democratic Republic of Congo], 166, 169–71 Elf, 75 environmental crimes/offences, 70–1 environmental degradation, 98 environmental impact assessment (EIA), 58–9, 64, 105 environmental management plan, 34, 94, 159. See also environmental management system environmental management system, 55, 94–5 environmental protection, 107–8. See also environmental degradation environmental regulation, 54, 59–61, 74 Europe, 185 European Commission, 185

Index

401

European Convention on Human Rights, 146 European Investment Bank, 157 European Union, 23, 181 European Union Parliament, 185, 209 extractive industries, 4–5, 7–10, 13, 22, 25, 27–8, 43, 71–2, 77–80, 82–6, 88–9, 95, 97, 102, 108–9, 112–13, 123, 150, 155, 157, 163, 178, 184–5, 192–4, 220, 222–4. See also mining industry; oil and gas industry ExxonMobil, 5–6, 82–4, 126, 157, 167, 194–6. See also Mobil

Global Reporting Initiative (GRI), 184 Grabosky, P.N., 36 Greater Nile Petroleum Operating Company (GNPOC), 18–19, 188 Grossman, Peter, 41, 43 Gunningham, Neil, 32, 36 Guyana, 201

Forstater, Maya, 191 France, 185–6, 199; Nouvelles Regulations Economiques, 186 Fung, Archon, 183, 185

Ikelegbe, Augustine, 99 India, 206 Indigenous Peoples Plan (IPP), 155, 163 Inter-American Development Bank, 176 International Bank for Reconstruction and Development (IBRD), 152–3, 157, 167, 173–4, 176–8 International Code of Ethics for Canadian Business, 181 International Council on Mining and Metals (ICMM), 86–7, 184 International Development Association (IDA), 152–3, 157, 173–4, 176–8 International Finance Corporation (IFC), 11, 152–7, 162–3, 165–9, 171–3, 176, 178, 216, 223 International Labour Organization (ILO), 11, 85, 88, 117, 130, 134, 136–7, 155, 178, 216, 223; Declaration on Fundamental Principles and Rights at Work and its Follow-up, 11, 88, 136–7, 196; Tripartite Declaration of Principles Concerning Multina-

Gabon, 3 gas flaring, 23–4, 53–4, 76, 101, 158 Gellner, Ernest, 214 Germany, 199 Ghana, 3, 7, 9–11, 14, 19, 22, 24, 42, 50, 60–80, 87, 92–100, 102–7, 161, 210–11, 220, 222–3; Environmental Assessment Regulations 1999, 64–6, 69, 94–5; Environmental Protection Agency Act, 64, 71; Environmental Protection Agency (EPA), 61, 64–9, 72–4, 94; Ghana Chamber of Mines, 92; Ghana Minerals Commission, 61–2, 73; Mineral Development Fund (MDF), 74–5; Minerals and Mining Act 2006, 61; Mining and Environmental Guidelines, 61; Mining Regulations 1970, 61; Obuasi, 92; Tarkwa, 24, 124 globalization, 31, 37, 44, 46–9

Haliburton, 27 Hawkins, Keith, 34 Higgins, Rosalyn, 148 Horta, Korinna, 158

402

Index

tional Enterprises and Social Policy, 11, 136 International Monetary Fund, 152 Internet, 188, 193 Kabila, Laurent, 21, 25 Kampala Declaration, 108 Kell, Georg, 121 Kigali [Rwanda], 20 Kimberley Process, 39, 191, 193; Kimberley Process Certification Scheme, 193 Kneller, Robert, 165 Konkola copper mine project [Zambia], 169 Kyoto Protocol, 37 Latin, Howard, 49 Liberia, 10, 20–2, 25, 143–4 Macdonald, Roderick, 33 Mbeki, Thabo, 207 Migdal, Joel, 27 Miller, Anthony, 195 Minerals Council of Australia, 87 mining industry, 9–10, 24, 60, 62, 64, 74 Mobil, 75 Model Business Principles, 181 Monks, Robert, 195, 199, 212 Monsanto, 191 Mosher, Jim, 215 Movement for the Survival of Ogoni Peoples (MOSOP), 17, 94, 97–8 Muchlinski, Peter, 44 Multilateral Investment Guarantee Agency (MIGA), 11, 152–7, 162–73, 176, 178–9, 216, 223 Namibia, 201

Nationalist and Integrationist Front (FNI), 92 National Union for the Total Independence of Angola (UNITA), 20, 28 Nestle, 191 Netherlands, 185 New Partnership for Africa’s Development (NEPAD), 50, 78, 108–9 Nigeria, 3, 7, 9–11, 14–18, 22–3, 25, 27, 42, 50–60, 65–80, 88, 91–107, 110–13, 123–4, 161, 169, 183, 188, 195–6, 202, 210–11, 214–15, 219–20, 222–3; Akassa, 23; Associated Gas ReInjection Act, 53–4; Department of Petroleum Resources (DPR), 54–6, 68, 72–5, 95; Director of Petroleum Resources, 51–2, 56; Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN), 54–6, 94–5; Environmental Impact Assessment Act (EIAA), 58–9; Federal Ministry of Environment (FME), 58–9, 73–4; Ijaw, 102; Ikenyan, 15; Itsekiri, 102; Mineral Oils (Safety) Regulations, 60; National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 56–8; National Environmental Standards and Regulations Enforcement Agency (NESREA), 56–8, 74; National Oil Spill Detection and Response Agency (NOSDRA), 58, 74; Niger Delta, 14, 16–17, 22–4, 94; Nigeria Police Force, 14–15, 18; Nigerian National Petroleum Corporation (NNPC), 75, 109, 111, 113; Ogoni, 17–18, 88, 98, 100–3, 109–10, 124, 188, 196, 214–15 (See also Ogonis/ Ogoniland); Ogoni Bill of Rights,

Index 17; oil and gas-producing communities, 14, 97, 100–2, 104–5, 188, 219; Oil in Navigable Waters Act, 70–1; Oil Pipelines Act, 69; Oil Terminal Dues Act, 71; Opia, 15; Petroleum Act, 51, 68; Petroleum (Drilling and Production) Regulations 1969 (PDPR), 51–3; Petroleum Refining Regulations 1974 (PRR), 51–2; Rivers State Internal Security Task Force, 15–17; Ukpeleide, Ikwerre, 23; Umuechen, 16; Urhobo, 102 Nike, 191 non-governmental organizations (NGOs), 5, 10, 12, 45, 47, 49, 58, 66, 88–9, 91, 93–4, 96–100, 102–4, 106, 109, 113, 122, 124, 127, 130, 133–5, 139, 145, 149, 170, 174, 179–80, 182, 187–90, 192–3, 196, 201, 214–15, 217–21, 225; AccountAbility1000, 184; Campaign for Democracy, 97; Civil Liberties Organization, 97; Committee for the Defence of Human Rights, 97; Constitutional Rights Project, 97; Environmental Rights Action, 94; Forest Stewardship Council, 193; Friends of the Earth, 188; Greenpeace, 188; Human Rights Watch, 16, 22, 92, 97, 188; Oxfam, 188; Sierra Club, 188; Third World Network, 97 Norms on the Responsibilities of TNCs and Other Business Enterprises with Regard to Human Rights, 11, 131–6, 151, 226 North American Free Trade Agreement, 147 Ogonis/Ogoniland, 16–17, 98, 109–13, 128

403

oil and gas industry, 7, 9–10, 51, 54–5, 58–60, 73–4, 76, 184, 194 oil-related pollution, 56, 58 Oloka-Onyango, J., 111 Organization for Economic Cooperation and Development (OECD), 25, 39, 86, 117, 134, 137–40, 146; OECD Guidelines for Multinational Enterprises, 11, 130, 134, 137–40, 216, 223 O’Rourke, Dara, 183, 185 PetroChina, 199 Petronas Corporation [Malaysia], 157, 167 power and influence of business, 45 power of TNCs, 5–6, 44. See also power and influence of business Priest, Margot, 80 Ratner, Stephen, 150 regulation of corporate conduct, 123 regulation of corporations, 27, 30–1, 99. See also regulation of corporate conduct Republic of Congo, 21 Resettlement Action Plan, 162, 175 Revolutionary United Front (RUF), 20 Rio Tinto, 83, 85, 167 Rome Statute of the International Criminal Court, 143 Rothstein, Jeffrey, 215 Royal Dutch Shell, 5–6, 15, 82, 188. See also Shell; Shell Petroleum Development Company Limited [Nigeria] RTZ Corp. Plc, 201 Sabel, Charles, 183, 185

404

Index

Sankoh, Foday, 20 Saro-Wiwa, Ken, 17, 106, 219 Schwartz, Allen G., 202, 205 Scott, Craig, 116 Securities and Exchange Commission, 185, 225 Shareholder Association for Research and Education (SHARE), 196 Shareholder Proposals Rule (SPR), 194, 197–8, 200 Shell, 16–17, 75–6, 83–4, 91–4, 98, 100–1, 103, 109, 111, 113, 123, 167, 169, 183–4, 190–1, 195–6, 206, 215 Shell Petroleum Development Company Limited [Nigeria], 15 Sierra Leone, 3, 10, 19–22 Smith, Craig, 191 social reports/social reporting, 12, 47, 182–7, 193, 213, 218 South Africa, 3, 6, 10, 24, 201, 207; Durban, 25 Statoil-Hydro, 183 Statute of the International Tribunal for Former Yugoslavia, 143 Statute of the International Tribunal for Rwanda, 143 subjects of international law, 115–16, 130 Sudan, 3, 10, 14, 18–20, 25, 28, 188, 202, 205 Supreme Court [United States], 207 sustainable utilization of energy and natural resources, 107 Sweden, 199 Talisman Energy, 85, 183, 188, 198 Tanzania, 162, 169 Taylor, Charles, 20, 143–4 Teubner, Gunther, 47, 147 Texaco, 75

Thor Chemicals Holdings Ltd, 201 Todaro, Michael, 13 TotalFinaElf, 5–6, 167. See also Elf Transnational Corporations (TNCs), 3–9, 11–31, 39, 43–4, 46–8, 50, 53–4, 58, 61, 63, 66–72, 74–82, 84–6, 88–90, 92–107, 109–12, 115–19, 123, 127, 130–2, 134–53, 158–61, 163, 166–8, 170–1, 181–9, 191–2, 194–7, 201–3, 205–8, 210–12, 214–26 Treaty Establishing the African Economic Community, 107 Trubek, David, 215 Uganda, 169 United Kingdom, 21, 181, 199 United Nations (UN), 13, 20–2, 25–6, 117–18, 120, 122, 126–7, 129–32, 134–5, 146, 210; Global Compact (GC), 11, 118–30, 134–6, 216, 223; Global Compact Office (GCO), 125–6; UN Commission on Transnational Corporations, 117; UN Development Programme (UNDP), 23; UN General Assembly, 133; UN Special Court for Sierra Leone, 143; UN Sub-Commission on the Promotion and Protection of Human Rights, 117, 131–3, 226 United States (US), 12, 20, 24, 27, 36, 39–40, 117, 120, 126, 137, 181, 185, 194, 197–8, 202, 204–7, 212 Universal Declaration of Human Rights (UDHR), 84–5, 89, 92 Voluntary Principles on Security and Human Rights, 88–91, 171, 181 Wassa Association of Communities

Index Affected by Mining (WACAM), 97–8 West African Gas Pipeline Project, 162 Williams, Cynthia, 78, 185 Wolfowitz, Paul, 170 World Bank, 8, 11, 94, 134, 211, 216, 223 World Bank Group (WBG), 152–68, 170, 172–80; External Compliance and Monitoring Group, 159; Extractive Industries Review, 178;

405

International Advisory Group, 159–60; Pollution Prevention and Abatement Handbook, 153; World Bank Inspection Panel, 158–9, 173–7, 179, 187; World Bank Operational Manual, 153, 164. See also World Bank World Economic Forum, 118 World Trade Organization, 152 Zadek, Simon, 191 Zambia, 25, 169