CSR, Human Rights and TNCs: Project Finance

1. CSR, Human Rights and TNCs:Project Finance Tom Sorell Centre for the Study of Global Ethics University of Birmingham

2. Outline • Human Rights and Multinationals • CSR –old and new • HR and non-state actors • HR and business NGOs, HR business groupings • UN Norms • Ruggie process

3. Outline 2 • Project Finance • Characteristics of Project Financings • HR Issues surrounding project financings • Project finance in the context of the Norms and Global Compact

4. Main claims • There shouldn’t be just one approach to the human rights risks posed by TNC activity • Attempts to regulate TNCs using international human rights law may be (1) impractical and (2) suffer from homogenizing TNCs • Human rights risks of TNC activity probably highest in developing countries

5. Main claims 2 • Project finance in developing countries has characteristics that make it suitable for H-R regulation of TNCs • Other H-R sensitive TNC activity may need a different approach

6. From old CSR to Human Rights • CSR –old and new • Old-primarily American • Primarily concerned with local non-business responsibilities of local branches of US big-business in US • Double standards problem • HRs with non-state actors

7. The Global Compact (1999- ) • http://www.unglobalcompact.org/AboutTheGC/index.html • Voluntary organization • Has thousands of members • Two overarching principles: Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses

8. Global Compact (Principle 2) • “Complicity” http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/Principle2.html

9. UN Norms • Adopted 2003 by the UN Subcommission on the Promotion and Protection of Human Rights • An attempt to bring TNCs into the UN Treaty system • Gives TNCs responsibilities for respecting and sometimes promoting h-rs in their “sphere of activity”

10. UN Norms 2 • Contemplate monitoring and legal enforcement mechanisms like those of UN treaty bodies • Outline responsibilities that some avant-garde Western TNCs have already voluntarily accepted • Heavily criticized by business. Were sent for further study by Harvard political scientist, John Ruggie

11. Ruggie process • Scepticism about “sphere of activity” in which Norms say companies have H-R responsibilities • Criticism of attempt to introduce legally enforceable norms • http://www.business-humanrights.org/Documents/Ruggie-HRC-2006

12. Project finance 1 • TNCs, as shareholders (sponsors), set up a project company to build and/or operate an infrastructure project • Project company financed by loans from banks secured against revenues from infrastructure process • Project company loans not secured against sponsor assets

13. Project finance for developing countries • Agent in a developing country vs. agent of development • First mover in development • Contract-ridden nature of PF • Govt and project companies as parties to contracts

14. Stabilization clauses • No added costs from legal changes • BTC case

15. Project finance and “sphere of activity” • Contractual nature of project finance heavily defines sphere of activity of project companies, and, indirectly TNC-sponsors; so Project Finance meets some of Ruggie’s worries about “sphere of activity”

16. Project finance and “complicity” • Agent of development vs presence in a developing country • Presence in a developing, h-r violating country vs contributing to its development effort • Intermediate complicity of PF companies • Vs gross complicity of Yahoo etc

17. PF activity vs TNC activity in general • Not all TNCs involved in developing countries • Not all TNC involvement in developing countries as agents of development • Not all TNC involvement in h-r violating developing countries “complicit”

18. Problematic cases for attention • TNCs owned by h-r violating states • Development funding by h-r violating states • Entirely different, public-private partnerships in developing countries