THURS AFTERNOON – GLOBAL RESPONSIBILITIES

Janet Stewart (chair)

Raises range of issues, including role of universities with regard to oil & gas

Audio recording of Downie paper and discussion

James Downie

Partner, Stronachs LLP

Powerpoint slides

Going to focus only on legal responsibilities and not on moral obligations, and will focus on:

1. UK legislation to tackle worldwide corruption – example of laws with overseas reach

2. attempts to make companies responsible for acts or omissions of their group companies: will conclude that not safe to assume using overseas subsidiary is sufficient – everyone accepts that PR risks but not aware that legal risks

1. Bribery Act 2010: can a company be liable for bribery by employee?

UK has one of the most robust legislations, which was response to OECD convention on combatting corruption – it covers both UK and abroad, public and private sectors

> Bribery Act 2010: 4 offences

  • offering or giving bribe: employees liable
  • requesting bribe: employees liable
  • bribing foreign public official
    • could be possible to find company liable for first 3 although difficult (would have to show ‘directing mind and will behind company’ involved in act of bribery) especially  in larger organisations where huge gap between management and low-level – a bit easier to show in smaller companies
  • failing to prevent bribery
    • for this offence, enough that act of bribery occurs to make companies liable, regardless of directors’ intention – only defence can be that company had put structures in place to avoid corruption

Jurisdiction: includes not just any UK citizen but any UK incorporated entity or any other entity that has part of business in UK – even if act of bribery has nothing to do with UK

Penalties: max. 10 years of prison and unlimited fine for company, though can also face debarring from contracting process as well as prosecution under proceeds of crime law

2. Can a parent company be found liable for corruption in subsidiary?

No longer possible to ringfence legal risk entirely in overseas subsidiaries, though still difficult to find parent companies liable

a. Some parent companies have been found responsible: e.g. Chandler vs. Cape: courts decided that parent company was responsible for well-being of employee of subsidiary who suffered from asbestosis: could have foreseen damage of asbestos (though especially because parent company had top asbestos experts)

b. In other cases parent companies have not been found responsible: e.g. Akpan vs. Royal Dutch Shell: damage due to spill from pipeline of subsidiary in Nigeria

  • Dutch court accepted jurisdiction, though had to consider Nigerian law
  • all claims against parent company (Shell) unsuccessful
    • too remote relationship with subsidiary
    • court did find subsidiary liable for not securing area from sabotage, which unprecedented in Nigeria
    • case now being appealed by Friends of the Earth International
    • court comments that trend in trying to find parent companies responsible in home jurisdictions for liability of subsidiaries

Discussion

Apologies for all the questions that I missed through attending to other business and writing my own questions!

Martin Strachan, Masters in oil & gas student

  • is there minimum for what considered corruption e.g. bottle of whisky?

> JD not supposed to catch corporate hospitality

  • is there risk of double jeopardy?

> JD yes, could be prosecuted in UK after prosecuted in Nigeria; though UK prosecutor could decide not in public interest to prosecute again

Adam Boggin, medical student: why does UK government care about bribery overseas?

> JD moral argument is that let’s lead from the front and this is position of UK government; but also that facilitates fair competition that circumvented by bribery

Jake Molloy, RMT union: increasingly employees being held liable e.g. blamed for being involved in accident in UK and overseas, especially if self employed; is there increased risk of liability if self employed?

> JD difficult to answer without specific examples

Audio recording of Frynas and Briggs papers and discussion

George Frynas

Professor of Corporate Social Responsibility, U Middlesex

Powerpoint slides

Picture9

In last 15 years  DFID etc. has argued that CSR can fill void in international development: key question is not whether CSR is nice or not, but whether CSR is adequate for international development?

Answer is no.

Macro-level effects is what matters – and CSR does nothing to alleviate

> shown that oil and gas hurts macro-level economics (‘resource curse’)

  • economic distortion (not investing in other sectors)
  • political effects: governance and corruption
  • threat of armed conflicts

Never heard single company representative who has been prepared to address these problems

Slide with pyramid of company investment (see link to Powerpoint slides above)

  • broad base is government taxes
  • above that business-as-usual investment
  • narrower top of pyramid is social investment, on which CSR focuses

> Companies will typically design some nice CSR schemes, but fail to maximise benefits – many countries face real capacity problems and need help, even though some help from World Bank, Norwegian government oil-for-development fund, etc.

  • companies say ‘we don’t get involved in politics’ but yes they do: massive investment in oil lobbyists etc. > might as well use influence for some good
    • some companies e.g. Statoil have taken some positive steps

Barnaby Briggs

Strategic Relations Manager, Shell International

Powerpoint slides

Picture10

If want to steal oil in Nigeria, not difficult to do it

  • much is stolen and goes locally as well as internationally – it is industrial production system (shows slide of illegal refinery)
  • illegal extraction is highly polluting
  • JTF have shut down 748 refineries in last 4 months – but possibly to get up and running within 1 month
  • scale and horribleness cannot be overstated
  • those working are local people who don’t regard selves as criminals
  • enters mainstream market at no particular premium >estimated 30-50% of oil in Delta is from evil source
  • 95% of revenue after costs goes to Nigerian government, so this is stealing from Nigerians

> agrees with George Frynas that impossible to ‘CSR your way’ out of this one

Local content spend

  • have increased “local content spend” up to £2.4 billion per year, and most of team there are Nigerian

Spills and flares

  • has been deliberate business of spilling oil though hacks or cuts in pipelines, because this makes for compensation for owners of land – Dutch court has found several spills deliberate
  • disagrees that corporate sector hates transparency – he loves transparency > refers to website with details of all spills and remediation of them
  • argued that Shell flares in Nigeria – much to do with militancy and government underspending on infrastructure – but now funding to reduce

Responding to George’s plea to work with government

  • agrees and Wikileaks have shown that Shell working with government for years, though need to carefully manage that relationship
  • about lobbying, concerned about idea of Shell being “force for good” – who defines good?

Agrees that Shell learn slowly and feels that only at beginning of learning what CSR is – and terrible mistake to have acronym, which just puts into box – and that CSR has to be done at highest, strategic level

Discussion

Apologies for all the questions that I missed through attending to other business and writing my own questions!

Mandy Meikle,Transition Towns: why is Nigeria so different to anywhere else which has large extraction?

> BB

  • not sure why…but pollution getting worse and worse – can now see oil in every single creek in Delta
  • certainly armed insurgency etc. makes more difficult

> GF: tragedy of Nigeria is that by time companies were made to listen was that too late – very difficult now to suggest solutions for country

Owen Logan, conference co-organiser:

  • Shell has made friends with most reactionary forces in Nigerian society
  • what seeing there is what used to be called imperalism

Nicholas Ellison: new catchword is “foreign corporate policy” e.g. recent Uni seminar, which took same view that CSR doesn’t work, and that need to work together with local partners etc. – is this just a new acronym, or is there something more to that?

Victor, research student from Niger Delta

  • refers back to Owen Logan’s comment: all roads run straight to oil facilities, other communities left without roads etc. > people have been pushed to the wall
  • grew up in Port Harcourt where Shell employees completely distinguished from rest of population
  • problem will be solved when Shell decides to leave politics: on that day Nigeria will begin to change

> BB disagrees with criticisms

  • answer is not for Shell to leave politics and GF has called for Shell to engage more in politics
  • Shell is not responsible for oil theft
  • history is riddled with mistakes: sponsoring agricultural projects is useless when agriculture is disappearing
  • 30 million people in Delta: not for Shell to give them power –they should be paying for it; Shell already built powerstation and not been paid for it > building infrastructure, including funds for roads, schools, hospitals, doesn’t seem to work
  • “foreign corporate policy” sounds very interesting but not heard phrase before – but mistake to assume that companies like Shell are in fact powerful and that run world (actually national oil companies in developing countries more powerful)

> GF: yes there are some good things done in name of CSR, but what frustrates him is that no one is talking about real issues

Leon Moller, RGU: does theft have an impact on profits?

> BB impact is limited – damage is more on environmental reputation, by association

John Colbrook, RGU: how much of Shell’s global profits are generated in Nigeria?

> BB not sure, but is significant

Hanifi Baris, CISRUL PhD student: to BB – you say you don’t want to define “good” but you do define ‘theft’ – how would respond if someone says that extracting country’s oil for own benefit through cosy relationship with government is “theft”?

> BB agrees that need to increase legitimacy as business, for example by highlighting that 95% of profits are going to Nigerian government

> GF: always hearing that Shell ‘can’t be moral force’, etc…. but yes you can do these things!

?? (worked for years in Nigeria)

  • GF’s suggestion that Shell should work more directly on Nigerian government is imperialism – imposing values of this society on a very different one

?? (Living Earth Foundation)

  • agrees that macro process and need to learn how to respond to these
  • fact that oil company in Venezuela is national doesn’t in itself resolve anything: same problems as everywhere else
    • Living Earth Foundation and other organisations have terrible relations with PDVSA
    • true that funding health projects but all dependent on central government

Audio recording of Greatrex paper and discussion

Tom Greatrex MP

UK Shadow Energy Minister

Issues on oil & gas get simplified into headline, which usually a) there is a lot of it or b) there is not a lot of it – so he is pleased that much broader debate in this conference

e.g. current debate on Independence has views and counter-views on cost and revenue, not always acknowledging that…

  • Scottish government would have to absorb many costs
  • production – and revenues that stem from it – may be inconsistent with pursuit of low carbon economy

> wider responsibilities of government must go beyond gross revenue figure: broader issues, e.g. Health and Safety Executive under threat EC takeover, which may undermine post-Piper Alpha UK regulatory system that among best in world

…rubs up against desire of any government to make most use of resource both for revenue and for any other economic benefits.

Since conference has touched on Norway, he was recently at Norwegian Labour Party conference in which delegates argued against carrying out Environmental Impact Assessment for new field because felt that EIA was just step toward development of field – better not to have an EIA in the first place!

> example of difficulty of balancing environmental protection and using resource… and there is debate about whether should be using fossil fuels in first place, following Nicholas Stern, due to risk of environmental change

Being pragmatic, struggles to see how can provide energy that required without fossil fuels, but shouldn’t be pushing to detriment of other potential sources

+ over-reliance on unconventional gas would leave similarly vulnerable to global fluctuations in price of gas

Policy must be  more than government aligning itself with industry for sake of revenue

  • must include international responsibilities, which should include more than Bribery Act
  • may well be extraction that shouldn’t happen, and UK could here set example for other parts of world, including countries where greater political volatility

Discussion

(Includes all members of panel)

GF in response to earlier questions and comments, issue for him not about imperialism but about capacity – agrees Nigeria is difficult place to operate and doesn’t envy some of companies, but Shell does have capacity to make a change there

BB identifies as problems

  • lack of trust: how to build trusting relationship (place-based accountability) in a place?
  • capacity: agrees crucial to work with people to build capacity e.g. will be better off when people have smaller businesses selling electronics such as mobile phones, or producing gasoline > there are people who now better off but agrees that not in Delta, where most or all are worse off than before – he finds this terrible

Friends of the Earth International person (in response to comments I have not summarised): corruption is not cultural – in all countries where he has worked, including Nigeria, there is strong resistance to corruption

> JD difficulty is drawing line between bottle of whisky and large payment, which is why in UK outright prohibition – but in some countries there is gift-giving culture

?? question for Tom Greatrex: World Development Movement published report that most of coalition government members have or had close links to fossil fuel companies or companies related to them, and WDM expressed deep anxiety that future renewable projects being postponed because of this; although TG had said need to continue with fossil fuels in short term, how short is short term?

> TG

  • short term is as short as possible, but depends on how quickly we can use renewable electricity, such as marine, in way that less intermittent, as well as what position we take around nuclear
  • with a view to generating investment in renewables, need first for clear sense of purpose of where government is going

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