Extractives

Reflections on the Trafigura Case

Commentary, 18 September 2009

By John Morrison, Chief Executive, IHRB

This commentary was originally published in the Guardian on 18 September 2009. 

As incidents of industrial pollution, human rights abuses, the quest for justice, and ultimate settlement go, the Trafigura case is a milestone. Its remarkable trajectory reinforces the urgent need for greater transparency and accountability in the way companies operate in our increasingly globalised world.

Trafigura is a commodity trading company whose traders spotted an opportunity to make quick profit in 2005, when they noticed that a Mexican refinery was selling contaminated petrol at a cheap price. Such oil is useless unless it is processed, separating the usable from the unusable oil. That process is expensive, polluting, complicated and can have adverse reaction to humans exposed to the toxic slop.

The highly toxic residue is difficult to dispose of: most developed countries have banned the activity altogether. But according to internal emails published in The Guardian, Trafigura hoped to refine it cheaply, but it hadn’t yet worked out how it would deal with the waste.

The ship Trafigura had chartered made a journey across the ocean with the waste, but various ports turned it away, until it found a willing company in Cote d’Ivoire. According to reports, this company had no prior experience of handling such toxic materials.

In 2006, the Ivorian company dumped the pollutants in various parts of the country’s capital, Abidjan. It emitted a foul smell, and many people were exposed to the waste, some experiencing breathing difficulties, and at least 15 people died, although campaigning organisations say the total number of deaths and disabilities may be much larger.

Over 30,000 victims became claimants in a law suit, which is now heading towards settlement, with the company offering each victim, irrespective of the scale of injury, about £1,000 – a settlement many victims have reportedly found acceptable. This is in addition to £100 million the company had already paid the Ivorian government, which led to the release of a company executive who was jailed, and the dropping of criminal charges against the company in Cote d’Ivoire.

It is never easy to assess the value of human life, and it must be assumed that the settlement arrived at between the victims and the company is on terms genuinely satisfactory for the victims. But three things stand out from this tragic saga. The role of the U.N. human rights mechanisms and the media; the company’s legal challenges against those who questioned its conduct; and the lack of an accountability framework. The three are inter-linked.

First, the UN Special Rapporteur on the adverse effects of the movement and dumping of toxic and dangerous products and wastes on the enjoyment of human rights wrote a clear and dispassionate report on the incident which highlighted the failings of all concerned parties, including Trafigura.

Underscoring the “protect-respect-remedy” framework defined by the Special Representative to the UN Secretary-General on business and human rights, the report found the company’s “due diligence” inadequate.

The leaked internal emails, if accurate, showed that some company officials were aware of the toxic nature of the waste, but had not made adequate plans for their disposal. Besides the Guardian, which published the emails, the BBC’s Newsnight and Al-Jazeera have broadcast investigative reports on the issue in the past.

That leads to the second issue: it is legitimate to ask why an abuse of this scale, highlighting the dark side of globalisation, was not known more widely. If other outlets did not pursue the story vigorously, it was not because they did not consider the issue important enough, but because of potential legal problems.

Trafigura’s lawyers aggressively challenged reporters who asked the company tough questions. News organisations in Norway, the Netherlands, and Britain faced legal threats, and given the nature of the English libel law – perhaps the strictest in the world – several British media outlets did not follow up the story. English libel laws make serious investigative journalism against powerful entities a challenging task.

The Guardian’s editor, Alan Rusbridger, wrote this January in The New York Review of Books about how hard it is for news organisations to pursue legitimate investigative inquiries against companies, because of the high cost of litigation. One reason newspapers may not have published stories questioning the speculative economic bubble leading to the sub-prime crisis last year may have been the threats of lawsuits from companies, whose risky lending practices the newspapers may have wanted to expose, but chose not to, on advice from their own lawyers.

And it wasn’t only media organisations which felt the chill. Non-Government Organisations (NGOs) have a fine record of reforming corporate behaviour through their campaigns, but when some of them have asked certain companies searching questions in order to write their own reports, they have faced the prospect of a long, tortuous, and potentially financially ruinous libel trial, should the company decide to sue.

Greater transparency is, therefore, necessary: that may require a reform in English libel law – a project free speech organisations like the English PEN and Index on Censorship are engaged in – and lawmakers need to think creatively of enacting legislation that lifts the restraints on the media and NGOs so that they can pursue legitimate issues of public concern without threats of crippling lawsuits.

Trafigura is not a household brand. It has been named in the Volcker Report of companies trading with Iraq under sanctions, and in Congressional hearings in the United States, it has been named as a company trading with Iran - a practice U.S. policy disapproves of.

Trafigura does not have high street or main street presence; it operates in the globalised world of business – it has been variously described as British, and Swiss-Dutch. Maybe it is all three – and it does not matter at one level. And yet, at another level, it does. And that has to do with the third critical issue: of accountability. Once a company which operates under different jurisdictions is involved in a case, it complicates accountability mechanisms. Operating under different jurisdictions may serve a legitimate private interest, but it is not necessarily conducive to the public interest at all times.

It makes it harder for victims to seek remedies, it makes it more expensive to mount legal challenges, and it makes it difficult for small, under-resourced NGOs to investigate their affairs. The complex structure of holding companies also discourages prosecutors from taking on cases, even when NGOs or news media highlight instances of human rights abuse.

Companies have entirely legitimate reasons of operating from different locations, and setting up headquarters for tax-planning purposes as well as to allocate resources efficiently. Companies also have the right to protect their capital from expropriation and have the right to repatriate their profit where laws permit. But when complex structures are designed to conceal assets to ward off potential liability from people whose rights may have been abused due to corporate misconduct, then the state has to step in, to defend the public good and public purpose.

Nothing in human rights law requires that the state must own all resources – but it has the primary obligation to regulate, which it cannot abandon. When companies operate from multiple jurisdictions, conduct their affairs in that space where national jurisdictions do not apply due to extraterritorial implications and the appropriate international regulatory framework has not yet been designed, they will pursue their self-interest. But if there are adverse consequences borne by people who live in weakly-administered jurisdictions, then that must stop.

As the SRSG has shown, companies’ responsibility to respect human rights includes undertaking due diligence. As Amnesty International pointed out in its intervention at the Human Rights Council last week, the Rapporteur’s examination of corporate human rights due diligence in the case was useful, but due diligence was primarily a tool for the willing and other measures were also needed to address those companies that were simply not interested in ensuring their operations respected human rights. A stronger framework is needed to ensure that tragedies like the one in Abidjan do not recur.

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