The Apparel Industry

The Oil and Gas Industry

Corporate Initiatives to Address Human Rights

The Role of Governments

In 1998, the debate on the relationship between corporate conduct and human rights evolved from questioning whether corporations should respect human rights to a recognition that corporations must implement credible human rights policies and practices and ensure compliance to these standards. At the center of this debate were the apparel and extractive industries. Both industries faced severe economic pressures due to the global economic crisis and increased scrutiny of their human rights records. Some transnational corporations attempted to address human rights; others chose to ignore the issue. However, events in 1998 strongly suggested that without an explicit and programmatic commitment to respect and promote human rights companies risked complicity and, in some cases, jeopardized their projects altogether.

The Apparel Industry

The effort to improve labor rights practices by corporations in the apparel and textile industries focused on programs to ensure respect for workers. Corporations such as Gap Incorporated and Nike, earlier criticized for labor rights violations in overseas plants, retreated in 1998 from previous hostility to rights-oriented criticism and worked to improve global practices through programs in partnership with nongovernmental organizations and trade unions. Among other initiatives in the United States, President Clinton’s Apparel Industry Partnership (AIP) and the Council on Economic Priorities’ Social Accountability 8000 (SA-8000) program, were two that promoted global codes of conduct on fair labor practices and credible independent monitoring with those codes.

In part, the shift was a response to economic considerations. Apparel companies had expected that Asian markets would be the source of new revenue and growth as demand flattened in the United States. But the Asian economic crisis—particularly due to mismanagement by corrupt and abusive governments—stifled the new demand. Reliant on image, faced with shrinking revenues and public scrutiny of their treatment of workers, companies could ill-afford to drive consumers away because of poor human rights records. However, most corporate initiatives on human rights were not independently assessed, and their effectiveness could not be measured.

The Oil and Gas Industry

The programs to address labor rights in the apparel industry coincided with a recognition that the oil and gas industry—also faced with severe financial pressures—was at the center of controversy in many operations throughout the world. Because of these companies’ importance to national, regional, and international economies; their contracts with abusive governments; their ties to state and private security forces; their effect on local communities; their influence on governments, and a reputation of complicity in human rights violations, the oil industry needed to improve its human rights record throughout the world. In 1998, Human Rights Watch documented human rights violations related to oil and gas projects in Colombia and closely monitored developments in Burma, Cameroon, China, Chad, Thailand, and Turkmenistan.

Colombia
In two open letters released in April, Human Rights Watch criticized the contractual relationship between Colombian security forces and two international consortia of oil companies operating the principal oil fields and pipelines in the nation. The letters detailedterms of the multimillion-dollar security contracts and reports of killings, beatings, and arrests committed by those forces responsible for protecting the companies’ installations. Human Rights Watch called on the companies to implement contractual and procedural structures to ensure respect for human rights as a result of their security arrangements.

A consortium composed of Occidental Petroleum, Royal Dutch/Shell, and the national oil company, ECOPETROL, which operates the Caño-Limón oil field in Arauca department, took no action to address reports of extrajudicial executions and a massacre committed by the state forces assigned to protect the consortium’s facilities. The companies’ response was that human rights violations were the responsibility of governments, and they did not announce any programs to ensure that their security providers do not commit human rights violations. Royal Dutch/Shell, the only member of the consortium with human rights policies, announced its intent to sell its share of this project as part of an overall divestiture of its Colombian holdings.

In Casanare department, the location of the Cusiana-Cupiagua oil fields developed by British Petroleum, ECOPETROL, Total, and Triton, contracts came up for renewal in June, as military, paramilitary, guerrilla, and criminal activity increased in the area. The renegotiated contracts between the companies and the Ministry of Defense restructured the flow of funds to avoid direct company payments to state security forces. Payments for security were to be made to the state-owned ECOPETROL as a conduit to the Defense Ministry instead of directly from the companies to the army. At the time of this writing, the oil companies still made direct payments to the National Police.

There were also some substantive changes in the contracts. BP, the only consortium member with a human rights policy, reported that human rights clauses were included in the new contract; an auditing mechanism was implemented to monitor the flow of funds; and a committee was established to monitor the performance of the military units providing security for the companies. Human Rights Watch could not assess the effectiveness of these programs because the contract was still not available to third parties. There was apparently no mechanism to ensure that the personnel guarding these installations would be screened for human rights violations.

The conduct of private security providers for the BP-led consortium continued to be a problem in 1998. Following allegations in 1997 that the consortium’s private security firm, Defense Systems Colombia (DSC), a subsidiary of the U.K.-based Defense Systems Limited (DSL), had imported arms into the country and trained Colombian National Police (PONAL) in counterinsurgency techniques, a government inquiry was launched to determine the role of this company and the police. DSC refused to cooperate with the investigation. In September 1998, BP reported that it had formed an oversight committee to monitor its private security providers, was developing a code of conduct for DSC, and had urged the company to cooperate fully with the government. At this writing, DSC remained uncooperative. Despite the allegations against DSC and its refusal to cooperate with the government investigation, BP renewed its contract with DSC for one more year.

In October, new allegations that DSC and a Israeli private security firm, Silver Shadow, had contemplated providing arms and intelligence services for the Colombian military while they were security contractors for the Ocensa pipeline. Reports alleged that DSC had set up intelligence networks to monitor individuals opposed to the company. BP steadfastly denied these claims and suspended a senior security official while investigating these allegations. The day after these allegations were published, the ELN reportedly blew up the Ocensa pipeline, killing sixty civilians and injuring dozens more. The act of targeting pipelines has been condemned by Human Rights Watch as a violation of the Geneva Conventions and causing unacceptable hardships on civilian populations caught in the middle of Colombia’s decades-old internal conflict.

Burma-Thailand
The $1.2 billion Yadana gas pipeline from Burma to Thailand, developed by the United States-based Unocal, the French company Total, the state-owned Petroleum Authority of Thailand (PTT), and the Burmese government’s Myanmar Oil and Gas Enterprise (MOGE), continued to generate human rights controversy. Press accounts reported that the Burmese forces providing security for the project continued to commit violations against villagers along the pipeline route, including killings, torture, rape, displacement of entire villages, and forced labor.

In Thailand, environmentalists’ opposition to the pipeline grew as construction crossed the border from Burma, and the Thai government’s response was to suppress protest. In one extreme incident, the Thai government dispatched approximately 200 army troops to the site of an environmental protest in Kanchanaburi and arbitrarily arrested approximately one hundred peaceful demonstrators in April.

Despite severe international criticism of the project and decisions by other oil majors such as Texaco and Atlantic Richfield to leave Burma, Unocal and Total defended their presence and argued that the pipeline would result in sustainable, long-term economic and social benefits to the 35,000 villagers living near the pipeline and lasting benefits to Burmese generally.

But international economic experts believed otherwise. For example, according to the International Monetary Fund (IMF), revenues from the pipeline were supposed to bolster and support the weak Burmese economy by mid-1998. In a later review the IMF, commenting on the project, reported that the “junta has already mortgaged its projected revenues of $200 million a year to repay new loans and finance its 15 percent stake in the project,” which would delay any profits to the government until 2002. The Thai government attempted to renegotiate its contract with Burma because, given a lack of demand and funding shortfalls due to the economic crisis, it could not pay for the natural gas.

Unocal’s financial situation was precarious as well. On April 30, Standard & Poor, the international investment rating service, downgraded Unocal’s corporate outlook from “stable” to “negative.” The decision was based on low oil prices, a “somewhat weak financial profile,” and “the company’s exposure to political risk” due to controversies surrounding its operations in Burma and Afghanistan, as well as political and economic turmoil in Thailand and Indonesia.

Chad-Cameroon
The joint venture of the United States-based Exxon, the French Elf Aquitaine, and Netherlands-based Royal Dutch/Shell which is constructing the $4 billion Chad-Cameroon oil pipeline was criticized throughout the year because of allegations of corruption and its detrimental effects on the environment and human rights.

On April 24, a coalition of European and African environmental groups and members of the German parliament announced fears of the displacement of inhabitants along the pipeline route and potential environmental damage. They also cited noticeable increase in human rights violations in the area surrounding the pipeline, in particular a massacre of twenty civilians in the oil-producing area. Reports of increased conflict and killings of civilians by government forces persisted through the first eight months of the year.

The pipeline also emerged as an internal issue in debates about corruption. For example, in a May interview with the N’djamena-based newspaper L’Observateur , Yorongar Ngarléjy, an opposition party member of the Chadian National Assembly, accused presidential candidate Wadal Abdelkader Kamougué of accepting bribes from Elf Aquitaine to finance his campaign. In June, Ngarléjy accused Chadian President Idriss Déby of nepotism because of senior appointments in the country’s oil industry. His accusations led to the National Assembly’s rescinding his parliamentary immunity; and he was arrested on June 3 for defamation, then convicted and sentenced to three years’ imprisonment, one year more than the maximum sentence stipulated by law. In addition, Mme. Sy Koumbo Singa Gali, the director of L’Observateur , and Polycarpe Togamissi, the journalist who conducted the interview of Ngarléjy, were arrested and convicted as accessories to the defamation. They received two-year suspended sentences and were fined 1 million Communauté Financière Africaine francs (CFA) each, twice the legal maximum.

In late August, eighty-six Northern and Southern environmental organizations called on the World Bank, which had extended a $340 million loan for the pipeline project, to suspend its funding on grounds of widespread human rights violations in oil-producing regions and the lack of adequate environmental safeguards. On September 1, the World Bank’s spokesperson, George Minang, said, “If security problems prevent adequate information gathering, the project is probably not ready to be implemented...This is not a good sign.”

Although Royal Dutch/Shell has a global human rights policy, at the time of this writing none of the consortium members had articulated a policy to ensure respect for human rights in the course of this operation.

Corporate Initiatives to Address Human Rights

Three companies responded to broad-based criticism of their operations: Norway’s state-owned Statoil, Royal Dutch/Shell, and British Petroleum.

In December 1997, the Norwegian government announced that oil revenues generated by Statoil would be invested in an ethical manner consistent with human rights. The government awarded the assignment to the United States-based Chase Manhattan Bank. On July 7, Statoil signed a global collective bargaining agreement with the International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM), in part, to “affirm their support for fundamental human rights in the community and in the place of work.” After ratifying the agreement, Statoil’s Jostein Gaasemyr said, “This is an important step for Statoil, because we see the implementation of human rights as a crucial challenge in some of the environments in which we do business.”

The agreement contained several concrete provisions to respect human rights, including adherence to International Labour Organisation (ILO) standards by recognizing the rights to freedom of association and collective bargaining; prohibitions on forced, bonded, and child labor; and nondiscrimination policies.

Royal Dutch/Shell responded to criticism by unveiling programs to highlight its performance on human rights. To further enhance its new corporate image, the company reportedly planned to spend $200 million on a public relations campaign designed by the transnational advertising agency M&C Saatchi, which led to scathing criticism by the press and NGOs. After presenting its first social audit highlighting its social policies, including an emphasis on human rights, Shell continued its dialogue with NGOs and spread the message that it had embraced the concept of human rights. However, the company was enmeshed in controversies in Chad, Colombia, Nigeria, and Peru while conducting feasibility studies for projects in Turkmenistan.

British Petroleum adopted an approach similar to Shell’s: the company revamped its business principles to include explicit references to human rights and released a social audit to highlight its human rights policies. The long-term implications of the new policy were still unclear at this writing. A well-implemented policy could have far-reaching effects, since BP merged with the U.S. oil major, Amoco, to form the third-largest oil company in the world (behind Shell and Exxon), with operations in countries with poor human rights records such as Algeria and Colombia, and operating in alliance with Statoil—which also has a human rights policy— in Angola and Azerbaijan.

The Role of Governments

Governments that discounted human rights in favor of promoting commercial and strategic interests remained another focus of the effort to promote corporate responsibility. Actions of the Dutch government towards China and the U.S.’s policy towards Turkmenistan illustrated the problem.

In 1998, the Dutch government, long a critic of China’s human rights record, followed the European Union’s lead and refused to sponsor a human rights resolution on China at the United Nations Human Rights Commission. Apparently linked to this silence on human rights, in February the Chinese government awarded Royal Dutch/Shell the largest single foreign investment in Chinese history—a $U.S.4.5 billion contract to build an ethylene plant with the government’s China National Offshore Oil Corporation. Thedeal was supposed to have been signed in early 1997 but had been canceled when the Dutch broke ranks with other E.U. members and sponsored an April 1997 human rights resolution against China at the United Nations Human Rights Commission.

U.S. dealings with Turkmenistan from March through July involved paying lip service to human rights while securing lucrative energy contracts from President Saparmurat Niyazov. Human Rights Watch has called Niyazov’s government one of the most repressive and abusive governments in the world and throughout 1998 urged the U.S. government not to ignore human rights in favor of oil and gas interests.

On March 10, preceding Niyazov’s visit to the United States, the Export-Import Bank awarded U.S.$96 million to Bateman Engineering, Dresser Rand, Corning, and General Electric to sell natural gas compression equipment and other services to Turkmenistan. During his April visit, government officials reported having raised human rights issues privately with Niyazov while awarding U.S. companies public funds for coveted oil and gas projects in Turkmenistan. The U.S. and Turkmen governments played the game of “hostage politik”—where repressive governments release political prisoners to gain political and commercial favor with Washington—during Niyazov’s visit to the U.S. The Department of State lobbied for and secured the release of ten political prisoners which the U.S. government then cited an example of improvement in human rights, in justification of its commercial interests.

At the same time, the U.S. awarded companies grants—using public funds—to get a foothold in Turkmenistan. During a meeting between Presidents Clinton and Niyazov on April 23, the U.S. government’s Trade and Development Administration (U.S.T.D.A.) awarded Exxon a $750,000 grant to conduct a pipeline feasibility study for a proposed $2.8 billion pipeline in Turkmenistan. After the deal was signed, the White House issued a press release stating, “Turkmenistan is committed to strengthening the rule of law and political pluralism, including free and fair elections for parliament and the presidency in accordance with international standards....” But when reporters asked Niyazov about the government’s attitude toward opposition parties, he said, “We do not have any opposition parties—you are ill-informed. We have none.”

Mobil Oil became the first U.S.-based energy company to sign a production-sharing agreement with the Turkmen government on July 10. On July 31, the State Department spokesperson James P. Rubin congratulated the Turkmen government for awarding the Enron Corporation a contract for another $750,000 pipeline feasibility study—paid for with a grant by the U.S.T.D.A. During the same month, the U.S. government announced its intention to triple U.S. aid to Turkmenistan without placing any conditionality on funding to ensure respect for human rights.

In August and September three more domestic critics of the Turkmen government were beaten and detained. Widespread abuses such as torture, arbitrary detention, and press censorship continued.