Beer, conflict and compensation: Heineken-Congo agreement

Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct

Heineken’s agreement with Congolese workers sets excellent example of dispute settlement on responsible business conduct.

Bralima in the Democratic Republic of the Congo is owned by Heineken International.

Doing business in conflict areas is challenging for everyone, whether you are talking about mining or even brewing beer. In 2015 a group of 168 former workers of Heineken’s subsidiary Bralima in the Democratic Republic of Congo submitted a complaint to the Dutch National Contact Point (NCP), a grievance mechanism set up under the OECD Guidelines for Multinational Enterprises, about the company’s conduct during the civil war in that country (1999-2003). The complaint concerned allegations of Bralima unjustly dismissing its workers and co-operating with the rebel movement in RCD-Goma, and the negative consequences this had for the firm’s workers and their families.

The complaint was successfully resolved recently. Details of the agreement between Heineken and the former Congolese workers, facilitated by the Dutch NCP, are confidential, but the overall outcome is public. All parties describe it as satisfactory and civil society even hailed it as “historic”.

This is good news. Heineken, their former workers and the Dutch NCP deserve praise for solving this highly complex corporate responsibility issue. Why?

One key reason lies in the fact that monetary compensation was awarded, according to reports. Although there have been many different sorts of remedy through the NCP system, monetary compensation has been rare.

Still, it is important to manage expectations. For a start, NCPs are a non-judicial grievance mechanism, meaning that the NCPs cannot legally enforce remedy. However, the NCP process can facilitate remedy, including compensation, as part of a mediation or conciliation process. NCPs can also recommend remedy, including financial compensation, in their final statements. The Heineken agreement illustrates that NCP processes are not exclusively forward-looking, but can also function retroactively.

Another reason why this is a historic agreement is that it shows that longstanding issues such as the Heineken case, that took place 15 years ago, can still be solved by an NCP process today. NCPs are known to get a lot of complex cases that often have already been in courts for years. This case demonstrates that even human rights issues that go back many years can still be solved if the conditions are in place.

The case is also a landmark because it shows that NCPs, when properly organised, can deal with human and labour rights issues in conflict areas. Indeed, Heineken has committed to improving its policy and practices on doing business in volatile and conflict-affected countries. Other companies should now follow Heineken’s example.

Make no mistake: a critical factor in this case was that Heineken and the complainants engaged fully and responsibly with the process. In many cases, using this problem-solving approach is more effective in addressing corporate responsibility issues than legalistic ones. Another reason for success was that the NCP was positioned to handle the case professionally. As the NCP is an adequately resourced, independent responsible business authority, which made it possible to be accessible and equitable towards all parties in a remote area ravaged by civil war. The mediation could rely on government support too, as it was facilitated by Dutch embassies in France and Uganda.

In short, several lessons on different levels can be drawn from the resolution of this business and human rights case. Above all, it should inspire other governments and NCPs, and businesses too. It shows that with the right mind-set, companies can successfully turn human rights issues into opportunities for improving corporate responsibility.

See also:

OECD Guidelines for Multinational Enterprises

Olivier van Beemen (2017), En RDC, une poignée d’ouvriers fait plier le géant Heineken, Le Monde

Olivier van Beemen (2017), Heineken betaalt Congolezen na klacht mensenrechtenschending, NRC

Abolish modern slavery!

Gabriela Ramos, OECD Chief of Staff and Sherpa to the G20

There are 45.8 million slaves in the world today according to the 2016 Global Slavery Index, nearly four times the total number of Africans sold in the Americas during the four centuries of the transatlantic slave trade. Modern servitude goes under a variety of names such as human trafficking or compulsory labour, fulfilling the prophecy of the great abolitionist Frederick Douglass, himself a former slave, that slavery “will call itself by yet another name; and you and I and all of us had better wait and see what new form this old monster will assume, in what new skin this old snake will come forth.”

One new form is child trafficking in India. It’s designed to meet the demand for household help from the expanding middle class by taking advantage of supply from impoverished rural communities. Deepti Minch was sold to a family in Delhi. “My life was tough. I worked from six in the morning until midnight. I had to cook meals, clean the house, take care of the children and massage the legs of my employers before going to bed.”

Child labour is one of the worst forms of abuse. In the Indian case, the OECD has partnered with Nobel Laureate Kailash Satyarthi on a range of issues related to promoting children’s welfare and well-being. Mr Satyarthi and the grassroots movement founded by him, Bachpan Bachao Andolan (Save the Childhood Movement), have liberated more than 84,000 children from exploitation and developed a successful model for their education and rehabilitation. Juliane Kippenberg of Human Rights Watch describes how children have been injured and killed in mining accidents, suffered poisoning from mercury used in gold processing, and developed respiratory disease from exposure to dust. She welcomes another OECD initiative to develop practical actions to help identify, mitigate and account for the risks of child labour in the mineral supply chains, for example carry out independent third party audits on the due diligence practices among smelters and refiners.

The issues go far beyond mining. Modern slaves may be sewing the clothes you wear, growing the food you eat, and producing the gadgets that keep you entertained and informed. Around 2 million of them are working for states or rebel groups, and can become trapped in a vicious circle in which militia fight for control of precious resources such as minerals, while the profits from controlling mines fund further conflict. Consumers, business leaders, policy makers, we all have a duty to tackle this crime. And we have the tools to do so.

The 2010 US Dodd-Frank Act obliges public companies to report on products containing minerals that may be benefiting armed groups in the Democratic Republic of the Congo. The UK government recognised the scale and seriousness of the problem by passing the 2015 Modern Slavery Act.  Prime Minister Theresa May set up a government task force on modern slavery and appointed an Anti-Slavery Commissioner. In an article promising that her government will lead the way in defeating modern slavery, the Prime Minister highlights the human suffering behind the headlines: “people are enduring experiences that are simply horrifying in their inhumanity. Vulnerable people who have travelled long distances believing they were heading for legitimate jobs are finding they have been duped, forced into hard labour, and then locked up and abused.”

The UK legislators are well aware of the complexity of the task facing them, and produced a Practical Guide for companies on transparency in supply chains that recommends the OECD Guidelines for Multinational Enterprises. They point out that although the OECD Guidelines are not specifically focused on modern slavery (although the Due Diligence Guidelines do include it), “they provide principles and standards for responsible business conduct in areas such as employment and industrial relations and human rights which may help organisations when seeking to respond to or prevent modern slavery”.

Ending slavery is made even more difficult by the size and complexity of supply chains that make it hard to identify who is responsible for ensuring rights are respected at all the locations involved in production. Workers are often employed by subcontractors or sub-subcontractors of MNEs in their own country, and unfortunately it may take a catastrophe like the collapse of garment factories at Rana Plaza in Bangladesh in 2013 to set change in motion. Following that tragedy, The OECD developed a Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. This Guidance, elaborated through an intense multi-stakeholder process, supports a common understanding of due diligence and responsible supply chain management in the sector. One of the most notable features is that it doesn’t allow multinationals to use the failings of local contractors as an excuse: “Enterprises should…seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship.”

It doesn’t always take a big disaster to change things though. The OECD and FAO produced due diligence guidance for the agriculture sector that will, among other things, help newcomers to the sector, such as institutional investors, to deal with ethical dilemmas and uphold internationally agreed standards of responsible business conduct, notably in markets with weak governance and insecure land rights. For instance the guidance recognises that regardless of the legal framework in which an operation takes place, indigenous people often have customary or traditional rights based on their relationship to the land, their culture and socio-economic status.

It’s easy to see how workers would benefit from improved conditions and why consumers would choose ethically-sourced products. But it makes good business sense too. The evidence on company performance shows that the ones that behave responsibly towards their employees, the environment, and society do better than the rest.

Modern slavery is a highly internationalised affair, and to end it we need to reinforce international coordination and cooperation. As more countries and sectors step up the fight against slavery and other abuses, our experience with the MNE Guidelines and due diligence guidance is likely to be called upon increasingly. We advocate the approach pioneered in the apparel industry where we work with industry, government, worker organisations, and civil society to elaborate strategies and we have to work together to implement them. We can all learn from each other and use our shared knowledge to expose slavery and help to abolish it. As Frederick Douglass said, “It flourishes best where it meets no reproving frowns, and hears no condemning voices.”

Useful links

Gabriela Ramos is moderating the first session of the 5th Global Forum on Responsible Business Conduct, “Responsible global supply chains through due diligence”, taking place at the OECD on 29-30 June. Watch the webcast here

Championing workers’ rights at a Nissan plant in Mississippi: Will international labour standards stand the test?

John Tarver, communications expert and founder of Atriptyc Communications, www.atriptyc.com. John can be contacted at [email protected]

Morris Mock used to be a small-town guy with a simple life. He is the son of a preacher and lives in Pearl, Mississippi where he enjoys eating out and going to church with his wife and daughter. A few years ago, his biggest claims to fame were singing in the church choir and being notoriously recognizable for the red baseball cap that rarely leaves his head.

Today that’s changed. Morris still sings in the choir but he also appears regularly in local, national and international media with the likes of Lethal Weapon star Danny Glover, the American Senator Bernie Sanders, and Members of the French Parliament. What’s the reason for this change? He has become a brave spokesperson for his colleagues at the Nissan plant in Canton, Mississippi who want to form a union but the plant’s management has been using intimidation tactics and threats to keep workers from voting to unionize.

For over a decade, workers at the Mississippi plant have struggled to overcome management’s intimidation and scare tactics. Workers claim that management has threatened to fire employees who show interest in or share information about unions. Management has also stated that union activity could lead to the plant’s closure.

Nissan has partnered with Renault in a global joint venture.  The CEO of this Renault-Nissan Alliance, Carlos Ghosn claims the company has no problems with unions – after all, it works with unions all over the world. However, evidence shows that management uses intimidation and anti-union videos to dissuade workers from holding a fair election to unionize.

So why don’t the workers hold a vote? “The workers are so scared.” Says Morris. “A lot of them support the union. But even with a majority, there is still too much fear, too many threats, too much intimidation.”

Threatening to fire workers for unionizing is illegal in the United States. In 2014, the U.S. National Labor Rights Board, after its own independent investigation, issued a complaint against Nissan for violating workers’ rights when a supervisor threatened to fire employees for being openly pro-union. This complaint is all the more significant since: only six percent of workers’ charges resulted in a Board complaint in 2014. Nissan has said it would continue to defend itself against this complaint.

Two months later, Renault-Nissan’s CEO, Mr. Ghosn, testified before the French Parliament’s Economic Affair’s Commission. Renault is the largest shareholder of Nissan, and the two are rapidly converging key business functions. The French government is the largest shareholder of Renault. When asked in a meeting of the French parliament’s Economic Affairs Committee about the situation at the Mississippi plant, Mr. Ghosn said that the plant respected American labor laws.

Morris met with parliamentarians in France – and with national labor groups – in hopes of receiving support and to participate in protests. His newly found PR skills are working. A group of 35 French MPs and Members of the European Parliament addressed a letter to Mr. Ghosn asking him to explain the state of affairs in Canton. That was in early 2016; they are still waiting for a reply.

In between meetings with elected officials, Morris has been learning about international initiatives that are meant to protect workers from intimidation and threats. One such initiative is the United Nations Global Compact, of which Renault and Nissan are participants. In Nissan’s 2016 Sustainability Report, Mr. Ghosn recalled, “We… continued our decade-long commitment to the core principles of the United Nations Global Compact.” Principle 3 of the compact states that “Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining”.

So, is Nissan living up to its commitment to international standards in pursuing an aggressive campaign against workers’ freedom of association? It would appear not. When asked about the discord between their actions in Mississippi and their commitment to international standards, Nissan replied that “international labor standards … do not apply to private enterprises like Nissan. Rather, they apply to governments, which then use them as guidance to structure national law.” This certainly raises the question why businesses such as Nissan have formally committed to the principles of the Global Compact.

Another set of international guidelines has come to Morris’ attention: the OECD’s Guidelines for Multinational Enterprises (MNE). Two labor organizations filed an OECD complaint that was accepted by the U. S. State Department’s national contact point; the contact point helps resolve non-compliance issues related to the guidelines.  While the State Department found that the issues raised were substantiated, Nissan refused the State Department’s offer to mediate “because long-established guidelines for bringing a union vote already exist”.

Morris and his colleagues haven’t let that discourage them. Their supporters at international labor organizations have filed OECD MNE complaints against the Renault-Nissan Alliance, Nissan and Renault in The Netherlands, Japan and France, where the three entities are respectively incorporated. They are hoping the companies live up to their commitments and undertake real human rights due diligence.

While waiting to find out if the OECD complaints are accepted, Morris and his colleagues staged the largest labor rights demonstration held in Mississippi since the 1960s.  Joined by Danny Glover, Senator Bernie Sanders and several thousand people in Mississippi, they came together on March 4 to demand that Nissan respect the workers’ fundamental right to form a union. From Paris and Brussels, French and European members of parliament sent strong messages of support for their cause. The workers reported that intimidation tactics intensified in the lead up to the protest. There was even a new video that aired in the plant to dissuade workers from attending.

Most people are aware of the long and violent history of voter suppression in Mississippi. Morris lives close to where Medgar Wiley Evers was assassinated for his activity in favor of voters’ rights, and only a few hours’ drive from where Martin Luther King met with the same fate for supporting labor rights. Morris sees his struggle as a continuation of Mr. Evers’ and Dr. King’s efforts.

Yet despite all of this, when Morris talks about his company, he remains very objective, even respectful of his employer. “This is the poorest state in the country, and Nissan is paying good money—for Mississippi, but we still need to educate folks. The worker needs a voice in the workplace.”

Amen to that.

Useful links

OECD Guidelines for Multinational Enterprises

 

Belief in Business

Richard Howitt,  Chief Executive of the International Integrated Reporting Council (IIRC) and member of the B20 Task Force on Energy, Climate and Resource Efficiency

A recurrent theme throughout this week’s OECD-B20-BIAC High Level Session on global economic governance was ‘disbelief’.

Policy makers are shocked by the fundamental challenge to their arguments for the benefits of international investment, free trade and open markets.

Populations in OECD countries and beyond were repeatedly said to be involved in a ‘backlash against globalisation,’ a populist revolt apparently sweeping the world.

OECD Secretary-General Angel Gurría berated a growth in global inequality which he acknowledged dates back decades, but said makes the support for international collaboration by those of us in the B20 group of international business leaders at this time “not just welcome but indispensable.”

In the face of the debate about ‘fake news’ and attempts to dismiss all value in expertise, this week’s 300-strong global gathering heard a strong call from governmental representatives for the OECD to remain a ‘house of evidence.’

OECD Director of Trade and Agriculture Ken Ash accepted the challenge, but argued that in the current climate, aggregate statistics would not be persuasive. It is necessary to wage “granular arguments that work while having your hair cut or in the coffee shop,” he said.

In my own contribution to the session on responsibility, trust and inter-connectedness, I stressed that this same argument applies not just to governments and to international institutions, but to businesses too.

I explained how ‘Integrated Reporting’ and the ‘integrated thinking’ which accompanies it, provides this broader, connected and more accessible approach to business reporting.

It is our mission to make integration the global norm in corporate reporting, backed by some significant endorsements from G20 Governments, the United Nations and within the OECD itself.

The OECD Round Table on Sustainable Development welcomed the advances made in Integrated Reporting; the OECD Forum on Responsible Business Conduct called for its improved application; and currently the IIRC is assisting the OECD in its work on developing metrics which measure business impact on people’s well-being.

The G20 Summit in Germany later this year will be invited to endorse the Financial Stability Board Task Force, which itself recommends that climate risk is integrated in company financial planning and reporting.

The case for Integrated Reporting involves the transition to low carbon growth not simply being considered as a potential cost to business, but also as a potential source of value creation too.

We say the same of other ‘capitals’ all too often considered to be external to the company in the current short-term approach to financial reporting. People, ideas and societal relationships have an equal potential to contribute to business success with a broader, longer-term perspective.

The movement towards integration echoes the call at this week’s High Level meeting from the Chair of the Business and Industry Advisory Committee at the OECD, Siemens’ senior executive Klaus Moosmayer, who said the BIAC is championing a more ‘holistic’ approach.

“We need more lighthouse examples for good communication, not only talking about risks, but opportunities too,” he agreed.

“This has to apply to business communications too. We need more integrated policies,” added Ash.

For me, the call for ‘inclusive globalisation’ which promotes international cooperation, but seeks to ensure that the benefits which follow are equitably shared, has to be the right approach.

1 500 global companies are now choosing to ‘tell their story’ through an integrated approach.

It is reporting which is not simply an advertisement of their social responsibility.  Nor is it restricted to meeting the compliance requirements of the regulator.

Integrated Reporting is the intelligent way for companies to remain competitive in a new era, where investors perceive different long-term risks, in the world of ‘multi-capitals’ and above all of new citizen expectations.

This week the OECD said that the world must adapt to meet those new challenges.

I say that businesses must make a contribution to achieving that aim.

Useful links

The Business and Industry Advisory Committee to the OECD (BIAC)

B20 recommendations for G20 Sherpa Meeting

OECD and the G20

The IIRC is launching a two-month comment period aimed at listening to and learning from the market. They’re inviting public feedback until April 30 2017 on critical incentives and barriers to applying the International Framework. Click here for the “Invitation to comment”.

Addressing the imbalance between investment protection and people protection: Making globalisation work for all

Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

We are facing a backlash against globalisation. This has gone hand in hand with a push back against investment treaties and trade agreements: just watch the election campaigns and the downfall of TTIP and TPP negotiations.

Nowadays, at the OECD many policymakers talk about “Making globalisation work for all”. If we really want to achieve this, policymakers have to take another critical look at the following.

A number of people have argued that investment policy today is marked by an imbalance between investor rights and investor responsibilities. I would frame it slightly differently.

We have developed investment protection of foreign investment because of states with failing policies and inadequate legal systems to safeguard investor rights. In regions where courts are dysfunctional, corrupt, politically biased or incompetent, foreign investors want extraterritorial protection. Fair point.

A related issue is that some people are victims of foreign economic activities. They also lack protection and remedy because of the exact same reasons: failing policies and weak legal systems. However, they do not have access to extraterritorial protection of their rights. So there is a fundamental asymmetry between investment protection and people protection. There is hard protection of investments and soft protection of people. Why do we protect investments with hard law and protect people with soft law? We have no credible answers.

This imbalance is fuelling two trends: a declining support for investment protection, which even undermines trade policy in general and free trade agreements in particular, and on the other hand societal and political pressures towards mandatory legislation on responsible business conduct, such as the recent due diligence law in France and the modern slavery act in the UK. It has also led to discussions in the UN on a binding treaty on business and human rights.

This topic will not disappear from the agenda. The imbalance will haunt policymakers for decades.

There should be at least two responses in my view: first, strengthening access to remedy for people, for example by strengthening the National Contact Points for responsible business conduct under the OECD Guidelines, and second, making investment protection more responsible. The inclusion of aspirational provisions on corporate social responsibility and cooperation in this field will not do the trick. It will only lead to accusations of “greenwashing” investment treaties.

Are there feasible options? Yes there are. We have seen recent precedents to make investment protection more responsible. Not all of them are easy or without controversy, but worth exploring.

One option is to exclude sectors that are considered as not responsible. There is a precedent for this approach: the TPP exemption of tobacco products from protection. This is controversial and the question remains whether this the way forward: will the coal sector be excluded in the future too?

A second option could include a provision ensuring that only those investors that comply with the OECD Guidelines for Multinational Enterprises are assured protection under such a treaty. This would be very complex from a procedural point of view, but not impossible.

A third option, which is more easily conceivable, is to exclude protection for investments that are linked to corruption and egregious human rights violations. This would be nothing more than “codifying” the “clean hands doctrine” that is already accepted by several arbitration tribunals. In the cases Metal-Tech Ltd v the Republic of Uzbekistan and World Duty Free Company Limited v The Republic of Kenya (2006) the tribunal excluded jurisdiction because of corruption related to the investment.[1]

A fourth feasible option worth exploring is to include a provision that specifies that material breaches of the OECD Guidelines – for example severe human rights violations  –  are taken into account by a tribunal when deciding on the merits of a claim or on potential damages awarded.

Of course these ideas are controversial and complex. It takes investment policymakers and treaty negotiators out of their comfort zone. As a former investment negotiator myself it even makes me uneasy, but we have to explore these options further. This is not impossible: precedents are available. Doing so requires political will and action is urgent. Why? Because we must respond to the backlash against investment and trade policy and make globalisation work for all.

Useful links

OECD Conference on investment treaties: The quest for balance between investor protection and governments’ right to regulate 14 March 2016, Paris

The growing pains of investment treaties OECD Secretary-General Angel Gurría on Insights

[1] Metal-Tech Ltd v Republic of Uzbekistan (2013): http://www.italaw.com/sites/default/files/case-documents/italaw3012.pdf  para110 iii ‘clean hands doctrine’165 &166; 236,237; 243; 372; World Duty Free Company Limited v The Republic of Kenya (2006): http://www.italaw.com/documents/WDFv.KenyaAward.pdf

Responsible Algorithms in Business: Robots, fake news, spyware, self-driving cars and corporate responsibility

Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

Why is the topic of robots frequently being raised at recent conferences on responsible business conduct?  For example, October last year the Polish Deputy Prime Minister noted the connection between robotisation and corporate responsibility during the opening of the Conference in Warsaw celebrating the 40 years anniversary of the OECD Guidelines for Responsible Business.

The potential negative impacts of robots or automated systems have proved cause for concern. In May 2010 there was a trillion dollar stock market crash, a ‘flash crash’, attributed to algorithm trading or in other words: robot investors. And let’s not forget the mathematical models that contributed to the financial crisis of 2007 and 2008. Recent events surrounding fake news, with Pizzagate as the most extreme example, are also contributing to these concerns.

What is the common denominator of these automated systems? Algorithms! These rule-based processes for solving mathematical problems are being applied to more and more areas of our daily lives. Likely, we are only at the beginning of the era of algorithms and their widespread application is raising many ethical questions for society and businesses in particular.

For example “killer robots”, weapons systems that select and attack targets without meaningful human control raise questions about dehumanisation of killing and who is responsible? In December the United Nations decided to set up an expert group, in order to look into this issue following a campaign ‘Stop Killer Robots’ by Human Rights Watch and other NGOs.  While self-driving cars will never be at risk of driving while intoxicated they can make decisions that might pose moral dilemmas for humans.  Online face recognition technology raises concerns around privacy.  These are just a few examples.

The pervasiveness of the use of algorithms may result in many unintended consequences.  In her book ‘Weapons of Math Destruction’ Cathy O’Neil describes how algorithms in combination with big data increase inequality and threaten democracy. She provides examples of the financial crisis and the housing market, but also of a college student who does not get a minimum wage job in a grocery store due to answers provided on a personality test, people whose credit card spending limits are lowered because they shopped at certain stores, etc. She also discussed predictive policing models such as those that predict recidivism and algorithms that send police to patrol areas on the basis of crime data, which can have a racist effect because of harmful or self-fulfilling prophecy feedback loops.

Scholars and practitioners in this field are beginning to consider the ethical implications of application of algorithms. Julia Bossmann of the Foresight institute described her top 9 ethical issues in artificial intelligence. Prof Susan Leigh Anderson of the University of Connecticut stated: “If Hollywood has taught us anything, it’s that robots need ethics.”  Cathy O’Neil proposes a ‘Hippocratic oath’ for data scientists. Recently a group of scholars developed Principles for Accountable Algorithms.  In the private sector Elon Musk, SpaceX CEO and other business leaders have founded OpenAI, an R&D company created to address ethical issues related to artificial intelligence. Amazon, Facebook, DeepMind, IBM and Microsoft founded a new organisation called the Partnership on Artificial Intelligence to Benefit People & Society. The partnership seeks to facilitate a dialogue on the nature, purpose of artificial intelligence and its impacts on people and society at large.  It is encouraging that certain industry efforts are being undertaken in this area. Additionally one thing should be clear for businesses that create and use these technologies: when things go wrong, using algorithms as a scapegoat won’t do the trick.

What guidance on these issues can be found in the most important instrument on business ethics, the OECD Guidelines for Multinational Enterprises (MNE), a multilateral agreement of 46 states on corporate responsibility. Cases brought to National Contact Points, the globally active complaints mechanism of the Guidelines, provide a good illustration of what the Guidelines recommend with respect to these issues.  For example, in February of 2013 a consortium of NGOs led by Privacy International (PI) submitted a complaint to the UK National Contact Point (NCP)  alleging that Gamma International had supplied a spyware product – Finfisher – to agencies of the Bahrain government which then used it to target pro-democracy activists.

The NCP concluded that Gamma had not acted consistently with the provisions of the OECD Guidelines requiring enterprises to do appropriate due diligence, to undertake a policy commitment to respect human rights and to remediate human rights impacts. Furthermore the company’s approach did not meet with the OECD Guidelines’ standards to respect human rights and the engagement of the company with the NCP process was unsatisfactory, particularly in view of the serious nature of the issues. The NCP recommended that the company engage in human rights due diligence.

What is human rights due diligence and what does it mean for companies developing algorithms? Under the Guidelines due diligence is a process that should be carried out by corporations as part of a broader range of actions to respect human rights. The right to privacy, freedom of speech, freedom from torture and arbitrary detention are examples of the many potential human rights that could be impacted. Due diligence is the process of identifying, preventing and mitigating actual and potential adverse human rights impacts, and accounting for how these impacts are addressed. If there is a risk of severe human rights impacts a heightened form of due diligence is recommended. For example, significant caution should be taken with regard to the sale and distribution of surveillance technology when the buyer is a government with a poor track record of human rights. Due diligence should be applied not only to a company’s activities but across its business relationships. In the context of a company producing algorithms therefore it is not sufficient that they behave responsibly in the context of their own operations but due diligence should also be applied to ensure buyers of the technology are not using it irresponsibly. In instances where this is the case, the company that created and sold the technology is expected to use its leverage in the value chain to prevent or mitigate the impact.

A number of valuable tools to respect human rights and implement the ’know your client’ principle have been developed in the context of ICT business operations. For example, the European Commission has developed a useful guide for companies on respecting human rights in the ICT sector. TechUK, an industry association of ICT companies in the UK, in partnership with the UK government has published a guide on how to design and implement appropriate due diligence processes for assessing cyber security export risks. Additionally the Electronic Frontier Foundation has developed a guide on How Corporations Can Avoid Assisting Repressive Regimes and the Global Network Initiative has developed Principles on Freedom of Expression and Privacy.

Beyond the human rights related recommendations, the OECD Guidelines make other relevant recommendations for companies developing algorithms. For example the Environment Chapter recommends environmental, health and safety impact assessments.[1] The Consumer Chapter advises companies to provide accurate, verifiable and clear information to consumers.[2] In addition companies should respect consumer privacy and take reasonable measures to ensure the security of personal data that they collect, store process or disseminate.[3]

Businesses that create algorithms should do their due diligence on potential human rights impacts. Companies should also carry out due diligence on labour, environmental and health and safety impacts. They should provide accurate verifiable and clear information about their algorithms and take measures to protect personal data. Collaborative industry efforts on responsible algorithms are highly needed to shape these expectations in concrete terms. Responsible algorithms will not only generate profit, but protect the rights of individuals worldwide while doing so.

Useful links

There’s an algorithm for that. Or there soon will be Marina Bradbury on Insights

[1]               OECD Guidelines for Multinational Enterprises, Chapter VI.3

[2]               OECD Guidelines for Multinational Enterprises, Chapter VIII.2

[3]               OECD Guidelines for Multinational Enterprises, Chapter VIII.6

Business speaks out on preventing corporate crime

foreign-bribery-reportDr. Klaus Moosmayer, Chief Compliance Officer, Siemens AG, and Chair of the BIAC Task Force on Anti-Bribery/Corruption, and Dr. Ulrike Desimoni, Senior Counsel Compliance Legal, Siemens AG. These comments are a contribution to a public consultation on foreign bribery and the liability of legal persons by the OECD Working Group on Bribery.

Business has on many occasions underlined the fundamental importance of compliance, which should be understood not just as adherence to the law and internal company rules, but as a key component of business integrity. It is true that a corporation may in certain cases create an environment that encourages employees, officers, and agents to pay bribes to secure business. Yes, but the corporation can also do the opposite. It can establish an effective compliance system. Effective compliance increases the likelihood of detection of offenses in the company and thus has a positive impact not only on detection and prosecution but also on prevention.

This is because compliance systems have a strong potential for deterrence within the company. Companies should therefore be urged to carry out effective compliance work in order to prevent white-collar crimes, shed light on internally detected misconduct, and disclose it to the authorities. In return, the compliance measures should be taken into consideration when setting the amount of the financial penalty in the event of a violation of the law, even to the extent of waiving a sanction on the company.

When imposing sanctions, the conduct of the company (on which the financial penalty is to be imposed) both before and after the offense must be taken into consideration. This includes the company’s unreserved assistance in clarifying the facts of the case but also the implementation or subsequent introduction of compliance measures, which can be understood as a clear indication of the company management’s commitment to acting in accordance with the law.

The fact that bribes were detected – and that needs to be emphasised – does not necessarily mean the established compliance system failed. In fact, it shows that the compliance system worked: Bribes were detected.

With regard to the 2010 UK Bribery Act, which – like anti-bribery law in some other countries – contains a compliance defence rule, Kenneth Clarke, Secretary of State for Justice highlights: “The objective of the Act is not to bring the full force of the criminal law to bear upon well run commercial organizations that experience an isolated incident of bribery on their behalf. So in order to achieve an appropriate balance, section 7 provides a full defence. This is in recognition of the fact that no bribery prevention regime will be capable of preventing bribery at all times.“

In our view, when it comes to the level of sanctions, different and adequate types of sanctions for legal persons are already in place, either criminal or non-criminal ones. These include fines, confiscation disgorgement, debarment from public procurement and other penalties like dissolution and publication.

While some focus mainly on the liability of companies, the ‘role’ the individual may have must not be disregarded. in In September 2015, the US Department of Justice (DoJ) released  its policy on Individual Accountability for Corporate Wrongdoing (“Yates memorandum”), which correctly signalled a priority of pursuing, punishing and deterring individual (executives, manager) wrongdoers. According to the Yates approach, “the most effective way to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” The policy and its six key steps to guide prosecutors and civil attorneys at DoJ in conducting and evaluating corporate investigations clearly show the need to focus on individual wrongdoers in addition to companies. Individuals, not only companies are accountable.

Useful links

Public consultation on foreign bribery and the liability of legal persons

OECD Roundtable on Corporate Liability for Foreign Bribery, Paris, 9 December 2016

OECD Anti-Bribery Convention